<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14A-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
AMERICAN BANKERS INSURANCE GROUP, INC.
- --------------------------------------------------------------------------------
(Name Of Registrant As Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, If Other Than The Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No Fee required
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11:
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $1.00 per share (Common Stock)
$3.125 Series B Cumulative Convertible Preferred Stock -- no par value
("Preferred Stock")
------------------------------------------------------------------------
(2) Aggregate number of securities to which the transaction applies:
Common Stock = 42,853,082 Preferred Stock = 1,983,205
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
Common Stock = $55.00 per Preferred Stock = $109.857
per
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$2,574,788,461.69
------------------------------------------------------------------------
(5) Total fee paid:
$514,960.00
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
PRELIMINARY COPY
[AMERICAN BANKERS INSURANCE GROUP, INC. LETTERHEAD]
R. KIRK LANDON
CHAIRMAN OF THE BOARD
[--], 1999
DEAR FELLOW SHAREHOLDER:
You are cordially invited to attend a special meeting of the shareholders
of American Bankers Insurance Group, Inc. The special meeting of the holders of
preferred stock will be held on [--], 1999 at [--] A.M., Eastern time, at the
Auditorium of the Company's Headquarters, 11222 Quail Roost Drive, Miami,
Florida 33157-6596. The special meeting of the holders of common stock will be
held on [--], 1999 at [--] A.M., Eastern time, at the Auditorium of the
Company's Headquarters, 11222 Quail Roost Drive, Miami, Florida 33157-6596. At
the special meetings you will be asked to approve a merger pursuant to which:
- each share of preferred stock will be converted into the right to receive
$109.857 in cash;
- each outstanding share of common stock will be converted into the right
to receive $55.00 in cash; and
- American Bankers will become a wholly-owned indirect subsidiary of
Fortis, Inc.
The Board of Directors has received a written opinion of Salomon Smith
Barney Inc. to the effect that, based upon and subject to the matters set forth
in the opinion, the consideration to be received by the holders of Series B
preferred stock and common stock pursuant to the merger is fair, from a
financial point of view, to the holders of American Bankers preferred stock and
the holders of American Bankers common stock.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, HAS
DETERMINED THAT THE MERGER IS FAIR TO, ADVISABLE AND IN THE BEST INTERESTS OF,
AMERICAN BANKERS AND ITS SHAREHOLDERS (INCLUDING HOLDERS OF PREFERRED STOCK AND
HOLDERS OF COMMON STOCK) AND RECOMMENDS THAT HOLDERS OF PREFERRED STOCK AND
COMMON STOCK VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
MERGER.
YOUR VOTE IS IMPORTANT. To assure your representation at the special
meeting applicable to you, please complete, sign and date the enclosed proxy
card and return it in the enclosed white prepaid envelope marked "Proxy". This
will allow your shares to be voted whether or not you attend the meeting.
Detailed information concerning the proposed merger is set forth in the
accompanying proxy statement. I urge you to read the enclosed material carefully
and request that you promptly complete and return the enclosed proxy in the
enclosed return envelope, which requires no postage if mailed in the United
States. If you attend the special meeting, you may vote in person even if you
have previously returned your proxy. Your vote is important regardless of the
number of shares you own.
Sincerely yours,
[/s/ R. Kirk Landon]
R. Kirk Landon
Chairman of the Board
[LETTERHEAD MEMBER COMPANIES]
<PAGE> 3
PRELIMINARY COPY
[AMERICAN BANKERS INSURANCE GROUP, INC. LETTERHEAD]
------------------------
NOTICE OF SPECIAL MEETING OF PREFERRED SHAREHOLDERS
------------------------
American Bankers Insurance Group, Inc. will hold a special meeting of the
holders of preferred stock on [--], 1999, at [--] A.M., Eastern time, at the
Auditorium of the Company's Headquarters, 11222 Quail Roost Drive, Miami,
Florida 33157-6596 for the following purposes:
1. To approve and adopt an Agreement and Plan of Merger, dated as of
March 5, 1999, among American Bankers Insurance Group, Inc., Fortis, Inc.,
and Greenland Acquisition Corp., and the merger contemplated thereby; and
2. To transact any other business that is properly brought before the
meeting or any adjournment or postponement thereof.
The accompanying proxy statement describes the proposed merger in detail.
Only shareholders of record at the close of business on [--], 1999 are
entitled to notice of and to vote at the meeting. Under Florida law, holders of
preferred stock have no right to an appraisal of the value of their shares in
connection with the merger.
By Order of the Board of Directors
[/s/ Arthur W. Heggen]
Arthur W. Heggen
Secretary
[--], 1999
Miami, Florida
THE FORM OF PROXY IS ENCLOSED. TO ASSURE THAT YOUR SHARES WILL BE VOTED AT
THE MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
SENDING A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE
MEETING.
PLEASE DO NOT SEND YOUR PREFERRED STOCK CERTIFICATES AT THIS TIME. IF THE
MERGER IS CONSUMMATED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF
YOUR CERTIFICATES.
[LETTERHEAD MEMBER COMPANIES]
<PAGE> 4
PRELIMINARY COPY
[AMERICAN BANKERS INSURANCE GROUP, INC. LETTERHEAD]
------------------------
NOTICE OF SPECIAL MEETING OF COMMON SHAREHOLDERS
------------------------
American Bankers Insurance Group, Inc. will hold a special meeting of the
holders of common stock on [--], 1999, at [--] A.M., Eastern time, at the
Auditorium of the Company's Headquarters, 11222 Quail Roost Drive, Miami,
Florida 33157-6596 for the following purposes:
1. To approve and adopt an Agreement and Plan of Merger, dated as of
March 5, 1999, among American Bankers Insurance Group, Inc., Fortis, Inc.,
and Greenland Acquisition Corp., and the merger contemplated thereby; and
2. To transact any other business that is properly brought before the
meeting or any adjournment or postponement thereof.
The accompanying proxy statement describes the proposed merger in detail.
Only shareholders of record at the close of business on [--], 1999 are
entitled to notice of and to vote at the meeting. Under Florida law, holders of
common stock have no right to an appraisal of the value of their shares in
connection with the merger.
By Order of the Board of Directors
[/s/ Arthur W. Heggen]
Arthur W. Heggen
Secretary
[--], 1999
Miami, Florida
THE FORM OF PROXY IS ENCLOSED. TO ASSURE THAT YOUR SHARES WILL BE VOTED AT
THE MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
SENDING A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE
MEETING.
PLEASE DO NOT SEND YOUR COMMON STOCK CERTIFICATES AT THIS TIME. IF THE
MERGER IS CONSUMMATED, YOU WILL BE SENT INSTRUCTIONS REGARDING THE SURRENDER OF
YOUR CERTIFICATES.
[LETTERHEAD MEMBER COMPANIES]
<PAGE> 5
PRELIMINARY COPY
DATED [--], 1999
AMERICAN BANKERS INSURANCE GROUP, INC.
PROXY STATEMENT
------------------------
This proxy statement is being furnished to the holders of preferred stock
and the holders of common stock of American Bankers Insurance Group, Inc.
This proxy statement is being mailed in connection with the solicitation of
proxies to approve a plan of merger involving the Company and Fortis, Inc.
If the merger is completed, Fortis will pay you $109.857 for each share of
the Company's preferred stock and $55.00 for each share of the Company's common
stock you own, and the Company will become a subsidiary of Fortis.
Because our Board of Directors has determined that the terms of the merger
agreement and the merger are fair to, advisable and in the best interests of our
shareholders, the board unanimously approved and adopted the merger agreement.
The Board of Directors considered the opinion of Salomon Smith Barney Inc. that
the cash to be paid in the merger is fair to both our preferred and common
shareholders from a financial point of view.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT.
We have scheduled a special meeting for our preferred shareholders and a
special meeting for our common shareholders to vote on the merger. YOUR VOTE IS
VERY IMPORTANT.
The date, time and place of the special meetings is:
Preferred Shareholders: on [--], 1999, at [--] A.M., Eastern time, at the
Auditorium of the Company's Headquarters, 11222
Quail Roost Drive, Miami, Florida 33157-6596.
Common Shareholders: on [--], 1999, at [--] A.M., Eastern time, at the
Auditorium of the Company's Headquarters, 11222 Quail
Roost Drive, Miami, Florida 33157-6596.
Whether or not you plan to attend the meeting, please take the time to vote
by completing and mailing the enclosed proxy card to us. If you sign, date and
mail your proxy without indicating how you want to vote, your proxy will be
counted as a vote in favor of the merger. If you abstain or do not vote, it will
have the effect of a vote against the merger.
This proxy statement provides you with detailed information about the
proposed merger. In addition, you may obtain information about the Company from
documents that we have filed with the Securities and Exchange Commission. We
encourage you to read the entire document carefully.
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION HAS NOT PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
------------------------
This proxy statement, the notice of special meeting of preferred
shareholders, the notice of special meeting of common shareholders and the
accompanying forms of proxy are first being mailed to shareholders of American
Bankers on or about [--], 1999.
THE DATE OF THIS PROXY STATEMENT IS [--], 1999.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
WHO CAN HELP ANSWER YOUR QUESTIONS.......................... 4
AVAILABLE INFORMATION....................................... 5
INCORPORATION OF DOCUMENTS BY REFERENCE..................... 6
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS... 6
SUMMARY..................................................... 8
MARKET PRICE AND DIVIDEND INFORMATION....................... 13
Recent Closing Prices..................................... 13
Number of Shareholders.................................... 13
SELECTED CONSOLIDATED FINANCIAL DATA........................ 14
THE SPECIAL MEETINGS........................................ 15
General; Dates, Times and Places.......................... 15
Purpose of the Special Meetings........................... 15
Revocation of Proxies..................................... 15
Record Dates; Votes Required.............................. 15
Quorum.................................................... 16
Expenses of Solicitation.................................. 16
Miscellaneous............................................. 17
THE MERGER.................................................. 18
Background of the Merger.................................. 18
Reasons for the Merger; Recommendation of the American
Bankers Board.......................................... 20
Opinion of American Bankers' Financial Advisor............ 21
Certain Federal Income Tax Consequences of the Merger..... 26
Regulatory Filings and Approvals.......................... 27
Management, Operations and Ownership Structure Following
the Merger............................................. 28
Interests of Certain Persons in the Merger................ 28
Absence of Appraisal Rights............................... 30
Public Trading Markets.................................... 30
THE MERGER AGREEMENT........................................ 31
General; Merger Consideration............................. 31
Closing; Effective Time................................... 31
Cancellation of Shares.................................... 31
Exchange Of Certificates.................................. 32
Transfers................................................. 32
Lost, Stolen or Destroyed Certificates.................... 32
Adjustments to Prevent Dilution........................... 32
Representations and Warranties............................ 32
Conduct of American Bankers' Business Prior to the
Merger................................................. 33
Agreement Not to Solicit Other Offers..................... 35
Employee Benefits......................................... 35
Treatment of Stock Options and Restricted Shares.......... 36
Certain Other Covenants and Agreements.................... 37
Conditions of the Proposed Merger......................... 39
Termination............................................... 40
Expenses and Termination Fees............................. 41
Amendment and Waiver...................................... 42
Tender Offer.............................................. 42
</TABLE>
i
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Modification for Preferred Stock.......................... 42
RELATED AGREEMENTS AND TRANSACTIONS......................... 43
Stock Option Agreement.................................... 43
Voting Agreement.......................................... 45
Amendment to American Bankers' Rights Agreement........... 46
Gaston Consulting Agreement............................... 46
Amendments to Severance Agreements........................ 46
INFORMATION REGARDING FORTIS................................ 47
INFORMATION REGARDING AMERICAN BANKERS...................... 47
EXPERTS..................................................... 48
</TABLE>
<TABLE>
<S> <C>
APPENDIX I -- MERGER AGREEMENT
APPENDIX II -- STOCK OPTION AGREEMENT
APPENDIX III -- VOTING AGREEMENT
APPENDIX IV -- SALOMON SMITH BARNEY OPINION
</TABLE>
ii
<PAGE> 8
QUESTIONS AND ANSWERS
ABOUT THE MERGER
This summary highlights certain information from this proxy statement, is
qualified by reference to the proxy statement and may not contain all of the
information that is important to you. To understand the merger more fully and
for a more complete description of the legal terms of the merger, you should
read carefully this entire document, the documents referred to in the
"Incorporation of Certain Documents by Reference" section on page 6 and the
appendices included with the proxy statement. The summary does not contain a
complete statement of material information relating to the merger agreement, the
merger, or other matters discussed in this document.
Q: WHY IS AMERICAN BANKERS PROPOSING TO MERGE WITH FORTIS?
A: The Board of Directors determined to recommend approval of the merger
agreement and the merger based on a wide variety of factors, including:
- American Bankers' historical growth and the capital requirements which
would be needed to sustain a similar level of growth in the future;
- the fact that the merger could be completed more quickly than other
alternative transactions;
- the terms and provisions of the merger agreement and related agreements;
- the opinion of American Bankers' financial advisor, Salomon Smith Barney,
based upon and subject to certain matters stated in the opinion, as to the
fairness, from a financial point of view, of the consideration to be
received by holders of preferred stock and common stock pursuant to the
merger;
- the historical market prices and recent trading activity of the common
stock; and
- the Board of Directors' belief that no other acquiror existed who was
willing and able to make a superior offer to Fortis' offer.
The Board of Directors also considered certain countervailing factors such
as the fact that the terms of the merger would not permit holders of common
stock or preferred stock to continue to hold a common equity interest in
Fortis following the merger, thus preventing holders of common stock and
preferred stock from participating in the synergies expected to result from
the combination of the two companies.
Q: WHAT DO I NEED TO DO NOW?
A: After you have carefully read this proxy statement, just indicate on your
proxy card how you want to vote, and sign and mail it in the enclosed white
prepaid return envelope marked "Proxy" as soon as possible, so that your
shares of preferred stock and/or common stock may be represented at the
special meeting for the holders of preferred stock or the special meeting
for the holders of common stock, as the case may be. The special meeting for
the holders of preferred stock will take place on [--], 1999 at [--] a.m.,
Eastern time, at the Auditorium of the Company's Headquarters, 11222 Quail
Roost Drive, Miami, Florida 33157-6596. The special meeting for the holders
of common stock will take place on [--], 1999 at [--] a.m., Eastern time, at
the Auditorium of the Company's Headquarters, 11222 Quail Roost Drive,
Miami, Florida 33157-6596. The Board of Directors unanimously recommends
voting FOR the proposed merger.
If you are a participant in the American Bankers Insurance Group, Inc. 401K
Plan or Leveraged Employee Stock Ownership Plan, please read carefully the
accompanying letter from American Bankers. This letter contains special
instructions for you on how to vote shares held pursuant to the American
Bankers Insurance Group, Inc. 401K Plan or Leveraged Employee Stock
Ownership Plan.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE MERGER?
A: In order to complete the merger, the merger agreement must be approved by
the holders of at least a majority of the shares of common stock, voting as
a separate class.
The approval of the holders of preferred stock is not required to complete
the merger. In the event that the holders of at least 2/3 of the shares of
preferred stock voting as a class do not approve the merger agreement and
the merger, or Fortis reasonably determines that such a vote is not likely
to be obtained, the proposed transaction will be modified so that
<PAGE> 9
the shares of preferred stock will remain outstanding following the merger. The
transaction as modified would not require the approval of the holders of
preferred stock or any additional approval by the holders of common stock.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares. Without instructions, your
shares will not be voted, which for purposes of voting on the proposed
merger will have the same effect as voting against the proposed merger.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting for the holders of preferred shares or the special meeting
for the holders of common shares, as applicable. You can do this in one of
three ways. First, you can send a written notice stating that you would like
to revoke your proxy.
Second, you can complete and submit a new proxy card. If you choose either
of these two methods, you must submit your notice of revocation or your new
proxy card to American Bankers at the address on page [4].
Third, you can attend the special meeting for the holders of preferred
shares or the special meeting for the holders of common shares, as
applicable, and vote in person. Simply attending the meeting, however, will
not revoke your proxy.
If you have instructed a broker to vote your shares, you must follow
directions received from your broker to change your vote.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES WHEN I RETURN MY PROXY FORM?
A: No. Holders of common stock and preferred stock should not send in their
stock certificates now. Following the merger, a separate letter of
transmittal will be mailed to the holders of common stock, and, if the
merger is approved by the holders of preferred stock, to the holders of
preferred stock, which will enable holders to receive the merger
consideration due to them.
Q: WHAT WILL HOLDERS OF PREFERRED STOCK RECEIVE IN THE MERGER?
A: Holders of preferred stock will receive $109.857 in cash, without interest,
for each share of preferred stock. However, if the merger is not approved by
the holders of at least 2/3 of the shares of preferred stock voting
separately as a class or Fortis reasonably determines that such a vote is
not likely to be obtained, and all conditions to the consummation of the
merger are otherwise satisfied, the merger will be completed and the
preferred stock will continue to remain outstanding after the merger,
pursuant to the same terms and conditions as are in effect on March 5, 1999,
except that each share of preferred stock will be convertible into $109.857
in cash.
Q: WHAT WILL HOLDERS OF COMMON STOCK RECEIVE IN THE MERGER?
A: Holders of common stock will receive $55.00, without interest, in cash in
exchange for each share of common stock.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working towards completing the merger as quickly as possible. In
addition to the approval of our shareholders described above, we must also
obtain certain insurance and other regulatory approvals. We presently expect
to complete the merger during [--], 1999.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER?
A: The receipt of cash by a shareholder of American Bankers' pursuant to the
merger will be a taxable transaction for federal income tax purposes and may
also be taxable under applicable state, local and foreign income and other
tax laws. A shareholder will recognize gain or loss in an amount equal to
the difference between the adjusted tax basis of the common stock or
preferred stock and the amount of cash received in exchange for that stock
in the merger. The gain or loss will be capital gain or loss if the common
stock or preferred stock is a capi-
2
<PAGE> 10
tal asset in the hands of the shareholder and will be long-term capital gain or
loss if the holding period exceeds one year. To review the tax consequences to
shareholders in greater detail, see page 26. If the merger is modified because
the holders of preferred stock do not approve the merger, there will be no
immediate federal income tax consequences to holders of preferred stock,
but a later conversion of the preferred stock would be a taxable
transaction. To review in greater detail the federal income tax
consequences to shareholders if the merger is so modified, see page 42.
Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETINGS?
A: We do not expect to ask you to vote on any matter other than the merger at
the special meeting for the holders of the preferred shares or the special
meeting for the holders of the common shares.
Q: I JUST RECEIVED ANOTHER PROXY STATEMENT FROM AMERICAN BANKERS. WHY IS
AMERICAN BANKERS SENDING OUT TWO PROXY STATEMENTS?
A: In addition to the special shareholder meetings to approve the merger,
American Bankers is also holding its regular annual shareholder meeting in
May of 1999. By the time you receive this proxy statement, you will also
have received a proxy statement to use in connection with the election of
directors and ratification of the appointment of the independent accountants
of American Bankers at the regular annual meeting.
It is very important that you take the time to complete the proxy card
enclosed with this proxy statement or attend the appropriate special
shareholders meeting or you will not be able to vote to approve the merger.
3
<PAGE> 11
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have more questions about the merger, you should contact:
American Bankers Insurance Group, Inc.
11222 Quail Roost Drive
Miami, Florida 33157
Attention: P. Bruce Camacho
Phone Number: (305) 252-7060
If you would like additional copies of the proxy statement, you should contact:
[Proxy Solicitor]
4
<PAGE> 12
NO PERSON HAS BEEN AUTHORIZED BY AMERICAN BANKERS TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY AMERICAN BANKERS. THIS PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION TO SELL OR A SOLICITATION OF AN OFFER TO BUY
ANY SECURITIES. THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT, UNDER ANY
CIRCUMSTANCES, IMPLY OR CREATE ANY IMPLICATION THAT THERE HAVE NOT BEEN ANY
CHANGES IN THE AFFAIRS OF AMERICAN BANKERS OR IN THE INFORMATION SET FORTH OR
INCORPORATED BY REFERENCE HEREIN SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company files annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission. You may read
and copy any reports, statements or other information we file at the Securities
and Exchange Commission's public reference rooms in Washington, D.C., New York,
New York and Chicago, Illinois. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the public reference
rooms. Our filings are also available to the public from commercial document
retrieval services and at the web site maintained by the Securities and Exchange
Commission at "http://www.sec.gov." In addition, material filed by American
Bankers can also be inspected at the offices of the New York Stock Exchange, at
20 Broad Street, New York, New York 10005.
All information contained in this proxy statement concerning Fortis and its
subsidiaries, including Greenland Acquisition Corp., has been supplied by Fortis
and has not been independently verified by American Bankers. Except as otherwise
indicated, all other information contained in this proxy statement (or, as
permitted by applicable rules and regulations of the Securities and Exchange
Commission, incorporated by reference into this proxy statement) has been
supplied or prepared by American Bankers.
5
<PAGE> 13
INCORPORATION OF DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" information into this proxy statement, which means that we can
disclose important information to you by referring you to another document filed
separately with the Securities and Exchange Commission. The information
incorporated by reference is deemed to be part of this proxy statement, except
for any information superseded by information in this proxy statement. This
proxy statement incorporates by reference the documents set forth below that we
have previously filed with the Securities and Exchange Commission under file
number 0-9633. These documents contain important information about us and our
finances.
(1) American Bankers' Annual Report on Form 10-K for the fiscal
year ended December 31, 1998;
(2) American Bankers' Proxy Statement dated [--], 1999;
(3) American Bankers' Current Report on Form 8-K filed March 10,
1999;
(4) the description of American Bankers' $3.125 Series B Cumulative
Convertible Preferred Stock as contained in Item 1 of American Bankers'
Registration Statement on Form 8-A filed on June 25, 1997;
(5) the description of American Bankers' Series C Participating
Preferred Stock as contained in Item 1 of American Bankers' Registration
Statement on Form 8-A filed on February 27, 1998; and
(6) the description of the common stock as contained in Item 1 of
American Bankers' Registration Statement on Form 8-A filed on June 25,
1997.
We are also incorporating by reference additional documents that we file
with the Securities and Exchange Commission between the date of this proxy
statement and the date of the special meeting for the holders of shares of
preferred stock and the special meeting for the holders of shares of common
stock. Any statement which is made in this proxy statement or incorporated by
reference into this proxy statement will be modified or superseded to the extent
any document subsequently filed with the Securities and Exchange Commission by
us does so.
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the
Securities and Exchange Commission. Documents incorporated by reference are
available from us without charge, excluding all exhibits unless we have
specifically incorporated by reference an exhibit in this proxy statement.
Shareholders may obtain documents incorporated by reference in this proxy
statement by requesting them in writing or by telephone at the address listed on
page 4. If you would like to request documents from us, please do so by [--],
1999 to make sure you receive them before the special meetings.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The following are or may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995:
(i) certain statements concerning possible or assumed future results
of operations of American Bankers contained in "The Merger -- Background of
the Merger," "The Merger -- American Bankers' Reasons for the Merger," and
"The Merger -- Opinion of American Bankers' Financial Advisor," including
any forecasts, projections and descriptions of anticipated cost savings or
other synergies referred to in this proxy statement, and certain statements
incorporated by reference from documents filed with the Commission by
American Bankers, including any statements contained in this proxy
statement, or in the documents incorporated by reference, regarding the
development of possible or assumed future results of operations of American
Bankers' businesses, the markets for American Bankers' services and
products, anticipated capital expenditures, regulatory developments,
competition or the effect of the merger;
6
<PAGE> 14
(ii) any statements preceded by, followed by or that include the words
"believes," "expects," "anticipates," "intends" or similar expressions
contained in the sections of this proxy statement cited above or
incorporated herein; and
(iii) other statements contained or incorporated by reference in this
proxy statement regarding matters that are not historical facts.
Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. American Bankers' shareholders are cautioned
not to place undue reliance on such statements, which speak only as of the
date of this proxy statement or, in the case of American Bankers documents
incorporated by reference, the date of such document.
All subsequent written and oral forward-looking statements
attributable to American Bankers or persons acting on its or their behalf
are expressly qualified in their entirety by the cautionary statements
contained or referred to in this section. American Bankers does not
undertake any obligation to release publicly any revisions to such
forward-looking statements to reflect events or circumstances after the
date of this proxy statement or to reflect the occurrence of unanticipated
events.
7
<PAGE> 15
SUMMARY
This summary highlights certain information from this document, is
qualified by reference to the full proxy statement and may not contain all of
the information that is important to you. To understand the merger more fully
and for a more complete description of the legal terms of the merger, you should
read carefully this entire document, the documents referred to in the
"Incorporation of Certain Documents by Reference" section on page 6 and the
appendices included with this proxy statement. The summary does not contain a
complete statement of material information relating to the merger agreement, the
merger, or other matters discussed in this document.
THE COMPANIES
Fortis, Inc.
One Chase Manhattan Plaza
New York, New York 10005
(212) 859-7000
Fortis, Inc. is part of an international financial services group operating
in the fields of insurance, banking and investment management. In its home
market, the Benelux, the Fortis group is one of the largest financial service
providers, offering a broad range of financial services through various
distribution channels. In other countries of Europe, the United States and Asia,
the Fortis group focuses on specialized financial products. At year-end 1997,
the Fortis group had assets in excess of EUR 298 billion (US$328 billion) and
total revenue for the year amounted to EUR 33 billion (US$37 billion).
American Bankers Insurance Group, Inc.
11222 Quail Roost Drive
Miami, Florida 33157
305-253-2244
American Bankers is a specialty insurer providing primarily credit-related
insurance products in the U.S. and Canada as well as in Latin America, the
Caribbean and the United Kingdom. The majority of American Bankers' gross
collected premiums are derived from credit-related insurance products sold
through financial institutions and other entities which provide consumer
financing as a regular part of their businesses.
REASONS FOR THE MERGER
The Board of Directors determined to recommend approval and adoption of the
merger agreement and the merger based on a wide variety of factors, including:
- American Bankers' historical growth and the capital requirements which
would be needed to sustain a similar level of growth in the future;
- the fact that the merger could be completed more quickly than other
alternative transactions;
- the terms and provisions of the merger agreement and related agreements;
- the opinion of American Bankers' financial advisor, Salomon Smith Barney,
based upon and subject to certain matters stated in the opinion, as to
the fairness, from a financial point of view, of the consideration to be
received by holders of preferred stock and common stock pursuant to the
merger;
- the historical market prices and recent trading activity of the common
stock; and
- the Board of Directors' belief that no other acquiror existed who was
willing and able to make a superior offer to Fortis' offer.
The Board of Directors also considered certain countervailing factors such
as the fact that the terms of the merger would not permit holders of common
stock and preferred stock to continue to hold a common equity interest in Fortis
following the merger, thus preventing holders of common stock and preferred
stock from participating in the synergies expected to result from the
combination of the two companies. See "The Merger -- Reasons for the Merger;
Recommendation of the American Bankers Board."
THE SPECIAL MEETINGS
When and where the meetings will be held. The special meeting for the
holders of preferred stock will be held at [--] a.m., Eastern time, on [--],
1999, at the Auditorium of the Company's Headquarters, 11222 Quail Roost Drive,
Miami, Florida 33157-6596.
The special meeting for the holders of common stock will be held at [--]
a.m., Eastern time, on [--], 1999, at the Auditorium of the Company's
8
<PAGE> 16
Headquarters, 11222 Quail Roost Drive, Miami, Florida 33157-6596.
Purposes of the Special Meetings. At the special meeting for the holders
of preferred stock and the special meeting for the holders of common stock,
holders of preferred stock and common stock will each be asked to approve the
merger agreement and the consummation of the merger.
Record Date; Voting Power. Holders of preferred stock and common stock who
owned shares as of the close of business on [--], 1999, the record date, are
entitled to vote at the special meetings.
As of the record date, there were outstanding [--] shares of preferred
stock allowed to vote at the special meeting for the holders of preferred stock
and approximately [--] shares of common stock allowed to vote at the special
meeting for the holders of common stock. Holders of preferred stock and common
stock each will have one vote at the special meeting for the holders of
preferred stock or at the special meeting for the holders of common stock,
respectively, for each share of preferred stock or common stock held of record
on the record date.
Common Shareholder Approval. The affirmative vote of the holders of a
majority of the outstanding shares of common stock as of the record date voting
as a separate class is required to approve and adopt the merger agreement and
the consummation of the merger. As of the record date, American Bankers'
directors and executive officers and their affiliates as a group beneficially
owned approximately [--] shares, or approximately [--]%, of the shares of common
stock that were issued and outstanding as of such date. Each of Messrs. R. Kirk
Landon and Gerald N. Gaston who, as of the record date, in the aggregate
beneficially owned approximately 3,148,006 shares, or approximately 7.5%, of the
shares of common stock, have contractually agreed with Fortis to vote in favor
of the merger agreement and the consummation of the merger and have agreed, if
requested by Fortis, to execute irrevocable proxies in connection therewith. See
"Related Agreements and Transactions -- Voting Agreement."
As of the record date, there were approximately [--] holders of record of
common stock, as shown on the records of American Bankers' transfer agent for
shares of common stock. Based on the approximately [--] shares of common stock
outstanding and entitled to vote on the record date, a total of approximately
[--] shares of common stock are required to be voted in favor of the merger
agreement and the merger in order for the merger to be approved and consummated.
Accordingly, American Bankers' directors, executive officers and their
affiliates hold shares of common stock representing approximately [--]% of the
total number of shares of common stock required for approval of the merger.
Holders of approximately [--]% of the number of shares of common stock required
for approval of the merger have contractually agreed to vote in favor of the
merger.
Preferred Shareholder Approval. The approval of the holders of preferred
stock is not required to complete the merger. However, the merger agreement
provides that if the holders of at least 2/3 of the shares of preferred stock
voting as a class do not approve the merger agreement and the merger, or Fortis
reasonably determines that such a vote is not likely to be obtained, the
proposed transaction will be modified to leave the preferred stock outstanding
after the merger, as described in "The Merger Agreement -- Modification for
Preferred Stock." The transaction as modified would not require the approval of
the holders of preferred stock or any additional approval by the holders of
common stock.
As of the record date, there were approximately [--] holders of record of
preferred stock, as shown on the records of American Bankers' transfer agent for
shares of preferred stock. As of the record date, none of American Bankers'
directors or executive officers or their affiliates beneficially owned any
shares of preferred stock. Based on the [--] shares of preferred stock
outstanding and entitled to vote on the record date, a total of [--] shares of
preferred stock are required to be voted in favor of the merger agreement to
approve it.
Quorum; Abstentions and Broker Non-Votes. The required quorum for both the
special meeting for the holders of preferred stock and special meeting for the
holders of common stock is a majority of the shares of preferred stock and
common stock, respectively, issued and outstanding as of the record date. Both
abstentions and broker non-votes will be included in determining the number of
shares present and voting at the special meeting for the holders of preferred
stock and special meeting for the holders of common stock for the purpose of
determining the presence of a quorum. Abstentions
9
<PAGE> 17
and broker non-votes will have the same effect as votes against the merger
agreement and the consummation of the merger. THE ACTIONS PROPOSED IN THIS PROXY
STATEMENT ARE NOT MATTERS THAT CAN BE VOTED ON BY BROKERS HOLDING SHARES FOR
BENEFICIAL OWNERS WITHOUT THE OWNERS' SPECIFIC INSTRUCTIONS. ACCORDINGLY, ALL
BENEFICIAL OWNERS OF PREFERRED STOCK AND COMMON STOCK ARE URGED TO RETURN THE
ENCLOSED PROXY CARD MARKED TO INDICATE THEIR VOTES.
RECOMMENDATION TO SHAREHOLDERS
The Board of Directors believes that the merger is fair to, advisable, and
in the best interests of, American Bankers and its shareholders (including
holders of both preferred stock and common stock), and unanimously recommends
that holders of preferred stock and common stock vote FOR approval and adoption
of the merger agreement and the merger.
Other Interests of Officers and Directors in the Merger. In considering
the recommendation of the American Bankers Board with regard to the merger,
shareholders should be aware that a number of American Bankers officers and
directors have option agreements, employment agreements, severance agreements or
benefit plans that provide them with interests in the merger that are different
from, and in addition to, the interests of shareholders of American Bankers
generally. See "The Merger -- Interests of Certain Persons in the Merger."
Opinion of Financial Advisor. In deciding to approve the merger, the Board
of Directors considered an opinion from its financial advisor, Salomon Smith
Barney, based upon and subject to certain matters stated in the opinion, as to
the fairness, from a financial point of view, of the consideration to be
received by holders of preferred stock and common stock pursuant to the merger,
as of the date of such opinion. This opinion is attached as Appendix IV to this
proxy statement. Shareholders are encouraged to read this opinion in its
entirety.
THE MERGER
THE MERGER AGREEMENT IS ATTACHED AS APPENDIX I TO THIS DOCUMENT. THE BOARD
OF DIRECTORS ENCOURAGES YOU TO READ THE MERGER AGREEMENT IN ITS ENTIRETY. IT IS
THE LEGAL DOCUMENT GOVERNING THE MERGER.
What American Bankers' shareholders will receive in the merger. Holders of
preferred stock will receive $109.857 in cash for each share of preferred stock.
However, if the merger is not approved by the holders of at least 2/3 of the
shares of preferred stock voting as a class or Fortis reasonably determines that
such a vote is not likely to be obtained, and all conditions to the consummation
of the merger are otherwise satisfied, the merger will be consummated and the
preferred stock will continue to remain outstanding after the merger, pursuant
to the terms and conditions as are in effect on March 5, 1999, except that each
share of preferred stock will be convertible into $109.857 in cash.
Holders of common stock will receive $55.00 in cash in exchange for each
share of common stock.
Conditions to the merger. The completion of the merger depends upon a
number of conditions being met, including the following:
- the approval of the merger by the holders of a majority of the
outstanding shares of common stock;
- that no law has been enacted or injunction entered which effectively
prohibits the merger;
- that all necessary approvals of governmental authorities and all material
required consents of third parties shall have been obtained; and
- that Fortis' and American Bankers' respective representations and
warranties are true and correct in all material respects and the parties
have performed in all material respects their respective obligations
under the merger agreement.
In addition, the obligations of Fortis under the merger agreement are
subject to the effectiveness of a consulting agreement between American Bankers
and Gerald N. Gaston, Chief Executive Officer and President of American Bankers.
Certain of the conditions to the merger may be waived by the party entitled
to assert the condition.
Termination of the Merger Agreement. Fortis and American Bankers can agree
to terminate the merger agreement without completing the merger, and either of
the companies can terminate the merger agreement if any of the following occurs:
- the merger is not completed by September 30, 1999 (however, if all
conditions to the completion of the merger other than the condition that
all necessary approvals of gov-
10
<PAGE> 18
ernmental authorities be obtained are satisfied, that date may be extended for
up to three (3) additional one-month periods to allow such consents to be
obtained);
- a court or other governmental authority permanently prohibits the merger;
- the required approval of the holders of common stock is not received at
the special meeting for the holders of the common stock; or
- the other company materially breaches or fails to comply with any of its
representations or warranties or obligations under the merger agreement.
In addition, Fortis can terminate the merger agreement if (A) American
Bankers enters into a binding agreement for, or recommends to its shareholders,
a business combination with a third party or (B) the Board of Directors
withdraws or adversely modifies its approval or recommendation of the merger
agreement or fails to reconfirm its recommendation of the merger agreement.
Termination Fee. The merger agreement requires American Bankers to pay to
Fortis a termination fee of $85 million if the merger agreement is terminated
under certain circumstances.
Regulatory Approvals. The Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, prohibits the companies from completing the merger until after
the companies have furnished certain information and materials to the Antitrust
Division of the Department of Justice and the Federal Trade Commission and a
required waiting period has ended. On [--], 1999, the companies furnished that
information and expect that the waiting period will expire on [--], 1999 unless
early termination is granted prior thereto. However, the Department of Justice
and the Federal Trade Commission will continue to have the authority to
challenge the merger on antitrust grounds before or after the merger is
completed.
The merger is also subject to the receipt of certain approvals from various
state and foreign insurance regulatory authorities. In [--], 1999, Fortis made
all applicable filings. As of the date of this proxy statement, approvals are
pending in certain jurisdictions.
Federal Income Tax Consequences. The receipt of cash by a shareholder of
American Bankers pursuant to the merger will be a taxable transaction for
federal income tax purposes and may also be taxable under applicable state,
local and foreign income and other tax laws. A shareholder will recognize gain
or loss in an amount equal to the difference between the adjusted tax basis of
the common stock or preferred stock and the amount of cash received in exchange
for that stock in the merger. The gain or loss will be capital gain or loss if
the common stock or preferred stock is a capital asset in the hands of the
shareholder and will be long-term capital gain or loss if the holding period
exceeds one year. To review the tax consequences to shareholders in greater
detail, see page 26. If, however, the merger is modified because the holders of
preferred stock do not approve the merger, there will be no immediate federal
income tax consequences to holders of preferred stock, but a later conversion of
the preferred stock would be a taxable transaction. To review in greater detail
the federal income tax consequences to shareholders if the merger is so
modified, see page 42.
Tender Offer. Under the terms of the merger agreement, Fortis is entitled,
at its sole option, to cause Greenland Acquisition Corp. to commence a tender
offer to acquire up to 100%, but not less than a majority, of the outstanding
common stock, and to acquire any amount up to 100% of the preferred stock.
Appraisal Rights. Under Florida law, holders of preferred stock and common
stock have no right to an appraisal of the value of their shares in connection
with the merger.
STOCK OPTION AGREEMENT
Fortis and American Bankers have entered into a stock option agreement
under which American Bankers has granted Fortis an option to purchase a number
of newly issued shares of common stock equal to approximately 19.9% of the
outstanding shares of common stock if certain events occur. The combined value
of the termination fee and the stock option is limited to $100 million. The
stock option agreement may make it more difficult and expensive for American
Bankers to consummate a business combination with a party other than Fortis.
VOTING AGREEMENT
Certain shareholders of American Bankers holding approximately 7.5 percent
of the outstanding American Bankers common stock have entered
11
<PAGE> 19
into a voting agreement with Fortis, pursuant to which such stockholders agreed
to vote their shares in favor of adoption of the merger agreement and approval
of the merger.
FORWARD LOOKING STATEMENTS MAY PROVE INACCURATE
THE COMPANIES HAVE MADE FORWARD LOOKING STATEMENTS IN THIS DOCUMENT AND IN
DOCUMENTS THAT ARE INCORPORATED BY REFERENCE THAT ARE SUBJECT TO RISKS AND
UNCERTAINTIES. FORWARD LOOKING STATEMENTS INCLUDE INFORMATION CONCERNING
POSSIBLE OR ASSUMED FUTURE RESULTS OF OPERATIONS OF AMERICAN BANKERS. WHEN WORDS
SUCH AS "BELIEVES," "EXPECTS," "ANTICIPATES" OR SIMILAR EXPRESSIONS ARE USED,
THEY ARE INTENDED TO IDENTIFY FORWARD LOOKING STATEMENTS. SHAREHOLDERS SHOULD
NOTE THAT MANY FACTORS, SOME OF WHICH ARE DISCUSSED ELSEWHERE IN THIS DOCUMENT
AND IN THE DOCUMENTS WHICH ARE INCORPORATED IN THIS PROXY STATEMENT BY
REFERENCE, COULD AFFECT THE FUTURE FINANCIAL AND BUSINESS RESULTS OF AMERICAN
BANKERS AND COULD CAUSE THOSE RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED
IN THE FORWARD LOOKING STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE INTO
THIS DOCUMENT.
12
<PAGE> 20
MARKET PRICE AND DIVIDEND INFORMATION
The common stock and preferred stock are listed on the New York Stock
Exchange, under the symbols "ABI" and "ABI 3 1/8 Pfd", respectively. The table
below sets forth, for the calendar quarters indicated, the high and low closing
sales prices per share of common stock and preferred stock reported on the New
York Stock Exchange composite tape (and, for periods prior to July 9, 1997 with
respect to common stock and preferred stock, the Nasdaq National Market) and the
dividends declared for the common stock and preferred stock. All prices are as
reported by the National Quotation Bureau, Incorporated.
<TABLE>
<CAPTION>
AMERICAN BANKERS AMERICAN BANKERS
COMMON STOCK(1) PREFERRED STOCK(2)
-------------------------- --------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1996:
First Quarter......................... 19 13/16 16 3/4 .095
Second Quarter........................ 21 15/16 16 7/16 .10
Third Quarter......................... 25 1/8 19 29/32 .10 59 50 .807
Fourth Quarter........................ 25 15/16 23 3/32 .10 60 1/4 56 1/2 .781
1997:
First Quarter......................... 29 5/8 24 3/8 .10 68 1/2 59 3/8 .781
Second Quarter........................ 34 1/32 25 3/16 .105 76 3/4 61 5/8 .781
Third Quarter......................... 38 5/16 32 3/16 .11 82 1/2 72 1/2 .781
Fourth Quarter........................ 45 15/16 36 11/16 .11 93 3/8 78 .781
1998:
First Quarter......................... 65 3/4 45 5/8 .11 132 1/2 92 3/8 .781
Second Quarter........................ 65 3/16 57 3/4 .11 131 1/4 117 5/8 .781
Third Quarter......................... 61 1/4 41 3/4 .11 123 5/8 86 .781
Fourth Quarter........................ 48 3/8 31 5/16 .12 100 65 1/2 .781
1999:
First Quarter (through March 26,
1999).............................. 52 1/2 44 1/2 .12 105 1/4 91 .781
</TABLE>
- ---------------
(1) All common stock information has been adjusted to reflect a two-for-one
stock split which was effected in September 1997.
(2) The preferred stock was not publicly traded prior to July 23, 1996.
RECENT CLOSING PRICES
The following table sets forth the closing prices per share of the common
stock and the preferred stock on the New York Stock Exchange on March 5, 1999,
the last trading day before announcement of the proposed merger, and on March
26, 1999, the latest practicable trading day before the filing of this proxy
statement.
<TABLE>
<CAPTION>
AMERICAN BANKERS AMERICAN BANKERS
COMMON STOCK PREFERRED STOCK
---------------- ----------------
<S> <C> <C>
March 5, 1999........................................ 46 3/8 97 7/16
March 26, 1999....................................... 52 1/8 104 15/16
</TABLE>
NUMBER OF SHAREHOLDERS
As of [--], 1999, there were [--] shareholders of record who held shares of
preferred stock and approximately [--] shareholders of record who held shares of
common stock, as shown on the records of American Bankers' transfer agent for
the preferred stock and American Bankers' transfer agent for the common stock,
respectively.
13
<PAGE> 21
SELECTED CONSOLIDATED FINANCIAL DATA
The selected financial data of American Bankers for the years 1998, 1997,
1996, 1995 and 1994 presented below has been derived from the audited
consolidated financial statements of American Bankers incorporated by reference
in this proxy statement. The information shown below is qualified in its
entirety by, and should be read in conjunction with, the related consolidated
financial statements of American Bankers, including the related notes thereto
and "Management's Discussion and Analysis of Results of Operations and Financial
Condition" for American Bankers incorporated by reference in this proxy
statement.
SELECTED FINANCIAL DATA OF AMERICAN BANKERS
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
AT OR YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues(a)
Net premiums earned........ 1,432,000 1,453,800 $1,378,500 $1,240,700 $1,094,300
Net investment income...... 149,700 134,100 121,200 99,400 74,400
Realized investment
gains................... 19,800 10,400 7,800 700 2,700
Merger termination fees,
net..................... 300,000 -- -- -- --
Other income............... 28,700 23,100 21,500 20,100 15,400
---------- ---------- ---------- ---------- ----------
Total revenues............... 1,930,200 1,621,400 1,529,000 1,360,900 1,186,800
---------- ---------- ---------- ---------- ----------
Benefits and expenses
Benefits, claims, losses,
and settlement
expenses................ 509,000 532,600 523,000 463,100 437,900
Commissions................ 625,300 614,200 571,800 526,500 437,700
Operating expenses......... 375,100 298,800 280,800 251,500 220,200
Interest expenses.......... 19,100 16,200 17,500 15,600 11,200
---------- ---------- ---------- ---------- ----------
Total benefits and
expenses................... 1,528,500 1,461,800 1,393,100 1,256,700 1,107,000
---------- ---------- ---------- ---------- ----------
Pre-tax income from
operations.............. 401,700 159,600 135,900 104,200 79,800
---------- ---------- ---------- ---------- ----------
Income tax (expense) benefit
Current.................... (148,600) (37,300) (28,900) (25,200) (14,800)
Deferred................... 13,900 (7,400) (12,500) (6,700) (8,500)
---------- ---------- ---------- ---------- ----------
(134,700) (44,700) (41,400) (31,900) (23,300)
---------- ---------- ---------- ---------- ----------
Net income................... $ 267,000 $ 114,900 $ 94,500 $ 72,300 $ 56,500
---------- ---------- ---------- ---------- ----------
Per common share data
Basic Net Income............. $ 6.12 $ 2.60 $ 2.24 $ 1.78 $ 1.40
---------- ---------- ---------- ---------- ----------
Diluted Net income........... $ 5.68 $ 2.45 $ 2.16 $ 1.74 $ 1.37
---------- ---------- ---------- ---------- ----------
Dividends per common share... $ 0.45 $ 0.43 $ 0.40 $ 0.38 $ 0.36
---------- ---------- ---------- ---------- ----------
Total Assets................. $4,368,500 $3,782,500 $3,469,500 $2,987,700 $2,432,500
Notes Payable................ $ 193,700 $ 242,600 $ 222,500 $ 236,000 $ 197,800
Stockholders' Equity......... $1,060,900 $ 813,900 $ 710,200 $ 513,000 $ 405,900
</TABLE>
1996 and prior per common share data is restated to reflect stock split
which was effected in September 1997.
The amounts reported are in accordance with Financial Accounting Standards
Board Statement 113.
14
<PAGE> 22
THE SPECIAL MEETINGS
GENERAL; DATES, TIMES AND PLACES
This proxy statement (the "Proxy Statement") is being provided by, and the
enclosed proxy is solicited by and on behalf of, the board of directors the
"American Bankers Board" of American Bankers Insurance Group Inc. ("American
Bankers" or the "Company") for use at the special meeting of the holders of the
Company's $3.125 Series B Cumulative Convertible Preferred Stock, no par value
(the "Preferred Stock"), and the special meeting of the holders of the Common
Stock, par value $1.00 per share (the "Common Stock"), as applicable.
The special meeting for the holders of the Preferred Stock (including any
and all adjournments and postponements thereof, the "Preferred Shareholders
Special Meeting") will be held on [ -- ], 1999 at [ -- ] A.M., Eastern time, at
the Auditorium of the Company's Headquarters, 11222 Quail Roost Drive, Miami,
Florida 33157-6596.
The special meeting for the holders of the Common Stock (including any and
all adjournments and postponements thereof, the "Common Shareholders Special
Meeting," and together with the Preferred Shareholder Special Meeting, the
"Special Meetings") will be held on [ -- ], 1999 at [ -- ] A.M., Eastern time,
at the Auditorium of the Company's Headquarters, 11222 Quail Roost Drive, Miami,
Florida 33157-6596.
PURPOSE OF THE SPECIAL MEETINGS
The purpose of the Special Meetings is to consider and vote upon the
approval and adoption of an Agreement and Plan of Merger, dated as of March 5,
1999 (the "Merger Agreement"), among American Bankers, Fortis, Inc. ("Fortis")
and Greenland Acquisition Corp. ("Sub") and the merger contemplated thereby (the
"Merger"), and to transact any other business that is properly brought before
the Special Meetings.
REVOCATION OF PROXIES
Any person signing and mailing the enclosed proxy may revoke it at any time
before it is voted by giving written notice of revocation to American Bankers,
by mailing to American Bankers a later dated proxy which is received by American
Bankers prior to the applicable Special Meeting or by voting in person at the
applicable Special Meeting.
RECORD DATES; VOTES REQUIRED
All voting rights for the Preferred Shareholders Special Meeting are vested
exclusively in the holders of Preferred Stock, with each share entitled to one
vote. Only holders of shares of Preferred Stock of record at the close of
business on [ -- ], 1999 (the "Record Date") are entitled to notice of and to
vote at the Preferred Shareholders Special Meeting. Holders of shares of
Preferred Stock have no dissenters' rights of appraisal in connection with the
Merger.
All voting rights for the Common Shareholders Special Meeting are vested
exclusively in the holders of Common Stock, with each share entitled to one
vote. Only holders of shares of Common Stock of record at the close of business
on the Record Date are entitled to notice of and to vote at the Common
Shareholders Special Meeting. Holders of shares of Common Stock have no
dissenters' rights of appraisal in connection with the Merger.
Approval and adoption of the Merger Agreement and the Merger requires the
affirmative vote by the holders of at least a majority of the shares of Common
Stock outstanding as of the Record Date voting as a separate class. In addition,
in the event that the Merger Agreement is not approved by the holders of at
least 2/3 of the shares of Preferred Stock outstanding, voting as a separate
class, the Merger Agreement provides that the Merger Agreement will be amended
to restructure the proposed Merger. See "The Merger Agreement -- Modification
for Preferred Stock."
15
<PAGE> 23
Under New York Stock Exchange ("NYSE") rules, brokers and nominees are
precluded from exercising their voting discretion on the proposal to approve and
adopt the Merger Agreement and the Merger and, for this reason, absent specific
instructions from the beneficial owner of shares, are not permitted to vote such
shares thereon. Because the affirmative vote of a majority of the shares of
Common Stock outstanding on the Record Date is required for approval of the
Merger, a broker non-vote or an abstention with respect to the Merger will have
the effect of a vote against the Merger.
As of the Record Date, no directors or executive officers of American
Bankers or any of their affiliates beneficially owned any shares of Preferred
Stock. As of the Record Date, directors and executive officers of American
Bankers and their affiliates as a group beneficially owned [ -- ] shares of
Common Stock, or approximately [ -- ]% of the shares of Common Stock outstanding
as of the Record Date. Messrs. R. Kirk Landon, Chairman of the American Bankers
Board, and Gerald N. Gaston, Vice Chairman, President and Chief Executive
Officer, of American Bankers, who held beneficially in the aggregate as of the
Record Date approximately 7.5% of the combined voting power of the Common Stock
outstanding as of the Record Date, have entered into a voting agreement (the
"Voting Agreement"), in which they have agreed, among other things, to vote all
of their shares of Common Stock in favor of the adoption and approval of Merger
Agreement and the Merger. See "Related Agreements and Transactions -- Voting
Agreement". Based on the approximately [ -- ] shares of Common Stock outstanding
as of the Record Date, a total of approximately [ -- ] shares of Common Stock
are required to be voted in favor of the Merger Agreement and the Merger in
order for the Merger Agreement and the Merger to be approved by the holders of
the Common Stock. Accordingly, American Bankers directors, executive officers
and their affiliates hold shares representing approximately [ -- ]% of the total
number of shares of Common Stock required for approval of the Merger Agreement
and the Merger. Holders of approximately [ -- ]% of the total number of shares
of Common Stock required for approval of the Merger Agreement and the Merger
have contractually agreed to vote in favor of the Merger Agreement and the
Merger.
QUORUM
The Florida Business Corporation Act (the "FBCA"), the American Bankers
Third Amended and Restated Articles of Incorporation (the "American Bankers
Articles"), the American Bankers Bylaws (the "American Bankers Bylaws") and the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") contain
requirements governing the actions of American Bankers shareholders at the
Special Meetings. According to the American Bankers Bylaws, holders of a
majority of the shares of Preferred Stock outstanding on the Record Date must be
present, either in person or by proxy, at the Preferred Shareholders Special
Meeting to constitute a quorum, and holders of a majority of the shares of
Common Stock outstanding on the Record Date must be present, either in person or
by proxy, at the Common Shareholders Special Meeting to constitute a quorum. In
general, abstentions and broker non-votes are counted as present or represented
for the purposes of determining a quorum for the Special Meetings.
EXPENSES OF SOLICITATION
The expenses of this solicitation will be borne by American Bankers. In
addition to solicitation by mail, arrangements will be made with brokers and
other custodians, nominees and fiduciaries to send proxy materials to their
principals and American Bankers will, upon request, reimburse them for
reasonable expenses of so doing. Solicitation of proxies from some shareholders
may be made by American Bankers' officers and regular employees by telephone,
facsimile, or in person after the initial solicitation. In addition, [ -- ] (the
"Proxy Solicitor") has been retained to assist in the solicitation of proxies.
The Proxy Solicitor may contact holders of shares of Preferred Stock and Common
Stock by mail, telephone, facsimile, telegraph and personal interviews and may
request brokers, dealers and other nominee shareholders to forward materials to
beneficial owners of shares of Preferred Stock and Common Stock. The Proxy
Solicitor will receive reasonable and customary compensation for its services
(estimated at $[ -- ]), will be reimbursed for certain reasonable out-of-pocket
expenses and will be indemnified against certain liabilities and expenses in
connection therewith, including certain liabilities under the federal securities
laws.
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MISCELLANEOUS
It is not expected that any matter not referred to herein will be presented
for action at the Special Meetings. If any other matters are properly brought
before the Special Meetings, the persons named in the proxies will have
discretion to vote on such matters in accordance with their best judgment. The
grant of a proxy will also confer discretionary authority on the persons named
in the proxy as proxy appointees to vote in accordance with their best judgment
on matters incident to the conduct of the Special Meetings, including (except as
stated in the following sentence) postponement or adjournment for the purpose of
soliciting additional votes. However, shares represented by proxies that have
been voted "AGAINST" the Merger Agreement and the Merger will not be used to
vote "FOR" postponement or adjournment of the Special Meetings for the purposes
of allowing additional time for soliciting additional votes "FOR" the approval
and adoption of the Merger Agreement and the Merger.
Holders of Preferred Stock and holders of Common Stock should not send
their stock certificates with their proxy cards. If the Merger is consummated, a
separate letter of transmittal will be mailed to the holders of Common Stock and
to the holders of Preferred Stock, if applicable, which will enable a holder to
receive the appropriate consideration.
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THE MERGER
BACKGROUND OF THE MERGER
Fortis, through a group of wholly owned subsidiaries called American
Security Group ("ASG"), and American Bankers have been engaged in similar lines
of insurance businesses for several years. From time to time, American Bankers
and Fortis have informally explored the possibility of some type of business
combination in which American Bankers might acquire ASG, or Fortis might acquire
American Bankers. Discussions began on a formal basis in October 1998, when
American Bankers considered a possible acquisition of ASG, with Fortis receiving
a substantial common equity interest in American Bankers.
On October 22, 1998, a meeting was held at American Bankers' headquarters,
involving Allen R. Freedman, Chairman and Chief Executive Officer of Fortis, J.
Kerry Clayton, Executive Vice President of Fortis, David Gubbay, Senior Vice
President Corporate Development of Fortis, Floyd G. Denison, Executive Vice
President of Finance for American Bankers and Arthur W. Heggen, Executive Vice
President and Secretary of American Bankers. The purpose of the meeting was to
exchange information to determine potential synergies which might be realized in
connection with a combination between ASG and American Bankers
On October 23, 1998, American Bankers and Fortis entered into a
confidentiality agreement (the "Confidentiality Agreement") to enable the
company to conduct due diligence in connection with the possible business
combination. A series of meetings and conference calls were held throughout
October, November and early December of 1998, during which evaluation material
on ASG was provided to American Bankers for evaluation.
On December 26, 1998, Mr. Gaston and Mr. Freedman met. At that meeting, Mr.
Freedman informed Mr. Gaston that Fortis was interested in acquiring American
Bankers. Mr. Gaston agreed that due diligence could continue on that basis, but
remained committed at that point to an acquisition of ASG by American Bankers.
In January 1999, meetings were conducted between representatives of Fortis
and American Bankers to investigate potential marketing and revenue synergies,
cost savings and compliance issues in the event American Bankers and ASG were
combined.
Between February 12 and 18, Fortis conducted an in-depth due diligence,
both on- and off-site, of American Bankers.
On February 17, Mr. Freedman and Mr. Gaston talked by telephone, at which
time Mr. Freedman reiterated Fortis' desire to acquire American Bankers, rather
than to complete a sale of ASG to American Bankers. The parties discussed
Fortis' proposed price range of $52.00 to $54.00 per share of Common Stock, and
American Bankers' proposed range of $55.50 to $57.00. On February 1, 1999,
Alston & Bird LLP, counsel to Fortis, delivered to American Bankers a
preliminary draft of a merger agreement, providing for Fortis' acquisition of
American Bankers.
On February 25, 1999, Fortis made a non-binding written proposal to
American Bankers to purchase all of the outstanding capital stock of American
Bankers for a purchase price of $55.00 per share of Common Stock and $109.857
per share of Preferred Stock. The proposal called for 70% of the purchase price
to be paid in cash with the remaining 30% to be paid in shares (or American
Depositary Receipts) of Fortis (NL) N.V., a Dutch corporation and a parent
company of Fortis. In addition, Fortis reserved the right to increase the cash
component of its offer, up to a maximum of 100%. The written proposal also
stated that retention of American Bankers executives after closing was
essential. Another draft of a merger agreement as well as drafts of a stock
option agreement and voting agreement, containing proposed terms for the
combination, were also delivered with the proposal.
Negotiations between representatives of Fortis and American Bankers over
the terms of the transaction continued over the next several days. In addition
to continuing discussions over the per share purchase price to be paid by
Fortis, discussions occurred regarding the portion of the purchase price to be
paid in cash and the
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<PAGE> 26
nature and amount of any termination fees. Beginning on March 1, American
Bankers, Fortis, Donaldson, Lufkin & Jenrette Securities Corporation, financial
advisor to Fortis, Salomon Smith Barney Inc. ("Salomon Smith Barney"), financial
advisor to American Bankers, Alston & Bird LLP, counsel to Fortis, Dewey
Ballantine LLP, counsel to American Bankers, and Jorden Burt Boros Cicchetti
Berenson & Johnson LLP, counsel to American Bankers, negotiated the terms of the
Merger Agreement, Stock Option Agreement and Voting Agreement.
On March 2, 1999, Fortis orally informed American Bankers that it was
modifying the terms of its offer so that 100% of the purchase price was to be
paid in cash. Later that day, the American Bankers Board met to consider Fortis'
proposal. At that meeting, Mr. Gaston presented the Fortis proposal to the
American Bankers Board and reviewed in detail the history of the recent
discussions with Fortis. Salomon Smith Barney made a presentation on the
financial aspects of a combination between American Bankers and Fortis. Salomon
Smith Barney also reported to the American Bankers Board that it, as well as Mr.
Gaston and Mr. Denison, based in part on limited discussions they had with
certain companies, did not believe that any of the companies they viewed as
possible acquirors would likely be willing and able to enter into a transaction
with American Bankers that would be on terms superior to those of Fortis'
proposal and which could be completed on a timely basis. Following Salomon Smith
Barney's presentation, Mr. Freedman was invited to join the meeting and address
the American Bankers Board to indicate Fortis' interest in acquiring American
Bankers. After Mr. Freedman left the meeting, the American Bankers Board asked
numerous questions about the Fortis' offer to management of American Bankers,
Salomon Smith Barney, Dewey Ballantine LLP and Jorden Burt Boros Cicchetti
Berenson & Johnson LLP. The American Bankers Board discussed the Fortis offer
and whether any other party existed who would be willing and able to make a
superior offer to Fortis' proposal. Following this discussion, the American
Bankers Board instructed management to continue negotiations with Fortis.
On March 4, 1999, American Bankers entered into Amendment Number Two
("Amendment Number Two") to the Rights Agreement (the "Rights Agreement")
between American Bankers and ChaseMellon Shareholder Services, L.L.C. Amendment
Number Two provides that Fortis, Sub and their affiliates will not be deemed to
be an Acquiring Person (as defined in the Rights Agreement), a Distribution Date
(as defined in the Rights Agreement) will not be deemed to occur, and the rights
issuable pursuant to the Rights Agreement will not separate from the shares of
Common Stock, solely as a result of Fortis or Sub entering into the Merger
Agreement, the Voting Agreement or the Stock Option Agreement or consummating
the Tender Offer (as hereinafter defined), the Merger and/or the other
transactions contemplated thereby.
On March 5, 1999, the American Bankers Board met again to discuss Fortis'
offer. The American Bankers Board discussed whether any other acquiror existed
who would be both willing and able to make a superior offer to Fortis' offer.
Dewey Ballantine LLP reviewed for the American Bankers Board its fiduciary
duties, and described the principal terms of the Merger Agreement, the Stock
Option Agreement and the Voting Agreement. Salomon Smith Barney presented its
opinion, based upon and subject to certain matters stated therein, as to the
fairness, from a financial point of view, of the consideration to be received by
holders of Preferred Stock and Common Stock. Salomon Smith Barney also provided
the American Bankers Board with the detailed analysis conducted by Salomon Smith
Barney in reaching its conclusions. The American Bankers Board asked questions
about the Merger to management of American Bankers, Salomon Smith Barney, Dewey
Ballantine LLP and Jorden Burt Boros Cicchetti Berenson & Johnson LLP.
Thereafter, following further discussion, the American Bankers Board unanimously
determined that the Merger is fair to, advisable and in the best interests of,
American Bankers and its shareholders (including holders of Preferred Stock and
Common Stock). Accordingly, the American Bankers Board unanimously approved the
Merger Agreement, Stock Option Agreement and Voting Agreement and the Merger,
and resolved unanimously to recommend that the shareholders of American Bankers
(including holders of Preferred Stock and Common Stock) vote for approval and
adoption of the proposed Merger Agreement and the Merger.
Later on March 5, 1999, the Merger Agreement and Stock Option Agreement
were executed by American Bankers and Fortis, and the Voting Agreement was
executed by Fortis and Messrs. Gaston and Landon.
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REASONS FOR THE MERGER; RECOMMENDATION OF THE AMERICAN BANKERS BOARD
In reaching its determination to recommend approval and adoption of the
Merger Agreement and the Merger, the American Bankers Board consulted with
American Bankers management, as well as Dewey Ballantine LLP, Jorden Burt Boros
Cicchetti Berenson & Johnson LLP and Salomon Smith Barney, and considered a
number of factors, including the following. In view of the wide variety of
factors considered in connection with the Merger, the American Bankers Board did
not consider it practicable to, nor did it attempt to, quantify or otherwise
assign relative weights to the specific factors it considered in reaching its
decision.
(i) American Bankers' Business, Condition and Prospects. The American
Bankers Board considered information with respect to the financial
condition, results of operations and business of American Bankers, on both
an historical and prospective basis, and current industry, economic and
market conditions, including American Bankers' market position in the
domestic credit insurance market and the recent emphasis on developing
international credit insurance markets for American Bankers. The members of
the American Bankers Board were familiar with and knowledgeable about
American Bankers' business and affairs and further reviewed these matters
in the course of their deliberations. The American Bankers Board considered
American Bankers' historical growth and the capital requirements which
would be needed to sustain a similar level of growth in the future, given
the preeminent position held by American Bankers in the domestic credit
insurance market. The American Bankers Board noted that there could be no
assurance as to American Bankers' access to such capital on acceptable
terms.
(ii) Time Needed to Complete the Transaction. The American Bankers
Board considered the fact that since Fortis currently has no securities
registered in the United States and does not have financial statements
meeting U.S. securities law requirements, a shorter time would be needed to
close an all-cash merger with Fortis rather than one with a purchase price
paid partially in shares or American Depositary Receipts. The American
Bankers Board also considered Fortis' size and standing in the insurance
industry and the likelihood that Fortis would be able to gain prompt
regulatory approval as a result of those factors, as evidenced by its
recent acquisitions of three United States based insurers.
(iii) Terms of the Merger. The American Bankers Board considered the
terms and provisions of the Merger Agreement, the Stock Option Agreement
and the Voting Agreement. The American Bankers Board considered the terms
of the Merger Agreement that permit the American Bankers Board, subject to
the limitations described below in "The Merger Agreement -- Agreement Not
to Solicit Other Offers", to receive unsolicited inquiries and proposals
from, and negotiate and give information to, third parties. The American
Bankers Board further considered that the total amount which could be
realized by Fortis pursuant to the termination fee and the Stock Option
Agreement was capped at $100 million. The American Bankers Board found
reasonable the views of Dewey Ballantine LLP and Salomon Smith Barney that
a $100 million termination fee was within the range of fees payable in
comparable transactions and that the fee, in conjunction with the Stock
Option Agreement and the Voting Agreement, would not in and of itself
preclude alternative proposals, although the American Bankers Board did
note that the granting to Fortis of the option contemplated by the Stock
Option Agreement could prevent any third party from engaging in a
transaction with American Bankers which could be accounted for as a
"pooling of interests," making any such alternative proposal less likely.
The American Bankers Board further considered that Fortis had stated that
it would not enter into a transaction which did not include provisions
similar to the termination fee, Stock Option Agreement and Voting
Agreement.
(iv) Opinion of Salomon Smith Barney. The American Bankers Board
considered the oral opinion delivered on March 5, 1999 by Salomon Smith
Barney (which it subsequently confirmed by delivery of a written opinion
dated March 5, 1999) that as of the date of such opinion, and based upon
and subject to certain matters stated therein, the Common Stock Merger
Consideration (as defined in such opinion) is fair, from a financial point
of view, to the holders of Common Stock and the Preferred Stock Merger
Consideration (as defined in such opinion) is fair, from a financial point
of view, to the holders of Preferred Stock. The American Bankers Board also
considered the oral and written presentations made to it by Salomon Smith
Barney. See "The Merger -- Opinion of American Bankers' Financial Advisor."
A
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copy of Salomon Smith Barney's written opinion to the American Bankers
Board, dated March 5, 1999, which sets forth the assumptions made, matters
considered and limitations on the review undertaken, is attached as
Appendix IV to this Proxy Statement and is incorporated herein by
reference.
(v) Historical and Recent Market Prices Compared to Consideration to
be Received by Holders of Common Stock. The American Bankers Board
reviewed the historical market prices and trading information with respect
to the Common Stock, and considered that (A) the price of $55.00 per share
of Common Stock represented a premium of approximately 15.2% over the
$47 3/4 closing price of the Common Stock on the NYSE on March 4, 1999, the
last full trading day prior to the March 5 American Bankers Board meeting
and (B) the price of $55.00 per share of Common Stock represented a 17.2%
premium over the average closing price of the Common Stock for the 30
previous trading days prior to the March 5 American Bankers Board meeting.
(vi) Potential for Other Acquirors. The American Bankers Board
considered the fact that Salomon Smith Barney, as well as Mr. Gaston and
Mr. Denison, based in part on limited discussions they had with certain
companies, did not believe that any of the companies they viewed as
possible acquirors would likely be willing and able to enter into a
transaction with American Bankers that would be on terms superior to those
of Fortis' proposal and which could be completed on a timely basis.
(vii) Countervailing Considerations. The American Bankers Board
considered certain factors that might be characterized as countervailing
factors, including:
(a) The fact that the terms of the Merger would not permit holders
of Common Stock or Preferred Stock to continue to hold a common equity
interest in Fortis following the Merger, thus preventing holders of
Common Stock or Preferred Stock from participating in the synergies
expected to result from the combination of the two companies.
(b) The fact that, if the Merger Agreement and the Merger are not
approved by the holders of Preferred Stock, the Merger Agreement
provides that the transaction will be modified, as described below in
"The Merger Agreement -- Modification for Preferred Stock," without any
further action, including any action by the American Bankers Board. In
that regard, the American Bankers Board noted that the transaction as
modified would not require the approval of the holders of the Preferred
Stock, and would not require any additional approval of the holders of
Common Stock.
(viii) Conflicts of Interest. The American Bankers Board reviewed the
matters discussed below in "The Merger -- Interests of Certain Persons in
the Merger" and determined that such matters did not affect the American
Bankers Board's assessment of the Merger and the value which it presented
to holders of Preferred Stock and Common Stock.
THE AMERICAN BANKERS BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT,
HAS DETERMINED THAT THE MERGER IS FAIR TO, ADVISABLE AND IN THE BEST INTERESTS
OF, AMERICAN BANKERS AND ITS SHAREHOLDERS (INCLUDING HOLDERS OF BOTH PREFERRED
STOCK AND COMMON STOCK), AND RECOMMENDS THAT HOLDERS OF PREFERRED STOCK AND
COMMON STOCK VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
MERGER.
OPINION OF AMERICAN BANKERS' FINANCIAL ADVISOR
Salomon Smith Barney was retained by American Bankers to act as its
financial advisor in connection with the proposed Merger. In connection with
such engagement, American Bankers requested that Salomon Smith Barney evaluate
the fairness, from a financial point of view, to holders of Common Stock and to
holders of Preferred Stock of the consideration to be received by such holders
pursuant to the terms of the proposed Merger. On March 5, 1999, at a meeting of
the American Bankers Board held to evaluate the Merger contemplated by the
Merger Agreement, Salomon Smith Barney delivered an oral opinion (subsequently
confirmed by delivery of a written opinion dated March 5, 1999) to the American
Bankers Board to the effect that, as of the date of such opinion and based upon
and subject to certain matters stated therein, the Common Stock Consideration
(as defined in the opinion) was fair, from a financial point of view, to the
holders of
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Common Stock, and the Preferred Stock Consideration (as defined in the opinion)
was fair, from a financial point of view, to the holders of Preferred Stock.
In arriving at its opinion, Salomon Smith Barney reviewed a draft of the
Merger Agreement and held discussions with certain senior officers, directors
and other representatives and advisors of American Bankers concerning the
business, operations and prospects of American Bankers. Salomon Smith Barney
examined certain publicly available business and financial information relating
to American Bankers and Fortis (NL) N.V., Fortis (B) and their affiliates
("Fortis Group") as well as certain financial forecasts for American Bankers and
other information and data for American Bankers which were provided to or
otherwise discussed with Salomon Smith Barney by the management of American
Bankers. Salomon Smith Barney reviewed the financial terms of the Merger as set
forth in the Merger Agreement in relation to, among other things: (i) current
and historical market prices and trading volumes of the Common Stock; (ii) the
historical and projected earnings and other operating data of American Bankers;
and (iii) the capitalization and financial condition of American Bankers.
Salomon Smith Barney also considered, to the extent publicly available, the
financial terms of certain other similar transactions recently effected which
Salomon Smith Barney considered relevant in evaluating the Merger and analyzed
certain financial, stock market and other publicly available information
relating to other companies whose operations Salomon Smith Barney considered
relevant in evaluating that of American Bankers. In addition to the foregoing,
Salomon Smith Barney conducted such other analyses and examinations and
considered such other financial, economic and market criteria as Salomon Smith
Barney deemed appropriate in arriving at its opinion. Salomon Smith Barney noted
that its opinion was necessarily based upon information available, and
financial, stock market and other conditions and circumstances existing and
disclosed to Salomon Smith Barney, as of the date of its opinion.
In rendering its opinion, Salomon Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or otherwise
reviewed by or discussed with Salomon Smith Barney. Salomon Smith Barney also
assumed, with the consent of the American Bankers Board, that the final terms of
the Merger Agreement reviewed by Salomon Smith Barney in draft form would not
vary materially from the draft reviewed by Salomon Smith Barney. With respect to
financial forecasts and other information and data furnished to or otherwise
reviewed by or discussed with Salomon Smith Barney, the management of American
Bankers advised Salomon Smith Barney that such forecasts and other information
and data were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of American Bankers as to
the future financial performance of American Bankers. Salomon Smith Barney did
not make and was not provided with an independent evaluation or appraisal of the
assets or liabilities (contingent or otherwise) of American Bankers nor did
Salomon Smith Barney make any physical inspection of the properties or assets of
American Bankers. No other limitations were imposed by American Bankers on
Salomon Smith Barney with respect to the investigations made or procedures
followed by Salomon Smith Barney in rendering its opinion.
In preparing its opinion to the American Bankers Board, Salomon Smith
Barney performed a variety of financial and comparative analyses. The summary of
such analyses set forth below does not purport to be a complete description of
the analyses underlying Salomon Smith Barney's opinion. The preparation of a
financial opinion is a complex analytic process involving various determinations
as to the most appropriate and relevant methods of financial analyses and the
application of those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to summary description. Salomon Smith
Barney believes that its analyses must be considered as a whole and that
selecting portions of such analyses or any of the individual factors considered,
without considering all analyses and factors, could create a misleading or
incomplete view of the processes underlying such analyses and its opinion. In
its analyses, Salomon Smith Barney made numerous assumptions with respect to
American Bankers, industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
American Bankers. The estimates contained in such analyses and the valuation
ranges resulting from any particular analysis are not necessarily indicative of
actual values or predictive of future results or values, which may be
significantly more or less favorable than those suggested by such analyses. In
addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which
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businesses or securities actually may be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. Salomon Smith
Barney's opinion dated March 5, 1999 and financial analyses were only one of
many factors considered by the American Bankers Board in its evaluation of the
Merger and should not be viewed as determinative of the views of the American
Bankers Board or management with respect to the Merger.
The following is a summary of the material financial analyses performed by
Salomon Smith Barney in connection with its opinion dated March 5, 1999.
Selected Public Company Analysis
Specialty Insurance Companies. Using publicly available information,
Salomon Smith Barney analyzed, among other things, the market values and trading
multiples of American Bankers and seven selected publicly traded specialty
insurance companies, consisting of: Frontier Insurance Group, Inc.; HCC
Insurance Holdings, Inc.; HSB Group, Inc.; Markel Corporation; Mutual Risk
Management Ltd.; Orion Capital Corporation; and W. R. Berkley Corporation
(collectively, the "Selected Specialty Companies"). Salomon Smith Barney
compared, among other things, market values of the Selected Specialty Companies
as multiples of, among other things, actual calendar 1998 net operating income
computed in accordance with generally accepted accounting principles ("GAAP"),
estimated calendar 1999 and calendar 2000 net operating income computed in
accordance with GAAP, and GAAP book value as of September 30, 1998. Net
operating income projections for the Selected Specialty Companies were based on
estimates of selected investment banking firms and net operating income
projections for American Bankers were based on estimates of its management. All
multiples were based on closing stock prices as of March 3, 1999. Salomon Smith
Barney applied a range of selected multiples for the Selected Specialty
Companies of actual calendar 1998 GAAP net operating income, estimated calendar
1999 and 2000 GAAP net operating income and GAAP book value as of September 30,
1998 of 12.0x to 16.0x, 11.0x to 15.0x, 9.0x to 13.0x and 1.50x to 2.25x,
respectively, to corresponding financial data of American Bankers (except that
GAAP book value of American Bankers is as of December 31, 1998). This resulted
in an equity reference range for American Bankers of approximately $33.00 to
$45.00 per share on a diluted basis.
Personal Lines Insurance Companies. Using publicly available information,
Salomon Smith Barney analyzed, among other things, the market values and trading
multiples of American Bankers and nine selected publicly traded personal lines
insurance companies, consisting of: The Allstate Corporation; American Financial
Group, Inc.; Erie Indemnity Company; Horace Mann Educators Corporation; Mercury
General Corporation; Ohio Casualty Corporation; The Progressive Corporation;
SAFECO Corporation; and 20th Century Industries (collectively, the "Selected
Personal Lines Companies"). Salomon Smith Barney compared, among other things,
market values of the Selected Personal Lines Companies as multiples of, among
other things, actual calendar 1998 net operating income computed in accordance
with GAAP, estimated calendar 1999 and calendar 2000 net operating income
computed in accordance with GAAP, and GAAP book value as of September 30, 1998.
Net operating income projections for the Selected Personal Lines Companies were
based on estimates of selected investment banking firms and net operating income
projections for American Bankers were based on estimates of its management. All
multiples were based on closing stock prices as of March 3, 1999. Salomon Smith
Barney applied a range of selected multiples for the Selected Personal Lines
Companies of actual calendar 1998 GAAP net operating income, estimated calendar
1999 and 2000 GAAP net operating income and GAAP book value as of September 30,
1998 of 13.0x to 16.0x, 11.5x to 13.5x, 10.5x to 12.5x and 1.75x to 2.25x,
respectively, to corresponding financial data of American Bankers (except that
GAAP book value of American Bankers is as of December 31, 1998). This resulted
in an equity reference range for American Bankers of approximately $36.00 to
$44.00 per share on a diluted basis.
Life Insurance Companies. Using publicly available information, Salomon
Smith Barney analyzed, among other things, the market values and trading
multiples of American Bankers and eight selected publicly traded life insurance
companies, consisting of: American General Corporation; The Equitable Companies
Incorporated; Hartford Life, Inc.; Jefferson-Pilot Corporation; Lincoln National
Corporation; Nationwide Financial Services, Inc.; Protective Life Corporation;
and ReliaStar Financial Corp. (collectively, the
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"Selected Life Companies"). Salomon Smith Barney compared, among other things,
market values of the Selected Life Companies as multiples of, among other
things, actual calendar 1998 net operating income computed in accordance with
GAAP, estimated calendar 1999 and calendar 2000 net operating income computed in
accordance with GAAP, and GAAP book value as of September 30, 1998. Net
operating income projections for the Selected Life Companies were based on
estimates of selected investment banking firms and net operating income
projections for American Bankers were based on estimates of its management. All
multiples were based on closing stock prices as of March 3, 1999. Salomon Smith
Barney applied a range of selected multiples for the Selected Life Companies of
actual calendar 1998 GAAP net operating income, estimated calendar 1999 and 2000
GAAP net operating income and GAAP book value as of September 30, 1998 of 17.0x
to 20.0x, 15.0x to 18.0x, 13.0x to 16.0x and 2.00x to 2.50x, respectively, to
corresponding financial data of American Bankers (except that GAAP book value of
American Bankers is as of December 31, 1998). This resulted in an equity
reference range for American Bankers of approximately $45.00 to $54.00 per share
on a diluted basis.
Financial Companies. Using publicly available information, Salomon Smith
Barney analyzed, among other things, the market values and trading multiples of
American Bankers and seven selected publicly traded financial companies,
consisting of: American Express Company; Aon Corporation; Associates First
Capital Corporation; HSB Group, Inc.; Marsh & McLennan Companies, Inc.; MBNA
Corporation; and Mutual Risk Management Ltd. (collectively, the "Selected
Financial Companies"). Salomon Smith Barney compared, among other things, market
values of the Selected Financial Companies as multiples of, among other things,
actual calendar 1998 net operating income computed in accordance with GAAP and
estimated calendar 1999 and calendar 2000 net operating income computed in
accordance with GAAP. Net operating income projections for the Selected
Financial Companies were based on estimates of selected investment banking firms
and net operating income projections for American Bankers were based on
estimates of its management. All multiples were based on closing stock prices as
of March 3, 1999. Salomon Smith Barney applied a range of selected multiples for
the Selected Financial Companies of actual calendar 1998 GAAP net operating
income and estimated calendar 1999 and 2000 GAAP net operating income of 19.0x
to 22.0x, 17.0x to 20.0x and 15.0x to 18.0x, respectively, to corresponding
financial data of American Bankers. This resulted in an equity reference range
for American Bankers of approximately $51.00 to $60.00 per share on a diluted
basis.
Salomon Smith Barney also compared the relationship between the price to
book value multiples and projected return on average equity of the Selected
Specialty Companies, Selected Personal Lines Companies, Selected Life Companies
and Selected Financial Companies with that of American Bankers.
Selected Insurance Transactions Analysis
Using publicly available information, Salomon Smith Barney analyzed the
purchase price and implied transaction multiples paid in fourteen selected
transactions in the insurance industry consisting of (target/ acquiror):
Transamerica Corporation/AEGON N.V.; NAC Re Corp./XL Capital Ltd.; Executive
Risk Inc./ The Chubb Corporation; CIGNA Corporation/ACE Limited; SunAmerica
Inc./American International Group, Inc.; General Re Corporation/Berkshire
Hathaway Inc.; The Netherlands Insurance Companies/ Guardian Royal Exchange Plc;
USF&G Corporation/The St. Paul Companies, Inc.; CapMAC Holdings, Inc./MBIA Inc.;
Omni Insurance Group, Inc./The Hartford Financial Services Group, Inc.; Titan
Holdings, Inc./USF&G Corporation; Colonial Penn Group Inc./GE Capital Corp.;
American States Financial Corporation/SAFECO Corporation; and Johnson &
Higgins/Marsh & McLennan Companies, Inc. (collectively, the "Selected
Transactions"). Salomon Smith Barney compared the purchase prices in such
transactions as multiples of, among other things, net operating income for the
last 12 months computed in accordance with GAAP, estimated GAAP net operating
income for the next year and GAAP book value as of the most recent date. All
multiples for the Selected Transactions were based on information available at
the time of announcement of the transactions. Salomon Smith Barney applied a
range of selected multiples for the Selected Transactions of GAAP net operating
income for the last 12 months, estimated GAAP net operating income for the next
year and most recent GAAP book value of 18.0x to 22.0x, 16.0x to 20.0x and 2.00x
to 2.75x, respectively, to corresponding financial data for American Bankers for
actual calendar 1998 GAAP net operating income, estimated calendar 1999 GAAP net
operating income and GAAP book value as of
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<PAGE> 32
December 31, 1998. This resulted in an equity reference range for American
Bankers of approximately $47.00 to $58.00 per share on a diluted basis.
No company, business or transaction used as a comparison in the "Selected
Public Company Analysis" or the "Selected Insurance Transactions Analysis" is
identical to American Bankers or the Merger. Accordingly, an analysis of the
results of the foregoing is not entirely mathematical; rather, it involves
complex considerations and judgments concerning differences in financial and
operating characteristics and other factors that could affect the acquisition,
public trading or other values of the Selected Specialty Companies, Selected
Personal Lines Companies, Selected Life Companies, Selected Financial Companies,
Selected Transactions or the business segment, company or transaction to which
they are being compared.
Discounted Dividend Analysis
Salomon Smith Barney performed a discounted dividend analysis of the
projected dividendable GAAP net operating income of American Bankers for fiscal
years 1999 through 2003, based on internal estimates of the management of
American Bankers. The range of the estimated terminal value for American Bankers
at the end of the five-year period was calculated by applying terminal multiples
ranging from 14.0x to 16.0x to American Bankers' projected 2004 GAAP net
operating income, representing American Bankers' estimated value at December 31,
2003. The terminal value of American Bankers and projected dividendable GAAP net
operating income of American Bankers for the five-year period were discounted to
December 31, 1998 using rates of 11.5% and 13.5%. This analysis resulted in an
equity reference range for American Bankers of approximately $44.38 to $54.02
per share on a diluted basis.
Other Factors and Comparative Analyses
In rendering its opinion, Salomon Smith Barney considered certain other
factors and conducted certain other comparative analyses, including, among other
things, a review of: (i) the historical and projected financial results of
American Bankers; (ii) the history of trading prices and volume for the Common
Stock; and (iii) premiums paid in selected transactions in the insurance
industry.
Pursuant to the terms of Salomon Smith Barney's engagement, American
Bankers has paid Salomon Smith Barney for its services a retainer fee (the
"Retainer Fee") of $100,000. In addition, American Bankers has agreed to pay
Salomon Smith Barney $1,000,000 with respect to each opinion delivered by
Salomon Smith Barney to the American Bankers Board as to whether the
consideration to be received by the shareholders of American Bankers in
connection with the transaction contemplated by the Merger Agreement or a
similar transaction with a party other than Fortis (each, a "Transaction") is
fair to the shareholders of American Bankers from a financial point of view.
However, under Salomon Smith Barney's engagement, the aggregate Opinion Fees
payable can not exceed $2,000,000. Aggregate Opinion Fees of $2,000,000 have
been paid for the opinions of Salomon Smith Barney delivered on December 21,
1997 and February 27, 1998. In addition, American Bankers has agreed to pay
Salomon Smith Barney a transaction fee (the "Transaction Fee") of $5.5 million
(less the Retainer Fee and Opinion Fees), except that in the event a Transaction
involves the purchase of shares of Common Stock, an additional fee will be
payable as follows: (A) if the total consideration per share paid to or received
by the shareholders of American Bankers is greater than $40.00 but less than or
equal to $58.00, American Bankers will pay to Salomon Smith Barney an additional
fee in the amount equal to the lesser of (x) $6.6 million and (y) 2% of the
aggregate amount of such consideration paid to all American Bankers shareholders
in excess of $40.00 per share; and (B) if the total consideration per share paid
to or received by the shareholders of American Bankers is greater than $58.00,
American Bankers will pay to Salomon Smith Barney an additional fee in an amount
equal to (x) $6.6 million plus (y) 1% of the aggregate amount of such
consideration paid to all American Bankers shareholders in excess of $58.00 per
share, provided, however, that the additional fee payable under clause (B) shall
not exceed $9.5 million. The Transaction Fee becomes payable upon the
consummation of a Transaction. American Bankers has also agreed to reimburse
Salomon Smith Barney for reasonable travel and other reasonable out-of-pocket
expenses incurred by Salomon Smith Barney in performing its services, including
the reasonable fees and expenses of its legal counsel, subject to a cumulative
limit of $100,000, and to indemnify Salomon Smith Barney and related
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persons against certain liabilities, including liabilities under the federal
securities laws, arising out of Salomon Smith Barney's engagement.
Salomon Smith Barney has advised American Bankers that, in the ordinary
course of business, Salomon Smith Barney and its affiliates may actively trade
or hold the securities of American Bankers and Fortis Group or its affiliates
for their own account or for the account of customers and, accordingly, may at
any time hold a long or short position in such securities. Salomon Smith Barney
has in the past provided certain investment banking services to American Bankers
and Fortis Group or its affiliates unrelated to the Merger, for which services
Salomon Smith Barney has received compensation. In addition, Salomon Smith
Barney and its affiliates (including Citigroup Inc. and its affiliates) may
maintain relationships with American Bankers and Fortis Group or its affiliates.
Salomon Smith Barney is a nationally recognized investment banking firm and
was selected by American Bankers based on Salomon Smith Barney's experience,
expertise and familiarity with American Bankers and its business. Salomon Smith
Barney regularly engages in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
bids, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes.
THE FULL TEXT OF THE WRITTEN OPINION OF SALOMON SMITH BARNEY DATED MARCH 5,
1999, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO AS APPENDIX IV AND IS INCORPORATED
HEREIN BY REFERENCE. HOLDERS OF COMMON STOCK AND PREFERRED STOCK ARE URGED TO
READ THIS OPINION CAREFULLY IN ITS ENTIRETY. SALOMON SMITH BARNEY'S OPINION IS
DIRECTED TO THE AMERICAN BANKERS BOARD AND RELATES ONLY TO THE FAIRNESS OF THE
COMMON STOCK CONSIDERATION AND PREFERRED STOCK CONSIDERATION FROM A FINANCIAL
POINT OF VIEW TO HOLDERS OF COMMON STOCK AND TO HOLDERS OF PREFERRED STOCK,
RESPECTIVELY, DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER OR RELATED
TRANSACTIONS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO
HOW SUCH SHAREHOLDER SHOULD VOTE AT THE SPECIAL MEETING. THE SUMMARY OF THE
OPINION OF SALOMON SMITH BARNEY SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion describes certain United States federal income tax
consequences of the Merger. The discussion is based upon the Internal Revenue
Code of 1986, as amended, existing and proposed Treasury regulations promulgated
thereunder, rulings, administrative pronouncements and judicial decisions,
changes to which could materially affect the tax consequences described herein
and could be made on a retroactive basis. This discussion does not address all
aspects of federal income taxation that may be important to a shareholder based
on such holder's particular circumstances and does not address any aspect of
state, local or foreign tax laws. This summary generally considers only shares
of Common Stock or Preferred Stock that are held as capital assets (generally,
assets held for investment) and may not apply to holders who acquired Common
Stock or Preferred Stock pursuant to the exercise of employee stock options or
other compensation arrangements with the Company, holders that are subject to
special tax treatment (such as broker-dealers, insurance companies, tax-exempt
organizations, financial institutions, and regulated investment companies),
holders that hold Common Stock or Preferred Stock as part of a "straddle",
"hedge", or "conversion transaction", or holders the functional currency of
which is not the U.S. dollar.
Consequences to Holders of Common Stock. A holder of Common Stock will
recognize gain or loss equal to the difference between the amount of cash
received in the Merger and the holder's adjusted tax basis in the shares of
Common Stock exchanged. Such gain or loss will generally be capital gain or loss
and will be long-term capital gain or loss if at the Effective Time (as
hereinafter defined) the holder has a holding period for the Common Stock of
more than one year.
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<PAGE> 34
Consequences to Holders of Preferred Stock. If the favorable vote of the
holders of at least 2/3 of the outstanding shares of Preferred Stock voting as a
class is obtained at the Preferred Shareholders Special Meeting, a holder of
Preferred Stock will recognize gain or loss equal to the difference between the
amount of cash received in the Merger and the holder's adjusted tax basis in the
shares of Preferred Stock exchanged. Such gain or loss will generally be capital
gain or loss and will be long-term capital gain or loss if at the Effective Time
the holder has a holding period for the Preferred Stock of more than one year.
If a favorable vote of the holders of the Preferred Shares is not obtained, the
Merger will be modified to leave the Preferred Stock outstanding after the
Merger. For a description of the federal income tax consequences associated with
such modification, see "The Merger Agreement -- Modification for Preferred
Stock."
Backup Withholding and Information Reporting. Payments of cash to a holder
surrendering shares of Common Stock or Preferred Stock will be subject to
information reporting and "backup" withholding at a rate of 31% of the cash
payable to the holder, unless the holder furnishes its taxpayer identification
number in the manner prescribed in applicable Treasury Regulations, certifies
that such number is correct, certifies as to no loss of exemption from backup
withholding and meets certain other conditions. Any amounts withheld from
payments to a holder under the backup withholding rules will be allowed as a
refund or credit against the holder's United States federal income tax
liability, provided the required information is furnished to the IRS.
THE PRECEDING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR
DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT TO THE MERGER. THUS, AMERICAN
BANKERS SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, AND OTHER
APPLICABLE TAX LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
REGULATORY FILINGS AND APPROVALS
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and the rules promulgated thereunder by the Federal
Trade Commission (the "FTC"), the Merger cannot be consummated until
notifications have been given and certain information has been furnished to the
FTC and the Antitrust Division of the Department of Justice (the "Antitrust
Division") and specified waiting period requirements have been satisfied. Fortis
and American Bankers each filed notification and report forms under the HSR Act
with the FTC and the Antitrust Division on [--], 1999. The companies expect that
the waiting period will expire on [--], 1999 unless terminated earlier.
At any time before or after consummation of the Merger, the Antitrust
Division or the FTC or any state could take such action under the antitrust laws
as it deems necessary or desirable in the public interest, including seeking to
enjoin the consummation of the Merger or seeking divestiture of substantial
assets of Fortis or American Bankers. Such action could include seeking to
enjoin the consummation of the Merger or seeking divestiture of American Bankers
or businesses of Fortis or American Bankers by Fortis. Private parties may also
seek to take legal action under the antitrust laws under certain circumstances.
Insurance. The Merger is also subject to the receipt of necessary
approvals from various state and foreign insurance regulatory authorities. In
[--], 1999, Fortis filed an Application for Approval of Acquisition of Control
of or Merger with a Domestic Insurer (Form A) or a comparable application (each,
a "Form A") in a total of [--] states and where such filings were required and
made filings in various foreign jurisdictions. The insurance laws and
regulations of certain of the states where such Form A filings were made require
hearings by the state insurance departments before deciding whether to grant
approval of an acquisition described in a Form A filing. In certain of the
states that do not require a hearing prior to approval, Fortis would be entitled
to a hearing in the event the state insurance department proposed not to grant
the approval. The approvals described in this paragraph are pending as of the
date hereof.
In addition to the Form A filings, in [--], 1999, Fortis filed
Pre-Acquisition Notification Forms Regarding the Potential Competitive Impact of
a Proposed Merger or Acquisition by a Non-Domiciliary Insurer Doing Business in
this State or by a Domestic Insurer (Form E) or a comparable form (each, a
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"Form E") in [--] states where such filings were required. The Form E filings
are generally reviewed within 30 days after filing with the state insurance
departments, which may request additional information on the competitive impact
of a proposed acquisition. The 30 day time period will expire on or about [--],
1999. The approvals described in this paragraph are pending in [--] states as of
the date hereof.
There can be no assurance that the required regulatory approvals described
above will be received or, if received, the timing and the terms and conditions
thereof.
MANAGEMENT, OPERATIONS AND OWNERSHIP STRUCTURE FOLLOWING THE MERGER
Following the Merger, American Bankers will continue its operations as a
wholly-owned indirect subsidiary of Fortis. The directors of Sub will become the
directors of American Bankers. The officers of American Bankers will remain
unchanged as a result of the Merger, except that certain employees of Fortis
will become officers of American Bankers and Mr. Gaston will retire from
employment with American Bankers. However, Mr. Gaston has entered into a
consulting agreement with the Company which will become effective following the
Merger. Certain other employees have entered into severance agreements with
American Bankers which will continue to be effective upon the consummation of
the Merger. See "Related Agreements and Transactions -- Gaston Consulting
Agreement."
Fortis and United Family Life Insurance Company ("UFL"), a Georgia
domiciled insurance company and a wholly-owned indirect subsidiary of Fortis,
have entered into a stock purchase agreement (the "UFL Agreement"), to which
American Bankers is not a party. Pursuant to the UFL Agreement, Fortis will
transfer all of the common stock of Sub to UFL, so that as of the Effective Time
(as defined below), Sub will merge with and into American Bankers as
contemplated by the Merger Agreement, UFL will become the direct owner of
American Bankers and American Bankers will become a wholly-owned indirect
subsidiary of Fortis.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the American Bankers Board with
respect to the Merger, American Bankers' shareholders should be aware that
certain members of management of American Bankers and members of the American
Bankers Board have interests in the Merger that are different from, or in
addition to, the interests of the shareholders of American Bankers generally.
The American Bankers Board was aware of such interests and considered them,
among other matters, in approving the Merger Agreement and the transactions
contemplated thereby.
Gaston Consulting Agreement. American Bankers has entered into a
consulting agreement with Gerald N. Gaston which is described more fully below
in "Related Agreements and Transactions -- Gaston Consulting Agreement."
Pursuant to this consulting agreement, at the Effective Time, the Company is
obligated to pay to Mr. Gaston a lump sum of $8,045,000 as full payment of the
Company's obligation under the Executive Severance Contract with Mr. Gaston,
dated February 1, 1990 (subject to adjustment so that the amount received by Mr.
Gaston as a result of the Merger shall not exceed 2.99 times Mr. Gaston's "base
amount" as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986,
as amended).
Severance Agreements. American Bankers is currently a party to severance
agreements with various of its executive officers. Pursuant to the Merger
Agreement, American Bankers has agreed to use its best efforts to cause such
executive officers to agree to amendments to such severance agreements. Pursuant
to such amended severance agreements, certain executive officers will receive
severance payments if they are terminated under certain circumstances. The
severance agreements, and the amendments thereto, are described more fully below
in "Related Agreements and Transactions -- Amendments to Severance Agreements."
Assuming each such executive officer terminated employment immediately following
the Merger for Good Reason or under certain other circumstances (as defined in
the amended severance agreements), the estimated aggregate amount payable to
such officers pursuant to the amended severance agreements as a result of such
terminations of employment would be approximately $10.8 million.
Stock Options and Restricted Stock. American Bankers maintains various
plans pursuant to which stock option awards and restricted stock awards are made
to its directors and executive officers. Under the 1999
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Non-Employee Director's One-Time Award Plan (the "1999 Non-Employee Directors
Plan"), the 1994 Senior Management Stock Option Plan (the "1994 Senior Plan"),
the 1991 Stock Option/Restricted Stock Award Plan (the "1991 Award Plan"), and
the 1991 Stock Incentive Compensation Plan (the "1991 Incentive Plan"), upon the
exercise of a stock option, the optionee is entitled to receive shares of Common
Stock which are subject to restrictions on transfer ("Restricted Stock") (which,
in the case of the 1994 Senior Plan and the 1991 Award Plan, are in addition to
non-restricted shares of Common Stock received upon such exercise). Pursuant to
the terms of the 1999 Non-Employee Directors Plan, the 1994 Senior Plan, the
1991 Award Plan and the 1991 Incentive Plan, upon a "change in control" (as
defined in such plans), the restrictions applicable to shares of Restricted
Stock then held by directors and executive officers on account of the exercise
of options under such plans will lapse. The Merger will constitute a change in
control under such plans and, accordingly, the restrictions on shares of
Restricted Stock then held by executive officers on account of the exercise of
options under such plans will lapse. American Bankers has also granted options
to purchase Common Stock under the 1997 Equity Incentive Plan (the "1997
Incentive Plan"). Pursuant to the award agreements entered into under the 1997
Incentive Plan, certain awards will become fully vested and exercisable upon a
"change in control" (as defined under the 1997 Incentive Plan). Upon the
exercise of an option under the 1997 Incentive Plan, the optionee is entitled to
receive shares of Restricted Stock (as well as non-restricted shares of Common
Stock). The Merger will constitute a change in control under the 1997 Incentive
Plan for certain of the awards thereunder, and, accordingly, those unvested
options subject to these change of control provisions under such plan will
become immediately vested and exercisable upon consummation of the Merger and
shares of Restricted Stock then held on account of the exercise of options under
the 1997 Incentive Plan will become fully vested. The treatment in the Merger of
outstanding options is described in more detail in "The Merger
Agreement -- Treatment of Stock Options."
Mr. James F. Jorden, a director of American Bankers, is the Managing Senior
Partner of the law firm of Jorden Burt Boros Cicchetti Berenson & Johnson LLP,
which provides legal services to American Bankers, including in connection with
the Merger, for which it will receive compensation.
On March 5, 1999, the American Bankers Board amended the 1994 Non-Employee
Directors' Stock Option Plan to allow grants thereunder to be exercisable for
five years or as otherwise determined by the American Bankers Board. The
American Bankers Board also extended by one year the term of certain options
issued under that plan which were set to expire in May, 1999.
The following table summarizes the payments to be made under the foregoing
plans and agreements to the named executive officers, the elected officers as a
group, and the directors of American Bankers:
<TABLE>
<CAPTION>
ALL ELECTED
OFFICERS AND
R. KIRK GERALD N. EUGENE E. JAY R. FLOYD G. DIRECTORS
LANDON GASTON BECKER FUCHS DENISON (28 PERSONS)
---------- ---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Consulting Agreements......................... $ 0 $8,045,000 $ 0 $ 0 $ 0 $ 8,045,000
Executive Severance........................... 0 0 648,000 495,510 1,770,098 10,812,215
1994 Directors Deferred Compensation
Plan(1)*.................................... 1,453,871 0 0 0 0 6,696,499
1999 Non-Employee Directors One-Time Award
Plan(1)*.................................... 0 0 0 0 0 113,750
Shares Subject to Options*.................... 0 0 11,813 9,450 11,025 1,687,700
Restricted Award Shares*...................... 0 0 938,250 729,750 750,600 6,677,905
Totals...................................... $1,453,871 $8,045,000 $1,598,063 $1,234,710 $2,531,723 $34,033,069
</TABLE>
- ---------------
* The aggregate value is based on the closing price of American Bankers Common
Stock on the NYSE Composite Transaction Tape on March 26, 1999. The value of
stock options included in the aggregate value is net of the applicable
exercise price of stock options.
(1) Values given for the 1994 Directors Deferred Compensation Plan are not net
of consideration paid.
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ABSENCE OF APPRAISAL RIGHTS
Under Florida law, holders of Preferred Stock and Common Stock are not
entitled to dissenters' or appraisal rights in connection with the Merger
because the Preferred Stock and the Common Stock are listed on the NYSE.
PUBLIC TRADING MARKETS
The Preferred Stock and Common Stock currently are listed on the NYSE under
the symbols "ABI 3 1/8 Pfd" and "ABI," respectively. Upon consummation of the
Merger, the Preferred Stock and Common Stock will be delisted from the NYSE and
deregistered under the Exchange Act (unless the Preferred Stock remains
outstanding as described below in "The Merger Agreement -- Modification for
Preferred Stock," in which case the Preferred Stock will remain outstanding and
may remain listed on the NYSE and registered under the Exchange Act).
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THE MERGER AGREEMENT
The following describes certain aspects of the proposed Merger, including
material provisions of the Merger Agreement. The following description of the
Merger does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreement, which is attached as Appendix I to this Proxy
Statement and is incorporated herein by reference. Holders of Preferred Stock
and Common Stock are urged to read the Merger Agreement carefully. Capitalized
terms used in this section or elsewhere in this Proxy Statement but not defined
in this Proxy Statement shall have the meanings attributed to them in the Merger
Agreement.
GENERAL; MERGER CONSIDERATION
The terms of the Merger are set forth in the Merger Agreement that was
approved by the American Bankers Board and the Fortis board of directors and
signed by American Bankers, Fortis and Sub on March 5, 1999, a copy of which is
attached hereto as Appendix I. Pursuant to the Merger Agreement, and on the
terms and conditions set forth therein, Sub will be merged with and into
American Bankers. American Bankers will be the surviving corporation in the
Merger (the "Surviving Corporation").
As a result of the Merger, each share of Common Stock (including any
associated rights issued pursuant to American Banker's shareholder rights plan)
issued and outstanding immediately prior to the Effective Time (other than
shares of Common Stock owned by Fortis, Sub or any other direct or indirect
subsidiary of Fortis (the "Fortis Companies") or owned by American Bankers or
any direct or indirect subsidiary of American Bankers (the "American Bankers
Companies") and in each case not held on behalf of third parties (the "Common
Excluded Shares")) shall be converted into and exchanged into the right to
receive $55.00 in cash, without interest, (such amount, the "Common Stock Merger
Consideration").
As a result of the Merger, each share of Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than shares of
Preferred Stock owned by the Fortis Companies or the American Bankers Companies
and in each case not held on behalf of third parties (the "Preferred Excluded
Shares," and together with the Common Excluded Shares, the ("Excluded Shares"))
shall be converted into and exchangeable into the right to receive $109.857 in
cash, without interest, (the "Preferred Stock Merger Consideration," and
together with the Common Stock Merger Consideration to be paid, the "Merger
Consideration"), provided, however, that if the Merger is not approved by the
holders of at least 2/3 of the outstanding shares of Preferred Stock voting as a
class (the "Preferred Stock Requisite Vote") at the Preferred Shareholders
Special Meeting or Fortis reasonably determines that the Preferred Stock
Requisite Vote is not likely to be obtained, and all conditions to the
consummation of the Merger are otherwise satisfied, the Preferred Stock will
continue to remain outstanding after the Merger pursuant to the same terms and
conditions as are in effect on March 5, 1999 (except that each share of
Preferred Stock will be convertible into $109.857 in cash). See "The Merger
Agreement -- Modification for Preferred Stock."
CLOSING; EFFECTIVE TIME
The Closing of the Merger (the "Closing") will take place on the first
business day on which the last to be fulfilled or waived of the conditions to
the Merger set forth in the Merger Agreement to be fulfilled prior to Closing is
satisfied or waived or on such other day as American Bankers and Fortis agree in
writing (the "Closing Date"). As soon as practicable following the Closing,
American Bankers and Fortis will cause Articles of Merger to be executed,
acknowledged and filed with the Secretary of State of the State of Florida. The
Merger will 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"). See "-- Conditions of the
Proposed Merger" and "The Merger -- Required Regulatory Filings and Approvals."
CANCELLATION OF SHARES
At the Effective Time, all shares of Preferred Stock and Common Stock 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
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Preferred Stock Merger Consideration or Common Stock Merger Consideration, as
applicable. Each Excluded Share 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 therefor and shall
cease to exist.
EXCHANGE OF CERTIFICATES
Promptly after the Effective Time, Fortis shall deposit, or shall cause to
be deposited, with [--] (the "Exchange Agent"), for the benefit of the holders
of shares of Preferred Stock and Common Stock, the Merger Consideration to be
issued or paid pursuant to the Merger Agreement in exchange for shares of
Preferred Stock and Common Stock outstanding immediately prior to the Effective
Time upon due surrender of the Certificates (or affidavits of loss in lieu
thereof) (such cash amounts payable with respect thereto, being hereinafter
referred to as the "Exchange Fund"). Promptly after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to each holder of
record of shares of Preferred Stock and each holder of record of shares of
Common Stock (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, and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration. 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 the Merger
Consideration that such holder has the right to receive pursuant to the
provisions of the Merger Agreement, 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.
TRANSFERS
After the Effective Time, there shall be no transfers on the stock transfer
books of American Bankers of the shares of Preferred Stock or Common Stock that
were outstanding immediately prior to the Effective Time.
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 Fortis or the
Exchange Agent, 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 appropriate Merger Consideration in respect thereof
pursuant to the Merger Agreement upon due surrender of and deliverable in
respect of the shares of Preferred Stock or Common Stock represented by such
Certificate pursuant to the Merger Agreement.
ADJUSTMENTS TO PREVENT DILUTION
In the event that American Bankers changes the number of shares of
Preferred Stock or Common Stock or securities convertible or exchangeable into
or exercisable for shares of Preferred Stock or 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, merger, subdivision or other similar transaction, the
Preferred Stock Merger Consideration or Common Stock Merger Consideration, as
applicable, shall be equitably adjusted.
REPRESENTATIONS AND WARRANTIES
Mutual Representations and Warranties
American Bankers, Fortis and Sub have made representations relating to,
among other things: (a) each of American Bankers', Fortis' and Sub's
capitalization and organization and similar corporate matters; (b)
authorization, execution, delivery, performance and enforceability of the Merger
Agreement and the
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Stock Option Agreement and related matters; (c) conflicts under governing
documents, required consents or approvals, and violations of any agreements or
law.
Additional Representations and Warranties of American Bankers
American Bankers has made additional representations relating to (a)
receipt of an opinion of its financial advisor; (b) retirement and other
employee plans and matters relating to the Employee Retirement Income Security
Act of 1974, as amended (ERISA); (c) ownership of intellectual property and
absence of infringement of third party intellectual property; (d) litigation and
undisclosed liabilities; (e) compliance with law, including compliance with
insurance, tax and environmental laws and regulations; (f) actions taken in
connection with takeover statutes; (g) the absence of contracts with labor
unions or organizations; (h) the disclosure and enforceability of certain
material contracts; (i) the Rights Agreement; (j) the adequacy of reserves and
related matters; (k) documents filed with the Commission and applicable
insurance regulatory authorities and the accuracy of information contained
therein; (l) absence of certain material adverse events, changes or effects; (m)
compliance with insurance laws and regulations and related insurance matters;
(n) certain tax matters; and (o) brokers and finders.
Additional Representations and Warranties of Fortis and Sub
Fortis additionally has represented that (i) it intends to maintain the
office, day care and school facilities of the Surviving Corporation at their
present location and (ii) it has sufficient cash or other funds to be able to
complete its obligations under the Merger Agreement.
CONDUCT OF AMERICAN BANKERS' BUSINESS PRIOR TO THE MERGER
American Bankers has covenanted and agreed as to itself and, where
indicated, each of its subsidiaries that after the date of the Merger Agreement
and prior to the Effective Time (unless Fortis shall otherwise approve in
writing and except as otherwise expressly contemplated by the Merger Agreement,
the Stock Option Agreement or as set forth in the American Bankers Disclosure
Letter) that
(a) it and its subsidiaries shall conduct their businesses in the
ordinary and usual course (it being understood that nothing contained in
the Merger Agreement permits American Bankers 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 American Bankers and its subsidiaries or to enter
into or engage in any new lines of business without Fortis' prior written
consent);
(b) it and its subsidiaries shall use their best efforts to preserve
their business organizations intact and maintain their existing relations
and goodwill with customers, suppliers, reinsurers, distributors,
creditors, lessors, employees and business associates;
(c) it shall not issue, sell, pledge, dispose of or encumber any
capital stock owned by it in any of its subsidiaries;
(d) it shall not amend or modify the American Bankers Articles or the
American Bankers Bylaws or amend, modify or terminate the Rights Agreement
except as contemplated by the Merger Agreement;
(e) it shall not split, combine or reclassify its outstanding shares
of capital stock;
(f) it shall not authorize, declare, set aside or pay any dividend
payable in cash, stock or property in respect of any capital stock other
than dividends from subsidiaries, regular quarterly cash dividends paid by
it on the Common Stock not in excess of $0.12 per share of Common Stock and
regular quarterly dividends paid by it on the Preferred Stock in accordance
with the American Bankers Articles;
(g) it shall not repurchase, redeem or otherwise acquire (except in
connection with any American Bankers Stock Plans) or permit any of its
subsidiaries to purchase or otherwise acquire any shares of its capital
stock or any securities convertible into or exchangeable or exercisable for
any shares of its capital stock;
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(h) neither it nor its subsidiaries shall issue, sell, pledge, dispose
of or encumber any shares of, or any securities convertible 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 of the Merger Agreement under any of the American
Bankers Stock Plans or upon conversion of the Preferred Stock);
(i) other than in the ordinary and usual course of business, neither
it nor any of its subsidiaries shall transfer, lease, license, guarantee,
sell, mortgage, pledge, dispose of or encumber any other property or assets
(including capital stock of its subsidiaries) or incur or modify any
material indebtedness or other liability;
(j) neither it nor any of its subsidiaries shall 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);
(k) 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 of its compensation and benefit plans, other than (x) cash
bonuses to sales personnel and the cash bonuses owed to employees pursuant
to the Management Incentive Plan in respect of 1998 in an aggregate amount
not to exceed $6,100,000 and (y) extend for up to 12 months the expiration
date of any stock option held by non-employee directors of American
Bankers, 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);
(l) 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 American Bankers 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;
(m) 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;
(n) 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 American Bankers 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 American Bankers or any of its subsidiaries or affiliates;
(o) 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, materially increases or reduces the American
Bankers insurance subsidiaries' consolidated ratio of net written premiums
to gross written premiums or (C) pursuant to which $10 million or more in
gross written premiums are ceded by an insurance subsidiary of American
Bankers to any person other than American Bankers or any of its
subsidiaries;
(p) neither it nor any of its insurance subsidiaries shall alter or
amend in any material respect its existing investment guidelines or
policies;
(q) 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
(r) neither it nor any of its subsidiaries shall authorize or enter
into any agreement to take any of the foregoing actions.
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AGREEMENT NOT TO SOLICIT OTHER OFFERS
American Bankers has agreed that it will not, and it will not permit or
cause any of its subsidiaries or any of its or its subsidiaries' directors and
officers to, and it 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) (collectively, its "Representatives")
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 15% or more of the
equity securities of it or any of its subsidiaries (any such proposal or offer,
for the purpose of the Merger Agreement being referred to as an "Acquisition
Proposal"). American Bankers has further agreed that it will not, and it will
not permit or cause any of its subsidiaries or any of its or its subsidiaries'
officers and directors to, and it shall direct its Representatives 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
the Merger 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); provided, however, that nothing contained in
the Merger Agreement shall prevent American Bankers or the American Bankers
Board 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 holders of Common Stock (A) providing information in response
to a request therefor by a person who has made an unsolicited bona fide written
Acquisition Proposal if the American Bankers Board 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 the Merger Agreement); (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 Acquisition Proposal to its
shareholders, if and only to the extent that, (i) in each such case referred to
in clause (A), (B) or (C) above, the American Bankers Board determines in good
faith after consultation with outside legal counsel that such action is
necessary in order for the American Bankers 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 American Bankers Board 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 Merger, taking into account the long-term prospects and
interests of it and its shareholders (any such more favorable Acquisition
Proposal being referred to, for the purpose of the Merger Agreement, as a
"Superior Proposal").
American Bankers also has agreed to immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
being conducted prior to execution of the Merger Agreement with respect to any
of the foregoing. American Bankers further agreed that it will take the
necessary steps to promptly inform its officers, directors, subsidiaries and
Representatives of the foregoing obligations and the obligations in the
Confidentiality Agreement.
American Bankers also agreed to notify Fortis immediately if any inquiries,
proposals or offers are received by, any such information is requested from, or
any 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 to keep Fortis 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. American Bankers further agreed to promptly request each person
that had executed a confidentiality agreement in connection with its
consideration of an Acquisition Proposal to return all confidential information
that had been furnished to such person by or on behalf of American Bankers or
any of its subsidiaries.
EMPLOYEE BENEFITS
Fortis has agreed that from the Effective Time until the first anniversary
thereof, the employees of American Bankers and its subsidiaries will continue to
be provided with benefits that are no less favorable in
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the aggregate than those currently provided by the Company and its subsidiaries
to such employees (other than plans involving the issuance or award of Common
Stock or rights to acquire Common Stock). Any such employees will receive credit
under any plans of Fortis or any of its subsidiaries for service with American
Bankers or its subsidiaries or predecessors (to the extent service with such
predecessors was credited under the Compensation and Benefit Plans disclosed in
the American Bankers Disclosure Letter) prior to the Effective Time for the
purpose of determining eligibility, vesting and benefit approval (except that no
employee of American Bankers shall be entitled to any benefit accrual under any
pension or other defined benefit plan of Fortis or any of its subsidiaries other
than American Bankers). Fortis also has agreed to cause 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 Fortis or any of its subsidiaries to
be waived with respect to such participants and their eligible dependants. All
discretionary awards and benefits under any group health plans of Fortis or any
of its subsidiaries shall be subject to the discretion of the persons or
committee administering such plans.
TREATMENT OF STOCK OPTIONS AND RESTRICTED SHARES
The Merger Agreement provides that at the Effective Time, each exercisable
option to acquire shares under any of the Company's stock option plans (each, an
"Option"), other than a 1998 Company Option (as defined below) will be cancelled
at the Effective Time and in consideration therefor, Fortis shall pay or shall
cause to be paid to the holder of such Option (i) in the case of shares of
Common Stock to be acquired pursuant to an Option which are designated as
Primary Shares (as defined in the applicable Option or American Bankers Stock
Plan), an amount equal to the product of (A) the excess of $55.00 per share over
the exercise price of the Option and (B) the number of shares of Common Stock
which are designated as Primary Shares and (ii) in the case of shares of Common
Stock to be acquired pursuant to an Option which are shares of Restricted Stock,
an amount equal to the product of (A) $55.00 and (B) the number of shares of
Common Stock which are shares of Restricted Stock.
Each Option issued pursuant to the 1997 Incentive Plan (whether or not
exercisable at the Effective Time) that by its terms does not require the
termination of the restrictions on the shares of Restricted Stock issued
pursuant to such Option as a result of the Merger (such Option, a "1998 Company
Option") will be cancelled at the Effective Time and in consideration therefor:
(i) with respect to any share of Restricted Stock which would be
issuable pursuant to such 1998 Company Option (a "Restricted Option
Share"), Fortis shall pay or shall cause to be paid to American Bankers an
amount equal to the product of (A) the excess of $55.00 over the price, if
any, per Restricted Option Share and (B) the number of Restricted Option
Shares, which amount shall be held by the Surviving Corporation and
delivered to the holder of the 1998 Company Option pursuant to the same
terms and conditions as would have been applicable to the Restricted Option
Share; and
(ii) with respect to shares of Common Stock issued pursuant to a 1998
Company Option which are not Restricted Stock, Fortis shall pay or shall
cause to be paid to the holder of such 1998 Company Option an amount equal
to the product of (A) the excess of $55.00 per share over the exercise
price of the Option and (B) the number of shares subject to such Option.
The Merger Agreement also provides that at the Effective Time, each share
of Restricted Stock other than a 1998 Restricted Share (as defined below), will
be cancelled at the Effective Time and in consideration therefor, Fortis shall
pay or shall cause to be paid to the holder of such shares of Restricted Stock
an amount equal to the product of (A) $55.00 and (B) the number of shares of
Restricted Stock held by such person, provided, however, that if any amount of
the consideration paid by a holder upon initial issuance of a share of
Restricted Stock was financed by a loan guaranteed by American Bankers, Fortis
shall pay or cause to be paid to the lender the lesser of the amount due on such
loan or $55.00, and shall pay to the holder an amount equal to the product of
(A) $55.00 and (B) the number of shares of Restricted Stock held by such person
less any amounts used to repay such loan.
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Each share of Restricted Stock which by its terms does not require the
termination of the restrictions on such share as a result of the Merger (a "1998
Restricted Share") will be cancelled at the Effective Time and in consideration
therefor:
(i) Fortis shall pay or shall cause to be paid to the holder of such
1998 Restricted Share the consideration paid by such holder upon initial
issuance of each 1998 Restricted Share (the "Exercise Price"), provided,
however, that if any amount of the Exercise Price was financed by a loan
guaranteed by American Bankers, Fortis shall pay or cause to be paid to the
lender the lesser of the amount due on such loan and the Exercise Price,
and shall pay to the holder of the 1998 Restricted Share the difference
between any loan so repaid and the Exercise Price; and
(ii) Fortis shall pay or shall cause to be paid to American Bankers,
to be held on behalf of the holder of the 1998 Restricted Share, the
difference between $55.00 and any amount paid out pursuant clause (i)
above, which sum shall be delivered to the holder of the 1998 Restricted
Share pursuant to the same terms and conditions as would have been
applicable to the 1998 Restricted Share.
Any amounts which are to be paid to American Bankers in respect of a 1998
Company Option or 1998 Restricted Share (as described above) will become payable
to the holder thereof immediately if American Bankers terminates the employment
of such holder solely as a result of a reduction in work force resulting from
the Merger occurring within 36 months of the Effective Time.
All payments to holders of Options or shares of Restricted Stock are
subject to applicable withholding taxes.
CERTAIN OTHER COVENANTS AND AGREEMENTS
Information; Filings
American Bankers and Fortis have agreed:
(i) to supply accurate, complete and updated information in connection
with the preparation of this Proxy Statement,
(ii) to furnish the other on request with all information concerning
itself, its subsidiaries, directors, officers and shareholders and such
other matters as may reasonably be necessary or advisable in connection
with this Proxy Statement and any other filing, notice or application made
in connection with the Merger and
(iii) to keep each other apprised of the status of matters relating to
the completion of the transactions contemplated by the Merger Agreement
including the provision of copies of communications received from
governmental entities and third parties and prompt notice of any change
that is reasonably likely to result in a material adverse effect on the
financial condition, properties, business or results of operations of
American Bankers and its subsidiaries taken as a whole.
American Bankers has agreed to promptly prepare and file this Proxy
Statement with the Commission. American Bankers and Fortis further agreed to
cooperate with one another and to use their respective reasonable best efforts
to
(i) cause to be done all things necessary, proper or advisable on its
part under the Merger Agreement and applicable laws to consummate and make
effective the Merger and the other transactions contemplated by the Merger
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) 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 Merger or any of the other
transactions contemplated by the Merger Agreement, including, without
limitation, upon request of Fortis, all material consents required in
connection with the consummation of the Merger,
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provided, however, that nothing in the foregoing requires Fortis, in connection
with the receipt of any regulatory approval, to (i) sell or agree to sell or
discontinue or limit any assets or businesses or any interest in any assets or
businesses of Fortis or American Bankers or any of their respective affiliates
or (ii) agree to any conditions relating to or changes or restrictions in, the
operations of any such assets or businesses which, in either case, could, in the
reasonable judgment of the Fortis board of directors, materially and adversely
impact the economic or business benefits to Fortis of the transactions
contemplated by the Merger Agreement.
Access
American Bankers has agreed to provide Fortis' officers, employees,
counsel, accountants and other authorized representatives with access to its and
its subsidiaries' management, property, books, contracts and records throughout
the period prior to the Effective Time and during such period to furnish to
Fortis all information as it may reasonably request, provided that such access
may be denied to prevent the disclosure of trade secrets of third parties or the
breach of any confidentiality obligations of American Bankers that, in the
reasonable opinion of American Bankers, would otherwise result, if American
Bankers has used all reasonable efforts to obtain the consent of such third
parties to such inspection or disclosure. No investigation made by Fortis
pursuant to the foregoing shall affect or be deemed to modify any representation
or warranty made by American Bankers. American Bankers has also agreed to make
available office space within its headquarters to enable Fortis to monitor the
operations and activities of American Bankers and its subsidiaries and to
develop plans (to the extent not prohibited by law) for the integration of the
business of American Bankers, including negotiating and confirming post-Closing
employment terms with current American Bankers employees.
In addition, Fortis can continue to review American Bankers' and its
subsidiaries' plans to become fully year 2000 compliant and American Bankers has
agreed to use reasonable efforts to correct any material aspect in which
American Bankers or its subsidiaries is not year 2000 compliant.
Special Meetings
American Bankers has agreed to take all action necessary to convene the
Preferred Shareholders Special Meeting and the Common Shareholders Special
Meeting as promptly as practicable after the Proxy Statement has been filed with
SEC. Subject to fiduciary obligations under applicable law, the American Bankers
Board shall recommend approval of the Merger, shall not withdraw or modify such
recommendation and shall take all lawful action to solicit the approval of the
Merger. In the event that the American Bankers Board withdraws or modifies its
recommendation, American Bankers has agreed that the Preferred Shareholders
Special Meeting and the Common Shareholders Special Meeting shall nevertheless
be convened, votes with respect to the Merger shall be taken and the reasons for
such withdrawal or modification shall be communicated to the shareholders of
American Bankers in accordance with the FBCA.
Directors and Officers of the Surviving Corporation
The Merger Agreement provides that, immediately following the Effective
Time, the directors of Sub shall be the directors of the Surviving Corporation.
The Merger Agreement further provides that the officers of American Bankers at
the Effective Time shall be the officers of the Surviving Corporation.
Indemnification of Directors and Officers; Directors and Officers' Insurance
Fortis has agreed to cause the Surviving Corporation to indemnify each
present and former director and officer of American Bankers from liability
arising out of matters existing or occurring at or prior to the Effective Time
to the fullest extent that American Bankers would have been permitted to
indemnify such parties under Florida law and the American Bankers Articles and
Bylaws. Such indemnification obligation is applicable only to the extent that
any directors' and officers' liability insurance policy of American Bankers or
its subsidiaries does not provide coverage and actual payment with respect to
any such matters. Fortis also has agreed that the Surviving Corporation will
maintain American Bankers' existing officers' and directors' liability insurance
or purchase substantially comparable insurance for up to six years following the
Effective
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Time, subject to certain maximum required premium amounts. See "The
Merger -- Interests of Certain Persons in the Merger".
Rights Agreement
American Bankers has agreed that, if requested by Fortis prior to the
Effective Time, the American Bankers Board will take all necessary action to
terminate or redeem all of the outstanding Rights and to terminate the Rights
Agreement (as hereinafter defined), effective immediately before the Effective
Time. See "Related Agreements and Transactions -- Amendment to Rights
Agreement".
Amendments to Severance Agreements
American Bankers has agreed to use its best efforts to cause itself and
certain persons employed by it to enter into, prior to the Effective Time,
amendments to the respective severance agreements currently effective between
such parties. See "Related Agreements and Transactions -- Amendments to
Severance Agreements".
Support of The ABIG Foundation, Inc.
Fortis has agreed to support The ABIG Foundation, Inc. (the "Foundation"),
through annual contributions of no less than $1,200,000 per year for each of
calendar years 2000 and 2001, subject to the reasonable determination of the
Board of Directors of the Surviving Corporation that such amount is reasonable
in light of the Surviving Corporation's then general economic performance and
condition and budgetary constraints. After calendar year 2001, the Surviving
Corporation will continue to support the community through charitable donations
consistent with past practices and with Fortis' guidelines for charitable
donations. Fortis has also agreed to continue to provide the Foundation the
office space it currently uses in Coral Gables, Florida, provided that such
obligation does not exceed a cost of $175,000 per year, and further provided
that certain office space therein is to be used by Mr. Gaston pursuant to his
consulting agreement. See "Related Agreements and Transactions -- The Gaston
Consulting Agreement." The Surviving Corporation shall be entitled to have at
least one designee, initially Mr. Allen Freedman, serving as a director of the
Foundation.
CONDITIONS OF THE PROPOSED MERGER
Mutual Conditions
The obligation of each of American Bankers and Fortis to effect the Merger
is conditioned on the following:
(a) the approval of the Merger by the holders of at least a majority
of the outstanding shares of Common Stock (the "Common Stock Requisite
Vote"), in accordance with applicable law;
(b) the expiration or termination of the waiting period applicable to
the consummation of the Merger under the HSR Act and, other than the filing
of the Articles of Merger in Florida, all notices, reports and other
filings required to be made prior to the Effective Time by American Bankers
or Fortis 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 American Bankers, Fortis or any of
their respective subsidiaries from, any governmental entity (collectively,
"Governmental Consents") in connection with the execution and delivery of
the Merger Agreement by American Bankers, Fortis and Sub and the
consummation of the Merger and the other transactions contemplated thereby
having been made or obtained (as the case may be);
(c) no court or governmental entity of competent jurisdiction having
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 the consummation of the Merger;
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(d) the other party's representations and warranties, subject to
certain materiality exceptions, being true and correct as of the date of
the Merger Agreement and as of the Closing Date and the receipt of
certificates to such effect;
(e) the performance in all material respects by the other party of its
obligations under the Merger Agreement and the receipt of certificates to
such effect; and
(f) the receipt by the other party of all material third party
consents (and, in the case of consents obtained by American Bankers, the
absence of material conditions imposed by or in connection with such
consents on the operations or businesses of the parties).
Additional Conditions to the Obligations of Fortis and Sub
The obligations of Fortis and Sub under the Merger Agreement are subject to
the effectiveness of a consulting agreement between Mr. Gerald N. Gaston and
American Bankers. See "Related Agreements and Transactions -- Gaston Consulting
Agreement".
TERMINATION
The Merger Agreement may be terminated:
(i) at any time prior to the Effective Time, whether before or after
approval of the Merger Agreement by holders of Preferred Stock or Common
Stock, by mutual written consent of American Bankers and Fortis;
(ii) by American Bankers or Fortis, any time before or after the
Merger Agreement is approved by holders of Preferred Stock or Common Stock,
if the Merger shall not have been consummated by September 30, 1999,
provided that the terminating party is not otherwise in material breach of
its obligations under the Merger Agreement in any manner that shall have
proximately contributed to the occurrence of the failure of the Merger to
be consummated, and further provided, that if all conditions to the
completion of the Merger other than the condition that all necessary
approvals of governmental authorities be obtained are satisfied, such date
may be extended for up to three (3) additional one-month periods to allow
such consents to be obtained;
(iii) by American Bankers or Fortis if the approval of the holders of
a majority of the outstanding shares of Common Stock shall not have been
obtained at a meeting duly convened therefor or any adjournment or
postponement thereof;
(iv) by American Bankers or Fortis if any order permanently
restraining, enjoining or otherwise prohibiting consummation of the Merger
shall become final and non-appealable;
(v) by American Bankers if at any time, American Bankers is not in
material breach of any of the terms of the Merger Agreement, the Merger
shall not have been approved by the Common Stock Requisite Vote, and the
American Bankers Board has authorized American Bankers, subject to the
terms of the Merger Agreement, to enter into a binding written agreement
concerning a transaction that constitutes a Superior Proposal and American
Bankers notifies Fortis in writing at least five days in advance that it
intends to enter into such an agreement and Fortis does not make an offer
to American Bankers that the American Bankers Board determines is at least
as favorable as the Superior Proposal;
(vi) by American Bankers, any time before the approval of the holders
of a majority of the outstanding shares of Common Stock shall have been
obtained, if the American Bankers Board authorizes it to enter into an
agreement with respect to a Superior Proposal (subject to (w) there being
no material breach by American Bankers of the provisions of the Merger
Agreement, (x) American Bankers giving written notice of such Superior
Proposal to Fortis, (y) Fortis failing to make, prior to five business days
after receipt of American Bankers' written notice of its intention to enter
into a binding agreement for a Superior Proposal, an offer that the
American Bankers' Board 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 American
Bankers and its shareholders and
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(z) American Bankers paying to Fortis prior to termination of the Merger
Agreement the fees described under "-- Expenses and Termination Fees";
(vii) by American Bankers or Fortis at any time prior to the Effective
Time in the event of a material breach by the other party of any
representation, warranty, covenant or agreement which is not curable or not
cured as provided in the Merger Agreement; or
(viii) by Fortis at any time prior to the Effective Time, if American
Bankers enters into a binding agreement for a Superior Proposal or if the
American Bankers Board withdraws or modifies its approval or recommendation
of the Merger Agreement or, after the mailing of this Proxy Statement,
fails to reconfirm its recommendation within ten business days after a
reasonable written request by Fortis to do so.
EXPENSES AND TERMINATION FEES
Except as described below, whether or not the Merger is consummated, all
costs and expenses incurred in connection with the Merger Agreement, the Merger
and the other transactions contemplated by the Merger Agreement shall be paid by
the party incurring such expenses, except that (i) expenses in connection with
printing and mailing this proxy statement and (ii) if Sub commences the Tender
Offer (as defined below), expenses incurred in printing and mailing documents
relating to the Tender Offer, shall both be shared equally by Fortis and
American Bankers.
The Merger Agreement provides that if the Merger Agreement is terminated:
- by American Bankers or Fortis in the manner described in clause (ii)
under "-- Termination" and at the time of such termination any person
shall then be making or proposing an Acquisition Proposal to American
Bankers or any of its subsidiaries or stockholders;
- by Fortis or American Bankers in the manner described in clause (iii)
under "-- Termination";
- by American Bankers in the manner described in clause (v) under
"-- Termination"; or
- by Fortis in the manner described in clause (viii) under
"-- Termination";
then American Bankers shall use reasonable efforts to cause any person making an
Acquisition Proposal, not later than two days after the date of such termination
or date of entrance into an agreement concerning a transaction that constitutes
an Acquisition Proposal or such earlier time as required by the Merger
Agreement, to pay Fortis a termination fee of $85 million (the "Termination
Fee") plus an amount, up to a maximum of $5,000,000, equal to Fortis' charges
and expenses (the "Expenses") incurred in connection with the transactions
contemplated by the Merger Agreement (except in the case of a termination by
American Bankers in the manner described in clause (iii) under "-- Termination,"
in which case American Bankers shall pay the Termination Fee and Expenses
directly). In addition, if the Merger Agreement is terminated as described in
clause (ii) under "-- Termination" and no person is making an Acquisition
Proposal to American Bankers, then American Bankers will pay the Expenses,
provided, however, that if American Bankers enters into an agreement concerning
a transaction that constitutes an Acquisition Proposal, American Bankers shall
cause the person making the Acquisition Proposal to pay to Fortis the
Termination Fee.
In the event the Merger Agreement is terminated by American Bankers or
Fortis in the manner described in clause (ii) under "-- Termination," and at the
time of such termination no person is then making or proposing an Acquisition
Proposal to American Bankers or any of its subsidiaries or any of its
shareholders, then American Bankers, no later than 2 days after being requested
by Fortis, shall pay Fortis its Expenses up to $5,000,000. If within 18 months
of such a termination, American Bankers enters into an agreement concerning a
transaction which constitutes an Acquisition Proposal, American Bankers has
agreed to cause the person making the Acquisition Proposal to pay to Fortis the
Termination Fee.
If American Bankers is obligated to use reasonable efforts to cause a
person making an Acquisition Proposal to pay a Termination Fee or Expenses but
is unable to do so, American Bankers is required to pay those amounts directly
to Fortis.
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AMENDMENT AND WAIVER
Subject to the provisions of applicable law, any provision of the Merger
Agreement may be amended or modified at any time prior to the Effective Time by
means of a written agreement executed and delivered by duly authorized officers
of the respective parties. 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.
TENDER OFFER
Under the terms of the Merger Agreement, Fortis is entitled, at its sole
option, to cause Sub to commence a tender offer (the "Tender Offer") to acquire
up to 100% (but not less than a majority) of the outstanding Common Stock
(excluding any Common Stock owned by Fortis pursuant to the Stock Option
Agreement (as defined below)), together with all associated stock purchase
rights issued pursuant to the Rights Agreement, and up to 100% of the Preferred
Stock.
MODIFICATION FOR PREFERRED STOCK
The Merger Agreement provides that if the vote of the holders of at least
2/3 of the outstanding shares of Preferred Stock is not obtained at the
Preferred Shareholders Special Meeting or Fortis reasonably determines that such
vote is not likely to be obtained, the proposed transaction will be modified so
that the shares of Preferred Stock will remain outstanding following the Merger
(except that each share of Preferred Stock will be convertible into $109.857 in
cash). The transaction as modified would not require the approval of the holders
of Preferred Stock and would require no additional approval by the holders of
the Common Stock or by the American Bankers Board.
Because as a result of such modification the Preferred Stock would remain
outstanding following the Merger, the Merger would have no immediate federal
income tax consequences to holders of Preferred Stock. If the Merger is so
modified, a future conversion of Preferred Stock would be a taxable transaction
for federal income tax purposes.
The foregoing discussion is based upon the Code, applicable Treasury
Regulations thereunder and administrative rulings and judicial authority as of
the date hereof. All of the foregoing are subject to change, possibly with
retroactive effect. In addition, the foregoing discussion does not address the
tax consequences that may be relevant to a particular shareholder subject to
special treatment under certain federal income tax laws. HOLDERS OF PREFERRED
STOCK ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES THAT WOULD RESULT TO THEM IF THE MERGER WERE MODIFIED TO TAKE PLACE
AS DESCRIBED ABOVE.
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RELATED AGREEMENTS AND TRANSACTIONS
STOCK OPTION AGREEMENT
The following description of certain terms of the Stock Option Agreement is
only a summary and does not purport to be complete. This discussion is qualified
in its entirety by reference to the Stock Option Agreement, a copy of which is
attached hereto as Appendix II.
The Option
In order to induce Fortis to enter into the Merger Agreement, American
Bankers entered into the Stock Option Agreement. Pursuant to the Stock Option
Agreement, Fortis has the option (the "Option"), under the circumstances
described below, to acquire up to 8,406,559 shares of authorized but unissued
Common Stock (the "Option Shares") (or approximately 19.9% of the outstanding
Common Stock as of March 1, 1998, prior to giving effect to the exercise of such
Option), including the associated rights under the Rights Agreement, at a price
of $55.00 per share (the "Option Price"). The Stock Option Agreement could have
the effect of making an acquisition of American Bankers by a third party more
costly because of the need to acquire in any such transaction the Option Shares
issued under the Stock Option Agreement, and could also jeopardize the ability
of a third party to acquire American Bankers in a transaction accounted for as a
pooling of interests.
The Option may only be exercised by Fortis, in whole or in part, at any
time or from time to time on the occurrence of one or more of the Triggering
Conditions described in the following paragraph. Fortis may exercise the Option
by either (a) paying the Option Price in cash and receiving the Option Shares
(which exercise requires the satisfaction of certain additional conditions) or
(b) electing, in lieu of the payment of the Option Price and the receipt of the
Option Shares, to receive a cash payment (the "Cash Payment") from American
Bankers. Such Cash Payment shall be in the amount of the excess of (i) the
higher of (x) the highest price per share of Common Stock paid or proposed to be
paid pursuant to one of the Triggering Conditions and (y) the closing price of
shares of Common Stock on the NYSE Composite Tape on the last trading day
immediately prior to receipt by American Bankers of Fortis' notice of its
intention to receive the Cash Payment, over (ii) the Option Price, multiplied by
all or such portion of the Option Shares as Fortis specifies in such notice.
Triggering Conditions
The Option may be exercised on satisfaction of certain conditions,
including the occurrence of at least one of the following "Triggering
Conditions":
(i) any person (as defined in Sections 3(a)(9) and 13(d)(3) of the
Exchange Act) (other than Fortis or any of its subsidiaries) shall have
commenced a tender offer (as defined in Rule 14d-2 of the Exchange Act) or
filed a registration statement under 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% or
more of the then outstanding Common Stock;
(ii) any person (other than Fortis or its subsidiaries) shall have
publicly announced or delivered to American Bankers a proposal, or
disclosed publicly or to American Bankers 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 American Bankers or any of
its subsidiaries (an "Acquisition Transaction");
(iii) American Bankers 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, with any person (other than
Fortis or any of its subsidiaries) to effect or provide for an Acquisition
Transaction;
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(iv) any person shall have solicited proxies or consents or announced
a bona fide intention to solicit proxies or consents from American Bankers'
shareholders (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 shareholders seeking
approval of the Merger, the Merger Agreement or any related transactions);
or
(v) any person (other than Fortis or any of its subsidiaries) shall
have acquired beneficial ownership or the right to acquire beneficial
ownership of, or any "group" 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% or more of the then
outstanding Common Stock.
Repurchase Right and Sale Rights
If Fortis exercises the Option but neither Fortis nor any other person has
acquired more than fifty percent (excluding the Option Shares) of the shares of
outstanding Common Stock prior to the first anniversary of the termination of
the Merger Agreement, American Bankers shall have the right, during the 30-day
period beginning on such anniversary, to purchase from Fortis all (but not less
than all) of the Option Shares previously purchased by Fortis at a purchase
price equal to the greater of (i) the Option Price or (ii) the average of the
last sales prices for Common Stock on the five trading days ending five days
prior to the date American Bankers gives notice of its intention to exercise
such right. In addition, if Fortis exercises the Option, at any time prior to
the first anniversary of the termination of the Merger Agreement, Fortis shall
have the right to sell to American Bankers all (but not less than all) of the
Option Shares previously purchased by Fortis at a price equal to the greater of
(i) the Option Price or (ii) the average of the last sales prices for Common
Stock on the five trading days ending five days prior to the date Fortis gives
notice of its intention to exercise such right.
The Stock Option Agreement further provides that if Fortis desires to sell
any of the Option Shares within three years after the purchase of such shares
and such sale requires the registration of such shares under the Securities Act,
American Bankers shall be required to cooperate with Fortis in registering such
shares including preparing and filing a registration statement under the
Securities Act for the purpose of permitting such sale of shares by Fortis.
American Bankers shall not be required to have declared effective more that two
such registration statements.
Profit Limitation
Notwithstanding any other provisions of the Stock Option Agreement, (i) in
no event shall Fortis' Total Profit (as defined below) exceed $100 million and
(ii) the Option may not be exercised for a number of Option Shares that would
result in a Notional Total Profit (as defined below) of more than $100 million.
"Total Profit" means the aggregate amount (before taxes) of (i) any
termination fees received by Fortis pursuant to the Merger Agreement, (ii) any
cash payments received by Fortis pursuant to the Stock Option Agreement, (iii)
any amount received by Fortis for the repurchase of the Option Shares by
American Bankers less the purchase price paid by Fortis for such shares and (iv)
any net cash amounts received by Fortis pursuant to the sale of the Option
Shares to an unaffiliated party less the purchase price paid by Fortis for such
shares. "Notional Total Profit" means, with respect to such number of Option
Shares as to which Fortis proposes to exercise the Option, the Total Profit
determined as of the date on which Fortis gives notice of its intention to
exercise the Option, assuming that the Option was exercised on such date for the
designated number of Option Shares and assuming that such shares, together with
all other Option Shares held by Fortis and its affiliates as of such date, were
sold for cash at the closing market price for the Common Stock as of the close
of business on the preceding trading day (less customary brokerage commissions).
Termination
The right to exercise the Option shall terminate upon the earlier of (i)
the Effective Time of the Merger, (ii) 90 days after the termination of the
Merger Agreement (the "Option Termination Date"); or (iii) 18 months after the
date of the Stock Option Agreement. If the Option cannot be exercised or the
Option
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Shares cannot be delivered to Fortis upon such exercise because the conditions
set out in the Stock Option Agreement (excluding the condition that one or more
of the Triggering Conditions shall have occurred) have not been satisfied, the
Option Termination Date shall be extended until thirty days after such
impediment to exercise or delivery has been removed.
VOTING AGREEMENT
The following description of certain terms of the Voting Agreement is only
a summary and does not purport to be complete. This discussion is qualified in
its entirety by reference to the complete text of the Voting Agreement, a copy
of which is attached hereto as Appendix III.
Voting and Proxies
In order to induce Fortis to enter into the Merger Agreement, each of
Messrs. Landon and Gaston (the "Shareholders") entered into the Voting
Agreement. Pursuant to and during the term of the Voting Agreement, each of the
Shareholders has agreed to vote all of the shares of Common Stock beneficially
owned by him (the "Shares") and all of the shares of Common Stock subsequently
acquired by him (the "New Shares"), and to cause any holder of record of such
Shares and New Shares to vote, (i) in favor of adoption and approval of the
Merger Agreement and the Merger at every meeting of the shareholders of American
Bankers at which such matters are considered and at every adjournment thereof
and (ii) against any action or proposal that would compete with or could serve
to materially interfere with, delay, discourage, adversely affect or inhibit the
timely consummation of the Merger. Each Shareholder has agreed to deliver to
Fortis upon request a proxy which shall be coupled with an interest and
irrevocable to the extent permitted under Florida law, with the total number of
his Shares correctly indicated thereon (and to do the same in respect of New
Shares). Each Shareholder also has agreed to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary or advisable in
order to consummate and make effective the transactions contemplated by the
Voting Agreement.
Prohibited Actions
Each Shareholder has agreed that he will not, and will not permit any
entity under his control to, (i) solicit proxies or become a "participant" in a
"solicitation" (as such terms are defined in Regulation 14A under the Exchange
Act) in opposition to or competition with the consummation of the Merger or
otherwise encourage or assist any party in taking or planning any action which
would compete with or could serve to materially interfere with, delay,
discourage, adversely affect or inhibit the timely consummation of the Merger in
accordance with the Merger Agreement, (ii) directly or indirectly encourage,
initiate or cooperate in a shareholders' vote or action by consent of American
Bankers shareholders in opposition to or in competition with the consummation of
the Merger, or (iii) become a member of a "group" (as such term used in Section
13(d) of the Exchange Act) with respect to any voting securities of American
Bankers for the purpose of opposing or competing with the consummation of the
Merger. However, the Voting Agreement does not restrict any director of American
Bankers from taking any action such director reasonably believes is necessary to
satisfy such director's fiduciary duty to shareholders of American Bankers.
During the term of the Voting Agreement, each of the Shareholders has
agreed (i) not to, and not to permit any entity under his control to, deposit
any of the Shares into a voting trust or subject the Shares to any other
arrangement with respect to voting and (ii) not to voluntarily transfer, sell,
offer, pledge or otherwise dispose of or encumber any of the Shares or New
Shares. Notwithstanding the foregoing, (A) Mr. Landon is permitted to Transfer
(i) Shares or New Shares Transferred for net after-tax proceeds of not in excess
of $10,000,000 and (ii) Shares or New Shares transferred pursuant to any
decision by a court or alternative dispute resolution entity, or in settlement
of any legal proceeding and (B) Mr. Gaston shall be permitted to Transfer Shares
or New Shares transferred for net after-tax proceeds of not in excess of
$2,000,000.
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Other Provisions
The Voting Agreement also contains provisions relating to, among other
things, representations and warranties by the Shareholders, the surrender of
stock certificates representing Shares and New Shares for the purpose of placing
appropriate legends thereon, and specific performance of the Voting Agreement.
The Voting Agreement terminates upon the earliest to occur of (i) the Effective
Time of the Merger, (ii) the termination of the Merger Agreement or (iii)
September 30, 1999.
AMENDMENT TO AMERICAN BANKERS' RIGHTS AGREEMENT
On March 4, 1999, American Bankers entered into Amendment Number Two.
Amendment Number Two provides that Fortis, Sub and their affiliates will not be
deemed to be an Acquiring Person (as defined in the Rights Agreement), a
Distribution Date (as defined in the Rights Agreement) will not be deemed to
occur, and the rights issuable pursuant to the Rights Agreement will not
separate from the shares of Common Stock, solely as a result of Fortis or Sub
entering into the Merger Agreement, the Voting Agreement or the Stock Option
Agreement or consummating the Tender Offer, the Merger and/or the other
transactions contemplated thereby.
GASTON CONSULTING AGREEMENT
Mr. Gaston entered into a Consulting Agreement with the Company dated March
5, 1999 (the "Gaston Consulting Agreement") which is effective at the Effective
Time. Under the Gaston Consulting Agreement, Mr. Gaston agreed to consult with
officers of the Company for a term of twenty-four months commencing at the
Effective Time. In addition, at the Effective Time, the Company is obligated to
pay to Mr. Gaston a lump sum of $8,045,000 as full payment of the Company's
obligation under the Executive Severance Contract with Mr. Gaston, dated
February 1, 1990 (subject to adjustment so that the amount received by Mr.
Gaston as a result of the Merger shall not exceed 2.99 times Mr. Gaston's "base
amount" as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986,
as amended). In addition, American Bankers has agreed to provide Mr. Gaston with
reasonable office space in Coral Gables, Florida, in premises currently leased
by American Bankers, providing the cost of such lease does not exceed $175,000
per year. Under the Gaston Consulting Agreement, Mr. Gaston agreed that for two
years after the termination of the Gaston Consulting Agreement, he would not
perform in any similar services for any competitor of the Company or become a
greater than five percent equity holder of any entity performing such services.
Mr. Gaston is restricted from inducing any customer, and certain potential
customers, of the Company to terminate or reduce its business with the Company
or to direct its business to any other person. Mr. Gaston is further restricted
from inducing any employee of the Company to terminate his or her employment and
from offering employment to certain persons employed by the Company unless such
persons cease to have been employed by the Company in any capacity for a period
of at least one year.
The obligations of Fortis and Sub under the Merger Agreement to effect the
Merger are subject to the effectiveness of the Gaston Consulting Agreement.
AMENDMENTS TO SEVERANCE AGREEMENTS
American Bankers is currently a party to severance agreements (the
"Severance Agreements") with Messrs. Eugene Becker, Philip Bruce Camacho, Floyd
G. Denision, Jay Fuchs, Darrell Gambero, Leonardo F. Garcia, Gerald N. Gaston,
Thomas Hayes, Arthur W. Heggen, Jason J. Israel, Kevin Klotz, Manuel Millor,
Sanford Neubarth and Michael Ray (each, an "Officer", and collectively
"Officers"). Pursuant to the Merger Agreement, American Bankers has agreed to
use its reasonable best efforts to cause the Officers (except Messrs. Becker,
Gaston and Fuchs) to agree to amendments to the Severance Agreements.
The Severance Agreements (other than those of Messrs. Becker and Fuchs)
provide that if, within 24 months following a Change of Control (as defined in
the Severance Agreements) of American Bankers, an Officer in good faith
determines that there has been a significant adverse change in circumstances
affecting such Officer's position or status within American Bankers, such
Officer may terminate his employment and be entitled to receive payment of an
amount (the "Maximum Amount") equal to the maximum amount that will
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not constitute a "parachute payment" as defined in Section 280G of the Code, as
amended (or any successor provision or, if no such provision exists, as defined
in such provision immediately prior to its repeal) and as calculated by American
Banker's independent auditors. The Severance Agreements (other than those of
Messrs. Becker and Fuchs) also provide that within fifteen (15) business days
following the occurrence of a Change in Control (as defined in the Severance
Agreements) of American Bankers, American Bankers is required to deposit with an
escrow agent an amount (the "Escrow Deposit") equal to the Maximum Amount
calculated as of the date of such Change in Control. The proposed amendment to
the Severance Agreements would provide (i) that American Bankers is not required
to make any Escrow Deposit in respect of a Change in Control (as defined in the
Severance Agreements) resulting from the consummation of the transactions
contemplated by the Merger Agreement, (ii) that the provision permitting the
Officer to resign in the event of a significant adverse change in circumstances
during the 24-month period following a Change in Control (as defined in the
Severance Agreements) be modified to provide that the Officer shall be permitted
to terminate employment during such 24-month period and receive payment of an
amount equal to the Maximum Amount only if such termination is for Good Reason
(as defined in the proposed amendment) and includes certain confidentiality and
non-competition obligations.
INFORMATION REGARDING FORTIS
The Fortis Group is an international financial services group operating in
the fields of insurance, banking and investment management. In its home market,
the Benelux, Fortis is one of the largest financial service providers, offering
a broad range of financial services through various distribution channels. In
other countries of Europe, the United States and Asia, the Fortis Group focuses
on specialized financial products. At year-end 1997 the Fortis Group had assets
in excess of EUR 298 billion (US$328 billion) and total revenue for the year
amounted to EUR 33 billion (US$37 billion).
Fortis, Inc., established in 1978, is the holding company through which
Fortis Group provides specialty insurance and investment products to businesses,
associations, financial service organizations and individuals in the United
States. It owns or manages approximately US$15 billion in assets and had
revenues of more than US$3.2 billion in 1997.
INFORMATION REGARDING AMERICAN BANKERS
American Bankers is a specialty insurer providing primarily credit-related
insurance products in the U.S. and Canada as well as in Latin America, the
Caribbean and the United Kingdom. The majority of American Bankers' gross
collected premiums are derived from credit-related insurance products sold
through financial institutions and other entities which provide consumer
financing as a regular part of their businesses.
American Bankers' credit-related insurance products consist primarily of
credit unemployment, accidental death and dismemberment ("AD&D"), disability,
property, and life insurance issued in connection with the financing of consumer
purchases. Credit-related insurance products generally offer a consumer a
convenient option to insure a credit card or loan balance so that the amount of
coverage purchased equals the amount of outstanding debt. Coverage is generally
available to all consumers with few of the underwriting conditions that apply to
ordinary term insurance, such as medical examinations and medical history
reports. American Bankers' life and AD&D insurance products generally provide
payment in full of the outstanding debt balance in the event of the insured's
death. The unemployment and disability products satisfy the minimum monthly loan
payment for a specified duration in the event of unemployment or disability.
American Bankers' property insurance products pay the loan balance or the cost
of repairing or replacing the insured's merchandise in the event of a loss due
to a covered event. American Bankers avoids lines of insurance characterized by
long loss payout periods, such as workers' compensation and most general
liability coverages.
American Bankers markets its products on a wholesale basis through a
network of clients that consist primarily of major financial institutions,
retailers and other entities which provide consumer financing as a regular part
of their businesses. American Bankers enters into contracts, typically with
terms of three to five
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years, with its corporate clients pursuant to which such clients market American
Bankers' insurance products to their customers. In return, these clients receive
expense reimbursements or commissions and are thus able to recover costs
associated with the marketing of the insurance and generate incremental
revenues. American Bankers' clients typically share in the profitability of
business written through them.
American Bankers also writes non credit-related insurance in markets where
it believes it has less competition from other insurers. For example, American
Bankers' extended service contracts products pay the cost of repairing or
replacing the insured's merchandise in the event of damages due to a covered
event. In addition, American Bankers acts as an administrator for the National
Flood Insurance Program, for which it earns a fee for collecting premiums and
processing claims. American Bankers does not assume any underwriting risk with
respect to this program.
American Bankers' business strategy is to continue developing distribution
channels which provide access to large numbers of potential insureds in markets
not traditionally served by other insurance companies. In addition, American
Bankers emphasizes long-term relationships and the development of insurance
programs designed to meet individual client needs. An essential part of American
Bankers' strategy is to invest in technology which enables American Bankers to
accommodate a large group of clients and their customers while simultaneously
offering customized insurance programs.
EXPERTS
The consolidated financial statements incorporated in this Proxy Statement
by reference to the Annual Report on Form 10-K of American Bankers for the year
ended December 31, 1998, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing. Representatives of
PricewaterhouseCoopers LLP will attend the Special Meetings and will have an
opportunity to make a statement and to respond to appropriate questions from
shareholders.
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APPENDIX I
<PAGE> 57
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
AMONG
AMERICAN BANKERS INSURANCE GROUP, INC.,
FORTIS, INC.
AND
GREENLAND ACQUISITION CORP.
DATED AS OF MARCH 5, 1999
<PAGE> 58
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 5, 1999 (this "Agreement"),
among AMERICAN BANKERS INSURANCE GROUP, INC., a Florida corporation (the
"Company"), FORTIS, INC., a Nevada corporation ("Parent"), and GREENLAND
ACQUISITION CORP., 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"). Annex
II to this Agreement sets forth an index of the defined terms used herein.
RECITALS
WHEREAS, the respective boards of directors of each of Parent, Merger
Subsidiary and the Company have determined that the merger of Merger Subsidiary
with and into the Company (the "Merger") upon the terms and subject to the
conditions set forth in this Agreement is advisable and have approved the
Merger;
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 that certain 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, Parent and certain stockholders of the Company 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 as set forth in this
Agreement.
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 Merger Subsidiary shall be merged with
and into the Company and the separate corporate existence of Merger Subsidiary
shall thereupon cease. The Company shall be the surviving corporation in the
Merger (sometimes hereinafter referred to as the "Surviving Corporation"), and
the separate corporate existence of the Company 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 Alston & Bird LLP, 1201 West Peachtree St., Atlanta,
Georgia at 9:00 A.M. on the business day designated by Parent, which shall not
be 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 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
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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 a majority of the outstanding Common Shares 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 all associated
Rights issued pursuant to the Rights Agreement, and up to 100% (or such lesser
percentage as Parent shall specify in the Tender Offer) of the outstanding
Preferred Shares. If Parent 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 within five business days of delivery of the notice described
in Section 1.4 (i) commence (within the meaning of Rule 14d-2(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) the Tender
Offer for (A) up to 100% (or such lesser percentage not less than a majority of
the outstanding Common Shares as Parent shall specify in the Tender Offer) of
the outstanding Common Shares (excluding for all purposes in calculating such
applicable majority any outstanding Shares owned by Parent or Merger Subsidiary
pursuant to the exercise of Parent's rights under the Stock Option Agreement),
together with the associated Rights issued pursuant to the Rights Agreement, at
a purchase price of not less than the Per Share Purchase Price per Common Share
net to the seller in cash, without interest thereon, and (B) at Parent's
election, up to 100% (or such lesser percentage as Parent shall specify in the
Tender Offer) of the outstanding Preferred Shares at a purchase price equal to
the Per Share Purchase Price multiplied by 1.9974 per Preferred Share, net to
the seller in cash without interest thereon, with such Tender Offer being 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 and comment on 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 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 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 the Termination
Date (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
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.
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(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 Shares accept the Tender Offer.
Parent and Merger Subsidiary shall have the opportunity to review and comment on
the Schedule 14D-9 prior to its being filed with the SEC. Upon the filing of the
Schedule l4D-1 and at the written request of Parent, 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 Shares.
(e) Directors. (i) Promptly upon the purchase by Merger Subsidiary of
Shares pursuant to the Tender Offer, and from time to time thereafter, Merger
Subsidiary shall be entitled to designate up to such number of directors,
rounded up to the next whole number, on the board of directors of the Company as
shall give Merger Subsidiary representation on such board of directors equal to
the product of the total number of directors on such board (giving effect to the
directors elected pursuant to this sentence) multiplied by the percentage that
the aggregate number of Shares beneficially owned by Parent, Merger Subsidiary
and any other Subsidiary of Parent bears to the total number of Shares then
outstanding, and the Company shall, at such time, promptly take all action
necessary to cause Merger Subsidiary's designees to be so elected, including
either increasing the size of the board of directors or securing the
resignations of incumbent directors or both. The Company will use its best
efforts to cause directors designated by Merger Subsidiary to constitute the
same percentage as is on the board of (i) each committee of the board of
directors, (ii) each board of directors of each Subsidiary of the Company and
(iii) each committee of each such Subsidiary board, in each case only to the
extent permitted by Law.
(ii) The Company shall promptly (subject to the prompt provision of
information by Parent and Merger Subsidiary) take all actions required pursuant
to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder in order to
fulfill its obligations under this Section 1.5(e) and shall include in the
Schedule 14D-9 or a separate Rule 14f-1 information statement provided to
stockholders such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill its
obligations under this Section 1.5(e). Parent or Merger Subsidiary will promptly
supply to the Company and be solely responsible for any information with respect
to either of them and their nominees, officers and directors required by Section
14(f) and Rule 14f-1.
(iii) Following the election or appointment of Merger Subsidiary's
designees pursuant to this Section 1.5(e) and prior to the Effective Time, any
amendment of this Agreement or the Governing Documents of the Company, any
termination of this Agreement by the Company, any extension by the Company of
the time for the performance of any of the obligations or other acts of Parent
or Merger Subsidiary, or any waiver of any of the Company's rights hereunder,
will require the concurrence of a majority of the directors of the Company then
in office who are not designated by Merger Subsidiary.
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ARTICLE II
CHARTER AND BY-LAWS
OF THE SURVIVING CORPORATION
2.1. The Charter. The Articles of Incorporation of the Company as in
effect immediately prior to the Effective Time shall be the charter of the
Surviving Corporation (the "Charter"), until duly amended or repealed as
provided therein or by applicable Law.
2.2. The By-Laws. The by-laws of the Company in effect at the Effective
Time shall be the by-laws of the Surviving Corporation (the "By-Laws"), until
duly amended or repealed 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.
3.2. Officers. The officers of the Company at the Effective Time shall,
from and after the Closing, 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.
ARTICLE IV
EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES
4.1. Conversion of Shares; Consideration. Subject to the provisions of
this Article 4, at the Effective Time, by virtue of the Merger and without any
action on the part of Parent, the Company, Merger Subsidiary or the stockholders
of any of the foregoing, the shares of the Constituent Corporations shall be
converted as follows:
(a) Each share of Merger Subsidiary Common Stock issued and outstanding
immediately prior to the Effective Time shall cease to be outstanding and shall
be converted into one share of common stock of the Surviving Corporation.
(b) Each share of Company common stock, par value $1.00 per share (a
"Common Share" or, collectively, the "Common Shares") (including any associated
Rights, but excluding shares held by the Company or any Subsidiary thereof or by
Parent or any Subsidiary thereof (Parent and each of its Subsidiaries being
referred to as "Parent Companies") and in each case not held on behalf of third
parties ("Excluded Common Shares"), issued and outstanding immediately prior to
the Effective Time shall cease to be outstanding and shall be converted into and
exchanged for the right to receive from Parent a cash payment in the amount of
Fifty-Five Dollars ($55.00) (the "Per Share Purchase Price"; the aggregate cash
paid for all Common Shares being the "Common Merger Consideration").
(c) 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 Subsidiary thereof 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 cease to be outstanding and shall
be converted into and exchanged for the right to receive from Parent a cash
payment equal to 1.9974 times the
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Per Share Purchase Price (the aggregate cash paid for all Preferred Shares being
"Preferred Merger Consideration" and, together with the Common Merger
Consideration, the "Merger Consideration").
(d) Each share of capital stock of Parent issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding from
and after the Effective Time.
4.2. Shares Held by the Company or Parent. Each Share held by the Company
or its Subsidiaries or by any Parent Entity shall be canceled and retired at the
Effective Time and no consideration shall be issued in exchange therefor.
4.3. Dissenting Stockholders. In accordance with Section 607.1302(4) of
the FBCA, no appraisal rights shall be available to holders of Shares in
connection with the Merger.
4.4. Conversion of Company Options and Restricted Shares.
(a) Conversion of Company Options. At the Effective Time, each Company
Option shall no longer represent the right to purchase or receive Common Shares,
but in lieu thereof shall represent the right to receive the following
applicable consideration:
(i) Each 1998 Company Option (as defined below) that is outstanding
and fully exercisable by its terms at the Effective Time (each an
"Exercisable Option"), (A) shall be canceled at the Effective Time and (B)
in consideration of such cancellation, Parent shall (or shall cause a
Constituent Corporation to), at the Effective Time:
(1) as to the "Primary Shares" (as defined in the 1998 Company
Option) that would be acquirable upon exercise of the Exercisable Option
(each a "Primary Share" and collectively "Primary Shares"), pay to the
holder of such Exercisable Option an amount in cash equal to (x) the
difference (if positive) between $55.00 and the price per Primary Share
specified in the 1998 Company Option pursuant to which the holder of
such Exercisable Option may purchase the Primary Shares to which such
Exercisable Option relates, multiplied by (y) the number of Primary
Shares subject to such Exercisable Option, less (z) any withholding of
Taxes as may be required by applicable Law, provided, however, that as
to the 1998 Company Option granted to Gary Bursevich, no amount shall be
payable by or to Gary Bursevich in respect of any such Primary Share,
and
(2) as to the "Restricted Shares" (as defined in the 1998 Company
Option) that would be acquirable upon exercise of the Exercisable Option
(each a "Restricted Option Share" and collectively "Restricted Option
Shares"), pay to the Company, to be held on behalf of the person or
entity that held the Exercisable Option immediately prior to the
Effective Time (the "Exercisable Option Holder"), an amount (the
"Restricted Option Shares Amount") equal to (x) the difference (if
positive) between $55.00 and the price, if any, per Restricted Option
Share specified in the 1998 Company Option pursuant to which the holder
of such Exercisable Option may acquire the Restricted Option Shares to
which such Exercisable Option relates, multiplied by (y) the number of
Restricted Option Shares subject to such Exercisable Option, provided,
however, that the Restricted Option Shares Amount shall be subject to
the same terms and conditions as are applicable, immediately prior to
the Effective Time, to such Restricted Option Shares under the 1998
Company Option, and the Restricted Option Shares Amount shall be held by
the Company and delivered to the Exercisable Option Holder upon the same
terms and conditions as would have applied to the Restricted Option
Shares under the 1998 Company Option.
For purposes of this Agreement, "1998 Company Option" shall mean any
Company Option issued pursuant to the 1997 Equity Incentive Plan that by
its terms does not require the termination of the restrictions on
transferability applicable to any shares of Common Stock issued pursuant to
any "Award" (as defined in the 1997 Equity Incentive Plan) upon a "Change
in Control" (as defined in the 1997 Equity Incentive Plan).
(ii) Each 1998 Company Option that is outstanding but not fully
exercisable by its terms at the Effective Time shall, at the Effective
Time, (A) be deemed to be an Exercisable Option and (B) be canceled in
accordance with, and in exchange for the consideration specified in,
Section 4.4(a)(i) hereof.
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(iii) Each Company Option other than a 1998 Company Option (a
"Pre-1998 Company Option") that is outstanding and fully exercisable by its
terms at the Effective Time (each a "Pre-1998 Exercisable Option"), (A)
shall be canceled at the Effective Time and (B) in consideration of such
cancellation, Parent shall (or shall cause a Constituent Corporation to),
at the Effective Time:
(1) as to the "Primary Shares" (as defined in the Pre-1998 Company
Option or applicable Company Stock Plan) that would be acquirable upon
exercise of the Pre-1998 Exercisable Option (each a "Pre-1998 Primary
Share" and collectively "Pre-1998 Primary Shares"), pay to the holder of
such Pre-1998 Exercisable Option an amount in cash equal to (x) the
difference (if positive) between $55.00 and the price per Pre-1998
Primary Share specified in the Pre-1998 Company Option pursuant to which
the holder of such Pre-1998 Exercisable Option may purchase the Pre-
1998 Primary Shares to which such Pre-1998 Exercisable Option relates,
multiplied by (y) the number of Pre-1998 Primary Shares subject to such
Pre-1998 Exercisable Option, less (z) any withholding of Taxes as may be
required by applicable Law, and
(2) as to each "Restricted Share" (as defined in the Pre-1998
Company Option or applicable Company Stock Plan) that would be
acquirable upon exercise of the Pre-1998 Exercisable Option (each a
"Pre-1998 Restricted Option Share"and collectively "Pre-1998 Restricted
Option Shares"), pay to the holder of such Pre-1998 Exercisable Option
an amount in cash equal to (x) $55.00, less (y) any withholding of Taxes
as may be required by applicable Law.
(b) Conversion of Restricted Shares.
(i) Each Common Share that was issued pursuant to a 1998 Company
Option or that was otherwise issued pursuant to the 1997 Equity Incentive
Plan and that is subject to restrictions pursuant to such 1998 Company
Option or other applicable agreement that do not lapse on a "Change in
Control" (as defined in the 1997 Equity Incentive Plan) (each a "1998
Restricted Share"), (A) shall be canceled at the Effective Time and (B) in
consideration of such cancellation, Parent shall (or shall cause a
Constituent Corporation to), at the Effective Time:
(1) pay to the holder of such 1998 Restricted Share (the
"Restricted Share Holder"), if the holder of the 1998 Restricted Share
paid any consideration upon the initial issuance of the 1998 Restricted
Share (the amount so paid, the "Exercise Price"), in cash at the
Effective Time the lesser of the Exercise Price or $55.00, provided,
however, that if a portion of the Exercise Price was financed by a loan
that was guaranteed by the Company, Parent shall (or shall cause a
Constituent Corporation to) pay (x) to the lender the lesser of the
amount of any outstanding obligation on such loan or the Exercise Price,
and (y) to Restricted Share Holder the remainder of the Exercise Price,
if any, reduced by any withholding of Taxes as may be required by
applicable Law, and
(2) pay to the Company, to be held on behalf of the Restricted
Share Holder, an amount equal to the difference between $55.00 and any
monies paid pursuant to clause (1) of this Section 4.4(b)(i)(B) (such
difference, the "Remainder"), provided, however, that the Remainder
shall be subject to the same terms and conditions as are applicable,
immediately prior to the Effective Time, to such 1998 Restricted Share
under the 1998 Company Option or other applicable agreement, and the
Remainder shall be held by the Company and delivered to the Restricted
Share Holder upon the same terms and conditions as would have applied to
the 1998 Restricted Share under the 1998 Company Option or other
applicable agreement.
(ii) Each Common Share that was issued pursuant to a Company Stock
Plan and that is subject to restrictions pursuant to such Company Stock
Plan which lapse, pursuant to the requirements of such Company Stock Plan,
as of the Effective Time (each a "Pre-1998 Restricted Share"), (A) shall be
canceled at the Effective Time and (B) in consideration of such
cancellation, Parent shall (or shall cause a Constituent Corporation to),
at the Effective Time, pay to the holder of such Pre-1998 Restricted Share
an amount in cash equal to (x) $55.00, less (y) any withholding of Taxes as
may be required by applicable Law, provided, however, that if a portion of
the purchase price for the Pre-1998 Restricted Share was financed by a loan
that was guaranteed by the Company, Parent shall (or shall cause a
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Constituent Corporation to) pay to the lender the lesser of $55.00 or the
amount of any outstanding obligation on such loan and to the holder of such
Pre-1998 Restricted Share the remainder, if any, reduced by any withholding
of Taxes as may be required by applicable Law.
(c) Payment upon Certain Terminations of Employment. In the event that,
within 36 months after the Effective Time, the Company (or any Subsidiary)
terminates the employment of any employee of the Company (or any Subsidiary) as
to whom a Restricted Option Shares Amount is held under Section 4.4(a)(i)(B)(2)
or a Remainder is held under Section 4.4(b)(i)(B)(2), and such employment
termination is due solely to a reduction in work force resulting from the
Merger, Parent shall cause the Company to pay to the Exercisable Option Holder
or the Restricted Share Holder (as the case may be) the full amount of the
Restricted Option Shares Amount or the Remainder, in cash, promptly after such
termination of employment, subject to withholding for Taxes as may be required
by applicable Law.
(d) Notices. Parent may, in its discretion, provide to and require each
holder of Company Options and Restricted Shares to execute and deliver to Parent
a written receipt confirming such holder's number of Company Options and
Restricted Shares and the dollar amounts that such holder is entitled to receive
pursuant to this Section 4.4. At or prior to the Effective Time, the Company
shall take all actions necessary to provide notice of the provisions of this
Section 4.4 to all holders of Company Options and Restricted Shares, with
Parent's prior review and consent (not to be unreasonably withheld or delayed)
to the form of such notice.
4.5. Exchange Procedures.
(a) Exchange Agent. Promptly after the Effective Time, Parent shall
deposit, or shall cause to be deposited, the Merger Consideration 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 (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 a
certificate which represented Shares immediately prior to the Effective Time
(the "Certificates") (i) a letter of transmittal specifying that delivery shall
be effected, and risk of loss and title to such Certificates shall pass, only
upon proper delivery of such 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 shall reasonably determine, and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the consideration described in Section 4.1. The Certificates so delivered
shall be duly endorsed as the Exchange Agent may require. In the event of a
transfer of ownership of Shares represented by Certificates that are not
registered in the transfer records of the Company, the consideration provided in
Section 4.1 may be issued to a transferee if the Certificates representing such
Shares are delivered to the Exchange Agent, accompanied by all documents
required to evidence such transfer and by evidence reasonably satisfactory to
the Exchange Agent and Parent that any applicable stock transfer Taxes have been
paid. If any Certificate shall have been lost, stolen, mislaid or destroyed,
upon receipt of (a) an affidavit of that fact from the holder claiming such
Certificate to be lost, mislaid, stolen or destroyed, (b) such bond, security or
indemnity as Parent and the Exchange Agent may reasonably require, and (c) any
other documents reasonably necessary to evidence and effect the bona fide
exchange thereof, the Exchange Agent shall issue to such holder the
consideration into which the Shares represented by such lost, stolen, mislaid or
destroyed Certificate shall have been converted. The Exchange Agent may
establish such other reasonable and customary rules and procedures in connection
with its duties as it may deem appropriate. After the Effective Time, each
holder of Shares (other than shares to be canceled pursuant to Section 4.2)
issued and outstanding at the Effective Time shall surrender the Certificates
representing such Shares to the Exchange Agent and shall promptly upon surrender
thereof receive in exchange therefor the consideration provided in Section 4.1,
together with all undelivered dividends or distributions in respect of such
Shares (without interest thereon) pursuant to Section 4.6, less any withholding
of Taxes as may be required by applicable Law. Parent shall not be obligated to
deliver the consideration to which any former holder of Shares is entitled as a
result of the Merger until such holder surrenders such holder's Certificates for
exchange as provided in this Section 4.5. Any other provision of this Agreement
notwithstanding, neither Parent, the Surviving Corporation nor the
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Exchange Agent shall be liable to a holder of Shares for any amounts paid or
property delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat or similar Law. Adoption of this Agreement by the
stockholders of the Company shall constitute ratification of the appointment of
the Exchange Agent.
4.6. Rights of Former Company Stockholders. At the Effective Time, the
stock transfer books of the Company shall be closed as to holders of Shares
immediately prior to the Effective Time and no transfer of Shares by any such
holder shall thereafter be made or recognized. Until surrendered for exchange in
accordance with the provisions of Section 4.5, each Certificate theretofore
representing Shares (other than shares to be canceled pursuant to Section 4.2)
shall from and after the Effective Time represent for all purposes only the
right to receive the consideration provided in Section 4.1 in exchange therefor,
subject, however, to the Surviving Corporation's obligation to pay any dividends
or make any other distributions with a record date prior to the Effective Time
which have been declared or made by the Company in respect of such Shares in
accordance with the terms of this Agreement and which remain unpaid at the
Effective Time. Upon surrender of such Certificate, any undelivered dividends
and cash payments payable hereunder (without interest) shall be delivered and
paid with respect to each Share represented by such Certificate.
4.7. Adjustments to Prevent Dilution. In the event that prior to the
Effective Time the Company changes the number of Shares or securities
convertible or exchangeable into or exercisable for Shares as a result of a
reclassification, stock split (including a reverse split), stock dividend or
distribution, recapitalization, merger, subdivision or other similar
transaction, the Merger Consideration shall be equitably adjusted.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Company. 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 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. The Company has made available to Parent a complete and correct copy of
the articles or certificate of incorporation and by-laws or other similar
governing documents as amended to date (collectively, "Governing Documents") of
the Company and each of its Subsidiaries. The Company's and its Subsidiaries'
Governing Documents 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.
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
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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, 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 42,243,082 Common Shares were issued and
outstanding and 836,120 Common Shares were held by the Company in treasury as of
the close of business on March 1, 1999, 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 are outstanding, (ii) 1,000,000
shares have been authorized as Series C Participating Preferred Stock, none of
which are outstanding and (ii) 2,300,000 shares have been authorized as
Preferred Shares, of which 1,983,205 Preferred Shares were outstanding as of
March 1, 1999. 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
March 1, 1999, there were approximately 609,000 (but no more than 610,000)
Common Shares subject to issuance (i) pursuant to the Company's 1999
Non-Employee Director One-Time Award Plan, 1997 Equity Incentive Plan, 1994
Amended and Restated Directors' Deferred Compensation Plan, 1994 Non-Employee
Directors' Stock Option Plan, 1994 Senior Management Stock Option Plan, 1991
Stock Option/Restricted Stock Plan, and 1991 Stock Incentive Plan (collectively,
the "Company Stock Plans") and (ii) upon conversion of the Preferred Shares. The
Company has no commitments to issue or deliver preferred shares, except that as
of the date hereof, 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 "Rights Agreement"). The Company Disclosure Letter contains a correct
and complete list, as of the date hereof, 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, exercise price and
number of Shares subject thereto. The Company Disclosure Letter also contains a
correct and complete list, as of the date hereof, of each Common Share that is
presently subject to restrictions pursuant to any of the Company Stock Plans
(each a "Restricted Share"), including the plan, the holder, date of grant,
number of Shares subject thereto, and date that the restrictions lapse. 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 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. The Company does not have
outstanding any bonds, debentures, notes or other obligations the holders of
which have the right to vote (or convertible into or exercisable for securities
having the right to vote) with the stockholders of the Company on any matter.
For 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 or other entity of any kind or
nature.
(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 the Merger, subject
only to approval of the Merger by the holders of at least a majority of the
outstanding Common Shares voting
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separately as a class (the "Company Common Stock Requisite Vote") and two-thirds
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"). 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 Inc., 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.
(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 Exchange Act and the
Securities Act of 1933, as amended (the "Securities Act"), (C) to obtain an
advance ruling certificate under The Competition Act of Canada, (D) required to
be made with the New York Stock Exchange ("NYSE"), and (E) the filing of
appropriate documents with, and approval of, the respective Commissioners of
Insurance or similar regulatory authorities of Arizona, Florida, Georgia,
Mississippi, New York, South Carolina, Texas, Puerto Rico, Cayman Islands,
Denmark, Turks & Caicos, Netherlands Antilles 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,
legislature, 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 or 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, any Governing Document of the Company or 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 ("Contract") 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 Company, a correct and
complete list of material 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),
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except those the failure to obtain, individually or in the aggregate, is not
reasonably likely to give rise to damage claims or other losses of $5,000,000 or
more.
(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, 1996 including (A) the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 (the
"Audit Date"), and (B) the Company's Quarterly Reports on Form 10-Q for the
periods ended March 31, 1998, June 30, 1998 and September 30, 1998, 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
the failure to include all required notes thereto 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 statements of each of the Company Insurance Subsidiaries as filed
with the applicable insurance regulatory authorities for the years ended
December 31, 1996, 1997 and 1998, including all exhibits, interrogatories,
notes, schedules and any actuarial opinions, affirmations or certifications or
other supporting documents filed in connection therewith (collectively,
including any such annual or quarterly statements filed subsequent to the date
hereof, the "Company SAP Statements"). The Company SAP Statements were (or will
be) prepared in conformity with statutory accounting practices prescribed or
permitted by the applicable insurance regulatory authority ("SAP") consistently
applied for the periods covered thereby and present (or will present) fairly the
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 (or will
comply) in all material respects with all applicable Laws, rules and regulations
when filed, and, to the knowledge 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 PriceWaterhouseCoopers 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, 1995 relating to the Company Insurance Subsidiaries.
The term "knowledge" when used in this Agreement with respect to the Company
shall mean the actual knowledge, after reasonable inquiry, of the following
employees of the Company: Eugene Becker, Bruce Camacho, Floyd Denison, Leonardo
Garcia, Gerald Gaston, Arthur Heggen, Jason Israel, Sanford Neubarth and Steve
Spiegel.
(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 material adverse 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 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
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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
Governing Documents 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 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 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 Company has 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 or by the Stock Option 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 any 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 Internal Revenue Code of 1986, as
amended (together with all regulations promulgated thereunder, 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"), and the Company has no knowledge 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 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 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
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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 multi-employer 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
included or incorporated by reference in the Company Reports filed 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 determined 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 or life benefits under any Compensation and Benefit Plan,
except as set forth in the Company Disclosure Letter.
(vii) Except as described in Section 5.1(h)(vii) of the Company
Disclosure Letter, 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 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 Law. The Company and its
Subsidiaries have no material unfunded liabilities with respect to any
employee benefit plan that covers such non-U.S. employees.
(ix) Except as described in Section 5.1(h)(ix) of the Company
Disclosure Letter, 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 1.28OG-1)
under any employment arrangement would be treated as an "excess parachute
payment" (as such term is defined in Section 28OG(b)(l) of the Code).
Section 5.1(h)(ix) of the Company Disclosure Letter contains a true and
complete list of each Person with whom the Company has an executive
severance agreement.
(i) Compliance with Laws; Permits. The business and operations of the
Company, and the Company Insurance Subsidiaries, have been conducted in
compliance with all applicable statutes, regulations and rules 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
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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 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) to the
knowledge of the Company, there is no pending or threatened charge by any
insurance regulatory authority that any of the Company Insurance Subsidiaries
has violated, nor any pending or threatened investigation by any insurance
regulatory authority with respect to possible violations of, any applicable
Insurance Laws; (ii) to the knowledge of the Company, 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); and (iii) each of 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 or the Stock
Option 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
Company, threatened, nor, to the knowledge 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 or the Stock Option Agreement. To the knowledge 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 applicable 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 or the Stock Option Agreement.
(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 Governing Documents 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
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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 (all of
which to the knowledge of the Company are set out in Section 5.1(k) of the
Company Disclosure Letter) 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 or any of its Subsidiaries 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, wildlife 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.
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
Entity pursuant to any Environmental Law.
(l) Taxes. Except as provided in Section 5.1(l) 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;
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(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
IRS or the statute of limitations with respect to the relevant Tax
liability has expired, for all taxable periods through and including the
period ending on December 31, 1994;
(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;
(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.
As used in this Agreement, (A) 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; (B) 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 (C) the term "Taxing Authority" shall mean any authority responsible for the
imposition, collection or administration of any Tax.
(m) 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.
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(n) 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 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) neither the Company nor its Subsidiaries is, 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 licenses, sublicenses or
other agreements as to which the Company is a party and pursuant to which
the Company or any of its Subsidiaries 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 of 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 Company, are
threatened by any Person;
(C) the Company has no knowledge 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 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.
(o) 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 such Contracts 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(o) of the Company Disclosure Letter, assuming the
consummation of the transactions contemplated by this Agreement, Parent or any
of its Subsidiaries to (i) sell any products or services of or to any other
person, (ii) engage in any line of business or (iii) 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.
(p) Rights Plan. (i) The Company has taken all actions necessary such
that, for all purposes under the Rights Agreement, Parent shall not be deemed an
Acquiring Person (as defined in the Rights
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Agreement), the Distribution Date (as defined in the Rights Agreement) shall not
be deemed to occur, and the rights issuable pursuant to the Rights Agreement
(the "Rights") will not separate from the Common Shares, as a result of Parent's
entering into this Agreement, the Voting 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 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 and (B) the holders of Rights will have no rights under the Rights or
the Rights Agreement.
(q) 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 Inc. as its financial advisor, the
arrangements with which have been disclosed to Parent prior to the date hereof.
(r) 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 all Insurance Laws applicable thereto and, as to premium rates 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 all Insurance
Laws 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 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, 1998.
(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 of any Company
Insurance Subsidiary since December 31, 1995, 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 and complete in all material
respects. Furthermore, to the knowledge of the Company, each Company Actuarial
Analysis was based upon an
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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.
(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 Subsidiary 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.
(s) 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 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, 1997 and
December 31, 1998, 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 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 association in connection with
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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.
(t) 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
Investment Company Act of 1940, as amended (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. 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 50,000,000 shares of common Stock, par value $.01 per
share ("Merger Subsidiary Common Stock"), 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 or a wholly owned Subsidiary of Parent, and there are (i) no
other shares of stock or voting securities of Merger Subsidiary, (ii) no
securities of Merger Subsidiary convertible 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, except securities that may be delivered to Parent. 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. 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. Parent has made
available to the Company a complete and correct copy of Parent's and Merger
Subsidiary's Governing Documents, each as amended to the date hereof. Parent's
and Merger Subsidiary's Governing Documents so delivered are in full force and
effect. As used in this Agreement, the term "Parent Material Adverse Effect"
means a material adverse effect that is reasonably likely to prevent, materially
delay or materially impair the ability of Parent or Merger Subsidiary to
consummate the transactions contemplated by this Agreement.
(c) Corporate Authority. 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.
(d) 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 obtain an advance ruling certificate under The
Competition Act of Canada, (D) required to be made with the NYSE, and (E) the
filing of appropriate documents with, and approval of, the respective
Commissioners of Insurance or similar regulatory authorities of Arizona,
Florida, Georgia, Mississippi, New York, South Carolina, Texas, Puerto Rico,
Cayman Islands, Denmark, Turks & Caicos, Netherlands Antilles 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,
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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.
(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 Governing Documents 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(d)(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 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.
(e) Financing. Parent has, or will have prior to the Closing Date,
sufficient cash, available lines of credit or other sources of immediately
available funds to enable it to make the aggregate cash payments required to be
paid pursuant to Section 4.1 and any other amounts to be paid by it hereunder.
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 Letter):
(a) its and its Subsidiaries' businesses shall be conducted only 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 each of its
Subsidiaries shall use its 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 any
Governing Document or amend, modify or terminate the 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 wholly owned Subsidiaries and other than regular quarterly dividends
paid by the Company on its Common Shares not in excess of $0.12 per share
and regular quarterly dividends paid by the Company on its Preferred Shares
in accordance with the Company's Governing Documents; or (v) repurchase,
redeem or otherwise acquire, except in connection with any of the Company
Stock Plans or pursuant to the American Bankers Insurance Group, Inc.
401(k) and Employee Stock Ownership Plan, 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;
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(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 exercise of
the Rights and the Shares issuable pursuant to options outstanding on the
date hereof under any of the Company Stock Plans or upon conversion of the
Preferred Shares); (ii) other than in the ordinary and usual course of
business, transfer, lease, license, 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, including entering into capital lease
obligations, other than in amounts not exceeding $5,000,000 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 $2,000,000 individually or $5,000,000
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, 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); provided, however, that the Company shall be entitled to (i)
pay cash bonuses to sales personnel and the cash bonuses owed to employees
pursuant to the Company's Management Incentive Plan for 1998 in an
aggregate amount not to exceed $6,100,000, and (ii) extend for up to 12
months the expiration date of any Company Stock Options held by
non-employee directors of the Company;
(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 $5,000,000 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 (i)
sell any products or services of or to any other Person, (ii) engage in any
line of business or (iii) 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 (i) which does not contain
standard cancellation and termination provisions, (ii) which, except in the
ordinary course of business, materially increases or reduces the Company
Insurance Subsidiaries' consolidated ratio of net written premiums to gross
written premiums or (iii) pursuant to which $10,000,000 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;
(l) neither it nor its Subsidiaries shall permit a material change in
any of its underwriting, investment, actuarial, financial reporting or
accounting practices or policies or in any material assumption
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underlying an actuarial practice or policy, except as may be required by
any change in GAAP, statutory accounting principles or applicable Law; and
(m) 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' Representatives 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'
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); 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 Common Stock
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; (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 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.
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, of 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
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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, and (ii) the Proxy Statement and any amendment or
supplement thereto will, at the date of mailing to stockholders and at the times
of the Stockholders Meetings, 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 Governing Documents, all action necessary to convene a meeting of holders of
Common Shares (the "Common Stockholders Meeting") as promptly as practicable
after the definitive Proxy Statement has been filed with the SEC, and a meeting
of holders of Preferred Shares (the "Preferred Stockholders Meeting" and,
together with the Common Stockholders Meeting, the "Stockholders Meetings") as
promptly as practicable after the definitive Proxy Statement has been filed with
the SEC 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 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
votes 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
Governing Documents, all action necessary to convene meetings of holders of
Shares as promptly as practicable upon the written request of Parent. Subject to
fiduciary obligations under applicable Law, the Company's board of directors
shall recommend 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.
6.5. Filings; Other Actions; Notification. (a) In connection with the
Stockholders Meetings, the Company shall prepare and deliver to Parent as
promptly as practicable after the date hereof a draft of a proxy statement (the
"Proxy Statement"). Thereafter, the Company and Parent shall use their
reasonable best efforts to cooperate fully to make such changes to the Proxy
Statement as may be reasonably requested by Parent or otherwise may be
appropriate, file the Proxy Statement with the SEC as soon as practicable, and
respond promptly to any SEC comments. Upon filing the final, definitive Proxy
Statement with the SEC, the Company shall mail such Proxy Statement to its
stockholders. Notwithstanding the foregoing, if Merger Subsidiary obtains 80% or
more of the Common Shares and 80% or more of the Preferred Shares through the
Tender Offer, Merger Subsidiary may, at its election, use the short form merger
provisions of Section 607.1104 of the FBCA.
(b) The Company and Parent shall cooperate with each other and use (and
shall cause their respective Subsidiaries to use) all reasonable 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 (if applicable, per Section 1.4), the Merger and the other transactions
contemplated by this Agreement and the Stock Option 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 or the Stock Option Agreement,
including, without limitation, upon request of Parent, all material consents
required in connection with the consummation of the Tender Offer and the Merger;
provided, however, that
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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 use 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
Subsidiaries (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) any
conditions relating to, or changes or restriction in, the operations of any such
assets or businesses which, in either case, could, in the reasonable judgment of
the board of directors 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 connection with the Offer Documents, the Schedule 14D-1, the
Schedule 14D-9, the Proxy 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 individuals listed in Section 6.5(e) of the Company Disclosure Letter 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 C.
6.6. Access; Technology Conversions. (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 directors, officers, employees,
counsel, accountants, financial advisors and other authorized agents and
representatives ("Representatives") access, during normal business hours
throughout the period prior to the earlier of the termination of this Agreement
or the Effective Time, to the Company's and its Subsidiaries' management,
properties, books, contracts, records and personnel (and will use commercially
reasonable efforts to provide access to its auditors (including such auditors'
work papers)) 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 Parent and its Subsidiaries shall not be entitled to make copies
of, or remove from the Company's premises the originals of, the Company's and
its Subsidiaries' profit and loss statements by account and account contracts;
and provided, further, 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 disclose any information, that in the reasonable
judgment of the board of directors 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 6.6(a) shall be directed
to an executive officer of the Company or such Person as may be designated
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by the Company's officers. All such information shall be governed by the terms
of the Confidentiality Agreement.
The Company will provide, and will cause its Subsidiaries to provide, to
Parent all information relating to financial and market conduct examinations or
other investigations by any Governmental Entity of the Company and/or its
Subsidiaries, including copies of all correspondence with any Governmental
Entity. The Company and its Subsidiaries will notify Parent of any meetings or
communications with any Governmental Entity relating to any material matter in
connection with any market conduct, financial or similar examination or
investigation and will permit Representatives of Parent to participate in all
conference calls or meetings relating to such matters. In addition, the Company
and its Subsidiaries will take all actions, including waiving any
confidentiality restrictions, that may be necessary or required to allow any
Governmental Entity to discuss all aspects of their examinations and/or
investigations with Parent; provided, that a Representative of the Company shall
be given the opportunity to be present during any such discussions. Prior to the
Effective Time, the Company will use its best efforts to resolve in a manner
reasonably acceptable to Parent any material regulatory compliance issues,
including issues arising out of market conduct examinations.
(b) From the date hereof through the earlier of termination of this
Agreement or the Effective Time, to the extent not prohibited by applicable Law,
the Company shall permit Parent to use an office within the Company's corporate
headquarters offices to afford Parent's internal auditors and other
Representatives reasonable access (without causing undue disruption of the
conduct of the Company's business) to monitor the operations and financial
activities of the Company and its Subsidiaries. In addition, the Company shall,
and shall cause its Subsidiaries to, to the extent not prohibited by applicable
Law, cooperate with Parent, upon Parent's reasonable request (without causing
undue disruption of the conduct of the Company's business), to develop plans for
the integration of the business of the Company and its Subsidiaries with that of
the Parent and to permit Parent to discuss all such plans with employees of the
Company and its Subsidiaries, including negotiating and confirming post-Closing
employment terms with such employees. Parent shall coordinate all activities
contemplated by this Section 6.6(b) through the Company's Chief Executive
Officer, Chief Financial Officer or their designees.
(c) From the date hereof through the earlier of termination of this
Agreement or the Effective Time, the Company and its Subsidiaries shall provide
Parent with the opportunity to conduct reasonable further due diligence about
the Company's and its Subsidiaries' year 2000 compliance, including performing
selected compliance audits and receiving from the Company reasonably detailed
information about the year 2000 compliance of the Company and its Subsidiaries.
In addition, from the date hereof through the earlier of termination of this
Agreement or the Effective Time, the Company shall, and shall cause its
Subsidiaries to, (i) permit Parent's Representatives to review and comment on
the Company's and its Subsidiaries' plans to complete their efforts to become
fully year 2000 compliant, and (ii) consider all reasonable requests of Parent
made in writing to the Company's Chief Executive Officer or his designee
concerning the year 2000 compliance of the Company and its Subsidiaries, and
(iii) use reasonable efforts, as determined in the reasonable judgment of the
Company's Chief Executive Officer, to correct any material aspect in which the
Company or any of its Subsidiaries is not year 2000 compliant. Notwithstanding
the foregoing, all final decisions with respect to such conversion design and
implementation shall be made by the appropriate Company or Subsidiary. In the
event that this Agreement is terminated and the Merger is not consummated for
any reason, neither party shall have any liability to the other with respect to
the involvement of Parent's Representatives in such conversion project.
6.7. Certain Replacement Benefits. Promptly after the Effective Time,
Parent shall use its reasonable best efforts to offer each Exercisable Option
Holder and Restricted Share Holder, in exchange for their rights to the
Restricted Option Shares Amount and the Remainder, alternative benefits that may
include favorable adjustments to such Restricted Option Shares Amount and
Remainder, options to acquire stock of Parent or an affiliate of Parent, stock
appreciation rights or other contractual obligations of Parent or the Company
that, in the reasonable judgment of Parent, will provide economic benefits for
such Exercisable Option Holder and Restricted Share Holder that are, as of the
Effective Time, comparable with (or, at the sole discretion of Parent, more
favorable than) the economic benefits of such Restricted Option Shares Amount
and Remainder, and that will contain comparable vesting arrangements, provided
that Parent shall not be
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obligated to offer any benefits that may have to be registered under any
securities Laws. Each Exercisable Option Holder and Restricted Share Holder
shall be entitled, in his or his discretion, to accept any such alternative
offer by Parent or retain the cash payment rights to the Restricted Option
Shares Amount and the Remainder pursuant to Section 4.4 hereof.
6.8. Publicity. The initial press release shall be a joint press release
and thereafter the Company and Parent 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.
6.9. Benefits; Facilities; Foundation.
(a) 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 employee benefits
(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. It is Parent's
intent that the employees of the Company and its Subsidiaries will become
participants in Parent's or its Subsidiaries' employee benefit plans as soon as
practicable following the Effective Time. 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 Effective Time for the
purpose of determining eligibility, vesting and benefit accrual (except that no
employee of the Company or any of its Subsidiaries shall be entitled to any
benefit accrual under any pension or other defined benefit plan of Parent or any
of its Subsidiaries other than the Company). In addition, 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 the employees of the Company or
its Subsidiaries 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.
(b) Facilities; Foundation. Parent intends to maintain, after the
Effective Time, the office, day care and public school facilities at the
Company's current Miami location, and Parent shall cause the Company to honor
all of the Company's legal commitments regarding such facilities. In connection
with The ABIG Foundation, Inc. (the "Foundation"), Parent agrees that after the
Effective Time it will (i) cause the Company, together with its Subsidiaries, to
make an annual contribution to the Foundation for each of calendar years 2000
and 2001 in an aggregate amount of not less than $1,200,000 per year, subject to
the reasonable determination of the board of directors of the Company that such
amount is reasonable at the time in light of the Company's then general economic
performance and condition and budgetary constraints; (ii) cause the Company to
continue providing to the Foundation the office space, that the Foundation is
presently using in Coral Gables, Florida, pursuant to the lease presently in
force for such office space, for the remaining initial term of 5 years, subject
to the Company's being permitted to allow Gerald N. Gaston to also use some of
such office space pursuant to a consulting agreement between Mr. Gaston and the
Company; provided, however, that (A) the cost of the obligations set forth in
item (ii) above shall not exceed $175,000 in any calendar year, (B) at all times
that any of the obligations in items (i) or (ii) are in effect with respect to
Parent or the Company, the Company shall be entitled to have at least one
designee, initially Allen R. Freedman, serving as a director of the Foundation,
(C) such contributed funds shall be used by the Foundation for charitable
purposes on behalf of the Company in a manner similar to the charitable purposes
for which contributed funds were used in calendar year 1998, and (D) if at any
time during the initial term of the lease Messrs. Gaston and Landon are not
using the above office space on behalf of the Foundation, the Company shall be
entitled to use the office space for its corporate purposes. After calendar year
2001, Parent will cause the Company to continue supporting the community through
charitable donations consistent with the Company's prior practices and with
Parent's general guidelines for charitable donations.
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6.10. Expenses. If the Merger or the Tender Offer is consummated, 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 printing and mailing of the Offer
Documents, the Schedule 14D-1, the Schedule 14D-9, and the Proxy Statement shall
be shared equally by Parent and the Company.
6.11. Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, Parent agrees that it will cause the
Company to continue to 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 was permitted under Florida Law and
its Governing Documents in effect on the date hereof to indemnify such Person
(and Company shall also advance expenses as incurred to the fullest extent
permitted 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). Parent agrees to guarantee Company's performance
pursuant to this Section 6.11. Notwithstanding anything to the contrary
contained in this Agreement, Parent and the Company shall be obligated to
provide indemnification only to the extent that any directors' and officers'
liability insurance policy of the Company or its Subsidiaries does not provide
coverage and actual payment thereunder with respect to the matters that would
otherwise be subject to indemnification hereunder.
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 6.11, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Company and Parent thereof,
but the failure to so notify shall not relieve Company 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) the
Company shall have the right to assume the defense thereof and Company 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 Company elects not to assume
such defense, or if counsel for the Indemnified Parties advises that there are
issues that raise conflicts of interest between Parent or Company and the
Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to
them, and the Company shall pay all reasonable fees and expenses of such counsel
for the Indemnified Parties promptly as statements therefor are received;
provided, however, that Company 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) Company shall not be
liable for any settlement effected without its prior written consent; and
provided, further, that Company 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 Company shall continue to 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
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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
Company 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 Company will purchase 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 6.11 are intended to be for the benefit
of, and shall be enforceable by, each of the Indemnified Parties, their heirs
and their representatives.
6.12. 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 to terminate the 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 a majority of the outstanding Common Shares
(including for all purposes of such calculation Common Shares purchased by
Parent pursuant to the Stock Option Agreement) for not less than $55.00 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 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), the Distribution Date (as defined
in the Rights Agreement) shall not be deemed to occur and the 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
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
in accordance with the second paragraph of Section 6.12(a).
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 (except that a
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waiver of a condition in Section 7.1(b) by Parent shall constitute a waiver by
Company as well) 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 Common Stock Requisite Vote and shall
have been duly approved by the sole stockholder of Merger Subsidiary in
accordance with applicable Law.
(b) 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 applicable 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).
(c) 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").
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 in the
representations and warranties 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.
(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 reasonable 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 this Agreement.
(d) Consulting Agreement. The Consulting Agreement entered into as of the
date hereof between the Company and Gerald N. Gaston shall be in full force and
effect.
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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:
(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 in the representations and warranties 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. 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.
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
obligations to effect the Merger contained in Section 7.1(a) and (b), Section
7.2(a), (c) and (d), and Section 7.3(a), (b), and (c) shall be deemed to be
waived in all respects, and (ii) if at least a majority 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.
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 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, 1999, whether such date is before or after the date
of approval by the stockholders of the Company (provided, however, that if all
conditions to Closing have been satisfied or waived on or before September 30,
1999, other than obtaining all Governmental Consents, such date shall be
extended past September 30, 1999 for up to three additional one-month periods at
the request of either Parent or the Company) (the "Termination Date"), (ii) by
action of the board of directors of Parent 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, (iii) by action of the board of directors
of the Company at any time if, at a meeting duly convened therefor or at any
adjournment or postponement thereof, the Company Common Stock Requisite Vote
shall not have been obtained and Section 8.3(a) is not
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applicable, 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); provided, that the right to terminate this 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
Common Stock 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 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") 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) Parent receives in immediately available funds all amounts
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 five business days after
Parent's receipt of the Alternative Transaction Notice and until the payment
required by Section 8.5 has been received by Parent, 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; or
(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 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 approval or recommendation of
this Agreement or, after the mailing of the 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
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 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
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<PAGE> 90
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, use reasonable efforts to cause the Person making the
Acquisition Proposal to pay Parent a termination fee of $85,000,000 plus an
amount equal to Parent's charges and expenses incurred in connection with the
transactions contemplated by this Agreement ("Expenses"), up to a maximum of
$5,000,000, except if Parent terminates this Agreement pursuant to Section
8.2(ii) or if Company terminates this Agreement pursuant to Section 8.2(iii), in
which case the Company shall make the foregoing payments. In every case, such
payments shall be made by wire transfer of same day funds. In order to
facilitate the timely making of the foregoing payments, 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
foregoing payments shall be made 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; accordingly, if the Company fails to cause the Person
making the Acquisition Proposal to pay to Parent promptly all amounts due
pursuant to this Section 8.5(b) or Section 8.5(c), then the Company shall be
obligated to pay such amounts to Parent and, if in order to obtain such
payments, Parent or Merger Subsidiary commences a suit that results in a
judgment against the Company for the amounts set forth in this paragraph (b) or
paragraph 8.5(c), the 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 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 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 cause the Person
making the Acquisition Proposal to pay to Parent the termination fee of
$85,000,000, in each case payable by wire transfer of same day funds.
(d) Parent will not, and will not permit or cause any of its Subsidiaries
or any of its or any such Subsidiary's officers or directors to, and shall
direct its and its Subsidiaries' Representatives not to, directly or indirectly,
initiate, solicit, encourage, participate in or otherwise facilitate any
discussion or negotiation with any Person that has made, or to Parent's
knowledge is contemplating making, an Acquisition Proposal, with respect to any
matter pertaining to the Company or its Subsidiaries or such Acquisition
Proposal or any termination or other similar fee or payment referenced in this
Agreement.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1. Survival. This Article IX and the agreements of the Company, Parent
and Merger Subsidiary contained in Sections 6.9 (Benefits) and 6.11
(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 6.6 (Access; Technology
Conversion), insofar as it relates to the Company's and Parent's respective
confidentiality obligations, Section 6.10 (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.
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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.
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 LAWS OF THE STATE OF FLORIDA WITHOUT
REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
(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.
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 shall be
deemed delivered (i) on the date personally delivered, (ii) one business day
after the date delivered by facsimile transmission with a confirmation copy sent
by overnight courier or first-class mail, or (iii) three business days after the
date sent by registered or certified mail, postage prepaid:
if to Parent or Merger Subsidiary:
Fortis, Inc.
One Chase Manhattan Plaza
New York, New York 10005
Attention: Jerome A. Atkinson,
Senior Vice President
and General Counsel
fax: (212) 859-7034
phone: (212) 859-7285
with a copy to (which shall not constitute notice):
B. Harvey Hill, Jr., Esq.
Alston & Bird LLP
1201 W. Peachtree Street
Atlanta, Georgia 30309
fax: (404) 881-4777
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<PAGE> 92
phone: (404) 881-7446
if to the Company:
American Bankers Insurance Group , Inc.
11222 Quail Roost Drive
Miami, Florida 33157-6596
Attention: Chief Executive Officer
fax: (305) 256-7110
phone: (305) 252-6991
with a copy to (which shall not constitute notice):
Josephine Cicchetti, Esq.
Jordan Burt Boros Cicchetti Berenson & Johnson LLP
777 Brickell Avenue, Suite 500
Miami, Florida 33131
fax: (305) 372-9928
phone: (305) 371-2600
and
Jonathan L. Freedman, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
fax: (212) 259-6333
phone: (212) 259-6680
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 and annexes hereto), the Company Disclosure Letter, the
Parent Disclosure Letter, and the Stock Option Agreement, and the
Confidentiality Agreement between Parent and the Company dated October 23, 1998,
as amended February 11, 1999 (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 6.11
(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.
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<PAGE> 93
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, Exhibit or Annex, such
reference shall be to a Section of or Exhibit or Annex 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." No uncertainty or ambiguity herein shall be construed or
resolved against any party, whether under any rule of construction or otherwise.
No party to this Agreement shall be considered the draftsman. The parties
acknowledge and agree that this Agreement has been reviewed, negotiated, and
accepted by all parties and their attorneys and shall be construed and
interpreted according to the ordinary meaning of the words used so as fairly to
accomplish the purposes and intentions of all parties hereto.
9.12. Assignment. This Agreement shall not be assignable by any party
hereto by operation of Law or otherwise, without the prior written consent of
the other parties; provided, however, that Parent may designate, by written
notice to 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. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
9.13. Alternative Preferred Stock Arrangement. Notwithstanding anything
to the contrary in this Agreement, if the Company Preferred Stock Requisite Vote
is not obtained at the Preferred Stockholders Meeting, or Parent reasonably
determines that the Company Preferred Stock Requisite Vote is not likely to be
obtained as contemplated by this Agreement, 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 as provided
hereinbefore but the Preferred Shares shall remain outstanding after the Merger.
In connection with the alternative for the Preferred Shares contemplated by the
prior sentence, the Company shall take all actions reasonably requested by
Parent and shall promptly amend this Agreement, as Parent may reasonably deem
necessary or appropriate to provide, among other matters, 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 each Preferred Share
shall be convertible as provided in the terms of the Preferred Shares set forth
in the Company's Governing Documents).
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: President, Chief Executive
Officer
and Vice Chairman of the Board
FORTIS, INC.
By: /s/ JEROME A. ATKINSON
---------------------------------------
Name: Jerome A. Atkinson
Title: Secretary / Senior VP
GREENLAND ACQUISITION CORP.
By: /s/ JEROME A. ATKINSON
---------------------------------------
Name: Jerome A. Atkinson
Title: Secretary / Senior VP
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<PAGE> 94
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-l(c) under the Exchange Act (relating to Merger
Subsidiary's obligation to pay for or return tendered 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 Shares, or may, in its
sole discretion, terminate or amend the Tender Offer as to any 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 a majority of all outstanding Common Shares on the date of
purchase (excluding for all purposes in calculating such majority 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 any 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
any 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
reasonable 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 Shares (whether or not
any Shares have theretofore been accepted for payment), any of the following
events shall occur:
(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 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
the date of the Agreement; 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 in the representations and warranties
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
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<PAGE> 95
(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 reasonable 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 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 event described in this Annex I shall be final
and binding upon all holders of 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.
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ANNEX II
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
SECTION
TERM CONTAINING DEFINITION
- ---- ---------------------
<S> <C>
Acquisition Proposal........................................ 6.2
Agreement................................................... 1st Paragraph
Alternative Transaction Notice.............................. 8.3(a)
Articles of Merger.......................................... 1.3
Audit Date.................................................. 5.1(e)(i)
Bankruptcy and Equity Exception............................. 5.1(c)(i)
By-Laws..................................................... 2.2
Certificate................................................. 4.5(b)
Charter..................................................... 2.1
Closing..................................................... 1.2
Closing Date................................................ 1.2
Code........................................................ 5.1(h)(ii)
Common Share................................................ 4.1(b)
Common Merger Consideration................................. 4.1(b)
Common Stockholders Meeting................................. 6.4(a)
Company..................................................... 1st Paragraph
Company Actuarial Analyses.................................. 5.1(r)(iii)
Company Common Stock Requisite Vote......................... 5.1(c)(i)
Company Disclosure Letter................................... 5.1
Company Insurance Contracts................................. 5.1(r)(i)
Company Insurance Subsidiaries.............................. 5.1(a)
Company Intellectual Property Rights........................ 5.1(n)(ii)(B)
Company Material Adverse Effect............................. 5.1(a)
Company Option.............................................. 5.1(b)
Company Preferred Stock Requisite Vote...................... 5.1(c)(i)
Company Reports............................................. 5.1(e)(i)
Company Requisite Vote...................................... 5.1(c)(i)
Company SAP Statements...................................... 5.1(e)(ii)
Company Stock Plans......................................... 5.1(b)
Compensation and Benefit Plans.............................. 5.1(h)(i)
Confidentiality Agreement................................... 9.7
Constituent Corporations.................................... 1st Paragraph
Contract.................................................... 5.1(d)(ii)
Costs....................................................... 6.11(a)
Current Premium............................................. 6.11(c)
D&O Insurance............................................... 6.11(c)
Effective Time.............................................. 1.3
Environmental Law........................................... 5.1(k)
ERISA....................................................... 5.1(h)(ii)
ERISA Affiliate............................................. 5.1(h)(iii)
Exchange Act................................................ 1.5(a)
Exchange Agent.............................................. 4.5(a)
Exchange Fund............................................... 4.5(a)
Excluded Common Shares...................................... 4.1(b)
</TABLE>
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<PAGE> 97
<TABLE>
<CAPTION>
SECTION
TERM CONTAINING DEFINITION
- ---- ---------------------
<S> <C>
Excluded Preferred Shares................................... 4.1(c)
Excluded Shares............................................. 4.1(c)
Exercisable Option.......................................... 4.4(a)(i)
Exercisable Option Holder................................... 4.4(a)(i)(2)
Exercise Price.............................................. 4.4(b)(i)(1)
Expenses.................................................... 8.5(b)
Expiration Date............................................. 1.5(b)
Extended Expiration Date.................................... 1.5(b)
FBCA........................................................ 1.1
Foundation.................................................. 6.9(b)
GAAP........................................................ 5.1(e)(i)
Governing Documents......................................... 5.1(a)
Governmental Consents....................................... 7.1(b)
Governmental Entity......................................... 5.1(d)(i)
Hazardous Substance......................................... 5.1(k)
HSR Act..................................................... 5.1(d)(i)
Indemnified Parties......................................... 6.11(a)
Insurance Laws.............................................. 5.1(i)
IRS......................................................... 5.1(h)(ii)
knowledge................................................... 5.1(e)(ii)
Laws........................................................ 5.1(i)
Merger...................................................... 1st Recital
Merger Consideration........................................ 4.1(c)
Merger Subsidiary........................................... 1st Paragraph
Merger Subsidiary Common Stock.............................. 5.2(a)
Minimum Tender Condition.................................... Annex I
NYSE........................................................ 5.1(d)
1940 Act.................................................... 5.1(t)
1998 Company Option......................................... 4.4(a)(i)
1998 Restricted Share....................................... 4.4(b)(i)
Offer Documents............................................. 1.5(a)
Order....................................................... 7.1(c)
Parent...................................................... 1st Paragraph
Parent Companies............................................ 4.1(b)
Parent Material Adverse Effect.............................. 5.2(b)
Pension Plan................................................ 5.1(h)(ii)
Per Share Purchase Price.................................... 4.1(b)
Person...................................................... 5.1(b)
Pre-1998 Company Option..................................... 4.4(a)(iii)
Pre-1998 Exercisable Option................................. 4.4(a)(iii)
Pre-1998 Primary Share...................................... 4.4(a)(iii)(1)
Pre-1998 Restricted Option Share............................ 4.4(a)(iii)(2)
Pre-1998 Restricted Share................................... 4.4(b)(ii)
Preferred Share............................................. 4.1(c)
Preferred Merger Consideration.............................. 4.1(c)
Preferred Stockholders Meeting.............................. 6.4(a)
Primary Share............................................... 4.4(a)(i)(1)
</TABLE>
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<TABLE>
<CAPTION>
SECTION
TERM CONTAINING DEFINITION
- ---- ---------------------
<S> <C>
Proxy Statement............................................. 6.3
Remainder................................................... 4.4(b)(i)(2)
Representatives............................................. 6.6(a)
Restricted Option Share..................................... 4.4(a)(i)(2)
Restricted Option Shares Amount............................. 4.4(a)(i)(2)
Restricted Share............................................ 5.1(b)
Restricted Share Holder..................................... 4.4(b)(i)(1)
Rights...................................................... 5.1(p)
Rights Agreement............................................ 5.1(b)
SAP......................................................... 5.1(e)(ii)
Schedule 14D-1.............................................. 1.5(a)
Schedule 14D-9.............................................. 1.5(c)
SEC......................................................... 5.1(e)(i)
Secretary................................................... 1.3
Securities Act.............................................. 5.1(d)
Senior Management Option.................................... 4.4(a)(ii)
Shares...................................................... 4.1(c)
Stock Option Agreement...................................... 2nd Recital
Subsidiary.................................................. 5.1(a)
Stockholders Meetings....................................... 6.4(a)
Superior Proposal........................................... 6.2
Surviving Corporation....................................... 1.1
Takeover Statute............................................ 5.1(j)
Tax......................................................... 5.1(l)
Tax Return.................................................. 5.1(l)
Taxing Authority............................................ 5.1(l)
Tender Offer................................................ 1.4
Termination Date............................................ 8.2
Third-Party Intellectual Property Rights.................... 5.1(n)(ii)(A)
Voting Agreement............................................ 3rd Recital
</TABLE>
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APPENDIX II
<PAGE> 100
CONFORMED COPY
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of March 5, 1999 (the "Agreement"),
between FORTIS, INC., a Nevada corporation (the "Grantee"), and AMERICAN BANKERS
INSURANCE GROUP, INC., a Florida corporation (the "Grantor").
WHEREAS, the Grantee, Greenland Acquisition Corp., a Florida corporation
and a wholly owned subsidiary of the Grantee ("Merger Subsidiary"), 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 Merger Subsidiary with and into the Grantor (the "Merger");
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, the Grantee and Merger Subsidiary have requested that the Grantor
grant to the Grantee an option to purchase up to 8,406,559 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 Merger Subsidiary 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, Merger Subsidiary 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 8,406,559 shares of
Common Stock (the "Shares") at a cash purchase price equal to $55.00 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 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 8,406,559.
(c) If at any time the Option is then exercisable pursuant to the
terms of Section l(a) hereof, the Grantee may elect, in lieu of exercising
the option to purchase Shares provided in Section l(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 l(d) is applicable, on the last
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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 (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 l(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
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 l(c) above) multiplied by the number of Shares
subject to the Stock Exercise Notice (subject to Section 20 hereof).
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:
(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, as amended (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 percent 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
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agreement in principle, 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 l(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 Alston & Bird LLP, 1201 West Peachtree
Street, Atlanta, Georgia, 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 l(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 l(c) or Section l(d) hereof, as
the case may be, the Grantor will deliver to the Grantee cash in an amount
determined pursuant to Section l(c) or Section l(d) hereof, as the case may
be. Except as otherwise provided in Section l(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) 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
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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;
(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 defined in
the Rights Agreement) pursuant to the Rights Agreement, dated as of
February 19, 1998, between the Grantor and ChaseMellon Shareholder
Services, LLC, as Rights Agent (the "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 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 on 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 for the consummation of the transactions
contemplated.
7. Repurchase of Shares. If by the first anniversary of the date the
Merger Agreement was terminated (the "Merger Termination Date") pursuant to the
terms thereof, 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
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<PAGE> 104
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.
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 (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
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<PAGE> 105
information furnished to the Grantor by the Grantee or the Underwriters, as
applicable, specifically for use or incorporation by reference therein.
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 will 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:
Fortis, Inc.
One Chase Manhattan Plaza
New York, New York 10005
Attention: Jerome A. Atkinson,
Senior Vice President and General Counsel
fax: (212) 859-7034
phone: (212) 859-7285
with a copy to (which shall not constitute notice):
B. Harvey Hill, Jr., Esq.
Alston & Bird LLP
1201 W. Peachtree Street
Atlanta, Georgia 30309
fax: (404) 881-4777
phone: (404) 881-7446
If to the Grantor:
American Bankers Insurance Group, Inc.
11222 Quail Roost Drive
Miami, Florida 33157-6596
Attention: Chief Executive Officer
fax: (305) 256-7110
phone: (305) 252-6991
with a copy to (which shall not constitute notice):
Josephine Cicchetti, Esq.
Jordan Burt Boros Cicchetti Berenson & Johnson LLP
777 Brickell Avenue, Suite 500
Miami, Florida 33131
fax: (305) 372-9928
phone: (305) 371-2600
II-6
<PAGE> 106
and
Jonathan L. Freedman, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
fax: (212) 259-6333
phone: (212) 259-6680
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 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 Merger Subsidiary) or direct or indirect parent companies, 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 Florida (regardless of the laws that
might otherwise govern under applicable Florida principles of conflicts of law).
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"), or (iii) 18 months after the date hereof; provided
that, if the Option 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. 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 l(c) or l(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.
II-7
<PAGE> 107
Notwithstanding any other provision of this Agreement, this Option may not
be exercised for a number of Shares as would, as of the date of the Stock
Exercise Notice, result in a Notional Total Profit (as defined below) of more
than $100 million and, if exercise of the Option otherwise would exceed such
amount, the Grantee, at its discretion, may increase the Purchase Price for that
number of Shares set forth in the Stock Exercise Notice so that the Notional
Total Profit shall not exceed $100 million; provided, that nothing in this
sentence shall restrict any exercise of the Option permitted hereby on any
subsequent date at the Purchase Price set forth in Section 1(a) hereof.
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 l(c) and Section
l(d) hereof, (ii) the amount of (x) 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 prior to
the first anniversary of the Merger Termination Date, less (y) the Grantee's
purchase price for such Shares.
As used herein, the term "Notional Total Profit" with respect to any number
of Shares as to which Grantee may propose to exercise this Option shall be the
Total Profit determined as of the date of the Stock Exercise Notice assuming
that this Option were exercised on such date for such number of Shares and
assuming that such Shares, together with all other Shares held by Grantee and
its affiliates as of such date, were sold for cash at the closing market price
for the Common Stock as of the close of business on the preceding trading day
(less customary brokerage commissions).
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.
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.
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.
By: /s/ GERALD N. GASTON
---------------------------------------
Name: Gerald N. Gaston
Title: President, Chief Executive
Officer and Vice Chairman of the
Board
FORTIS, INC.
By: /s/ JEROME A. ATKINSON
---------------------------------------
Name: Jerome A. Atkinson
Title: Secretary / Senior VP
II-8
<PAGE> 108
APPENDIX III
<PAGE> 109
CONFORMED COPY
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") is entered into as of March 5,
1999, between the undersigned stockholders (each a "Stockholder" and
collectively, the "Stockholders") of AMERICAN BANKERS INSURANCE GROUP, INC., a
Florida corporation (the "Company"), and FORTIS, INC., a Nevada corporation
("Parent").
WHEREAS, concurrently with the execution and delivery of this Agreement,
Greenland Acquisition Corp., a Florida corporation and a wholly owned subsidiary
of Parent ("Merger Subsidiary"), Parent and the Company have entered into an
Agreement and Plan of Merger dated as of March 5, 1999 (the "Merger Agreement"),
providing for the merger of the Company with and into Merger Subsidiary (the
"Merger") pursuant to the terms and conditions of the Merger Agreement, and
setting forth certain representations, warranties, covenants and agreements of
the parties thereto in connection with the Merger; and
WHEREAS, as an inducement and a condition to Parent entering into the
Merger Agreement, pursuant to which each Stockholder will receive the Merger
Consideration (as defined in the Merger Agreement) in exchange for each share of
Common Stock, par value $1.00 per share, of the Company ("Company Common Stock")
owned by such Stockholder, the Stockholders each have agreed to enter into this
Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. Representations of Stockholders. Each of the Stockholders severally
represents as to himself or herself that such Stockholder:
(a) is the holder in the capacity set forth on Exhibit A hereto of
that number of shares of Company Common Stock set forth opposite such
Stockholder's name on Exhibit A (such Stockholder's "Shares");
(b) does not beneficially own (as such term is defined in the
Securities Exchange Act of 1934, as amended (the "1934 Act")) any shares of
Company Common Stock other than his or her Shares, and other than any
shares of Company Common Stock that such Stockholder has the right to
obtain upon the exercise of Company Stock Options (as defined in the Merger
Agreement) outstanding on the date hereof;
(c) has the right, power and authority to execute and deliver this
Agreement and to perform his obligations under this Agreement, and this
Agreement has been duly executed and delivered by such Stockholder and
constitutes a valid and legally binding agreement of such Stockholder,
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; and such execution, delivery and
performance by Shareholder of this Agreement will not (i) conflict with,
require a consent, waiver or approval under, or result in a breach of or
default under, any of the terms of any contract, commitment or other
obligation (written or oral) to which such Stockholder is a party or by
which such Stockholder is bound; (ii) violate any order, writ, injunction
decree or statute, or any rule or regulation, applicable to Stockholder or
any of the properties or assets of Stockholder; or (iii) result in the
creation of, or impose any obligation on such Stockholder to create, any
lien, charge or other encumbrance of any nature whatsoever upon the Shares;
and
(d) the Shares are now and will at all times during the term of this
Agreement be held by such Stockholder, or by a nominee or custodian for the
account of such Stockholder, free and clear of all pledges, liens, proxies,
claims, charges, security interests, preemptive rights and any other
encumbrances whatsoever with respect to the ownership, transfer or voting
of such Shares; and there are no outstanding options, warrants or rights to
purchase or acquire, or other agreements relating to, such Shares other
than this Agreement, except, in the case of Mr. Landon for 40,000 Shares
subject to an option granted prior to the date hereof to a third party.
III-1
<PAGE> 110
The representations and warranties contained herein shall be made as of the date
hereof and as of each date from the date hereof through and including the date
that the Merger is consummated.
2. Agreement to Vote Shares. Each of the Stockholders severally agrees to
vote his or her Shares and any New Shares (as defined in Section 7 hereof), and
shall cause any holder of record of his or her Shares or New Shares to vote, (a)
in favor of adoption and approval of the Merger Agreement and the Merger (and
each other action and transaction, contemplated by the Merger Agreement and this
Agreement) at every meeting of the stockholders of the Company at which such
matters are considered and at every adjournment thereof, and (b) against any
action or proposal that would compete with or could serve to materially
interfere with, delay, discourage, adversely affect or inhibit the timely
consummation of the Merger or Tender Offer. Any such vote shall be cast or
consent shall be given in accordance with such procedures relating thereto as
shall ensure that it is duly counted for purposes of determining that a quorum
is present and for purposes of recording the results of such vote or consent.
Each Stockholder severally agrees to deliver to Parent upon request a proxy
substantially in the form attached hereto as Exhibit B, which proxy shall be
coupled with an interest and irrevocable to the extent permitted under Florida
law, with the total number of such Stockholder's Shares and any New Shares
correctly indicated thereon. Each Stockholder also agrees to use his or her
reasonable efforts to take, or cause to be taken, all action, and do, or cause
to be done, all things necessary or advisable in order to consummate and make
effective the transactions contemplated by this Agreement.
3. No Voting Trusts. After the date hereof, the Stockholders severally
agree that they will not, nor will they permit any entity under their control
to, deposit any of their Shares in a voting trust or subject any of their Shares
to any arrangement with respect to the voting of such Shares other than
agreements entered into with Parent or Merger Subsidiary.
4. No Proxy Solicitations. Each of the Stockholders severally agrees that
such Stockholder will not, nor will such Stockholder permit any entity under
their control to, (a) solicit proxies or become a "participant" in a
"solicitation" (as such terms are defined in Regulation 14A under the 1934 Act)
in opposition to or competition with the consummation of the Merger or otherwise
encourage or assist any party in taking or planning any action which would
compete with or otherwise could serve to materially interfere with, delay,
discourage, adversely affect or inhibit the timely consummation of the Merger or
the Tender Offer in accordance with the terms of the Merger Agreement, (b)
directly or indirectly encourage, initiate or cooperate in a stockholders' vote
or action by consent of the Company's stockholders in opposition to or in
competition with the consummation of the Merger or the Tender Offer, or (c)
become a member of a "group" (as such term is used in Section 13(d) of the 1934
Act) with respect to any voting securities of the Company for the purpose of
opposing or competing with the consummation of the Merger or the Tender Offer;
provided, that the foregoing shall not restrict any director of the Company from
taking any action such director believes is necessary to satisfy such director's
fiduciary duty to stockholders of the Company.
5. Transfer and Encumbrance. On or after the date hereof, each of the
Stockholders severally agrees not to voluntarily transfer, sell, offer, pledge
or otherwise dispose of or encumber ("Transfer") any of his or her Shares or New
Shares prior to the earlier of (a) the effective date of the Merger or (b) the
date this Agreement shall be terminated in accordance with its terms.
Notwithstanding anything to the contrary in this Agreement, (A) Mr. Landon shall
be permitted to Transfer (i) Shares or New Shares Transferred for net after-tax
proceeds of not in excess of $10,000,000 and (ii) Shares or New Shares
Transferred pursuant to any decision by a court or alternative dispute
resolution entity, or in settlement of any legal proceeding and (B) Mr. Gaston
shall be permitted to Transfer Shares or New Shares Transferred for net
after-tax proceeds of not in excess of $2,000,000.
6. Legend. As soon as practicable after the execution of this Agreement,
each Stockholder shall surrender to the Company the certificates representing
the Shares in his or her possession (and within 30 days the Shares not in his or
her possession), shall cause the following legend to be placed on the
certificates representing such Shares and shall request that such legend remain
thereon until the earlier of (i) expiration or termination of the Agreement or
(ii) the consummation of the Merger:
The shares of capital stock represented by this certificate are subject to
a Voting Agreement, dated as of March 5, 1999 among the Stockholders named
therein and Fortis, Inc., which, among other things,
III-2
<PAGE> 111
(a) restricts the sale or transfer of such shares except in accordance
therewith, and (b) restricts the voting of such shares except in accordance
therewith.
In the event that Parent requests that a proxy be executed and delivered by
Stockholder to it pursuant to Section 2 hereof, Stockholder shall promptly
surrender to the Company the certificates representing the Shares covered by the
proxy and cause the foregoing legend to be revised to add to the end of such
legend the following words:
, and such shares are also subject to an irrevocable proxy under Section
607.0722 of the Florida Business Corporation Act.
Stockholder shall provide Parent with reasonably satisfactory evidence of its
compliance with this Section 6 on or prior to the date five business days after
the execution hereof with respect to Shares in his possession (or within 30 days
with respect to Shares not in his possession) or of the request relating to
Stockholder's proxy, as the case may be.
7. Additional Purchases. Each of the Stockholders severally agrees that
in the event (i) of any stock dividend, stock split, recapitalization,
reclassification, combination or exchange of shares of capital stock of the
Company on, of or affecting the Shares of a Stockholder, (ii) such Stockholder
purchases or otherwise acquires beneficial ownership of any shares of Company
Common Stock after the execution of this Agreement, or (iii) such Stockholder
voluntarily acquires the right to vote or share in the voting of any shares of
Company Common Stock other than the Shares (collectively, "New Shares"), such
Stockholder agrees to deliver promptly to Parent upon request of Parent an
irrevocable proxy substantially in the form attached hereto as Exhibit B with
respect to such New Shares. Each of the Stockholders also severally agrees that
any New Shares acquired or purchased by him or her shall be subject to the terms
of this Agreement to the same extent as if they constituted Shares.
8. Specific Performance. Each party hereto severally acknowledges that it
will be impossible to measure in money the damage to the other party if the
party hereto fails to comply with any of the obligations imposed by this
Agreement, that every such obligation is material and that, in the event of any
such failure, the other party will not have an adequate remedy at law or
damages. Accordingly, each party hereto severally agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that the other party has an adequate remedy at law. Each
party hereto severally agrees that it will not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with any other
party's seeking or obtaining such equitable relief.
9. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
and shall not be assignable without the written consent of all other parties
hereto.
10. Entire Agreement. This Agreement supersedes all prior agreements,
written or oral, among the parties hereto with respect to the subject matter
hereof and contains the entire agreement among the parties with respect to the
subject matter hereof. This Agreement may not be amended, supplemented or
modified, and no provisions hereof may be modified or waived, except by an
instrument in writing signed by all the parties hereto. No waiver of any
provisions hereof by any party shall be deemed a waiver of any other provisions
hereof by any such party, nor shall any such waiver be deemed a continuing
waiver of any provision hereof by such party.
11. Miscellaneous.
(a) This Agreement shall be deemed a contract made under, and for all
purposes shall be construed in accordance with, the laws of the State of
Florida.
(b) If any provision of this Agreement or the application of such
provision to any person or circumstances shall be held invalid by a court
of competent jurisdiction, the remainder of the provision held invalid and
the application of such provision to persons or circumstances, other than
the party as to which it is held invalid, shall not be affected.
III-3
<PAGE> 112
(c) This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
(d) This Agreement shall terminate upon the earliest to occur of (i)
the Effective Time of the Merger, (ii) termination of the Merger Agreement
or (iii) the Termination Date (as defined in the Merger Agreement).
(e) All Section headings herein are for convenience of reference only
and are not part of this Agreement, and no construction or reference shall
be derived therefrom.
(f) The obligations of the Stockholders set forth in this Agreement
shall not be effective or binding upon any Stockholder until after such
time as the Merger Agreement is executed and delivered by the Company,
Parent and Merger Subsidiary, and the parties agree that there is not and
has not been any other agreement, arrangement or understanding between the
parties hereto with respect to the matters set forth herein.
III-4
<PAGE> 113
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
FORTIS, INC.
By: /s/ JEROME A. ATKINSON
------------------------------------
Name: Jerome A. Atkinson
Title: Secretary/Senior VP
THE STOCKHOLDERS:
/s/ GERALD N. GASTON
--------------------------------------
Name: Gerald N. Gaston
/s/ R. KIRK LANDON
--------------------------------------
Name: R. Kirk Landon
R. Kirk Landon/B. Landon
Foundation
/s/ R. KIRK LANDON
--------------------------------------
By: R. Kirk Landon
R. Kirk Landon Revocable Trust
/s/ R. KIRK LANDON
--------------------------------------
Name: R. Kirk Landon, Trustee
Landon Corporation
/s/ R. KIRK LANDON
--------------------------------------
Name: R. Kirk Landon
III-5
<PAGE> 114
[EXHIBITS INTENTIONALLY OMITTED]
<PAGE> 115
APPENDIX IV
<PAGE> 116
March 5, 1999
The Board of Directors
American Bankers Insurance Group, Inc.
11222 Quail Roost Drive
Miami, Florida 33157-6596
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the common stock, par value $1.00 per share ("ABI
Common Stock"), and to the holders of the $3.125 Series B Convertible Preferred
Stock, no par value ("ABI Preferred Stock"), of American Bankers Insurance
Group, Inc. ("American Bankers") of the consideration to be received by such
holders pursuant to the terms of and subject to the conditions set forth in the
Agreement and Plan of Merger, to be dated as of March 5, 1999 (the "Merger
Agreement"), by and among Fortis, Inc., a wholly owned subsidiary of Fortis,
Inc. ("Merger Sub") and American Bankers, pursuant to which, among other things,
Merger Sub will be merged with and into American Bankers (the "Merger").
As more fully described in the Merger Agreement, upon the consummation of
the Merger, (i) each outstanding share of ABI Common Stock will be converted
into the right to receive $55.00 in cash (the "Common Stock Consideration") and
(ii) each outstanding share of ABI Preferred Stock will be converted into the
right to receive cash in an amount equal to the product of $55.00 and 1.9974
(the "Preferred Stock Consideration").
The Merger Agreement further provides that Fortis, Inc., at its election,
may cause Merger Sub to commence a cash tender offer for up to 100% (but not
less than a majority) of the outstanding ABI Common Stock at a purchase price of
not less than $55.00 per share. If Merger Sub commences such a tender offer,
Fortis, Inc. may also elect to cause Merger Sub concurrently to commence a cash
tender offer for up to 100% (or such lesser percentage as Fortis, Inc. may
decide) of the outstanding ABI Preferred Stock at a purchase price per share
equal to the Preferred Stock Consideration. Common Stock Consideration and
Preferred Stock Consideration also shall refer herein to the respective purchase
prices per share payable in such a tender offer. If Merger Sub purchases more
than a majority of the outstanding ABI Common Stock in such a tender offer, the
Merger Agreement provides that each remaining outstanding share of ABI Common
Stock will be converted in the Merger into the right to receive Common Stock
Consideration and each outstanding share of ABI Preferred Stock will be
converted in the Merger into the right to receive Preferred Stock Consideration.
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of American Bankers concerning the business, operations and
prospects of American Bankers. We examined certain publicly available business
and financial information relating to American Bankers and Fortis Group as well
as certain financial forecasts for American Bankers and other information and
data for American Bankers which were provided to or otherwise discussed with us
by the management of American Bankers. We reviewed the financial terms of the
Merger as set forth in the Merger Agreement in relation to, among other things:
current and historical market prices and trading volumes of the ABI Common
Stock; the historical and projected earnings and other operating data of
American Bankers; and the capitalization and financial condition of American
Bankers. We considered, to the extent publicly available, the financial terms of
certain other transactions recently effected which we considered relevant in
evaluating the Merger and analyzed certain financial, stock market and other
publicly available information relating to other companies whose operations we
considered relevant in evaluating that of American Bankers. In addition to the
foregoing, we conducted such other analyses and examinations and
IV-1
<PAGE> 117
The Board of Directors
American Bankers Insurance Group, Inc.
March 5, 1999
Page 2
considered such other financial, economic and market criteria as we deemed
appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. We have also assumed with your consent, that the final
terms of the Merger Agreement reviewed by us in draft form will not vary
materially from the draft reviewed by us. With respect to financial forecasts
and other information and data provided to or otherwise reviewed by or discussed
with us, we have been advised by the management of American Bankers that such
forecasts and other information and data were reasonably prepared on bases
reflecting the best currently available estimates and judgment of the management
of American Bankers as to the future financial performance of American Bankers.
We have not made or been provided with an independent evaluation or appraisal of
the assets or liabilities (contingent or otherwise) of American Bankers nor have
we made any physical inspection of the properties or assets of American Bankers.
Our opinion is necessarily based upon information available to us, and
financial, stock market and other conditions and circumstances existing and
disclosed to us, as of the date hereof.
Salomon Smith Barney Inc. has acted as financial advisor to American
Bankers in connection with the proposed Merger and will receive a fee for such
services. A significant portion of the fee we will receive with respect to our
engagement as financial advisor to American Bankers is contingent upon the
consummation of the Merger. We may have in the past provided investment banking
services to American Bankers and Fortis Group or its affiliates, for which
services we may have received compensation. In the ordinary course of our
business, we and our affiliates may actively trade or hold the securities of
American Bankers and Fortis Group or its affiliates for our own account or for
the account of our customers and, accordingly, may at any time hold a long or
short position in such securities. In addition, we and our affiliates (including
Citigroup Inc. and its affiliates) may maintain relationships with American
Bankers and Fortis Group or its affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of American Bankers in its evaluation of
the proposed Merger, and our opinion is not intended to be and does not
constitute a recommendation to any stockholder as to how such stockholder should
vote on the proposed Merger.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, (i) the Common Stock
Consideration is fair, from a financial point of view, to the holders of ABI
Common Stock and (ii) the Preferred Stock Consideration is fair, from a
financial point of view, to the holders of ABI Preferred Stock.
Very truly yours,
/s/ SALOMON SMITH BARNEY INC.
--------------------------------------
Salomon Smith Barney Inc.
IV-2
<PAGE> 118
FOR USE BY HOLDERS OF COMMON STOCK OF
AMERICAN BANKERS INSURANCE GROUP, INC.
American Bankers Insurance Group, Inc.
11222 Quail Roost Drive
Miami, Florida 33157
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R. Kirk Landon, Gerald N. Gaston and Arthur
W. Heggen as Proxies, each with the power to appoint his substitute, and hereby
authorizes each of them to represent and to vote, as designated below, all the
shares of the common stock, par value $1.00 per share ("Common Stock"), of
American Bankers Insurance Group, Inc. (the "Company") held of record by the
undersigned on [?], 1999, at the Special Meeting of Stockholders (the "Special
Meeting") to be held on [?], 1999, and at any and all adjournments or
postponements thereof.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MERGER (EACH AS DEFINED IN THE ACCOMPANYING PROXY STATEMENT)
AND RECOMMENDS THAT HOLDERS OF COMMON STOCK VOTE FOR APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT AND THE MERGER.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE
ENCLOSED ENVELOPE. IF YOUR ADDRESS IS INCORRECTLY SHOWN, PLEASE PRINT CHANGES.
<PAGE> 119
American Bankers Insurance Group, Inc.
PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY
1. Approval and adoption of the
Agreement and Plan of Merger For Against Abstain
by and among American Bankers [] [] []
Insurance Group, Inc., Fortis,
Inc. and Greenland Acquisition
Corp., and the merger contemplated
thereby, as described in the
accompanying Proxy Statement.
2. In their discretion, the Proxies
are authorized to vote upon such
other business as may properly
come before the Special Meeting
or any adjournment or
postponement thereof.
All other proxies heretofore given by the undersigned to vote shares of the
Common Stock of the Company which the undersigned would be entitled to vote if
personally present at the Special Meeting or any and all adjournments or
postponements thereof, are hereby expressly revoked.
Dated: ____________________, 1999
______________________________________
Signature(s)
______________________________________
Signature(s)
Please date this Proxy and sign it exactly as your name or name(s) appear above.
When shares are held jointly, both must sign. When signing as an attorney,
executor, administrator, trustee or guardian, please give full title as such.
If shares are held by a corporation, please sign in full corporate name by the
President or other authorized officer. If shares are held by a partnership,
please sign in partnership name by an authorized person.
<PAGE> 120
FOR USE BY HOLDERS OF
$3.125 SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK OF
AMERICAN BANKERS INSURANCE GROUP, INC.
American Bankers Insurance Group, Inc.
11222 Quail Roost Drive
Miami, Florida 33157
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R. Kirk Landon, Gerald N. Gaston and
Arthur W. Heggen as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and to vote, as designated below,
all the shares of $3.125 Series B Cumulative Convertible Preferred Stock
("Preferred Stock") of American Bankers Insurance Group, Inc. (the "Company")
held of record by the undersigned on [?], 1999, at the Special Meeting of
Stockholders (the "Special Meeting") to be held on [?], 1999, and at any and all
adjournments or postponements thereof.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MERGER (EACH AS DEFINED IN THE ACCOMPANYING PROXY STATEMENT)
AND RECOMMENDS THAT HOLDERS OF PREFERRED STOCK VOTE FOR APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT AND THE MERGER.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREINBY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE
ENCLOSED ENVELOPE. IF YOUR ADDRESS IS INCORRECTLY SHOWN, PLEASE PRINT CHANGES.
<PAGE> 121
American Bankers Insurance Group, Inc.
PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY
1. Approval and adoption of the
Agreement and Plan of Merger by For Against Abstain
American Bankers Insurance Group, [ ] [ ] [ ]
Inc., Fortis, Inc. and Greenland
Acquisition Corp., and the merger
contemplated thereby, as described
in the accompanying Proxy Statement.
2. In their discretion, the Proxies are
authorized to vote upon such
other business as may properly
come before the Special Meeting
or any adjournment or
postponement thereof.
All other proxies heretofore given by the undersigned to vote shares of the
$3.125 Series B Cumulative Convertible Preferred Stock of the Company which the
undersigned would be entitled to vote if personally present at the Special
Meeting or any and all adjournments or postponements thereof, are hereby
expressly revoked.
Dated: ____________________, 1999
______________________________________
Signature(s)
______________________________________
Signature(s)
Please date this Proxy and sign it exactly as your name or name(s) appear above.
When shares are held jointly, both must sign. When signing as an attorney,
executor, administrator, trustee or guardian, please give full title as such.
If shares are held by a corporation, please sign in full corporate name by the
President or other authorized officer. If shares are held by a partnership,
please sign in partnership name by an authorized person.
