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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
AMERICAN BANKERS INSURANCE
GROUP, INC.
(NAME OF SUBJECT COMPANY)
AMERICAN BANKERS INSURANCE
GROUP, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $1.00 PER SHARE,
INCLUDING THE ASSOCIATED SERIES A PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS
(TITLE OF CLASS OF SECURITIES)
24456 10 5
(CUSIP NUMBER OF CLASS OF SECURITIES)
GERALD N. GASTON
VICE CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
AMERICAN BANKERS INSURANCE GROUP, INC.
11222 QUAIL ROOST DRIVE
MIAMI, FL 33157-6596
(305) 253-2244
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
------------------------
COPIES TO:
<TABLE>
<S> <C>
MORTON A. PIERCE, ESQ. JOSEPHINE CICCHETTI, ESQ.
JONATHAN L. FREEDMAN, ESQ. JORDEN BURT BERENSON & JOHNSON LLP
DEWEY BALLANTINE LLP 777 BRICKELL AVENUE, SUITE 500
1301 AVENUE OF THE AMERICAS MIAMI, FL 33131
NEW YORK, NY 10019 (305) 371-2600
(212) 259-8000
</TABLE>
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is American Bankers Insurance Group, Inc.,
a Florida corporation (the "Company" or "American Bankers"), and the address of
the principal offices of the Company is 11222 Quail Roost Drive, Miami, FL
33157-6596. The title of the class of equity securities to which this statement
relates is the Common Stock, par value $1.00 per share, of the Company (the
"Common Stock"), including the associated Series A Participating Preferred Stock
Purchase Rights (the "Rights") issued pursuant to the Rights Agreement dated as
of February 24, 1988, as amended and restated as of November 14, 1990, and as
further amended on December 19, 1997 and February 5, 1998 (the "Rights
Agreement"), between the Company and ChaseMellon Shareholder Services, L.L.C.,
as successor Rights Agent (such Common Stock and the Rights being collectively
referred to herein as the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This statement relates to the tender offer by Season Acquisition Corp.
("Purchaser"), a New Jersey corporation and a wholly-owned subsidiary of Cendant
Corporation, a Delaware corporation ("Cendant"), to purchase 23,501,260 Shares
at a price of $58.00 per Share, net to the seller in cash, without interest
thereon, as disclosed in the Tender Offer Statement on Schedule 14D-1, dated
January 27, 1998 (the "Schedule 14D-1"), filed by Purchaser and Cendant with the
Securities and Exchange Commission (the "SEC"), upon the terms and subject to
the conditions set forth in the Offer to Purchase, dated January 27, 1998, and
the related Letter of Transmittal (which, together with any amendments or
supplements thereto, constitute the "Cendant Offer").
The Schedule 14D-1 states that the principal executive offices of Cendant
and Purchaser are located at 6 Sylvan Way, Parsippany, New Jersey 07054.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above.
(b) Except as described herein, to the knowledge of the Company, as of the
date hereof, there are no material contracts, agreements, arrangements or
understandings, or any actual or potential conflicts of interest between the
Company or its affiliates and (i) any executive officer or director of the
Company or (ii) Purchaser, Cendant or their respective executive officers,
directors or affiliates.
Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates and certain of its executive officers, directors or
affiliates are described in the Company's Proxy Statement, dated April 11, 1997
(the "Proxy Statement") mailed to shareholders in connection with the Annual
Meeting of Shareholders of the Company held on May 23, 1997 (the "Annual
Meeting") under the sections entitled "Directors' Compensation," at pages 13-14
of the Proxy Statement, "Approval of American Bankers Insurance Group, Inc. 1997
Equity Incentive Plan," at pages 17-22 of the Proxy Statement, "Compensation of
Executive Officers," at pages 22-31 of the Proxy Statement, and "Certain
Relationships and Transactions," at page 11 of the Proxy Statement. A copy of
the relevant portions of the Proxy Statement are filed as Exhibit 1 hereto and
are incorporated by reference herein.
As described in the Proxy Statement, American Bankers is currently a party
to severance agreements (the "Severance Agreements") with Messrs. Gerald N.
Gaston, Floyd G. Denison, Michael Ray, Stephen T. Williams, Leonardo F. Garcia,
Jason J. Israel, Thomas Hayes, Arthur W. Heggen, R. Kirk Landon, Jay R. Fuchs,
Eugene E. Becker, Sanford Neubarth, and Philip Bruce Camacho (each, an
"Officer," and collectively "Officers"). Pursuant to such severance agreements,
the Officers will receive severance payments if they are terminated under
certain circumstances.
Severance Agreements that were entered into prior to 1989 (the "Prior
Severance Agreements") provide that an Officer is entitled to receive payment of
an amount (the "Designated Amount") equal to twice the Officer's Current Annual
Salary (as defined in the Severance Agreement) in the event that American
Bankers is Merged or Sold (as defined in the Severance Agreement), regardless of
whether the Officer has terminated
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his employment. Under the terms of the Prior Severance Agreements, American
Bankers would be treated as having been Merged or Sold as a result of
consummation of the Cendant Offer, and the Officers would be entitled to payment
of an amount equal to the Designated Amount. The estimated aggregate amount
payable to the Officers under the Prior Severance Agreements as a result of the
consummation of the Cendant Offer is $4,785,000.
Severance Agreements that were entered into after 1988 (the "Recent
Severance Agreements") provide that if, within 24 months following a Change of
Control (as defined in the Recent Severance Agreements) of American Bankers, an
Officer in good faith determines that there has been a significant adverse
change in circumstances affecting such Officers' position or status within
American Bankers, such Officer may terminate his employment and be entitled to
receive payment of an amount (the "Maximum Amount") equal to the maximum amount
that will not constitute a "parachute payment" as defined in Section 280G of the
Internal Revenue Code of 1986, as amended and the rules and regulations
promulgated thereunder (the "Code") (or any successor provision or, if no such
provision exists, as defined in such provision immediately prior to its repeal)
and as calculated by American Bankers' independent auditors. The Recent
Severance Agreements also provide that within fifteen (15) business days
following the occurrence of a Change in Control (as defined in the Recent
Severance Agreements) of American Bankers, American Bankers is required to
deposit with an escrow agent an amount (the "Escrow Deposit") equal to the
Maximum Amount calculated as of the date of such Change in Control. Under the
terms of the Recent Severance Agreements, a change of control of American
Bankers will be treated as having occurred as a result of the consummation of
the Cendant Offer. Assuming each Officer who is a party to a Recent Severance
Agreement terminated employment immediately following the consummation of the
Cendant Offer because such Officer determined that there has been an adverse
change in circumstances affecting such Officers' position or status, the
estimated aggregate amount payable to such Officers as a result of such
terminations would be approximately $18,385,000.
As described in the Proxy Statement, American Bankers maintains various
plans pursuant to which stock option awards and restricted stock awards are made
to its executive officers. Under the 1994 Senior Management Stock Option Plan
(the "1994 Senior Plan"), the 1991 Stock Option/Restricted Stock Award Plan (the
"1991 Award Plan") and the 1991 Stock Incentive Compensation Plan (the "1991
Incentive Plan"), upon the exercise of a stock option, the optionee is entitled
to receive shares of Common Stock which are subject to restrictions on transfer
("Restricted Stock") (which, in the case of the 1994 Senior Plan and the 1991
Award Plan, are in addition to non-restricted shares of Common Stock received
upon such exercise). Pursuant to the terms of the 1994 Senior Plan, the 1991
Award Plan and the 1991 Incentive Plan, upon a "change in control" (as defined
in such plans), the restrictions applicable to shares of Restricted Stock then
held by executive officers on account of the exercise of options under such
plans will lapse. Consummation of the Cendant Offer will constitute a change in
control under such plans and, accordingly, the restrictions on shares of
Restricted Stock then held by executive officers on account of the exercise of
options under such plans will lapse.
American Bankers has also granted options to purchase Common Stock under
the 1997 Equity Incentive Plan (the "1997 Incentive Plan"). Pursuant to the
award agreements entered into under the 1997 Incentive Plan, all outstanding
stock options will become fully vested and exercisable upon a change in control
(as defined under the 1997 Incentive Plan). Upon the exercise of an option under
the 1997 Incentive Plan, the optionee is entitled to receive shares of
Restricted Stock (as well as non-restricted shares of Common Stock).
Consummation of the Cendant Offer will constitute a change in control under the
1997 Incentive Plan and, accordingly, all unvested options under such plan will
become immediately vested and exercisable upon consummation of the Cendant Offer
and shares of Restricted Stock then held on account of the exercise of options
under the 1997 Incentive Plan will become fully vested.
Certain members of management of the Company and members of the Board of
Directors have certain interests in the Proposed AIG Merger. Such interests are
described on pages 35-36 and 55-56 of the Proxy Statement/Prospectus, which
material is filed as part of Exhibit 1 hereto and is incorporated by reference
herein in its entirety.
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Mr. James F. Jorden, a director of American Bankers, is the Managing Senior
Partner of the law firm of Jorden Burt Berenson & Johnson LLP, which provides
legal services to American Bankers, including in connection with the Proposed
AIG Merger (as defined below) and the Cendant Offer, for which it will receive
compensation.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a)-(b) Recommendation, Reasons for the Recommendation and Background. The
Board of Directors of the Company (the "Board of Directors" or the "Board") has
unanimously determined (with one director absent) that, in light of all the
relevant circumstances and for the reasons set forth below, it is unable to take
a position with respect to the Cendant Offer and is making no recommendation at
this time with respect to the Cendant Offer. The reasons for this determination
include the following:
(1) The Board of Directors, along with its legal and financial
advisors, considered the fact that the Cendant Offer currently contemplates
a price of $58 per Share, a 23% premium over the $47 per Share in the
Proposed AIG Merger. However, because of the provisions of the AIG Merger
Agreement which prohibit the Company from engaging in negotiations with or
having discussions with Cendant concerning the Cendant Offer as well as the
lack of certain information which the Company expects will be disclosed in
the regulatory process, the Board of Directors has been unable to assess
several aspects of the Cendant Offer, including the following:
- Cendant's relatively high level of financial leverage, which would
be further increased by the indebtedness it intends to incur to
finance the Cendant Offer, and the effect of such leverage on the
opeations of the Company;
- Cendant's proposed business plans for the Company following the
Cendant Offer if the Cendant Offer were successful, including
treatment of accounts, employees and policyholders;
- Cendant's experience in owning and operating insurance companies;
- The ability of Cendant to provide licensed facilities outside of
the United States to permit international distribution of the
Company's products;
- The ability of Cendant to realize the synergies that Cendant has
indicated will be achieved;
- Whether increased revenue levels projected by Cendant require
additional capital infusions in the Company's operating
subsidiaries and the source of such capital;
- Cendant's plans with respect to intercompany transactions with the
Company's insurance subsidiaries involving intercompany royalties
and fees;
- The potential reaction of the Company's producers and reinsurers to
Cendant; and
- The potential volatility of the Cendant common stock, par value
$.01 per share (the "Cendant Common Stock").
(2) The Board of Directors continues to believe that the transaction
contemplated (the "Proposed AIG Merger") by the Agreement and Plan of
Merger (the "AIG Merger Agreement"), dated as of December 21, 1997, as
amended and restated as of January 7, 1998 and as further amended on
January 28, 1998, among the Company, American International Group, Inc.
("AIG") and AIGF, Inc., a Florida corporation and a wholly-owned subsidiary
of AIG ("AIGF") represents a more attractive alternative than operating on
a stand-alone basis because:
- AIG represents a strong long-term strategic partner for the Company
and AIG is a market leader in the insurance industry with an
excellent and long-standing operating history;
- AIG has extensive knowledge of and experience in regulatory
matters;
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- The Board believes that AIG's long-term debt rating will enable the
Company to have access to capital on more favorable terms than it
previously experienced. The Board also believes that the favorable
claims-paying ratings of AIG's insurance subsidiaries would enhance
sales of the Company's insurance products; and
- The Board believes that a combination with AIG would allow access
to AIG's considerable international experience and substantial
resources, at a time of industry consolidation, which would enable
the Company to expand beyond the domestic market. The Board of
Directors also believes that a combination with AIG would allow the
Company to enjoy opportunities for operating efficiencies and
synergies as a result of the Proposed AIG Merger, particularly in
the international distribution of the Company's products.
(3) The Board of Directors believes that the Cendant Offer has
commenced a process which may lead to higher bids or offers for the Company
from Cendant, AIG or others. Consequently, the Board of Directors believes
that it would be premature to make a recommendation with respect to the
Cendant Offer at this time. The Company has not to date received any such
higher bids or offers from Cendant, AIG, or others.
The Board did not assign relative weights to the factors listed above.
A discussion of the background of the events leading up to the execution of
the AIG Merger Agreement by the Company, and the reasons for the determination
of the Board to recommend approval and adoption of the AIG Merger Agreement are
set forth on pages 22-31 of the Proxy Statement/Prospectus of the Company and
AIG filed with the SEC on January 30, 1998 (the "Proxy Statement/Prospectus"), a
complete copy of which is filed as Exhibit 3 hereto, and such material on pages
22-31 is incorporated by reference herein in its entirety. The AIG Merger
Agreement is filed as Exhibit 2 hereto and is incorporated by reference herein
in its entirety. In connection with the AIG Merger Agreement, (i) AIG and the
Company entered into a Stock Option Agreement, dated as of December 21, 1997
(the "Stock Option Agreement") pursuant to which the Company granted AIG an
option to purchase a number of newly issued shares of Common Stock equal to
approximately 19.9% of the outstanding shares of Common Stock upon the
occurrence of certain events and (ii) R. Kirk Landon, Chairman of the Company
and Gerald N. Gaston, Vice Chairman, President and Chief Executive Officer of
the Company (collectively, the "Shareholders") entered into a Voting Agreement
dated as of December 21, 1998 with AIG (the "Voting Agreement"), pursuant to
which each of Messrs. Landon and Gaston and certain entities affiliated with Mr.
Landon agreed to vote all of the Shares beneficially owned by such shareholder
(representing approximately 8.2% of the outstanding Shares) (i) in favor of
adoption and approval of the AIG Merger Agreement and the Proposed AIG Merger at
every meeting of the shareholders of the Company at which such matters are
considered and at every adjournment thereof and (ii) against any action or
proposal that would compete with or could serve to materially interfere with,
delay, discourage, adversely affect or inhibit the timely consummation of the
Proposed AIG Merger. The Stock Option Agreement and the Voting Agreement are
filed as Exhibit 4 and Exhibit 5 hereto, respectively, and are incorporated in
their entirety herein by reference. Descriptions of the terms of the Stock
Option Agreement and the Voting Agreement are set forth on pages 52-54 of the
Proxy Statement/Prospectus, and such material on pages 52-54 is incorporated by
reference herein in its entirety. A description of the terms of the AIG Merger
Agreement is set forth on pages 38-51 of the Proxy Statement/Prospectus, and
such material on pages 38-51 is incorporated by reference herein in its
entirety. The descriptions of the AIG Merger Agreement, the Stock Option
Agreement and the Voting Agreement do not purport to be complete and are
qualified in their entirety by reference to the full text of such agreements,
complete copies of which are filed as Exhibits 2, 4 and 5, respectively, hereto.
On January 27, 1998, Cendant publicly announced a proposal to acquire the
Company for $58 per share of Common Stock, to be paid in cash and common stock
of Cendant. Such proposal was communicated in a letter (the "Cendant Offer
Letter") to the members of the Board of Directors from Henry R. Silverman,
President and Chief Executive Officer of Cendant, and Walter A. Forbes, Chairman
of Cendant. A copy of the Cendant Offer Letter is filed as Exhibit 6 hereto and
is incorporated in its entirety herein by reference. On January 27, 1998,
Cendant filed its tender offer documents with the SEC on Schedule 14D-1.
Pursuant to the
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Cendant Offer, Purchaser seeks to purchase 23,501,260 Shares, subject to the
terms and conditions stated therein, at $58 per Share in cash. Cendant
contemplates that after consummation of the Cendant Offer, the Company would be
merged with and into a subsidiary of Cendant (the "Cendant Merger") and all
Shares not tendered in the Cendant Offer would be converted into that number of
shares of Cendant Common Stock having a value equal to $58. Cendant also
contemplates that in such merger, each outstanding share of $3.125 Series B
Cumulative Convertible Preferred Stock of the Company (the "Preferred Stock")
would be converted into one share of a new series of convertible preferred stock
of Cendant having similar terms, except that such shares would be convertible
into shares of Cendant common stock in accordance with the terms of the
Preferred Stock.
The Cendant Offer is subject to a number of conditions, including (a) there
being validly tendered and not properly withdrawn prior to the expiration of the
Cendant Offer a number of Shares which, together with Shares owned by Cendant
and Purchaser, constitute at least 51% of the Shares outstanding on a fully
diluted basis; (b) Purchaser being satisfied, in its sole discretion, that the
provisions of Section 607.0901(2) of the Florida Business Corporation Act (the
"FBCA") are inapplicable to the Cendant Merger; (c) Purchaser being satisfied,
in its sole discretion, that the provisions of Section 607.0902 of the FBCA
continue to be inapplicable to the acquisition of Shares pursuant to the Cendant
Offer; (d) the purchase of Shares pursuant to the Cendant Offer having been
approved for purposes of rendering the supermajority vote requirement of the
Company's Third Amended and Restated Articles of Incorporation (the "Articles")
inapplicable to Cendant and Purchaser; (e) the Rights having been redeemed by
the Board, or Purchaser being satisfied, in its sole discretion, that the Rights
are invalid or otherwise inapplicable to the Cendant Offer and to the Cendant
Merger; (f) the option contemplated by the Stock Option Agreement having been
terminated or invalidated without any Shares having been issued thereunder; and
(g) Cendant and Purchaser having obtained all insurance regulatory approvals
necessary for their acquisition of control over the Company's subsidiaries on
terms and conditions satisfactory to Purchaser, in its sole discretion.
In connection with its proposal, on January 27, 1998, Cendant commenced
litigation against the Company, members of the Board, AIG and AIGF in the United
States District Court for the Southern District of Florida, as described more
fully in Item 8 below.
Also on January 27, 1998, the Company issued a press release, a copy of
which is filed as Exhibit 7 hereto and is incorporated in its entirety herein by
reference, announcing that the Board would review Cendant's proposal in due
course, and requesting that holders of Shares not take any action until such
time as the Company responds to the Cendant Offer.
Subsequent to the announcement of the Cendant Offer, AIG on January 27,
1998 delivered notice to the Company exercising its option to purchase the
8,265,626 Shares issuable under the Stock Option Agreement. The consummation of
such purchase is subject to applicable regulatory approvals. A copy of the AIG
notice of exercise of the option under the Stock Option Agreement is filed as
Exhibit 8 hereto and is incorporated in its entirety herein by reference.
On January 28, 1998, the Board of Directors met telephonically to review
the terms of the Cendant Offer. The Board was apprised of the nature of the
litigation commenced by Cendant and others. Members of the Board were also
advised as to their fiduciary duties with respect to the Cendant Offer and the
Proposed AIG Merger as well as the Company's contractual obligations under the
AIG Merger Agreement. The Board determined to meet again on February 5, 1998, at
which time it would consider fully the Cendant Offer and the advice of its legal
and financial advisors.
Thereafter, representatives of Smith Barney Inc., now affiliated with
Salomon Brothers Inc. ("Salomon Smith Barney"), financial advisor to the Company
and Dewey Ballantine LLP and Jorden Burt Berenson & Johnson LLP, counsel to the
Company had periodic discussion with representatives of Goldman, Sachs & Co.,
financial advisor to AIG ("Goldman Sachs") and Sullivan & Cromwell, counsel to
AIG, to discuss AIG's position with respect to the Cendant Offer.
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On January 30, 1998, the Company and AIG filed the Proxy
Statement/Prospectus with the Commission, and on February 2, 1998 copies of the
Proxy Statement/Prospectus were distributed to shareholders of the Company.
On January 30, 1998, the Company and AIG were informed that they had been
granted early termination, effective January 30, 1998, of the waiting period for
approval of the Proposed AIG Merger under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules promulgated thereunder. The
early termination also applies to AIG's option to purchase Shares under the
Stock Option Agreement.
On January 30, 1998, Cendant filed preliminary proxy materials with the SEC
to solicit shareholders of the Company in opposition to the Proposed AIG Merger.
Concurrently, Cendant announced its intention to send proxy materials to
shareholders of the Company promptly after such materials are finalized in
accordance with federal securities laws.
At its meeting on February 5, 1998, the Board of Directors, along with its
legal and financial advisors, fully considered the Cendant Offer, as well as the
fiduciary duties of the Board and its obligations under Florida law to consider
the impact of the Cendant Offer on other constituencies such as policyholders,
accounts and employees, and determined that, in light of all the relevant
circumstances and for the reasons set forth above, it is unable to take a
position with respect to the Cendant Offer and is making no recommendation at
this time with respect to the Cendant Offer.
As described more fully in Item 8 below, at its meeting on February 5,
1998, the Board of Directors also unanimously approved an amendment to the
Rights Agreement providing that the Board of Directors may extend a Distribution
Date (as defined in the Rights Agreement) beyond the dates set forth in the
Rights Agreement, upon approval by a majority of the Continuing Directors (as
defined in the Rights Agreement). Pursuant to the Rights Agreement, as so
amended, the Board of Directors resolved that the Distribution Date shall not
occur until such date as may be determined by action of the Board of Directors
in accordance with the terms of the Rights Agreement, as amended.
In addition to the matters set forth above, at its meeting on February 5,
1998, the Board of Directors of the Company approved the filing of this
Statement as well as a letter to be sent to shareholders (the "Shareholder
Letter") and a press release (the "February 6 Company Press Release"), each
dated February 6, 1998, describing the position of the Board of Directors set
forth herein. Copies of the Shareholder Letter and the February 6 Company Press
Release are filed as Exhibits 9 and 10, respectively, hereto and are
incorporated by reference herein.
On February 5, 1998, the Company issued a press release (the "Earnings
Release") announcing operating results for the year ended December 31, 1997. The
Earnings Release, which includes summarized financial statement tables for the
quarter ended and year ended December 31, 1997, is filed as Exhibit 11 hereto
and is incorporated herein by reference in its entirety.
The Earnings Release sets forth the following information. Net operating
income for the fourth quarter of 1997 was $29.2 million or $.62 per share on a
diluted basis. This compares with net operating income of $25.2 million or $.54
per share for the same period in 1996. Operating results for the fourth quarter
1997 increased $4.0 million or 16% as compared with the same period in 1996. On
a basic earnings per share basis, net operating income for the fourth quarter of
1997 was $.66 per share compared with $.57 per share for the same period of
1996.
Gross collected premiums for the fourth quarter of 1997 increased
approximately 10% from $652.6 million to $720.2 million. Gross collected
premiums for 1997 were $2.740 billion versus $2.493 billion for 1996. This
represents an increase of approximately 10% in 1997 over 1996.
Operating results in the fourth quarter were driven by the growth in net
earned premiums of 10% over the same period in 1996, coupled with consistently
good underwriting results and a favorable operating expense ratio. The ratio of
claims and commission expenses to net earned premiums was 78.7% which continues
to reflect favorable underwriting trends experienced throughout 1997. Operating
expenses in the quarter totaled $74.2 million or 11.2% of gross earned premiums.
This compared with an operating expense ratio of 12.2% for the same period in
1996. The quarter also benefited from a lower effective tax rate of 25.9%
compared with
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31.3% in the same period in 1996. The overall effective tax rate for 1997 was
28% compared with 30.5% for 1996.
Net income for the fourth quarter of 1997 was $30.0 million or $.64 per
share on a diluted basis, compared with $26.2 million or $.56 per share for the
same period in 1996. On a basic earnings per share basis, net income for the
fourth quarter of 1997 was $28.2 million or $.68 per share compared with $24.3
million or $.59 per share for the same period in 1996. Fourth quarter net income
includes realized investment gains, net of tax, of $.8 million or $.02 per share
compared with realized investment gains, net of tax, of $1.0 million or $.02 per
share for the same period in 1996.
Weighted average shares outstanding on a diluted basis for the quarter were
47.1 million compared with a split adjusted figure of 46.7 million for the same
period in 1996. The Company declared a two-for-one Common Stock split in August
1997. As a result of the stock split all common shareholders of record on August
29, 1997 received one additional share for each share they held.
On a diluted basis net operating income increased $18.6 million or 21% in
1997 over 1996. Net operating income for the year ended December 31, 1997 was
$108.3 million or $2.31 per share compared with net operating income of $89.7
million or $2.04 per share in 1996. On a basic earnings per share basis, net
operating income per share for 1997 was $2.44 per share compared with $2.12 per
share for 1996.
Adjusted net income for the year ended December 31, 1997 was $115.1 million
or $2.45 per share on a diluted basis, compared with net income of $94.7 million
or $2.16 per share for 1996.
Stockholders' equity was $698.9 million (excluding $115 million of
preferred stock) and book value per common share was $16.83 at December 31,
1997.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company has retained Broadgate Consultants, Inc. as a public relations
advisor in connection with the Cendant Offer and has retained MacKenzie
Partners, Inc. to assist the Company in communications with shareholders and to
provide other services in connection with the Proposed AIG Merger and the
Cendant Offer. The Company will pay Broadgate Consultants, Inc. and MacKenzie
Partners, Inc. reasonable and customary compensation for their services and will
reimburse MacKenzie Partners, Inc. and Broadgate Consultants, Inc. for their
reasonable out-of-pocket expenses incurred in connection therewith.
The Company retained Salomon Smith Barney to explore and evaluate a
strategic combination with AIG. The Company agreed to pay Salomon Smith Barney:
(i) a retainer fee (the "Retainer Fee") of $100,000, which has been paid; and
(ii) an additional fee of $1,000,000 (an "Opinion Fee"), which becomes payable
upon delivery by Salomon Smith Barney of an Opinion (whether oral or written, as
requested by the Company) to the Board of Directors of the Company as to whether
the consideration to be received by the Company or its shareholders, as the case
may be, in connection with either the transaction contemplated by the AIG Merger
Agreement or the Cendant Offer (each a "Transaction") is fair to the Company or
such shareholders from a financial point of view (provided, however, that the
aggregate Opinion Fees payable shall not exceed $2,000,000) (Salomon Smith
Barney rendered such an Opinion in connection with the approval by the Board of
Directors of the Proposed AIG Merger and has been paid an Opinion Fee by the
Company). In addition, the Company has agreed to pay Salomon Smith Barney a
transaction fee (the "Transaction Fee") of $5.5 million (less the Retainer Fee
and Opinion Fees referred to in (i) and (ii) above), except that in the event a
Transaction involves the purchase of shares of Common Stock, an additional fee
will be payable as follows: (A) if the total consideration per share paid to or
received by the shareholders of the Company is greater than $40.00 but less than
or equal to $58.00, the Company will pay to Salomon Smith Barney an additional
fee in an amount equal to the lesser of (x) $6.6 million and (y) 2% of the
aggregate amount of such consideration paid to all Company shareholders in
excess of $40.00 per share; and (B) if the total consideration per share paid to
or received by the shareholders of the Company is greater than $58.00, the
Company will pay to Salomon Smith Barney an additional fee in an amount equal to
(x) $6.6 million plus (y) 1% of the aggregate amount of such consideration paid
to all Company shareholders in excess of $58.00 per share, provided, however,
that the additional fee payable under this clause (B) shall not exceed $9.5
8
<PAGE> 9
million. The Transaction Fee described in the preceeding sentence becomes
payable upon the consummation of a Transaction. The Company also has agreed to
reimburse Salomon Smith Barney for its out-of-pocket expenses, incurred by
Salomon Smith Barney, including the fees and expenses of its legal counsel,
subject to a cumulative maximum limit of $100,000, and to indemnify Salomon
Smith Barney and related persons against certain liabilities under the federal
securities laws, arising out of Salomon Smith Barney's engagement.
Except as described above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any other person to make
solicitations or recommendations to security holders on its behalf with respect
to the Proposed AIG Merger or the Cendant Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Other than normal periodic purchases made pursuant to the Company's
various employee and director benefit plans and as described below, to the
Company's best knowledge, no transactions in Shares have been effected during
the past 60 days by the Company or, to the best knowledge of the Company, any
executive officer, director, affiliate or subsidiary of the Company. On January
23 and 26, 1998, Messrs. Gaston and Landon, respectively, gave notice to the
Company of their intention to convert $1,737,312.50 aggregate principal amount
and $1,985,500 aggregate principal amount, respectively, of the Company's
convertible debentures due May 24, 1999 held by them (the "Debentures") into
140,000 Shares and 160,000 Shares, respectively. The Debentures were issued to
Messrs. Gaston and Landon pursuant to the Company's 1994 ABIG Key Executive
Debenture Plan. On December 22, 1997, Watsco, Inc., a corporation of which Mr
Albert H. Nahmad, a director of the Company, is President, Chairman of the Board
and Chief Executive Officer, sold 8,000 Shares at a price of $45 3/4 per share,
in open market transactions.
(b) To the best knowledge of the Company, none of the Company's executive
officers, directors, affiliates or subsidiaries intend, with respect to any
Shares held of record or beneficially owned by such persons, to tender any
Shares to Purchaser and Cendant.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except for discussions among the financial advisors and counsel as
described in Item 4 above, no negotiation is being undertaken or is underway by
the Company in response to the Cendant Offer which relates or would result in:
(1) An extraordinary transaction such as a merger or reorganization,
involving the Company or any subsidiary of the Company;
(2) A purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary of the Company;
(3) A tender offer for or other acquisition of securities by or of the
Company; or
(4) Any material change in the present capitalization or dividend
policy of the Company.
(b) Except as set forth herein, the Company has not entered into any
transaction, board resolution, agreement in principle or signed contract in
response to the Cendant Offer which relates to or would result in one or more of
the matters referred to in Item 7(a). However, the Board has determined that
disclosure of the substance of negotiations concerning, or the possible terms
of, or potential parties to any transaction or proposals of the type referred to
in Item 7(a), if any, prior to an agreement in principle with respect thereto
would jeopardize the initiation or continuation of negotiations with respect to
such transactions and has, accordingly, adopted a resolution directing that no
such disclosure with respect to any transaction be made until such agreement in
principle has been reached.
9
<PAGE> 10
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Litigation.
On or about January 27, 1998, Cendant and Purchaser filed an action in the
United States District Court, Southern District of Florida, Miami Division,
alleging various causes of action relating to the Proposed AIG Merger: Cendant
Corporation, et al. v. American Bankers Insurance Group, Inc., et al., Civil
Action No. 98-0159 (the "Cendant Action"). On or about January 27, 1998, a
putative class action was filed in the Circuit Court of the Eleventh Judicial
District in and for Dade County, Florida, on behalf of the Company's
shareholders, alleging causes of action relating to the Proposed AIG Merger:
Goodman v. American Bankers Insurance Group Inc., et al., Case No. 98-01916-CA01
(the "Goodman State Court Action"). On or about January 28, 1998, a putative
class action was filed in the United States District Court in Miami, on behalf
of the Company's shareholders, alleging causes of action relating to the
Proposed AIG Merger: Goodman v. American Bankers Insurance Group Inc., et al.,
Civil Action No. 98-0175 (the "Goodman Federal Court Action"). Also on or about
January 28, 1998, another putative class action was filed in the United States
District Court in Miami, on behalf of the Company's shareholders, alleging
causes of action relating to the Proposed AIG Merger: Lopate, et al. v. Landon,
et al., Civil Action No. 98-0168 (the "Lopate Federal Court Action"). On or
about February 2, 1998, another putative class action was filed in the United
States District
Court in Miami, on behalf of the Company's shareholders, alleging causes of
action relating to the Proposed AIG Merger: Bildstein v. American Bankers
Insurance Group, et al., Civil Action No. 98-0212 (the "Bildstein Federal Court
Action").
The defendants in the Cendant Action are the Company, AIG, AIGF and Gerald
N. Gaston, R. Kirk Landon, Eugene M. Matalene, Jr., Armando Codina, Peter J.
Dolara, James F. Jorden, Bernard P. Knoth, Albert H. Nahmad, Nicholas J. St.
George, Robert C. Strauss, George E. Willamson II, Daryl L. Jones, Nicholas A.
Buoniconti and Jack F. Kemp who are members of the Company's Board of Directors
(collectively the "Individual Defendants"). The defendants in the Goodman State
Court Action and the Goodman Federal Court Action are the Company, AIG, the
Individual Defendants and William H. Allen, Jr., also a director of the Company.
The defendants in the Lopate Federal Court Action are the Company, AIG, AIGF and
the Individual Defendants, except Mr. Kemp. The defendants in the Bildstein
Federal Court Action are the Company, AIG, the Individual Defendants and Mr.
Allen.
Each of the lawsuits identified above allege substantially similar causes
of action: breaches of fiduciary duty against the Individual Defendants for
having agreed to the Proposed AIG Merger, the Stock Option Agreement, the 120
day so-called "No-Shop" provision, the 180 day non-termination provision and the
$66 million termination fee, and for having exempted the Proposed AIG Merger
from the provisions of the Rights Agreement.
The Cendant Action also alleges civil conspiracy to commit a breach of
fiduciary duty against AIG and AIGF and violation of Section 13(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") and the regulations
promulgated thereunder against AIG. Plaintiffs in the Cendant Action allege that
AIG's Schedule 13D filed on January 16, 1998 fails to disclose that Maurice R.
Greenberg, the chairman of AIG, controls AIG. Plaintiffs claim that AIG failed
to disclose that Mr. Greenberg controls approximately 30% of the outstanding
shares of common stock of AIG through his alleged control of Starr International
Company, Inc., C.V. Starr & Co. Inc. and the Starr Foundation, and his alleged
influence over persons who, directly or indirectly, report to him.
On February 2, 1998, plaintiffs in the Cendant Action filed an amended
complaint, additionally claiming that the Proxy Statement/Prospectus is false
and misleading and allegedly violates Sections 14(a) and 14(e) of the Exchange
Act. The Amended Complaint alleges that the Proxy Statement/Prospectus is false
and misleading in that it: (i) claims that AIG has exercised the option
contemplated by the Stock Option Agreement, thereby suggesting that it will
obtain the option shares in three to ten business days, when in fact the option
contemplated by the Stock Option Agreement will not be exercisable until such
time as AIG obtains the requisite regulatory approval, which is not imminent, as
the Proxy Statements/Prospectus suggests; (ii) states that the Company and AIG
expect the Proposed AIG Merger to close in March 1998, when they know that the
likelihood of receiving all required regulatory approval prior to the second
quarter of
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<PAGE> 11
1998 is remote; (iii) claims there are expense savings and synergies to be
obtained as a result of the Proposed AIG Merger without disclosing the plans for
achieving them and that in order to accomplish the cost savings desired by AIG,
it is likely that jobs will be eliminated and employees of the Company will be
terminated, including those based in Florida; (iv) misleadingly misrepresents
the number of shares "contractually committed" to vote in favor of the Proposed
AIG Merger; (v) misleadingly implies that AIG will be able to vote the Shares
covered by the Stock Option Agreement at the special meetings of shareholders at
which voting for the Proposed AIG Merger will be held; (vi) misleadingly fails
to disclose that AIG is controlled by Mr. Greenberg, directly and indirectly,
through his control of Starr International Company, Inc., Starr Foundation and
C.V. Starr & Co. Inc.; and (vii) conceals the purportedly inadequate financial
terms of the Proposed AIG Merger by, among other things, presenting the fairness
opinion of its financial adviser, without revealing whether the opinion was
based on projections that allegedly were revised by decreasing revenue and
income growth from historical levels solely to create the illusion that
economically the Proposed AIG Merger is "fair" and to gain approval for the
Proposed AIG Merger.
The Goodman State Court Action, the Goodman Federal Court Action, the
Lopate Federal Court Action, and the Bildstein Federal Court Action allege
breaches of fiduciary duty similar to those alleged in the Cendant Action, and
the latter three actions include a claim against AIG for violation of Section
13(d) of the Exchange Act and the regulations promulgated thereunder.
Each of the lawsuits, identified above seeks injunctive and declaratory
relief against the actions allegedly taken by the defendants including
corrective disclosure and an injunction against the Proposed AIG Merger as well
as unspecified damages and attorneys' fees.
Amendment to Rights Agreement.
At its meeting on February 5, 1998, the Board of Directors of the Company
unanimously approved Amendment No. 2 to the Rights Agreement ("Amendment No. 2")
which provides that a Distribution Date under the Rights Agreement will be the
Close of Business (as defined in the Rights Agreement) on the day (or such later
date as may be determined by action of the Board of Directors, upon approval by
a majority of the Continuing Directors (as defined in the Rights Agreement))
which is the earlier of (i) the tenth day after the first date of public
announcement by the Company or an Acquiring Person (as defined in the Rights
Agreement) that an Acquiring Person has become such or (ii) the tenth business
day after the date that a tender or exchange offer by any person (other than the
Company and certain exempted persons) is first published or sent or given within
the meaning of Rule 14d-2(a), if upon consummation thereof, such person would
become the beneficial owner of fifteen percent or more of the shares of Common
Stock then outstanding. Amendment No. 2 is filed as Exhibit 13 hereto and is
incorporated by reference herein. Pursuant to the Rights Agreement, as so
amended, the Board of Directors resolved that the Distribution Date shall not
occur until such date as may be determined by action of the Board of Directors
in accordance with the terms of the Rights Agreement, as amended. Therefore, the
Cendant Offer will not at this time cause a Distribution Date to occur, although
the Board may cause a Distribution Date to occur in connection therewith in the
future.
Descriptions of the terms of the Rights Agreement and the FBCA, the
Articles and the Company's By-Laws relating to business combination restrictions
are set forth on pages 72-74 of the Proxy Statement/Prospectus, and such
material on pages 72-74 is incorporated by reference herein in its entirety.
Regulatory Process
The completion of the Proposed AIG Merger and the Cendant Offer are each
contingent upon the receipt of approvals from the insurance regulators in each
domestic and foreign jurisdiction which is a domicile of an insurance company
subsidiary of the Company. On or before January 9, 1998, AIG filed applications
for such approvals in all such jurisdictions. On January 27, 1998, Cendant filed
applications for such approvals. As required by the laws of the respective
domestic jurisdictions, copies of such applications were delivered to the
Company and/or its insurance company subsidiaries; however, the copies of
Cendant's applications provided to the Company were incomplete.
11
<PAGE> 12
Each jurisdiction has a statutory framework pursuant to which consideration
of the applications is conducted. In certain jurisdictions, hearings are
required. In other jurisdictions, hearings may be initiated by the regulator or
at the request of an affected party. On February 2, 1998, Cendant petitioned to
intervene in the consideration of AIG's application in Florida and to have such
consideration consolidated with the consideration of its own application and
petitioned for a hearing on the AIG application as provided for by Florida law.
Cendant asserted that it should be admitted as party to the AIG approval process
as provided by Florida law because its substantial interests as a shareholder
and competing acquiror of the Company will be affected by the AIG application.
Cendant further asserted that the AIG application raises disputed issues of
material fact as to whether AIG's proposed acquisition of a controlling interest
in the Florida domestic insurers should be approved, and that Cendant has a
right to be heard on these issues through participation in the proceedings. The
Florida Insurance Commissioner has not yet acted upon Cendant's petition for a
hearing or request for consolidation. If Cendant's petition is granted, a
hearing will be conducted within 60 days after the date of its petition and the
90 day period within which the Florida Insurance Commissioner is required to act
on AIG's application will be tolled during the pendency of the hearing.
Therefore, if a hearing is held as a result of Cendant's petition, the Proposed
AIG Merger will not be approved (if approved at all) prior to the end of March,
1998.
The Company has requested a hearing in connection with Cendant's
application in Florida. In addition, the Company has sent a letter to the
insurance regulatory authorities of certain other states where Cendant has filed
applications for approval of the Cendant Offer, stating that such document
provided to the Company was not complete, in that it omitted certain exhibits
which are part of the application, and requesting that Cendant be instructed to
provide the portions of the application not included in the initial delivery to
the Company and all additional information filed with such regulatory
authorities in respect of the application.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1.................. Pages 11, 13-14, 17-22 and 22-31 of the Company's
Proxy Statement, dated April 11, 1997, in
connection with the Annual Meeting of Shareholders
of the Company held on May 23, 1997 and pages 35-36
and 55-56 of the Proxy Statement/Prospectus dated
January 30, 1997
Exhibit 2.................. Agreement and Plan of Merger, dated as of December
1, 1997, as amended and restated as of January 7,
1998 and as further amended by Amendment No. 1 on
January 28, 1998, among the Company, AIG and AIGF
(incorporated by reference to Appendix I of the
Proxy Statement/ Prospectus)
Exhibit 3.................. The Proxy Statement/Prospectus (incorporated by
reference to the Proxy Statement/Prospectus on
Schedule 14A filed on January 30, 1998) (0-9633)
Exhibit 4.................. Stock Option Agreement, dated as of December 21,
1997, between the Company and AIG (incorporated by
reference to Appendix II of the Proxy
Statement/Prospectus)
Exhibit 5.................. Voting Agreement, dated as of December 21, 1997,
between AIG, and Gerald N. Gaston, R. Kirk Landon,
R. Kirk/B. Landon Foundation, R. Kirk Landon
Revocable Trust, and Landon Corporation
(incorporated by reference to Appendix III of the
Proxy Statement/Prospectus)
Exhibit 6.................. Letter, dated January 27, 1998, from Cendant to the
Board of Directors of the Company
Exhibit 7.................. Press Release, dated January 27, 1998, of the
Company
12
<PAGE> 13
Exhibit 8.................. Letter, dated January 27, 1998, from AIG to the
Company, exercising the option to purchase
8,265,626 shares of Common Stock pursuant to the
Stock Option Agreement
Exhibit 9.................. Letter, dated February 6, 1998, from the Company to
holders of Common Stock*
Exhibit 10................. Press Release, dated February 6, 1998, of the
Company
Exhibit 11................. Earnings Press Release dated February 5, 1998, of
the Company
Exhibit 12................. Amended Complaint filed in Cendant Corporation, et
al. v. American Bankers Insurance Group, Inc., et
al., Civil Action No. 98-0159 (Moore)
Complaint filed in Goodman v. American Bankers
Insurance Group Inc., et al., Case No.
98-01915-0801
Complaint filed in Goodman v. American Bankers
Insurance Group Inc., et al., Civil Action No.
98-0175 (Moreno)
Complaint filed in Lopate, et al. v. Landon, et
al., Civil Action No. 98-0168 (Moreno)
Complaint filed in Bildstein v. American Bankers
Insurance Group, Inc. et al., Civil Action No.
98-0212 (Brown)
Exhibit 13................. Amendment No. 2, dated as of February 5, 1998, to
the Rights Agreement, dated as of February 24,
1988, as amended and restated as of November 14,
1990 and as further amended on December 19, 1997,
between the Company and ChaseMellon Shareholder
Services, L.L.C. as successor Rights Agent
Exhibit 14................. Form of Executive Compensation Agreement
(incorporated by reference to Exhibit 10(a) of the
Company's Annual Report on Form 10-K for the year
ended December 31, 1996)
Exhibit 15................. Form of Executive Severance Benefits Agreement
(incorporated by reference to Exhibit 10(c) of the
Company's Annual Report on Form 10-K for the year
ended December 31, 1996)
Exhibit 16................. 1991 Stock Incentive Compensation Plan, as amended
February 18, 1994 (incorporated by reference to
Exhibit 10(j) of the Company's Annual Report on
Form 10-K for the year ended December 31, 1996)
Exhibit 17................. 1991 Stock Option/Restricted Stock Award Plan, as
amended February 18, 1994 (incorporated by
reference to Exhibit 10(k) of the Company's Annual
Report on Form 10-K for the year ended December 31,
1996)
Exhibit 18................. 1994 Non-Employee Directors' Stock Option Plan
(incorporated by reference to Exhibit 10(p) of the
Company's Annual Report on Form 10-K for the year
ended December 31, 1996)
Exhibit 19................. 1997 Equity Incentive Plan (incorporated by
reference to Exhibit B of the Company's Proxy
Statement on Schedule 14A filed on April 11, 1997)
- ---------------
* Included in copies mailed to shareholders of the Company.
13
<PAGE> 14
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
AMERICAN BANKERS INSURANCE GROUP, INC.
By: /s/ GERALD N. GASTON
---------------------------------------
Name: Gerald N. Gaston
Title: Chief Executive Officer,
President and Vice Chairman
Date: February 6, 1998
14
<PAGE> 15
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
Exhibit 1.................. Pages 11, 13-14, 17-22 and 22-31 of the Company's
Proxy Statement, dated April 11, 1997, in
connection with the Annual Meeting of Shareholders
of the Company held on May 23, 1997 and pages 35-36
and 55-56 of the Proxy Statement/Prospectus dated
January 30, 1997
Exhibit 2.................. Agreement and Plan of Merger, dated as of December
1, 1997, as amended and restated as of January 7,
1998 and as further amended by Amendment No. 1 on
January 28, 1998, among the Company, AIG and AIGF
(incorporated by reference to Appendix I of the
Proxy Statement/ Prospectus)
Exhibit 3.................. The Proxy Statement/Prospectus (incorporated by
reference to the Proxy Statement/Prospectus on
Schedule 14A filed on January 30, 1998) (0-9633)
Exhibit 4.................. Stock Option Agreement, dated as of December 21,
1997, between the Company and AIG (incorporated by
reference to Appendix II of the Proxy
Statement/Prospectus)
Exhibit 5.................. Voting Agreement, dated as of December 21, 1997,
between AIG, and Gerald N. Gaston, R. Kirk Landon,
R. Kirk/B. Landon Foundation, R. Kirk Landon
Revocable Trust, and Landon Corporation
(incorporated by reference to Appendix III of the
Proxy Statement/Prospectus)
Exhibit 6.................. Letter, dated January 27, 1998, from Cendant to the
Board of Directors of the Company
Exhibit 7.................. Press Release, dated January 27, 1998, of the
Company
Exhibit 8.................. Letter, dated January 27, 1998, from AIG to the
Company, exercising the option to purchase
8,265,626 shares of Common Stock pursuant to the
Stock Option Agreement
Exhibit 9.................. Letter, dated February 6, 1998, from the Company to
holders of Common Stock*
Exhibit 10................. Press Release, dated February 6, 1998, of the
Company
Exhibit 11................. Earnings Press Release dated February 5, 1998, of
the Company
Exhibit 12................. Amended Complaint filed in Cendant Corporation, et
al. v. American Bankers Insurance Group, Inc., et
al., Civil Action No. 98-0159 (Moore)
Complaint filed in Goodman v. American Bankers
Insurance Group Inc., et al., Case No.
98-01915-0801
Complaint filed in Goodman v. American Bankers
Insurance Group Inc., et al., Civil Action No.
98-0175 (Moreno)
Complaint filed in Lopate, et al. v. Landon, et
al., Civil Action No. 98-0168 (Moreno)
Complaint filed in Bildstein v. American Bankers
Insurance Group, Inc. et al., Civil Action No.
98-0212 (Brown)
<PAGE> 16
EXHIBIT NO. DESCRIPTION
Exhibit 13................. Amendment No. 2, dated as of February 5, 1998, to
the Rights Agreement, dated as of February 24,
1988, as amended and restated as of November 14,
1990 and as further amended on December 19, 1997,
between the Company and ChaseMellon Shareholder
Services, L.L.C. as successor Rights Agent
Exhibit 14................. Form of Executive Compensation Agreement
(incorporated by reference to Exhibit 10(a) of the
Company's Annual Report on Form 10-K for the year
ended December 31, 1996)
Exhibit 15................. Form of Executive Severance Benefits Agreement
(incorporated by reference to Exhibit 10(c) of the
Company's Annual Report on Form 10-K for the year
ended December 31, 1996)
Exhibit 16................. 1991 Stock Incentive Compensation Plan, as amended
February 18, 1994 (incorporated by reference to
Exhibit 10(j) of the Company's Annual Report on
Form 10-K for the year ended December 31, 1996)
Exhibit 17................. 1991 Stock Option/Restricted Stock Award Plan, as
amended February 18, 1994 (incorporated by
reference to Exhibit 10(k) of the Company's Annual
Report on Form 10-K for the year ended December 31,
1996)
Exhibit 18................. 1994 Non-Employee Directors' Stock Option Plan
(incorporated by reference to Exhibit 10(p) of the
Company's Annual Report on Form 10-K for the year
ended December 31, 1996)
Exhibit 19................. 1997 Equity Incentive Plan (incorporated by
reference to Exhibit 8 of the Company's Proxy
Statement on Schedule 14A filed on April 11, 1997)
- ---------------
* Included in copies mailed to shareholders of the Company.
<PAGE> 1
page 11 Exhibit 1
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Jorden Burt Berenson & Johnson LLP, of which Mr. Jorden is a Senior Managing
Partner, serves as general counsel for the Company and its subsidiaries. In
1996, the firm received approximately $3,785,400 for legal services rendered
and costs incurred in that capacity.
Mr. St. George is President, Chief Executive Officer and Director of Oakwood
Homes Corporation. ABLAC has reinsurance agreements with an affiliate of
Oakwood Homes Corporation. In 1996, ABLAC ceded premium of $4,541,367 to
Oakwood Life Insurance Company, LTD. under these reinsurance contracts.
Mr. Williamson is President of Williamson Cadillac Company, Williamson Saturn
Inc. and WWW Enterprises (automobile dealerships). In 1996, Mr. Williamson's
automobile dealerships sold ABLAC Credit Life, Health and Disability policies.
Total net written premium by these dealerships was $192,784 in 1996.
The Company believes these transactions were made on terms no less favorable
than that which could have been received by unaffiliated third parties.
<PAGE> 2
page 13-14
DIRECTORS' COMPENSATION
ANNUAL AND MEETING FEES
Directors who are not officers or employees of the Company are paid a quarterly
fee of $5,000 ($5,500, if chairman of a committee of the ABIG Board or chairman
of the Boards of any subsidiary of the Company). Mr. Landon and Mr. Gaston,
received no additional fees for their directorships. Directors who are not
officers or employees of the Company are also paid a fee of $750 for each
meeting of the Board of Directors or its committees which they attend and $375
for each meeting attended telephonically, but only one attendance fee is paid
for attendance at meetings held on a single day. Directors who reside outside
Miami are also reimbursed for transportation and other travel expenses. The
Company's By-laws provide for indemnification of directors to the fullest extent
permitted under Florida Statutes.
DIRECTORS' DEFERRED COMPENSATION PLAN
2
<PAGE> 3
The Company's Directors' Deferred Compensation Plan (the "Deferred Plan") was
adopted by the Board of Directors of the Company in October 1980 and amended and
restated in February 1994, subject to shareholder approval which was obtained on
May 25, 1994. Under the Deferred Plan, directors may elect to defer the receipt
of their compensation in cash or in stock equivalents. Upon termination from the
Board of Directors, the Director will receive, as elected, either cash or actual
shares of the Company's Common Stock for fees deferred as stock equivalents.
Directors who elect to defer fees must make an election in writing prior to an
annual meeting of the shareholders. All fees earned during each director's term
shall be deferred until retirement, resignation or death. The deferral may be
revoked with respect to future payments or the form of future payments to be
deferred may be changed upon written notice delivered to the Company prior to an
annual meeting of the shareholders. The revocation or change will be effective
six months following receipt of the notice. For the year ended December 31,
1996, ten members of the Company's Board elected to defer their compensation
under the plan. Under the Deferred Plan 100,000 shares of the Company's
authorized but previously unissued Common Stock have been reserved. At this
year's Meeting, a proposal to amend the Deferred Plan to increase the number of
shares of Common Stock reserved for issuance from 100,000 to 200,000 will be
presented to the shareholders. If approved, the amendment will immediately go
into effect.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
On May 25, 1994, shareholders approved the adoption of the 1994 Non-Employee
Directors' Stock Option Plan ("Non-Employee Directors' Plan"). Under the terms
of the plan, each non-employee director will receive 1,000 options at the annual
Board of Directors meeting exercisable at prices equivalent to the fair market
value of the Company's Common Stock on the date of grant. Options granted are
not exercisable before the six-month anniversary nor after the fifth anniversary
from the date of the grant. When adopted, there were 50,000 shares authorized
and currently options for 39,000 shares have been issued. At this year's
Meeting, a proposal to adopt the American Bankers Insurance Group, Inc. 1997
Equity Incentive Plan will be presented to shareholders. This plan includes
provisions under which each non-employee director will receive options on
substantially the same terms as the Non-Employees Directors' Plan, except that
the options will not be exercisable before the one year anniversary from the
date of grant. If the proposed plan is approved, the Company shall cease making
grants under the Non-Employee Directors' Plan.
3
<PAGE> 4
page 17-22
APPROVAL OF AMERICAN BANKERS INSURANCE GROUP, INC. 1997 EQUITY INCENTIVE PLAN
The American Bankers Insurance Group, Inc. 1997 Equity Incentive Plan (the
"Plan") was approved by the Board of Directors of the Company on February 19,
1997. The Board of Directors has determined that a new stock incentive plan is
needed to promote the interests of the Company and its shareholders by providing
the Company's directors, officers and employees with an incentive to undertake
and continue service with the Company and its subsidiaries. Pursuant to the
Plan, the Company proposes to grant to selected officers and employees of the
Company and its subsidiaries stock options, stock appreciation rights,
restricted stock awards, merit awards, performance share awards and cash awards
("Awards"). In addition, under the Plan, the Company will grant to each current
member of its Board of Directors who is not an officer or employee of the
Company ("Outside Director") an option to purchase 1000 shares of Common Stock
on the date of each annual meeting of the Board. Except for performance share
awards, there are approximately 260 full-time employees and Outside Directors
who the Compensation and
4
<PAGE> 5
Nominating Committee intends to consider as eligible to receive Awards. For
performance share awards, the Compensation and Nominating Committee intends that
all current full-time employees are eligible. At this time, there are
approximately 2,860 full-time employees. The Plan will be effective and
implemented only after approval of the Company's shareholders at the Meeting. If
approved by the shareholders, no further grants will be made under the 1991
Stock Incentive Compensation Plan, 1994 Senior Management Stock Option Plan and
1994 Non-Employee Directors' Stock Option Plan.
The principal provisions of the Plan are summarized below. This summary,
however, does not purport to be complete and is qualified in its entirety by
reference to the provisions of the Plan. A copy of the Plan is set forth as
Exhibit B. Capitalized terms used without definition in this summary have the
meanings specified under the Plan.
SHARES AVAILABLE FOR ISSUANCE
Under the Plan, 2,000,000 shares of the Company Common Stock will be available
for grants of Awards. Of this amount, only 700,000 shares in the aggregate are
authorized for the issuance of restricted stock and merit awards and only
200,000 shares in the aggregate are authorized for the issuance of performance
share awards under the Plan. In general, if any Award under the Plan expires or
terminates without having been fully exercised, or if any Award shall be
forfeited, the shares subject to the unexercised or forfeited portion of such
Award will become available for grants of new Awards under the Plan. In
addition, if there is a change in capitalization of the Company the number of
shares available for grants and the shares subject to outstanding Awards will be
adjusted accordingly.
PLAN ADMINISTRATION
The Plan will be administered by the Compensation and Nominating Committee of
the Board of Directors (the "Committee"). The Board and the Committee will have
the authority to amend the Plan as it deems advisable; subject to any regulatory
or shareholder approval required by law. The Committee may, subject to any
regulatory or shareholder approval required by law, at any time modify or amend
the terms of an outstanding Award so long as the rights of any holder of an
outstanding Award are not adversely affected or no law is violated.
Except with respect to Awards made to Outside Directors and subject to the terms
of the Plan, the Committee will select the individuals to whom Awards will be
granted, determine the number of shares subject to each Award, prescribe the
terms and conditions of each Award granted under the Plan, and make any other
determination necessary or advisable for administration of the Plan.
STOCK OPTIONS
Employee Stock Options
5
<PAGE> 6
Options may be granted by the Committee as incentive stock options ("ISOs")
intended to qualify for favorable tax treatment under the Federal tax law or as
nonqualified stock options ("NQSOs"). The options may, in the Committee's
discretion, be made transferable.
The Plan requires that the exercise price of all options be equal to or greater
than the fair market value of Common Stock on the date of grant of that option.
The term of any ISO cannot exceed ten years from the date of grant, and the term
of any NQSO cannot exceed ten years and one month from the date of grant.
Subject to the terms of the Plan and any additional restrictions imposed at the
time of grant, options ordinarily will become exercisable, at least in part,
commencing one year after the date of grant.
Outside Directors Stock Options
Under the Plan, each Outside Director will receive options to purchase 1,000
shares of Common Stock on the date of each annual meeting of the Board. The
exercise price of the Outside Directors' options will be equal to the last trade
price of the Common Stock on the date of grant. The options will expire on the
fifth anniversary of their grant.
General Terms
Options will become exercisable in whole or in part on such date as the
Committee determines, but in no event prior to the first anniversary of their
grant. No exercise of options may be for fewer than 50 shares (or the total
remaining shares covered by the option if fewer than 50 shares).
Subject to such rules as the Committee may impose, the exercise price of an
option may be paid in cash, in shares of Common Stock owned by the optionee for
at least six months and not used in a stock option exercise during the preceding
six months, with a combination of cash and shares, or by effecting a "cashless
exercise" with a broker, or with such other consideration as shall be approved
by the Committee (including with respect to an employee stock option, if
permitted by the Committee, the equivalent cash dividend paid upon each share of
Common Stock by the Company during the period between the grant of the option
and its exercise to the extent of the number of shares for which the option was
exercised).
The options of an employee or Outside Director who dies or becomes disabled
during the term of the options will continue to be exercisable up to six months
after the death or disability or up to the expiration of the options, whichever
occurs earlier. The options of an employee or Outside Director who leaves the
Company other than as a result of death or disability will terminate
automatically upon termination of
6
<PAGE> 7
employment.
STOCK APPRECIATION RIGHTS
The Committee may grant stock appreciation rights ("SARs"), in tandem with any
options granted under the Plan or may solely grant SARs. An SAR granted in
tandem with an option may be exercised only when the underlying option is
exercisable. An SAR permits the holder to receive (in shares of Common Stock,
cash, or a combination thereof) an aggregate value equal to the excess of the
fair market value of one share of Common Stock over the exercise price specified
in the SAR multiplied by the number of shares covered by such option or portion
thereof which is to be exercised.
The Plan requires that the exercise price of all SARs be equal or greater than
the fair market value of the Common Stock on the date of grant of the SARs. For
SARs granted in tandem with options, the exercise price shall be that of the
related option. SARs will become exercisable on such date as the Committee
determines, but in no case earlier than the first anniversary of their grant.
RESTRICTED STOCK AND MERIT AWARDS TO EMPLOYEES
The Committee may grant shares of Common Stock to participants in such amounts,
and subject to such restrictions and additional terms and conditions, if any, as
the Committee in its sole discretion shall determine consistent with the
provisions of the Plan ("Restricted Stock"). The Committee may also grant from
time to time shares of Common Stock to selected Plan participants free of
restrictions ("Merit Awards") in such amounts as the Committee in its sole
discretion shall determine consistent with the provisions of the Plan. As a
condition to any award of Restricted Stock or Merit Award, the Committee may
require a participant to pay an amount equal to, or in excess of, the par value
of the shares of Restricted Stock or Common Stock awarded to him or her.
Unless otherwise directed by the Committee, Restricted Stock may not be sold,
assigned, transferred, pledged or otherwise encumbered during a "Restricted
Period", which in the case of grants to employees shall not be less than one
year from the date of grant. The Restricted Period with respect to any
outstanding shares of Restricted Stock awarded to employees may be reduced by
the Committee at any time. Except for such restrictions, the employee as the
owner of such stock shall have all the rights of a shareholder including, but
not limited to, the right to vote such stock and to receive dividends thereon as
and when paid.
In the event that an employee's employment is terminated for any reason, an
employee's Restricted Stock will be forfeited; provided, however, that the
Committee may limit such forfeiture in its sole discretion. At the end of the
Restricted Period all shares of Restricted Stock shall be transferred free and
clear of all restrictions to the employee. Employees may be offered the
opportunity to defer receipt of their shares of Restricted Stock and may be
granted a bonus for such deferral.
7
<PAGE> 8
PERFORMANCE SHARE AWARDS
The Committee may make, in its sole discretion and subject to the terms and
conditions it may determine in accordance with the Plan, awards of Common Stock
or Restricted Stock which shall be earned on the basis of the Company's
performance in relation to established performance measures for a specific
performance period ("Performance Shares"). Such measures may include, but shall
not be limited to, return on investment, earnings per share, return on
shareholders' equity, or return to shareholders. Unless otherwise determined by
the Committee, Performance Shares may not be sold, assigned, transferred,
pledged, or otherwise encumbered during the relevant performance period. The
amount of any Performance Share award in the aggregate during the term of the
Plan to an individual shall not exceed 100,000 shares of Common Stock.
Performance Shares may be paid in cash, shares of Common Stock or shares of
Restricted Stock in such proportion as the Committee may determine. An employee
must be employed at the end of the performance period to receive payment of
Performance Shares; provided, however, that in the event an employee's
employment is terminated by reason of death, disability, retirement or other
reason approved by the Committee, the Committee may limit such forfeiture in its
sole discretion. Employees may be offered the opportunity to defer receipt of
payment of earned Performance Shares and may be granted a bonus for such
deferral.
CASH AWARDS
The Committee may, on such terms as it determines in its sole discretion, make
grants of cash or loans in order to help defray in whole or in part the economic
cost (including tax cost) of an Award ("Cash Awards"). The Cash Award may be
granted at the time of grant of any award or upon exercise of any Award.
CHANGE OF CONTROL
In the case of the sale or other disposition of assets by the Company which
results in the termination of an employee's employment or for a "change in
control" of the Company (as defined in the Plan), Awards granted pursuant to the
Plan, may become fully exercisable in the discretion of the Committee or as may
otherwise be provided in the recipient's Award agreement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following brief description of the tax consequences of awards under the Plan
is based on Federal tax laws currently in effect and does not purport to be a
complete description of such Federal tax consequences.
8
<PAGE> 9
Options
There are no Federal tax consequences either to the optionee or to the Company
upon the grant of an ISO or a NQSO. On the exercise of an ISO, the optionee will
not recognize any income and the Company will not be entitled to a deduction,
although such exercise may give rise to alternative minimum tax liability for
the optionee. Generally, if the optionee disposes of shares acquired upon
exercise of an ISO within two years of the date of grant or one year of the date
of exercise, the optionee will recognize ordinary income, and the Company will
be entitled to a deduction, equal to the excess of the fair market value of the
shares on the date of exercise over the option price (limited generally to the
gain on the sale). Upon the ultimate sale of the shares, the balance of any gain
or loss will be treated as a capital gain or loss to the optionee. If the shares
are disposed of after the foregoing holding requirements are met, the Company
will not be entitled to any deduction, and the entire gain or loss for the
optionee will be treated as a capital gain or loss.
On exercise of a NQSO, the excess of the date-of-exercise fair market value of
the shares acquired over the option price will generally be taxable to the
optionee as ordinary income and deductible by the Company. The disposition of
shares acquired upon exercise of a NQSO will generally result in a capital gain
or loss for the optionee depending on the cost and holding period of such
shares, but will have no tax consequences for the Company.
Stock Appreciation Rights
The amount of any cash (or the fair market value of any Common Stock) received
by the holder of an option upon the exercise of SARs under the Plan will be
subject to ordinary income tax in the year of receipt and generally the Company
will be entitled to a deduction for such amount.
Restricted Stock Awards
An employee who has been awarded Restricted Stock will not recognize taxable
income at the time of the award unless he or she elects otherwise. At the time
any restrictions applicable to the Restricted Stock award lapse, the recipient
will recognize ordinary income and generally the Company will be entitled to a
corresponding deduction equal to the excess of the fair market value of such
stock at such time over the amount paid therefore. Dividends paid to the
recipient on the Restricted Stock during the Restricted Period will be ordinary
compensation income to the recipient and deductible as such by the Company.
Merit Awards
A grant of Common Stock pursuant to a Merit Award will result in income
9
<PAGE> 10
for the employee, and a generally a tax deduction for the Company, equal
generally to the fair market value of such shares less any amount paid for them.
Performance Share Awards
An employee who has been awarded Performance Shares will not recognize taxable
income, and the Company will not be entitled to a deduction, at the time of the
award. At the time the employee is entitled to the Performance Shares, the
employee will recognize ordinary income equal to the sum of the cash and the
fair market value of the shares of Common Stock at such time, and generally the
Company will be entitled to a corresponding deduction. To the extent Performance
Shares are paid in shares of Restricted Stock, the Federal income tax
consequences described above applicable to Restricted Stock will apply.
Cash Awards
An employee who has been awarded cash under Cash Awards will recognize taxable
income, and the Company will generally be entitled to a deduction, at the time
of payment of the award. An employee who receives a bona fide loan under Cash
Awards will not recognize taxable income on the amounts distributed under the
loan. The Company will not be entitled to a deduction and will be taxed on the
interest payments.
PLAN BENEFITS
AMERICAN BANKERS INSURANCE GROUP, INC. 1997 EQUITY INCENTIVE PLAN
The Committee has made no determinations with respect to grants of stock
options, SARs, Restricted Stock, Merit Awards or Performance Shares to officers
and employees under the Plan. If the Plan is approved by the shareholders, the
Outside Directors will be granted options at the annual meeting of the Directors
which follows the Meeting. Accordingly, the benefits to the Outside Directors
are as follows:
NUMBER OF
OPTIONS
NAME AND POSITION GRANTS (1)
----------------- ----------
All Current Outside Directors 13,000
(1) The value of option grants cannot be determined at this time
On March 7, 1997, the last trade price of Common Stock on Nasdaq Stock Market's
National Market was $58.50 per share.
RECOMMENDATION
The Board of Directors of the Company is of the opinion that approval
10
<PAGE> 11
of the adoption of the American Bankers Insurance Group, Inc. 1997 Equity
Incentive Plan is in the best interests of the Company and its shareholders, and
accordingly, the Board of Directors recommends that the shareholders vote FOR
the American Bankers Insurance Group, Inc. 1997 Equity Incentive Plan. The
affirmative vote of a majority of the shares of the Company's Common Stock
represented in person or by proxy and entitled to vote at the Meeting will be
required to approve the adoption of the American Bankers Insurance Group, Inc.
1997 Equity Incentive Plan.
page 22-31
COMPENSATION OF EXECUTIVE OFFICERS
REPORT OF THE COMPENSATION AND NOMINATING COMMITTEE OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION
The Compensation and Nominating Committee of the Board of Directors (the
"Committee") is responsible for establishing the various compensation programs
for the executive officers. In addition, the Committee assists the Chairman of
the Board and the Chief Executive Officer in the development of a management
succession plan and reviews the qualifications of candidates for corporate
officership and recommends the officers for approval by the Board of Directors.
COMPENSATION POLICIES
In developing compensation plans and setting compensation levels, the Committee
reviewed a diverse group of insurance company salaries. The Committee also
reviewed the same diverse group with respect to stock options and long term
incentive plans.
EXECUTIVE OFFICER COMPENSATION
The Company's compensation program for executive officers consists of three key
elements: a base salary, an annual bonus, and long-term incentives. The
Committee believes that this approach best serves the interests of shareholders
by ensuring that executive officers are compensated in a manner that advances
both short-and long-term interests of shareholders.
Base Salary. Base salaries of individual executive officers are reviewed by the
Committee annually. In determining adjustments to base salary for a particular
year, the Committee relies on reports from consultants and reports from the
Company's Human Resources Department. Salaries for all officers, with the
exception of the Chief Executive Officer, are based upon recommendations made by
the officers' superiors taking into account the superiors' subjective assessment
of the nature of the position, and the contribution, experience and Company
tenure of
11
<PAGE> 12
the executive officer. The Chief Executive Officer reviews all salary
recommendations with the Committee, which is responsible for approving or
disapproving those recommendations.
Annual Bonus. Executive officers and other senior officers participate in the
Management Incentive Plan ("MIP"). The Committee chooses those officers who will
participate in the MIP, acting upon the advice of the Chief Executive Officer.
Each participant's MIP is based on individual performance objectives, which may
include profits, premiums, and other individual performance measures. The
performance objectives have different weights, but in general, at least 40% of
each participant's bonus must be based on the Company's profit objective. A
target bonus percentage is established for each participant. For executive
officers this percentage ranges from 30% to 100% of base salary. A participant
can earn up to 200% of this target bonus percentage based on their actual
performance on each category in their MIP. For each category three performance
levels are determined in advance. The minimum is the minimum level of acceptable
performance, where 0% of the target bonus percentage would be earned. The target
is the planned performance level, where 100% of the target bonus percentage
would be earned. The maximum is the most optimistic level of performance that
has only a slight probability of being achieved, where 200% of the target bonus
percentage would be earned. The actual performance is compared to the
established objectives and the award for each item measured.
Long-term Incentives. Long-term incentives include stock option grants and
convertible debentures. A stock option permits the holder to buy Company stock
at a specific price during a specific time period. As the price of Company stock
rises, the option increases in value. The number of options granted to any one
employee is based on a formula which is tied to the executive officer's base
salary. However, other subjective factors are taken into consideration such as:
the executive's level of responsibility, experience and long-term expected
contribution to the Company. During 1996, the Company granted stock options to
executive officers under the 1994 Senior Management Stock Option Plan.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Gaston was promoted to CEO, effective January 1, 1996. On February 5, 1996,
commensurate with his increase in responsibilities, his salary was increased to
$525,000. The Committee, in determining CEO base pay, reviewed a number of
Executive Compensation analyses for insurance companies with comparable premium
income. Median income for CEO's of insurance companies with comparable premium
income, ranged between $600,000 to $745,000. Effective May 22, 1996, Mr. Gaston
received a raise of 14.29% increasing his base pay to $600,000. His May 1996
increase was based on factors including the compensation analyses discussed
above, increased earnings per share and stock price
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<PAGE> 13
performance.
Mr. Gaston's MIP award for 1996 is expected to be $919,100, to be paid on the
date of the Meeting. Fifty percent of his award was directly related to 1996
actual profits which exceeded the plan objective by 19.5%. Other categories used
to determine Mr. Gaston's award included the gross written premium for the
Company, stock price performance, completion of corporate projects, completion
of building expansion and quality improvements having relative weights of 17%,
11%, 10%, 8% and 4%, respectively. Corporate projects involve criteria that are
confidential and disclosure of such criteria would have an adverse effect on the
Company.
Mr. Gaston did not receive any option grants under the 1994 Senior Management
Stock Option Plan. With respect to the Company's long-term incentive plans, he
currently owns 33,000 of restricted shares issued under the 1991 Stock
Option/Restricted Stock Award Plan and a debenture due May 24, 1999 convertible
into 70,000 shares of stock issued under the 1994 Key Executive Debenture Plan.
The restricted shares were scheduled to begin vesting in 1996. During 1995, this
plan was amended to allow the Company to grant recipients the option to extend
the original vesting period for one, two, or three years. Mr. Gaston elected to
defer vesting for an additional one year period that will expire during 1997.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, generally disallows a tax deduction
to public companies for compensation over $1 million paid to the corporation's
Chief Executive Officer and four other most highly compensated executive
officers. Qualifying performance-based compensation will not be subject to the
deduction limit if certain requirements are met. The Compensation and Nominating
Committee reviews the compensation of its executive officers (which currently
consists of the Management Incentive Plan and the stock option plans described
above). At this time, this is a limited issue for the Company and the
Compensation and Nominating Committee believes that the financial impact of any
loss of deduction to the Company is immaterial. The Compensation and Nominating
Committee monitors the executives' compensation and the related deduction under
Section 162(m).
CONCLUSION
The Compensation and Nominating Committee has the responsibility for ensuring
that the Company's compensation program continues to be in the best interests of
its shareholders. The Committee consists entirely of non-employee directors. The
Committee's objective is to assist the Company, through a sound and reasonable
structured compensation program, in the recruitment, retention and motivation of
talented managers capable of contributing significantly to the Company's
increased profitability and to the creation, over time, of enhanced shareholder
value. The Committee administers the program, which
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<PAGE> 14
encompasses base pay and long and short-term incentive plans and reviews the
general compensation philosophy of the Company, as well as, the specific
elements of the compensation program. The advice of qualified outside advisors
and independent compensation experts is obtained to assist the Compensation and
Nominating Committee in establishing and evaluating compensation policies,
especially in relation to other comparable companies. Finally, the Compensation
and Nominating Committee also reviews the results of the Company's compensation
programs to determine if such programs are performing appropriately and
achieving the desired results.
Armando M. Codina, Chairman
Nicholas A. Buoniconti
Peter J. Dolara
Malcolm G. MacNeill
George E. Williamson II
COMPENSATION AND NOMINATING COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Present members of the Compensation and Nominating Committee are Messrs. Armando
M. Codina (Chairman), Nicholas A. Buoniconti, Peter J. Dolara and Malcolm G.
MacNeill. Mr. Dolara succeeded Mr. Williamson in October 1996.
Mr. Williamson is President of Williamson Cadillac Company, Williamson Saturn
Inc. and WWW Enterprises (automobile dealerships). In 1996, Mr. Williamson's
automotive sold ABLAC Credit Life, Health and Disability Policies. Total net
written premium by these dealerships was $192,784 in 1996.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The Summary Compensation Table below indicates the cash compensation paid by the
Company and its subsidiaries as well as certain other compensation paid or
accrued to the Chief Executive Officer and the four other highest paid executive
officers, for services rendered in all capacities during the fiscal years ended
December 31, 1996, 1995 and 1994, respectively.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
------------------------------------------
OTHER
14
<PAGE> 15
ANNUAL
COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) ($)(2)
- --------------------------- ---- --------- ----------- ------------
R Kirk Landon 1996 544,135 454,600 --
Chairman and
Chief International 1995 482,992 437,000 --
Marketing Officer ABIG 1994 451,652 241,000 --
Gerald N Gaston 1996 560,481 919,100 --
President, Vice Chairman and 1995 428,230 405,600 --
Chief Executive Officer ABIG 1994 390,063 233,200 --
Eugene E Becker 1996 253,423 229,900 --
Executive Vice President and 1995 230,973 171,600 --
Chief Marketing Officer of 1994 217,296 122,500 --
ABIG
Jay R Fuchs 1996 194,329 159,200 --
President of ABLAC and 1995 178,310 125,800 --
ABIC 1994 169,369 84,300 --
Jason J Israel 1996 175,138 129,300 --
Executive Vice President of 1995 136,436 76,600 --
Administration 1994 128,310 65,400 --
(TABLE CONTINUED)
LONG TERM COMPENSATION
-----------------------------------
AWARDS
---------------------
RESTRICTED
STOCK OPTIONS/ ALL OTHER
AWARDS SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(3)(4) (#)(3) ($)(5)
- --------------------------- ---- ---------- -------- ------------
R Kirk Landon 1996 -- -- 21,728
Chairman and
Chief International 1995 -- -- 18,954
Marketing Officer ABIG 1994 -- -- 13,126
Gerald N Gaston 1996 -- -- 21,728
President, Vice Chairman and 1995 -- -- 18,954
Chief Executive Officer ABIG 1994 -- -- 13,126
Eugene E Becker 1996 123,000 4,500 21,728
Executive Vice President and 1995 84,700 4,200 18,954
Chief Marketing Officer of 1994 61,950 4,200 13,126
ABIG
Jay R Fuchs 1996 90,200 3,300 21,728
President of ABLAC and 1995 66,550 3,300 18,954
ADIC 1994 48,675 3,300 13,126
Jason J Israel 1996 82,000 3,000 21,319
Executive Vice President of 1995 42,350 2,100 17,238
Administration 1994 30,975 2,100 10,608
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<PAGE> 16
(1) Estimated. Bonuses earned during a fiscal year are not paid until May of the
following fiscal year.
(2) Officers also receive certain perquisites and personal benefits; however,
such items do not exceed the lesser of $50,000 or 10% of such Officer's salary
and bonus and, therefore, are not required to be reported.
(3) Officers received Restricted Stock under the 1994 Senior Management Stock
Option Plan ("Senior Plan"). The 1994 Senior Plan provides that upon the
exercise of an option for a "Primary Share," the grantee will receive two
additional shares of "Restricted Shares," and the Restricted Shares vest three
years from the date of exercise. Holders of Restricted Shares are entitled to
receive dividends equal to those granted to the holders of the Company's Common
Stock generally, and are entitled to vote such shares. The exercise price for
the Primary Shares was $41.00. For specific terms of this plan, see the plan
description on pages 25 and 26.
(4) At December 31, 1996, Restricted Shares of Common Stock held by the
executive officers named in the table and the market value thereof was as
follows: Mr. Landon, 40,500 shares acquired under the 1991 Stock
Option/Restricted Stock Award Plan ("1991 Plan"), $2,070,562; Mr. Gaston, 33,000
shares acquired under the 1991 Plan, $1,687,125; Mr. Becker 3,000 shares
acquired under the 1991 Plan and 8,600 acquired under the Senior Plan, $593,050;
Mr. Fuchs, 6,000 shares acquired under the 1991 Plan and 6,600 under the Senior
Plan, $644,175; and Mr. Israel, 3,000 shares acquired under the 1991 Plan and
2,800 shares acquired under the Senior Plan, $296,525.
(5) For 1996 this amount represents the estimated allocation of shares of the
Company's Common Stock under the Leveraged Employee Stock Ownership Plan
(LESOP). Mr. Landon, Mr. Gaston, Mr. Becker, Mr. Fuchs are estimated to receive
425 shares each and Mr. Israel is estimated to receive 417 shares. The value is
based on the market value at year-end of $51.125 multiplied by the number of
estimated shares allocated to each named executive officer.
STOCK OPTIONS AND SARS
The following table sets forth information with regard to grants of stock
options to each of the named executive officers during the year ended December
31, 1996. Grants were made under the 1994 Senior Management Stock Option Plan.
No SARs have been granted.
OPTION GRANTS IN 1996
INDIVIDUAL GRANTS
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<PAGE> 17
OPTIONS
GRANTED TO
OPTIONS EMPLOYEES EXERCISE
GRANTED IN FISCAL OF BASE EXPIRATION
NAME (#)(1) YEAR(2) PRICE($/SH) DATE
- ---- -------- ---------- ----------- ----------
R Kirk Landon -- -- -- --
Gerald N Gaston -- -- -- --
Eugene B Becker 4,500 5% 41.00 5/21/99
Jay R Fuchs 3,300 4% 41.00 5/21/99
Jason J Israel 3,000 3% 41.00 5/21/99
(TABLE CONTINUED)
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
OPTION TERM
----------------------
NAME 5%($)(3) l0%($)(3)
- ---- -------- ---------
R Kirk Landon -- --
Gerald N Gaston -- --
Eugene E Becker 152,070 184,065
Jay R Fuchs 111,518 134,581
Jason J Israel 101,380 122,710
(1) Options were granted under the 1994 Senior Management Stock Option Plan to
Mr. Becker, Mr. Fuchs and Mr. Israel. Mr. Becker and Mr. Fuchs exercised their
options during November 1996. Upon exercise of the option, Mr. Becker received
3,000 Restricted Shares and Mr. Fuchs received 2,200 Restricted Shares. Mr.
Israel has not exercised his option, however upon exercise of the option he will
receive 2,000 Restricted Shares. See footnote (3) under Summary Compensation
Table of this Proxy Statement for material terms of the options granted.
(2) As a percentage of options granted under the 1994 Senior Management Stock
Option Plan. During 1996, 29,400 stock options for Primary Shares were granted
under the 1994 Senior Management Stock Option Plan which includes 3,600 Stock
Options for Primary Shares granted to the named executive officers. An
additional 74,300 stock options were granted under the, 1991 Stock Incentive
Compensation Plan to key employees other than those named above.
(3) Assumed annual rates of appreciation of 5% and 10% would result in the price
of the Company's Common Stock increasing to $47.46 and $54.57, respectively.
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<PAGE> 18
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with regard to stock option exercises
during 1996 by each of the named executive officers and December 31, 1996 values
of all unexercised options held by such individuals.
AGGREGATED OPTION EXERCISES IN 1996 AND 1996 YEAR-END OPTION VALUES
SHARES
ACQUIRED
ON VALUE REALIZED
NAME EXERCISE(#) ($)(1)
- ---- ----------- --------------
R Kirk Landon -- --
Gerald N Gaston -- --
Eugene B Becker 4,500 170,250
Jay R Fuchs 23,701 773,642
Jason J Israel -- --
(TABLE CONTINUED)
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
12/31/96(#)(2) 12/31/96($)(3)
------------- -------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ---- ------------- -------------
R Kirk Landon 162,843/0 5,897,975/0
Gerald N Gaston 141,636/0 5,121,698/0
Eugene E Becker 34,665/0 1,587,507/0
Jay R Fuchs 0/0 0/0
Jason J Israel 16,396/0 725,801/0
(1) Market value at date of exercise minus exercise price.
(2) All unexercised options include options that were granted under the 1987
Executive Stock Option/Dividend Accrual Plan. Also included are: 80,000 shares
for Mr. Landon and 70,000 shares for Mr. Gaston which are issuable upon
conversion of the debentures granted under the 1994 ABIG Key Executive Debenture
Plan and 3,000 shares for Mr. Israel under the 1994 Senior Management Stock
Option Plan.
(3) Market value at year-end minus exercise price.
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OTHER BENEFIT PLANS/AGREEMENTS
1994 ABIG KEY EXECUTIVE DEBENTURE PLAN
On May 25, 1994, shareholders of the Company approved the adoption of the 1994
ABIG Key Executive Debenture Plan (the "Debenture Plan"). The Debenture Plan
provides for the offering for sale of subordinated debentures ("Debentures") to
key executive officers of the Company and its subsidiaries. Such persons include
individuals who hold the title of executive vice presidents and above. The
Debentures are convertible to shares of the Company's Common Stock in accordance
with the provisions of the plan. Under the Debenture Plan 150,000 shares of the
Company's authorized but previously unissued Common Stock are reserved for
issuance on conversion and all shares are subject to outstanding Debentures.
1994 SENIOR MANAGEMENT STOCK OPTION PLAN AND THE 1991 STOCK OPTION/RESTRICTED
STOCK AWARD PLAN
On May 25, 1994, shareholders approved the adoption of the 1994 Senior Plan (the
"Senior Plan"). The Senior Plan is a non-qualified plan under the Internal
Revenue Code of 1986, as amended. The Senior Plan provides for the issuance of
up to 700,000 shares of the Company's authorized but previously unissued Common
Stock to persons who are full-time, key management employees of the Company and
its subsidiaries. Such persons include individuals who hold the titles of
Business Board Chairman and senior vice presidents and above. There are
approximately forty-five (45) individuals who are considered key management
employees at this time.
The Compensation and Nominating Committee (the "Committee") may at any regular
quarterly or annual meeting, subject to the provisions of the Senior Plan, grant
employees options to purchase shares of the Company's Common Stock ("Primary
Shares") at the fair market value of such shares on the date of grant. The
grantee will also receive, for no additional consideration, two shares of the
Company's Common Stock subject to certain transfer restrictions ("Restricted
Shares") for every one Primary Share purchased upon the exercise of the option.
The restrictions will lapse on the Restricted Shares three years from the date
the option is exercised, provided that the employee still holds the Primary
shares purchased on the date the option was exercised.
Payment of the purchase price for Primary Shares shall be made in cash or in
such other form as the Company may approve including shares of Common Stock of
the Company, held for at least six months, valued at their fair market value on
the date of the exercise of the option. Options granted under the Senior Plan
may not be exercised on or after the third anniversary of the grant date or such
shorter time as determined by the Committee on the date of grant. No options
will be granted pursuant to the Senior Plan after ten years from its adoption by
the Board of Directors.
19
<PAGE> 20
During a three-year vesting period, Restricted Shares are subject to a
forfeiture in the event the related Primary Shares are disposed of 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 annual
anniversary after the date the options are exercised or upon death, disability
or retirement of the employee or a change in control of the Company.
The 1991 Stock Option/Restricted Stock Award Plan was adopted by the Board of
Directors in November 1990 subject to shareholder approval, which was obtained
on May 22, 1991. Upon shareholder approval of the Senior Plan, the Company
ceased granting options under this plan. Nevertheless, the options granted under
this plan are outstanding. The terms of the plan are substantially similar to
those of the Senior Plan except that (i) the employee is awarded three
Restricted Shares for every Primary Share and (ii) originally, full vesting
occurs on the fifth annual anniversary after the exercise date of the options.
During 1995, the plan was amended to allow the Company to grant recipients the
option to extend the original vesting period for either one, two or three years.
Upon shareholder approval of the American Bankers Insurance Group, Inc. 1997
Equity Incentive Plan, the Company will discontinue making grants under the
Senior Plan.
1991 STOCK INCENTIVE COMPENSATION PLAN
The 1991 Stock Incentive Compensation Plan provides for the issuance of options
for up to 289,586 shares of the Company's Common Stock to persons who are key
management employees of the Company and its subsidiaries. The plan was adopted
by the Board of Directors in November 1990 subject to shareholder approval which
was obtained on May 22, 1991. The plan, which is a non-qualified plan under the
Internal Revenue Code, is effective for a period of ten years.
Options issued pursuant to the plan are exercisable at fifty percent of the fair
market value (as defined in the plan) on the grant date. Options must be
exercised within sixty days of the grant date. Shares obtained upon exercise are
subject to restrictions. Vesting occurs ratably over a five-year period or upon
death, disability or retirement of the employee or a change in control of the
Company. Non-vested shares are subject to forfeiture if employment is terminated
except by death, disability or retirement. During the restricted period,
employees receive all cash dividends paid and exercise the voting rights
assigned to each share.
Upon shareholder approval of the American Bankers Insurance Group, Inc. 1997
Equity Incentive Plan, the Company will discontinue making grants under this
plan.
EXECUTIVE STOCK OPTION/DIVIDEND ACCRUAL PLAN
The 1987 Executive Stock Option/Dividend Accrual Plan provided for the
20
<PAGE> 21
issuance of up to 1,000,000 shares of the Company's Common Stock to persons who
are officers and key management employees of the Company. The plan became
effective upon shareholder approval on May 27, 1987 and has a term of ten years.
The Company has discontinued making grants under this plan.
Options which were issued pursuant to the plan are exercisable at fair market
value (as defined in the plan) on the date of grant. From the date of grant
until the exercise date of options, and to the extent cash dividends are
declared by the Company in respect of its Common Stock, cash is accrued for the
benefit of the optionee as if the options had already been exercised and
dividends were payable thereon, provided that all such accrued cash will be
applied toward the exercise price of the options on the date of exercise.
1988 LEVERAGED EMPLOYEE STOCK OWNERSHIP PLAN ("LESOP")
The 1988 LESOP is a defined contribution stock bonus plan and trust in which
employees of ABIC and ABLAC and certain other subsidiaries of the Company are
eligible to participate. Generally, an employee becomes eligible to participate
in the plan following a 12-month period of employment.
The LESOP trust fund acquired 1,752,537 shares of the Company's Common Stock,
which will be allocated to participants annually over the 10-year period
commencing December 31, 1989. The LESOP trust fund borrowed money (the "Loan")
to purchase the stock. Each year the Company makes a contribution to the LESOP
which is used to pay the Loan and certain LESOP expenses. As principal payments
are made, stock held in the trust fund is allocated to participants' accounts.
Participants have the right to instruct the LESOP trustee as to the voting of
allocated shares.
The vested value of a participant's account becomes payable upon termination of
employment for any reason including death. However, the vested value of a
participant's account becomes distributable upon final payment of the Loan.
There is no partial vesting, but full vesting occurs after the completion of
five years of service (including certain service prior to January 1, 1989), or
upon the participant's earlier death, disability or retirement. If a participant
terminates employment prior to vesting, his account is forfeited. The
participant's interest in the vested value of their account is represented by
their allocated shares of the Company's stock and by cash for fractional shares.
CERTAIN CONTRACTS
To help ensure that Senior Management will be prepared to function in the
Company's best interests in the event of any possible change in
21
<PAGE> 22
control of the Company, whether by merger, sale or other comparable action, and
to help ensure the continuing services of such officers, the Board of Directors
(with only non-employee directors participating) authorized the Company
originally to enter into certain contracts with selected executive officers.
While there was no reason to believe that a merger or sale was imminent, the
Board of Directors believed it in the best interest of the Company and its
shareholders that it act at that time to avoid the need for hasty action in the
future and to ensure continuity of highly qualified management.
The contracts generally provide the executive officers will receive the
following compensation in the amounts and for the reasons indicated:
(a) In the event the company becomes a party to a merger or sale, an amount up
to two times his then current base salary or an amount equal to the maximum
amount that will not constitute a "parachute amount" as defined in Section 280G
of the Internal Revenue Service Code. As of March 15, 1996, the maximum
allowable is up to, but not including three times the average of the
individual's previous compensation for the past five years. Under the contract,
a merger or sale is deemed to have taken place when any person (or group)
obtains sufficient ownership of stock to exercise control over the operations of
the Company.
(b) Upon retirement at or after attainment of age 65, from 100% up to 150% of
current base salary. Upon termination for the convenience of the Company, an
amount equal to his then current annual base salary. Termination for convenience
means termination at the behest of the Company, whether by dismissal, by
requested resignation or by resignation which follows a greater than 20%
decrease in the employee's salary.
(c) In the event of termination of employment for certain illnesses or
disabilities which preclude an employee from rendering satisfactory services for
a period of three months or more, an amount from 50% up to 100% of his then
current annual base salary.
(d) In the event of death, an amount payable to his beneficiary or estate equal
to 150% his annual base salary at the time of death.
If, at December 31, 1996, a merger or sale had occurred as set forth above, the
Company would have been obligated to make payments to Mr. Landon, Mr. Gaston,
Mr. Becker, Mr. Fuchs and Mr. Israel in the amounts of $1,387,390, $1,251,606,
$506,846, $388,658 and $403,969, respectively.
RETIREMENT PLANS
The Company has a non-contributory pension plan covering substantially all of
its employees. The Company contributes such amounts as are necessary, on an
actuarial basis, to provide the plan with assets
22
<PAGE> 23
sufficient to meet the benefits to be paid to plan members. Contributions under
the plan are based on length of service and average annual compensation.
Compensation includes normal salary and wages and does not include bonuses,
overtime pay, reimbursements or special pay. Upon normal retirement, age 65, the
participant's monthly benefit will be equal to 2% of the "average monthly
earnings" multiplied by the number of years of service to the Company less 50%
of the monthly primary social security benefits to which the individual is
entitled. The participant's "average monthly earnings" equals the average
monthly compensation for the highest 60 consecutive months of compensation
within the last 120 months immediately preceding retirement. There was no
actuarially-determined pension expense as a result of the plan reaching the full
funding limitation.
On August 24, 1991, the Board of Directors approved the Non-qualified
Supplemental Benefit Plan. The plan is a non-qualified, unfunded, deferred
compensation arrangement designed solely to equalize the total benefits certain
key executives would have received under the Company's Retirement Plan, but for
the limitations on benefits imposed by Section 415 of the Internal Revenue Code
(as reflected in Section 7.01 of the Retirement Plan). The plan is intended to
benefit the Company and its affiliates by recognizing the value of the past and
present services of the key executives covered by the plan and to encourage them
to continue careers with the Company and its affiliates. The Compensation and
Nominating Committee administers and interprets the provisions of the plan.
Participants are those key executives designated from time to time by the Board
of Directors.
Following are the estimated annual benefits under both Retirement Plans for
various lengths of service and compensation levels based on the assumption that
the retiree will choose a life-only benefit and is retiring at age 65 during the
year 1996. Election of the other available payment options could change the
benefit; however, all benefits are actuarially equivalent. For annual benefits
in excess of $120,000 or salaries in excess of $150,000, assume the employee is
a member of both retirement plans.
PENSION ACCRUAL BASED ON YEARS OF SERVICE
5 YEARS 10 YEARS 15 YEARS 20 YEARS
AVERAGE ANNUAL SERVICE SERVICE SERVICE SERVICE
- -------------- ------- -------- -------- --------
$100,000. 1,804 11,804 21,804 31,804
$150,000. 6,804 21,804 36,804 51,804
$200,000. 11,804 31,804 51,804 71,804
$250,000. 16,804 41,804 66,804 91,804
$300,000. 21,804 51,804 81,804 111,804
$350,000. 26,804 61,904 96,804 131,604
$400,000. 31,804 71,804 111,804 151,804
$450,000. 36,804 81,804 126,804 171,804
$500,000. 41,804 91,804 141,804 191,804
$550,000. 46,804 101,804 156,804 211,804
23
<PAGE> 24
$600,000. 51,804 111,804 171,804 231,804
$650,000. 56,804 121,804 186,804 251,804
$700,000. 61,804 131,804 201,804 271,804
$750,000. 66,804 141,804 216,804 291,804
(TABLE CONTINUED)
25 YEARS 30 YEARS 35 YEARS 40 YEARS 45 YEARS
AVERAGE ANNUAL SERVICE SERVICE SERVICE SERVICE SERVICE
- -------------- -------- -------- -------- -------- --------
$100,000. 41,804 51,804 61,804 71,804 81,804
$150,000. 66,604 81,804 96,804 111,804 126,804
$200,000. 91,804 111,804 131,804 151,804 171,804
$250,000. 116,804 141,804 166,804 191,804 216,804
$300,000. 141,804 171,804 201,804 231,804 261,804
$350,000. 166,804 201,804 236,804 271,804 306,804
$400,000. 191,804 231,804 271,804 311,804 351,804
$450,000. 216,804 261,804 306,804 351,804 396,804
$500,000. 241,804 291,804 341,804 391,804 441,804
$550,000. 266,804 321,804 376,804 431,804 486,804
$600,000. 291,804 351,804 411,804 471,804 531,804
$650,000. 316,804 381,804 446,804 511,804 576,804
$700,000. 341,804 411,804 481,804 551,804 621,804
$750,000. 366,804 441,804 516,804 591,804 666,804
The years of service, as of December 31, 1996, for Mr. Landon, Mr. Gaston, Mr.
Becker, Mr. Fuchs and Mr. Israel are 44, 19, 23, 19 and 11 years, respectively.
24
<PAGE> 1
Exhibit 6
[Letterhead of Cendant]
January 27, 1998
Board of Directors
American Bankers Insurance Group, Inc.
11222 Quail Roost Drive
Miami, Florida 33157
Attention: Mr. R. Kirk Landon, Chairman
Dear Members of the Board:
On behalf of Cendant Corporation we are pleased to submit a proposal
to acquire American Bankers Insurance Group, Inc. for $58 per common share
payable in cash and stock. Our proposal, representing a premium of $11 (in
excess of 23%) over the value of American International Group's proposal, is
demonstrably superior to the AIG proposed transaction.
Several months ago one of our senior executives had discussed with
Mr. Gaston our interest in pursuing a business combination with American
Bankers. As recently as December, in response to our inquiry as to whether
American Bankers was engaged in discussions relating to an acquisition and to
our expression of Cendant's strong interest in exploring such a transaction with
American Bankers, Mr. Gaston said that American Bankers was not pursuing any
acquisition transaction, and suggested that he meet with our senior executive in
early January to discuss the matter further. In view of this, it is particularly
disappointing that we were not made aware that American Bankers was interested
in pursuing acquisition proposals and, accordingly, we did not have the
opportunity to submit an offer prior to the announcement of your proposed
transaction with AIG.
<PAGE> 2
Board of Directors
January 27, 1998
Page 2
We would have liked to discuss our proposal directly with you.
However, the terms of Section 6.2 of your agreement with AIG purport to prohibit
discussions with us or any other party until 120 days following the date of such
agreement, at which time, as both you and AIG have publicly stated, the
acquisition of American Bankers by AIG likely will have been completed, making
any discussions between us irrelevant. We believe this is an extraordinary
measure and raises questions about whether it is in the best interests of
American Bankers' shareholders.
Accordingly, we will be commencing promptly a cash tender offer
directly to American Bankers' shareholders for 51% of American Bankers' shares
at a price of $58 per common share to be followed by a second step merger in
which shares of Cendant common stock with a fixed value of $58 per share will be
exchanged on a tax-free basis for the balance of American Bankers' common stock
and each share of American Bankers' preferred stock will be converted into one
share of Cendant preferred stock having substantially similar terms, except that
such shares will be convertible into shares of Cendant common stock calculated
in accordance with the terms of the American Bankers' preferred stock.
The provisions in your agreement with AIG include highly unusual and
restrictive conditions which, in fact, represent a virtual forfeiture of the
Board's fundamental mandate of protecting the interests of shareholders.
Accordingly, we have today commenced litigation in federal court in Miami to
ensure that your shareholders will have the opportunity to consider our offer
and to assist your board in fulfilling its fiduciary obligations and to resolve
certain other issues.
<PAGE> 3
Board of Directors
January 27, 1998
Page 3
Although we have determined that it is both necessary and
appropriate, under the circumstances, to commence our cash tender offer and
litigation, our strong preference would be to enter into a merger agreement with
you containing substantially the same terms and conditions (other than price and
inappropriate terms) as your proposed transaction with AIG.
In addition to its significant economic superiority, the merits and
the strategic value of the combination of Cendant and American Bankers are
compelling. Cendant (NYSE:CD) is the product of the recent combination of CUC
International Inc. and HFS Incorporated, creating the world's largest consumer
and business services company. Cendant interacts with approximately 170 million
customers and members around the world, several times each year. Cendant is
investment grade rated and has a market value of approximately $30 billion.
Cendant's 1997 revenues and net income are estimated by Wall Street analysts at
approximately $5.1 billion and $900 million, respectively. Cendant has recently
announced its acquisition of Providian Direct, a direct marketer of automobile
insurance. Under separate cover, we have sent a copy of the proxy statement for
the merger that created Cendant.
Cendant's vision for American Bankers is one of exceptional growth
and opportunity, which involves utilizing Cendant's distribution channels and
customer base as an outlet for American Bankers' products and capitalizing on
American Bankers existing relationship with financial institutions and retailers
to increase penetration of Cendant's products. Consistent with this vision, and
Cendant's past strategic acquisition practices, Cendant would expect American
Bankers' management to continue with the company, would not expect significant
employment reductions and would expect American Bankers to continue to maintain
its headquarters in Miami.
The price we are offering in our proposal clearly provides
significantly greater value to your shareholders than the proposed transaction
with AIG. It would also benefit Cendant's shareholders and be accretive to
earnings within the first year. Our proposal is not subject
<PAGE> 4
Board of Directors
January 27, 1998
Page 4
to any due diligence or financing condition and the funds for the cash portion
of our offer are available from existing cash resources and under our credit
facilities. In addition, Cendant, having acquired control of insurers in the
past, is extremely familiar with the insurance regulatory process, has obtained
approvals of the type required to implement this proposal and will be able to
complete our proposed transaction on a timely basis.
Accordingly, we strongly believe that you are obligated by
principles of fiduciary duty to consider and accept our proposal. Consistent
with your clear fiduciary duties, we expect you will provide us with at least
the same information you furnished to AIG in the course of your discussions and
negotiations with them and that you will discuss and negotiate with us the
details of our proposal. In addition, you should take whatever other actions are
reasonably necessary or appropriate so that we may operate on a level playing
field with AIG and any other companies which may be interested in acquiring
American Bankers.
Our Board of Directors is fully supportive of our proposal and has
unanimously authorized and approved it and no other Cendant approval is required
for this transaction. Consistent with our Board of Directors' action, we and our
advisors stand ready to meet with you and your advisors at your earliest
convenience. We want to stress that we are flexible as to all aspects of our
proposal and are anxious to proceed to discuss and negotiate it with you as soon
as possible.
Should you find it helpful to do so in connection with reviewing and
considering our proposal, you and your advisors should feel free to contact our
outside advisors: Steven B. Wolitzer of Lehman Brothers and Jack Levy of Merrill
Lynch & Co., our financial advisors, and David Fox of Skadden, Arps, Slate,
Meagher & Flom LLP, our legal counsel.
<PAGE> 5
Board of Directors
January 27, 1998
Page 5
Personally and on behalf of our colleagues at Cendant, we look
forward to hearing from you soon and working with you on our proposal.
Sincerely,
/s/ Henry R. Silverman /s/ Walter A. Forbes
Henry R. Silverman Walter A. Forbes
President and Chairman
Chief Executive
Officer
cc: All Directors
<PAGE> 1
Exhibit 7
[LETTERHEAD OF AMERICAN BANKERS INSURANCE GROUP]
News Release
================================================================================
FOR IMMEDIATE RELEASE
AMERICAN BANKERS INSURANCE GROUP, INC.'S BOARD TO REVIEW
CENDANT'S UNSOLICITED TENDER OFFER
Miami, FL, January 27, 1998,... American Bankers Insurance Group, Inc. (NYSE:
ABI) announced today, in response to Cendant Corporation's proposed tender offer
and second-step merger, that the Company's Board of Directors will review the
terms of the tender offer in due course. American Bankers stated that the
shareholders need not take any action at this time and requested that
shareholders await the response of the American Bankers' Board.
American Bankers Insurance Group, Inc. (ABI) concentrates on marketing
affordable, specialty insurance products and services through financial
institutions, retailers and other entities offering consumer financing as a
regular part of their business. ABI, through its insurance subsidiaries,
operates in the United States, Canada, the Caribbean, Latin America and the
United Kingdom.
Media Contact: Thomas C. Franco, Broadgate Consultants (212) 232-2222
####
<PAGE> 1
Exhibit 8
[AMERICAN INTERNATIONAL GROUP, INC. Letterhead]
January 27, 1998
American Bankers Insurance Group, Inc.
11222 Quail Roost Drive
Miami, Florida 33157
Attention: Gerald N. Gaston, Vice Chairman,
President and Chief Executive Officer
Dear Mr. Gaston:
In accordance with Section 1(b) of the Stock Option Agreement (the "Agreement"),
dated as of December 21, 1997, between American International Group, Inc.
("AIG") and American Bankers Insurance Group, Inc. ("ABIG"), AIG hereby
exercises its right to purchase 8,265,626 shares of Common Stock, par value
$1.00 per share, of ABIG (the "Common Stock") at a cash purchase price equal to
$47.00 per share.
Subject to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and
applicable insurance regulatory approvals, the closing of the purchase will
occur at 9:00 A.M., local time, at the offices of Sullivan & Cromwell, 125 Broad
Street, New York, New York, on the third business day following the date hereof
or such later date as provided by Section 3 of the Agreement. AIG may provide
notice at a later date of its election to consummate the purchase of that
portion of the total number of shares for which applicable regulatory approvals
have been received as of such date and to subsequently consummate the purchase
of the balance of the shares following receipt of all applicable regulatory
approvals. AIG will make payment for the shares of Common Stock by certified or
official bank check.
Sincerely,
/s/ Kathleen E. Shannon
Kathleen E. Shannon
Vice President & Secretary
cc: Josephine Cicchetti
(Jorden Burt Berenson & Johnson LLP)
Jonathan L. Freedman
(Dewey Ballantine LLP)
James C. Morphy
(Sullivan & Cromwell)
<PAGE> 1
EXHIBIT 9
[AMERICAN BANKERS INSURANCE GROUP, INC. LETTERHEAD]
R. KIRK LANDON
CHAIRMAN OF THE BOARD
February 6, 1998
Dear Common Stockholder:
On January 27, 1998, Cendant Corporation launched an unsolicited $58 per
share tender offer for 51% of the common stock of American Bankers Insurance
Group, Inc. As you know, we had previously announced a planned merger with a
subsidiary of American International Group, Inc. in which each share of American
Bankers common stock would be converted into cash and/or AIG common stock with a
value equal to $47.
Your Board of Directors has determined at this time that it is unable to
take a position with respect to the tender offer by Cendant and is making no
recommendation with respect to the Cendant offer. The reasons for this decision
are set forth in Item 4 of the enclosed Schedule 14D-9. This decision is based
upon the fact that the Board of Directors has been unable to assess several
aspects of the Cendant tender offer.
The combination of the AIG merger agreement and the Cendant tender offer
makes for a complex situation. We will keep you advised of future developments
and we thank you for your continued support.
Very truly yours,
[/s/ R. Kirk Landon]
R. Kirk Landon,
Chairman of the Board
[LETTERHEAD MEMBER COMPANIES]
<PAGE> 1
Exhibit 10
[AMERICAN BANKERS INSURANCE GROUP LETTERHEAD]
NEWS RELEASE
Contact: P. Bruce Camacho
Executive Vice President
Investor Relations
(305) 252-7060
FOR IMMEDIATE RELEASE
AMERICAN BANKERS INSURANCE GROUP INC.'S BOARD
RESPONDS TO CENDANT'S UNSOLICITED TENDER OFFER
Miami, Fl. February 6, 1998.... American Bankers Insurance Group, Inc. (NYSE:
ABI) announced today that after thorough and careful analysis and discussions
with its financial and legal advisors its Board of Directors determined that it
is unable to take a position with respect to the tender offer by Cendant
Corporation and is making no recommendation at this time with respect to the
Cendant offer. On January 27, 1998, Season Acquisition Corp., (a wholly owned
subsidiary of Cendant Corporation) made an unsolicited offer to acquire
American Bankers for $58 a share in cash and stock. American Bankers had
previously announced that it had entered into a definitive merger agreement
with American International Group, Inc. with respect to an acquisition of the
Company by AIG in which each share of American Bankers common stock would be
converted into cash and/or AIG common stock with a value equal to $47.
The Board's decision to take no position with respect to the Cendant
unsolicited tender offer was based upon the fact that the Board of Directors
has been unable to assess several aspects of the Cendant offer, including,
Cendant's relatively high level of leverage, Cendant's business plans for
American Bankers, the synergies Cendant has indicated will be achieved,
required capital infusions in Americn Bankers' operating subisdiaries and
others. Such aspects are detailed in the Company's Schedule 14D-9 which will be
filed with the Securities and Exchange Commission later today and mailed to
shareholders of American Bankers. To aid in making these assessments, American
Bankers intends to request a hearing in connection with Cendant's application
to the Florida insurance regulatory authorities.
American Bankers also announced that it had taken action with respect to its
shareholders' rights plan so that a distribution date (as defined in the plan)
will not at this time occur with respect to the Cendant offer.
American Bankers Insurance Group, Inc. (ABI) concentrates on marketing
affordable, specialty insurance products and services through financial
institutions, retailers and other entities offering consumer financing as a
regular part of their business. ABI, through its insurance subsidiaries,
operates in the United States, Canada, Latin America, the Caribbean and the
United Kingdom.
<PAGE> 1
Exhibit 11
[AMERICAN BANKERS INSURANCE GROUP LETTERHEAD]
NEWS RELEASE
Contact: P. Bruce Camacho
Executive Vice President
Investor Relations
(305) 252-7060
FOR IMMEDIATE RELEASE
AMERICAN BANKERS INSURANCE GROUP, INC. REPORTS FOURTH OUARTER
1997 OPERATING EARNINGS PER SHARE OF $.62
MIAMI, FL, FEBRUARY 5,1998.... AMERICAN BANKERS INSURANCE GROUP, INC. (NYSE:ABI)
today announced net operating income for the fourth quarter of 1997 was $29.2
million or $.62 per share on a diluted basis. This compares with net operating
income of $25.2 million or $.54 per share for the same period in 1996. Operating
results for the fourth quarter 1997 increased $4.0 million or 16% as compared
with the same period in 1996. On a basic earnings per share basis, net operating
income for the fourth quarter of 1997 was $.66 per share compared with $.57 per
share for the same period of l996.
Gross collected premiums for the fourth quarter of 1997 increased approximately
10% from $652.6 million to $720.2 million. Gross collected premiums for 1997
were $2.740 billion versus $2.493 billion for 1996. This represents an increase
of approximately 10% in 1997 over 1996.
Operating results in the fourth quarter were driven by the growth in net earned
premiums of 10% over the same period in 1996, coupled with consistently good
underwriting results and a favorable operating expense ratio. The ratio of
claims and commission expenses to net earned premiums was 78.7% which continues
to reflect favorable underwriting trends experienced throughout 1997. Operating
expenses in the quarter totaled $74.2 million or 11.2% of gross earned premiums,
this compared with an operating expense ratio of 12.2% for the same period in
1996. The quarter also benefited from a lower effective tax rate of 25.9%
compared with 31.3% in the same period in 1996. The overall effective tax rate
for 1997 was 28% compared with 30.5% for 1996.
- more -
<PAGE> 2
AMERICAN BANKERS INSURANCE GROUP, INC.
NEWS RELEASE - PAGE 2
Net income for the fourth quarter of 1997 was $30.0 million or $.64 per share on
a diluted basis, compared with $26.2 million or $.56 per share for the same
period in 1996. On a basic earnings per share basis, net income for the fourth
quarter of 1997 was $28.2 million or $.68 per share compared with $24.3 million
or $.59 per share for the same period in 1996. Fourth quarter net income
includes realized investment gains, net of tax, of $.8 million or $.02 per share
compared with realized investment gains, net of tax, of $1.0 million or $.02 per
share for the same period in 1996.
Weighted average shares outstanding on a diluted basis for the quarter were 47.1
million compared with a split adjusted figure of 46.7 million for the same
period in 1996. The Company declared a two-for-one common stock split in August
1997. As a result of the stock split all common shareholders of record on August
29, 1997 received one additional share for each share they held.
On a diluted basis, net operating income increased $18.6 million or 21% in 1997
over 1996. Net operating income for the year ended December 31, 1997 was
$108.3 million or $2.31 per share compared with net operating income of $89.7
million or $2.04 per share in 1996. On a basic earnings per share basis, net
operating income per share for 1997 was $2.44 per share compared with $2.12 per
share for 1996.
Adjusted net income for the year ended December 31, 1997 was $115.1 million or
$2.45 per share on a diluted basis, compared with net income of $94.7 million or
$2.16 per share for 1996.
Stockholders' equity was $698.9 million (excluding $115 million of preferred
stock) and book value per common share was $16.83 at December 31, 1997.
American Bankers Insurance Group, Inc. (ABI) concentrates on marketing
affordable, specialty insurance products and services through financial
institutions, retailers and other entities offering consumer financing as a
regular part of their business. ABI, through its insurance subsidiaries,
operates in the United States, Canada, Latin America, the Caribbean and the
United Kingdom.
Earnings per share for all periods are reported in accordance with FASB
statement 128.
- more -
<PAGE> 3
AMERICAN BANKERS INSURANCE GROUP, INC.
NEWS RELEASE - PAGE 3
The comparative consolidated results are as follows: (in thousands)
<TABLE>
<CAPTION>
Quarter Ended Year Ended
December 31 December 31
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income before realized investment
gains and income taxes $ 39,180 $ 36,578 $149,201 $128,133
Realized investment gains 1,295 1,528 10,394 7,812
-------- -------- -------- --------
Income before income taxes 40,475 38,106 159,595 135,945
Income tax expense 10,488 11,936 44,732 41,442
-------- -------- -------- --------
Net income $ 29,987 $ 26,170 $114,863 $ 94,503
======== ======== ======== ========
</TABLE>
- more -
<PAGE> 4
AMERICAN BANKERS INSURANCE GROUP, INC.
NEWS RELEASE - PAGE 4
The following is a breakdown of operating income and realized investment gains,
net of taxes: (in thousands except per common share data)
<TABLE>
<CAPTION>
Quarter Ended Year Ended
December 31 December 31
---------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Basic:
Net operating income $ 27,348 $ 23,320 $ 100,918 $ 86,310
Net realized investment gains 842 993 6,757 5,078
--------- --------- --------- ---------
Adjusted net income 28,190 24,313 107,675 91,388
Dividends on preferred stock 1,797 1,857 7,188 3,115
--------- --------- --------- ---------
Net income as reported $ 29,987 $ 26,170 $ 114,863 $ 94,503
========= ========= ========= =========
Basic per share data:
Net operating income $ .66 $ .57 $ 2.44 $ 2.12
Net realized investment gains .02 .02 .16 .12
--------- --------- --------- ---------
Adjusted net income $ .68 $ .59 $ 2.60 $ 2.24
========= ========= ========= =========
Weighted average shares outstanding 41,576 40,830 41,433 40,697
========= ========= ========= =========
Diluted:
Net operating income $ 29,204 $ 25,234 $ 108,338 $ 89,653
Net realized investment gains 842 993 6,757 5,078
--------- --------- --------- ---------
Adjusted net income 30,046 26,227 115,095 94,731
Interest on convertible debentures (59) (57) (232) (228)
--------- --------- --------- ---------
Net income as reported $ 29,987 $ 26,170 $ 114,863 $ 94,503
========= ========= ========= =========
Diluted per share data:
Net operating income $ .62 $ .54 $ 2.31 $ 2.04
Net realized investment gains .02 .02 .14 .12
--------- --------- --------- ---------
Adjusted net income $ .64 $ .56 $ 2.45 $ 2.16
========= ========= ========= =========
Weighted average shares outstanding 47,050 46,689 46,999 43,890
========= ========= ========= =========
</TABLE>
Earnings per share for all periods are reported in accordance with FASB
statement 128.
####
<PAGE> 1
Exhibit 12
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
CENDANT CORPORATION and
SEASON ACQUISITION CORP.,
Plaintiffs,
Case No. 98-0159-CIV-MOORE
v. Magistrate Judge Johnson
AMERICAN BANKERS INSURANCE GROUP,
INC., GERALD N. GASTON, R. KIRK
LANDON, EUGENE M. MATALENE, JR.,
ARMANDO CODINA, PETER J. DOLARA,
JAMES F. JORDEN, BERNARD P. KNOTH,
ALBERT H. NAHMAD, NICHOLAS J. ST.
GEORGE, ROBERT C. STRAUSS, GEORGE E.
WILLIAMSON II, DARYL L. JONES,
NICHOLAS A. BUONICONTI, JACK F. KEMP,
AMERICAN INTERNATIONAL GROUP, INC.
and AIGF, INC.,
Defendants.
- --------------------------------------/
AMENDED COMPLAINT FOR
DECLARATORY AND INJUNCTIVE RELIEF
Plaintiffs Cendant Corporation ("Cendant") and Season Acquisition Corp.
("Season Acquisition"), by their counsel, for their Amended Complaint allege
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Case No. 98-0159-CIV-MOORE
upon knowledge as to themselves and their own acts and upon information and
belief as to all other matters, as follows:
JURISDICTION
1. The claims asserted herein arise under Sections 13(d), 14(a) and 14(e)
of the Exchange Act, 15 U.S.C. ss.ss. 78m(d), 78n(a), and 78n(e), and the rules
and regulations promulgated thereunder by the Securities and Exchange Commission
(the "SEC"), and the law of the State of Florida. This Court has jurisdiction
over this action pursuant to Section 27 of the Exchange Act, 15 U.S.C. ss. 78aa;
28 U.S.C. ss. 1331 (federal question); 28 U.S.C. ss. 1332 (diversity of
citizenship); and 28 U.S.C. ss. 1367 (supplemental jurisdiction).
VENUE
2. Venue is proper in this District pursuant to Section 27 of the Exchange
Act and 28 U.S.C. ss. 1391(b). The claims asserted herein arose in this
District, and the acts and transactions complained of have occurred, are
occurring, and unless enjoined, will continue to occur in this District.
PARTIES
3. Plaintiff Cendant is a corporation organized and existing under the
laws of the State of Delaware with its principal of business located in
Parsippany, New Jersey. Cendant is a global provider of direct marketing and
other services to
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Case No. 98-0159-CIV-MOORE
consumers in the travel, real estate and insurance industries, among others.
Cendant is the beneficial owner of 371,200 shares of the common stock of
American Bankers Insurance Group, Inc. ("American Bankers" or the "Company").
Cendant publicly announced on January 27, 1998, that plaintiff Season
Acquisition, a wholly owned subsidiary of Cendant, would commence a tender offer
to purchase 51% of the outstanding common shares of American Bankers, with the
remaining 49% of the shares to be acquired through a second-step merger more
fully described below. Season Acquisition is a New Jersey corporation with its
principal place of business also in Parsippany, New Jersey.
4. Defendant American Bankers is a Florida corporation with its principal
place of business located in Miami, Florida. Through its subsidiaries, American
Bankers is a specialty insurer providing primarily credit-related insurance
products in the United States, Canada, Latin America, the Caribbean and the
United Kingdom. Most of American Bankers' insurance products are sold through
financial institutions and other entities that provide consumer financing as a
regular part of their business.
5. Defendant Gerald N. Gaston has been President of American Bankers since
1980 and its Chief Executive Officer and Vice Chairman of the Board of Directors
(the "Board") since 1996. Gaston is a member of the Executive, Finance
3
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Case No. 98-0159-CIV-MOORE
and Takeover Evaluation Committees of the Board. As an officer and director of
American Bankers, Gaston owed and continues to owe fiduciary duties of loyalty
and care to the Company's shareholders. Gaston is a control person of American
Bankers pursuant to Section 20(a) of the Exchange Act, and therefore is jointly
and severally liable for the violations of the federal securities laws committed
by American Bankers.
6. Defendant B. Kirk Landon has been Chairman of the Board since 1980 and
Chief International Officer of American Bankers since 1996. Landon is a member
of the Planning, Executive, Finance and Takeover Evaluation Committees of the
Board. As an officer and director of American Bankers, Landon owed and continues
to owe fiduciary duties of loyalty and care to the Company's shareholders.
Landon is a control person of American Bankers pursuant to Section 20(a) of the
Exchange Act, and therefore is jointly and severally liable for the violations
of the federal securities laws committed by American Bankers.
7. Defendants Eugene M. Matalene, Jr., Armando M. Codina, Peter J. Dolara,
James F. Jorden, Bernard P. Knoth, Albert H. Nahmad, Nicolas J. St. George,
Robert C. Strauss, George E. Williamson II, Daryl L. Jones, Nicholas A.
Buoniconti and Jack F. Kemp are, and at all relevant times have been, directors
of American Bankers. As directors, these defendants owed and continue to owe
duties of loyalty and care to the Company's shareholders. These defendants are
control
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Case No. 98-0159-CIV-MOORE
persons of American Bankers pursuant to Section 20(a) of the Exchange Act, and
therefore are jointly and severally liable for the violations of the federal
securities laws committed by American Bankers.
8. Defendant AIG is a Delaware corporation with its principal executive
offices in New York, New York. AIG is a holding company engaged primarily in the
general and life insurance businesses both in the United States and abroad. AIG
is controlled by its Chairman, Maurice R. Greenberg ("Greenberg"), a material
fact that AIG has wrongfully failed to disclose in violation of Section 13(d) of
the Exchange Act.
9. Defendant AIGF, Inc. ("AIGF") is a Florida corporation wholly-owned by
AIG. Pursuant to a merger agreement signed by American Bankers, AIG and AIGF in
December 1997 (the "AIG Merger Agreement"), AIG has proposed to acquire American
Bankers through a merger of American Bankers into AIGF, with AIGF to be the
surviving corporation in the merger.
NATURE OF THE ACTION
10. This action arises from an attempt by American Bankers and its
directors to sell the Company to AIG at an inferior price, to the detriment of
the Company's owners -- its shareholders, and through wrongful means. In
furtherance of these unlawful objectives, defendants have taken and continue to
take improper steps
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to ensure the success of the inferior acquisition proposal made by AIG and to
deter, impede and defeat a higher, competing bid for the Company announced by
Cendant (the "Cendant Bid"). The price that Cendant has offered to pay -- $58.00
per American Bankers common share -- amounts to a 25% premium over the market
price of American Bankers common stock when it was announced on January 26,
1998, and exceeds by more than 23% the price per share offered by AIG.
11. The Cendant Bid commenced on January 28, 1998 as a tender offer for
51% of the outstanding common shares of American Bankers by Season Acquisition
(the "Season Tender Offer"). It will be followed by a subsequent merger of
American Bankers into Season Acquisition (the "Season Merger"), with each
non-tendering American Bankers common shareholder receiving stock with a value
of $58.00 per American Bankers common share, the same price paid to common
shareholders tendering into the Season Tender Offer. The total price to be paid
to American Bankers common shareholders under the terms of the Cendant Bid
amounts to approximately $2.7 billion, which exceeds the total price offered by
AIG by approximately half a billion dollars.
12. American Bankers was aware prior to signing a deal with AIG that
Cendant had expressed strong interest in acquiring American Bankers.
Nevertheless, the Board considered only AIG's proposal, completely and
improperly excluding
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Cendant, to the detriment of the Company's shareholders and in breach of the
Board's fiduciary obligations. The Company decided to sell to AIG at an inferior
price without ever having approached a single third party to gauge the fair
market value for American Bankers. The American Bankers management even prepared
"revised" projections that incorporated lower revenue and income estimates
solely for the purpose of considering the AIG Merger Proposal. Then, to prevent
the emergence of any other bidder -- no matter how beneficial to American
Bankers' shareholders -- the Board approved the terms of the proposed merger
agreement with AIG (the "AIG Merger Proposal"), which purport to suspend the
Board's fiduciary obligations by prohibiting the directors from evaluating any
competing proposal, even one, like the Cendant Bid, that clearly is superior to
the merger proposal made by AIG. In further breach of their duties, the Board
adopted a "poison pill" rights plan (the "Rights Plan") that could irrevocably
deprive the Company's shareholders of the much higher Cendant Bid if the Rights
are distributed and become unredeemable -- an event that could occur as soon as
two weeks from now. Cendant and Season Acquisition, therefore, have no recourse
other than to seek emergency intervention of this Court to compel American
Bankers and its directors to adequately discharge their fiduciary duties and
negotiate with Cendant, the highest bidder, and to take all necessary action
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to allow the Company's shareholders to decide for themselves which proposal they
wish to accept on a level playing field free from coercion.
13. By approving the AIG Merger Proposal, the American Bankers Board has
determined that the separate existence of American Bankers should be terminated
and the Company's shareholders should sell and relinquish control of American
Bankers to AIG, which will purchase control in exchange for cash and stock of
AIG. Such a determination triggers a duty for the Board to sell the Company for
the highest price. As demonstrated by the Cendant Bid, however, American Bankers
is not for sale for the highest price. The Board has firmly resolved to deal
with only one bidder, AIG, and as a result, Cendant and Season Acquisition are
prevented from having any meaningful opportunity to present a higher offer and
acquire the Company. In contrast, AIG has been allowed access to confidential
information about American Bankers and has been allowed to negotiate a
definitive agreement to buy American Bankers on terms highly favorable to AIG,
but not to the Company's shareholders.
14. If the Board-approved impediments (further described below) to non-AIG
tender offers or merger proposals are allowed to stand, Cendant and Season
Acquisition will forever lose the opportunity to have their proposal fairly
considered by the Board and will lose the opportunity to create a new combined
entity with
8
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Case No. 98-0159-CIV-MOORE
unique business strengths. In addition, the American Bankers shareholders will
be denied the right to receive approximately half a billion dollars more for
their shares of American Bankers than AIG has offered.
15. The decision of the Company's directors to sell control of American
Bankers imposes special obligations on the Board under Florida law. In
particular, the directors are required to secure the transaction offering the
best value reasonably available to the shareholders -- and they must exercise
their fiduciary duties of loyalty and care to the corporation and its
shareholders to further that end. In pursuing that goal, the directors must
follow procedures, such as conducting an auction or adequately canvassing the
market for potential buyers, to ensure that they have fulfilled their obligation
to determine the existence and viability of all reasonably available
alternatives. Arrangements which purport to restrict directors from taking those
steps are invalid and unlawful.
16. As for the AIG Merger Agreement, American Bankers' loyalty to AIG has
exceeded all reasonable and permissible limits. The Board's arrangements with
AIG deny any kind of fair bidding process and impose potentially insuperable
barriers to any and all competing bids that could provide the Company's
shareholders with the best available value to which they are legally entitled.
In exchange for the extraordinary defensive protections awarded by the Company
to AIG, which are
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Case No. 98-0159-CIV-MOORE
rarely encountered -- and never countenanced -- in the corporate sale context,
AIG is offering the Company's shareholders a skimpy control premium that was
only six percent (6%) above the market price of American Bankers common stock
upon announcement of the AIG transaction and is l5% less than the market price
of American Bankers shares as of the time of this Amended Complaint. As a
result, the Company's Board is denying shareholders the substantially higher
control premium available through the Cendant Bid or other potential
transactions.
17. The arsenal of defensive weapons improperly deployed by American
Bankers to protect AIG includes an option permitting AIG to purchase 19.9% of
the outstanding shares of American Bankers common stock (the "Lock-Up Option").
The Lock-Up Option would provide AIG with sufficient voting power to skew the
voting process to attempt to block any and all competing bids, regardless of
price and the desires of American Bankers' shareholders, and ensure the success
of the inferior AIG Merger Proposal, which the Company is prohibited from
abandoning for a period of 180 days, or six months, under the AIG Merger
Agreement. The Lock-Up Option is conditioned upon several events occurring, one
of which is the commencement of a tender offer. Since the Season Tender Offer
was commenced last week, only regulatory approval of the Lock-Up Option stands
in the way of AIG's exercise of the Lock-Up Option. Injunctive relief is
therefore essential to prevent
10
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Case No. 98-0159-CIV-MOORE
AIG from irrevocably tilting the playing field in favor of its lowball Merger
Proposal, to the irreparable detriment of Cendant and the other shareholders of
American Bankers.
18. In addition to the Lock-Up Option and 180-day "no termination"
provision, there are a number of additional obstacles to competing bids erected
by American Bankers and AIG, including: (a) an agreement flatly prohibiting the
Board from entertaining any other bids under any circumstances for a period of
120 days, i.e., before the AIG Merger Proposal is consummated; (b) a voting
agreement obligating members of American Bankers management to vote their stock
- -- 8.2% of the shares outstanding -- in favor of the AIG Merger Proposal; (c) an
agreement to pay AIG a "termination" or "break-up" fee of at least $66 million
if the AIG Merger Proposal is not consummated; and (d) an agreement to exempt
AIG -- but only AIG from the American Bankers "poison pill" Rights Plan and to
extend the life of the Rights Plan so as to deter all bids other than AIG's.
19. All of these measures are designed to prevent American Bankers
shareholders from obtaining the best available transaction, are intended to
prevent a fair auction process or even a fair test of what the market would be
willing to pay, and are intended to deliver control of American Bankers to AIG
cheaply in breach of the fiduciary duties owed by the Company's directors to its
shareholders.
11
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20. For these reasons, the Lock-Up Option and other defensive measures
approved by the Board are unreasonable, unlawful and unenforceable, and should
be enjoined. American Bankers and its Board of Directors should be directed to
dismantle their defensive arsenal and create a level playing field so that
Cendant and Season Acquisition may present their superior bid to the Company's
shareholders.
21. Apparently recognizing that the inferior price offered by AIG would
never be accepted voluntarily by the American Bankers shareholders if free to
select the superior Cendant Bid, defendants have already begun a campaign to
attempt to stack the deck in AIG's favor. On January 27, 1998, the same day
Cendant and Season Acquisition launched their Tender Offer, AIG issued a press
release announcing that it purportedly had given notice to American Bankers of
its intention to exercise the Lock-Up Option to acquire 19.9% of the outstanding
shares of American Bankers at $47.00 per share -- 16% below the market price at
the time of the announcement (the "Option Announcement"). The Option
Announcement was deliberately designed to convey the false and materially
misleading impression that AIG had issued a notice pursuant to the AIG Merger
Agreement to purchase the Option Shares, a notice which must specify a closing
date no more than 10 business days thereafter. In reality, AIG knows that it
cannot exercise the Lock-Up Option within 10 business days and has no reasonable
basis, to believe that it can, because any
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such exercise of the Option is conditioned on certain insurance and other
regulatory approvals that AIG knows cannot be obtained within 10 business days
as AIG has falsely suggested in the Option Announcement. Nevertheless, AIG is
conveying the misleading impression that the Option will be exercised much
sooner than possible, to attempt to artificially manipulate American Bankers
shareholders into believing that it knows that insurance and regulatory
approvals are imminent, that the AIG merger is inevitable and that the Cendant
Bid cannot succeed. The Option Announcement, therefore, constitutes a violation
of both Sections 14(a) and 14(e) of the Exchange Act.
22. On January 30, 1998, defendants took additional steps in furtherance
of their effort to force-feed the AIG Merger Proposal to the American Bankers
shareholders. On that date, defendants began disseminating to the stockholders a
materially false and misleading proxy statement and prospectus to solicit
proxies to be voted in favor of the AIG Merger Proposal at special meetings of
the Company's preferred and common shareholders, scheduled to be held on March 4
and March 6, respectively (the "Proxy Statement"). The Proxy Statement is false
and misleading in that, among other things, it attempts to reinforce the false
and misleading impression that the AIG merger will be able to close imminently
by repeating the false claim that AIG has "exercised" the Lock-Up Option well in
advance of obtaining the requisite
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regulatory approvals needed to do so. It also states that the AIG merger is
expected to close in March 1998, without disclosing any of the "facts" on which
the statement is based. In truth and in fact, there is no basis to believe that
the transaction can possibly be consummated that rapidly given the need to
obtain numerous insurance regulatory approvals that will not be forthcoming by
the end of March, particularly given that AIG's insurance regulatory filings in
certain states are not complete, while other states have requested AIG to file
additional information which, on information and belief, has not yet been filed.
Moreover, on information and belief, no controlling person of AIG (including its
Chairman, Greenberg) has made the appropriate filings with insurance regulators.
Furthermore, insurance regulatory approval in certain states requires a public
hearing prior to any approval, and, upon information and belief no hearing has
even been noticed yet.
23. In the Proxy Statement, defendants also attempt to conceal the nature
of the "expense savings" to be achieved by the AIG Merger. The Proxy Statement
falls to disclose that for AIG to accomplish its contemplated "expense savings,"
it is likely that jobs will have to be eliminated and American Bankers personnel
terminated, including those employed in Miami.
24. Notably, the Proxy Statement practically ignores the fact that since
the Board signed the AIG Merger Agreement last December, a far superior
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offer for American Bankers -- the Cendant Bid -- has emerged and the American
Bankers stock price has increased to levels well above the AIG Merger Proposal
price. Nowhere in the Proxy Statement are these recent material events evaluated
in any way; nor does it seem that the Proxy Statement has incorporated them in
evaluating the AIG Merger Proposal.
25. AIG should be compelled immediately to correct the materially
misleading public disclosures it has made to date in connection with its AIG
Merger Proposal. Specifically, defendants should be directed to make a
corrective disclosure regarding the Option Announcement and the Proxy Statement
and be enjoined from making any materially false and misleading statements,
including by means of any proxy solicitations, during the pendency of the
contest for control of American Bankers. Additionally, AIG should be compelled
to disclose, as it must under Section 13(d) of the Securities Exchange Act of
1934 (the "Exchange Act"), that Greenberg, the Chairman of AIG, is a person
controlling AIG, and therefore would obtain control of American Bankers in the
event the AIG Merger Proposal is consummated.
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CHRONOLOGY OF EVENTS
American Bankers Secretly
Negotiates A Deal Exclusively With AIG
26. In December 1997, John H. Fullmer, Executive Vice President and Chief
Marketing Officer of Cendant, spoke with the President of American Bankers,
defendant Gerald Gaston, and asked him whether the Company was actively engaged
in discussions relating to an acquisition, noting that if it was,
representatives of Cendant would like to meet immediately with representatives
of American Bankers to discuss Cendant's serious interest in acquiring the
Company. Gaston assured Mr. Fullmer that the Company was not pursuing any
acquisition transaction and did not pursue the subject further with Mr. Fullmer.
In truth and in fact, defendant Gaston and his fellow directors had been for
months actively negotiating a sale of American Bankers to AIG, which the Board
had identified as the preferred bidder for the Company without adequately
evaluating alternative transactions that could maximize the value of American
Bankers shares to be received by all of the Company's shareholders.
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The AIG Merger Proposal
And Merger Agreement
27. By press release dated December 22, 1997 (the "Release"), American
Bankers and AIG announced that they had entered into a "definitive" merger
agreement -- the AIG Merger Proposal -- whereby AIG, through AIGF, would acquire
100% of the outstanding capital stock of American Bankers in exchange for a
combination of AIG stock and cash totaling $47.00 per share. The total value of
the transaction was estimated in the Release to be approximately $2.2 billion.
The price offered pursuant to the AIG Merger Proposal represented a mere $2.75
per share -- or 6% -- premium above the previous day's closing price of American
Bankers common stock on the New York Stock Exchange. A copy of the Release is
attached hereto as Exhibit A.
28. The Release also revealed that in connection with the AIG Merger
Proposal, American Bankers had issued an option to AIG to purchase up to 19.9%
of American Bankers common stock -- the sole purpose for which is to improperly
deter any competing bidders for American Bankers and to bolster support for
AIG's economically inferior proposal. In this same vein, officers and directors
of American Bankers who together held approximately 9% of American Bankers
common stock were said to have already agreed to vote in favor of the AIG Merger
Proposal. The
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AIG Merger Proposal was, according to the Release, expected to close "early in
1998," but few other terms of the transaction were disclosed in the Release or
any other document disseminated by American Bankers or AIG at the time.
American Bankers Files A Form 8-K
Attaching The AIG Merger Agreement
29. On January 13, 1998 -- more than three weeks following issuance of the
Release -- American Bankers filed with the Securities and Exchange Commission a
Form 8-K, disclosing, for the first time, the terms of the AIG Merger Proposal
and attaching as exhibits the AIG Merger Agreement; a Stock Option Agreement
(the Lock-Up Option) and a Voting Agreement. Copies of the AIG Merger Agreement,
the Lock-Up Option and the Voting Agreement are attached hereto as Exhibits B, C
and D.
The AIG Merger Agreement Attempts To Lock up
A Transaction With AIG At An Inferior Price And Impede The
Financially Superior Bid From Cendant And Season Acquisition
30. The price to be received by American Bankers's shareholders in the AIG
Merger Proposal provides a minuacule control premium (6%) over the price at
which American Bankers shares were trading on the day it was made, and is by no
means the best value that the directors could expect to receive. Incredibly,
American Bankers admits in the Proxy Statement that it accepted AIG's lowball
price despite
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Case No. 98-0159-CIV-MOORE
the fact that its financial advisor "was not requested to and did not approach
third parties or hold discussions with third parties to solicit indications of
interest in the possible acquisition of American Bankers." The Board's failure
to use the AIG Merger Proposal as a market test to verify that a fair value was
being paid by AIG or to attract the highest available bid was in violation of
their fiduciary duties.
31. Besides failing to make ant attempt to determine if the price offered
by AIG was a fair market value, the directors of American Bankers, who will be
given continuing positions on the board of directors of the merged entity, have
unlawfully attempted to end bidding for the Company before it could begin by
approving and effecting an astonishing array of potent defensive devices in the
AIG Merger Proposal designed to prematurely "lock up" the merger with AIG and
deter any third parties from consummating any transaction, even if offering
higher value to the Company's shareholders. Among these unlawful defense devices
were a Lock-Up Option granting AIG the right to purchase 19.9% of the
outstanding American Bankers shares in the event of a competing acquisition
proposal; a "no-shop" provision which purports to prohibit the Board from even
considering any other bids -- no matter how high the price -- for a period of
120 days; an agreement that American Bankers may not terminate the AIG Merger
Agreement for 180 days, except under extremely limited circumstances
inapplicable here; a "break-up" fee of at least $66
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million to be paid to AIG if the AIG Merger Proposal is not consummated; and an
undertaking to exempt the AIG Merger Proposal from the American Bankers "poison
pill" Rights Plan and an agreement to extend the life of the Rights, currently
scheduled to expire on March 10, 1998, thus deterring any acquisition proposals
not approved by the Board.
Gaston And Landon Have Already
Agreed To Vote Their Shares
In Favor Of The AIG Merger Proposal
32. Concurrently with the Board's approval of the AIG Merger Agreement,
defendants Gaston and Landon entered into the Voting Agreement, whereby they
have agreed to vote all of their American Bankers stock "(a) in favor of
adoption and approval of the [AIG] Merger Agreement . . . and (b) against any
action or proposal that would compete with or could serve to materially
interfere with, delay, discourage, adversely affect or inhibit the timely
consummation of the [AIG Merger Proposal]." According to the American Bankers
Form 8-K, as amended, the shares irrevocably committed to AIG pursuant to the
Voting Agreement amount to approximately 8.2% of the outstanding shares of
American Bankers.
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American Bankers Has Granted AIG A
"Lock-Up" Option For Nearly 20% Of
American Bankers Outstanding Stock
33. In connection with the AIG Merger Agreement, American Bankers and AIG
have entered into a Stock Option Agreement pursuant to which American Bankers
has granted AIG an option, exercisable under certain conditions, to purchase
8,265,626 newly issued shares of American Bankers common stock at an exercise
price of $47.00 per share. The Lock-Up Option represents 19.9% of American
Bankers' outstanding common stock as of December 21, 1997.
34. The Lock-Up Option becomes exercisable by AIG in the event that, among
other circumstances:
a. any person or group commences a tender offer for at least 15% of
American Bankers stock;
b. any person announces publicly or delivers to American Bankers a
proposal for the purchase of 15% or more of American Bankers's
assets or of any class of American Bankers securities; or
c. any person solicits, or announces an intention to solicit, proxies
or consents from American Bankers shareholders for election of
directors or to oppose the AIG Merger Proposal.
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35. Because the Lock-Up Option was triggered by the Season Tender Offer,
AIG awaits only required regulatory approval to be able to exercise the option
and purchase 19.9% of the Company's stock. The Lock-Up Option is designed for
the sole purpose and effect of precluding consummation of any superior bid for
American Bankers, including the Cendant Bid, in that AIG could use the 19.9%
stake, along with the 8.2% block it directs pursuant to the Voting Agreement, to
block any competing bids for American Bankers and to unfairly skew the vote
statutorily required by the Florida corporation law in favor of its own merger
proposal, thereby attempting to guarantee the success of its economically
inferior proposal. In fact, AIG has already invoked the threat of directing
28.1% of the vote in an attempt to sour shareholder interest in the economically
superior Season Tender Offer. The Option Announcement implies that AIG's control
of enough shares to tank the Season Tender Offer and to skew the vote on the AIG
Merger Proposal in its favor is inevitable, making an American Bankers
shareholder's tender to Season Acquisition futile.
36. The chilling effect of the Lock-Up Option is exacerbated by Article
VIII of American Bankers' Third Amended and Restated Articles of Incorporation
(the "Charter") and Section 607.0901 of the Florida Business Corporation Act
(the "Act"). If the Board of American Bankers refuses to approve the Season
Tender
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Offer or the Season Merger, both the Charter and the Act would operate to permit
AIG to veto the proposed second-step merger with Season Acquisition upon
completion of the Season Tender Offer, a result that effectively would prevent
the acquisition of control of American Bankers, even if more than 50% of the
Company's shareholders tender their shares in response to the Season Tender
Offer. Consequently, the Lock-Up Option, along with the Charter and the Act,
effectively permit AIG to block any and a11 competing bids no matter how
favorable to the Company's shareholders.
37. The Lock-Up Option provides no economic or other benefit to American
Bankers or its shareholders. Its only purpose is to deter other bids. AIG does
not want to be a 19.9% shareholder of American Bankers and American Bankers does
not want AIG as a 19.9% shareholder. This is shown by the provisions of the
Lock-Up Option that (a) permit AIG to sell the option shares it acquires back to
the Company in the event the AIG Merger Agreement terminates; and (b) allow the
Company to repurchase the option shares acquired by AIG in the event no person
obtains control of American Bankers within one year following termination of the
AIG Merger Agreement.
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Case No. 98-0159-CIV-MOORE
American Bankers Agrees Not To
Consider Any Other Offers
38. While the Lock-Up Option is, itself, a virtually insuperable barrier
to competing bids, the defendant directors have created further impediments to
competing bids in further breach of fulfillment of their fiduciary duty to
maximize the value to be obtained in the sale of the Company. More specifically,
Section 6.2 of the AIG Merger Agreement contains a "no-shop" provision that
purports to prohibit the Board from entertaining any competing bids for a period
of 120 days from the date of the AIG Merger Proposal. Pursuant to that
provision, the directors are flatly prohibited from: (a) initiating, soliciting,
encouraging or otherwise facilitating any inquiries or the making of any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation or similar transaction; or (b) engaging in any negotiations
concerning, or providing any confidential information or data to, or having any
discussions with, any person relating to an acquisition proposal or otherwise
facilitating any effort or attempt to make or implement an acquisition proposal
(the "No-Shop Provision").
39. The No-Shop Provision reflects a complete abdication of the directors'
fiduciary obligations under Florida law. It is also highly unusual, in that it
prohibits the Board from considering any competing proposal for 120 days under
any
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circumstances -- regardless of whether the competing proposal is demonstrably
and significantly more favorable to American Bankers shareholders than the AIG
Merger Proposal. Given that the Company and AIG have announced in the Proxy
Statement that they can consummate the AIG Merger Proposal in March 1998, i.e.,
within 120 days of signing the AIG Merger Agreement, the No-Shop Provision
unquestionably is designed and intended to make the AIG merger a fait accompli,
without regard to whether it represents the best available transaction for the
shareholders of American Bankers.
The Board Has Agreed To An Unreasonable
Termination Provision And Break-Up Fee
40. As if the No-Shop Provision, Voting Agreement, and Lock-Up Option were
not enough to deter competing bids for American Bankers and to ensure the
success of the AIG Merger Proposal, American Bankers has acquiesced to a
termination provision (the "Termination Provision") in the AIG Merger Agreement
that provides that even if the shareholders of American Bankers resoundingly
reject the AIG Merger Proposal, American Bankers is stuck with that contract and
cannot terminate it until 180 days -- 6 months -- after the date of its
execution, providing AIG with a continuing advantage over any other bidder by
effectively allowing AIG a continuing right of first refusal.
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41. The only way that American Bankers could terminate the AIG Merger
Agreement prior to the 180 day period would be if the American Bankers
shareholders fail to approve the AIG Merger Proposal and if no "Acquisition
Proposals" are made prior to the time of the shareholder vote; the Season Tender
Offer qualifies as an Acquisition Proposal under the AIG Merger Agreement and
therefore this lone exception cannot apply here.
42. AIG, by contrast, has several circumstances under which it can
terminate the AIG Merger Agreement, and collect a windfall by doing so. For
example, if the AIG Merger Proposal is rejected by the Company's shareholders in
the face of a competing acquisition proposal, like the Season Tender Offer, AIG
may terminate the AIG Merger Agreement and collect from American Bankers a
"termination fee" of $66 million dollars -- 3% of the total value of the AIG
Merger (the "Break-Up Fee").
43. The Break-Up Fee bears no reasonable relation to either the costs to
AIG in making its proposal or to any effort by the Board to ensure that the
American Bankers shareholders receive the best available price for their shares.
The sole or primary purpose of the Break-Up Fee is to chill interest by
competing bidders by forcing them to effectively pay a $66 million penalty for
topping AIG's bid.
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The Board Has Agreed To Terminate
Its Poison Pill Only For The AIG Merger Proposal
44. American Bankers also has a shareholder Rights Plan, commonly known as
a "poison pill," to deter unsolicited takeover attempts. Pursuant to the Rights
Plan, each share of American Bankers common stock comes with a "Right." The
Rights Plan provides that, absent appropriate action by the Board, the Rights
will "detach" and be separately distributed to shareholders within 10 days of
the commencement of acquisition proposals such as the Season Tender Offer. Ten
days after distribution, the Rights become non-redeemable. If the Rights are not
redeemed by the Company's Board and the Season Tender Offer were to close, the
Rights Plan would allow all Rights holders, except for Cendant and Season
Acquisition (whose Rights would be null and void) to acquire additional shares
of American Bankers at a 50% discount, significantly diluting Cendant and Season
Acquisition's ownership of American Bankers stock and making any acquisition of
the Company prohibitively expensive for Cendant and Season Acquisition.
Alternatively, if American Bankers were to merge with and into Season
Acquisition, the Rights Plan would allow all Rights holders to acquire shares of
Cendant at a 50% discount, inflicting the same kind of substantial financial
penalty that would deter the Cendant Bid. Pursuant to an
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amendment to the Rights Plan provided for in the AIG Merger Agreement, however,
the Rights Plan does not apply to the AIG Merger Proposal.
45. If the American Bankers Board does not redeem the Rights or take other
appropriate action to prevent the Rights from impeding the Cendant Bid, the
Rights will become non-redeemable on February 17, 1998 absent the issuance of
injunctive relief. Triggering of the Rights would either substantially dilute
the holdings of Cendant and Season Acquisition in American Bankers upon closing
of the Season Tender Offer, making it prohibitively expensive, or inflict a
tremendous penalty on Cendant upon any acquisition of American Bankers by
merger. Accordingly, absent injunctive relief, the Cendant Bid cannot be
completed unless the American Bankers Board redeems the Rights or amends the
Rights Plan to make it inapplicable to either the Season Tender Offer or the
Season Merger. Failure to take such action prevents the shareholders of American
Bankers from deciding for themselves the merits of the Cendant Bid.
46. While the Rights Plan is scheduled to expire on March 10, 1998,
American Bankers has committed itself in the AIG Merger Agreement, to extending
the Rights Plan, or adopting a new Rights Plan with identical terms, at AIG's
request. Through this agreement, the Board of American Bankers has abdicated its
fiduciary
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obligations in connection with the Rights Plan by placing an important decision
regarding its shareholders' rights in the hands of a third party -- AIG.
The Company's Defensive
Arsenal Constitutes A
Breach Of The Directors' Duties
47. In the process of agreeing to adopt and implement the panoply of
takeover defenses described above, including the Lock-Up Option, the No-Shop
Provision, the Termination Provision, the Break-Up Fee, and the Rights Plan (the
"Takeover Defenses"), the Board failed adequately to inform themselves of all
relevant facts and circumstances. The illicit Takeover Defenses cannot be
justified as needed to induce a bidder to make an offer for American Bankers;
cannot be justified as needed to secure an enhanced price in the context of an
ongoing bidding contest; and cannot otherwise be justified as a reasonable means
of securing whatever advantage the Board perceived would be provided by a deal
with AIG at $47.00 per share. Consequently, the Board breached its fiduciary
duties when it approved the Takeover Defenses and it continues to breach its
fiduciary duties in not dismantling them.
48. The Board of American Bankers agreed to the Takeover Defenses (a)
despite its knowledge that potential acquirers other than AIG (including Cendant
or its affiliates) were interested in making offers to acquire the Company; (b)
after refusing to obtain indications whether such alternative buyers would offer
terms more
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attractive to American Bankers shareholders than those offered by AIG, and (c)
despite its knowledge that the Takeover Defenses would prevent the Company's
shareholders from receiving a substantial premium for relinquishing control of
American Bankers. Thus, in direct breach of their fiduciary duties, the
Company's directors have actually punished their own shareholders by rewarding
AIG for making a lowball bid and deterring other interested parties from making
higher offers.
AIG Belatedly Files A Materially
False And Misleading Schedule 13D
49. On January 16, 1998, fifteen days after it was legally obligated to do
so, AIG belatedly filed a Schedule 13D with the SEC disclosing its beneficial
ownership of the American Bankers shares subject to the voting Agreement, i.e.,
8.2% of the shares outstanding.
50. The Schedule 13D is materially false and misleading in that AIG has
failed to disclose, as it must under Section 13(d) of the Exchange Act, that
AIG's Chairman of the Board, Greenberg, is a person "controlling" AIG, i.e., a
person who has "possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a person, whether through the
ownership of voting securities, by contract or otherwise." 17 C.F.R. ss.
240.12b-2. Greenberg exercises control over AIG through, among other things,
control of approximately 30 percent
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of the outstanding shares of common stock of AIG, a portion of which is held
directly -- and nominally -- by Starr International Company, Inc. ("Starr
International"), The Starr Foundation ("Starr Foundation") and C.V. Starr & Co.,
Inc. ("C.V. Starr") -- private companies that Greenberg controls, and by other
AIG officers and directors, whom Greenberg also controls. More specifically:
o Greenberg controls Starr International, which owns 16.1% of the
outstanding shares of AIG. Although not revealed in the Schedule
13D, Greenberg is the owner of 9.09% of the voting stock of Starr
International and is the Chairman of Starr International's Board,
which is comprised entirely of officers and employees of AIG or its
affiliates who have been hand-picked and are controlled by
Greenberg, on whom they depend for their continuing positions at
AIG, and who collectively hold approximately 64% of the voting stock
of Starr International. Accordingly, Greenberg and his underlings
effectively control Starr International and its 16.1% of AIG.
o Greenberg also controls C.V. Starr, which owns 2.40% of the
outstanding shares of AIG. Although not revealed in the Schedule
13D, Greenberg is the owner of 24.39% of the common stock of C.V.
Starr and the President, Chief Executive Officer and a member of the
C.V. Starr Board, which is comprised entirely of officers and
employees of AIG or its affiliates who have been hand-picked and are
controlled by Greenberg, on whom they depend for their continuing
positions at AIG, and who collectively hold approximately 70% of
C.V. Starr's common stock. Accordingly, Greenberg and his underlings
control C.V. Starr and its 2.4% of AIG.
o Greenberg also controls Starr Foundation, which owns approximately
3.60% of the outstanding shares of AIG. Although not revealed in the
Schedule 13D, Greenberg is the
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Chairman of Starr Foundation and he controls its Board of Directors,
most (if not all) of which is comprised of officers or employees of
AIG or its affiliates who have been hand-picked and are controlled
by Greenberg, on whom they depend for their continuing positions at
AIG. Accordingly, Greenberg and his underlings control Starr
Foundation and its 3.6% of AIG.
o Approximately 4.6% of the outstanding shares of AIG are owned by
officers and directors who are appointed, and therefore controlled
by, Greenberg.
o Greenberg is Chairman and Chief Executive Officer of AIG; he has
admitted in various public filings to direct ownership of 2.28% of
the outstanding shares of AIG.
51. Greenberg's position as Chairman and Chief Executive Officer of AIG
and his control over almost one-third of that corporation's stock gives him the
power, directly and indirectly, to direct or cause the direction of the
management and policies of AIG. These material facts, which are legally required
to be disclosed, have been illegally omitted from AIG's Schedule 13D. As a
result, the shareholders of American Bankers remain unaware that Greenberg
controls AIG, and that he would effectively control American Bankers in the
event it is merged with AIG.
THE CENDANT BID
52. The Season Tender Offer, commenced January 28, 1998 (the day after the
original complaint in this action was filed), seeks 51% of the common shares of
American Bankers, in exchange for $58.00 per common share in cash. As soon as
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practicable after the tender offer doses, it is anticipated that Cendant,
through Season Acquisition, will acquire the balance of the Company's
outstanding common shares by means of the Season Merger with American Bankers,
whereby all non-tendering American Bankers common shareholders would receive
Cendant stock with a value equal to the Season Tender Offer price, $58.00 per
share. Under the Season Tender Offer and Season Merger, the common shareholders
of American Bankers would receive aggregate consideration of approximately $2.7
billion, approximately half a billion dollars more than anticipated by the AIG
Merger Proposal.
53. The Season Tender Offer as expressly contingent upon satisfaction of
certain conditions, including: (a) the tender of at least 51% of the outstanding
common shares of American Bankers common stock on a fully diluted basis; (b)
entry of an order invalidating the Lock-Up Option; (c) Board approval of the
Season Offer and Season Merger pursuant to the Charter and the Act; and (d)
redemption of the Rights or amendment of the Rights Plan to make it inapplicable
to the Season Tender Offer and Season Merger.
54. By letter to the American Bankers Board dated January 27, 1998,
Cendant has indicated its strong preference to enter into a merger agreement
with American Bankers containing substantially the same terms and conditions
(other than price and inappropriate terms) as those contained in the AIG Merger
Agreement. The
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American Bankers Board, however, has thus far declined to meet with Cendant or
any of its subsidiaries or affiliates, including Season Acquisition, much less
consent to the form of merger agreement proposed in the letter. Instead, the
Board has merely announced in a press release that it would consider the Season
Tender Offer "in due course."
The Option Announcement
55. On January 27, 1998, the same day on which Cendant launched its bid,
AIG issued a press release stating that it had "given notice to American Bankers
Insurance Group (ABIG) of its intention to exercise its contractual right to
acquire 19.9 percent of ABIG Common Stock at $47.00 per share, subject to
receipt of regulatory approvals." This statement was calculated by AIG to create
the impression that it had given "notice" within the meaning of the Lock-Up
Option, i.e., written notice by AIG to American Bankers pursuant to Section 1(b)
of the Option "specifying a date . . . not later than 10 business days and not
earlier than three business days following the date such notice is given for the
closing of such purchase (the "Stock Exercise Notice"). In this way, AIG has
attempted to materially mislead the market into believing that it will be
"closing" on the Option within three to ten business days, with the attendant
ability to block and frustrate the Cendant Bid in that same time frame. In
reality, AIG will not be in a position to lock-up its merger that quickly
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because, contrary to the message it has delivered to the Company's shareholders,
AIG is prohibited from obtaining any Option shares prior to, among other things,
expiration or termination of AIG's waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and receipt of the other regulatory
approvals, including insurance regulatory approvals, required to be obtained by
AIG prior to the delivery of the shares, events which AIG knew would not occur
on or before the expiration of ten business days from AIG's issuance of the
Option Announcement. Nevertheless, AIG is creating the misleading impression
that the Lock-Up Option will be exercised far sooner in an attempt to condition
the Company's shareholders to believe that the AIG Merger will be approved by
all the insurance and other regulatory authorities, and therefore can be
consummated by the date the meeting of the shareholders is to be held.
American Bankers And AIG
Jointly File The Proxy Statement
56. On January 30, American Bankers and AIG jointly filed the Proxy
Statement along with AIG's Form S-4 registration statement, which registered the
AIG shares intended to be issued and exchanged for American Bankers shares
pursuant to the AIG Merger Proposal. The Proxy Statement, which schedules
preferred and common shareholder votes on the AIG Merger for March 4 and 6,
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1998, respectively, contains numerous materially false and misleading statements
in an attempt to deceive American Bankers stockholders into believing that a
transaction with AIG can close as soon as a vote can be held, and that the
Cendant Bid cannot succeed.
57. The Proxy Statement repeats the materially false and misleading
disclosures made in the Option Announcement that AIG "sent a notice to American
Bankers exercising its option" under the Lock-Up Option. Like the Option
Announcement, this statement in the Proxy Statement creates the false and
misleading impression that AIG will be "closing" on the Option within three to
ten business days.
58. The Proxy Statement also falsely states that American Bankers and AIG
"expect to complete the Merger during March 1998." The Proxy Statement omits to
disclose any facts supporting the claim that a closing in March can occur given
required regulatory approvals. Although the Proxy Statement also states that AIG
has "made all applicable filings" for insurance regulatory approval, in fact
AIG's insurance regulatory filings are not complete in some states, while in
other states the regulatory authorities have requested that AIG file
supplemental information, which, on information and belief, AIG has not yet
done. The omission of this information violates Item 14(a)(9) of Schedule 14A,
which requires a proxy statement to disclose the status of any federal or state
regulatory approval process. And Greenberg, who
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controls AIG directly and through other entities that he controls, has, upon
information and belief, failed to even apply for regulatory approval, as he must
under applicable regulations. In light of the delays that will result from
these incomplete or tardy filings and the time it will take to grant insurance
regulatory approval, including a hearing process in certain jurisdictions, there
is no reasonable basis to believe that the AIG Merger can reasonably be expected
to close in the first quarter of 1998, and defendants' statement that they will
consummate the AIG Merger Agreement in March 1998 is materially false and
misleading.
59. The Proxy Statement also seeks to conceal from American Bankers
shareholders the source of the "expense savings" to be achieved through the AIG
Merger. The Proxy Statement nowhere specifies how the "expense savings" will be
achieved and falls to disclose that AIG's contemplated cost savings are likely
to be accomplished, among other ways, through elimination of jobs and
termination of employees of American Bankers, including those in Florida. The
failure to disclose this material information constitutes a violation of
Sections 14(a) and 14(e) of the Exchange Act.
60. In seeking to further the impression that the AIG Merger is a fait
accompli, the Proxy Statement also is materially misleading in its description
of the extant voting arrangements between American Bankers management and AIG.
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Specifically, the Proxy Statement claims that "approximately 16.0% of the number
of shares of Common Stock required for approval of the Merger have contractually
agreed to vote in favor of the Merger." In reality, pursuant to the Voting
Agreement, 8.2% is the true percentage of the outstanding American Bankers
shares "contractually committed" to vote for AIG, and the higher percentage
touted by defendants is intended to create the erroneous impression that
approval of the AIG Merger Proposal is a foregone conclusion.
61. In this same vein, the Proxy Statement describes at length the Lock-Up
Option, and the false and misleading Option Announcement, but fails to disclose
that AIG will not be able to vote any of the shares that it may obtain pursuant
to the Lock-Up Option in favor of the AIG Merger Proposal, because AIG did not
beneficially own those shares prior to or on the record date.
62. Like AIG's Schedule 13D, the Proxy Statement is also false and
misleading in that it fails to reveal that AIG is controlled by Greenberg,
directly and through Starr International, Starr Foundation and C.V. Starr. This
material fact is omitted despite a lengthy description of AIG's capital stock in
the Proxy Statement. No warning is given to the shareholders of American Bankers
that, should the AIG Merger Agreement be consummated, the Company issuing stock
in the AIG merger -- AIG -- is controlled by Greenberg.
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63. The Proxy Statement also attempts to conceal the bases on which the
inadequate financial terms of the AIG Merger were approved. In connection with
its review of the AIG Merger Proposal, the American Bankers management prepared
"revised" internal projections that contained lower estimates of revenue and
income. These lower projections were also provided to the American Bankers
financial adviser, Salomon Smith Barney, in order to obtain its fairness
opinion. The Proxy Statement falsely and misleadingly presents the opinion of
Salomon Smith Barney, however, without disclosing the extent to which the
financial adviser employed and relied on the lower "revised" projections in its
analyses, and whether the fairness opinion could have been given or whether the
analyses would have materially changed had the unrevised, higher projections
been used.
64. The Proxy Statement also mentions some of the bases of evaluation of
the fairness of the AIG Merger Proposal made by the Company's financial adviser.
For example, the financial adviser relied on supposed "comparative analyses";
yet neither the transactions in the insurance industry nor the public insurance
companies analyzed are remotely "comparable" to American Bankers or the AIG
Merger Proposal. Only one of the insurance industry transactions reviewed was
similar to the AIG Merger Proposal in size, and none of those transactions
involved comparable businesses to AIG and American Bankers. Nor were the
"selected public
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companies" similar in business to American Bankers. These hand-picked
comparisons could not form a reasonable basis for accepting the inferior AIG
Merger Proposal price.
IRREPARABLE INJURY
65. Absent relief from this Court, American Bankers and AIG may complete
the AIG Merger Proposal without allowing the shareholders to fairly consider and
choose from other, financially superior offers, including the Cendant Bid.
Cendant and the Company's other shareholders therefore will suffer irreparable
injury in that defendants' unlawful actions, unless enjoined, will deprive
Cendant and Season Acquisition of the unique opportunity to acquire American
Bankers and the other shareholders will be unable to obtain the best available
value for their shares. In addition, in the absence of an order granting the
relief requested, American Bankers shareholders and the investing public will
continue to be fed materially misleading information and denied material
information to which they are lawfully entitled under the federal securities
laws and which is essential to informed decision making with respect to
purchasing, selling and voting American Bankers stock.
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FIRST CLAIM FOR RELIEF
(Breach of Fiduciary Duty of Due Care
Against the American Bankers Directors)
66. Plaintiffs repeat and reallege the preceding paragraphs as if fully
set forth herein.
67. Directors of a corporation are fiduciaries. They owe a duty of care to
the corporation and its shareholders.
68. The directors of American Bankers have breached their duty of care by,
among other actions:
a. approving the AIG Merger Agreement and the Takeover Defenses without
making adequate efforts to determine whether those agreements, as
opposed to any other offer or potential offer for control of
American Bankers, including the Season Acquisition Offer and Merger,
were in the best interests of the American Bankers shareholders;
b. Failing adequately to inform themselves of, or adequately to
consider, potential transactions available to American
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Bankers before voting upon and approving the AIG Merger Agreement
and the Takeover Defenses;
c. falling adequately to inform themselves, or adequately to consider,
the effect of the AIG Merger Proposal and the Takeover Defenses upon
American Bankers's ability to obtain better offers and upon the
interests of American Bankers shareholders; and
d. falling adequately to inform themselves as to the probable
illegality of several provisions of the AIG Merger Agreement and the
Takeover Defenses.
69. Accordingly, approval of the AIG Merger Agreement and the Takeover
Defenses violated the American Bankers directors' fiduciary duty of care, and
are therefore void and unenforceable.
70. Plaintiffs have no adequate remedy at law.
SECOND CLAIM FOR RELIEF
(Breach of Fiduciary Duty to Sell the Company
for the Highest Price Against American Bankers and its Directors)
71. Plaintiffs repeat and reallege the preceding paragraphs as if fully
set forth herein.
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72. The AIG Merger Proposal would shift control of American Bankers to AIG
and end American Bankers's separate corporate existence. Thus, before agreeing
to the Takeover Defenses in the agreement with AIG, the Board had to adequately
discharge its duty of care to determine if the bid made by AIG offered the best
available price and other terms.
73. The Cendant Bid demonstrates that the AIG Merger Proposal is
inadequate, and that American Bankers' directors acted in breach of their duties
by entering into the AIG Merger Proposal and adopting the Takeover Defenses that
were designed to ensure AIG's success.
74. American Bankers's swift acceptance of AIG's bid, without even
engaging in discussions with Cendant or its affiliates, despite its expression
of serious interest to defendant Gaston, the President of the Company,
demonstrates that American Bankers's directors failed to take adequate steps to
ensure that the Company's shareholders would receive the best possible price and
terms for their shares.
75. Despite American Bankers's lack of knowledge as to whether AIG's bid
represented the best possible transaction, American Bankers entered into the AIG
Merger Agreement and the Takeover Defenses with the purpose and intent of
foreclosing or unreasonably burdening any higher bid. By entering into the AIG
Merger Agreement and the Takeover Defenses without adequate knowledge and
information to reasonably
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conclude that AIG's bid constituted the best available offer, and by impeding
any competing offers for American Bankers, including the Cendant Bid, American
Bankers' directors have breached their duty of care under applicable law, and
the AIG Merger Agreement and the Takeover Defenses are thereby void and
unenforceable.
76. Plaintiffs have no adequate remedy at law.
THIRD CLAIM FOR RELIEF
(Breach of Fiduciary Duty to Conduct a Proper Sale
Against American Bankers and its Directors)
77. Plaintiffs repeat and reallege the preceding paragraphs as if fully
set forth herein.
78. In considering the AIG Merger Proposal, which involves a change in
control, the American Bankers directors were required to act reasonably under
the circumstances. In treating different bidders unequally in the ways stated
above, the American Bankers directors could comply with their duties only if
their conduct was reasonably related to achieving the best price available to
shareholders.
79. There was no basis for the Board to conclude that the AIG Merger
Agreement represented the best available alternative for American Bankers and
its shareholders. There was no basis for the Board to conclude that the unequal
treatment of Season Acquisition and AIG is or was reasonably related to
achieving the best price
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available. The fact that no such basis ever existed is amply demonstrated by
(among many other facts):
a. Cendant's emergence as a serious, bona fide bidder attempting to
negotiate an alternative transaction, and American Bankers's refusal
to attempt to determine (through good faith discussions) whether
Cendant would offer a transaction superior to AIG's;
b. the nature, structure and massive size of the Takeover Defenses and
the burden they place on competing bids;
c. the Board's failure to contact Cendant or any of its subsidiaries or
affiliates, including Season Acquisition, about a possible
transaction with American Bankers, despite knowing of Cendant's
interest in such a transaction;
d. the Board's failure to make adequate efforts to determine whether
any other party would make a bid superior to AIG's; and
e. the Board's failure to properly canvass the market before agreeing
to sell the Company to AIG; and
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f. the Board's failure to negotiate with AIG a merger agreement
permitting the Board to entertain superior acquisition proposals
prior to submission of the AIG Merger Proposal to a vote of the
Company's shareholders.
80. Under the circumstances, the approval of and adherence to the AIG
Merger Agreement and the Takeover Defenses were and are violations of the
fiduciary duties owed by the American Bankers directors. For the same reasons,
the other measures the American Bankers Board has taken in treating Cendant and
AIG unequally, including with respect to the Rights Plan, the Charter, the Act
and other structural defenses, are breaches of duty.
81. Plaintiffs have no adequate remedy at law.
FOURTH CLAIM RELIEF
(Civil Conspiracy to Commit a Breach of
Fiduciary Duty against AIG and AIGF)
82. Plaintiffs repeat and reallege the preceding paragraphs as if fully
set forth herein.
83. AIG and AIGF knowingly conspired with American Bankers and its
directors to commit the unlawful breaches of fiduciary duty by American Bankers
and its directors detailed above. AIG and AIGF knew that American Bankers and
its
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directors owed fiduciary duties of care and loyalty to the shareholders of
American Bankers, including a duty to, once deciding to sell American Bankers,
obtain the best available price and other terms for the American Bankers
shareholders. Despite this knowledge, and in furtherance of the conspiracy, AIG
and AIGF, among other overt acts, negotiated and entered into the AIG Merger
Agreement, the Lock-Up Option, and the Voting Agreement, contracts containing
terms that purport to compel the Company's directors to abdicate their fiduciary
responsibilities to the shareholders.
84. As AIG well knows, the AIG Merger Agreement, Lock-Up Option and Voting
Agreement were designed and intended to enable AIG to acquire control of
American Bankers at a price well below what other bidders are willing to pay and
to preclude other bidders from successfully topping AIG's inadequate proposal.
In seeking and obtaining this result, AIG and AIGF have conspired with the
defendant directors to commit the above-mentioned breaches of fiduciary duty to
the irreparable detriment of the American Bankers shareholders.
85. Plaintiffs have no adequate remedy at law.
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Case No. 98-0159-CIV-MOORE
FIFTH CLAIM FOR RELIEF
(For Violations of Section 13(d) of
the Exchange Act and the Rules and
Regulations Promulgated Thereunder Against AIG)
86. Plaintiffs repeat and reallege the preceding paragraphs as if fully
set forth herein.
87. Section 13(d) of the Exchange Act and Rule 13d-l thereunder provide
that any person who acquires, directly or indirectly, beneficial ownership of
more than 5 percent of any class of equity security of an issuer registered
under Section 12 of the Exchange Act, shall, within 10 days after such
acquisition, send to the issuer and file with the SEC and any exchange where the
security is traded, a Schedule 13D pursuant to the SEC's Rule 13d-1 setting
forth, among other things, the identity of the person who beneficially owns more
than 5 percent of the issuer's stock and, in the event such person is a
corporation, the identity of each person controlling such corporation.
88. The purpose of Section 13(d) is, among other things, to permit
companies, their shareholders and the investing public generally to (i) be aware
of accumulations of blocks of stock in excess of 5 percent of the outstanding
shares of any equity security, and (ii) ascertain the background of, and other
pertinent information relating to, the holders of such blocks -- and the persons
who control such holders -- with respect to the particular issuer in question,
all with a view toward enabling
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shareholders and the public to make informed investment decisions based upon
full disclosure of all relevant and material information concerning issuers and
those in a position to assert control over them.
89. On January 16, 1998, defendant AIG filed a Schedule 13D with the SEC
disclosing that it is the beneficial owner of 8.2 percent of the outstanding
common shares of American Bankers common stock -- the shares that are subject to
the Voting Agreement. The Schedule 13D does not disclose, however, that
Greenberg is a person controlling AIG -- an omission that constitutes a
violation of Section 13(d) of the Exchange Act and the rules and regulations
promulgated by the SEC thereunder. AIG thus has deprived the shareholders of
American Bankers and the investing public of the material information that they
are entitled to receive.
90. Plaintiffs have no adequate remedy at law.
SIXTH CLAIM FOR RELIEF
(For Violations of Section 14(a) of the
Exchange Act and the Rules and Regulations
Promulgated Thereunder Against All Defendants)
91. Plaintiffs repeat and reallege the preceding paragraphs as if fully
set forth herein.
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92. Section 14(a) of the Exchange Act provides that no person may make a
solicitation of any proxies in contravention of such rules and regulations as
the SEC may prescribe for the protection of shareholders.
93. Rule 14a-9 promulgated by the SEC pursuant to Section 14(a) of the
Exchange Act prohibits any person making a solicitation by means of a written or
oral communication containing a false or misleading statement with respect to
any material fact, or which omits to state any material fact necessary to make
the statements made not false or misleading.
94. The Option Announcement is a materially misleading proxy solicitation
by AIG which fails to state material facts necessary to make the American
Bankers shareholders aware that despite its claims, AIG cannot buy shares
pursuant to the Lock-Up Option until it obtains the required regulatory
approvals, which will not be forthcoming within three to ten business days from
the date of the Option Announcement. The failure to disclose this information
violates Section 14(a) and Rule 14a-9 promulgated thereunder.
95. The Proxy Statement is materially false and misleading in that it:
a. claims that AIG has exercised the Lock-Up Option, thereby
misleadingly suggesting that it will obtain the Option shares in
three to ten business days, when in reality the Lock-Up Option
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will not be exercisable until such time as AIG obtains the requisite
regulatory approval, which is not imminent, as the Proxy Statement
suggests;
b. states that American Bankers and AIG expect the AIG Merger Agreement
to close in March 1998, when they know that the likelihood of
receiving all required regulatory approval prior to the second
quarter of 1998 is remote;
c. touts expense savings and synergies to be obtained as a result of
the AIG Merger without disclosing the plans for achieving them and
that in order to accomplish the cost savings desired by AIG, it is
likely that jobs will be eliminated and employees of American
Bankers will be terminated, including those based in Florida;
d. misleadingly misrepresents the number of shares "contractually
committed" to vote in favor of the AIG Merger Proposal;
e. misleadingly implies that AIG will be able to vote the Lock-Up
Option shares at the special meetings of shareholders at which
voting for the AIG Merger Proposal will be held;
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f. misleadingly fails to disclose that AIG is controlled by
Greenberg, directly and through his control of Starr
International, Starr Foundation and C.V. Starr; and
g. conceals the inadequate financial terms of the AIG Merger by,
among other things, presenting the fairness opinion of its
financial adviser, without revealing whether the opinion was
based on projections that were revised by decreasing revenue
and income growth from historical levels solely to create the
illusion that economically the AIG Merger Proposal is "fair"
and to gain approval for the AIG Merger Proposal.
96. Plaintiffs have no adequate remedy at law.
SEVENTH CLAIM FOR RELIEF
(For Violations of Section 14(e) of the
Exchange Act and the Rules and Regulations
Promulgated Thereunder Against All Defendants)
97. Plaintiffs repeat and reallege the preceding paragraphs as if
fully set forth herein.
98. Section 14(e) of the Exchange Act prohibits any person from
making any untrue statement of material fact or omitting to state any material
fact necessary to make the statements made not misleading, or from engaging in
any fraudulent, deceptive
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or manipulative acts in connection with any tender offer or any solicitation of
shareholders in opposition to a tender offer.
99. The Option Announcement and the Proxy Statement are materially
misleading, as alleged above, in violation of Section 14(e) of the Exchange Act.
100. The misrepresentations in the Option Announcement and the Proxy
Statement were made by American Bankers and AIG with knowledge of their false
and misleading nature in order to dissuade American Bankers shareholders from
accepting the Cendant Bid and to coerce them into voting in favor of the AIG
Merger Proposal.
101. Plaintiffs have no adequate remedy at law.
WHEREFORE, Plaintiffs respectfully request that this Court:
A. Declare and decree that the AIG Merger Agreement is unlawful and
void and was entered into in breach of the fiduciary duties of American Bankers
and its directors;
B. Enjoin, temporarily, preliminarily and permanently, AIG, its
officers, employees, agents, nominees and affiliates, and all other persons
acting in concert with them or on their behalf directly or indirectly, from:
(i) acquiring or attempting to acquire any shares of American
Bankers stock;
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(ii) soliciting or arranging for the solicitation of orders to
sell any shares of American Bankers stock;
(iii) voting in person, by proxy or pursuant to the Voting
Agreement any shares of American Bankers stock; and
(iv) soliciting or arranging for the solicitation of proxies,
consents or authorizations with respect to the shares of American Bankers stock
unless and until AIG files a full and complete Schedule 13D with respect to
American Bankers, unless and until such time in the future as the Court may
determine that the effects of AIG's unlawful conduct has dissipated.
C. Enjoin, temporarily, preliminarily and permanently, AIG, AIGF,
their employees, agents and all other persons acting on their behalf from (i)
issuing or causing to be issued false, misleading or omissive statements,
whether written or oral, with respect to any proposed transaction involving
either AIG or AIGF and American Bankers or Cendent or Season Acquisition and
American Bankers; (ii) taking any steps whatsoever to consummate the AIG Merger
Proposal until full corrective disclosure is made regarding the matters
discussed in the Option Announcement and the Proxy Statement; (iii) soliciting
any proxy, consent or authorization with respect to securities of American
Bankers without first complying with the applicable provisions of Sections 14(a)
and 14(c) of the Exchange Act and the Rules promulgated thereunder.
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D. Enjoin, temporarily, preliminarily and permanently, any steps to
carry out, implement or effectuate the AIG Merger Agreement, or to consummate
the AIG Merger Proposal, unless and until: (i) the Lock-Up Option is revoked or
invalidated or waived or otherwise rendered unexercisable; (ii) the No-Shop
Provision is revoked or waived or otherwise invalidated; (iii) the Termination
Provision is revoked or waived or invalidated or otherwise rendered
unexercisable; (iv) the Break-Up Fee is revoked or waived by both American
Bankers and the AIG Defendants or otherwise invalidated; and (v) the Board
affords Cendant and Season Acquisition equal treatment to AIG under the Rights
Plan, the Charter and the Act.
E. Enjoin, temporarily, preliminarily and permanently, any steps to
adopt, carry out, implement or effectuate any extension of the term of the
Rights Plan, any distribution of the Rights or any action that could make the
Rights become exercisable or non-redeemable.
F. Declare and decree that the Lock-Up Option is unlawful, void and
was entered into in breach of the fiduciary duties of American Bankers and its
directors;
G. Enjoin, temporarily, preliminarily and permanently, exercise of
the Lock-Up Option, any payment pursuant to the terms of the Lock-Up Option, or
the voting or sale of any shares obtained by AIG upon any exercise of the
Lock-Up.
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H. Declare and decree that the No-Shop Provision is unlawful, void
and was entered into in breach of the fiduciary duties of American Bankers and
the Board;
I. Enjoin, temporarily, preliminarily and permanently, the No-Shop
Provision;
J. Declare and decree that the Termination Provision is unlawful,
void and was entered into in breach of the fiduciary duties of American Bankers
and the Board;
K. Declare and decree that the Break-Up Fee is unlawful, void and
was entered into in breach of the fiduciary duties of American Bankers and the
Board;
L. Enjoin, temporarily, preliminarily and permanently, payment of
the Break-Up Fee;
M. Declare and decree that the refusal of American Bankers and its
directors to fully and fairly consider the Season Tender Offer constitutes a
breach of their fiduciary duties.
N. Require American Bankers and its directors to take all steps
necessary to provide Cendant and Season Acquisition a fair and equal opportunity
to acquire American Bankers, including furnishing to them the same information
and access to information that was provided to AIG;
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O. Award plaintiffs the costs and disbursements of this action,
including reasonable attorneys fees; and
P. Grant such other and further relief as this Court may deem just
and proper.
Dated: February 2, 1998
Miami, Florida
SHUTTS & BOWEN LLP
1500 Miami Center
201 South Biscayne Boulevard
Miami, Florida 33131
Telephone: 305-353-6300
Facsimile: 305-381-9982
By: /s/ Robert T. Wright,Jr
-------------------------
Robert T. Wright,Jr
Florida Bar No. 185525
John C. Shawde
Florida Bar No. 449784
Attorneys for Plaintiffs
Cendant Corporation and
Season Acquisition Corp.
Of Counsel:
Jonathan J. Lerner
Samuel Kadet
Seth M. Schwartz
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
919 Third Avenue
New York; New York 10022
Telephone: 212-735-3000
Facsimile: 212-735-2000
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Case No. 98-0159-CIV-MOORE
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct copy of the foregoing Amended
Complaint has been served this 2nd day of February, 1998, upon the following:
Via Hand-delivery to: Via Facsimile (w/o exhibits), U.S.
Lewis F. Murphy, Esq. Mail and Federal Express to:
Steel, Hector & Davis LLP Richard H. Klapper, Esq.
Co-Counsel for AIG and AIGF SULLIVAN & CROMWELL
200 South Bisacayne Boulevard Co-Counsel for AIG and AIGF
First Union Financial Center, 125 Broad Street
Suite 40008 New York, New York 10004-2498
Miami, Florida 33131-2398 Facsimile: (212) 558-4000
Via Hand-delivery to: Via Facsimile (w/o exhibits), U.S.
Franklin G. Burt, Esq. Mail and Federal Express to:
Jorden Burt Berenson & Johnson LLP Robert C. Meyers, Esq.
Co-Counsel for American Bankers Dewey Ballantine LLP
and Individual Director Co-Counsel for American Bankers
Defendants and Individual Director Defendants
777 Brickell Avenue 1301 Avenue of the Americas
5th Floor New York, New York 10019-6092
Miami, Florida 33131 Facsimile: (212) 259-6333
By: /s/ Robert T. Wright,Jr
-------------------------
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
98-0168
JOEL L. LOPATE and KAY LOPATE, CIV-MORENO
individually and on behalf of all
others similarly situated, Case No. [ILLEGIBLE]
Plaintiffs,
CLASS ACTION
- v.- COMPLAINT
R. KIRK LANDON, GERALD N. GASTON,
NICHOLAS A. BUONICONTI, ARMANDO M. MAGISTRATE JUDGE
CODINA, PETER DOLARA, BERNARD P. GARBER
KNOTH, JAMES F. JORDEN, DARYL L.
JONES, EUGENE M. MATALENE, JR., FILED BY ___ D.C.
ALBERT H. NAHMAD, NICHOLAS J. ST. 98 JAN 28 AM 10:07
GEORGE, ROBERT C. STRAUSS, GEORGE CARLOS JUENKE
E. WILLIAMSON, II, AMERICAN BANKERS CLERK U.S. DIST. CT.
INSURANCE GROUP INC., AMERICAN S.D. OF FLA.-MIAMI
INTERNATIONAL GROUP, INC. and AIGF, INC.,
Defendants.
Plaintiffs allege, upon information and belief except as to
paragraph 1, which is alleged on knowledge, as follows:
THE PARTIES
1. Plaintiffs Joel L. Lopate and Kay Lopate were at all times
relevant hereto the owners of shares of common stock of American Bankers
Insurance Group, Inc. ("American Bankers" or the "Company").
2. American Bankers is a Florida corporation with its principal
executive offices located in Miami, Florida. American Bankers shares are traded
on the New York Stock Exchange under the symbol "ABI". As of December 31, 1997,
there were approximately 20.8 million shares of
<PAGE> 60
American Bankers common stock outstanding held by approximately 1,532
shareholders of record.
3. Defendant R. Kirk Landon ("Landon") has been Chairman of the
Board of the Company since 1980, and was formerly the Chief Executive Officer of
the Company.
4. Defendant Gerald N. Gaston ("Gaston") is Vice Chairman of the
Board of the Company. Gaston has been President of the Company since 1980 and
Chief Executive Officer since 1996.
5. Defendants Nicholas A. Buoniconti, Armando M. Codina, Peter
Dolara, Bernard P. Knoth, James F. Jorden, Daryl L. Jones, Eugene M. Matalene,
Jr., Albert H. Nahmad, Nicholas J. St. George, Robert C. Strauss, and George E.
Williamson, II are directors of the Company (collectively with Landon and Gaston
said Defendants will be referred to as the "Individual Defendants").
6. Defendant American International Group, Inc. ("AIG") is a
Delaware corporation with its principal executive offices in New York, New York.
AIG is a holding company engaged primarily in the general and life insurance
businesses both in the United States and abroad. AIG is controlled by its
Chairman, Maurice R. Greenberg, a material fact that AIG has wrongfully failed
to disclose in violation of Section 13(d) of the Exchange Act.
7. Defendant AIGF, Inc. ("AIGF") is a Florida corporation wholly
owned by AIG. Pursuant to a merger
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<PAGE> 61
agreement signed by American Bankers, AIG and AIGF in December 1997 (the "AIG
Merger Agreement"), AIG is to acquire American Bankers through a merger of
American Bankers into AIGF, with AIGF to be the surviving corporation in the
merger.
JURISDICTION AND VENUE
8. The claims asserted herein arise under Section 13(d) of the
Exchange Act, 15 U.S.C. ss. 78m(d), and the rules and regulation promulgated
thereunder by the Securities and Exchange Commission (the "SEC"), and the laws
of the State of Florida. This court has jurisdiction over this action pursuant
to Section 27 of the Exchange Act, 15 U.S.C. ss. 78aa; 28 U.S.C. ss. 1331
(federal question); and 28 U.S.C. ss. 1367 (supplemental jurisdiction).
9. This Court has jurisdiction over this action because American
Bankers is located and does business in Florida.
10. Venue is proper in this District pursuant to Section 27 of the
Exchange Act and 28 U.S.C. ss. 1391(b). The claims asserted herein arose in this
District, and the acts and transactions complained of have occurred, are
occurring, and unless enjoined, will continue to occur in this District.
CLASS REPRESENTATION ALLEGATIONS
11. Plaintiffs bring this action pursuant to Rule 23(a) and Rule
23(b)(3) of the Federal Rules of Civil
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<PAGE> 62
Procedure on their own behalf, and on behalf of all other class members
similarly situated in the United States of America. Excluded from the Class are
Defendants, and any person or other entity related to or affiliated with
Defendants.
12. The Class satisfies the requirements of Rule 23(a) --
numerosity, commonality, typicality, and adequacy -- and Rule 23(b)(3) --
predominance and superiority -- for the reasons set forth below.
13. This action is properly maintainable as a class action for the
following reasons:
(a) The Class is so numerous that joinder of all members is
impracticable. As of December 31, 1997, there were approximately 1,532 holders
of record of American Bankers common stock, which stock trades on the New York
Stock Exchange.
(b) Members of the Class are scattered throughout the United
Status and are so numerous that it is impracticable to bring them all before
this Court.
(c) There are questions of law and fact which are common to
the Class and which predominate over questions affecting any individual class
member. The common questions include, inter alia, the following:
(i) Whether defendants have engaged and are continuing
to engage in a plan and scheme to benefit themselves at the expense of the
members of the Class;
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<PAGE> 63
(ii) Whether defendants violated the federal securities
laws;
(iii) Whether the Individual Defendants, as officers
and/or directors of the Company have fulfilled, and are capable of fulfilling,
their fiduciary duties to plaintiffs and the other members of the Class,
including their duties of, loyalty, due care, and candor;
(iv) Whether the defendants have disclosed all material
facts in connection with the challenged transaction; and
(v) Whether plaintiffs and the other members of the
Class would be irreparably damaged were defendants not enjoined from the conduct
described herein;
(d) The claims of plaintiffs are typical of the claims of the
other members of the Class in that all members of the Class will be damaged by
defendants' actions.
(e) Plaintiffs are committed to prosecuting this action and
have retained competent counsel experienced in litigation of this nature.
Plaintiffs are adequate representatives of the Class.
(f) A class action is superior to any other method available
for the fair and efficient adjudication of this controversy since it would be
impractical and undesirable for each of the members of the Class, who has
suffered or will suffer damages, to bring separate actions.
14. Moreover, defendants have acted and will
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<PAGE> 64
continue to act on grounds generally applicable to the Class, thereby making
appropriate final injunctive or corresponding declaratory relief with respect to
the Class as a whole.
SUBSTANTIVE ALLEGATIONS
15. American Bankers 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. 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.
16. On December 22, 1997, American Bankers and AIG jointly announced
that American Bankers was to be purchased by AIG for $2.2 billion in stock and
cash, equivalent to $47 a share ("the AIG Merger Agreement") with AIGF to be the
surviving corporation in the merger.
17. This offer represented a 6.2% premium over American Bankers'
share price the prior trading day.
18. As part of the AIG Merger Agreement, American Bankers
shareholders would receive cash only in certain circumstances and cash would be
paid only to those shareholders requesting it.
19. Also as part of the AIG Merger Agreement, the Individual
Defendants agreed to be barred from talking to
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<PAGE> 65
other bidders for 120 days after the agreement (the "120-day provision").
20. Undisclosed in the AIG Merger Agreement was the fact that
American Bankers had received repeated overtures over the past several years
from Cendant Corporation, formerly known as CUC International ("Cendant").
21. John H. Fullmer, Cedant's executive Vice President and Chief
Marketing Officer, and representatives of the Company, including Gerald N.
Gaston, the Company's Vice Chairman, President and Chief Executive Officer, met
on various occasions to discuss possible strategic marketing alliances.
22. At a meeting held on May 1997, Mr. Fullmer and Mr. Gaston met
and discussed Cendant's interest in acquiring the Company and the existence of
certain financial issues relating to a possible combination.
23. In the summer of 1997, a merger was pending between CUC and HFS,
now Cendant. Representatives of HFS separately identified the Company as a
possible acquisition candidate.
24. During the course of planning for the then-pending merger of
CUC and HFS, their mutual interest in the company was identified and scheduled
to be pursued following completion of that merger.
- 7 -
<PAGE> 66
25. On December 3, 1997, a significant shareholder of the Company
indicated to a Senior Vice president of what is now Cendant that it believed
American Bankers was considering a sale transaction. This information was
conveyed to Mr. Fullmer, who attempted on several occasions to contact Mr.
Gaston to inquire as to its validity.
26. Mr. Fullmer ultimately spoke with Mr. Gaston in mid-December
1997 and described the merger of CUC and HFS which created Cendant and
emphasized that the resulting size and scale of Cendant had eliminated the
financial issues relating to an acquisition of the Company which they had
previously discussed. Mr. Fullmer inquired whether the company was actively
engaged in discussions relating to an acquisition, and indicated that, if the
Company was so engaged, representatives of his company would like to meet
immediately with the Company's representatives to discuss its strong interest in
exploring such a transaction.
27. In response to Mr. Gaston's assurances that the Company was not
actively engaged in acquisition discussions, Mr. Fullmer agreed to forward to
Mr. Gaston information regarding Cendant and to contact Mr. Gaston to schedule a
meeting in early January 1998 to discuss a possible acquisition transaction.
28. On December 22, 1997, the Company and AIG announced that they
had entered into the AIG Merger
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<PAGE> 67
Agreement and that certain stockholders of the Company had entered into the
Voting Agreement with AIG.
29. In connection with the execution of the AIG Merger Agreement,
the Company and AIG entered into an option agreement (the "AIG Lockup Option
Agreement") pursuant to which the Company granted to AIG an option (the "AIG
Lockup Option"), exercisable in certain events, to purchase up to approximately
8,265,626 common shares (which represented 19.9% of the outstanding number of
common shares at the time the AIG Lockup Option Agreement was entered into) at
an exercise price of $47.00 per common share, subject to adjustment as set forth
therein. The AIG Lockup Option may not be exercised prior to AIG's receipt of
applicable regulatory approvals, including insurance regulatory approvals.
30. Also as part of the AIG Merger Agreement, the Company has agreed
to a provision which provides that the Company and its subsidiaries, officers,
directors, employees, agents and representatives will not, directly or
indirectly, (i) initiate, solicit, encourage, or otherwise facilitate any
inquiries or the making of any proposal or offer with respect to a merger,
reorganization, share exchange, consolidation or similar transaction involving,
or any purchase of 15% or more of the assets or any equity securities of, the
Company or any of its subsidiaries (an "Acquisition Proposal"), or (ii) engage
in any negotiations
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<PAGE> 68
concerning, provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal,
until after 120 days have elapsed since the date of the AIG Merger Agreement
(the "120-day provision").
31. The AIG Merger Agreement provides that under certain
circumstances in which the AIG Merger Agreement is terminated, the Company will
have an obligation to pay a cash fee of $66 million to AIG (the "AIG Termination
Fee"). However, pursuant to the terms of the AIG Lockup Option Agreement, AIG's
total profit under the AIG Lockup Option Agreement (including the amount of the
AIG Termination Fee) is limited to $66 million.
32. In connection with the execution of the AIG Merger Agreement,
AIG entered into a Voting Agreement (the "AIG Voting Agreement") with R. Kirk
Landon, Chairman of the Board of the Company, and Gerald N. Gaston, Vice
Chairman, President and Chief Executive Officer of the Company, pursuant to
which Messrs. Landon and Gaston agreed (i) to vote the approximately 8.25% of
the outstanding Company shares beneficially owned by them (A) in favor of
adopting the AIG Merger Agreement and approving the proposed AIG Merger and (b)
against any action or proposal that would compete with or could serve to
materially interfere with, delay, discourage, adverse affect or inhibit the
timely
- 10 -
<PAGE> 69
consummation of the proposed AIG Merger, and (ii) upon request, to grant to AIG
an irrevocable proxy with respect to such common shares.
33. On January 27, 1998, Cendant Corporation commenced a tender
offer of $2.41 billion for American Bankers or $58 a share as compared to the
AIG offer of $47 a share.
34. Cendant said it was making the tender offer because the AIG
Merger Agreement entered by defendants barred defendants from talking to other
bidders for 120 days after the agreement.
35. Cendant indicated that the "120 days" provision raised
questions about whether the AIG Merger Agreement was in the best interests of
American Bankers shareholder.
36. The Cendant proposal represents a premium of $11 (in excess of
23%) over the value of American International Group's offer, and is
demonstrably superior to the AIG proposed transaction.
37. In response to whether Cendant might raise its offer, Henry
Silverman, Chief Executive Officer of Cendant, responded that Cendant's offer is
"flexible."
38. Defendants have not disclosed the reasons for the preferential
treatment afforded AIG, nor why they failed to continue their discussions with
Cendant.
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<PAGE> 70
FIRST CLAIM FOR RELIEF
(Breach of Fiduciary Duty)
39. Plaintiffs repeat and reallege paragraphs 1 through 38 as if
fully set forth herein.
40. Having decided to seek a transaction in which all of American
Bankers shares would be acquired, the director defendants' fiduciary
responsibilities required them to take all steps reasonably calculated to
achieve the highest value obtainable for American Bankers shares.
41. By failing to continue discussions with Cendant, by negotiating
solely with AIG, and entering the AIG Merger Agreement, Lock-up Option, the
120-day provision, the Termination Fee, and the Voting Agreement, defendants'
breached their fiduciary obligations and violated their duty to maximize
shareholder value.
SECOND CLAIM FOR RELIEF
(Breach of Fiduciary Duty of Candor)
42. Plaintiffs repeat and reallege paragraphs 1 through 41 as if
fully set forth herein.
43. Defendants have failed to disclose the reason for failing to
consider, solicit, and/or entertain Cendant's offer. Instead, knowing full well
of Cendant's interest, American Bankers and the Individual Defendants entered
the AIG Merger Agreement, the Lockup Option, the 120-day provision, the
Termination Fee, and the Voting Agreement without explanation.
- 12 -
<PAGE> 71
44. Defendants' aforesaid conduct and their failure to disclose the
existence of another potential acquiror is a breach of their fiduciary duties as
such information is material and/or necessary for Class members to have in order
to make an informed decision Merger Agreement.
45. By reason of their positions, Defendants were in possession of
material inside information not disclosed to the investing public concerning
American Bankers, and the process by which Cendant was spurned and AIG welcomed,
which facts were misrepresented in violation of defendants' fiduciary
obligations.
46. As a result of the foregoing, the defendants have breached
and/or aided and abetted breaches of fiduciary duties owed to American Bankers
and its stockholders.
THIRD CLAIM FOR RELIEF
(For Violations of Section 13(d) of
the Exchange Act and the Rules and
Regulations Promulgated Thereunder Against AIG)
47. Plaintiffs repeat and reallege the preceding paragraphs as if
fully set forth herein.
48. Section 13(d) of the Exchange Act and Rule 13d-1 thereunder
provide that any person who acquires, directly or indirectly, beneficial
ownership of more than 5 percent of any class of equity security of an issuer
registered under Section 12 of the Exchange Act, shall, within 10 days after
such acquisition, send to the issuer
- 13 -
<PAGE> 72
and file with the SEC and any exchange where the security is traded, a Schedule
13D pursuant to the SEC's Rule 13d-1 setting forth, among other things, the
identity of the person who beneficially owns more than 5 percent of the issuer's
stock and, in the event such person is a corporation, the identity of each
person controlling such corporation.
49. The purpose of Section 13(d) is, among other things, to permit
companies, their shareholders and the investing public generally to (i) be aware
of accumulations of blocks of stock in excess of 5 percent of the outstanding
shares of any equity security, and (ii) ascertain the background of, and other
pertinent information relating to, the holders of such blocks -- and the persons
who control such holders -- with respect to the particular issuer in question,
all with a view toward enabling shareholders and the public to make informed
investment decisions based upon full disclosure of all relevant and material
information concerning issuers and those in a position to assert control over
them.
50. On January 16, 1998, defendant AIG filed a Schedule 13D with the
SEC disclosing that it is the beneficial owner of 8.3 percent of the outstanding
common shares of American Bankers common stock -- the shares that are subject to
the Voting Agreement.
- 14 -
<PAGE> 73
51. The Schedule 13D is materially false and misleading in that AIG
has failed to disclose, as it must under Section 13(d) of the Exchange Act, that
AIG's Chairman of the Board, Maurice R. Greenberg, is a person "controlling"
AIG, i.e., a person who has "possession, direct or indirect, of power to direct
or cause the direction of the management and policies of a person, whether
through the ownership of voting securities, by contract or otherwise." 17 C.F.R.
P.240.12b-2.
52. Greenberg exercises control over AIG through, among other
things, control of approximately 30 percent of the outstanding shares of common
stock of AIG, a portion of which is held directly -- and nominally -- by Starr
International Company, Inc. ("Starr International"), The Starr Foundation
("Starr Foundation") and C.V. Starr & Co., Inc. ("C.V. Starr") -- private
companies that Greenberg controls, and by other AIG officers and directors, whom
Greenberg also controls.
53. Greenberg's position is Chairman and Chief Executive Officer of
AIG and his control over almost one-third of that corporation's stock gives him
the power, directly and indirectly, to direct or cause the direction of the
management and policies of AIG. These material facts, which are legally required
to be disclosed, have been illegally omitted from AIG's Schedule 13D. As a
result, the shareholders of American Bankers remain unaware that
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<PAGE> 74
Greenberg controls AIG, and that he would effectively control American Bankers
in the event it is merged with AIG.
54. Plaintiffs have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
1. Declaring this to be a proper class action and;
2. Ordering defendants to carry out their fiduciary duties to
plaintiffs and the other members of the Class, including the duties of care,
loyalty, and candor by among other things: (i) ordering defendants to conduct a
market check and (ii) consider all bona fide third party offers.
3. Granting preliminary and permanent injunctive relief against the
consummation of the transaction as described herein;
4. In the event the transaction is consummated, rescinding the
transaction effected by defendants and awarding rescissionary damages;
5. Ordering defendants, jointly and severally, to pay to plaintiffs
and to other members of the Class all damages suffered and to be suffered by
them as the result of the acts and transactions alleged herein;
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<PAGE> 75
6. declaring null and void the AIG Merger Agreement, the 120-day
provision, the Lockup Option, the Termination Fee and the AIG Voting Agreement
each as described herein;
7. compelling defendants to make full disclosure of all material
information;
8. awarding plaintiffs the costs and disbursements of the action,
including a reasonable allowance for plaintiffs' attorney's fees and experts'
fees; and
9. granting such other and further relief as this Court may deem to
be just and proper.
JURY DEMAND
Plaintiffs demand a trial by jury on all issues so triable as a
matter of right.
Dated: January 28, 1998
Respectfully submitted,
Counsel for Plaintiffs
GOODKIND LABATON RUDOFF & SUCHAROW LLP
200 South Biscayne Blvd.
Suite 2100
Miami, Florida 33133
Telephone: (305) 579-1260
Facsimile: (305) 579-1229
By: /s/ Peter H. Rachman
----------------------------
Emily C. Komlossy
Florida Bar No. 007714
Peter H. Rachman
Florida Bar No. 977756
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<PAGE> 76
PLAINTIFF'S CERTIFICATION OF SECURITIES
FRAUD CLASS ACTION COMPLAINT
KAY LOPATE ("Plaintiff"), hereby certify that:
1. Plaintiff has reviewed the complaint filed herewith in the
captioned action (the "Complaint"), and have authorized the filing thereof.
2. Plaintiff is willing to serve as a representative parties on
behalf of the class (the "Class") as defined in the Complaint, including
providing testimony at deposition and trial, if necessary.
3. During the proposed Class Period described in the Complaint,
plaintiff Kay Lopate purchased the following shares of American Bankers
Insurance Group:
<TABLE>
<CAPTION>
Date No. of Shares Purchase price Per Share
- ---- ------------- ------------------------
<S> <C> <C>
6-19-96 200 41 5/8
</TABLE>
4. I have not sold the foregoing shares.
5. Plaintiff did not purchase these securities at the direction of
counsel, or in order to participate in any private action arising under the
Securities Exchange Act of 1934.
6. During the three year period preceding the date of this
Certification, Plaintiff has not sought to serve as a representative plaintiff
in actions arising under the federal securities laws.
7. Plaintiff will not accept any payment for serving as a
representative party on behalf of the Class beyond a pro
<PAGE> 77
rata of any possible recovery, except for an award, as ordered or approved by
the court, for reasonable costs and expenses (including lost wages) directly
relating to the representation of the Class.
Signed under the penalties of perjury this 28th day of January,
1998.
/s/ Kay Lopate
-----------------------
KAY LOPATE
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<PAGE> 78
IN THE CIRCUIT COURT OF
THE ELEVENTH JUDICIAL
CIRCUIT IN AND FOR DADE
COUNTY, FLORIDA
CASE NO.:
[ILLEGIBLE]
- - - - - - - - - - - - - - - - - - - X
ANN GOODMAN, on behalf of herself :
and others similarly situated, :
:
Plaintiff, :
:
-against- :
:
AMERICAN BANKERS INSURANCE GROUP, : --------------
INC., GERALD N. GASTON, DARYL L., : ORIGINAL
JONES, BERNARD P. KNOTH, ALBERT H. : FILER
NAHMAD, GEORGE E. WILLIAMSON, : [ILLEGIBLE]
NICHOLAS A. BUONICONTI, ARMANDO M. : --------------
CODINA, PETER J. DOLARA, EUGENE M. :
MATALENE, JR., NICHOLAS J. ST. :
GEORGE, WILLIAM H. ALLEN, JACK F. :
KEMP, JAMES F. JORDEN, R. KIRK :
LANDON, ROBERT C. STRAUSS, and :
AMERICAN INTERNATIONAL GROUP, INC. :
:
Defendants :
:
:
- - - - - - - - - - - - - - - - - - - X
CLASS ACTION COMPLAINT
Plaintiff, by her attorneys, alleges upon information and belief,
except as to paragraph 1 which is alleged upon knowledge, as follows:
THE PARTIES
1. Plaintiff is the owner of shares of common stock of defendant
American Bankers Insurance Group Inc. ("ABI" or the "Company") and has been the
owner continuously of such shares since prior to the wrongs complained of
herein.
LEESFIELD LEIGHTON RUBIO MAHFOOD
2350 South Dixie Highway Miami, Florida 33133 (305) 854-4900
<PAGE> 79
2. Defendant ABI is a corporation duly existing and organized under
the laws of the State of Florida, with its principal offices located at 11222
Quail Roost Drive, Miami, Florida 33157. Its stock is traded on the New York
Stock Exchange under the symbol "ABI." The Company is a holding company with
subsidiaries which market credit life, credit property, unemployment, accident
and health, homeowners, physical damage, livestock, individual and group life
insurance products. As of November 3, 1997, there were over 41.5 million shares
of the Company's common stock outstanding held by over 1500 shareholders of
record.
3. Defendant American International Group Inc. ("AIG") is a
corporation duly existing and organized under the laws of the State of Delaware,
with its principal offices located at 70 Pine Street, New York, New York 10270.
AIG is a holding company with subsidiaries which, among other things, provide a
broad line of property and casualty insurance, individual and group life,
annuity and accident and health insurance and specialty insurance.
4. Defendants Gerald N. Gaston, Daryl L. Jones, Bernard P. Knoth,
Albert H. Nahmad, George E. Williamson. Nicholas A. Buoniconti, Armando M.
Codina, Peter J. Dolara, Eugene M. Matalene, Jr., Nicholas J. St. George,
William H. Allen, Jack F. Kemp, James F. Jorden, R. Kirk Landon, and Robert C.
Strauss are, and at all times relevant hereto have been, directors of the
Company.
2
LEESFIELD LEIGHTON RUBIO MAHFOOD
2350 South Dixie Highway Miami, Florida 33133 (305) 854-4900
<PAGE> 80
5. The defendants referred to in paragraphs 4 are collectively
referred to herein as the "Individual Defendants."
6. By reason of the above Individual Defendants' positions with the
Company as officers and/or directors, said individuals are in a fiduciary
relationship with plaintiff and the other public stockholders of ABI, and owe
plaintiff and the other members of the class the highest obligations of good
faith, fair dealing, due care, loyalty and full, candid and adequate disclosure.
CLASS ACTION ALLEGATIONS
7. Plaintiff brings this action on her own behalf and as a class
action, pursuant to Rule 1.220 of the Florida Rules of Civil Procedure, on
behalf of herself and all ABI securities holders or their successors in
interest, similarly situated (the "Class"). Excluded from the Class are
defendants herein and any person, firm, trust, corporation, or other entity
related to or affiliated with any of the defendants.
8. This action is properly maintainable as a class action.
9. The Class is so numerous that joinder of all members is
impracticable. As of November 3, 1997, there were over 41.5 million shares of
ABI common stock outstanding held by over 1500 shareholders of record.
3
LEESFIELD LEIGHTON RUBIO MAHFOOD
2350 South Dixie Highway Miami, Florida 33133 (305) 854-4900
<PAGE> 81
10. There are questions of law and fact which are common to the
Class and which predominate over questions affecting any individual Class
members. The common questions include, inter alia, the following:
(a) whether defendants have engaged in conduct constituting
unfair dealing to the detriment of the Class;
(b) whether the proposed merger is grossly unfair to the
Class;
(c) whether plaintiff and the other members of the Class would
be irreparably damaged were the transactions complained of herein consummated;
and
(d) whether defendants have breached, or aided and abetted the
breach of fiduciary and other common law duties owed by them to plaintiff and
the other members of the Class.
11. The plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The claims
of plaintiff are typical of the claims of the other members of the class and
plaintiff has the same interests as the other members of the Class. Accordingly,
plaintiff is an adequate representative of the Class and will fairly and
adequately protect the interests of the Class.
12. Plaintiff anticipates that there will be no difficulty in the
management of this litigation.
4
LEESFIELD LEIGHTON RUBIO MAHFOOD
2350 South Dixie Highway Miami, Florida 33133 (305) 854-4900
<PAGE> 82
13. Defendants have acted on grounds generally applicable to the
Class with respect to the matters complained of herein, thereby making
appropriate the relief sought herein with respect to the Class as a whole.
SUBSTANTIVE ALLEGATIONS
14. This action seeks to enjoin the consummation of, or in the
alternative, damages resulting from, a merger of ABI and AIG. On or about
December 22, 1997, AIG and ABI announced that they had entered into a definitive
merger agreement whereby AIG would acquire 100 percent of the outstanding stock
of ABI. Under the terms of the merger agreement, ABI stockholders would receive
AIG stock equal to $47 for each share of ABI common stock, with a total cash
value of approximately 52.2 billion. Under certain circumstances, ABI
stockholders may elect to receive $47 in cash.
15. The proposed transaction has already been approved by the boards
of directors of both ABI and AIG and the parties have announced that they expect
the deal to close early in 1998. According to a press release issued on
December 22, 1997, ABI has given to AIG an option to purchase up to 19.9% of its
common stock in the event that another bidder emerges and certain officers and
directors of ABI who hold approximately 9% of ABI's outstanding common stock
have agreed to vote in favor of the merger.
5
LEESFIELD LEIGHTON RUBIO MAHFOOD
2350 South Dixie Highway Miami, Florida 33133 (305) 854-4900
<PAGE> 83
16. According to am 8-K filed on January 20, 1999 by ABI, if ABI
fails to get shareholder approval of the AIG transaction or if ABI accepts a
superior third party bid, ABI must pay AIG a $66 million termination fee. The
agreement between AIG and ABI also prohibits any discussions with other
interested bidders until 120 days following the date of the agreement.
17. On January 27, 1998, it was announced that Cendant Corp.
("Cendant") offered to buy ABI for $58 per share in cash and stock, in a deal
valued at approximately $2.7 billion on a fully-diluted basis. Cendant is one of
the world's largest providers of consumer and business services, operating in
three principal segments: membership, travel and real estate services. In a
company press release, Cendant stated that its offer was 23% higher than the $47
per share offer made by AIG. Cendant's offer contemplates a cash tender offer to
purchase of 23.5 ABI shares for $58 per share in cash and an exchange of the
remaining shares on a tax-free basis for common shares of Cendant with a fixed
value of $58 per share.
18. According to its press release and its letter to the board of
directors of ABI, Cendant would have preferred to discuss the offer with ABI but
was unable to present its offer to ABI's board given the restrictive conditions
contained in the AIG-ABI agreement. Cendant stated that one of its executives
had approached ABI's
6
LEESFIELD LEIGHTON RUBIO MAHFOOD
2350 South Dixie Highway Miami, Florida 33133 (305) 854-4900
<PAGE> 84
president, defendant Gaston, several months ago to express Cendant's interest in
acquiring ABI but was told, as recently as December, that ABI was not interested
in pursuing any acquisition transaction and suggested that they meet again in
January to discuss the matter further.
19. According to Cendant's letter to the board of directors of ABI,
Cendant expects that the management of ABI would continue with the Company, that
ABI will maintain its headquarters in Miami and that there would not be
significant employee reductions. The Cendant offer is not conditioned upon
financing or due diligence. Cendant also reported that it has begun making the
requisite filings with several state insurance commissions in order to acquire
ABI on a timely basis.
20. The Individual Defendants have thus far failed to announce any
active auction or open bidding procedures best calculated to maximize
shareholder value. Thus, ABI's stockholders will have no effective option other
than to accept the unfair terms proposed in the merger agreement. Defendants
have not considered adequately or encouraged other possible purchases of and
offers for the assets of ABI or its stock in a manner designed to obtain the
highest possible price for ABI's public stockholders. The 120-day provision
contained in the merger agreement is preventing the Individual Defendants from
carrying out their fiduciary duties to plaintiff and the Class. If the merger
7
LEESFIELD LEIGHTON RUBIO MAHFOOD
2350 South Dixie Highway Miami, Florida 33133 (305) 854-4900
<PAGE> 85
between AIG and ABI closes before the 120-day period expires, the Individual
Defendants will be precluded from even considering Cendant's higher offer.
21. Defendants, aided and abetted by AIG, have breached their
fiduciary duties to the Company's shareholders. Cendant has clearly made a
superior proposal for ABI since it has offered $58 per ABI share in contrast to
AIG's $47 per ABI share. However, ABI and the Individual Defendants have failed
to act on the superior proposal and are breaching their fiduciary duties to
shareholders by not taking the proper actions to maximize shareholder value
since:
o They have failed to withdraw or modify its approval or
recommendation of the merger agreement; and
o They have failed to consider, approve or recommend the
Cendant superior proposal;
22. In light of the foregoing, the Individual Defendants must, as
their fiduciary obligations require:
o undertake an appropriate evaluation of ABI's worth as a
merger/acquisition candidate;
o take all appropriate steps to enhance the ABI's value
and attractiveness as a merger/acquisition candidate;
o take all appropriate steps to effectively expose ABI to
the marketplace in an effort to create an active auction
for the ABI, including but not limited to engaging in
serious negotiations with Cendant representatives;
8
LEESFIELD LEIGHTON RUBIO MAHFOOD
2350 South Dixie Highway Miami, Florida 33133 (305) 854-4900
<PAGE> 86
o act independently so that the interests of ABI's public
stockholders will be protected; and
o adequately ensure that no conflicts of interest exist
between defendants' own interests and their fiduciary
obligation to maximize stockholder value or, if such
conflicts exist, to ensure that all conflicts be
resolved in the best interests of ABI's public
stockholders.
23. As a result of defendants' failure to take such steps, plaintiff
and the other members of the Class have been and will be damaged in that they
have not and will not receive their proportionate share of the value of the
Company's assets and business, and have been and will be prevented from
obtaining a fair price for their common stock.
24. By reason of the foregoing, the Individual Defendants, aided and
abetted by ABI and AIG, have violated their fiduciary duties to ABI and the
public stockholders of ABI in that they have failed to maximize shareholder
value (including failing to actively pursue the acquisition of ABI by other
companies, failing to conduct an adequate market check and failing to consider
Cendant's higher offer) and have otherwise failed to take other steps to protect
the interests of the class.
25. Unless enjoined by this Court, defendants will continue to
breach their fiduciary duties owed to plaintiff and the other members of the
Class, by failing to take the steps set forth above, by excluding the Class from
9
LEESFIELD LEIGHTON RUBIO MAHFOOD
2350 South Dixie Highway Miami, Florida 33133 (305) 854-4900
<PAGE> 87
its fair proportionate share of ABI's valuable assets and businesses, all to the
irreparable harm of the Class.
26. Plaintiff and the other members of the Class have no adequate
remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
a. Ordering that this action may be maintained as a class
action and certifying plaintiff as Class representatives;
b. Declaring that defendants breached their fiduciary and
other duties to plaintiff and the other members of the Class;
c. Entering an order requiring defendants to take the steps
set forth hereinabove;
d. Awarding compensatory damages against defendants
individually and severally in an amount to be determined upon the proof
submitted to this Court;
e. Awarding costs and disbursements, including plaintiff's
counsel's fees and experts' fees; and
10
LEESFIELD LEIGHTON RUBIO MAHFOOD
2350 South Dixie Highway Miami, Florida 33133 (305) 854-4900
<PAGE> 88
f. Granting such other and further relief as to the Court may
seem just and proper.
Dated: January 27. 1998.
Respectfully Submitted,
LEESFIELD LEIGHTON RUBIO
& MAHFOOD, P.A.
By: /s/ George G. Mahfood
----------------------
George G. Mahfood
Florida Bar # 77356
2350 South Dixie Highway
Miami, Florid 33133
(305) 854-4900
OF COUNSEL:
ABBEY, GARDY & SQUITIERI, LLP
212 East 39th Street
New York, New York 10016
Telephone: (212) 889-3700
11
LEESFIELD LEIGHTON RUBIO MAHFOOD
2350 South Dixie Highway Miami, Florida 33133 (305) 854-4900
<PAGE> 89
UNITED STATE DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
FILED BY ____________
98 JAN 28 PM 2:48
CARLOS [ILLEGIBLE]
CLERK U.S. DIST. CT.
S.D. OF FLA MIAMI
- - - - - - - - - - - - - - - - - - - X
:
ANN GOODMAN, on behalf of herself :
and others similarly situated, :
: Case No.: 98-0175
Plaintiff, : CIV-MORENO
: MAGISTRATE JUDGE
-against- : BROWN
:
:
:
AMERICAN BANKERS INSURANCE GROUP, : INDIVIDUAL AND CLASS
INC., GERALD N. GASTON, DARYL L. : ACTION COMPLAINT
JONES, BERNARD P. KNOTH, ALBERT H. :
NAHMAD, GEORGE E. WILLIAMSON, :
NICHOLAS A. BUONICONTI, ARMANDO M. :
CODINA, PETER J. DOLARA, EUGENE H. :
MATALENE, JR., NICHOLAS J. ST. :
GEORGE, WILLIAM H. ALLEN, JACK F. :
KEMP, JAMES F. JORDEN, R. KIRK :
LANDON, ROBERT C. STRAUSS, and :
AMERICAN INTERNATIONAL GROUP, INC. :
:
Defendants :
:
- - - - - - - - - - - - - - - - - - - X
Plaintiff, by her attorneys, alleges upon information and belief,
except as to P.3 which is alleged upon knowledge, as follows:
JURISDICTION AND VENUE
1. The claims asserted herein arise under Section l3(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. ss. 78m(d), and
the rules and regulations promulgated thereunder by the Securities and Exchange
Commission (the "SEC"), and the laws of the State of Florida. This Court has
jurisdiction over this action pursuant to Section 27 of the
<PAGE> 90
Exchange Act. 15 U.S.C. ss. 78aa; 28 U.S.C. ss. 1331 (federal question); and 28
U.S.C. ss. 1367 (supplemental jurisdiction).
2. Venue is properly found within this Judicial District under 28
U.S.C. ss. 1391. Many of the acts and transactions giving rise to the violations
of law complained of herein occurred in this Judicial District. In addition, ABI
maintains its principal executive offices within this Judicial District.
THE PARTIES
3. Plaintiff is the owner of shares of common stock of defendant
American Bankers Insurance Group Inc. ("ABI" or the "Company") and has been the
owner continuously of such shares since prior to the wrongs complained of
herein.
4. Defendant ABI is a corporation duly existing and organized under
the laws of the State of Florida, with its principal offices located at 11222
Quail Roost Drive, Miami, Florida 33157. Its stock is traded on the New York
Stock Exchange under the symbol "ABI." The Company is a holding company with
subsidiaries which market credit life, credit property, unemployment, accident
and health, homeowners, physical damage, livestock, individual and group life
insurance products. As of November 3, 1997, there were over 41.5 million shares
of the Company's common stock outstanding held by over 1500 shareholders of
record.
5. Defendant American International Group Inc. ("AIG") is a
corporation duly existing and organized under the
2
<PAGE> 91
laws of the State of Delaware, with its principal offices located at 70 Pine
Street, New York, New York 10270. AIG is a holding company with subsidiaries
which, among other things, provide a broad line of property and casualty
insurance, individual and group life, annuity and accident and health insurance
and specialty insurance. AIG is controlled by its chairman, Maurice R. Greenberg
("Greenberg").
6. Defendants Gerald N. Gaston, Daryl L. Jones, Bernard P. Knoth,
Albert H. Nahmad. George E. Williamson, Nicholas A. Buoniconti, Armando M.
Codina, Peter J. Dolara, Eugene M. Matalene, Jr., Nicholas J. St. George,
William H. Allen, Jack F. Kemp, James F. Jorden, R. Kirk Landon, and Robert C.
Strauss are, and at all times relevant hereto have been, directors of the
Company.
7. The defendants referred to in paragraph 6 are collectively
referred to herein as the "Individual Defendants."
8. By reason of the above Individual Defendants' positions with the
Company as officers and/or directors, said individuals are in a fiduciary
relationship with plaintiff and the other public stockholders of ABI, and owe
plaintiff and the other members of the class the highest obligations of good
faith, fair dealing, due care, loyalty and full, candid and adequate disclosure.
SUBSTANTIVE ALLEGATIONS
9. This action seeks to enjoin the consummation of, or in the
alternative, damages resulting from, a merger of ABI
3
<PAGE> 92
and AIG. Defendants have taken a series of unlawful steps in violation of the
federal securities laws and Florida State law to ensure the success of AIG's
acquisition proposal for ABI and to deter any competing bids for ABI.
The AIG/ABI Transaction
10. On or about December 22, 1997, AIG and ABI announced that they
had entered into a definitive merger agreement whereby AIG would acquire 100
percent of the outstanding stock of ABI. Under the terms of the merger
agreement, ABI stockholders would receive AIG stock equal to $47 for each share
of ABI common stock, with a total cash value of approximately $2.2 billion.
Under certain circumstances, ABI stockholders may elect to receive $47 in cash.
11. The proposed transaction has already been approved by the boards
of directors of both ABI and AIG and the parties have announced that they expect
the deal to close early in 1998. According to a press release issued on December
22, 1997, ABI has given to AIG an option to purchase up to 19.9% of its common
stock in the event that another bidder emerges (the "Lock-Up Option"). The
Lock-Up Option would provide AIG with sufficient voting power to attempt to
ensure the success of the AIG proposal by blocking any competing bid. Moreover,
certain officers and directors of ABI who hold approximately 9% of ABI's
outstanding common stock have agreed to vote in favor of the merger pursuant to
the terms of a Voting Agreement entered into by defendants Gaston and Landon.
4
<PAGE> 93
12. According to an 8-K filed on January 20, 1998 by ABI, if ABI
fails to get shareholder approval of the AIG transaction or if ABI accepts a
superior third party bid, ABI must pay AIG a $66 million termination fee. The
agreement between AIG and ABI also (1) prohibits any discussions with other
interested bidders until 120 days following the date of the agreement; (2)
prohibits ABI from terminating the AIG merger agreement for 180 days except
under extremely limited conditions; and (3) exempts AIG from ABI's "poison pill"
rights plan and extends the life of the rights plan in order to deter bids other
than AIG's.
The Cendant Offer
13. On January 27, 1998, it was announced that Cendant Corp.
("Cendant") offered to buy ABI for $58 per share in cash and stock, in a deal
valued at approximately $2.7 billion on a fully-diluted basis. Cendant is one of
the world's largest providers of consumer and business services, operating in
three principal segments: membership, travel and real estate services. In a
company press release, Cendant stated that its offer was 23% higher than the $47
per share offer made by AIG. Cendant's offer contemplates a cash tender offer to
purchase 23.5 ABI shares for $58 per share in cash and an exchange of the
remaining shares on a tax-free basis for common shares of Cendant with a fixed
value of $58 per share.
14. According to its press release and its letter to the board of
directors of ABI, Cendant would have preferred to
5
<PAGE> 94
discuss the offer with ABI but was unable to present its offer to ABI's board
given the restrictive conditions contained in the AIG-ABI agreement. Cendant
stated that one of its executives had approached ABI's president, defendant
Gaston, several months ago to express Cendant's interest in acquiring ABI but
was told, as recently as December, that ABI was not interested in pursuing any
acquisition transaction and suggested that they meet again in January to discuss
the matter further.
15. According to Cendant's letter to the board of directors of ABI,
Cendant expects that the management of ABI would continue with the Company, that
ABI will maintain its headquarters in Miami and that there would not be
significant employee reductions. The Cendant offer is not conditioned upon
financing or due diligence. Cendant also reported that it has begun making the
requisite filings with several state insurance commissions in order to acquire
ABI on a timely basis.
AIG's False and Misleading 13D
16. On January 16, 1998, AIG filed a Schedule 13D with the SEC
disclosing its beneficial ownership of the ABI shares subject to the Voting
Agreement. The Schedule 13D failed to disclose that Greenberg, AIG's Chairman of
the Board, exercises control over AIG through, among other things, control of
approximately 30% of the outstanding shares of common stock of AIG, a portion of
which is held directly and nominally by three private companies that Greenberg
controls and by other AIG officers and directors, whom Greenberg also controls.
6
<PAGE> 95
17. Greenberg's position as Chairman and Chief Executive Officer of
AIG and his control over almost one-third of AIG's stock gives him the power,
directly and indirectly, to direct or cause the direction of the management and
policies of AIG. These material facts were required to be disclosed in AIG's
Schedule 13D but were omitted therefrom. As a result, plaintiff was unaware that
Greenberg controls AIG and that he would effectively control ABI in the event
that the proposed transaction with AIG is consummated.
FIRST CLAIM FOR RELIEF
(Individually For Violations Of Section 13(d)
Of The Exchange Act And The Rules And
Regulations Promulgated Thereunder Against AIG)
18. Plaintiff repeats and realleges the preceding paragraphs as if
fully set forth herein.
19. Section 13(d) of the Exchange Act and Rule 13d-1 promulgated
thereunder provide that any person who acquires, directly or indirectly,
beneficial ownership of more than 5% of any class of equity security of an
issuer registered under Section 12 of the Exchange Act, shall, within 10 days
after such acquisition, send to the issuer and file with the SEC and any
exchange where the security is traded, a Schedule 13(d) pursuant to Rule 13d-1
setting forth, among other things, the identity of the person who beneficially
owns more than 5% of the issuer's stock and in the event that such person is a
corporation, the identity of each person controlling such corporation.
7
<PAGE> 96
20. On January 16, 1998, defendant AIG filed a Schedule 13D with the
SEC disclosing that it is the beneficial owner of 8.3% of the outstanding common
shares of ABI pursuant to the Voting Agreement. The Schedule 13D does not
disclose that Maurice R. Greenberg is a person controlling AIG. This
non-disclosure constitutes a violation of Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder by the SEC. Plaintiff has
therefore been deprived of material information that she was entitled to
receive.
21. Unless enjoined by the Court, AIG will deny material information
to plaintiff to which she is entitled under the federal securities laws and
which is essential to informed decision making with respect to purchasing,
selling or voting her ABI stock.
22. Plaintiff has no adequate remedy at law.
SECOND CLAIM FOR RELIEF
(As A Class Action For Breach Of
Fiduciary Duty Against All Defendants)
23. Plaintiff repeats and realleges the preceding paragraphs as if
fully set forth herein.
24. Plaintiff brings this count on her own behalf and as a class
action, pursuant to Rules 23(a) and 23(b)(2) and (b)(3) of the Federal Rules
of Civil Procedure, on behalf of herself and all ABI securities holders or their
successors in interest, similarly situated (the "Class"). Excluded from the
Class are defendants herein and any person, firm, trust,
8
<PAGE> 97
corporation, or other entity related to or affiliated with any of the
defendants.
25. This count is properly maintainable as a class action.
26. The Class is so numerous that joinder of all members is
impracticable. As of November 3, 1997, there were over 41.5 million shares of
ABI common stock outstanding held by over 1500 shareholders of record.
27. There are questions of law and fact which are common to the
Class and which predominate over questions affecting any individual Class
members. The common questions include, inter alia, the following:
(a) whether defendants have engaged in conduct constituting
unfair dealing to the detriment of the Class;
(b) whether the proposed merger is grossly unfair to the
Class;
(c) whether plaintiff and the other members of the Class would
be irreparably damaged were the transaction complained of herein consummated;
and
(d) whether defendants have breached, or aided and abetted the
breach of fiduciary and other common law duties owed by them to plaintiff and
the other members of the Class.
28. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The claims
of plaintiff are typical of the claims of the other members of the class and
plaintiff has the same
9
<PAGE> 98
interests as the other members of the Class. Accordingly, plaintiff is an
adequate representative of the Class and will fairly and adequately protect the
interests of the Class.
29. Plaintiff anticipates that there will be no difficulty in the
management of this litigation.
30. Defendants have acted on grounds generally applicable to the
Class with respect to the matters complained of herein, thereby making
appropriate the relief sought herein with respect to the Class as a whole.
31. The Individual Defendants have thus far failed to announce any
active auction or open bidding procedures best calculated to maximize
shareholder value. Thus, ABI's stockholders will have no effective option other
than to accept the unfair terms proposed in the merger agreement. Defendants
have not considered adequately or encouraged other possible purchases of and
offers for the assets of ABI or its stock in a manner designed to obtain the
highest possible price for ABI's public stockholders.
32. The 120-day provision contained in the merger agreement is
preventing the Individual Defendants from carrying out their fiduciary duties to
plaintiff and the Class. If the merger between AIG and ABI closes before the
120-day period expires, the Individual Defendants will be precluded from even
considering Cendant's higher offer. ABI's other defensive measures, approved by
the Individual Defendants, are designed to prevent ABI's shareholders from
obtaining the best possible
10
<PAGE> 99
transaction and are intended to prevent a fair auction process and a fair test
of what the market is willing to pay for ABI.
33. Defendants, aided and abetted by AIG, have breached their
fiduciary duties to the Company's shareholders. Cendant has clearly made a
superior proposal for ABI since it has offered $58 per ABI share in contrast to
AIG's $47 per ABI share. However, ABI and the Individual Defendants have failed
to act on the superior proposal and are breaching their fiduciary duties to
shareholders by not taking the proper actions to maximize shareholder value
since:
o They have failed to withdraw or modify their approval or
recommendation of the merger agreement; and
o They have failed to consider, approve or recommend the
Cendant superior proposal.
34. In light of the foregoing, the Individual Defendants must, as
their fiduciary obligations require:
o undertake an appropriate evaluation of ABI's worth as a
merger/acquisition candidate;
o take all appropriate steps to enhance the ABI's value
and attractiveness as a merger/acquisition candidate;
o take all appropriate steps to effectively expose ABI to
the marketplace in an effort to create an active auction
for the ABI, including but not limited to engaging in
serious negotiations with Cendant representatives and
dismantling their takeover defenses;
o act independently so that the interests of ABI's public
stockholders will be protected; and
o adequately ensure that no conflicts of interest exist
between defendants' own
12
<PAGE> 100
interests and their fiduciary obligation to maximize
stockholder value or, if such conflicts exist, to ensure
that all conflicts be resolved in the best interests of
ABI's public stockholders.
35. As a result of defendants' failure to take such steps, plaintiff
and the other members of the Class have been and will be damaged in that they
have not and will not receive their proportionate share of the value of the
Company's assets and business, and have been and will be prevented from
obtaining a fair price for their common stock.
36. By reason of the foregoing, defendants, aided and abetted by
AIG, have violated their fiduciary duties to ABI and the public stockholders of
ABI in that they have failed to maximize shareholder value (including failing to
actively pursue the acquisition of ABI by other companies, failing to conduct an
adequate market check and failing to consider Cendant's higher offer) and have
otherwise failed to take other steps to protect the interests of the class.
37. Unless enjoined by this Court, defendants will continue to
breach their fiduciary duties owed to plaintiff and the other members of the
Class, by failing to take the steps set forth above, by excluding the Class from
its fair proportionate share of ABI's valuable assets and businesses, all to the
irreparable harm of the Class.
38. Plaintiff and the other members of the Class have no adequate
remedy at law.
12
<PAGE> 101
WHEREFORE, plaintiff demands judgment as follows:
(1) Ordering that plaintiff's second claim for relief
may be maintained as a class action and certifying plaintiff as Class
representative;
a. Declaring that defendants breached their fiduciary and
other duties to plaintiff and the other members of the Class by entering into
the merger agreement between AIG and ABI;
b. Entering an order requiring defendants to take the steps
set forth hereinabove;
c. Entering and order requiring AIG to file a full and
complete Schedule 13D;
d. Preliminarily and permanently enjoining the defendants and
their counsel, agents, employees and all persons acting under, in concert with,
or for them, from proceeding with, consummating or closing, the proposed
transaction between ABI and AIG;
e. In the event that the proposed merger is consummated,
rescinding it and setting it aside;
f. Awarding compensatory damages against defendants
individually and severally in an amount to be determined upon the proof
submitted to this Court;
g. Awarding costs and disbursements, including plaintiff's
counsel's fees and experts' fees;
h. A jury trial on all issues so triable; and
13
<PAGE> 102
i. Granting such other and further relief as to the Court may
seem just and proper.
Dated: January 25, 1998
Attorneys for Plaintiff
LEESFIELD LEIGHTON RUBIO
& MAHFOOD, P.A.
By: /s/ George G. Mahfood
------------------------------
George G. Mahfood
Florida Bar # 77356
2350 South Dixie Highway
Miami, Florida 33133
(305) 854-4900
OF COUNSEL:
ABBEY, GARDY & SQUITIERI, LLP
212 East 39th Street
New York, New York 10016
Telephone: (212) 889-3700
14
<PAGE> 103
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
CENDANT CORPORATION and
SEASON ACQUISITION CORP.,
Plaintiffs,
Case No. 98-0159-CIV-MOORE
V.
Magistrate Judge Johnson
AMERICAN BANKERS INSURANCE GROUP,
INC., GERALD N. GASTON, R. KIRK
LANDON, EUGENE H. MATALENE, JR.,
ARMANDO CODINA, PETER J. DOLARA,
JAMES F. JORDEN, BERNARD P. KNOTH,
ALBERT H. NAHMAD, NICHOLAS J. ST.
GEORGE, ROBERT C. STRAUSS, GEORGE E.
WILLIAMSON II, DARYL L. JONES, NICHO
LAS A. BUONICONTI, JACK F. KEMP,
AMERICAN INTERNATIONAL GROUP, INC.
and AIGF, INC.,
Defendants.
- -----------------------------------------/
AGREED ORDER ON PLAINTIFFS' MOTION FOR EXPEDITED DISCOVERY
THIS CAUSE came on before the Court upon Plaintiff's Motion for
Expedited Discovery. Upon consideration of plaintiffs' motion, the agreement of
counsel and other matters of record, it is hereby:
ORDERED AND ADJUDGED that Plaintiffs' Motion for Expedited Discovery
is GRANTED in the following respects. Defendants shall serve their written
responses and
<PAGE> 104
objections, if any, to Plaintiffs' Request for Production of Documents and their
initial production of responsive documents by hand and/or overnight delivery
service on February 3, 1998. Defendants shall complete their production of
responsive documents not subject to unresolved objections by hand and/or
overnight delivery on February 6, 1998. Defendants shall apprise plaintiffs of
any objections with respect to the volume of production upon identification of
such circumstance, and in any event prior to February 3, 1998, and shall attempt
to resolve such volume issues through immediate negotiations. It is further
ORDERED AND ADJUDGED that the deposition discovery proposed by
plaintiffs in Exhibit "A" to Plaintiffs' Motion for Expedited Discovery will
commence on February 9, 1998 and be completed by February 19, 1998, at mutually
convenient times and places subject to the availability of the witnesses and any
Court order limiting discovery for good cause shown. Defendants will serve any
objections to witnesses designated by plaintiffs for deposition on February 3,
1998. It is further
ORDERED AND ADJUDGED that the parties shall negotiate and submit an
appropriate Confidentiality Stipulation and Order on February 3, 1998. It is
further
ORDERED AND ADJUDGED that discovery shall proceed on an expedited
basis, including, without limitation, subpoenas on third party witnesses. It is
further
ORDERED AND ADJUDGED that the parties will continue their good faith
negotiations with respect to expedited discovery issues and attempt to resolve
any disputes prior to seeking a judicial determination.
DONE AND ORDERED in Chambers in Miami, Florida, this 29th day of
January, 1998.
2
<PAGE> 105
Case No. 98-0159-CIV-MOORE
/s/ K. Mitchell Moore
------------------------------------
K. Mitchell Moore, Judge
United States District Court
Copies provided to: All Counsel of Record
3
<PAGE> 106
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
- --------------------------------------- Case No. 98-0212
BERND BILDSTEIN, IRA, individually,
and on behalf of a class of others
similarly situated, INDIVIDUAL AND
CLASS ACTION COMPLAINT
Plaintiff,
AMERICAN BANKERS INSURANCE GROUP, INC., MAGISTRATE JUDGE
GERALD N. GASTON, R. KIRK LANDON, BROWN
EUGENE M. MATALENE JR., ARMANDO M.
CODINA, PETER J. DOLARA, JAMES F.
JORDEN, BERNARD P. KNOTH, ALBERT H.
NAHMAD, WILLIAM M. ALLEN, NICHOLAS J.
ST. GEORGE, ROBERT C. STRAUSS, GEORGE E.
WILLIAMSON II, DARYL L. JONES, NICHOLAS
A. BUONICONTI, JACK F. KEMP, and
AMERICAN INTERNATIONAL GROUP, INC.,
Defendants.
- ----------------------------------------
Plaintiff, by the undersigned attorneys, for his complaint against
defendants, alleges upon information and belief, except as to those allegations
which pertain to the named plaintiff and his counsel (which are based upon
knowledge), as follows:
JURISDICTION AND VENUE
1. The claims asserted herein arise under Section 13(d) of the Securities
Exchange Act (the "Exchange Act"), 15 U.S.C. Section 78m(d) and the rules and
regulations promulgated thereunder by the Securities and Exchange Commission
(the "SEC") and the laws of the State of Florida. This Court has jurisdiction
over this action pursuant to Section 27 of the Exchange Act, 15 U.S.C. Section
78aa, and 28 U.S.C. Sections 1331
<PAGE> 107
Exchange Act, 15 U.S.C. Section 78aa and 28 U.S.C. Sections (federal question),
28 U.S.C. Section 1367 (supplemental jurisdiction).
2. Venue is proper in this District pursuant to Section 27 of the Exchange
Act and 28 U.S.C. Section 1391(b). Defendant American Bankers Insurance Group,
Inc. ("American Bankers" or the "Company") is headquartered in this District.
Further, the claims asserted herein arose in this District, and the acts and
transactions complained of have occurred, are occurring, and unless enjoined,
will continue to occur in this District.
THE PARTIES
3. Plaintiff Bernd Bildstein, through his Individual Retirement Account,
is the owner of shares of common stock of American Bankers and has been the
owner of such shares continuously since prior to the wrongs complained of
herein.
4. Defendant American Bankers is a corporation duly existing and organized
under the laws of the State of Florida, with its principal offices located at
11222 Quail Roost Drive, Miami, Florida 33157. The Company's stock is traded on
the New York Stock Exchange under the symbol "ABI" The Company is a holding
company with subsidiaries which market credit life, credit property,
unemployment, accident and health, homeowners, physical damage, livestock,
individual and group life insurance products. As of November 3, 1997, there were
over 41.5 million shares of the Company's common stock outstanding held by over
1500 shareholders of record.
2
<PAGE> 108
5. Defendant American International Group Inc ("AlG") is a corporation
duly existing and organized under the laws of the State of Delaware, with its
principal offices located at 70 Pine Street, New York, New York 10270. AIG is a
holding company with subsidiaries which, among other things, provide a broad
line of property and casualty insurance, individual and group life, annuity and
accident and health insurance and specialty insurance, AIG is controlled by its
Chairman, Maurice R. Greenberg ("Greenberg").
6. Defendants Gerald N. Gaston, Daryl L. Jones, Bernard P. Knoth, Albert
H. Nahmad, George E. Williamson, II, Nicholas A. Buoniconti, Armando M. Codina,
Peter J. Dolara, Eugene M. Matalene, Jr., Nicholas J. St. George, William H.
Allen, Jack F. Kemp, James F. Jorden, R. Kirk Landon, and Robert C. Strauss are,
and at all times relevant hereto have been, directors of American Bankers.
7. The defendants referred to in paragraph 6 are collectively referred to
herein as the "Individual Defendants."
8. By reason of the above Individual Defendants' positions with the
Company as officers and/or directors, said individuals are in a fiduciary
relationship with plaintiff and the other public stockholders of American
Bankers, and owe plaintiff and the other members of the class the highest
obligations of good faith, fair dealing, due care, loyalty and full, candid and
adequate disclosure.
3
<PAGE> 109
PLAINTIFF'S CLASS ACTION ALLEGATIONS
9. Plaintiff brings certain claims in this action as a class action
pursuant to Federal Rule of Civil Procedure 23 (a) and 23 (b) (3) on behalf of
himself and on behalf of a class (the "Class") of persons who own American
Bankers common stock and were damaged thereby. Excluded from the Class are the
defendants herein; Members of the immediate family of each of the Individual
Defendants; the directors and officers of American Bankers; any corporation,
firm, partnership, trust or other person affiliated with any of the foregoing;
and the legal representatives, agents, heirs, successors-in-interest or assigns
of any excluded person.
10. The members all the Class are so numerous that joinder of all members
is impracticable. As of November 3, 1997, American Bankers had approximately
41.5 million shares outstanding. The precise number of class members is unknown
to plaintiffs at this time but class members are believed to number in the
thousands.
11. Plaintiff will fairly and adequately represent the interests of the
members of the Class. Plaintiff has retained competent counsel experienced in
complex securities class action litigation to further ensure such protection and
plaintiff intends to prosecute this action vigorously.
12. Plaintiff's class action claims are typical of the claims of other
members of the Class because the plaintiff and all the Class members' damages
arise from and were caused by the same series of wrongful acts complained of
herein. Plaintiff
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does not have interests antagonistic to, or in conflict with, the members of the
Class.
13. A class action is superior to other available methods for the fair and
efficient adjudication of certain claims in this controversy. As the damages
suffered by the individual Class members may be relatively small, the expense
and burden of individual litigation make it virtually impossible for most class
members individually to seek redress for the wrongful conduct alleged.
Plaintiff knows of no difficulty that will be encountered in the management of
this litigation that would preclude its maintenance as a class action.
14. Common questions of law and fact exist as to all members of the Class
and predominate over any questions affecting solely individual members of the
Class. Among the common questions of law and fact common to the Class are:
(a) whether state law was violated by defendants' acts as alleged
herein;
(b) whether defendants participated directly or indirectly in the
concerted action or common course of conduct complained of herein;
(c) whether the Individual Defendants breached their fiduciary
duties to the class;
(d) the extent of injuries sustained by members of the Class and the
appropriate measure of damages.
15. The names and addresses of the record owners of the shares of American
Bankers common stock is available from the
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Company and/or its transfer agent. Notice can be provided to such record owners
by a combination of published notice and first class mail using techniques and
forms of notice similar to those customarily used in class actions arising under
the federal securities laws.
SUBSTANTIVE ALLEGATIONS
THE AIG/AMERICAN BANKERS TRANSACTION
16. On or about December 22, 1997, AIG and American Bankers announced that
they had entered into a definitive merger agreement whereby AIG would acquire
100 percent of the outstanding stock of American Bankers (the "AIG Merger
Proposal"). Under the terms of the AIG Merger Proposal, American Bankers
stockholders would receive AIG stock equal to $47 for each share of American
Bankers common stock, with a total cash value of approximately $2.2 billion. The
price offered pursuant to the AIG merger proposal represented a mere $2.75 per
share -- or 6% -- premium above the previous day's closing price of American
Bankers common stock on the New York Stock Exchange.
17. The December 22, 1997 announcement also revealed that, in connection
with the AIG Merger Proposal, American Bankers had issued an option to AIG to
purchase up to 19.9% of American Bankers common stock (the "Lock Up Option")
- -- the sole purpose of which is to improperly skew any American Bankers
shareholder vote in favor of AIG's economically inferior proposal. In this same
vein officers and directors of American Bankers who together
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held approximately 9% of American Bankers common stock were said to have already
agreed to vote in favor of AIG's a merger proposal (the "Voting Agreement").
AMERICAN BANKERS' DEFENSIVE ARSENAL CONSTITUTES A BREACH OF THE DIRECTORS'
DUTIES
18. Rather than use the AIG merger proposal as a market test to verify
that a fair value was being paid by AIG or to attract the highest available
bid, as their fiduciary duties require, the directors of American Bankers have
unlawfully attempted to end bidding for the Company before it could begin.
Without investigating or exploring, much less procuring, higher bids, the
Individual Defendants, who will be given continuing positions on the board of
directors of the merged AIG/American Bankers entity, have -- in violation of
their fiduciary duties of loyalty and care -- approved and effected an
astonishing array of patent defensive devices in the AIG merger proposal
designed to prematurely "lock up" the merger with AIG and deter any third
parties from consummating any transaction, even if offering higher value to the
Company's shareholders. To that illicit end, the American Bankers Board of
Directors has approved, among other things!
* a Lock-Up Option granting AIG the right to purchase 19.9% of the
outstanding American Bankers shares in the event of a competing acquisition
proposal;
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* a Voting Rights Agreement whereby certain Of the Individual
Defendants have agreed to vote approximately 9% of American Bankers common stock
in favor of the AIG merger proposal;
* a "No-Shop" provision which purports to prohibit the Board from
even considering any other bids -- no matter how high the price -- for a period
of 120 days;
* an agreement that American Bankers may not terminate the AIG
merger agreement for 180 days, except under extremely limited circumstances;
* a "Break-Up", fee of at least $66 million to be paid to AIG if
the AIG merger proposal is not consummated; and,
* an undertaking to exempt the AIG merger proposal from the American
Bankers "poison pill" Rights Plan and an agreement to extend the life of the
Rights, currently scheduled to expire an March 10, 1998, thus deterring any
acquisition proposals not approved by the Board.
AIG'S FILING OF A MATERIALLY FALSE AND MISLEADING SCHEDULE 13D
19. On January 16, 1988, fifteen days after it was legally obligated to do
so, AIG belatedly filed a Schedule 13D with the SEC disclosing its beneficial
ownership of American Bankers shares subject to the Voting Agreement, i.e., 8.2%
of the shares outstanding.
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20. The Schedule 13D is materially false and misleading in that AIG has
failed to disclose, as it must under Section 13(d) of the Exchange Act, that
AIG's Chairman of the Board, Maurice. R. Greenberg, is a person "controlling"
AIG, i.e., a person who has "Possession, direct or indirect, of the power to
direct or cause the direction of management and policies of a person, whether
through the ownership of the voting securities, by contract or otherwise." 17
C.F.R. 240.12b-2. Greenberg exercises control over AIG through, among other
things, control of approximately 30 percent of the outstanding shares of AIG
common stock, a portion of which is held directly -- and nominally -- by Starr
International Company, Inc. ("Starr International"), The Starr Foundation
("Starr Foundation") and C.V. Starr & Co., Inc. ("C.V. Starr") -- private
companies that Greenberg Controls, and by other AIG officers and directors, whom
Greenberg also controls. More specifically:
* Greenberg controls Starr International, which owns 16.1% of the
outstanding shares of AIG. Although not yet revealed in the Schedule 13D,
Greenberg is the owner of 9.09% of the voting stock of Starr International and
is the Chairman of Starr International's Board, which is comprised entirely of
AIG's officers and employees or AIG's affiliates who have been handpicked and
are controlled by Greenberg, on whom they depend for their continuing positions
at AIG, and who collectively hold approximately 64% of the voting stock of Starr
International.
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Accordingly, Greenberg and his underlings effectively control Starr
International and its 16.1% stake in AIG.
* Greenberg also controls C.V. Starr, which owns 2.4% of AIG common
stock. Although not revealed in the Schedule 13D, Greenberg is the owner of
24.39% of the common stock of C.V. Starr and the President, Chief Executive
Officer and a member of C.V. Starr's Board, which is comprised entirely of AIG's
officers and employees or AIG's affiliates who have been hand-picked and are
controlled by Greenberg, on whom they depend for their continuing positions at
AIG, and who collectively hold approximately 70% of the voting stock of C.V.
Starr. Accordingly, Greenberg and his underlings effectively control C.V. Starr
and its 2.4% stake in AIG.
* Greenberg also controls Starr Foundation, which owns 3.6% of AIG
common stock. Although not revealed in the Schedule 13D, Greenberg is the
Chairman of Starr Foundation and he controls its Board of Directors, most (if
not all) of which is comprised of AIG's officers and employees or AIG's
affiliates who have been hand-picked and are controlled by Greenberg, on whom
they depend for their continuing positions at AIG. Accordingly, Greenberg and
his underlings effectively control Starr Foundation and its 3.6% stake in AIG.
* Approximately 4.6% of the outstanding shares of AIG are owned by
officers and directors who are appointed, and therefore controlled by,
Greenberg.
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Greenberg is the Chairman and Chief Executive Officer of AIG; he
has admitted in various public filings to direct ownership of 2.28% of the
outstanding shares of AIG.
21. Greenberg's position as Chairman and Chief Executive Officer of AIG
and his control over almost one-third of that corporation's stock gives him the
power, directly and indirectly, to direct or cause the direction of the
management and policies of AIG. These material facts, which are legally required
to be disclosed, have been illegally omitted from AIG's Schedule 13D. As a
result, the Class remains unaware that Greenberg controls AIG and that he would
effectively control American Bankers in the event it was merged with AIG.
THE CENDANT BID
22. In December 1997, John H. Fullmer, Executive Vice President and Chief
Marketing Officer of Cendant Corporation ("Cendant") , spoke with defendant
Gaston and asked him whether American Bankers was actively engaged in
discussions related to an acquisition, noting that if it was, Cendant would like
to meet immediately with representatives of American Bankers to discuss
Cendant's interest in acquiring American Bankers. Gaston assured Fullmer that
American Bankers was not pursuing any such transactions and did not pursue the
matter further with Mr. Fullmer. In truth and in fact, as described more fully
above, defendant Gaston and his fellow directors were actively negotiating a
sale of American Bankers to AIG. The Individual Defendants had identified AIG as
the preferred bidder for
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American Bankers without adequately evaluating alternative transactions that
could maximize the value of American Bankers shares to be received by all of the
Company's shareholders,
23. On January 27, 1998, it was announced that Cendant Corp. ("Cendant")
offered to buy, through a tender offer, Americas Bankers for $58 per share in
cash and stock, in a deal valued at approximately $2.7 billion on a
fully-diluted basis. Cendant is one of the world's largest providers of consumer
and business services, operating in three principal segments: membership, travel
and real estate services. In a company press release, Cendant stated that its
offer was 23% higher than the $47 per share offer made by AIG. Cendant's offer
contemplates a cash tender offer to purchase 51% or 23.5 million American
Bankers shares for $58 per share in cash and an exchange of the remaining
shares on a tax-free basis for common shares of Cendant with a fixed value of
$58 per share.
24. According to its press release and its letter to the board of
directors of American Bankers, Cendant would have preferred to discuss the offer
with American Bankers but was unable to present its offer to American Bankers'
board given the restrictive conditions contained in the AIG merger agreement.
25. According to Cendant's letter to the board of directors of American
Bankers, Cendant expects that the management of American Bankers would continue
with the merged Cendant/American Bankers entity, that American Bankers will
maintain its headquarters in Miami and that there would not be significant
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employee reductions. The Cendant offer is not conditioned upon financing or due
diligence. Cendant also reported that it has begun making the requisite filings
with several state insurance commissions in order to acquire American Bankers on
a timely basis.
FIRST CLAIM FOR RELIEF
(Individually For Injunctive Relief for Violations Of.
Section 13(d)Of The Exchange Act And The Rules And
Regulations Promulgated Thereunder Against AIG)
26. Plaintiff repeats and realleges the preceding paragraphs as if fully
set forth herein.
27. Section 13(d) of the Exchange Act and Rule 13d-1 thereunder provide
that any person who acquires, directly or indirectly. beneficial ownership of
More than 5 percent of any class of equity security of an issuer registered
under Section 12 of the Exchange Act, shall, within 10 days after such
acquisition, send to the issuer and file with the SEC and any exchange where the
security is traded, a Schedule 13D pursuant to the SEC's Rule 13d-1 setting
forth, among other things, the identity of the person who beneficially owns more
than 5 percent of the issuer's stock and, in the event such person is a
corporation, the identity of each person controlling such corporation.
28. The purpose of Section 13(d) is, among other things, to permit
companies, their shareholders and the investing public generally to (i) be aware
of accumulations of blocks of stock in excess of 5 percent of the outstanding
shares of any equity
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security, and (ii) ascertain the background of, and other pertinent information
relating to, the holders of such blocks -- and the persons who control such
holders -- with respect to the particular issuer in question, all with a view
toward enabling shareholders and the public to make informed investment
decisions based on full disclosure of all relevant and material information
concerning issuers and those in a position to assert control over them.
29. On January 16, 1998, defendant AIG filed a Schedule 13D with the SEC
disclosing that it is the beneficial owner of 8.3 percent of the outstanding
common shares of American Bankers common stock -- the shares that are subject to
the Voting Agreement. The Schedule 13D does not disclose, however, that Maurice
R. Greenberg is a person controlling AIG -- an omission that constitutes a
violation of Section 13(d). of the Exchange Act and the rules and regulations
promulgated by the SEC thereunder. AIG has thus deprived the shareholders of
American Bankers and the investing public of the material information that they
are entitled to receive.
30. Plaintiff has no adequate remedy at law and accordingly injunctive
relief is appropriate for the violations of Section 13(d) of the Exchange Act.
SECOND CLAIM FOR RELIEF
(As A Class Action For Breach Of
Fiduciary Duty Against All Defendants)
31. Plaintiff repeats and realleges the preceding paragraphs as if fully
set forth herein.
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32. Plaintiff brings this count on his own behalf and as a class action,
pursuant to Rule 23 of the Federal Rules of Civil Procedure, on behalf of
himself and the Class, as described above.
33. The Individual Defendants have thus far failed to announce any active
auction or open bidding procedures best calculated to maximize shareholder
value. Thus, American Barkers' stockholders will have no effective option other
than to accept the unfair terms proposed in the AIG merger agreement. Defendants
have not considered adequately or encouraged other possible purchases of and
offers for the assets of American Bankers or its stock in a manner designed to
obtain the highest possible price for American Bankers' public stockholders.
34. The 120-day provision preventing the Board from considering other bona
fide offers contained in the AIG merger agreement is preventing the Individual
Defendants from carrying out their fiduciary duties to plaintiff and the Class.
If the merger between AIG and American Bankers closes before the 120-day period
expires, the Individual Defendants will be precluded from even, considering
Cendant's higher offer. American Bankers' other defensive measures set forth
above, approved by the Individual Defendants, are designed to prevent American
Bankers' shareholders from obtaining the best possible transaction and are
intended to prevent 9 fair auction process and a fair test of what the
market is willing to pay for American Bankers.
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35. Defendants, aided and abetted by AIG, have breached their fiduciary
duties to the Company's shareholders, Cendant has clearly made a superior
proposal for American Bankers since it has offered $58 per American Bankers
share in contrast to AIG's $47 per ABI share. However, American Bankers and the
Individual Defendants have failed to act on the superior proposal and are
breaching their fiduciary duties to shareholders by not taking the proper
actions to maximize shareholder value since;
- They have failed to withdraw or modify American Bankers'
approval or recommendation of the merger agreement; and
- They have failed to consider, approve or recommend the Cendant
superior proposal;
36. In light of the foregoing, the Individual Defendants must, as their
fiduciary obligations require:
- undertake an appropriate evaluation of American Banker's worth
as a merger/acquisition candidate;
- take all appropriate steps to enhance the American Banker's
value and attractiveness as a merger/acquisition candidate;
- take all appropriate steps to effectively expose American
Bankers to the marketplace in an effort to create an active
auction for the American Bankers, including but not limited
to engaging in serious negotiations with Cendant
representatives and dismantling their takeover defenses;
- act independently so that the interests of American Bankers'
public stockholders will be protected; and
- adequately ensure that no conflicts of interest exist between
defendants' own interests and their fiduciary obligation to
maximize stockholder value or, if such conflicts exist, to
ensure that all conflicts
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<PAGE> 122
be resolved in the best interests Of American Bankers, public
stockholders.
37. As a result of defendants' failure to take such steps, plaintiff and
the other members of the Class have been and will be damaged in that they have
not and will not receive their proportionate share of the value of the Company's
assets and business, and have been. and will be prevented from obtaining a fair
price for their common stock.
38. By reason of the foregoing, defendants, aided and abetted by AIG, have
violated their fiduciary duties to American Bankers and the public stockholders
of American Bankers in that they have failed to maximize shareholder value
(including failing to actively Pursue the acquisition of American Bankers by
other companies, failing to conduct an adequate market check and failing to
consider Cendant's higher offer) and have otherwise failed to take other steps
to protect the interests of the class.
39. Unless enjoined by this Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and the other members of the Class, by
failing to take the steps set forth above, by excluding the Class from its fair
proportionate share of American Bankers' valuable assets and businesses, all to
the irreparable harm of the Class.
40. Plaintiff and the other members of the Class have no adequate remedy
at law.
WHEREFORE, plaintiff demands judgment as follows:
a. Ordering that plaintiff's second claim for
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relief may be maintained as a class action and certifying plaintiff as Class
representative and his counsel as Class counsel;
b. Declaring that defendants breached their fiduciary and
other duties to plaintiff and the other members of the Class by entering into
the merger agreement between AIG and American Bankers;
c. Entering an order requiring defendants to take the steps
set forth hereinabove;
d. Entering an order requiring AIG to file a full and complete
Schedule 13D;
e. Preliminarily and permanently enjoining the defendants and
their counsel, agents, employees and all persons acting under, in concert with,
or for them, from proceeding with, consummating or closing the proposed
transaction between American Bankers and AIG;
f. In the event that the proposed merger is consummated,
rescinding it and setting it aside;
g. Awarding compensatory damages under plaintiff's second
claim for relief against defendants individually and severally in an amount to
be determined upon the proof submitted to this Court;
h. Awarding costs and disbursements, including plaintiff's
counsel's fees and experts fees; and
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i. Granting such other and further relief as to the Court may
seem just and proper.
Dated: February 2, 1998
BURT & PUCILLO, LLP
By: /s/ Michael J. Pucillo
-----------------------------------
Michael J. Pucillo
Florida Bar No. 261033
Wendy Zoberman
Florida Bar No. 434670
222 Lakeview Avenue
Suite 300 East
West Palm Beach, FL 33401
(561) 835-9400
(561) 835-0322 - Fax
Jules Brady
STULL, STULL & BRODY
6 East 45th Street
Suite 500
New York, NY 10017
(212) 687-7230
(212) 490-2022 - Fax
Robert C. Susser
ROBERT C. SUSSER, P.C.
6 East 43rd Street
Suite 1900
New York, NY 10017-4609
(212) 808-0298
(212) 949-0639 - Fax
19
<PAGE> 1
Exhibit 13
AMENDMENT NUMBER TWO TO THE RIGHTS AGREEMENT
Amendment Number Two dated as of February 5, 1998 ("Amendment Number Two"),
by and between American Bankers Insurance Group, Inc., a Florida corporation
(the "Company") and ChaseMellon Shareholder Services, L.L.C. (as successor to
Manufacturers Hanover Trust Company ("Manufacturers Hanover"), a New York
banking corporation, the "Rights Agent"), to the Rights Agreement (as
hereinafter defined). Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Rights Agreement.
RECITALS
WHEREAS, the Company and Manufacturers Hanover entered into and executed
the Rights Agreement dated as of February 24, 1988, as Amended and Restated as
of November 14, 1990, and as further amended as of December 19, 1997 (the
"Rights Agreement"); and
WHEREAS, the Company and the Rights Agent have agreed to and hereby desire
to supplement and amend the Rights Agreement in the manner set forth herein; and
WHEREAS, except as otherwise stated herein, the Rights Agreement remains in
full force and effect;
<PAGE> 2
NOW THEREFORE, in consideration of the mutual agreements and covenants
hereinafter set forth, the Company and the Rights Agent hereby agree to amend
and supplement the Rights Agreement as follows:
SECTION 3(a) OF THE RIGHTS AGREEMENT IS AMENDED TO READ, IN ITS ENTIRETY, AS
FOLLOWS:
(a) Until the Close of Business on the day (or such later date as may be
determined by action of the Board of Directors, upon approval by a majority of
the Continuing Directors) which is the earlier of (i) the tenth (10th) day after
the first date of public announcement (which, for purposes of this definition,
shall include, without limitation, a report filed pursuant to Section 13(d)
under the Exchange Act) by the Company or an Acquiring Person that an Acquiring
Person has become such (or, if the tenth (10th) day after such date occurs
before the Record Date, the Record Date), or (ii) the tenth (10th) Business Day
after the date that a tender or exchange offer by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any such
plan) is first published or sent or given within the meaning of Rule 14d-2(a) of
the General Rules and Regulations under the Exchange Act, if upon consummation
thereof, such Person would be the Beneficial Owner of fifteen percent (15%) or
more of the shares of Common Stock then outstanding (the earlier of such dates
being herein referred to as the "Distribution Date"), (x) the Rights will be
evidenced (subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferrable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company). As soon as
practicable after the Distribution Date, the Rights Agent will send by
first-class, insured, postage prepaid mail, to each record holder of the Common
Stock as of the Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more rights
certificates, in substantially the form of Exhibit B hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant to Section
11(p) hereof, at the time of distribution of the Right Certificates, the Company
shall make the necessary and appropriate rounding adjustments (in accordance
with Section 14(a) hereof) so that Rights Certificates representing only whole
numbers of Rights are distributed and cash is
<PAGE> 3
paid in lieu of any fractional Rights. As of and after the Distribution
Date, the Rights will be evidenced solely by the Rights Certificates.
This Amendment Number Two may be executed in any number of counterparts with
the same effect as if the signatures thereunto and hereto were upon the same
instrument.
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment Number
Two to be duly executed and their respective corporate seals to be hereunto
affixed and attested, all as of the day and year first written above.
ATTEST: AMERICAN BANKERS
INSURANCE GROUP, INC.
By: /s/ Ann Kasay By: /s/ Gerald N. Gaston
-------------------------------- --------------------------------
Name: Ann Kasay Name: Gerald N. Gaston
Title: Admin. Asst. Title: C.E.O.
ATTEST: CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
By: /s/ Leslie B. Kahle By: /s/ James M. Balson
-------------------------------- -------------------------------
Name: Leslie B. Kahle Name: James M. Balson
Title: Vice President Title: Vice President
