<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
(AMENDMENT NO. 6)
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 BOROS CICCHETTI
DEWEY BALLANTINE LLP BERENSON & JOHNSON LLP
1301 AVENUE OF THE AMERICAS 777 BRICKELL AVENUE, SUITE 500
NEW YORK, NY 10019 MIAMI, FL 33131
(212) 259-8000 (305) 371-2600
</TABLE>
================================================================================
<PAGE> 2
This Amendment No. 6 amends and supplements the Solicitation/Recommendation
Statement on Schedule 14D-9, dated February 6, 1998 (as amended, the "Schedule
14D-9") of American Bankers Insurance Group, Inc., a Florida corporation (the
"Company" or "American Bankers"), filed in connection with the Cendant Offer.
Capitalized terms used herein shall have the definitions set forth in the
Schedule 14D-9 unless otherwise provided herein.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
The response to Item 4 is hereby amended and supplemented as follows:
On February 28, 1998, AIG, AIGF and American Bankers entered into an
Amended and Restated Agreement and Plan of Merger (the "Amended AIG Merger
Agreement") and an amended and restated Stock Option Agreement (the "Amended
Stock Option Agreement"), copies of which are filed as Exhibit 31 and Exhibit 32
hereto, respectively, and are incorporated by reference herein in their
entirety. The principal amendments to the original AIG Merger Agreement and
Stock Option Agreement are as follows:
- - The value of the per share consideration that each holder of Common Stock will
be entitled to receive in the Proposed AIG Merger has been raised from $47 to
$58. The elections contemplated by the AIG Merger Agreement with respect to
cash and stock have not been amended.
- - In lieu of proceeding to acquire American Bankers by the contemplated
statutory merger, AIG, at its option, will be permitted to effect the
acquisition of American Bankers through a tender offer for 100% (or such
lesser percentage not less than 49.9% (excluding for all purposes in
calculating such applicable percentage any shares of Common Stock owned by AIG
pursuant to the exercise of its option under the Stock Option Agreement) as
AIG may determine) of the outstanding Common Stock for at least $58 in cash
followed by a second step merger between American Bankers and AIGF in which
American Bankers shareholders would receive, at AIG's election, either cash
or, if non-taxable, AIG common stock with a value equal to the amount paid for
each share of Common Stock in the tender offer. If AIG consummates such a
tender offer, AIG will be entitled to designate two members of the Board of
Directors of American Bankers, and American Bankers will increase the size of
its Board of Directors to the extent permitted by its Articles and bylaws, and
will thereafter cause AIG's designees promptly to be elected to its Board of
Directors. AIG and American Bankers also have agreed to waive certain of the
conditions to their respective obligations to consummate the Proposed AIG
Merger in the event that AIG commences and consummates a tender offer.
- - The provision contained in the AIG Merger Agreement which prohibited American
Bankers from providing information to third parties, engaging in negotiations
or discussions with third parties or recommending an Acquisition Proposal (as
defined in the Amended AIG Merger Agreement) to the shareholders of American
Bankers for a period of 120 days following the execution of the AIG Merger
Agreement has been eliminated. Consequently, American Bankers is now permitted
to provide information to any party who has made an unsolicited bona fide
Acquisition Proposal for American Bankers, including Cendant, if such party
enters into an appropriate confidentiality agreement.
- - The provision contained in the AIG Merger Agreement which prohibited the Board
of Directors of American Bankers from terminating the AIG Merger Agreement in
certain circumstances for a period of 180 days following the execution of the
AIG Merger Agreement, has been amended to reduce such period of time to 150
days.
- - The $66 million termination fee has been increased to $81.5 million (which
still represents approximately 3% of the aggregate consideration to be paid in
the Proposed AIG Merger) plus an amount equal to AIG's expenses incurred in
connection with the Proposed AIG Merger since January 27, 1998 up to a maximum
of $5 million. The circumstances in which the Amended AIG Merger Agreement may
be terminated and in which such termination fee is payable by American Bankers
have been amended. Such circumstances shall include AIG having commenced a
tender offer and such tender offer not having been consummated by the 60th day
from the date of commencement thereof.
<PAGE> 3
- - The maximum profit that AIG can obtain on its option to purchase 8,265,626
shares of Common Stock pursuant to the Amended Stock Option Agreement has been
amended to be $100 million. Such amount will still be reduced by the amount of
any termination fee paid by American Bankers under the Amended AIG Merger
Agreement. The option has also been modified pursuant to the Amended Stock
Option Agreement so that, at AIG's option, if the Amended AIG Merger Agreement
is terminated at a time when regulatory approval for AIG to consummate the
purchase of the Common Stock subject to the option has not yet been obtained,
AIG's prior exercise of such option may be settled in cash in an amount equal
to the Spread (as defined in the Amended Stock Option Agreement) times the
number of shares of Common Stock subject to the exercise of such option less
any termination fee paid pursuant to the Amended AIG Merger Agreement.
- - In the event that AIG commences a tender offer (as described above) and
another person has commenced or commences a tender offer to acquire at least
49.9% of the outstanding shares of Common Stock for not less than $58 in cash
per share and such person has proposed to follow such tender offer with a
second step merger in which American Bankers' shareholders would receive
consideration with a value equal to not less than the value paid by such
person pursuant to its tender offer, then American Bankers will be entitled to
amend or modify the Rights Agreement and the new rights agreement, dated as of
February 19, 1998, between American Bankers and ChaseMellon Shareholder
Services, L.L.C., adopted by the Board of Directors of American Bankers on
February 19, 1998 (the "New Rights Agreement") in a manner consistent with the
amendments made by American Bankers to such agreements with respect to the
Proposed AIG Merger or the optional tender offer by AIG (as described above)
to exempt any such other person from being deemed to be an Acquiring Person
(as defined in such agreements) and such other tender offer from triggering a
Distribution Date (as defined in such agreements) or causing the Rights or New
Rights to separate from the Common Stock. In addition, in such event American
Bankers will also be entitled to grant such approvals and take such action to
eliminate or minimize the effect of any state antitakeover statutes on such
other tender offer.
- - AIG has agreed to maintain the corporate headquarters of American Bankers in
Miami at American Bankers' current location for the foreseeable future and, in
any event, for not less than 5 years following consummation of the Proposed
AIG Merger. In addition, AIG has agreed to ensure, to the extent within its
reasonable control, that the public school and day care facility next to
American Bankers' headquarters in Miami will remain in operation at their
current location for as long as the corporate headquarters of American Bankers
shall be maintained at its current location.
- - The special meetings of American Bankers' preferred and common shareholders
previously scheduled for March 4, 1998 and March 6, 1998, respectively, will
be postponed until March 25, 1998 and March 27, 1998, respectively.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The response to Item 8 is hereby amended and supplemented as follows:
Amendment to Rights Agreement
On February 27, 1998, the Company sent a letter to the holders of the
Company's $3,125 Series B Cumulative Convertible Preferred Stock (the "Preferred
Stock"), in accordance with the terms of the Preferred Stock, containing a
summary of the New Rights Agreement. The letter from the Company to the holders
of Preferred Stock is filed as Exhibit 34 hereto and is incorporated by
reference herein in its entirety.
<PAGE> 4
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<S> <C>
Exhibit 31...... Agreement and Plan of Merger, dated as of December 21, 1997, as
amended and restated as of January 7, 1998, as amended by
Amendment No. 1 dated as of January 28, 1998, and as amended
and restated as of February 28, 1998, among the Company, AIG
and AIGF.
Exhibit 32...... Stock Option Agreement, dated as of December 21, 1997, as
amended and restated as of February 25, 1998, between the
Company and AIG.
Exhibit 33...... Press Release, dated March 2, 1998, of the Company and AIG.
Exhibit 34...... Letter, dated February 27, 1998, from the Company to holders of
$3.125 Series B Cumulative Convertible Preferred Stock.
</TABLE>
<PAGE> 5
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: March 2, 1998
<PAGE> 6
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
---------------- ---------------------------------------------------------------
<S> <C>
Exhibit 31...... Agreement and Plan of Merger, dated as of December 21, 1997, as
amended and restated as of January 7, 1998, as amended by
Amendment No. 1 dated as of January 28, 1998, and as amended
and restated as of February 28, 1998, among the Company, AIG
and AIGF.
Exhibit 32...... Stock Option Agreement, dated as of December 21, 1997, as
amended and restated as of February 25, 1998, between the
Company and AIG.
Exhibit 33...... Press Release, dated March 2, 1998, of the Company and AIG.
Exhibit 34...... Letter, dated February 27, 1998, from the Company to holders of
$3.125 Series B Cumulative Convertible Preferred Stock.
</TABLE>
<PAGE> 1
Exhibit 31
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
Among
AMERICAN BANKERS INSURANCE GROUP, INC.,
AMERICAN INTERNATIONAL GROUP, INC.
and
AIGF, INC.
Dated as of December 21, 1997,
as amended and restated
as of January 7, 1998,
as amended by Amendment
No. 1 dated as of
January 28, 1998, and
as amended and restated
as of February 28, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
RECITALS
ARTICLE I
The Merger; Closing; Effective Time
1.1. The Merger............................................................2
1.2. Closing...............................................................2
1.3. Effective Time........................................................2
1.4. Optional Tender Offer.................................................2
1.5. The Tender Offer......................................................3
(a) Conditions; Consideration; Schedule 14D-1.......................3
(b) Expiration Date.................................................3
(c) Schedule 14D-9; Meetings Of Stockholders........................4
(d) Mailing and Content of Offer Documents and Schedule 14D-9.......4
(e) Directors.......................................................4
ARTICLE II
Charter and By-Laws
of the Surviving Corporation
2.1. The Charter...........................................................5
2.2. The By-Laws...........................................................5
ARTICLE III
Officers and Directors
of the Surviving Corporation
3.1. Directors.............................................................5
3.2. Officers..............................................................5
-i-
<PAGE> 3
Page
ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates
4.1. Effect on Capital Stock...............................................6
(a) Common Stock Merger Consideration...............................6
(b) Preferred Stock Merger Consideration............................9
(c) Cancellation of Shares..........................................9
(d) Merger Subsidiary...............................................9
(e) Election Form...................................................9
(f) Tender Offer...................................................10
4.2. Exchange of Certificates for Shares..................................10
(a) Exchange Agent.................................................10
(b) Exchange Procedures............................................11
(c) Distributions with Respect to Unexchanged Shares...............12
(d) Transfers......................................................12
(e) Fractional Shares..............................................12
(f) Termination of Exchange Fund...................................12
(g) Lost, Stolen or Destroyed Certificates.........................13
(h) Affiliates.....................................................13
4.3. Dissenters' Rights...................................................13
4.4. Adjustments to Prevent Dilution......................................13
4.5. Treatment of the Convertible Notes...................................13
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company........................14
(a) Organization, Good Standing and Qualification..................14
(b) Capital Structure..............................................15
(c) Corporate Authority; Approval and Fairness.....................16
(d) Governmental Filings; No Violations............................16
(e) Company Reports; Financial Statements..........................18
(f) Absence of Certain Changes.....................................19
(g) Litigation and Liabilities.....................................19
(h) Employee Benefits..............................................20
(i) Compliance with Laws; Permits..................................22
(j) Takeover Statutes..............................................23
-ii-
<PAGE> 4
Page
(k) Environmental Matters..........................................24
(l) Tax Matters....................................................24
(m) Taxes..........................................................25
(n) Labor Matters..................................................27
(o) Intellectual Property..........................................27
(p) Material Contracts.............................................28
(q) Rights Plan....................................................28
(r) Brokers and Finders............................................29
(s) Insurance Matters..............................................29
(t) Liabilities and Reserves.......................................31
(u) Investment Company.............................................32
5.2. Representations and Warranties of Parent and Merger Subsidiary.......32
(a) Capitalization of Merger Subsidiary............................32
(b) Organization, Good Standing and Qualification..................33
(c) Capital Structure..............................................33
(d) Corporate Authority............................................33
(e) Governmental Filings; No Violations............................34
(f) Parent Reports; Financial Statements...........................34
(g) Absence of Certain Changes.....................................35
(h) Tax Matters....................................................36
(i) Brokers and Finders............................................36
(j) Insurance Matters..............................................36
ARTICLE VI
Covenants
6.1. Interim Operations...................................................37
6.2. Acquisition Proposals................................................40
6.3. Information Supplied.................................................41
6.4. Stockholders Meetings................................................41
6.5. Filings; Other Actions; Notification.................................42
6.6. Taxation.............................................................44
6.7. Access...............................................................44
6.8. Affiliates...........................................................45
6.9. Stock Exchange Listing and De-listing................................45
6.10. Publicity............................................................46
6.11. Benefits; Corporate Headquarters; School and Day Care Facility.......46
(a) Stock Options..................................................46
(b) Employee Benefits..............................................47
-iii-
<PAGE> 5
Page
(c) Corporate Headquarters.........................................47
(d) School and Day Care Facility...................................47
6.12. Expenses.............................................................48
6.13. Indemnification; Directors' and Officers' Insurance..................48
6.14. Convertible Notes....................................................49
6.15. Other Actions by the Company and Parent..............................49
(a) Rights.........................................................49
(b) Takeover Statute...............................................50
(c) Dividends......................................................50
ARTICLE VII
Conditions
7.1. Conditions to Each Party's Obligation to Effect the Merger...........51
(a) Stockholder Approval...........................................51
(b) Listing........................................................51
(c) Regulatory Consents............................................51
(d) Litigation.....................................................51
(e) S-4............................................................52
(f) Blue Sky Approvals.............................................52
7.2. Conditions to Obligations of Parent and Merger Subsidiary............52
(a) Representations and Warranties.................................52
(b) Performance of Obligations of the Company......................52
(c) Consents.......................................................52
(d) Tax Opinion....................................................53
(e) Affiliates Letters.............................................53
7.3. Conditions to Obligation of the Company..............................53
(a) Representations and Warranties.................................53
(b) Performance of Obligations of Parent and Merger Subsidiary.....53
(c) Consents Under Agreements......................................54
(d) Tax Opinion....................................................54
7.4. Waiver of Conditions Following Consummation of Tender Offer..........54
ARTICLE VIII
Termination
8.1. Termination by Mutual Consent........................................55
8.2. Termination by Either Parent or the Company..........................55
8.3. Termination by the Company...........................................55
-iv-
<PAGE> 6
Page
8.4. Termination by Parent................................................56
8.5. Effect of Termination and Abandonment................................56
ARTICLE IX
Miscellaneous and General
9.1. Survival.............................................................58
9.2. Modification or Amendment............................................58
9.3. Waiver of Conditions.................................................58
9.4. Counterparts.........................................................58
9.5. GOVERNING LAW; WAIVER OF JURY TRIAL..................................58
9.6. Notices..............................................................59
9.7. Entire Agreement; No Other Representations...........................60
9.8. No Third Party Beneficiaries.........................................60
9.9. Obligations of Parent and of the Company.............................61
9.10. Severability.........................................................61
9.11. Interpretation.......................................................61
9.12. Assignment...........................................................61
9.13. Alternative Transaction Structure. .................................61
Exhibit A -- Stock Option Agreement
Exhibit B -- Voting Agreement
Exhibit C -- Form of Affiliate Letter
Exhibit D -- Amendment of Severance Agreement (Form A)
Exhibit E -- Amendment of Severance Agreement (Form B)
-v-
<PAGE> 7
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of
December 21, 1997, as amended and restated as of January 7, 1998, as amended by
Amendment No. 1 dated as of January 28, 1998, and as amended and restated as of
February 28, 1998 (as so amended and restated, hereinafter this "Agreement"),
among AMERICAN BANKERS INSURANCE GROUP, INC., a Florida corporation (the
"Company"), AMERICAN INTERNATIONAL GROUP, INC., a Delaware corporation
("Parent"), and AIGF, INC., a Florida corporation and a wholly-owned subsidiary
of Parent ("Merger Subsidiary," the Company and Merger Subsidiary sometimes
being hereinafter collectively referred to as the "Constituent Corporations.")
RECITALS
WHEREAS, the respective boards of directors of each of Parent,
Merger Subsidiary and the Company have determined that the merger of the Company
with and into Merger Subsidiary (the "Merger") upon the terms and subject to the
conditions set forth in this Agreement is advisable and have approved the
Merger;
WHEREAS, it is intended that, for federal income tax purposes,
the Merger shall qualify as a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder (the "Code");
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Parent's willingness to enter
into this Agreement, the Company and Parent have entered into a Stock Option
Agreement dated as of the date of this Agreement and attached hereto as Exhibit
A (the "Stock Option Agreement"), pursuant to which the Company has granted
Parent an option to purchase shares of common stock of the Company under certain
circumstances;
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Parent's willingness to enter
into this Agreement, certain stockholders of the Company and Parent have entered
into a Voting Agreement dated as of the date of this Agreement and attached
hereto as Exhibit B (the "Voting Agreement"), pursuant to which such
stockholders have agreed, among other things, to vote their shares of common
stock of the Company in favor of the Merger; and
WHEREAS, the Company, Parent and Merger Subsidiary desire to
make certain representations, warranties, covenants and agreements in connection
with this Agreement.
<PAGE> 8
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
The Merger; Closing; Effective Time; Optional Tender Offer
1.1. The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, at the Effective Time (as defined in Section 1.3)
the Company shall be merged with and into Merger Subsidiary and the separate
corporate existence of the Company shall thereupon cease. Merger Subsidiary
shall be the surviving corporation in the Merger (sometimes hereinafter referred
to as the "Surviving Corporation"), and the separate corporate existence of
Merger Subsidiary with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger, except as set forth in
Article III. The Merger shall have the effects specified in the Florida Business
Corporation Act, as amended (the "FBCA").
1.2. Closing. The closing of the Merger (the "Closing") shall
take place (i) at the offices of Sullivan & Cromwell, 125 Broad Street, New
York, New York at 9:00 A.M. on the business day designated by Parent, which
shall be not earlier than the first business day on which, and not later than
the fifth business day following the first business day on which, the last to be
fulfilled or waived of the conditions set forth in Article VII (other than those
conditions that by their nature are to be satisfied at the Closing, but subject
to the fulfillment or waiver of those conditions) shall be satisfied or waived
in accordance with this Agreement or (ii) at such other place and time and/or on
such other date as the Company and Parent may agree in writing (the "Closing
Date").
1.3. Effective Time. As soon as practicable following the
Closing, the Company and Parent will cause Articles of Merger (the "Articles of
Merger") to be executed, acknowledged and filed with the Secretary of State of
the State of Florida (the "Secretary") as provided in Section 607.1105 of the
FBCA. The Merger shall become effective at the time the Secretary accepts for
record the Articles of Merger or at such later time agreed by the parties and
established under the Articles of Merger (the "Effective Time").
1.4. Optional Tender Offer. Parent shall be entitled at any
time after the date hereof, at its sole option, to cause Merger Subsidiary to
commence a tender offer (the "Tender Offer") to acquire up to 100% (or such
lesser percentage not less than 49.9% as Parent shall specify in the Tender
Offer) of the outstanding Common Shares (as defined in Section 4.1(a))
(excluding for all purposes in calculating such applicable percentage any
outstanding Common Shares owned by Parent or Merger Subsidiary pursuant to the
exercise of Parent's rights under the Stock Option Agreement). If Parent
-2-
<PAGE> 9
determines to commence such Tender Offer after the date hereof, Parent shall
notify the Company of its intention to do so in accordance with the notice
requirements of Section 9.6.
1.5. The Tender Offer. (a) Conditions; Consideration; Schedule
14D-1. Parent and Merger Subsidiary shall (i) within five business days of
delivery of the notice described in Section 1.4 commence (within the meaning of
Rule 14d-2(a) of the Exchange Act) the Tender Offer for up to 100% (or such
lesser percentage not less than 49.9% as Parent shall specify in the Tender
Offer) of the outstanding Common Shares (excluding for all purposes in
calculating such applicable percentage any outstanding Common Shares owned by
Parent or Merger Subsidiary pursuant to the exercise of Parent's rights under
the Stock Option Agreement), together with the associated New Rights (as defined
in Section 5.1(q)) issued pursuant to the New Rights Agreement (as defined in
Section 5.1(b)), at a purchase price of not less than $58.00, net to the seller
in cash, without interest thereon, per Common Share, upon the terms and subject
to the conditions set forth in Annex I to this Agreement and such further
customary terms as may be set forth in an Offer to Purchase and Letter of
Transmittal (the "Offer Documents") to be mailed by Merger Subsidiary in
connection with the Tender Offer and (ii) file with the SEC a Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D- 1") with respect to the Tender
Offer which will contain the Offer Documents as exhibits. The Company shall have
the opportunity to review the Schedule 14D-1 prior to its being filed with the
SEC. Without the prior written consent of the Company, Merger Subsidiary shall
not decrease the price per Common Share or change the form of consideration
payable in the Tender Offer, decrease the number of Common Shares sought, impose
additional conditions to the Tender Offer or amend any other term of the Tender
Offer in any manner adverse to the holders of Common Shares; it being understood
that Parent can reduce the Minimum Tender Condition (as defined in Annex I) to a
percentage not less than 35% of the outstanding Common Shares on a fully-diluted
basis (excluding for all purposes of such dilution calculation Common Shares
purchased or subject to purchase by Parent pursuant to the exercise of Parent's
rights under the Stock Option Agreement). Upon the terms and subject to the
conditions of the Tender Offer, Merger Subsidiary will accept for payment and
will purchase, as soon as permitted under the terms of the Tender Offer, all
Common Shares validly tendered and not withdrawn prior to the expiration of the
Tender Offer.
(b) Expiration Date. Parent and Merger Subsidiary agree that,
except as provided thereby, Merger Subsidiary shall not terminate or withdraw
the Tender Offer prior to the expiration date thereof, which shall be a date at
least 20 business days from the date of commencement thereof (the "Expiration
Date"). If, at the Expiration Date, the conditions to the Tender Offer described
in Annex I hereto shall not have been satisfied or earlier waived, Merger
Subsidiary, at its sole option, may extend the Expiration Date on one or more
occasions for an additional period or periods of time and, unless this Agreement
has been terminated in accordance with its terms, shall extend it until a date
-3-
<PAGE> 10
that is not later than the sixtieth day from the date of commencement of the
Tender Offer (including, for purposes of calculating such 60 days, the date of
commencement of the Tender Offer as the first day) (the "Extended Expiration
Date"), if requested to do so by the Company and Parent is otherwise going to
let the Tender Offer expire without the purchase of Common Shares thereunder.
Parent and Merger Subsidiary shall use their reasonable efforts to consummate
the Tender Offer in accordance with the terms of this Agreement and the
conditions to the Tender Offer set forth in Annex I.
(c) Schedule 14D-9; Meetings of Stockholders. The Company
agrees that it shall, on the same day that Merger Subsidiary and Parent file
with the SEC the Schedule 14D-1, file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 with respect to the Tender Offer (including
exhibits, and as amended from time to time, the "Schedule 14D-9"), which shall
contain, subject to applicable law regarding fiduciary duties, the
recommendation of the Company's board of directors that the holders of Common
Shares accept the Tender Offer. Parent and Merger Subsidiary shall have the
opportunity to review the Schedule 14D-9 prior to its being filed with the SEC.
Upon the filing of the Schedule14D-1, the Company shall cancel the meetings of
stockholders referred to in Section 6.4(a) unless such meetings shall have
already occurred.
(d) Mailing and Content of Offer Documents and Schedule 14D-9.
The Company agrees that copies of the Schedule 14D-9 (excluding exhibits), shall
be enclosed with the Offer Documents to be mailed by Merger Subsidiary to the
stockholders of the Company in connection with the Tender Offer. In connection
with the Tender Offer, the Company will furnish Parent and Merger Subsidiary
with such information, including lists of the stockholders of the Company,
mailing labels and lists of security positions, and such assistance as Parent or
Merger Subsidiary or their agents may request in communicating the Tender Offer
to the record and beneficial holders of the Common Shares.
(e) Directors. Promptly following Merger Subsidiary's purchase
of and payment for Common Shares pursuant to the Tender Offer, Parent and Merger
Subsidiary shall be entitled to designate two members of the board of directors
to the Company. Accordingly, the Company shall, upon request by Parent or Merger
Subsidiary, promptly increase the size of the board of directors of the Company
to the extent permitted by the Company's charter and by-laws, and shall
thereafter cause Parent's designees promptly to be elected or appointed to the
board of directors of the Company.
-4-
<PAGE> 11
ARTICLE II
Charter and By-Laws
of the Surviving Corporation
2.1. The Charter. The Articles of Incorporation of Merger
Subsidiary as in effect immediately prior to the Effective Time shall be the
charter of the Surviving Corporation (the "Charter"), until duly amended as
provided therein or by applicable law.
2.2. The By-Laws. The by-laws of Merger Subsidiary in effect
at the Effective Time shall be the by-laws of the Surviving Corporation (the
"By-Laws"), until thereafter amended as provided therein or by applicable law.
ARTICLE III
Officers and Directors
of the Surviving Corporation
3.1. Directors. The directors of Merger Subsidiary at the
Effective Time shall, from and after the Effective Time, be the directors of the
Surviving Corporation until their successors have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in accordance
with the Charter and the By-Laws. Parent shall cause all of the directors of the
Surviving Corporation to resign immediately following the Effective Time and
shall thereafter cause to be appointed as directors of the Surviving Corporation
each person that was a director of the Company immediately prior to the
Effective Time who is willing to serve as a director of the Surviving
Corporation plus two additional persons designated by Parent.
3.2. Officers. The officers of the Company at the Effective
Time shall, from and after the Effective Time, be the officers of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Charter and the By-Laws.
-5-
<PAGE> 12
ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates
4.1. Effect on Capital Stock. At the Effective Time, as a
result of the Merger and without any action on the part of the holder of any
capital stock of the Company:
(a) Common Stock Merger Consideration. (i) Subject to
paragraphs (ii), (iii) and (iv) below, each share of Common Stock, par value
$1.00 per share, of the Company (a "Common Share" or, collectively, the "Common
Shares") issued and outstanding immediately prior to the Effective Time (other
than Common Shares owned by Parent, Merger Subsidiary or any other direct or
indirect subsidiary of Parent (collectively, the "Parent Companies") or Common
Shares that are owned by the Company or any direct or indirect subsidiary of the
Company and in each case not held on behalf of third parties (collectively,
"Excluded Common Shares")) shall be converted into, and become exchangeable for,
that portion of a share of Common Stock, par value $2.50 per share, of Parent
("Parent Common Stock") equal to the lesser of (i) .4811 (the "Maximum Exchange
Ratio") and (ii) the decimal derived by dividing $58.00 by the average of the
closing prices per share of Parent Common Stock as reported on the NYSE
composite transactions reporting system (as reported in the New York City
edition of the Wall Street Journal) for the ten trading days ending on the third
trading day prior to the date of the consummation of the Merger (the "Base
Period Stock Price"); provided, however, if the Base Period Stock Price is below
$120.5625, Parent shall elect to either (i) pay a cash amount equal to the Per
Share Cash Top-Up Amount (provided that Parent may not elect to pay the cash
amount contemplated by this clause (i) if the aggregate cash amount so paid
would exceed the Non-Election Cash Pool) or (ii) (x) increase the Maximum
Exchange Ratio (the "Adjusted Maximum Exchange Ratio") up to a decimal such that
the product of the Adjusted Maximum Exchange Ratio times the Base Period Stock
Price (the "Product") equals or is less than $58.00 and (y) if the Product is
less than $58.00, pay a cash amount equal to the difference between $58.00 and
such Product (provided that Parent may not elect to pay such an aggregate amount
of cash pursuant to this clause (ii) which would exceed the Non-Election Cash
Pool); provided, further, however, if the Tender Offer is commenced and
consummated and more than 49.9% of the outstanding Common Shares (excluding for
all purposes in calculating such percentage any outstanding Common Shares owned
by Parent or Merger Subsidiary pursuant to the exercise of Parent's rights under
the Stock Option Agreement) are purchased by Merger Subsidiary pursuant to the
Tender Offer, each Common Share issued and outstanding immediately prior to the
Effective Time (other than Excluded Common Shares) shall be converted into, and
become exchangeable for, at Parent's election, either (i) provided that the
Merger would still be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that each
of Parent, Merger
-6-
<PAGE> 13
Subsidiary and the Company would be a party to that reorganization within the
meaning of Section 368(b) of the Code, that portion of a share of Parent Common
Stock determined as set forth above or (ii) cash in an amount equal to the
amount paid per Common Share in the Tender Offer. In the event that Parent
elects to consummate the Merger as contemplated by clause (ii) in the preceding
sentence or is required by Section 7.4 to consummate the Merger by paying cash
to the holders of Common Shares, the parties to this Agreement acknowledge and
agree that the Merger will not be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, each of Parent,
Merger Subsidiary and the Company would not be treated as a party to a
reorganization within the meaning of Section 368(b) of the Code, the parties to
this Agreement will be deemed to have waived the covenant contained in Section
6.6 and the conditions to the consummation of the Merger contained in Section
7.2(d) and Section 7.3(d), the Merger will not be treated as a Common Stock
Fundamental Change for purposes of the Preferred Shares and the Merger shall be
consummated by merging Merger Subsidiary into the Company in lieu of merging the
Company into Merger Subsidiary. The payments referred to in this Section
4.1(a)(i) shall be referred to as the "Non-Election Merger Consideration". If
the Tender Offer is consummated at a price per Common Share in cash that is
higher than $58.00, it is agreed that (x) such higher amount shall be deemed to
be inserted in lieu of $58.00 in each place that $58.00 appears in this Section
4.1 and (y) a fraction equal to such price per Common Share divided by $120.5625
shall be deemed to be inserted in lieu of .4811 in this Section 4.1(a)(i);
(ii) Subject to Section 4.1(f), Common Shares for which the
holder of such shares has made a Cash Election shall be converted into, and
become exchangeable for, $58.00 in cash (the "Cash Election Merger
Consideration"), provided that in no event shall holders of Common Shares who
have made a Cash Election be entitled to receive an aggregate amount of cash in
excess of the Maximum Cash Pool. In the event that Cash Elections are submitted
with respect to an aggregate number of Common Shares which, except for the
limitation imposed by the Maximum Cash Pool, would require Parent to pay cash in
the aggregate in excess of the Maximum Cash Pool, a pro rata portion of such
Common Shares (rounded down to the nearest whole Common Share) shall be
converted into the right to receive the Cash Election Merger Consideration,
which proration as to each shareholder shall be based upon the ratio of the (i)
Maximum Cash Pool to (ii) the aggregate number of Common Shares with respect to
which Cash Elections are submitted multiplied by $58.00. All Common Shares which
are not converted into the right to receive the Cash Election Merger
Consideration as a result of this paragraph shall be converted into the right to
receive the Stock Election Merger Consideration;
(iii) Subject to Section 4.1(f), Common Shares for which a
holder has made a Stock Election shall be converted into, and become
exchangeable for, that portion of a share of Parent Common Stock equal to the
lesser of (i) the Maximum Exchange Ratio and (ii) the decimal derived by
dividing $58.00 by the Base Period Stock Price; provided, however, if the Base
Period Stock Price is below $120.5625, Parent shall elect
-7-
<PAGE> 14
to either (i) pay a cash amount equal to the Per Share Cash Top-Up Amount
(provided that Parent may not elect to pay the cash amount contemplated by this
clause (i) if the aggregate cash amount paid would exceed the Stock Election
Cash Pool) or (ii) (x) establish the Adjusted Maximum Exchange Ratio such that
the Product equals or is less than $58.00 and (y) if the Product is less than
$58.00, pay a cash amount equal to the difference between $58.00 and such
Product (provided that Parent may not elect to pay an aggregate amount of cash
pursuant to this clause (ii) which would exceed the Stock Election Cash Pool).
The foregoing payments shall be referred to herein as the "Stock Election Merger
Consideration" and, together with the Non-Election Merger Consideration and the
Cash Election Merger Consideration, the "Common Stock Merger Consideration."
(iv) Parent may at its option, but shall not be obliged to,
increase the portion of a share of Parent Common Stock into which each share of
Common Stock may be converted pursuant to Section 4.1(a)(i) and (if applicable)
Section 4.1(a)(iii) to the extent that in the reasonable judgment of Parent such
increase is necessary to enable the Merger to qualify as a "reorganization"
within the meaning of Section 368(a) of the Code.
(v) For purposes of this Agreement the following terms shall
have the following meanings:
"Maximum Cash Pool" means an amount of cash equal to (i) .499
multiplied by the sum of (x) the amount of the Common Stock Merger
Consideration, calculated for purposes of this definition based on the Base
Period Stock Price, and, if applicable, (y) the aggregate amount of cash paid by
Merger Subsidiary pursuant to the Tender Offer minus, if applicable, (ii) the
aggregate amount of cash paid by Merger Subsidiary pursuant to the Tender Offer.
"Non-Election Cash Pool" means an amount of cash equal to the
Maximum Cash Pool minus the aggregate amount of cash paid in the Merger to the
holders of Common Shares that make a Cash Election.
"Stock Election Cash Pool" means an amount of cash equal to
the greater of (i) $0 and (ii) the Aggregate Cash Top-Up Amount minus the
aggregate amount of cash paid in the Merger to the holders of Common Shares that
do not make a Stock Election.
"Per Share Cash Top-Up Amount" means the greater of (i) $0 and
(ii) (x) $58.00 minus (y) the product of (A) the Base Period Stock Price and (B)
the Maximum Exchange Ratio.
-8-
<PAGE> 15
"Aggregate Cash Top-Up Amount" means the lesser of (i) the
product of (x) the Per Share Cash Top-Up Amount and (y) the number of
outstanding Common Shares as of the Effective Time and (ii) an amount equal to
the Maximum Cash Pool.
(b) Preferred Stock Merger Consideration. Each share of $3.125
Series B Convertible Preferred Stock, no par value, of the Company (a "Preferred
Share" or, collectively, the "Preferred Shares" and, together with the Common
Shares, the "Shares") issued and outstanding immediately prior to the Effective
Time (other than Preferred Shares owned by Parent Companies or Preferred Shares
that are owned by the Company or any direct or indirect subsidiary of the
Company and in each case not held on behalf of third parties (collectively,
"Excluded Preferred Shares" and, together with the Excluded Common Shares, the
"Excluded Shares") shall be converted into, and become exchangeable for one
share (the "Preferred Stock Merger Consideration," and, together with the Common
Stock Merger Consideration, the "Merger Consideration"), of Series C Preferred
Stock, par value $5.00 per share, of Parent ("Parent Preferred Stock") which
shall contain terms substantially similar to the terms of the Preferred Shares
(after making the conversion adjustments required to be made for a Common Stock
Fundamental Change pursuant to the Company's Third Amended and Restated Articles
of Incorporation as a result of the Merger) and shall be convertible into Parent
Common Stock.
(c) Cancellation of Shares. At the Effective Time, all Shares
shall no longer be outstanding and shall be canceled and retired and shall cease
to exist, and each certificate (a "Certificate") formerly representing any of
such Shares (other than Excluded Shares) shall thereafter represent only the
right to the Merger Consideration and the right, if any, to receive pursuant to
Section 4.2(e) cash in lieu of fractional shares into which such Shares have
been converted pursuant to this Section 4.1(c) and any distribution or dividend
pursuant to Section 4.2(c). Each Share issued and outstanding immediately prior
to the Effective Time and owned by any of the Parent Companies or owned by the
Company or any direct or indirect subsidiary of the Company (in each case other
than Shares that are owned on behalf of third parties), shall, by virtue of the
Merger and without any action on the part of the holder thereof, cease to be
outstanding, shall be canceled and retired without payment of any consideration
therefore and shall cease to exist.
(d) Merger Subsidiary. At the Effective Time, each share of
Common Stock, par value $.01 per share, of Merger Subsidiary issued and
outstanding immediately prior to the Effective Time shall be converted into one
share of common stock of the Surviving Corporation.
(e) Election Form. Each holder of Common Shares will be
entitled to elect with respect to all or any portion of the Common Shares held
by such holder to have such shares converted at the Effective Time into the
right to receive the Stock Election
-9-
<PAGE> 16
Merger Consideration (the "Stock Election") or the Cash Election Merger
Consideration (the "Cash Election"). The form for making the Stock Election and
Cash Election (the "Election Form") shall be determined by mutual agreement
between Parent and the Company and shall be mailed to holders of Common Shares
on the record date for the Common Stockholders Meeting together with the related
Prospectus/Proxy Statement (as hereinafter defined). To be effective, the
Election Form must be properly completed, signed and submitted by the Election
Deadline (as hereinafter defined) to the Exchange Agent (as hereinafter defined)
and accompanied by the certificates representing the Common Shares as to which
an Election is being made or an appropriate guarantee of delivery by a
commercial bank or trust company in the United States or a member of a
registered national securities exchange or the National Association of
Securities Dealers, Inc.). An Election Form which is not effective shall be
treated as if no election had been made with respect to the Common Shares
covered by such Election Form and any holder who does not submit an effective
Election Form shall receive the Non-Election Merger Consideration. Parent will
have the discretion, which it may delegate in whole or in part to the Exchange
Agent, to determine whether Election Forms have been properly completed, signed
and submitted or revoked and to disregard immaterial defects in Election Forms.
The decisions of Parent or, if delegated, of the Exchange Agent shall be
conclusive and binding. Neither Parent, Merger Subsidiary nor the Exchange Agent
will be under any obligation to notify any person of any defect in an Election
Form submitted to the Exchange Agent. The Exchange Agent shall also make all
computations contemplated by Section 4.1(a) hereof, and all such computations
shall be conclusive and binding on the holders of Common Shares in the absence
of manifest error.
Parent and the Company each shall use its best efforts to make
the Election Form available to all persons who become holders of record of
Common Shares during the period between the record date for the Common
Stockholders Meeting and 5:00 P.M., New York City time, on the third trading day
prior to the date of the consummation of the Merger (the "Election Deadline").
Parent will publicly announce the Election Deadline not later than 10:00 A.M. on
the trading day preceding the date on which the Election Deadline occurs.
(f) Tender Offer. In the event that the Tender Offer is
commenced and consummated, Section 4.1(e) shall be of no force and effect and
holders of Common Shares therefore shall not be entitled to make a Stock
Election or a Cash Election. In such circumstances, all consideration paid in
the Merger to holders of Common Shares will be paid in accordance with Section
4.1(a)(i) and Section 4.1(a)(iv) and no consideration will be paid in accordance
with Section 4.1(a)(ii) or (iii).
-10-
<PAGE> 17
4.2. Exchange of Certificates for Shares.
(a) Exchange Agent. Promptly after the Effective Time, Parent
shall deposit, or shall cause to be deposited, with an exchange agent selected
by Parent with the Company's prior approval, which shall not be unreasonably
withheld (the "Exchange Agent"), for the benefit of the holders of Shares,
certificates representing the shares of Parent Common Stock and Parent Preferred
Stock and, after the Effective Time, if applicable, any cash, dividends or other
distributions with respect to the Parent Common Stock and Parent Preferred Stock
to be issued or paid pursuant to this Agreement in exchange for Shares
outstanding immediately prior to the Effective Time upon due surrender of the
Certificates (or affidavits of loss in lieu thereof) pursuant to the provisions
of this Article IV (such certificates for shares of Parent Common Stock and
Parent Preferred Stock, together with the amount of any cash, dividends or other
distributions payable with respect thereto, being hereinafter referred to as the
"Exchange Fund").
(b) Exchange Procedures. Promptly after the Effective Time,
the Surviving Corporation shall cause the Exchange Agent to mail to each holder
of record of Shares (other than holders of Excluded Shares) (i) a letter of
transmittal specifying that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates (or
affidavits of loss in lieu thereof) to the Exchange Agent, such letter of
transmittal to be in such form and have such other provisions as Parent and the
Company may reasonably agree, and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for (A) certificates representing
shares of Parent Common Stock or Parent Preferred Stock, as applicable, and (B)
if applicable, any cash, unpaid dividends or other distributions and cash in
lieu of fractional shares. Subject to Section 4.2(h), upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor (x) a certificate representing that number of whole
shares of Parent Common Stock or Parent Preferred Stock, as applicable, that
such holder is entitled to receive pursuant to this Article IV, (y) a check in
the amount (after giving effect to any required tax withholdings) of (A) any
cash in lieu of fractional shares plus (B) any cash, including unpaid non-stock
dividends and any other dividends or other distributions, that such holder has
the right to receive pursuant to the provisions of this Article IV, and the
Certificate so surrendered shall forthwith be canceled. No interest will be paid
or accrued on any amount payable upon due surrender of the Certificates. In the
event of a transfer of ownership of Shares that is not registered in the
transfer records of the Company, a certificate representing the proper number of
shares of Parent Common Stock or Parent Preferred Stock, as applicable, together
with a check for any cash to be paid upon due surrender of the Certificate and
any other dividends or distributions in respect thereof, may be issued and/or
paid to such a transferee if the Certificate formerly representing such Shares
is presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to
-11-
<PAGE> 18
evidence that any applicable stock transfer taxes have been paid. If any
certificate for shares of Parent Common Stock or Parent Preferred Stock, as
applicable, is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of such
exchange that the Person (as defined below) requesting such exchange shall pay
any transfer or other taxes required by reason of the issuance of certificates
for shares of Parent Common Stock or Parent Preferred Stock, as applicable, in a
name other than that of the registered holder of the Certificate surrendered, or
shall establish to the satisfaction of Parent or the Exchange Agent that such
tax has been paid or is not applicable.
For the purposes of this Agreement, the term "Person" shall
mean any individual, corporation (including not-for-profit), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity (as defined in Section 5.1(d)) or
other entity of any kind or nature.
(c) Distributions with Respect to Unexchanged Shares. All
shares of Parent Common Stock and Parent Preferred Stock to be issued pursuant
to the Merger shall be deemed issued and outstanding as of the Effective Time
and whenever a dividend or other distribution is declared by Parent in respect
of the Parent Common Stock or Parent Preferred Stock, as applicable, the record
date for which is at or after the Effective Time, that declaration shall include
dividends or other distributions in respect of all shares issuable pursuant to
this Agreement. No dividends or other distributions in respect of the Parent
Common Stock or Parent Preferred Stock, as applicable, shall be paid to any
holder of any unsurrendered Certificate until such Certificate is surrendered
for exchange in accordance with this Article IV. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
issued and/or paid to the holder of the certificates representing whole shares
of Parent Common Stock and Parent Preferred Stock, as applicable, issued in
exchange therefor, without interest, (A) at the time of such surrender, the
dividends or other distributions with a record date after the Effective Time
theretofore payable with respect to such whole shares of Parent Common Stock and
Parent Preferred Stock, as applicable, and not paid and (B) at the appropriate
payment date, the dividends or other distributions payable with respect to such
whole shares of Parent Common Stock and Parent Preferred Stock, as applicable,
with a record date after the Effective Time but with a payment date subsequent
to surrender.
(d) Transfers. After the Effective Time, there shall be no
transfers on the stock transfer books of the Company of the Shares that were
outstanding immediately prior to the Effective Time.
(e) Fractional Shares. Notwithstanding any other provision of
this Agreement, no fractional shares of Parent Common Stock will be issued. Each
holder of Common Shares who would be entitled to receive a fractional share of
Parent Common Stock but for this Section 4.2(e) shall be entitled to receive, in
lieu thereof, a cash
-12-
<PAGE> 19
payment in an amount equal to such fractional share of Parent Common Stock
multiplied by the Base Period Stock Price.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund (including the proceeds of any investments thereof and any Parent Common
Stock and Parent Preferred Stock) that remains unclaimed by the stockholders of
the Company for 180 days after the Effective Time shall be paid to Parent. Any
stockholders of the Company who have not theretofore complied with this Article
IV shall thereafter look only to Parent for payment of their shares of Parent
Common Stock and Parent Preferred Stock, as applicable, and any cash, dividends
and other distributions in respect thereof payable and/or issuable pursuant to
Section 4.1 and Section 4.2(c) upon due surrender of their Certificates (or
affidavits of loss in lieu thereof), in each case, without any interest thereon.
Notwithstanding the foregoing, none of Parent, the Surviving Corporation, the
Exchange Agent or any other Person shall be liable to any former holder of
Shares for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(g) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such Person of a
bond in customary amount as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed Certificate the shares of Parent Common Stock
or Parent Preferred Stock, as applicable, and any cash payable and any unpaid
dividends or other distributions in respect thereof pursuant to Section 4.1 and
4.2(c) upon due surrender of and deliverable in respect of the Shares
represented by such Certificate pursuant to this Agreement.
(h) Affiliates. Notwithstanding anything herein to the
contrary, Certificates surrendered for exchange by any "affiliate" (as
determined pursuant to Section 6.8) of the Company shall not be exchanged until
Parent has received a written agreement from such Person as provided in Section
6.8 hereof.
4.3. Dissenters' Rights. In accordance with Section 607.1302
of the FBCA, no appraisal rights shall be available to holders of Shares in
connection with the Merger.
4.4. Adjustments to Prevent Dilution. In the event that the
Company changes the number of Shares or securities convertible or exchangeable
into or exercisable for Shares, or Parent changes the number of shares of Parent
Common Stock or securities convertible or exchangeable into or exercisable for
shares of Parent Common Stock, issued and outstanding prior to the Effective
Time as a result of a reclassification, stock split (including a reverse split),
stock dividend or distribution, recapitalization,
-13-
<PAGE> 20
merger, subdivision or other similar transaction, the Merger Consideration shall
be equitably adjusted.
4.5. Treatment of the Convertible Notes. The Convertible Notes
(as defined in Section 5.1(b)) shall be treated as set forth in Section 6.14.
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company. (i) Except
as set forth in the corresponding sections or subsections of the disclosure
letter delivered to Parent by the Company on or prior to entering into this
Agreement (the "Company Disclosure Letter") or in any Company Report (as
hereinafter defined) filed prior to the date hereof, the Company hereby
represents and warrants to Parent and Merger Subsidiary that:
(a) Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Florida and each of its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of organization and each of the Company and its
Subsidiaries has all requisite corporate or similar power and authority to own
and operate its properties and assets and to carry on its business as presently
conducted and is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership or operation of its
properties or conduct of its business requires such qualification, except where
the failure to be so qualified or in good standing, when taken together with all
other such failures, is not reasonably likely to have a Company Material Adverse
Effect (as defined below). The Company has made available to Parent a complete
and correct copy of the Company's and its Subsidiaries' charter and by-laws,
each as amended to date. The Company's and its Subsidiaries' charter and by-laws
so delivered are in full force and effect.
As used in this Agreement, the term (i) "Subsidiary" means,
with respect to the Company, Parent or Merger Subsidiary, as the case may be,
any entity, whether incorporated or unincorporated, of which at least a majority
of the securities or ownership interests having by their terms ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions is directly or indirectly owned or controlled by such party or
by one or more of its respective Subsidiaries or by such party and any one or
more of its respective Subsidiaries, and (ii) "Company Material Adverse Effect"
means a material adverse effect on the financial condition, properties, business
or results of operations of the Company and its Subsidiaries taken as a whole.
-14-
<PAGE> 21
The Company conducts its insurance operations through the
Subsidiaries set forth on Section 5.1(a) of the Company Disclosure Letter
(collectively, the "Company Insurance Subsidiaries"). Each of the Company
Insurance Subsidiaries is (i) duly licensed or authorized as an insurance
company and, where applicable, a reinsurer in its jurisdiction of incorporation,
(ii) duly licensed or authorized as an insurance company and, where applicable,
a reinsurer in each other jurisdiction where it is required to be so licensed or
authorized, and (iii) duly authorized in its jurisdiction of incorporation and
each other applicable jurisdiction to write each line of business reported as
being written in the Company SAP Statements (as hereinafter defined), except, in
any such case, where the failure to be so licensed or authorized is not
reasonably likely to have a Company Material Adverse Effect. The Company has
made all required filings under applicable insurance holding company statutes
except where the failure to file is not reasonably likely to have a Company
Material Adverse Effect.
(b) Capital Structure. The authorized stock of the Company
consists of 100,000,000 Common Shares, of which 41,535,807 Common Shares were
outstanding as of the close of business on November 3, 1997, and 10,000,000
shares of Preferred Stock, no par value, of which (i) 350,000 shares have been
authorized as Series A Participating Preferred Stock, none of which were
outstanding as of December 21, 1997 and (ii) 2,300,000 shares have been
authorized as Preferred Shares, of which 2,300,000 Preferred Shares were
outstanding as of December 21, 1997. All of the outstanding Common Shares and
Preferred Shares have been duly authorized and are validly issued, fully paid
and nonassessable. The Company has no commitments to issue or deliver Common
Shares, except that, as of December 21, 1997, there were approximately 5,630,610
(but no more than 5,664,193) Common Shares subject to issuance (i) pursuant to
the Company's 1997 Equity Incentive Plan, 1994 Amended and Restated Directors'
Deferred Compensation Plan, 1994 Key Executive Debenture Plan, 1994 Non-Employee
Directors' Stock Option Plan, 1994 Senior Management Stock Option Plan, 1991
Stock Option/Restricted Stock Plan, 1991 Stock Incentive Plan, and 1987
Executive Stock Option/Dividend Accrual Plan (collectively, the "Company Stock
Plans") and (ii) upon conversion of the Preferred Shares and the Company's
convertible debenture bonds due May 24, 1999 ("Convertible Notes"). The Company
has no commitments to issue or deliver preferred shares, except that as of
December 21, 1997, there were shares of Series A Participating Preferred Stock
subject to issuance pursuant to the Rights Agreement, as amended and restated as
of November 14, 1990, and as further amended, between the Company and
ChaseMellon Shareholder Services, LLC (as successor to Manufacturers Hanover
Trust Company), as Rights Agent (the "Rights Agreement") and as of February 28,
1998, there were shares of Series C Participating Preferred Stock subject to
issuance pursuant to the Rights Agreement, dated as of February 19, 1998,
between the Company and ChaseMellon Shareholder Services, LLC, as Rights Agent
(the "New Rights Agreement"). The Company Disclosure Letter contains a correct
and complete list of each outstanding option to purchase or acquire Common
Shares under each of the Company Stock Plans (each a "Company Option"),
including the plan, the holder, date of grant,
-15-
<PAGE> 22
exercise price and number of Shares subject thereto. Each of the outstanding
shares of capital stock or other securities of each of the Company's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and owned by the Company or a direct or indirect wholly-owned subsidiary of the
Company, free and clear of any lien, pledge, security interest, claim or other
encumbrance. Except as set forth above and in the Stock Option Agreement, there
are no preemptive or other outstanding rights, options, warrants, conversion
rights, stock appreciation rights, redemption rights, repurchase rights,
agreements, arrangements or commitments to issue or sell any shares of capital
stock or other securities of the Company or any of its Subsidiaries or any
securities or obligations convertible or exchangeable into or exercisable for,
or giving any Person a right to subscribe for or acquire, any securities of the
Company or any of its Subsidiaries, and no securities or obligations evidencing
such rights are authorized, issued or outstanding. Except for the Convertible
Notes, the Company does not have outstanding any bonds, debentures, notes or
other obligations the holders of which have the right to vote (or, except as
referred to in this subsection (b), convertible into or exercisable for
securities having the right to vote) with the stockholders of the Company on any
matter ("Voting Debt").
(c) Corporate Authority; Approval and Fairness. (i) The
Company has all requisite corporate power and authority and has taken all
corporate action necessary in order to execute, deliver and perform its
obligations under this Agreement and the Stock Option Agreement and to
consummate, subject only to approval of the Merger by the holders of at least a
majority of the outstanding Common Shares voting separately as a class (the
"Company Common Stock Requisite Vote") and a majority of the outstanding
Preferred Shares voting separately as a class (the "Company Preferred Stock
Requisite Vote" and, together with the Company Common Stock Requisite Vote, the
"Company Requisite Vote"), the Merger. This Agreement and the Stock Option
Agreement are the valid and binding agreements of the Company enforceable
against the Company in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles (the "Bankruptcy and Equity Exception").
(ii) The board of directors of the Company (A) has declared
that the Agreement, the Stock Option Agreement, the Tender Offer, the Merger and
the other transactions contemplated hereby and thereby are advisable and in the
best interests of the Company, (B) has authorized, approved and adopted in all
respects the Agreement, the Stock Option Agreement, the Tender Offer, the Merger
and the other transactions contemplated hereby and thereby, and (C) has received
the opinion of its financial advisors, Salomon Smith Barney, to the effect that
the consideration to be received by the holders of the Shares in the Tender
Offer and the Merger, taken together, is fair from a financial point of view to
such holders.
-16-
<PAGE> 23
(d) Governmental Filings; No Violations. (i) Other than the
filings and/or notices (A) pursuant to Section 1.3, (B) under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the Securities Act of 1933, as amended (the "Securities Act"), (C) to comply
with state securities or "blue-sky" laws, (D) required to be made with the NYSE
or Nasdaq, and (E) the filing of appropriate documents with, and approval of,
the respective Commissioners of Insurance or similar regulatory authorities of
Arizona, Florida, Georgia, New York, South Carolina, Texas, Puerto Rico, Mexico,
Cayman Islands, Argentina, Turks & Caicos, Dominican Republic and the United
Kingdom and such notices and consents as may be required under the antitrust
notification insurance laws of any state in which the Company, Parent or any of
their respective subsidiaries is domiciled or does business, no notices, reports
or other filings are required to be made by the Company with, nor are any
consents, registrations, approvals, permits or authorizations required to be
obtained by the Company from, any governmental or regulatory authority, agency,
commission, body or other governmental entity ("Governmental Entity"), in
connection with the execution and delivery of this Agreement and the Stock
Option Agreement by the Company and the consummation by the Company of the
Merger and the other transactions contemplated hereby and thereby, except those
that the failure to make or obtain are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect or prevent,
materially delay or materially impair the ability of the Company to consummate
the transactions contemplated by this Agreement and the Stock Option Agreement.
(ii) The execution, delivery and performance of this Agreement
and the Stock Option Agreement by the Company do not, and the consummation by
the Company of the Merger and the other transactions contemplated hereby and
thereby will not, constitute or result in (A) a breach or violation of, or a
default under, the charter or by-laws of the Company or the comparable governing
instruments of any of its Subsidiaries, (B) a breach or violation of, or a
default under, the acceleration of any obligations or the creation of a lien,
pledge, security interest or other encumbrance on the assets of the Company or
any of its Subsidiaries (with or without notice, lapse of time or both) pursuant
to, any agreement, lease, contract, note, mortgage, indenture, arrangement or
other obligation ("Contracts") binding upon the Company or any of its
Subsidiaries or (provided, as to consummation, the filings and notices are made,
and approvals are obtained, as referred to in Section 5.1(d)(i)), any Law (as
defined in Section 5.1(i)) or governmental or non-governmental permit or license
to which the Company or any of its Subsidiaries is subject or (C) any change in
the rights or obligations of any party under any of the Contracts, except, in
the case of clause (B) or (C) above, for any breach, violation, default,
acceleration, creation or change that, individually or in the aggregate, is not
reasonably likely to have a Company Material Adverse Effect or prevent,
materially delay or materially impair the ability of the Company to consummate
the transactions contemplated by this Agreement or the Stock Option Agreement.
Section 5.1(d) of the Company Disclosure Letter sets forth, to the knowledge of
the executive officers of the
-17-
<PAGE> 24
Company, a correct and complete list of Contracts of the Company and its
Subsidiaries pursuant to which consents or waivers are or may be required prior
to consummation of the transactions contemplated by this Agreement and the Stock
Option Agreement (whether or not subject to the exception set forth with respect
to clauses (B) and (C) above), except those the failure to obtain, individually
or in the aggregate, is not reasonably likely to have a Company Material Adverse
Effect.
(e) Company Reports; Financial Statements. (i) The Company has
made available to Parent each registration statement, report, proxy statement or
information statement prepared by it since December 31, 1994 including (i) the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 (the
"Audit Date"), and (ii) the Company's Quarterly Reports on Form 10-Q for the
periods ended March 31, 1997, June 30, 1997 and September 30, 1997, each in the
form (including exhibits, annexes and any amendments thereto) filed with the
Securities and Exchange Commission (the "SEC") (collectively, including any such
reports filed subsequent to the date hereof, the "Company Reports"). As of their
respective dates, the Company Reports did not, and any Company Reports filed
with the SEC subsequent to the date hereof will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading. Each of the consolidated
balance sheets included in or incorporated by reference into the Company Reports
(including the related notes and schedules) fairly presents, or will fairly
present, the consolidated financial position of the Company and its Subsidiaries
as of its date and each of the consolidated statements of income and of changes
in financial position included in or incorporated by reference into the Company
Reports (including any related notes and schedules) fairly presents, or will
fairly present, the results of operations, retained earnings and changes in
financial position, as the case may be, of the Company and its Subsidiaries for
the periods set forth therein (subject, in the case of unaudited statements, to
notes and normal year-end audit adjustments that will not be material in amount
or effect), in each case in accordance with generally accepted accounting
principles ("GAAP") consistently applied during the periods involved, except as
may be noted therein.
(ii) The Company has made available to Parent true and
complete copies of the annual and quarterly statements of each of the Company
Insurance Subsidiaries as filed with the applicable insurance regulatory
authorities for the years ended December 31, 1994, 1995 and 1996 and the
quarterly periods ended March 31, 1997, June 30, 1997 and September 30, 1997,
including all exhibits, interrogatories, notes, schedules and any actuarial
opinions, affirmations or certifications or other supporting documents filed in
connection therewith (collectively, the "Company SAP Statements"). The Company
SAP Statements were prepared in conformity with statutory accounting practices
prescribed or permitted by the applicable insurance regulatory authority
consistently applied for the periods covered thereby and present fairly the
-18-
<PAGE> 25
statutory financial position of such Company Insurance Subsidiaries as at the
respective dates thereof and the results of operations of such Subsidiaries for
the respective periods then ended. The Company SAP Statements complied in all
material respects with all applicable laws, rules and regulations when filed,
and, to the knowledge of the executive officers of the Company, no material
deficiency has been asserted with respect to any Company SAP Statements by the
applicable insurance regulatory body or any other governmental agency or body.
The statutory balance sheets and income statements included in the Company SAP
Statements have been audited by Price Waterhouse LLP, and the Company has made
available to Parent true and complete copies of all audit opinions related
thereto. The Company has made available to Parent true and complete copies of
all examination reports of insurance departments and any insurance regulatory
agencies since January 1, 1994 relating to the Company Insurance Subsidiaries.
The term "knowledge" when used in this Agreement with respect to the executive
officers of the Company shall mean the actual knowledge, after reasonable
inquiry, of the executive officers of the Company.
(f) Absence of Certain Changes. Except as disclosed in the
Company Reports filed prior to the date hereof, since the Audit Date the Company
and its Subsidiaries have conducted the businesses of the Company and its
Subsidiaries, taken as a whole, only in, and have not engaged in any material
transaction other than according to, the ordinary and usual course of such
businesses and there has not been (i) any change in the financial condition,
management, properties, prospects, business or results of operations of the
Company and its Subsidiaries or, to the knowledge of the executive officers of
the Company, any development or combination of developments which, individually
or in the aggregate, has had or is reasonably likely to have a Company Material
Adverse Effect; (ii) any material damage, destruction or other casualty loss
with respect to any material asset or property owned, leased or otherwise used
by the Company or any of its Subsidiaries, whether or not covered by insurance;
(iii) any declaration, setting aside or payment of any dividend or other
distribution in respect of the stock of the Company, except for regular
quarterly cash dividends on its Common Shares publicly announced prior to the
date hereof and regular quarterly cash dividends on its Preferred Shares paid in
accordance with the Company's Articles of Incorporation prior to the date
hereof; (iv) any change by the Company in accounting principles, practices or
methods other than those required by GAAP or SAP; (v) any material addition, or
any development involving a prospective material addition, to the Company's
consolidated reserves for future policy benefits or other policy claims and
benefits; or (vi) any material change in the accounting, actuarial, investment,
reserving, underwriting or claims administration policies, practices,
procedures, methods, assumptions or principles of any Company Insurance
Subsidiary. Since the Audit Date, except as provided for herein or as disclosed
in the Company Reports filed prior to the date hereof, there has not been any
increase in the compensation payable or that could become payable by the Company
or any of its Subsidiaries to officers or key employees or any amendment of any
of the
-19-
<PAGE> 26
Compensation and Benefit Plans (as hereinafter defined) other than increases or
amendments in the ordinary course and increases or amendments approved by
Parent.
(g) Litigation and Liabilities. Except as disclosed in the
Company Reports filed prior to the date hereof, there are no (i) civil, criminal
or administrative actions, suits, claims, hearings, investigations or
proceedings pending or, to the knowledge of the executive officers of the
Company, threatened against the Company or any of its Subsidiaries, directors or
officers or (ii) obligations or liabilities of any nature, whether or not
accrued, contingent or otherwise and whether or not required to be disclosed,
including those relating to environmental and occupational safety and health
matters, or any other facts or circumstances of which the executive officers of
the Company have knowledge that could result in any claims against, or
obligations or liabilities of, the Company or any of its affiliates, except for
those that are not, individually or in the aggregate, reasonably likely to have
a Company Material Adverse Effect or prevent or materially burden or materially
impair the ability of the Company to consummate the transactions contemplated by
this Agreement.
(h) Employee Benefits.
(i) A copy of each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option, employment, termination,
severance, change of control, compensation, medical, health or other plan,
agreement, policy or arrangement that covers employees, directors, former
employees or former directors of the Company and its Subsidiaries (the
"Compensation and Benefit Plans") and any trust agreement or insurance contract
forming a part of such Compensation and Benefit Plans has been made available to
Parent prior to the date hereof. The Compensation and Benefit Plans are listed
in Section 5.1(h) of the Company Disclosure Letter and any "change of control"
or similar provisions therein are specifically identified in Section 5.1(h) of
the Company Disclosure Letter.
(ii) All Compensation and Benefit Plans are in substantial
compliance with all applicable law, including the Code and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Each Compensation
and Benefit Plan that is an "employee pension benefit plan" within the meaning
of Section 3(2) of ERISA (a "Pension Plan") and that is intended to be qualified
under Section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service (the "IRS") with respect to "TRA" (as defined
in Section 1 of Rev. Proc. 93-39), and the Company is not aware of any
circumstances reasonably likely to result in revocation of any such favorable
determination letter. There is no pending or, to the knowledge of the executive
officers of the Company, threatened material litigation relating to the
Compensation and Benefit Plans. Neither the Company nor any of its Subsidiaries
has engaged in a transaction with respect to any Compensation and Benefit Plan
that, assuming the taxable
-20-
<PAGE> 27
period of such transaction expired as of the date hereof, would subject the
Company or any of its Subsidiaries to a material tax or penalty imposed by
either Section 4975 of the Code or Section 502 of ERISA.
(iii) No liability under Subtitle C or D of Title IV of ERISA
has been or is expected to be incurred by the Company or any Subsidiary with
respect to any ongoing, frozen or terminated "single-employer plan", within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any
of them, or the single-employer plan of any entity which is considered one
employer with the Company under Section 4001 of ERISA or Section 414 of the Code
(an "ERISA Affiliate"). The Company and its Subsidiaries have not contributed,
or been obligated to contribute, to a multiemployer plan under Subtitle E of
Title IV of ERISA at any time since September 26, 1980. No notice of a
"reportable event", within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been required to be filed
for any Pension Plan or by any ERISA Affiliate within the 12-month period ending
on the date hereof.
(iv) All contributions required to be made under the terms of
any Compensation and Benefit Plan as of the date hereof have been timely made or
have been reflected on the most recent consolidated balance sheet filed or
incorporated by reference in the Company Reports prior to the date hereof.
Neither any Pension Plan nor any single-employer plan of an ERISA Affiliate has
an "accumulated funding deficiency" (whether or not waived) within the meaning
of Section 412 of the Code or Section 302 of ERISA. Neither the Company nor its
Subsidiaries has provided, or is required to provide, security to any Pension
Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code.
(v) Under each Pension Plan which is a single-employer plan,
as of the last day of the most recent plan year ended prior to the date hereof,
the actuarially deter mined present value of all "benefit liabilities", within
the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the Pension Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such Pension
Plan, and there has been no material change in the financial condition of such
Pension Plan since the last day of the most recent plan year.
(vi) Neither the Company nor its Subsidiaries have any
obligations for retiree health and life benefits under any Compensation and
Benefit Plan, except as set forth in the Company Disclosure Letter. The Company
or its Subsidiaries may amend or terminate any such plan under the terms of such
plan at any time without incurring any material liability thereunder.
(vii) The consummation of the Merger and the other
transactions contemplated by this Agreement, either alone or in connection with
a subsequent termination of employment, will not (x) entitle any employees of
the Company or its
-21-
<PAGE> 28
Subsidiaries to severance pay, (y) accelerate the time of payment or vesting or
trigger any payment of compensation or benefits under, increase the amount
payable or trigger any other material obligation pursuant to, any of the
Compensation and Benefit Plans or (z) result in any breach or violation of, or a
default under, any of the Compensation and Benefit Plans.
(viii) All Compensation and Benefit Plans covering current or
former non-U.S. employees or former employees of the Company and its
Subsidiaries comply in all material respects with applicable local law. The
Company and its Subsidiaries have no material unfunded liabilities with respect
to any Pension Plan that covers such non-U.S. employees.
(ix) No amount that could be received (whether in cash or
property or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer, director or independent
contractor of the Company who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation Section 1.280G-1) under any employment
arrangement would be treated as an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code). Schedule 5.1(h)(ix) contains a true
and complete list of each such employment arrangement in existence as of the
date hereof. To the extent that any employment arrangement set forth on Schedule
5.1(h)(ix) has been superseded, the new arrangement is not materially different
than the superseded arrangement.
(i) Compliance with Laws; Permits. (i) The business and
operations of the Company and the Company Insurance Subsidiaries have been
conducted in compliance with all applicable statutes and regulations regulating
the business of insurance and all applicable orders and directives of insurance
regulatory authorities and market conduct recommendations resulting from market
conduct examinations of insurance regulatory authorities (collectively,
"Insurance Laws"), except where the failure to so conduct such business and
operations is not, individually or in the aggregate, reasonably likely to have a
Company Material Adverse Effect. Notwithstanding the generality of the
foregoing, except where the failure to do so would not, individually or in the
aggregate, be reasonably likely to have a Company Material Adverse Effect, each
Company Insurance Subsidiary and, to the knowledge of the executive officers of
the Company, its agents have marketed, sold and issued insurance products in
compliance, in all material respects, with Insurance Laws applicable to the
business of such Company Insurance Subsidiary and in the respective
jurisdictions in which such products have been sold, including, without
limitation, in compliance with (i) all applicable prohibitions against
"redlining" or withdrawal of business lines, (ii) all applicable requirements
relating to the disclosure of the nature of insurance products as policies of
insurance and (iii) all applicable requirements relating to insurance product
projections and illustrations. In addition, (i) there is no pending or, to the
knowledge of the executive officers of the Company, threatened charge by any
insurance regulatory authority that any of the
-22-
<PAGE> 29
Company Insurance Subsidiaries has violated, nor any pending or, to the
knowledge of the executive officers of the Company, threatened investigation by
any insurance regulatory authority with respect to possible violations of, any
applicable Insurance Laws where such violations are, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect; (ii)
none of the Company Insurance Subsidiaries is subject to any order or decree of
any insurance regulatory authority relating specifically to such Company
Insurance Subsidiary (as opposed to insurance companies generally) which is,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect; and (iii) the Company Insurance Subsidiaries have filed all
reports required to be filed with any insurance regulatory authority on or
before the date hereof as to which the failure to file such reports is,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect.
In addition to Insurance Laws, except as set forth in the
Company Reports filed prior to the date hereof, the businesses of each of the
Company and its Subsidiaries have not been, and are not being, conducted in
violation of any federal, state, local or foreign law, statute, ordinance, rule,
regulation, judgment, order, injunction, decree, arbitration award, agency
requirement, license or permit of any Governmental Entity (collectively with
Insurance Laws, "Laws"), except for violations or possible violations that are
not, individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect or prevent or materially burden or materially impair the
ability of the Company to consummate the transactions contemplated by this
Agreement. Except as set forth in the Company Reports filed prior to the date
hereof, no investigation or review by any Governmental Entity with respect to
the Company or any of its Subsidiaries is pending or, to the knowledge of the
executive officers of the Company, threatened, nor, to the knowledge of the
executive officers of the Company, has any Governmental Entity indicated an
intention to conduct the same, except for those the outcome of which are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect or prevent or materially burden or materially impair the ability
of the Company to consummate the transactions contemplated by this Agreement. To
the knowledge of the executive officers of the Company, no material change is
required in the Company's or any of its Subsidiaries' processes, properties or
procedures in connection with any such Laws, and the Company has not received
any notice or communication of any material noncompliance with any such Laws
that has not been cured as of the date hereof. The Company and its Subsidiaries
each has all permits, licenses, trademarks, patents, trade names, copyrights,
service marks, franchises, variances, exemptions, orders and other governmental
authorizations, consents and approvals necessary to conduct its business as
presently conducted except those the absence of which are not, individually or
in the aggregate, reasonably likely to have a Company Material Adverse Effect or
prevent or materially burden or materially impair the ability of the Company to
consummate the Merger and the other transactions contemplated by this Agreement,
the Stock Option Agreement or the Voting Agreement.
-23-
<PAGE> 30
(j) Takeover Statutes. The Company has taken all actions
necessary such that no restrictive provision of any "fair price," "moratorium,"
"control share acquisition," "interested shareholder" or other similar
anti-takeover statute or regulation (including, without limitation, Sections
607.0901 and 607.0902 of the FBCA) (each a "Takeover Statute") or restrictive
provision of any applicable anti-takeover provision in the charter or by-laws of
the Company (including Article VIII of the Company's Third Amended and Restated
Articles of Incorporation) is, or at the Effective Time will be, applicable to
the Company, Parent, the Shares, the Tender Offer, the Merger or any other
transaction contemplated by this Agreement, the Stock Option Agreement or the
Voting Agreement.
(k) Environmental Matters. Except as disclosed in the Company
Reports filed prior to the date hereof and except for such matters as are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect: (i) the Company and its Subsidiaries have complied with all
applicable Environmental Laws; (ii) the properties currently owned or operated
by the Company (including soils, groundwater, surface water, buildings or other
structures) are not contaminated with any Hazardous Substances; (iii) the
properties formerly owned or operated by the Company or any of its Subsidiaries
were not contaminated with Hazardous Substances during the period of ownership
or operation by the Company or any of its Subsidiaries; (iv) neither the Company
nor any of its Subsidiaries is subject to liability for any Hazardous Substance
disposal or contamination on any third party property; (v) neither the Company
nor any of its Subsidiaries has been associated with any release or threat of
release of any Hazardous Substance; (vi) neither the Company nor any of its
Subsidiaries has received any notice, demand, letter, claim or request for
information alleging that the Company or any of its Subsidiaries may be in
violation of or liable under any Environmental Law; (vii) neither the Company
nor any of its Subsidiaries is subject to any orders, decrees, injunctions or
other arrangements with any Governmental Entity or is subject to any indemnity
or other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (viii) there are no
circumstances or conditions involving the Company or any of its Subsidiaries
that could reasonably be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use, or transfer of any
property of the Company pursuant to any Environmental Law.
As used herein, the term "Environmental Law" means any
federal, state, local or foreign law, statute, ordinance, regulation, judgment,
order, decree, arbitration award, agency requirement, license, permit,
authorization or opinion, relating to: (A) the protection, investigation or
restoration of the environment, health and safety, or natural resources, (B) the
handling, use, presence, disposal, release or threatened release of any
Hazardous Substance or (C) noise, odor, wetlands, pollution, contamination or
any injury or threat of injury to persons or property.
-24-
<PAGE> 31
As used herein, the term "Hazardous Substance" means any
substance that is: (A) listed, classified or regulated pursuant to any
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
material, lead-containing paint polychlorinated biphenyls, radioactive materials
or radon; or (C) any other substance which may be the subject of regulatory
action by any Government Authority pursuant to any Environmental Law.
(l) Tax Matters. As of the date hereof, neither the Company
nor any of its Affiliates has taken or agreed to take any action, nor do the
executive officers of the Company have any knowledge of any fact or
circumstance, that would prevent the Merger and the other transactions
contemplated by this Agreement from qualifying as a "reorganization" within the
meaning of Section 368(a) of the Code.
(m) Taxes. Except as provided in Section 5.1(m) of the Company
Disclosure Letter and except for such matters as are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect:
(i) the Company and each of its Subsidiaries have filed
completely and correctly all Tax Returns (as defined below) that are required by
all applicable laws to be filed by them, and (x) have paid, or made adequate
provision for the payment of, all Taxes (as defined below) which have or may
become due and payable pursuant to those Tax Returns, have paid all estimated
Taxes due and (y) have paid all other charges, claims and assessments received
to date other than those charges, claims and assessments for Taxes being
contested in good faith for which adequate provision has been made on the most
recent balance sheet included in the Company Reports;
(ii) all Taxes which the Company and its Subsidiaries are
required by law to withhold and collect have been duly withheld and collected,
and have been paid over, in a timely manner, to the proper Taxing Authorities
(as defined below) to the extent due and payable;
(iii) neither the Company nor any of its Subsidiaries have
executed any waiver to extend, or otherwise taken or failed to take any action
that would have the effect of extending, the applicable statute of limitations
in respect of any Tax liabilities of the Company or its Subsidiaries for the
fiscal years prior to and including the most recent fiscal year;
(iv) the Company and its Subsidiaries have never been
members of any consolidated group for income tax purposes other than the
consolidated group of which the Company is the common parent; and the Company
and its Subsidiaries are not parties to any tax sharing agreement or
arrangement, other than with each other;
-25-
<PAGE> 32
(v) no liens for Taxes exist with respect to any of the
assets or properties of the Company or its Subsidiaries, except for statutory
liens for Taxes not yet due or payable or that are being contested in good
faith;
(vi) all of the income Tax Returns filed by or on behalf
of each of the Company and its Subsidiaries have been examined by and settled
with the Internal Revenue Service or appropriate Taxing Authority, or the
statute of limitations with respect to the relevant Tax liability expired, for
all taxable periods through and including the period ending on the date on which
the Effective Time occurs;
(vii) all Taxes due with respect to any completed and
settled audit, examination or deficiency litigation with any Taxing Authority
have been paid in full;
(viii) there is no audit, examination, deficiency, or
refund litigation pending with respect to any Taxes and during the past three
years no Taxing Authority has given written notice of the commencement of any
audit, examination, deficiency or refund litigation, with respect to any Taxes;
(ix) the Company is not bound by any currently effective
private ruling, closing agreement or similar agreement with any Taxing Authority
relating to a material amount of Taxes;
(x) the Company shall not be required to include in a
taxable period ending after the Effective Time, any taxable income attributable
to income that economically accrued in a prior taxable period as a result of
Section 481 of the Code, the installment method of accounting or any comparable
provision of state or local Tax law;
(xi) (A) no material amount of property of the Company
is "tax exempt property" within the meaning of Section 168(h) of the Code, (B)
no material amount of assets of the Company is subject to a lease under Section
7701(h) of the Code, and (C) the Company is not a party to any material lease
made pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect prior to the date of enactment of the Tax Equity and
Fiscal Responsibility Act of 1982; and
(xii) immediately following the Merger, the Company will
not have any material amount of income or gain that has been deferred under
Treasury Regulation Section 1.1502-13, or any material excess loss account in a
Subsidiary under Treasury Regulation Section 1.1502-19; and
(xiii) the Company is not a "consenting corporation"
within the meaning of Section 341(f) of the Code.
-26-
<PAGE> 33
As used in this Agreement, (i) the term "Tax" (including, with
correlative meaning, the terms "Taxes" and "Taxable") shall mean, with respect
to any Person, (a) all taxes, domestic or foreign, including without limitation
any income (net, gross or other, including recapture of any tax items such as
investment tax credits), alternative or add-on minimum tax, gross income, gross
receipts, premium, gains, sales, use, ad valorem, transfer, recording,
franchise, profits, property (real or personal, tangible or intangible), fuel,
license, withholding (whether on amounts paid to or by such Person), payroll,
employment, unemployment, social security, excise, severance, stamp, occupation,
or environmental tax, customs, duties, or other like assessments or governmental
charges of any kind whatsoever, together with any interest, penalties, additions
or additional amounts imposed with respect thereto (including, without
limitation, penalties for failure to file Tax Returns), (b) any joint or several
liability of such Person with any other Person for the payment of any amounts of
the type described in clause (a) hereof and (c) any liability of such Person for
the payment of any amounts of the type described in (a) as a result of any
express or implied obligation to indemnify any other Person; (ii) the term "Tax
Return(s)" shall mean all returns, consolidated or otherwise (including without
limitation information returns), required to be filed with any Taxing Authority;
and (iii) the term "Taxing Authority" shall mean any authority responsible for
the imposition, collection or administration of any Tax.
(n) Labor Matters. Neither the Company nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization.
(o) Intellectual Property.
(i) The Company and/or each of its Subsidiaries owns, or is licensed or
otherwise possesses legally enforceable rights to use all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
technology, know-how, computer software programs or applications, and tangible
or intangible proprietary information or materials that are used in the business
of the Company and its Subsidiaries as currently conducted, except for any such
failures to own, be licensed or possess that are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect, and to
the knowledge of the executive officers of the Company all patents, trademarks,
trade names, service marks and copyrights held by the Company and/or its
Subsidiaries are valid and subsisting.
(ii) Except as disclosed in Company Reports filed prior to the date
hereof or as are not, individually or in the aggregate, reasonably likely to
have a Company Material Adverse Effect:
(A) the Company is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations
hereunder, in violation of any
-27-
<PAGE> 34
licenses, sublicenses and other agreements as to which the Company is a
party and pursuant to which the Company is authorized to use any
third-party patents, trademarks, service marks, and copyrights
("Third-Party Intellectual Property Rights");
(B) no claims with respect to (I) the patents, registered and material
unregistered trademarks and service marks, registered copyrights, trade
names, and any applications therefor owned by the Company or any its
Subsidiaries (the "Company Intellectual Property Rights"); (II) any
trade secret material to the Company; or (III) Third-Party Intellectual
Property Rights are currently pending or, to the knowledge of the
executive officers of the Company, are threatened by any Person;
(C) the executive officers of the Company do not know of any valid
grounds for any bona fide claims (I) to the effect that the sale,
licensing or use of any product as now used, sold or licensed or
proposed for use, sale or license by the Company or any of its
Subsidiaries, infringes on any copyright, patent, trademark, service
mark or trade secret; (II) against the use by the Company or any of its
Subsidiaries, of any trademarks, trade names, trade secrets,
copyrights, patents, technology, know-how or computer software programs
and applications used in the business of the Company or any of its
Subsidiaries as currently conducted or as proposed to be conducted;
(III) challenging the ownership, validity or effectiveness of any of
the Company Intellectual Property Rights or other trade secret material
to the Company; or (IV) challenging the license or legally enforceable
right to use of the Third-Party Intellectual Rights by the Company or
any of its Subsidiaries; and
(D) to the knowledge of the executive officers of the Company, there is
no unauthorized use, infringement or misappropriation of any of the
Company Intellectual Property Rights by any third party, including any
employee or former employee of the Company or any of its Subsidiaries.
(p) Material Contracts. All of the material contracts of the
Company and its Subsidiaries that are required to be described in the Company
Reports or to be filed as exhibits thereto are described in the Company Reports
or filed as exhibits thereto and are in full force and effect. True and complete
copies of all such material contracts have been delivered or have been made
available by the Company to Parent. Neither the Company nor any of its
Subsidiaries nor any other party is in breach of or in default under any such
contract except for such breaches and defaults as are not, individually or in
the aggregate, reasonably likely to have a Company Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is party to any agreement
containing any provision or covenant limiting in any material respect the
ability of the Company or any of its Subsidiaries or, except as specifically
identified on Section 5.1(p) of the Company
-28-
<PAGE> 35
Disclosure Letter, assuming the consummation of the transactions contemplated by
this Agreement, Parent or any of its Subsidiaries to (A) sell any products or
services of or to any other person, (B) engage in any line of business or (C)
compete with or to obtain products or services from any person or limiting the
ability of any person to provide products or services to the Company or any of
its Subsidiaries.
(q) Rights Plan. (i) The Company has taken all actions
necessary such that, for all purposes under the Rights Agreement and the New
Rights Agreement, Parent shall not be deemed an Acquiring Person (as defined in
the Rights Agreement and the New Rights Agreement, respectively), the
Distribution Date (as defined in the Rights Agreement and the New Rights
Agreement, respectively) shall not be deemed to occur and the rights issuable
pursuant to the Rights Agreement (the "Rights") and the rights issuable pursuant
to the New Rights Agreement (the "New Rights") will not separate from the Common
Shares, as a result of Parent's entering into this Agreement or the Stock Option
Agreement or consummating the Tender Offer, the Merger and/or the other
transactions contemplated hereby or thereby.
(ii) The Company has taken all necessary action with respect
to all of the outstanding Rights and New Rights so that, as of immediately prior
to the Effective Time and immediately prior to the consummation of the Tender
Offer, (A) neither the Company nor Parent will have any obligations under the
Rights or the Rights Agreement or under the New Rights or the New Rights
Agreement and (B) the holders of the Rights will have no rights under the Rights
or the Rights Agreement and the holders of New Rights will have no rights under
the New Rights or the New Rights Agreement.
(r) Brokers and Finders. Neither the Company nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders, fees in connection
with the Merger or the other transactions contemplated in this Agreement except
that the Company has employed Salomon Smith Barney as its financial advisor, the
arrangements with which have been disclosed to Parent prior to the date hereof.
(s) Insurance Matters. (i) Except as otherwise are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect, all policies, binders, slips, certificates, annuity contracts
and participation agreements and other agreements of insurance, whether
individual or group, in effect as of the date hereof (including all
applications, supplements, endorsements, riders and ancillary agreements in
connection therewith) that are issued by the Company Insurance Subsidiaries (the
"Company Insurance Contracts") and any and all marketing materials, are, to the
extent required under applicable law, on forms approved by applicable insurance
regulatory authorities or which have been filed and not objected to by such
authorities within the period provided for objection, and such forms comply in
all material respects with the insurance statutes, regulations and rules
applicable thereto and, as to premium rates
-29-
<PAGE> 36
established by the Company or any Company Insurance Subsidiary which are
required to be filed with or approved by insurance regulatory authorities, the
rates have been so filed or approved, the premiums charged conform thereto in
all material respects, and such premiums comply in all material respects with
the insurance statutes, regulations and rules applicable thereto.
(ii) All reinsurance and coinsurance treaties or agreements,
including retrocessional agreements, to which the Company or any Company
Insurance Subsidiary is a party or under which the Company or any Company
Insurance Subsidiary has any existing rights, obligations or liabilities are in
full force and effect, except for such treaties or agreements the failure to be
in full force and effect of which are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect. Neither the Company
nor any Company Insurance Subsidiary, nor, to the knowledge of the executive
officers of the Company, any other party to a reinsurance or coinsurance treaty
or agreement to which the Company or any Company Insurance Subsidiary is a
party, is in default in any material respect as to any provision thereof, and no
such agreement contains any provision providing that the other party thereto may
terminate such agreement by reason of the transactions contemplated by this
Agreement. The Company has not received any notice to the effect that the
financial condition of any other party to any such agreement is impaired with
the result that a default thereunder may reasonably be anticipated, whether or
not such default may be cured by the operation of any offset clause in such
agreement. No insurer or reinsurer or group of affiliated insurers or reinsurers
accounted for the direction to the Company and the Company Insurance
Subsidiaries or the ceding by the Company and the Company Insurance Subsidiaries
of insurance or reinsurance business in an aggregate amount equal to two percent
or more of the consolidated gross premium income of the Company and the Company
Insurance Subsidiaries for the year ended December 31, 1996.
(iii) Prior to the date hereof, the Company has delivered or
made available to Parent a true and complete copy of any actuarial reports
prepared by actuaries, independent or otherwise, with respect to the Company or
any Company Insurance Subsidiary since December 31, 1994, and all attachments,
addenda, supplements and modifications thereto (the "Company Actuarial
Analyses"). The information and data furnished by the Company or any Company
Insurance Subsidiary to its independent actuaries in connection with the
preparation of the Company Actuarial Analyses were accurate in all material
respects. Furthermore, to the knowledge of the executive officers of the
Company, each Company Actuarial Analysis was based upon an accurate inventory of
policies in force for the Company and the Company Insurance Subsidiaries, as the
case may be, at the relevant time of preparation, was prepared using appropriate
modeling procedures accurately applied and in conformity with generally accepted
actuarial standards consistently applied, and the projections contained therein
were properly prepared in accordance with the assumptions stated therein.
-30-
<PAGE> 37
(iv) None of Standard & Poor's Corporation, Moody's Investors
Service, Inc. or A.M. Best Company has announced that it has under surveillance
or review its rating of the financial strength or claims-paying ability of any
Company Insurance Subsidiary and the Company has no reason to believe that any
rating presently held by the Company Insurance Subsidiaries is likely to be
modified, qualified, lowered or placed under such surveillance for any reason,
including as a result of the transactions contemplated hereby.
(v) Except as would not reasonably be expected to have a
Company Material Adverse Effect, all annuity contracts and life insurance
policies issued by each Company Insurance Subsidiary to an annuityholder
domiciled in the United States meet all definitional or other requirements for
qualification under the Code section applicable (or intended to be applicable)
to such annuity contracts or life insurance policies, including, without
limitation, the following: (A) each life insurance policy meets the requirements
of sections 101(f), 817(h) or 7702 of the Code, as applicable; (B) no life
insurance contract issued by any Company Insurance Company is a "modified
endowment contract" within the meaning of section 7702A of the Code unless and
to the extent that the holders of the policies have been notified of their
classification; (C) each annuity contract issued, entered into or sold by any
Company Insurance Subsidiary qualifies as an annuity under federal tax law; (D)
each annuity contract meets the requirements of, and has been administered
consistent with section 817(h) and 72 of the Code including but not limited to
section 72(s) of the Code (except for those contracts specifically excluded from
such requirement pursuant to section 72(s)(5) of the Code); (E) each annuity
contract intended to qualify under sections 130, 403(a), 403(b) or 408(b) of the
Code contains all provisions required for qualification under such sections of
the Code; (F) each annuity contract marketed as, or in connection with, plans
that are intended to qualify under section 401, 403, 408 or 457 of the Code
complies with the requirements of such section; and (G) none of the Company
Insurance Subsidiaries have entered into any agreement or are involved in any
discussions or negotiations and there are no audits, examinations,
investigations or other proceedings with the IRS with respect to the failure of
any life insurance policy under section 7702 or 817(h) of the Code or the
failure of any annuity contract to meet the requirements of section 72(s) of the
Code. There are no "hold harmless" indemnification agreements respecting the tax
qualification or treatment of any product or plan sold, issued, entered into or
administered by the Company Insurance Subsidiaries, and there have been no
claims asserted by any Person under such "hold harmless" indemnification
agreements so set forth.
(t) Liabilities and Reserves. (i) The reserves carried on the
Company SAP Statements of each Company Insurance Subsidiary for future insurance
policy benefits, losses, claims and similar purposes were, as of the respective
dates of such Company SAP Statements, in compliance in all material respects
with the requirements for reserves established by the insurance departments of
the state of domicile of such Company Insurance Subsidiary, were determined in
all material respects in accordance
-31-
<PAGE> 38
with generally accepted actuarial standards and principles consistently applied,
and were fairly stated in all material respects in accordance with sound
actuarial and statutory accounting principles. Such reserves were adequate in
the aggregate to cover the total amount of all reasonably anticipated
liabilities of the Company and each Company Insurance Subsidiary under all
outstanding insurance, reinsurance and other applicable agreements as of the
respective dates of such Company SAP Statements. The admitted assets of each
Company Insurance Subsidiary as determined under applicable Laws are in an
amount at least equal to the minimum amounts required by applicable Laws. In
addition, the Company has delivered or made available to Parent copies of all
work papers used as the basis for establishing the reserves for the Company and
the Company Insurance Subsidiaries at December 31, 1995 and December 31, 1996,
respectively.
(ii) Except for regular periodic assessments in the ordinary
course of business or assessments based on developments which are publicly known
within the insurance industry, to the knowledge of the executive officers of the
Company, no claim or assessment is pending or threatened against any Company
Insurance Subsidiary which is peculiar or unique to such Company Insurance
Subsidiary by any state insurance guaranty associations in connection with such
association's fund relating to insolvent insurers which if determined adversely,
would, individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect.
(u) Investment Company. None of the Company Insurance
Subsidiaries maintains any separate accounts. Neither the Company nor any of its
Subsidiaries conducts activities of or is otherwise deemed under applicable law
to control an "investment advisor" as such term is defined in Section 2(a)(20)
of the 1940 Act, whether or not registered under the Investment Advisers Act of
1940, as amended. Neither the Company nor any of its Subsidiaries is an
"investment company" as defined under the 1940 Act, and neither the Company nor
any of its Subsidiaries sponsors any Person that is such an investment company.
5.2. Representations and Warranties of Parent and Merger
Subsidiary. Except as set forth in the corresponding sections or subsections of
the disclosure letter delivered to the Company by Parent on or prior to entering
into this Agreement (the "Parent Disclosure Letter") or in any Parent Report (as
hereinafter defined) filed prior to the date hereof, Parent and Merger
Subsidiary each hereby represent and warrant to the Company that:
(a) Capitalization of Merger Subsidiary. The authorized stock
of Merger Subsidiary consists of 1,000 shares of Common Stock, par value $.01
per share, 100 of which are duly authorized, validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding stock of Merger
Subsidiary is, and at the Effective Time will be, owned by Parent, and there are
(i) no other shares of stock or voting securities of Merger Subsidiary, (ii) no
securities of Merger Subsidiary convertible
-32-
<PAGE> 39
into or exchangeable for shares of stock or voting securities of Merger
Subsidiary and (iii) no options or other rights to acquire from Merger
Subsidiary, and no obligations of Merger Subsidiary to issue or deliver, any
stock, voting securities or securities convertible into or exchangeable for
stock or voting securities of Merger Subsidiary. Merger Subsidiary has not
conducted any business prior to the date hereof and has no, and prior to the
Effective Time will have no, assets, liabilities or obligations of any nature
other than those incident to its formation and pursuant to this Agreement and
the Merger and the other transactions contemplated by this Agreement.
(b) Organization, Good Standing and Qualification. (i) Each of
Parent and Merger Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation and has
all requisite corporate power and authority to own and operate its properties
and assets and to carry on its business as presently conducted and is qualified
to do business and is in good standing as a foreign corporation in each
jurisdiction where the ownership or operation of its properties or conduct of
its business requires such qualification, except where the failure to be so
qualified or in such good standing, is not reasonably likely, individually or in
the aggregate, to have a Parent Material Adverse Effect (as defined below).
Parent has made available to the Company a complete and correct copy of Parent's
and Merger Subsidiary's charter and by-laws, each as amended to the date hereof.
Parent's and Merger Subsidiary's charter and by-laws so delivered are in full
force and effect.
As used in this Agreement, the term "Parent Material Adverse
Effect" means a material adverse effect on the financial condition, properties,
business or results of operations of Parent and its Subsidiaries taken as a
whole.
(c) Capital Structure. The authorized capital stock of Parent
consists of 1,000,000,000 shares of Parent Common Stock, of which 701,493,275
shares were outstanding as of the close of business on September 30, 1997, and
6,000,000 shares of Serial Preferred Stock, par value $5.00 per share, none of
which was outstanding as of the close of business on December 21, 1997. All of
the outstanding shares of Parent Common Stock are duly authorized, validly
issued, fully paid and nonassessable.
(d) Corporate Authority.
(i) Each of the Parent and Merger Subsidiary has all requisite
corporate power and authority and has taken all corporate action necessary in
order to execute, deliver and perform its obligations under this Agreement and
to consummate the Tender Offer and the Merger. This Agreement is a valid and
binding agreement of Parent and Merger Subsidiary, enforceable against each of
Parent and Merger Subsidiary in accordance with its terms, subject to the
Bankruptcy and Equity Exception.
-33-
<PAGE> 40
(ii) Prior to the Effective Time, Parent will have taken all
necessary action to permit it to issue the number of shares of Parent Common
Stock and Parent Preferred Stock required to be issued pursuant to Article IV.
The Parent Common Stock and Parent Preferred Stock, when issued, will be duly
authorized, validly issued, fully paid and nonassessable, and no stockholder of
Parent will have any preemptive right of subscription or purchase in respect
thereof. The Parent Common Stock and Parent Preferred Stock, when issued, will
be registered under the Securities Act and Exchange Act and registered or exempt
from registration under any applicable state securities or "blue sky" laws.
(e) Governmental Filings; No Violations. (i) Other than the
filings and/or notices (A) pursuant to Section 1.3, (B) under the HSR Act, the
Securities Act and the Exchange Act, (C) to comply with state securities or
"blue sky" laws, (D) required to be made with the NYSE or Nasdaq, and (E) the
filing of appropriate documents with, and approval of, the respective
Commissioners of Insurance of the states of Arizona, Florida, Georgia, New York,
South Carolina, Texas, Puerto Rico, Mexico, Cayman Islands, Argentina, Turks &
Caicos, Dominican Republic and the United Kingdom, and such notices and consents
as may be required under the antitrust notification insurance laws of any state
in which the Company, Parent or any of their respective subsidiaries is
domiciled or does business, no notices, reports or other filings are required to
be made by Parent or Merger Subsidiary with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
Parent or Merger Subsidiary from, any Governmental Entity, in connection with
the execution and delivery of this Agreement by Parent and Merger Subsidiary and
the consummation by Parent and Merger Subsidiary of the Merger and the other
transactions contemplated hereby, except those that the failure to make or
obtain are not, individually or in the aggregate, reasonably likely to have a
Parent Material Adverse Effect or prevent, materially delay or materially impair
the ability of Parent or Merger Subsidiary to consummate the transactions
contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement
by Parent and Merger Subsidiary do not, and the consummation by Parent and
Merger Subsidiary of the Merger and the other transactions contemplated hereby
will not, constitute or result in (A) a breach or violation of, or a default
under, the certificate or by-laws of Parent and Merger Subsidiary or the
comparable governing instruments of any of its Subsidiaries, (B) a breach or
violation of, or a default under, the acceleration of any obligations or the
creation of a lien, pledge, security interest or other encumbrance on the assets
of Parent or any of its Subsidiaries (with or without notice, lapse of time or
both) pursuant to, any Contracts binding upon Parent or any of its Subsidiaries
or (provided, as to consummation, the filings and notices are made, and
approvals are obtained, as referred to in Section 5.2(e)(i)) or any Law or
governmental or non-governmental permit or license to which Parent or any of its
Subsidiaries is subject or (C) any change in the rights or obligations of any
party under any of the Contracts, except, in the case of
-34-
<PAGE> 41
clause (B) or (C) above, for breach, violation, default, acceleration, creation
or change that is not, individually or in the aggregate, reasonably likely to
have a Parent Material Adverse Effect or prevent, materially delay or materially
impair the ability of Parent or Merger Subsidiary to consummate the transactions
contemplated by this Agreement.
(f) Parent Reports; Financial Statements. Parent has made
available to the Company each report or proxy statement prepared by it since
December 31, 1994, including (i) Parent's Annual Report on Form 10-K for the
year ended December 31, 1996 (the "Parent Audit Date"), and (ii) Parent's
Quarterly Reports on Form 10-Q for the periods ended March 31, 1997, June 30,
1996 and September 30, 1997, each in the form (including exhibits, annexes and
any amendments thereto) filed with the SEC (collectively, including any such
reports filed subsequent to the date hereof, the "Parent Reports"). As of their
respective dates, the Parent Reports did not, and any Parent Reports filed with
the SEC subsequent to the date hereof will not, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
in which they were made, not misleading. Each of the consolidated balance sheets
included in or incorporated by reference into the Parent Reports (including the
related notes and schedules) fairly presents, or will fairly present, the
consolidated financial position of Parent and its Subsidiaries as of its date
and each of the consolidated statements of income and of changes in financial
position included in or incorporated by reference into the Parent Reports
(including any related notes and schedules) fairly presents, or will fairly
present, the results of operations, retained earnings and changes in financial
position, as the case may be, of Parent and its Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to notes and normal
year-end audit adjustments that will not be material in amount or effect), in
each case in accordance with GAAP consistently applied during the periods
involved, except as may be noted therein.
(ii) The annual and quarterly statements of each Subsidiary
through which Parent conducts its insurance operations (the "Parent Insurance
Subsidiaries") as filed with the applicable insurance regulatory authorities for
the years ended December 31, 1994, 1995 and 1996 and the quarterly periods ended
March 31, 1997, June 30, 1997 and September 30, 1997, including all exhibits,
interrogatories, notes, schedules and any actuarial opinions, affirmations or
certifications or other supporting documents filed in connection therewith
(collectively, the "Parent SAP Statements") were prepared in conformity with
statutory accounting practices prescribed or permitted by the applicable
insurance regulatory authority consistently applied for the periods covered
thereby and present fairly the statutory financial position of such Parent
Insurance Subsidiaries as at the respective dates thereof and the results of
operations of such Subsidiaries for the respective periods then ended. The
Parent SAP Statements complied in all material respects with all applicable
laws, rules and regulations when filed, and no deficiency that is material to
Parent and its Subsidiaries, taken as a whole, has been asserted with respect
-35-
<PAGE> 42
to any Parent SAP Statements by the applicable insurance regulatory body or any
other governmental agency or body.
(g) Absence of Certain Changes. Except as disclosed in the
Parent Reports filed prior to the date hereof, since the Parent Audit Date
Parent and its Subsidiaries have conducted the business of Parent and its
Subsidiaries, taken as a whole, only in, and have not engaged in any transaction
material to the Company and its Subsidiaries, taken as a whole, other than
according to, the ordinary and usual course of such businesses and there has not
been (i) any change in the financial condition, management, properties,
prospects, business or results of operations of Parent and its Subsidiaries or
any development or combination of developments of which management of Parent has
knowledge that, individually or in the aggregate, is reasonably likely to have a
Parent Material Adverse Effect; (ii) any material damage, destruction or other
casualty loss with respect to any material asset or property owned, leased or
otherwise used by Parent or any of its Subsidiaries, whether or not covered by
insurance that, individually or in the aggregate, is reasonably likely to have a
Parent Material Adverse Affect; (iii) any declaration, setting aside or payment
of any dividend or other distribution in respect of the capital stock of Parent,
except for dividends or other distributions on its capital stock publicly
announced prior to the date hereof or declared and paid consistent with past
practice (including customary increases); or (iv) any material addition, or any
development involving a prospective material addition, to Parent's consolidated
reserves for future policy benefits.
(h) Tax Matters. As of the date hereof, neither Parent nor any
of its Affiliates has taken or agreed to take any action, nor do the officers of
Parent have any knowledge of any fact or circumstance, that would prevent the
Merger and the other transactions contemplated by this Agreement from qualifying
as a "reorganization" within the meaning of Section 368(a) of the Code.
(i) Brokers and Finders. Neither Parent nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders, fees in connection
with the Merger or the other transactions contemplated by this Agreement, except
that Parent has employed Goldman, Sachs & Co. and Barclays as its financial
advisors.
(j) Insurance Matters. The business and operations of the
Parent Insurance Subsidiaries have been conducted in compliance with all
Insurance Laws, except where the failure to so conduct such business and
operations is not, individually or in the aggregate, reasonably likely to have a
Parent Material Adverse Effect. Notwithstanding the generality of the foregoing,
except where the failure to do so would not, individually or in the aggregate,
be reasonably likely to have a Parent Material Adverse Effect, each Parent
Insurance Subsidiary and, to the knowledge of Parent's executive officers, its
agents have marketed, sold and issued insurance products in
-36-
<PAGE> 43
compliance, in all material respects, with Insurance Laws applicable to the
business of such Parent Insurance Subsidiary and in the respective jurisdictions
in which such products have been sold, including, without limitation, in
compliance with (i) all prohibitions against "redlining" or withdrawal of
business lines, (ii) all applicable requirements relating to the disclosure of
the nature of insurance products as policies of insurance and (iii) all
applicable requirements relating to insurance product projections and
illustrations. In addition, (i) there is no pending or, to the knowledge of the
executive officers of Parent, threatened charge by any insurance regulatory
authority that any of the Parent Insurance Subsidiaries has violated, nor any
pending or, to the knowledge of the executive officers of the Parent, threatened
investigation by any insurance regulatory authority with respect to possible
violations of, any applicable Insurance Laws where such violations are,
individually or in the aggregate, reasonably likely to have a Parent Material
Adverse Effect; (ii) none of the Parent Insurance Subsidiaries is subject to any
order or decree of any insurance regulatory authority relating specifically to
such Parent Insurance Subsidiary (as opposed to insurance companies generally)
which is, individually or in the aggregate, reasonably likely to have a Parent
Material Adverse Effect; and (iii) the Parent Insurance Subsidiaries have filed
all reports required to be filed with any insurance regulatory authority on or
before the date hereof as to which failure to file such reports is, individually
or in the aggregate, reasonably likely to have a Parent Material Adverse Effect.
Except as otherwise are not, individually or in the aggregate,
reasonably likely to have a Parent Material Adverse Effect, all policies,
binders, slips, certificates, annuity contracts and participation agreements and
other agreements of insurance, whether individual or group, in effect as of the
date hereof (including all applications, supplements, endorsements, riders and
ancillary agreements in connection therewith) that are issued by the Parent
Insurance Subsidiaries and any and all marketing materials, are, to the extent
required under applicable law, on forms approved by applicable insurance
regulatory authorities or which have been filed and not objected to by such
authorities within the period provided for objection, and such forms comply in
all material respects with the insurance statutes, regulations and rules
applicable thereto and, as to premium rates established by Parent or the Parent
Insurance Subsidiaries which are required to be filed with or approved by
insurance regulatory authorities, the rates have been so filed or approved, the
premiums charged conform thereto in all material respects, and such premiums
comply in all material respects with the insurance statutes, regulations and
rules applicable thereto.
-37-
<PAGE> 44
ARTICLE VI
Covenants
6.1. Interim Operations. The Company covenants and agrees as
to itself and its Subsidiaries that, after the date hereof and prior to the
Effective Time (unless Parent shall otherwise approve in writing, and except as
otherwise expressly contemplated by this Agreement or the Stock Option Agreement
or set forth in Section 6.1 of the Company Disclosure Schedule):
(a) its and its Subsidiaries's businesses shall be conducted
in the ordinary and usual course (it being understood and agreed that nothing
contained herein shall permit the Company to enter into or engage in (through
acquisition, product extension or otherwise) the business of selling any
products or services materially different from existing products or services of
the Company and its Subsidiaries or to enter into or engage in new lines of
business without Parent's prior written approval);
(b) to the extent consistent with (a) above it and its
Subsidiaries shall use their respective reasonable best efforts to preserve its
business organization intact and maintain its existing relations and goodwill
with customers, suppliers, reinsurers, distributors, creditors, lessors,
employees and business associates;
(c) it shall not (i) issue, sell, pledge, dispose of or
encumber any capital stock owned by it in any of its Subsidiaries; (ii) amend
its charter or by-laws or amend, modify or terminate the Rights Agreement or New
Rights Agreement; (iii) split, combine or reclassify its outstanding shares of
capital stock; (iv) authorize, declare, set aside or pay any dividend payable in
cash, stock or property in respect of any capital stock other than dividends
from its direct or indirect wholly-owned Subsidiaries and other than regular
quarterly dividends paid by the Company on its Common Shares not in excess of
$0.11 per share and regular quarterly dividends paid by the Company on its
Preferred Shares in accordance with the Company's Articles of Incorporation; or
(v) repurchase, redeem or otherwise acquire, except in connection with any of
the Company Stock Plans, or permit any of its Subsidiaries to purchase or
otherwise acquire, any shares of its stock or any securities convertible into or
exchangeable or exercisable for any shares of its stock;
(d) neither it nor any of its Subsidiaries shall (i) issue,
sell, pledge, dispose of or encumber any shares of, or securities convertible
into or exchangeable or exercisable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of its capital stock of
any class or any other property or assets (other than Shares issuable pursuant
to options outstanding on the date hereof under any of the Company Stock Plans
or upon conversion of the Preferred Shares or Convertible Notes); (ii) other
than in the ordinary and usual course of business, transfer, lease, license,
-38-
<PAGE> 45
guarantee, sell, mortgage, pledge, dispose of or encumber any other property or
assets (including capital stock of any of its Subsidiaries) or incur or modify
any material indebtedness or other liability; or (iii) make or authorize or
commit for any capital expenditures other than in amounts not exceeding $5
million in the aggregate or, by any means, make any acquisition of, or
investment in, assets or stock of any other Person or entity, including by way
of assumption reinsurance, in excess of $2 million individually or $5 million in
the aggregate (other than in connection with ordinary course investment
activities);
(e) neither it nor any of its Subsidiaries shall terminate,
establish, adopt, enter into, make any new grants or awards under, amend or
otherwise modify, any Compensation and Benefit Plans, other than awards made in
the normal course under the Management Incentive Plan in respect of 1997
performance and grants of up to 20,000 restricted Common Shares to be made in
January 1998 under the year 2000 Tenure Award Program, or increase the salary,
wage, bonus or other compensation of any employees except increases occurring in
the ordinary and usual course of business (which shall include normal periodic
performance reviews and related compensation and benefit increases);
(f) neither it nor any of its Subsidiaries shall pay,
discharge, settle or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction of claims, liabilities or obligations legally
due and payable and arising in the ordinary and usual course of business, claims
arising under the terms of products, contracts or policies issued by the Company
Insurance Subsidiaries in the ordinary and usual course of business and such
other claims, liabilities or obligations as shall not exceed $5 million in the
aggregate;
(g) neither it nor any of its Subsidiaries shall make or
change any Tax election, settle any material audit, file any amended tax returns
or permit any insurance policy naming it as a beneficiary or loss-payable payee
to be canceled or terminated except in the ordinary and usual course of
business;
(h) neither it nor any of its Subsidiaries shall enter into
any agreement containing any provision or covenant limiting in any material
respect the ability of the Company or any Subsidiary or affiliate to (A) sell
any products or services of or to any other person, (B) engage in any line of
business or (C) compete with or to obtain products or services from any person
or limiting the ability of any person to provide products or services to the
Company or any of its Subsidiaries or affiliates;
(i) neither it nor any of its Subsidiaries shall enter into
any new quota share or other reinsurance transaction (A) which does not contain
standard cancellation and termination provisions, (B) which, except in the
ordinary course of business,
-39-
<PAGE> 46
materially increases or reduces the Company Insurance Subsidiaries' consolidated
ratio of net written premiums to gross written premiums or (C) pursuant to which
$5 million or more in gross written premiums are ceded by the Company Insurance
Subsidiaries to any Person other than the Company or any of its Subsidiaries;
(j) neither it nor any of the Company Insurance Subsidiaries
will alter or amend in any material respect their existing investment guidelines
or policies;
(k) neither it nor any of its Subsidiaries shall take any
action or omit to take any action that would cause any of its representations
and warranties herein to become untrue in any material respect; and
(l) neither it nor any of its Subsidiaries will authorize or
enter into an agreement to do any of the foregoing.
6.2. Acquisition Proposals. The Company will not, and will not
permit or cause any of its Subsidiaries or any of the officers and directors of
it or its Subsidiaries to, and shall direct its and its Subsidiaries' employees,
agents and representatives (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, 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 (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal"). The Company will not, and will not permit or cause any
of its Subsidiaries or any of the officers and directors of it or its
Subsidiaries to and shall direct its and its Subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any Person relating to an Acquisition
Proposal, whether made before or after the date of this Agreement, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal
(including, without limitation, by means of an amendment to the Rights Agreement
or the New Rights Agreement); provided, however, that nothing contained in this
Agreement shall prevent the Company or its Board of Directors from (i) complying
with Rule 14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal or (ii) at any time prior to the approval of the Merger by the Company
Requisite Vote (A) providing information in response to a request therefor by a
Person who has made an unsolicited bona fide written Acquisition Proposal if the
Board of Directors receives from the Person so requesting such information an
executed confidentiality agreement on terms substantially equivalent to those
contained in the Confidentiality Agreement (as defined in Section 9.7); (B)
engaging in any negotiations or discussions with any Person who has made an
unsolicited bona fide written Acquisition Proposal; or (C) recommending such an
-40-
<PAGE> 47
Acquisition Proposal to the stockholders of the Company, if and only to the
extent that, (i) in each such case referred to in clause (A), (B) or (C) above,
the Board of Directors of the Company determines in good faith after
consultation with outside legal counsel that such action is necessary in order
for its directors to comply with their respective fiduciary duties under
applicable law and (ii) in each case referred to in clause (B) or (C) above, the
Board of Directors of the Company determines in good faith (after consultation
with its financial advisor) that such Acquisition Proposal, if accepted, is
reasonably likely to be consummated, taking into account all legal, financial
and regulatory aspects of the proposal and the Person making the proposal and
would, if consummated, result in a more favorable transaction than the
transaction contemplated by this Agreement, taking into account the long-term
prospects and interests of the Company and its stockholders (any such more
favorable Acquisition Proposal being referred to in this Agreement as a
"Superior Proposal"). The Company will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. The Company agrees
that it will take the necessary steps to promptly inform the individuals or
entities referred to in the first sentence hereof of the obligations undertaken
in this Section 6.2 and in the Confidentiality Agreement (as defined in Section
9.7). The Company will notify Parent immediately if any such inquiries,
proposals or offers are received by, any such information is requested from, or
any such discussions or negotiations are sought to be initiated or continued
with, any of its representatives indicating, in connection with such notice, the
name of such Person and the material terms and conditions of any proposals or
offers and thereafter shall keep Parent informed, on a current basis, on the
status and terms of any such proposals or offers and the status of any such
negotiations or discussions. The Company also will promptly request each Person
that has heretofore executed a confidentiality agreement in connection with its
consideration of an Acquisition Proposal to return all confidential information
heretofore furnished to such Person by or on behalf of it or any of its
Subsidiaries.
6.3. Information Supplied. The Company and Parent each agrees,
as to itself and its Subsidiaries, that none of the information supplied or to
be supplied by it or its Subsidiaries for inclusion or incorporation by
reference in (i) the Offer Documents, the Schedule 14D-1 and the Schedule 14D-9
will, at the time of filing thereof and at the time of distribution thereof,
contain any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, (ii) the Registration Statement on Form S-4 to be filed with the SEC
by Parent in connection with the issuance of shares of Parent Common Stock and
Parent Preferred Stock in the Merger (including the proxy statement and
prospectus (the "Prospectus/ Proxy Statement") constituting a part thereof) (the
"S-4 Registration Statement") will, at the time the S-4 Registration Statement
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
-41-
<PAGE> 48
under which they were made, not misleading, and (iii) the Prospectus/Proxy
Statement and any amendment or supplement thereto will, at the date of mailing
to stockholders and at the times of the meetings of stockholders of the Company
to be held in connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
6.4. Stockholders Meetings. (a) The Company will take, in
accordance with its charter and by-laws, all action necessary to convene a
meeting of holders of Common Shares (the "Common Stockholders Meeting") on March
27, 1998, and a meeting of holders of Preferred Shares (the "Preferred
Stockholders Meeting" and, together with the Common Stockholders Meeting, the
"Stockholders Meetings") on March 25, 1998, to consider and vote upon the
approval of the Merger. It is agreed that, except as provided in Section 1.5(c),
the Company will not cancel, adjourn or postpone the Stockholders Meetings
without the prior written consent of Parent. Subject to fiduciary obligations
under applicable law, the Company's board of directors shall recommend such
approval, shall not withdraw or modify such recommendation and shall take all
lawful action to solicit such approval. Without limiting the generality of the
foregoing, in the event that the Company's board of directors withdraws or
modifies its recommendation, the Company nonetheless shall cause the
Stockholders Meetings to be convened and a vote taken with respect to the Merger
and the board of directors shall communicate to the Company's stockholders its
basis for such withdrawal or modification as contemplated by Section
607.1103(2)(a) of the FBCA.
(b) In the event that the Stockholders Meetings contemplated
by Section 6.4(a) are cancelled pursuant to Section 1.5(c) in connection with
the commencement of the Tender Offer, the Company will take, in accordance with
its charter and by-laws, all action necessary to convene meetings of holders of
Shares as promptly as practicable, but in no event more than 45 days, after a
post-effective amendment to the S-4 Registration Statement is declared
effective, to consider and vote upon the approval of the Merger. Subject to
fiduciary obligations under applicable law, the Company's board of directors
shall recommend such approval, shall not withdraw or modify such recommendation
and shall take all lawful action to solicit such approval. Without limiting the
generality of the foregoing, in the event that the Company's board of directors
withdraws or modifies its recommendation, the Company nonetheless shall cause
such stockholders meetings to be convened and a vote taken with respect to the
Merger and the board of directors shall communicate to the Company's
stockholders its basis for such withdrawal or modification as contemplated by
Section 607.1103(2)(a) of the FBCA.
6.5. Filings; Other Actions; Notification. (a) Parent and the
Company shall promptly prepare and file with the SEC the Prospectus/Proxy
Statement, and Parent shall prepare and file with the SEC the S-4 Registration
Statement as promptly as
-42-
<PAGE> 49
practicable. Parent and the Company each shall use all reasonable efforts to
have the S-4 Registration Statement declared effective under the Securities Act
as promptly as practicable after such filing, and promptly thereafter mail the
Prospectus/Proxy Statement to the stockholders of the Company. Parent shall also
use all reasonable efforts to obtain prior to the effective date of the S-4
Registration Statement all necessary state securities law or "blue sky" permits
and approvals required in connection with the Merger and to consummate the other
transactions contemplated by this Agreement and will pay all expenses incident
thereto.
(b) The Company and Parent shall cooperate with each other and
use (and shall cause their respective Subsidiaries to use) all best efforts (i)
to cause to be done all things, necessary, proper or advisable on its part under
this Agreement and applicable Laws to consummate and make effective the Tender
Offer, the Merger and the other transactions contemplated by this Agreement as
soon as practicable, including preparing and filing as promptly as practicable
all documentation to effect all necessary notices, reports and other filings,
and (ii) to obtain as promptly as practicable all consents, registrations,
approvals, permits and authorizations necessary or advisable to be obtained from
any third party and/or any Governmental Entity in connection with, as a result
of or in order to consummate the Tender Offer, the Merger or any of the other
transactions contemplated by this Agreement, including, without limitation, upon
request of Parent, all material consents required in connection with the
consummation of the Tender Offer, the Merger; provided, however, that nothing in
this Section 6.5 shall require, or be construed to require, Parent, in
connection with the receipt of any regulatory approval, to proffer to, or agree
to (i) sell or hold separate and agree to sell or to discontinue to or limit,
before or after the Effective Time, any assets, businesses, or interest in any
assets or businesses of Parent, the Company or any of their respective
Affiliates (or to consent to any sale, or agreement to sell, or discontinuance
or limitation by the Company of any of its assets or businesses) or (ii) agree
to any conditions relating to, or changes or restriction in, the operations of
any such asset or businesses which, in either case, could, in the judgment of
the Board of Parent, materially and adversely impact the economic or business
benefits to Parent of the transactions contemplated by this Agreement. Subject
to applicable laws relating to the exchange of information, Parent and the
Company shall have the right to review in advance, and to the extent practicable
each will consult the other on, all the information relating to Parent or the
Company, as the case may be, and any of their respective Subsidiaries, that
appear in any filing made with, or written materials submitted to, any third
party and/or any Governmental Entity in connection with the Tender Offer, the
Merger and the other transactions contemplated by this Agreement. In exercising
the foregoing right, each of the Company and Parent shall act reasonably and as
promptly as practicable.
(c) The Company and Parent each shall, upon request by the
other, furnish the other with all information concerning itself, its
Subsidiaries, directors, officers and stockholders and such other matters as may
be reasonably necessary or advisable in
-43-
<PAGE> 50
connection with the Offer Documents, the Schedule 14D-1, the Schedule 14D-9, the
Prospectus/Proxy Statement, the S-4 Registration Statement or any other
statement, filing, notice or application made by or on behalf of Parent, the
Company or any of their respective Subsidiaries to any third party and/or any
Governmental Entity in connection with the Tender Offer, the Merger and the
other transactions contemplated by this Agreement.
(d) The Company and Parent each shall keep the other apprised
of the status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be, or any of
its Subsidiaries, from any third party and/or any Governmental Entity with
respect to the Tender Offer, the Merger and the other transactions contemplated
by this Agreement. The Company and Parent each shall give prompt notice to the
other of any change that is reasonably likely to result in a Company Material
Adverse Effect or Parent Material Adverse Effect, respectively.
(e) The Company shall use its best efforts to cause the
Company and each of the persons listed in Section 6.5(e) of the Company
Disclosure Schedule to enter into prior to the earlier of the consummation of
the Tender Offer and the Effective Time an Amendment of Severance Agreement in
the form attached hereto as Exhibit D or E, as applicable.
6.6. Taxation. Subject to Section 6.2, neither Parent nor the
Company shall take or cause to be taken any action, whether before or after the
Effective Time, that would disqualify the Merger as a "reorganization" within
the meaning of Section 368(a) of the Code. Each of Parent and the Company agrees
to use all reasonable efforts to cure any impediment to the qualification of the
Merger as a "reorganization" within the meaning of Section 368(a) of the Code,
provided that this Section 6.6 shall not oblige Parent to increase the portion
of a share of Parent Common Stock into which a share of Common Stock is
converted pursuant to Parent's right under Section 4.1(a)(iv).
6.7. Access. (a) Upon reasonable notice, and except as may
otherwise be required by applicable law, the Company shall (and shall cause its
Subsidiaries to) afford Parent's officers, employees, counsel, accountants and
other authorized representatives ("Representatives") access, during normal
business hours throughout the period prior to the Effective Time, to the
Company's and its Subsidiaries' management, properties, books, contracts and
records and, during such period, shall (and shall cause its Subsidiaries to)
furnish promptly to Parent all information concerning the Company's and its
Subsidiaries' business, properties and personnel as may reasonably be requested,
provided that no investigation pursuant to this Section shall affect or be
deemed to modify any representation or warranty made by the Company, and
provided, further, that the foregoing shall not require the Company to permit
any inspection, or to
-44-
<PAGE> 51
disclose any information, that in the reasonable judgment of the Company would
result in the disclosure of any trade secrets of third parties or violate any of
its obligations with respect to confidentiality if the Company shall have used
all reasonable efforts to obtain the consent of such third party to such
inspection or disclosure. All requests for information made pursuant to this
Section 6.7(a) shall be directed to an executive officer of the Company or such
Person as may be designated by the Company's officers. All such information
shall be governed by the terms of the Confidentiality Agreement (as hereinafter
defined).
(b) Upon reasonable notice, and except as may otherwise be
required by applicable law, Parent shall afford the Company's Representatives
such access as is reasonably requested (giving due consideration to the size and
capitalization of, and availability of public information concerning, Parent and
the pricing and other terms contained in this Agreement), during normal business
hours throughout the period prior to the Effective Time, to a limited number of
Parent's management personnel and all relevant books and records, provided that
no investigation pursuant to this Section shall affect or be deemed to modify
any representation or warranty made by Parent, and provided, further, that the
foregoing shall not require Parent to permit any inspection, or to disclose any
information, that in the reasonable judgment of Parent would result in the
disclosure of any trade secrets of third parties or violate any of its
obligations with respect to confidentiality. All requests for information made
pursuant to this Section 6.7(b) shall be directed to an executive officer of
Parent or such Person as may be designated by Parent's officers. All such
information shall be governed by the terms of the Confidentiality Agreement (as
hereinafter defined).
6.8. Affiliates. Prior to the earlier of the date of
consummation of the Tender Offer and the date of the Stockholders Meetings, the
Company shall deliver to Parent a list of names and addresses of those Persons
who will be, in the opinion of the Company, as of the time of the Stockholders
Meetings referred to in Section 6.4, "affiliates" of the Company within the
meaning of Rule 145 under the Securities Act. There shall be added to such list
the names and addresses of any other Person subsequently identified by either
Parent or the Company as a Person who may be deemed to be such an affiliate of
the Company; provided, however, that no such Person identified by Parent shall
be added to the list of affiliates of the Company unless Parent delivers to the
Company, on or before the earlier of the date of consummation of the Tender
Offer and the date of the Stockholders Meetings, an opinion of counsel
reasonably satisfactory to the Company to the effect that such Person is such an
affiliate. The Company shall exercise its reasonable best efforts to deliver or
cause to be delivered to Parent, prior to the earlier of the date of the
consummation of the Tender Offer and the date of the Stockholders Meetings, from
each affiliate of the Company identified in the foregoing list (as the same may
be supplemented as aforesaid), a letter dated as of the date of consummation of
the Tender Offer or the date of the Stockholders Meetings, as applicable,
substantially in the form attached as Exhibit C (the "Affiliates Letter").
-45-
<PAGE> 52
Parent shall not be required to maintain the effectiveness of the S-4
Registration Statement or any other registration statement under the Securities
Act for the purposes of resale of Parent Common Stock or Parent Preferred Stock
by such affiliates received in the Merger and the certificates representing
Parent Common Stock and Parent Preferred Stock received by such affiliates shall
bear a customary legend regarding applicable Securities Act restrictions and the
provisions of this Section.
6.9. Stock Exchange Listing and De-listing. Parent shall use
its reasonable best efforts to cause (i) the shares of Parent Common Stock to be
issued in the Merger to be approved for listing on the NYSE subject to official
notice of issuance and (ii) the shares of Parent Preferred Stock to be issued in
the Merger to be approved for listing on the NYSE subject to official notice of
issuance, prior to the Closing Date. The Surviving Corporation shall use its
best efforts to cause (i) the Common Shares to be de-listed from the NYSE and
de-registered under the Exchange Act as soon as practicable following the
Effective Time and (ii) the Preferred Shares to be de-listed from the NYSE and
de-registered under the Exchange Act as soon as practicable following the
Effective Time.
6.10. Publicity. The initial press release shall be a joint
press release and thereafter the Company and Parent each shall consult with each
other prior to issuing any press releases or otherwise making public
announcements with respect to the Tender Offer, the Merger and the other
transactions contemplated by this Agreement and prior to making any filings with
any third party and/or any Governmental Entity (including any national
securities exchange) with respect thereto, except as may be required by law or
by obligations pursuant to any listing agreement with or rules of any national
securities exchange interdealer quotation service.
6.11. Benefits; Corporate Headquarters; School and Day Care
Facility.
(a) Stock Options.
(i) At the Effective Time, each Company Option whether
vested or unvested, shall be deemed to constitute an option to acquire, on the
same terms and conditions as were applicable under such Company Option, the same
number of shares of Parent Common Stock as the holder of such Company Option
would have been entitled to receive pursuant to the Merger had such holder
exercised such option in full immediately prior to the Effective Time and
assuming that the Common Stock Merger Consideration consisted entirely of Parent
Common Stock (rounded down to the nearest whole number), at a price per share
(rounded up to the nearest whole cent) equal to (y) the aggregate exercise price
for the Common Shares otherwise purchasable pursuant to such Company Option
divided by (z) the number of full shares of Parent Common Stock deemed
purchasable pursuant to such Company Option in accordance with the foregoing;
provided, however, that in the case of any Company Option to which Section 422
of the
-46-
<PAGE> 53
Code applies, the option price, the number of shares purchasable pursuant to
such option and the terms and conditions of exercise of such option shall be
determined in accordance with the foregoing, subject to such adjustments as are
necessary in order to satisfy the requirements of Section 424(a) of the Code;
provided, further, that to the extent that Common Shares acquired upon exercise
of a Company Option would be subject to vesting or other restrictions under the
terms of the relevant Company Stock Plan under which such Company Option was
issued ("Company Restricted Shares"), the number of shares of Parent Common
Stock to be issued upon exercise of an assumed Company Option in accordance with
the foregoing that bears the same ratio to the total shares of Parent Common
Stock deemed purchasable pursuant to such assumed Company Option as the number
of Company Restricted Shares bears to the total number of Company Shares
issuable under such Company Option shall be subject to the same vesting and
other restrictions as would be applicable to the Company Restricted Shares. At
or prior to the Effective Time, the Company shall make all necessary
arrangements with respect to the Company Stock Plans to permit the assumption of
the unexercised Company Options by Parent pursuant to this Section.
(ii) Effective at the Effective Time, Parent shall assume each
Company Option in accordance with the terms of the relevant Company Stock Plan
under which it was issued and the stock option agreement by which it is
evidenced. At or prior to the Effective Time, Parent shall take all corporate
action necessary to reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery upon exercise of Company Options assumed by it in
accordance with this Section. As soon as practicable after the Effective Time,
Parent shall file a registration statement on Form S-3 or Form S-8, as the case
may be (or any successor or other appropriate forms), or another appropriate
form (or shall cause such Company Option to be deemed to be an option issued
pursuant to a Parent Stock Plan for which shares of Parent Common Stock have
previously been registered pursuant to an appropriate registration form) with
respect to the Parent Common Stock subject to such Company Options, and shall
use its reasonable best efforts to maintain the effectiveness of such
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such Company Options remain
outstanding.
(b) Employee Benefits. Parent agrees that, during the period
commencing at the Effective Time and ending on the first anniversary thereof,
the employees of the Company and its Subsidiaries will continue to be provided
with benefits under the Company's and its Subsidiaries' existing employee
benefit plans (other than plans involving the issuance or award of Shares or
rights to acquire Shares) that are no less favorable in the aggregate than those
currently provided by the Company and its Subsidiaries to such employees. Any
such employees will receive credit under any plans of Parent or any of its
Subsidiaries for service with the Company or any of its Subsidiaries or
predecessors (to the extent service with such predecessors was credited under
the Compensation and Benefit Plans disclosed in the Company Disclosure Letter)
prior to the
-47-
<PAGE> 54
Effective Time for the purpose of determining eligibility and vesting; and
Parent shall cause any and all pre-existing condition limitations (to the extent
such limitations did not apply to a pre-existing condition under the
Compensation and Benefit Plans) and eligibility waiting periods under group
health plans of the Parent or any of its Subsidiaries to be waived with respect
to such participants and their eligible dependents. All discretionary awards and
benefits under any employee benefit plans of Parent or any of its Subsidiaries
shall be subject to the discretion of the persons or committee administering
such plans.
(c) Corporate Headquarters. Parent shall maintain the
corporate headquarters of the Surviving Corporation at the Company's current
Miami location for the foreseeable future, and in any event, for not less than
five years from the Effective Time.
(d) School and Day Care Facility. Parent shall ensure, to
the extent within its reasonable control, that the public school and day care
facility operated on or adjacent to the Company's current Miami location shall
remain in operation at their current locations for so long as the Surviving
Corporation's corporate headquarters shall be maintained at the Company's
current Miami location.
6.12. Expenses. The Surviving Corporation shall pay all
charges and expenses, including those of the Exchange Agent, in connection with
the transactions contemplated in Article IV. Except as otherwise provided in
Section 8.5(b), whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the Tender Offer, the Merger and
the other transactions contemplated by this Agreement shall be paid by the party
incurring such expense, except that expenses incurred in connection with the
filing fee for the S-4 Registration Statement and printing and mailing the Offer
Documents, the Schedule 14D-1, the Schedule 14D-9, the Prospectus/Proxy
Statement and the S-4 Registration Statement shall be shared equally by Parent
and the Company.
6.13. Indemnification; Directors' and Officers' Insurance. (a)
From and after the Effective Time, Parent agrees that it will indemnify and hold
harmless each present and former director and officer of the Company, (when
acting in such capacity) determined as of the Effective Time (each, an
Indemnified Party and, collectively, the "Indemnified Parties"), against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent that the
Company would have been permitted under Florida law and its charter or by-laws
in effect on the date hereof to indemnify such Person (and Parent shall also
advance expenses as incurred to the fullest extent permitted
-48-
<PAGE> 55
under applicable law provided the Person to whom expenses are advanced provides
a written affirmation of his or her good faith belief that the standard of
conduct necessary for indemnification has been met), and an undertaking to repay
such advances if it is ultimately determined that such Person is not entitled to
indemnification).
(b) Any Indemnified Party wishing to claim indemnification
under paragraph (a) of this Section 6.13, upon learning of any such claim,
action, suit, proceeding or investigation, shall promptly notify Parent thereof,
but the failure to so notify shall not relieve Parent of any liability it may
have to such Indemnified Party if such failure does not materially prejudice the
indemnifying party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) Parent
or the Surviving Corporation shall have the right to assume the defense thereof
and Parent shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if
Parent or the Surviving Corporation elects not to assume such defense or counsel
for the Indemnified Parties advises that there are issues which raise conflicts
of interest between Parent or the Surviving Corporation and the Indemnified
Parties, the Indemnified Parties may retain counsel satisfactory to them, and
Parent or the Surviving Corporation shall pay all reasonable fees and expenses
of such counsel for the Indemnified Parties promptly as statements therefor are
received; provided, however, that Parent shall be obligated pursuant to this
paragraph (b) to pay for only one firm of counsel for all Indemnified Parties in
any jurisdiction unless the use of one counsel for such Indemnified Parties
would present such counsel with a conflict of interest, (ii) the Indemnified
Parties will cooperate in the defense of any such matter and (iii) Parent shall
not be liable for any settlement effected without its prior written consent; and
provided, further, that Parent shall not have any obligation hereunder to any
Indemnified Party if and when a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
(c) The Surviving Corporation shall maintain the Company's
existing officers' and directors' liability insurance ("D&O Insurance") or D&O
Insurance that is substantially comparable to the Company's existing D&O
Insurance for a period of two years after the Effective Time so long as the
annual premium therefor is not in excess of 200% of the last annual premium paid
prior to the date hereof (such last annual premium being hereinafter referred to
as the "Current Premium"); provided, however, that if the existing D&O Insurance
or substantially comparable D&O Insurance cannot be acquired during the two-year
period for not in excess of 200% of the Current Premium, then the Surviving
Corporation will obtain as much D&O Insurance as can be obtained for the
remainder of such period for a premium not in excess (on an annualized basis) of
200% of the Current Premium. If the D&O Insurance is terminated prior to the end
of the sixth anniversary of the Effective Time, the Surviving Corporation will
purchase
-49-
<PAGE> 56
extended reporting coverage under D&O Insurance covering claims made during the
remainder of such period with respect to acts which occurred prior to the
Effective Time.
(d) The provisions of this Section are intended to be for
the benefit of, and shall be enforceable by, each of the Indemnified Parties,
their heirs and their representatives.
6.14. Convertible Notes. The Company shall repay, at par, the
aggregate principal amount outstanding under the Convertible Notes and cancel
such Convertible Notes in their entirety if they are outstanding as of the
Effective Time.
6.15. Other Actions by the Company and Parent.
(a) Rights. If requested by Parent at least three business
days prior to the Expiration Date or the Effective Time, as the case may be, the
board of directors of the Company shall take all necessary action to terminate
or redeem all of the outstanding Rights and New Rights and to terminate the
Rights Agreement and the New Rights Agreement, effective immediately prior to
the Expiration Date or the Effective Time, as the case may be.
Notwithstanding anything in this Agreement (including, without
limitation, Section 6.1(c)) to the contrary, if Merger Subsidiary shall commence
the Tender Offer, prior to the expiration of any other tender offer which (i) is
made by any person to acquire not less than 49.9% of the outstanding Common
Shares (excluding for all purposes of such calculation Common Shares purchased
by Parent pursuant to the Stock Option Agreement) for not less than $58.00 in
cash per Common Share and (ii) is proposed by such person to be followed by a
merger in which such person will acquire all of the remaining outstanding Common
Shares for cash or other consideration with a value per Common Share equal to
not less than the value per Common Share paid by such person pursuant to such
tender offer (the value of such other consideration to be determined in the good
faith judgment of the Company's board of directors after receipt of advice from
its financial advisors), the Company shall be entitled, at its option, to amend
or modify the Rights Agreement and New Rights Agreement to provide, in a manner
consistent with the amendments to the Rights Agreement made with respect to
Parent and the Tender Offer, that the person making such tender offer shall not
be deemed an Acquiring Person (as defined in the Rights Agreement and the New
Rights Agreement, respectively), the Distribution Date (as defined in the Rights
Agreement and the New Rights Agreement, respectively) shall not be deemed to
occur and the Rights and the New Rights will not separate from the Common
Shares, as a result of such person's consummating the tender offer.
(b) Takeover Statute. If any Takeover Statute is or may
become applicable to the Tender Offer, the Merger or the other transactions
contemplated by this
-50-
<PAGE> 57
Agreement, the Stock Option Agreement or the Voting Agreement, each of Parent
and the Company and its board of directors shall grant such approvals and take
such actions as are necessary so that such transactions may be consummated as
promptly as practicable on the terms contemplated by this Agreement, the Stock
Option Agreement or the Voting Agreement, as the case may be, or by the Tender
Offer or the Merger and otherwise act to eliminate or minimize the effects of
such statute or regulation on such transactions.
The Company and its board of directors shall be entitled, at
their election, to grant such approvals and take such actions as are necessary
to eliminate or minimize the effects of any Takeover Statute on any tender offer
with respect to which the Company has amended or modified the Rights Agreement
or New Rights Agreement in accordance with the second paragraph of Section
6.15(a).
(c) Dividends. The Company shall coordinate with Parent the
declaration, setting of record dates and payment dates of dividends on Common
Shares and Preferred Shares so that holders of Common Shares and Preferred
Shares do not receive dividends on (i) both Common Shares and Parent Common
Stock received in the Merger or (ii) both Preferred Shares and Parent Preferred
Stock received in the Merger in respect of any calendar quarter or portion
thereof or fail to receive a dividend on (i) either Common Shares or Parent
Common Stock received in the Merger or on (ii) either Preferred Shares or Parent
Preferred Stock received in the Merger in respect of any calendar quarter.
ARTICLE VII
Conditions
7.1. Conditions to Each Party's Obligation to Effect the
Merger. Except as provided in Section 7.4, the respective obligation of each
party to effect the Merger is subject to the satisfaction or waiver at or prior
to the Effective Time of each of the following conditions:
(a) Stockholder Approval. The Merger shall have been duly
approved by holders of Shares constituting the Company Requisite Vote and shall
have been duly approved by the sole stockholder of Merger Subsidiary in
accordance with applicable law.
(b) Listing. The shares of Parent Common Stock issuable to
the holders of Common Shares pursuant to this Agreement shall have been
authorized for listing on the NYSE upon official notice of issuance. The shares
of Parent Preferred Stock issuable to the holders of Preferred Shares pursuant
to this Agreement shall have been authorized for listing on the NYSE upon
official notice of issuance.
-51-
<PAGE> 58
(c) Regulatory Consents. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated, and, other than the filing provided for in Section 1.3, all notices,
reports and other filings required to be made prior to the Effective Time by the
Company or Parent or any of their respective Subsidiaries with, and all
consents, registrations, approvals, permits and authorizations required to be
obtained prior to the Effective Time by the Company or Parent or any of their
respective Subsidiaries from, any Governmental Entity (collectively,
"Governmental Consents"), in connection with the execution and delivery of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby shall have been made or obtained (as the case may be).
(d) Litigation. No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law, statute, ordinance, rule, regulation, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Merger
(collectively, an "Order").
(e) S-4. The S-4 Registration Statement shall have become
effective under the Securities Act. No stop order suspending the effectiveness
of the S-4 Registration Statement shall have been issued, and no proceeding for
that purpose shall have been initiated or be threatened, by the SEC.
(f) Blue Sky Approvals. Parent shall have received all state
securities and "blue sky" permits and approvals, if any, necessary to consummate
the transactions contemplated hereby.
7.2. Conditions to Obligations of Parent and Merger
Subsidiary. Except as provided in Section 7.4, the obligations of Parent and
Merger Subsidiary to effect the Merger are also subject to the satisfaction or
waiver by Parent at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement; and the
representations and warranties of the Company set forth in this Agreement shall
be true and correct as of the Closing Date as though made on and as of the
Closing Date (except to the extent any such representation or warranty expressly
speaks as of an earlier date) except where the failure of such representations
and warranties to be so true and correct (without giving effect to any
qualifications as to "Company Material Adverse Effect", "material" or similar
qualifications) are not, individually or in the aggregate, reasonably likely to
have a Company Material Adverse Effect, and Parent shall have received a
certificate signed on behalf of the Company by an executive officer of the
Company to such effect.
-52-
<PAGE> 59
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by an
executive officer of the Company to such effect.
(c) Consents. The Company shall have obtained the consent or
approval of each Person whose consent or approval shall be required under any
Contract to which the Company or any of its Subsidiaries is a party, except
those for which the failure to obtain such consents or approvals is not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect or is not, individually or in the aggregate, reasonably likely to
prevent or to materially burden or materially impair the ability of the Company
to consummate the transactions contemplated by this Agreement; and no such
consent or approval, and no Governmental Consent shall impose any condition or
conditions relating to, or requiring changes or restrictions in, the operations
of any asset or businesses of the Company, Parent or their respective
Subsidiaries which could, in the judgment of the Board of Parent, individually
or in the aggregate, materially and adversely impact the economic or business
benefits to Parent and its Subsidiaries of the transactions contemplated by this
Agreement.
(d) Tax Opinion. Parent shall have received, prior to the
effective date of the S-4 Registration Statement, the opinion of Sullivan &
Cromwell, counsel to Parent, to the effect that the Merger will be treated for
Federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, and that each of Parent, Merger Subsidiary and the Company
will be a party to that reorganization within the meaning of Section 368(b) of
the Code, and such firm shall have reconfirmed such opinion as of the Closing
Date. In rendering such opinion, Sullivan & Cromwell may rely upon and require
such certificates of the Company, Parent and Merger Subsidiary and/or their
officers or principal stockholders as are customary for such opinions.
(e) Affiliates Letters. Parent shall have received an
Affiliates Letter from each Person identified as an affiliate of the Company
pursuant to Section 6.8.
(f) Employment Agreements. The employment agreements entered
into as of December 21, 1997 between the Company and Messrs. Gaston and
Dennison, respectively, shall be in full force and effect.
7.3. Conditions to Obligation of the Company. Except as
provided in Section 7.4, the obligation of the Company to effect the Merger is
also subject to the satisfaction or waiver by the Company at or prior to the
Effective Time of the following conditions:
-53-
<PAGE> 60
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Subsidiary set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement, and
the representations and warranties of Parent and Merger Subsidiary set forth in
this Agreement shall be true and correct as of the Closing Date as though made
on and as of the Closing Date (except to the extent any such representation or
warranty expressly speaks as of an earlier date) except where the failure of
such representations and warranties to be so true and correct (without giving
effect to any qualifications as to "Parent Material Adverse Effect", "material"
or similar qualifications) are not, individually or in the aggregate, reasonably
likely to have a Parent Material Adverse Effect, and the Company shall have
received a certificate signed on behalf of Parent by an executive officer of
Parent and on behalf of Merger Subsidiary by an executive officer of Merger
Subsidiary to such effect.
(b) Performance of Obligations of Parent and Merger
Subsidiary. Each of Parent and Merger Subsidiary shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and the Company shall have received a
certificate signed on behalf of Parent by an executive officer of Parent and on
behalf of Merger Subsidiary by an executive officer of Merger Subsidiary to such
effect.
(c) Consents Under Agreements. Parent shall have obtained the
consent or approval of each Person whose consent or approval shall be required
in order to consummate the transactions contemplated by this Agreement under any
Contract to which Parent or any of its Subsidiaries is a party, except those for
which failure to obtain such consents or approvals is not, individually or in
the aggregate, reasonably likely to have a Parent Material Adverse Effect or is
not, individually or in the aggregate, reasonably likely to prevent or to
materially burden or materially impair the ability of Parent to consummate the
transactions contemplated by this Agreement.
(d) Tax Opinion. The Company shall have received, prior to
the effective date of the S-4 Registration Statement, the opinion of Jorden Burt
Berenson & Johnson LLP, counsel to the Company, to the effect that the Merger
will be treated for Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, and that each of Parent, Merger
Subsidiary and the Company will be a party to that reorganization within the
meaning of Section 368(b) of the Code, and such firm shall have reconfirmed such
opinion as of the Closing Date. In rendering such opinion, Jorden Burt Berenson
& Johnson LLP may rely upon and require such certificates of the Company, Parent
and Merger Subsidiary and/or their officers or principal stockholders as are
customary for such opinions.
7.4. Waiver of Conditions Following Consummation of Tender
Offer. Parent, Merger Subsidiary and the Company acknowledge and agree that if
the Tender Offer shall be commenced and consummated, (i) the conditions to their
respective
-54-
<PAGE> 61
obligations to effect the Merger contained in Section 7.1(a), (b), (c), and (f),
Section 7.2(a), (c), (e), and (f) and Section 7.3(a), (b), (c) and (d) shall be
deemed to be waived in all respects and (ii) if at least one-half of the members
of the board of directors of the Company are nominees or designees of Parent,
the condition to Parent's and Merger Subsidiary's obligations to effect the
Merger contained in Section 7.2(b) shall be deemed to be waived in all respects.
Parent, Merger Subsidiary and the Company further acknowledge and agree that if
the Tender Offer shall be commenced and consummated and the conditions to their
respective obligations to effect the Merger contained in Section 7.1(e) or
7.2(d) are not satisfied at such time as all of the other conditions to the
consummation of the Merger have been satisfied (or waived as contemplated by the
first sentence of this Section 7.4 or otherwise), then Parent shall consummate
the Merger by paying to each holder of a Common Share cash in amount equal to
the amount of cash paid for each Common Share pursuant to the Tender Offer.
ARTICLE VIII
Termination
8.1. Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after the approval by stockholders of the Company and
Parent referred to in Section 7.1(a), by mutual written consent of the Company
and Parent by action of their respective Boards of Directors.
8.2. Termination by Either Parent or the Company. This
Agreement may be terminated and the Merger may be abandoned (i) by action of the
Board of Directors of either Parent or the Company if the Merger shall not have
been consummated by September 30, 1998, whether such date is before or after the
date of approval by the stockholders of the Company (the "Termination Date"),
(ii) by action of the Board of Directors of Parent if (x) the Company Common
Stock Requisite Vote shall not have been obtained at a meeting duly convened
therefor or at any adjournment or postponement thereof or (y) Merger Subsidiary
shall have commenced the Tender Offer and the Tender Offer shall not have been
consummated by the sixtieth day from the date of commencement of the Tender
Offer (including, for purposes of calculating such 60 days, the date of
commencement of the Tender Offer as the first day), (iii) by action of the Board
of Directors of the Company at any time after 150 days from December 21, 1997,
if the Company Common Stock Requisite Vote shall not have been obtained at a
meeting duly convened therefor or at any adjournment or postponement thereof or
(iv) by action of the Board of Directors of either Parent or the Company if any
Order permanently restraining, enjoining or otherwise prohibiting consummation
of the Tender Offer or the Merger shall become final and non-appealable (whether
before or after the approval by the stockholders of the Company or Parent);
provided, that the right to terminate this
-55-
<PAGE> 62
Agreement pursuant to clause (i) above shall not be available to any party that
has breached in any material respect its obligations under this Agreement in any
manner that shall have proximately contributed to the occurrence of the failure
of the Tender Offer or the Merger to be consummated.
8.3. Termination by the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, by action of the Board of Directors of the Company:
(a) if (i) the Company is not in material breach of any of
the terms of this Agreement, (ii) the Merger shall not have been approved by the
Company Requisite Vote, (iii) the Board of Directors of the Company authorizes
the Company, subject to complying with the terms of this Agreement, to enter
into a binding written agreement concerning a transaction that constitutes a
Superior Proposal and the Company notifies Parent in writing that it intends to
enter into such an agreement, attaching the most current version of such
agreement to such notice, (iv) Parent does not make, prior to the later of (x)
five business days after receipt of the Company's written notification of its
intention to enter into a binding agreement for a Superior Proposal (the
"Alternative Transaction Notice"), or (y) the Section 8.3 Termination Date (as
hereinafter defined), an offer that the Board of Directors of the Company
determines, in good faith after consultation with its financial advisors, is at
least as favorable, as the Superior Proposal, taking into account the long term
prospects and interests of the Company and its stockholders, and (v) the Company
prior to such termination pays to Parent in immediately available funds the fees
required to be paid pursuant to Section 8.5. Without limiting the generality of
the foregoing, the Company agrees and acknowledges (x) that it cannot terminate
this Agreement pursuant to this Section 8.3(a) in order to enter into a binding
agreement referred to in clause (iii) above until at least the date falling 150
days from December 21, 1997 (the "Section 8.3 Termination Date") or, if later,
five business days after receipt of the Alternative Transaction Notice and (y)
to notify Parent promptly if its intention to enter into a written agreement
referred to in its Alternative Transaction Notice shall change at any time after
giving such notification.
(b) if there has been a material breach by Parent or Merger
Subsidiary of any representation, warranty, covenant or agreement contained in
this Agreement that is not curable or, if curable, is not cured within 20 days
after written notice of such breach is given by the Company to the party
committing such breach.
8.4. Termination by Parent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the consummation of the Tender Offer or the approval by the
stockholders of Parent referred to in Section 7.1(a), by action of the Board of
Directors of Parent if (a) the Company enters into a binding agreement for, or
recommends, a Superior Proposal or the Board of Directors of the Company shall
have withdrawn or adversely modified its
-56-
<PAGE> 63
approval or recommendation of this Agreement or, after the mailing of the
Prospectus/Proxy Statement or the Offer Documents, failed to reconfirm its
recommendation of this Agreement within ten business days after a reasonable
written request by Parent to do so, or (b) there has been a material breach by
the Company of any representation, warranty, covenant or agreement contained in
this Agreement that is not curable or, if curable, is not cured within 20 days
after written notice of such breach is given by Parent to the party committing
such breach.
8.5. Effect of Termination and Abandonment. (a) In the event
of termination of this Agreement and the abandonment of the Merger pursuant to
this Article VIII, this Agreement (other than as set forth in Section 9.1) shall
become void and of no effect with no liability (other than the liabilities
arising under the provisions, including this Section 8.5, set forth in Section
9.1) on the part of any party hereto (or of any of its directors, officers,
employees, agents, legal and financial advisors or other representatives);
provided, however, except as otherwise provided herein, no such termination
shall relieve any party hereto of any liability or damages resulting from any
breach of this Agreement.
(b) In the event that this Agreement is terminated (i) by the
Company pursuant to Section 8.2(iii) or Section 8.3(a) or (ii) by Parent
pursuant to Section 8.2(ii) or Section 8.4(a) or (iii) by either Parent or the
Company pursuant to Section 8.2(i) (and at the time of such termination pursuant
to Section 8.2(i) any Person shall then be making or proposing an Acquisition
Proposal to the Company or any of its Subsidiaries or any of its stockholders),
then the Company shall, not later than immediately prior to the time of such
termination or not later than immediately prior to the time of entering into an
agreement concerning a transaction that constitutes an Acquisition Proposal, pay
Parent a termination fee of $81.5 million plus an amount equal to Parent's
charges and expenses incurred in connection with the transactions contemplated
by this Agreement since January 27, 1998, up to a maximum of $5,000,000, in each
case by wire transfer of same day funds. In order to facilitate the timely
making of the foregoing payment, in the event that Parent elects to terminate
this Agreement, Parent shall notify the Company thereof not later than 10:00
a.m. (New York City time) on the business day immediately preceding the date of
such termination. In the event that Parent fails to provide such advance notice
of its election to terminate this Agreement, the Company shall be obligated to
make the foregoing payment not later than 12:00 p.m. (New York City time) on the
business day immediately following the date of such termination. The Company
acknowledges that the agreements contained in this Section 8.5(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Parent and Merger Subsidiary would not have entered
into this Agreement initially, or entered into the amendment and restatement of
this Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to this Section 8.5(b), and, in order to obtain such payment, Parent or
Merger Subsidiary commences a suit which results in a judgment against the
Company for the fee set forth in this paragraph (b), the
-57-
<PAGE> 64
Company shall pay to Parent or Merger Subsidiary its costs and expenses
(including attorneys' fees) in connection with such suit, together with interest
from the date of termination of this Agreement on the amounts owed at the prime
rate of The Chase Manhattan Bank, in effect from time to time during such period
plus two percent.
(c) In the event this Agreement is terminated (i) by the
Company or Parent pursuant to Section 8.2(i) and at the time of such termination
no Person is then making or proposing an Acquisition Proposal to the Company or
any of its Subsidiaries or any of its stockholders, then the Company shall
promptly, but in no event later than two business days after Parent shall have
requested payment of its charges and expenses incurred in connection with the
transactions contemplated hereby ("Expenses"), pay to Parent the amount of such
Expenses up to a maximum of $5,000,000 and, if within 18 months of such
termination, the Company enters into an agreement concerning a transaction that
constitutes an Acquisition Proposal, the Company at the time of entering into
such agreement, shall pay to Parent the termination fee of $81.5 million, in
each case payable by wire transfer of same day funds.
ARTICLE IX
Miscellaneous and General
9.1. Survival. This Article IX and the agreements of the
Company, Parent and Merger Subsidiary contained in Sections 6.11 (Benefits) and
6.13 (Indemnification; Directors' and Officers' Insurance) shall survive the
consummation of the Merger. This Article IX, the agreements of the Company,
Parent and Merger Subsidiary contained in Section 6.7 (Access), insofar as it
relates to the Company's and Parent's respective confidentiality obligations,
Section 6.12 (Expenses) and Section 8.5 (Effect of Termination and Abandonment)
shall survive the termination of this Agreement. All other representations,
warranties, covenants and agreements in this Agreement shall not survive the
consummation of the Merger or the termination of this Agreement.
9.2. Modification or Amendment. Subject to the provisions of
applicable law, at any time prior to the Effective Time, the parties hereto may
modify or amend this Agreement, by written agreement executed and delivered by
duly authorized officers of the respective parties.
9.3. Waiver of Conditions. The conditions to each of the
parties' obligations to consummate the Merger are for the sole benefit of such
party and may be waived by such party in whole or in part to the extent
permitted by applicable law.
-58-
<PAGE> 65
9.4. Counterparts. This Agreement may be executed in any
number of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
9.5. GOVERNING LAW; WAIVER OF JURY TRIAL. (A) THIS AGREEMENT
SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED,
CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF
DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF, EXCEPT THAT
MATTERS RELATING TO THE VALIDITY AND EFFECTS OF THE MERGER AND THE FIDUCIARY
OBLIGATIONS OF THE DIRECTORS OF THE COMPANY REFERRED TO IN SECTION 6.2 AND 6.4
HEREOF SHALL BE GOVERNED BY THE APPLICABLE PROVISIONS OF THE FLORIDA BUSINESS
CORPORATION LAW.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH
PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH PARTY HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.5.
(c) THE COMPANY AND MERGER SUBSIDIARY EACH AGREES THAT, IN
CONNECTION WITH ANY LEGAL SUIT OR PROCEEDING ARISING WITH RESPECT TO THIS
AGREEMENT, IT SHALL SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF DELAWARE AND AGREES TO VENUE IN SUCH COURTS. THE
COMPANY AND MERGER SUBSIDIARY EACH HEREBY APPOINTS THE SECRETARY OF THE COMPANY
AND MERGER SUBSIDIARY, RESPECTIVELY, AS ITS AGENT FOR SERVICE OF PROCESS FOR
PURPOSES OF THE FOREGOING SENTENCE ONLY.
-59-
<PAGE> 66
9.6. Notices. Any notice, request, instruction or other
document to be given hereunder by any party to the others shall be in writing
and delivered personally or sent by registered or certified mail, postage
prepaid, or by facsimile:
if to Parent or Merger Subsidiary
American International Group, Inc.
70 Pine Street
New York, New York 10270
Attention: General Counsel
fax: (212) 785-1584
(with a copy to James C. Morphy, Esq.,
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
fax: (212) 558-3588)
if to the Company
American Bankers Insurance Group, Inc.
11222 Quail Roost Drive
Miami, Florida 33157
Attention: Chief Executive Officer
fax: (305) 252-7068
(with a copy to Josephine Cicchetti, Esq.,
Jorden Burt Berenson & Johnson LLP
777 Brickell Avenue, Suite 500
Miami, Florida 33131
fax: (305) 372-9928
and
Jonathan L. Freedman, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
fax: (212) 259-6333)
-60-
<PAGE> 67
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
9.7. Entire Agreement; No Other Representations. This
Agreement (including any exhibits hereto), the Company Disclosure Letter, the
Parent Disclosure Letter, the Stock Option Agreement and the Confidentiality
Agreement between Parent and the Company (the "Confidentiality Agreement")
constitute the entire agreement, and supersede all other prior agreements,
understandings, representations and warranties both written and oral, among the
parties, with respect to the subject matter hereof.
9.8. No Third Party Beneficiaries. Except as provided in
Section 6.13 (Indemnification; Directors' and Officers' Insurance), this
Agreement is not intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
9.9. Obligations of Parent and of the Company. Whenever this
Agreement requires a Subsidiary of Parent to take any action, such requirement
shall be deemed to include an undertaking on the part of Parent to cause such
Subsidiary to take such action. Whenever this Agreement requires a Subsidiary of
the Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
9.10. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
9.11. Interpretation. The table of contents and headings
herein are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof. Where a reference in this Agreement is made to a Section or
Exhibit, such reference shall be to a Section of or Exhibit to this Agreement
unless otherwise indicated. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
9.12. Assignment. This Agreement shall not be assignable by
operation of law or otherwise; provided, however, that Parent may designate, by
written notice to
-61-
<PAGE> 68
the Company, another wholly-owned direct or indirect Subsidiary to be a
Constituent Corporation in lieu of Merger Subsidiary, in which event all
references herein to Merger Subsidiary shall be deemed references to such other
Subsidiary, except that all representations and warranties made herein with
respect to Merger Subsidiary as of the date of this Agreement shall be deemed
representations and warranties made with respect to such other Subsidiary as of
the date of such designation.
9.13. Alternative Transaction Structure. Notwithstanding
anything to the contrary contained in this Agreement, if the Company Preferred
Stock Requisite Vote is not obtained at the meeting duly convened to consider
the Merger or Parent reasonably determines that the Company Preferred Stock
Requisite Vote is not likely to be obtained pursuant to the Agreement (other
than pursuant to this Section 9.13), Parent shall, subject to the Company Common
Stock Requisite Vote and the other terms and conditions of this Agreement, merge
Merger Subsidiary with and into the Company such that the separate corporate
existence of Merger Subsidiary shall cease and the Company shall continue as the
Surviving Corporation. In connection with the alternative transaction
contemplated by the prior sentence, the Company shall take all actions
reasonably requested by Parent including, without limitation, promptly amending
this Agreement, as Parent may reasonably deem necessary or appropriate,
including, if applicable, to provide that the Preferred Shares shall remain
outstanding after the Merger pursuant to the same terms and conditions as are in
effect on the date hereof (except that the Preferred Shares shall be convertible
into Parent Common Stock) and adding, if applicable, the number of days between
the date of the Preferred Stockholders Meeting and the date of the Common
Stockholders Meeting to the time periods set forth in Section 8.2(i) and (iv)
and the Section 8.3 Termination Date and eliminating the covenant contained in
Section 6.6 and the conditions to closing contained in Sections 7.2(d) and
7.3(d).
-62-
<PAGE> 69
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first written above.
AMERICAN BANKERS INSURANCE GROUP, INC.
By: /s/ Gerald N. Gaston
-----------------------------------
Name: Gerald N. Gaston
Title: Vice Chairman, President and
Chief Executive Officer
AMERICAN INTERNATIONAL GROUP, INC.
By: /s/ Howard I. Smith
-----------------------------------
Name: Howard I. Smith
Title: Executive Vice President
AIGF, INC.
By: /s/ Howard I. Smith
-----------------------------------
Name: Howard I. Smith
Title: Executive Vice President
-63-
<PAGE> 70
ANNEX I
CERTAIN CONDITIONS OF THE TENDER OFFER. The capitalized terms used in this Annex
I have the meanings set forth in the attached Agreement. Notwithstanding any
other provision of the Tender Offer, Merger Subsidiary shall not be required to
accept for payment or, subject to any applicable rules and regulations of the
SEC, including Rule 14e-1(c) under the Exchange Act (relating to Merger
Subsidiary's obligation to pay for or return tendered Common Shares promptly
after termination or withdrawal of the Tender Offer), pay for, or may delay the
acceptance for payment of or payment for, any tendered Common Shares, or may, in
its sole discretion, terminate or amend the Tender Offer as to any Common Shares
not then paid for if (a) prior to the Expiration Date (i) there shall not have
been tendered and not withdrawn at least that number of Common Shares that would
represent at least 49.9% of all outstanding Common Shares on the date of
purchase (excluding for all purposes in calculating such 49.9% any outstanding
Common Shares owned by Parent or Merger Subsidiary pursuant to the exercise of
Parent's rights under the Stock Option Agreement) (the "Minimum Tender
Condition"), (ii) any waiting period applicable to the consummation of the
Tender Offer and the Merger under the HSR Act shall not have expired or been
terminated, (iii) other than the filing provided for in Section 1.3 of the
Agreement, any notices, reports and other filings required to be made prior to
the Effective Time by the Company or Parent or any of their respective
Subsidiaries with, and all consents, registrations, approvals, permits and
authorizations required to be obtained prior to the Effective Time by the
Company or Parent or any of their respective Subsidiaries from, any Governmental
Entity, in connection with the execution and delivery of the Agreement and the
consummation of the Tender Offer and the Merger and the other transactions
contemplated by the Agreement shall not have been made or obtained (as the case
may be), or (iv) the Company shall not have obtained the consent or approval of
each Person whose consent or approval shall be required under any Contract to
which the Company or any of its Subsidiaries is a party, except those for which
the failure to obtain such consents or approvals is not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect or is
not, individually or in the aggregate, reasonably likely to prevent or to
materially burden or materially impair the ability of the Company to consummate
the transactions contemplated by the Agreement; or any such consent or
approval, or any Governmental Consent, imposes any condition or conditions
relating to, or requires changes or restrictions in, the operations of any asset
or businesses of the Company, Parent or their respective Subsidiaries which
could, in the judgment of the board of directors of Parent, individually or in
the aggregate, materially and adversely impact the economic or business benefits
to Parent and its Subsidiaries of the transactions contemplated by the
Agreement; or (b) at or before the time of payment for any of such Common Shares
(whether or not any Common Shares have theretofore been accepted for payment),
any of the following events shall occur:
I-1
<PAGE> 71
(i) any court or Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered
any law, statute, ordinance, rule, regulation, judgment,
decree, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and restrains,
enjoins or otherwise prohibits consummation of the Tender
Offer or the Merger, or which makes the acceptance for payment
of, or payment for, any Common Shares in the Tender Offer
illegal;
(ii) the representations and warranties of the Company set
forth in the Agreement shall not be true and correct in all
material respects as of December 21, 1997; or such
representations and warranties shall not be true and correct
as of the Expiration Date as though made on and as of the
Expiration Date (except to the extent any such representation
or warranty expressly speaks as of an earlier date) except
where the failure of such representations and warranties to be
so true and correct (without giving effect to any
qualifications as to "Company Material Adverse Effect",
"material" or similar qualifications set forth in the
Agreement) are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect,
or Parent shall not have received a certificate on the
Expiration Date signed on behalf of the Company by an
executive officer of the Company to such effect;
(iii) the Company shall not have performed in all material
respects all obligations required to be performed by it under
the Agreement at or prior to the Expiration Date; or
(iv) the Agreement shall have been terminated in accordance
with its terms prior to the Expiration Date; or Parent, Merger
Subsidiary and the Company shall have otherwise agreed that
Merger Subsidiary may amend, terminate or withdraw the Tender
Offer;
which, in the sole judgment of Parent and Merger Subsidiary, in any such case,
and regardless of the circumstances (including any action or inaction by Parent
or Merger Subsidiary) giving rise to any such conditions, makes it inadvisable
to proceed with the Tender Offer and/or with such acceptance for payment of or
payment for Common Shares.
The foregoing conditions are for the sole benefit of Parent
and Merger Subsidiary and may be asserted by Parent or Merger Subsidiary
regardless of the circumstances (including any action or inaction by Parent or
Merger Subsidiary) giving rise to such condition or may be waived by Parent or
Merger Subsidiary, by express and specific action to that effect, in whole or in
part at any time and from time to time in their sole discretion. Any
determination by Parent and Merger Subsidiary concerning any
I-2
<PAGE> 72
event described in this Annex I shall be final and binding upon all holders of
Common Shares. The failure by Merger Subsidiary at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right, the waiver
of any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
I-3
<PAGE> 1
Exhibit 32
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 21, 1997, as
amended and restated as of February 28, 1998 (the "Agreement"), between AMERICAN
INTERNATIONAL GROUP, INC., a Delaware corporation (the "Grantee"), and AMERICAN
BANKERS INSURANCE GROUP, INC., a Florida corporation (the "Grantor").
WHEREAS, the Grantee, AIGF, INC., a Florida corporation and a
wholly owned subsidiary of the Grantee ("Newco"), and the Grantor are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), which provides, among other things, for the merger of the Grantor
with and into Newco (the "Merger");
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement, the Grantee and Newco have requested that the Grantor grant to
the Grantee an option to purchase up to 8,265,626 shares of Common Stock, par
value $1.00 per share, of the Grantor (the "Common Stock"), upon the terms and
subject to the conditions hereof; and
WHEREAS, in order to induce the Grantee and Newco to enter
into the Merger Agreement, the Grantor is willing to grant the Grantee the
requested option.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth herein, the parties hereto agree as
follows:
1. The Option; Exercise; Adjustments; Payment of Spread. (a)
Contemporaneously herewith the Grantee, Newco and the Grantor are entering into
the Merger Agreement. Subject to the other terms and conditions set forth
herein, the Grantor hereby grants to the Grantee an irrevocable option (the
"Option") to purchase up to 8,265,626 shares of Common Stock (the "Shares") at a
cash purchase price equal to $47.00 per share (the "Purchase Price"). The Option
may be exercised by the Grantee, in whole or in part, at any time, or from time
to time, following the occurrence of one of the events set forth in Section 2(d)
hereof, and prior to the termination of the Option in accordance with the terms
of this Agreement.
(b) In the event the Grantee wishes to exercise the Option,
the Grantee shall send a written notice to the Grantor (the "Stock Exercise
Notice") specifying a date (subject to the HSR Act (as defined below) and
applicable
<PAGE> 2
insurance regulatory approvals) 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. In the event of any change in the number of issued and
outstanding shares of Common Stock by reason of any stock dividend, stock split,
split-up, recapitalization, merger or other change in the corporate or capital
structure of the Grantor, the number of Shares subject to this Option and the
purchase price per Share shall be appropriately adjusted to restore the Grantee
to its rights hereunder, including its right to purchase Shares representing
19.9% of the capital stock of the Grantor entitled to vote generally for the
election of the directors of the Grantor which is issued and outstanding
immediately prior to the exercise of the Option at an aggregate purchase price
equal to the Purchase Price multiplied by 8,265,626.
(c) If at any time the Option is then exercisable pursuant to
the terms of Section 1(a) hereof, the Grantee may elect, in lieu of exercising
the Option to purchase Shares provided in Section 1(a) hereof, to send a written
notice to the Grantor (the "Cash Exercise Notice") specifying a date not later
than 20 business days and not earlier than 10 business days following the date
such notice is given on which date the Grantor shall pay to the Grantee an
amount in cash equal to the Spread (as hereinafter defined) multiplied by all or
such portion of the Shares subject to the Option as Grantee shall specify. As
used herein "Spread" shall mean the excess, if any, over the Purchase Price of
the higher of (x) if applicable, the highest price per share of Common Stock
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid or proposed to be paid by any person pursuant to one of the
transactions enumerated in Section 2(d) hereof (the "Alternative Purchase
Price") or (y) the closing price of the shares of Common Stock on the NYSE
Composite Tape on the last trading day immediately prior to the date of the Cash
Exercise Notice (the "Closing Price") or, if Section 1(d) is applicable, on the
last trading day immediately prior to termination of the Merger Agreement. If,
in the case of clause (x) above, the Alternative Purchase Price can be
calculated by reference to an all cash amount paid or proposed to be paid for
any shares of Common Stock outstanding, such cash amount shall be deemed to be
the Alternative Purchase Price; if, in the case of clause (x) above, no shares
of Common Stock will be purchased for all cash, the Alternative Purchase Price
shall be the sum of
-2-
<PAGE> 3
(i) the fixed cash amount, if any, included in the Alternative Purchase Price
plus (ii) the fair market value of such property other than cash included in the
Alternative Purchase Price. If such other property consists of securities with
an existing public trading market, the average of the closing prices (or the
average of the closing bid and asked prices if closing prices are unavailable)
for such securities in their principal public trading market on the five trading
days ending five days prior to the date of the Cash Exercise Notice or, if
Section 1(d) is applicable, ending on the last trading day immediately prior to
termination of the Merger Agreement, shall be used to calculate the fair market
value of such property. If such other property consists of something other than
cash or securities with an existing public trading market and, as of the payment
date for the Spread, agreement on the value of such other property has not been
reached, the Alternative Purchase Price shall be deemed to equal the Closing
Price. Upon exercise of its right to receive cash pursuant to this Section 1(c),
the obligations of the Grantor to deliver Shares pursuant to Section 3 shall be
terminated with respect to such number of Shares for which the Grantee shall
have elected to be paid the Spread.
(d) Notwithstanding anything in the foregoing to the contrary,
it is agreed that if after the delivery by Grantee of the Stock Exercise Notice,
which was delivered to Grantor on January 27, 1998, with respect to all
8,265,626 Shares, but prior to the receipt of all regulatory approvals required
for the consummation of the purchase of the Shares subject to such Stock
Exercise Notice, Grantor or Grantee intends to terminate the Merger Agreement
pursuant to the terms thereof, the party intending to so terminate the Merger
Agreement shall provide at least one full business days' notice of such
intention to the other party and, if requested to do so by Grantee, Grantor
shall take such steps as may be necessary so as to pay to Grantee, not later
than immediately prior to such termination, cash by wire transfer in immediately
available funds in an aggregate amount equal to the Spread (as defined in
Section 1(c) above) multiplied by the number of Shares subject to the Stock
Exercise Notice, less any amounts paid to Grantee by Grantor pursuant to Section
8.5 of the Merger Agreement.
2. Conditions to Delivery of Shares. The Grantor's obligation
to deliver Shares upon exercise of the Option is subject only to the conditions
that:
-3-
<PAGE> 4
(a) No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in the
United States prohibiting the delivery of the Shares shall be in
effect; and
(b) Any applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired
or been terminated; and
(c) Any approval required to be obtained prior to the delivery
of the Shares under the insurance laws of any state or foreign
jurisdiction shall have been obtained and be in full force and effect;
and
(d) (i) any person (other than Grantee or any of its
subsidiaries) shall have commenced (as such term is defined in Rule
14d-2 under the Securities Exchange Act of 1934 (the "Exchange Act") a
tender offer, or shall have filed a registration statement under the
Securities Act of 1933 (the "Securities Act") with respect to an
exchange offer, to purchase any shares of Common Stock such that, upon
consummation of such offer, such person or a "group" (as such term is
defined under the Exchange Act) of which such person is a member shall
have acquired beneficial ownership (as such term is defined in rule
13d-3 of the Exchange Act), or the right to acquire beneficial
ownership, of 15 percent or more of the then outstanding Common Stock;
(ii) any person (other than Grantee or any of its subsidiaries) shall
have publicly announced or delivered to Grantor a proposal, or
disclosed publicly or to Grantor an intention to make a proposal, to
purchase 15% or more of the assets or any equity securities of, or to
engage in a merger, reorganization, tender offer, share exchange,
consolidation or similar transaction involving the Grantor or any of
its subsidiaries (an "Acquisition Transaction"); (iii) Grantor or any
of its subsidiaries shall have authorized, recommended, proposed or
publicly announced an intention to authorize, recommend or propose, or
entered into, an agreement, including without limitation, an agreement
in principle,
-4-
<PAGE> 5
with any person (other than Grantee or any of its subsidiaries) to
effect or provide for an Acquisition Transaction; (iv) any person shall
solicit proxies or consents or announce a bona fide intention to
solicit proxies or consents from Grantor's stockholders (x) relating to
directors, (y) in opposition to the Merger, the Merger Agreement or
any related transactions or (z) relating to an Acquisition Transaction
(other than solicitations of stockholders seeking approval of the
Merger, the Merger Agreement or any related transactions); or (v) any
person (other than Grantee or any of its subsidiaries) shall have
acquired beneficial ownership (as such term is defined in Rule 13d-3
under the Exchange Act) or the right to acquire beneficial ownership
of, or any "group" (as such term is defined under the Exchange Act)
shall have been formed which beneficially owns or has the right to
acquire beneficial ownership of, shares of Common Stock (other than
trust account shares) aggregating 15 percent or more of the then
outstanding Common Stock. As used in this Agreement, "person" shall
have the meaning specified in Sections 3(a)(9) and 13(d)(3) of the
Exchange Act.
3. The Closing. (a) Except as otherwise provided in Section
1(d), any closing hereunder shall take place on the date specified by the
Grantee in its Stock Exercise Notice or Cash Exercise Notice, as the case may
be, at 9:00 A.M., local time, at the offices of Sullivan & Cromwell, 125 Broad
Street, New York, New York, or, if the conditions set forth in Section 2(a), (b)
or (c) have not then been satisfied, on the second business day following the
satisfaction of such conditions, or at such other time and place as the parties
hereto may agree (the "Closing Date"). On the Closing Date, (i) in the event of
a closing pursuant to Section 1(b) hereof, the Grantor will deliver to the
Grantee a certificate or certificates, representing the Shares in the
denominations designated by the Grantee in its Stock Exercise Notice and the
Grantee will purchase such Shares from the Grantor at the price per Share equal
to the Purchase Price or (ii) in the event of a closing pursuant to Section 1(c)
or Section 1(d) hereof, as the case may be, the Grantor will deliver to the
Grantee cash in an amount determined pursuant to Section 1(c) or Section 1(d)
hereof, as the case may be. Except as otherwise provided in Section
-5-
<PAGE> 6
1(d), any payment made by the Grantee to the Grantor, or by the Grantor to the
Grantee, pursuant to this Agreement shall be made by certified or official bank
check or by wire transfer of federal funds to a bank designated by the party
receiving such funds.
(b) The certificates representing the Shares shall bear an
appropriate legend relating to the fact that such Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act").
4. Representations and Warranties of the Grantor. The Grantor
represents and warrants to the Grantee that (a) the Grantor is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Florida and has the requisite corporate power and authority to enter
into and perform this Agreement; (b) the execution and delivery of this
Agreement by the Grantor and the consummation by it of the transactions
contemplated hereby have been duly authorized by the Board of Directors of the
Grantor and this Agreement has been duly executed and delivered by a duly
authorized officer of the Grantor and constitutes a valid and binding obligation
of the Grantor, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles; (c) the Grantor has taken all necessary corporate action to
authorize and reserve the Shares issuable upon exercise of the Option and the
Shares, when issued and delivered by the Grantor upon exercise of the Option and
paid for by Grantee as contemplated hereby, will be duly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights; (d) except
as otherwise required by the HSR Act and applicable insurance laws, the
execution and delivery of this Agreement by the Grantor and the consummation by
it of the transactions contemplated hereby do not require the consent, waiver,
approval or authorization of or any filing with any person or public authority
and will not violate, result in a breach of or the acceleration of any
obligation under, or constitute a default under, any provision of Grantor's
charter or by-laws, or any material indenture, mortgage, lien, lease, agreement,
contract, instrument, order, law, rule, regulation, judgment, ordinance, or
decree, or restriction by which the Grantor or any of its subsidiaries or any of
their respective properties or assets is bound;
-6-
<PAGE> 7
(e) no "fair price", "moratorium", "control share acquisition," "interested
shareholder" or other form of antitakeover statute or regulation, including
without limitation, Sections 607.0901 or 607.0902 of the Florida Business
Corporation Act, or similar provision contained in the charter or by-laws of
Grantor, including without limitation, Article VIII of Grantor's Third Amended
and Restated Articles of Incorporation, is or shall be applicable to the
acquisition of Shares pursuant to this Agreement; and (f) the Grantor has taken
all corporate action necessary so that any Shares acquired pursuant to this
Agreement shall not be counted for purposes of determining the number of shares
of Common Stock beneficially owned by the Grantee or any of its Affiliates or
Associates (as such terms are defined in the Rights Agreement and New Rights
Agreement) pursuant to the Rights Agreement, as amended and restated on November
14, 1990, as amended on December 19, 1997, between the Grantor and ChaseMellon
Shareholder Services, LLC (as successor to Manufacturers Hanover Trust Company),
as Rights Agent (the "Rights Agreement") or pursuant to the Rights Agreement,
dated as of February 19, 1998, between the Grantor and ChaseMellon Shareholder
Services, LLC, as Rights Agent (the "New Rights Agreement").
5. Representations and Warranties of the Grantee. The Grantee
represents and warrants to the Grantor that (a) the execution and delivery of
this Agreement by the Grantee and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Grantee and this Agreement has been duly executed and
delivered by a duly authorized officer of the Grantee and constitutes a valid
and binding obligation of Grantee; and (b) the Grantee is acquiring the Option
and, if and when it exercises the Option, will be acquiring the Shares issuable
upon the exercise thereof for its own account and not with a view to
distribution or resale in any manner which would be in violation of the
Securities Act.
6. Listing of Shares; Filings; Governmental Consents. Subject
to applicable law and the rules and regulations of the New York Stock Exchange,
Inc. (the "NYSE"), the Grantor will promptly file an application to list the
Shares on the NYSE and will use its reasonable best efforts to obtain approval
of such listing and to effect all necessary filings by the Grantor under the HSR
Act and the
-7-
<PAGE> 8
applicable insurance laws of each state and foreign jurisdiction; provided,
however, that if the Grantor is unable to effect such listing on the NYSE by the
Closing Date, the Grantor will nevertheless be obligated to deliver the Shares
upon the Closing Date. Each of the parties hereto will use its reasonable best
efforts to obtain consents of all third parties and governmental authorities, if
any, necessary to the consummation of the transactions contemplated.
7. Repurchase of Shares. If by the date that is the first
anniversary of the date the Merger Agreement was terminated pursuant to the
terms thereof (the "Merger Termination Date"), neither the Grantee nor any other
Person has acquired more than fifty percent (excluding the Shares) of the shares
of outstanding Common Stock, then the Grantor has the right to purchase (the
"Repurchase Right") all, but not less than all, of the Shares at the greater of
(i) the Purchase Price or (ii) the average of the last sales prices for shares
of Common Stock on the five trading days ending five days prior to the date the
Grantor gives written notice of its intention to exercise the Repurchase Right.
If the Grantor does not exercise the Repurchase Right within thirty days
following the end of the one year period after the Merger Termination Date, the
Repurchase Right lapses. In the event the Grantor wishes to exercise the
Repurchase Right, the Grantor shall send a written notice to the Grantee
specifying a date (not later than 20 business days and not earlier than 10
business days following the date such notice is given) for the closing of such
purchase.
8. Sale of Shares. At any time prior to the first anniversary
of the Merger Termination Date, the Grantee shall have the right to sell (the
"Sale Right") to the Grantor all, but not less than all, of the Shares at the
greater of (i) the Purchase Price, or (ii) the average of the last sales prices
for shares of Common Stock on the five trading days ending five days prior to
the date the Grantee gives written notice of its intention to exercise the Sale
Right. If the Grantee does not exercise the Sale Right prior to the first
anniversary of the Merger Termination Date, the Sale Right terminates. In the
event the Grantee wishes to exercise the Sale Right, the Grantee shall send a
written notice to the Grantor specifying a date not later than 20 business days
and not earlier than 10 business days following the date such notice is given
for the closing of such sale.
-8-
<PAGE> 9
9. Registration Rights. (a) In the event that the Grantee
shall desire to sell any of the Shares within three years after the purchase of
such Shares pursuant hereto, and such sale requires, in the opinion of counsel
to the Grantee, which opinion shall be reasonably satisfactory to the Grantor
and its counsel, registration of such Shares under the Securities Act, the
Grantor will cooperate with the Grantee and any underwriters in registering such
Shares for resale, including, without limitation, promptly filing a registration
statement which complies with the requirements of applicable federal and state
securities laws, and entering into an underwriting agreement with such
underwriters upon such terms and conditions as are customarily contained in
underwriting agreements with respect to secondary distributions; provided that
the Grantor shall not be required to have declared effective more than two
registration statements hereunder and shall be entitled to delay the filing or
effectiveness of any registration statement for up to 60 days if the offering
would, in the judgment of the Board of Directors of the Grantor, require
premature disclosure of any material corporate development or material
transaction involving the Grantor or interfere with any previously planned
securities offering by the Company.
(b) If the Common Stock is registered pursuant to the
provisions of this Section 9, the Grantor agrees (i) to furnish copies of the
registration statement and the prospectus relating to the Shares covered thereby
in such numbers as the Grantee may from time to time reasonably request and (ii)
if any event shall occur as a result of which it becomes necessary to amend or
supplement any registration statement or prospectus, to prepare and file under
the applicable securities laws such amendments and supplements as may be
necessary to keep available for at least 45 days a prospectus covering the
Common Stock meeting the requirements of such securities laws, and to furnish
the Grantee such numbers of copies of the registration statement and prospectus
as amended or supplemented as may reasonably be requested. The Grantor shall
bear the cost of the registration, including, but not limited to, all
registration and filing fees, printing expenses, and fees and disbursements of
counsel and accountants for the Grantor, except that the Grantee shall pay the
fees and disbursements of its counsel, and the underwriting fees and selling
commissions applicable to the shares of Common Stock sold by the Grantee. The
Grantor shall indemnify and hold harmless
-9-
<PAGE> 10
(i) Grantee, its affiliates and its officers and directors and (ii) each
underwriter and each person who controls any underwriter within the meaning of
the Securities Act or the Securities Exchange Act of 1934, as amended
(collectively, the "Underwriters") ((i) and (ii) being referred to as
"Indemnified Parties") against any losses, claims, damages, liabilities or
expenses, to which the Indemnified Parties may become subject, insofar as such
losses, claims, damages, liabilities (or actions in respect thereof) and
expenses arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained or incorporated by reference in any
registration statement filed pursuant to this paragraph, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that the Grantor will not be liable in any such
case to the extent that any such loss, liability, claim, damage or expense
arises out of or is based upon an untrue statement or alleged untrue statement
in or omission or alleged omission from any such documents in reliance upon and
in conformity with written information furnished to the Grantor by the
Indemnified Parties expressly for use or incorporation by reference therein.
(c) The Grantee and the Underwriters shall indemnify and hold
harmless the Grantor, its affiliates and its officers and directors against any
losses, claims, damages, liabilities or expenses to which the Grantor, its
affiliates and its officers and directors may become subject, insofar as such
losses, claims, damages, liabilities (or actions in respect thereof) and
expenses arise out of or are based upon any untrue statement of any material
fact contained or incorporated by reference in any registration statement filed
pursuant to this paragraph, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Grantor by the Grantee or
the Underwriters, as applicable, specifically for use or incorporation by
reference therein.
-10-
<PAGE> 11
10. Expenses. Each party hereto shall pay its own expenses
incurred in connection with this Agreement, except as otherwise specifically
provided herein.
11. Specific Performance. The Grantor acknowledges that if the
Grantor fails to perform any of its obligations under this Agreement immediate
and irreparable harm or injury would be caused to the Grantee for which money
damages would not be an adequate remedy. In such event, the Grantor agrees that
the Grantee shall have the right, in addition to any other rights it may have,
to specific performance of this Agreement. Accordingly, if the Grantee should
institute an action or proceeding seeking specific enforcement of the provisions
hereof, the Grantor hereby waives the claim or defense that the Grantee has an
adequate remedy at law and hereby agrees not to assert in any such action or
proceeding the claim or defense that such a remedy at law exists. The Grantor
further agrees to waive any requirements for the securing or posting of any bond
in connection with obtaining any such equitable relief.
12. Notice. All notices, requests, demands and other
communications hereunder shall be deemed to have been duly given and made if in
writing and if served by personal delivery upon the party for whom it is
intended or delivered by registered or certified mail, return receipt requested,
or if sent by facsimile transmission, upon receipt of oral confirmation that
such transmission has been received, to the person at the address set forth
below, or such other address as may be designated in writing hereafter, in the
same manner, by such person:
If to the Grantee:
American International Group, Inc.
70 Pine Street
New York, New York 10270
Attn: General Counsel
Telecopy: (212) 785-1584
-11-
<PAGE> 12
With a copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Attn: James C. Morphy, Esq.
Telecopy: (212) 558-3588
If to the Grantor:
American Bankers Insurance Group, Inc.
11222 Quail Roost Drive
Miami, Florida 33157
Attn: Chief Executive Officer
Telecopy: (305) 252-7068
With a copy to:
Jorden Burt Berenson & Johnson LLP
777 Brickell Avenue
Suite 500
Miami, Florida 33131
Attn: Josephine Cicchetti
Telecopy: (305) 372-9928
and
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Attn: Jonathan L. Freedman
Telecopy: (212) 259-6333
13. Parties in Interest. This Agreement shall inure to the
benefit of and be binding upon the parties named herein and their respective
successors and assigns; provided, however, that such successor in interest or
assigns shall agree to be bound by the provisions of this Agreement. Nothing in
this Agreement, express or implied, is intended to confer upon any person other
than the Grantor or the Grantee, or their successors or assigns, any rights or
remedies under or by reason of this Agreement.
14. Entire Agreement; Amendments. This Agreement, together
with the Merger Agreement and the other documents referred to therein, contains
the entire agreement between the parties hereto with respect to the subject
-12-
<PAGE> 13
matter hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions. This
Agreement may not be changed, amended or modified orally, but may be changed
only by an agreement in writing signed by the party against whom any waiver,
change, amendment, modification or discharge may be sought.
15. Assignment. No party to this Agreement may assign any of
its rights or obligations under this Agreement without the prior written consent
of the other party hereto, except that the Grantee may assign its rights and
obligations hereunder to any of its direct or indirect wholly owned
subsidiaries (including Newco), but no such transfer shall relieve the Grantee
of its obligations hereunder if such transferee does not perform such
obligations.
16. Headings. The section headings herein are for convenience
only and shall not affect the construction of this Agreement.
17. Counterparts. This Agreement may be executed in any number
of counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (regardless of
the laws that might otherwise govern under applicable Delaware principles of
conflicts of law).
THE GRANTOR AGREES THAT, IN CONNECTION WITH ANY LEGAL SUIT OR
PROCEEDING ARISING WITH RESPECT TO THIS AGREEMENT, IT SHALL SUBMIT TO THE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
AND AGREES TO VENUE IN SUCH COURTS. THE GRANTOR HEREBY APPOINTS THE SECRETARY OF
THE GRANTOR AS ITS AGENT FOR SERVICE OF PROCESS FOR PURPOSES OF THE FOREGOING
SENTENCE ONLY.
19. Termination. The right to exercise the Option granted
pursuant to this Agreement shall terminate at the earlier of (i) the Effective
Time (as defined in the Merger Agreement); (ii) 90 days after the Merger
Termination Date (the date referred to in clause (ii) being hereinafter referred
to as the "Option Termination Date") and, (iii) 18 months after the date hereof;
provided that, if the Option
-13-
<PAGE> 14
cannot be exercised or the Shares cannot be delivered to Grantee upon such
exercise because the conditions set forth in Section 2(a), (b) or (c) hereof
have not yet been satisfied, the Option Termination Date shall be extended until
thirty days after such impediment to exercise or delivery has been removed.
All representations and warranties contained in this Agreement
shall survive delivery of and payment for the Shares.
20. Profit Limitation. (a) Notwithstanding any other provision
of this Agreement, in no event shall the Grantee's Total Profit (as hereinafter
defined) exceed $100 million and, if it otherwise would exceed such amount, the
Grantee, at its sole election, shall either (a) reduce the number of shares of
Common Stock required to be delivered by Grantor pursuant to the Stock Exercise
Notice, (b) deliver to the Grantor for cancellation Shares previously purchased
by Grantee, (c) reduce the cash payable to Grantee pursuant to Section 1(c) or
1(d) hereof, (d) pay cash or other consideration to the Grantor or (e) undertake
any combination thereof, so that Grantee's Total Profit shall not exceed $100
million after taking into account the foregoing actions.
As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount of cash
received by Grantee pursuant to Section 8.5 of the Merger Agreement and Section
1(c) and Section 1(d) hereof, (ii) (x) the amount of cash received by Grantee
pursuant to the Grantor's repurchase of Shares pursuant to Sections 7 or 8
hereof, less (y) the Grantee's purchase price for such Shares, and (iii) (x) the
net cash amounts received by Grantee pursuant to the sale of Shares (or any
other securities into which such Shares are converted or exchanged) to any
unaffiliated party, less (y) the Grantee's purchase price for such Shares.
21. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
-14-
<PAGE> 15
22. Public Announcement. The Grantee will consult with the
Grantor and the Grantor will consult with the Grantee before issuing any press
release with respect to the initial announcement of this Agreement, the Option
or the transactions contemplated hereby and neither party shall issue any such
press release prior to such consultation except as may be required by law or the
applicable rules and regulations of the NYSE.
-15-
<PAGE> 16
IN WITNESS WHEREOF, the Grantee and the Grantor have caused
this Agreement to be duly executed and delivered on the day and year first above
written.
AMERICAN BANKERS INSURANCE GROUP, INC.
/s/ Gerald N. Gaston
------------------------------------
By: Gerald N. Gaston
Title: Vice Chairman, President, and
Chief Executive Officer
AMERICAN INTERNATIONAL GROUP, INC.
/s/ Howard I. Smith
------------------------------------
By: Howard I. Smith
Title: Executive Vice President
-16-
<PAGE> 1
Exhibit 33
Contact: AIG - Joe Norton
212/770-3144
ABI: Bruce Camacho
305/252-7060
AIG AND AMERICAN BANKERS INSURANCE GROUP
AMEND MERGER AGREEMENT
VALUE INCREASED TO $58 PER ABI SHARE
NEW YORK and MIAMI, (March 2) - American International Group, Inc. (NYSE:AIG)
and American Bankers Insurance Group, Inc. (NYSE:ABI) today announced that they
have reached an amended merger agreement between the two companies. The amended
agreement calls for AIG to pay $58.00 in stock and cash for each ABI share.
R. Kirk Landon, Chairman of the Board of ABI, said, "The American Bankers
Board of Directors strongly affirms its belief that this merger agreement with
AIG is the superior alternative for ABI, our shareholders, policyholders,
employees and communities. AIG is a strong, experienced, well-capitalized and
well-positioned industry partner for us. There is also no question that our
merger with AIG will bring significant opportunities for our company and all
our constituencies."
AIG Chairman M.R. Greenberg commented, "AIG is very pleased to have reached
this new agreement with American Bankers, and we look forward to presenting it
to the ABI shareholders. AIG's commitment to American Bankers reflects our
belief that this is a strategic investment with solid long term prospects. We
have tremendous respect for the company and its employees and we continue to
believe there are outstanding opportunities for American Bankers to grow and
prosper as part of AIG. We reiterate our pledge to keep ABI as a separately
managed company within AIG, to provide it with the necessary capital to grow and
to maintain ABI's headquarters in Miami. We look forward to consummating this
merger on an expedited basis."
As a result of this new agreement, ABI and AIG announced that ABI is
postponing the two shareholder meetings currently scheduled for March 4 and
March 6. The new dates will be March 25 and March 27.
AIG is the leading U.S.-based international insurance organization and
among the largest underwriters of commercial and industrial insurance in the
United States. Its member companies write property, casualty, marine, life and
financial services insurance in approximately 130 countries and jurisdictions,
and are engaged in a range of financial services businesses. American
International Group, Inc.'s common stock is listed on the New York Stock
Exchange, as well as the stock exchanges in London, Paris, Switzerland and
Tokyo.
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.
<PAGE> 1
Exhibit 34
[AMERICAN BANKERS INSURANCE GROUP LETTERHEAD]
February 27, 1998
To Our $3.125 Series B Cumulative Convertible Preferred Stock Holders:
On February 19, 1998, the Board of Directors of American Bankers Insurance
Group, Inc. (the "Company") adopted a new shareholders' rights agreement. The
Company's existing shareholders' rights agreement will expire on March 10,
1998. The new shareholders' rights agreement is substantially identical to the
existing shareholders' rights agreement, except the exercise price has been set
at $75 and the expiration date is March 10, 2003.
One right (a "Right") for each outstanding share of the Company's common
stock, par value $1.00 per share ("Common Stock") will be distributed to
shareholders of record at the close of business on March 10, 1998. The Rights
initially will be part of and will trade with the Common Stock. A Right will
also be part of each share of Common Stock issued upon conversion of the $3.125
Series B Cumulative Convertible Preferred Stock.
We have enclosed a summary description of the Rights Agreement, dated as
of February 19, 1998, between American Bankers Insurance Group, Inc. and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent.
We thank you for your continued support.
Sincerely,
/s/ Gerald N. Gaston
Gerald N. Gaston
President and Chief Executive Officer
<PAGE> 2
SUMMARY OF
RIGHTS AGREEMENT, DATED AS OF FEBRUARY 19, 1998,
BETWEEN
AMERICAN BANKERS INSURANCE GROUP, INC.
AND
CHASEMELLON SHAREHOLDER SERVICES, L.L.C., AS RIGHTS AGENT
On February 19, 1998, the Company declared a dividend distribution of one
Right (a "Right") for each outstanding share of the Company's Common Stock to
shareholders of record at the close of business on March 10, 1998 (the "Record
Date"). Except as described below, each Right, when exercisable, entitles the
registered holder thereof to purchase from the Company 1/100th of a share (a
"Unit") of Series C Participating Preferred Stock, no par value (the "Preferred
Stock"), at a Purchase Price of $75.00 per Unit, subject to adjustment. The
terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement") between the Company and ChaseMellon Shareholder Services, L.L.C.,
as Rights Agent.
Initially, each Right will be a part of and trade with each share of
Common Stock outstanding. The Rights will separate from the Common Stock and a
Distribution Date will occur 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 such term is defined below)) which is the earlier
of (i) 10 days following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding shares of Common Stock, or (ii) 10 business days following the
commencement of a tender offer or exchange offer that would result in a person
or group beneficially owning 15% or more of such outstanding shares of Common
Stock. Until the Distribution Date, (i) the Rights will be evidenced by the
Common Stock certificates (and no separate Rights certificate will be issued)
and will be transferred with and only with such Common Stock certificates,
(ii) new Common Stock certificates issued after the Record Date will contain a
notation incorporating the Rights Agreement by reference, and (iii) the
surrender for transfer of any certificates for Common Stock outstanding will
also constitute the transfer of the Rights associated with the Common Stock
represented by such certificate.
Notwithstanding the foregoing, no Distribution Date will occur until such
date as may be determined by action of the Board of Directors, upon approval by
a majority of the Continuing Directors, as a result of the Cendant Offer (as
such term is defined in the Rights Agreement). In addition, the Rights
Agreement provides that the date of execution, delivery or consummation of the
transactions contemplated by the Agreement and Plan of Merger dated as of
December 21, 1997, as amended and restated as of January 7, 1998, and as
amended by Amendment No. 1 thereto dated as of January 28, 1998, among the
Company, American International Group, Inc. ("AIG") and AIGF, Inc., a
wholly-owned subsidiary of AIG ("AIGF") (the "Merger Agreement"), the Stock
Option Agreement dated as of December 21, 1997, between the Company and AIG
(the "Stock Option Agreement") and the Voting Agreement dated as of December
21, 1997, among AIG and certain stockholders of the Company (the "Voting
Agreement") shall not be deemed to be a Distribution Date for any purpose of
the Rights Agreement solely by reason of such execution, delivery or
consummation; provided, however, that any other acquisition of Beneficial
Ownership (as such term is defined in the Rights Agreement) of Common Stock by
AIG, AIGF or any of their Affiliates (as such term is defined in the Rights
Agreement) otherwise than pursuant to the Merger Agreement, the Stock Option
Agreement or the Voting Agreement shall give rise to a Distribution Date. The
Rights Agreement also provides that neither AIG, AIGF nor any of their
Affiliates be deemed to be an Acquiring Person for any purpose of the Rights
Agreement solely by reason of the execution, delivery or consummation of the
transactions contemplated by the Merger Agreement, the Stock Option Agreement
or the Voting Agreement; provided, however, that AIG, AIGF or any of their
Affiliates shall be deemed to be an Acquiring Person if any of them acquire
Beneficial Ownership of any shares of Common Stock other than pursuant to the
Merger Agreement, the Stock Option Agreement or the Voting Agreement.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as set forth in the Rights
Agreement and except as
<PAGE> 3
otherwise determined by the Board of Directors, only shares of Common Stock
issued prior to the Distribution date will be issued with Rights.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on March 10, 2003, unless earlier redeemed or exchanged
by the Company as described below.
If (i) the Company is the surviving corporation in a merger with an
Acquiring Person and the Company's Common Stock remains outstanding and
unchanged, (ii) an Acquiring Person is or becomes the beneficial owner of 15% or
more of the then outstanding shares of the Company's Common Stock, (iii) an
Acquiring Person engages in one or more "self-dealing" transactions as set forth
in the Rights Agreement, or (iv) there is any recapitalization, reclassification
or similar transaction involving the Company, which has the effect of increasing
by more than 1% an Acquiring Person's proportionate share of the beneficial
ownership of the outstanding shares of any class of equity securities or
securities exercisable for or convertible into equity securities of the Company
or its subsidiaries, then each holder of a Right will thereafter have the right
to receive, upon exercise of the Right, Common Stock or, in certain
circumstances, cash, property or other securities of the Company having a value
equal to two times the Purchase Price of the Right; PROVIDED, HOWEVER, that the
Rights to purchase Common Stock (or cash, property or other securities of the
Company) are not exercisable following the occurrence of any of the events set
forth above until such time as the Rights are no longer redeemable by the
Company as set forth below or until certain other events occur as set forth in
the Rights Agreement. Notwithstanding any of the foregoing, following the
occurrence of any of the events set forth in this paragraph, all Rights that
are, or (under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person will be null and void.
If at any time on or after the Distribution Date (i) the Company is
acquired in a merger or other business combination transaction in which the
Company is not the surviving corporation (or is the surviving corporation but
the Company's Common Stock is changed or exchanged), or (ii) more than 50% of
the Company's assets or earning power is sold or transferred, then each holder
of a Right (except Rights which previously have been voided as set forth in the
preceding paragraph) shall thereafter have the right to receive, upon exercise
of the Right, Common Stock of the acquiring entity having a value equal to two
times the Purchase Price of the Right. The events set forth in this paragraph
and in the preceding paragraph are referred to as the "Triggering Events." If
any acquiring entity does not have Registered Common Stock (as such term is
defined in the Rights Agreement) each Right will entitle its holder to purchase,
for the Purchase Price, at such holder's option, (i) the number of shares of
such entity (or, at such holder's option, of the surviving corporation in such
acquisition, which could be the Company) which, at the time of the transaction,
would have a book value of two times the Purchase Price of the Right or (ii) if
such entity has an affiliate that has Registered Common Stock, the number of
shares of such affiliate which, at the time of the transaction, would have a
market value of two times the Purchase Price of the Right.
The Purchase Price payable, and the number of Units of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) if holders of the Preferred Stock are granted certain rights or
warrants to subscribe for Preferred Stock or convertible securities at less than
the current market price of the Preferred Stock, or (iii) upon the distribution
to holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment
in cash will be made based on the market price of the Preferred Stock on the
last trading date prior to the date of exercise.
<PAGE> 4
At any time after the acquisition by a Person or group of affiliated or
associated Persons of beneficial ownership of 15% or more of the outstanding
Common Stock and prior to the acquisition by such Person or group of 50% of the
outstanding Common Stock, the Board of Directors of the Company may exchange
the Rights (other than the Rights owned by such Person or group that have
become void), in whole or in part, at an exchange ratio of one share of Common
Stock (or of a share of a class of series or the Company's preferred stock
having equivalent rights, preferences and privileges) per Right (subject to
adjustment).
At any time until 10 days following the Distribution Date, the Company may
redeem the Rights in whole, but not in part, at a price of $.01 per Right,
payable in cash or stock. The redemption period may be extended by the Company
at any time prior to the expiration of such period. After the redemption period
has expired, the Company's right of redemption may be reinstated if an
Acquiring Person reduces his beneficial ownership to 10% or less of the
outstanding shares of Common Stock in a transaction or series of transactions
not involving the Company and there are no other persons who are Acquiring
Persons. Immediately upon the action of the Board of Directors ordering
redemption of the Rights, the Rights will terminate and the only right of the
holders of Rights will be to receive the $.01 redemption price. The decision to
redeem or to extend the redemption period shall require the vote of a majority
of the Disinterested Directors, with the concurrence of a majority of the
Continuing Directors voting separately.
The term "Continuing Director" means any member of the Board of Directors
of the Company who was a member of the Board immediately prior to the time that
any person became an Acquiring Person, and any member of the Board subsequent
to the time that any Person shall become an Acquiring Person if such person is
recommended or approved by a majority of the Continuing Directors, but shall
not include an Acquiring Person, or any representative of such Acquiring Person.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the
right to vote or to receive dividends.
Other than those provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors prior to the Distribution Date. On and after the
Distribution Date, the provisions of the Rights Agreement may be amended by a
majority of the Disinterested Directors, with the concurrence of a majority of
the Continuing Directors voting separately, in order to cure any ambiguity, to
make changes in any manner which the Disinterested Directors and Continuing
Directors may deem necessary or desirable and which does not adversely affect
the interests of holders of Rights (excluding the interests of any Acquiring
Person), or to shorten or lengthen any time period under the Rights Agreement;
PROVIDED, HOWEVER, that no amendment to adjust the time period governing
redemption shall be made at any time that the Rights are not redeemable.
The Rights Agreement provides that the Company may not consolidate or
merge with, or sell 50% or more of the Company's assets or earning power to,
any person that has securities or is bound by agreements which would
substantially diminish the benefits of the Rights.
The foregoing description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement.
A copy of the Rights Agreement (and the exhibits thereto) has been filed
by the Company with the Securities and Exchange Commission on Amendment No. 3 to
Schedule 14D-9, dated February 20, 1998.
