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DATED JANUARY 30, 1998
AS SUPPLEMENTED MARCH 10, 1998
AMERICAN BANKERS INSURANCE GROUP, INC.
PROXY STATEMENT
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AMERICAN INTERNATIONAL GROUP, INC.
PROSPECTUS
This Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") is being
furnished to the holders of $3.125 Series B Cumulative Convertible Preferred
Stock, no par value (the "Preferred Stock"), and the holders of Common Stock,
par value $1.00 per share (the "Common Stock"), of American Bankers Insurance
Group, Inc., a Florida corporation ("American Bankers"), in connection with the
solicitation of proxies by the Board of Directors of American Bankers (the
"American Bankers Board") for use at the special meeting of holders of Preferred
Stock and at any and all adjournments or postponements thereof (the "Preferred
Shareholders Special Meeting") to be held at 10:00 a.m., Eastern time, on March
25, 1998, at the Auditorium of the Company's Headquarters, 11222 Quail Roost
Drive, Miami, Florida 33157-6596 and at the special meeting of holders of Common
Stock and at any and all adjournments or postponements thereof (the "Common
Shareholders Special Meeting" and, together with the Preferred Shareholders
Special Meeting, the "Special Meetings") to be held at 10:00 a.m., Eastern time,
on March 27, 1998, at the Auditorium of the Company's Headquarters, 11222 Quail
Roost Drive, Miami, Florida 33157-6596. The Preferred Shareholders Special
Meeting and the Common Shareholders Special Meeting were originally scheduled
for March 4, 1998 and March 6, 1998, respectively, but were postponed until
March 25, 1998 and March 27, 1998, respectively, as more fully described herein.
This Proxy Statement/Prospectus also constitutes the Prospectus of American
International Group, Inc. ("AIG") for use in connection with the offer and
issuance of shares of $3.125 Cumulative Convertible Serial Preferred Stock,
Series C, par value $5.00 per share (the "AIG Series C Preferred Stock"), and
shares of Common Stock, par value $2.50 per share (the "AIG Common Stock"), of
AIG pursuant to the merger (the "Merger") of American Bankers with and into
AIGF, Inc., a Florida corporation and a newly formed, wholly-owned subsidiary of
AIG ("AIGF"), pursuant to the terms of the Agreement and Plan of Merger (the
"Merger Agreement"), dated as of December 21, 1997, as amended and restated as
of January 7, 1998, as amended by Amendment No. 1 thereto dated as of January
28, 1998, and as amended and restated as of February 28, 1998, among American
Bankers, AIG and AIGF, a copy of which is attached hereto as Appendix I.
As a result of the Merger, each share of Preferred Stock issued and
outstanding immediately prior to the Effective Time (as hereinafter defined)
(other than shares owned by AIG, AIGF or any other direct or indirect subsidiary
of AIG (the "AIG 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 (collectively, the "Excluded
Preferred Shares")) shall be converted into, and become exchangeable for, one
share of AIG Series C Preferred Stock. The AIG Series C Preferred Stock will
contain terms substantially similar to the terms of the Preferred Stock (after
making appropriate conversion adjustments) and will be convertible into AIG
Common Stock.
As a result of the Merger, each share of Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares owned by
the AIG Companies or the American Bankers Companies and in each case not held on
behalf of third parties (collectively, the "Excluded Common Shares" and,
together with the Excluded Preferred Shares, the "Excluded Shares")) shall be
converted into, and become exchangeable for, at the election of such holder, and
subject to certain limitations and procedures more fully described in this Proxy
Statement/Prospectus, (i) $58.00 in cash, without interest, subject to a maximum
number of shares of Common Stock that can be converted into cash (in excess of
which shares will be converted into AIG Common Stock) or (ii) AIG Common Stock
with a value of $58.00 (based on a specific ten day averaging period for AIG
Common Stock), subject to AIG's right, in certain circumstances and subject to
certain limitations, to pay a portion of such consideration in cash in lieu of
AIG Common Stock. Holders of Common Stock shall receive cash in lieu of
fractional shares of AIG Common Stock otherwise payable.
HOLDERS OF PREFERRED STOCK AND COMMON STOCK ARE STRONGLY URGED TO READ AND
CONSIDER CAREFULLY THIS PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY, PARTICULARLY
THE MATTERS REFERRED TO UNDER "RISK FACTORS" STARTING ON PAGE 24.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
This Proxy Statement/Prospectus, the Notice of Special Meeting of Preferred
Shareholders, the Notice of Special Meeting of Common Shareholders, the
accompanying forms of proxy and the Election Form and Letter of Transmittal are
being mailed to shareholders of American Bankers on or about March 10, 1998.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS JANUARY 30, 1998, AS SUPPLEMENTED
MARCH 10, 1998.
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TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
WHO CAN HELP ANSWER YOUR QUESTIONS.......................... 6
AVAILABLE INFORMATION....................................... 7
INCORPORATION OF DOCUMENTS BY REFERENCE..................... 8
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS... 9
SUMMARY..................................................... 10
MARKET PRICE AND DIVIDEND INFORMATION....................... 17
Dividend Information...................................... 18
Recent Closing Prices..................................... 18
Number of Shareholders.................................... 18
SELECTED CONSOLIDATED FINANCIAL DATA........................ 19
COMPARATIVE PER SHARE DATA.................................. 23
RISK FACTORS................................................ 24
THE SPECIAL MEETINGS........................................ 25
General; Dates, Times and Places.......................... 25
Purpose of the Special Meetings........................... 25
Revocation of Proxies..................................... 25
Record Dates; Votes Required.............................. 25
Quorum.................................................... 26
Expenses of Solicitation.................................. 26
Miscellaneous............................................. 27
THE MERGER.................................................. 29
Background of the Merger.................................. 29
Projections............................................... 34
Reasons for the Merger; Recommendation of the American
Bankers Board.......................................... 35
Opinion of American Bankers' Financial Advisor............ 39
Certain Federal Income Tax Consequences of the Merger..... 43
Required Regulatory Filings and Approvals................. 46
Litigation................................................ 49
Resale of AIG Series C Preferred Stock and AIG Common
Stock.................................................. 52
Management and Operations Following the Merger............ 52
Interests of Certain Persons in the Merger................ 53
Absence of Appraisal Rights............................... 54
Accounting Treatment...................................... 54
Public Trading Markets.................................... 54
THE MERGER AGREEMENT........................................ 55
General; the Election; Merger Consideration............... 55
Optional Tender Offer..................................... 57
Closing; Effective Time................................... 59
Cancellation of Shares.................................... 59
Fractional Shares......................................... 59
Exchange of Certificates.................................. 59
Distributions with Respect to Unexchanged Shares.......... 60
Transfers................................................. 60
Termination of Exchange Fund.............................. 60
Lost, Stolen or Destroyed Certificates.................... 61
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<TABLE>
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Adjustments to Prevent Dilution........................... 61
Conditions of the Proposed Merger......................... 61
Conduct of American Bankers' Business Prior to the
Merger................................................. 62
Agreement Not to Solicit Other Offers..................... 64
Employee Benefits......................................... 65
Treatment of Stock Options................................ 65
Tax Matters............................................... 66
Certain Other Covenants and Agreements.................... 66
Representations and Warranties............................ 69
Termination............................................... 70
Expenses and Termination Fees............................. 70
Amendment and Waiver...................................... 71
Alternative Transaction Structure......................... 71
RELATED AGREEMENTS AND TRANSACTIONS......................... 73
Stock Option Agreement.................................... 73
Voting Agreement.......................................... 75
Amendment to American Bankers' Rights Agreement........... 76
Employment Agreements..................................... 76
Amendments to Severance Agreements........................ 77
INFORMATION REGARDING AIG................................... 78
INFORMATION REGARDING AMERICAN BANKERS...................... 78
DESCRIPTION OF AIG CAPITAL STOCK............................ 80
General................................................... 80
AIG Common Stock.......................................... 80
AIG Preferred Stock....................................... 80
AIG Series C Preferred Stock.............................. 80
COMPARATIVE RIGHTS OF COMMON SHAREHOLDERS................... 88
Authorized Capital........................................ 89
Election and Size of Board of Directors................... 89
Removal of Directors...................................... 90
Vacancies on the Board of Directors....................... 90
Action By Written Consent................................. 90
Amendments to Charter..................................... 91
Amendments to Bylaws...................................... 91
Special Meetings of Shareholders.......................... 91
Vote on Extraordinary Corporate Transactions.............. 92
Inspection of Documents................................... 92
Dividends................................................. 93
Appraisal Rights of Dissenting Shareholders............... 93
Indemnification of Directors and Officers................. 94
Limitation of Liability................................... 95
Preemptive Rights......................................... 95
Special Redemption Provisions............................. 95
Preferred Stock Purchase Rights........................... 96
Shareholder Suits......................................... 97
Business Combination Restrictions......................... 97
LEGAL MATTERS............................................... 98
EXPERTS..................................................... 99
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APPENDIX I -- AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
APPENDIX II -- STOCK OPTION AGREEMENT
APPENDIX III -- VOTING AGREEMENT
APPENDIX IV -- SALOMON SMITH BARNEY OPINION
APPENDIX V -- CERTIFICATE OF DESIGNATION OF AIG $3.125 CUMULATIVE
CONVERTIBLE SERIAL PREFERRED STOCK, SERIES C
APPENDIX VI -- CERTIFICATE OF DESIGNATION OF AMERICAN BANKERS $3.125
CUMULATIVE CONVERTIBLE SERIES B PREFERRED STOCK
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QUESTIONS AND ANSWERS
ABOUT THE MERGER
This summary highlights certain information from this document, is
qualified by reference thereto 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 at the beginning of this document and the
Appendices hereto. 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: I RECEIVED A PROXY STATEMENT/PROSPECTUS IN EARLY FEBRUARY. WHY HAVE I BEEN
SENT THIS PROXY STATEMENT/PROSPECTUS NOW?
A: American Bankers, AIG and AIGF entered into an Agreement and Plan of Merger
(the "Original Merger Agreement") on December 21, 1997, which was amended
and restated as of January 7, 1998, and amended by Amendment No. 1 as of
January 28, 1998. American Bankers and AIG also entered into a Stock Option
Agreement (the "Original Stock Option Agreement") on December 21, 1997. In
early February, American Bankers and AIG distributed to the holders of
record of Preferred Stock and Common Stock, a proxy statement/ prospectus,
dated January 30, 1998 (the "Original Proxy Statement/Prospectus"), which
described the Original Merger Agreement, the Original Stock Option
Agreement, certain related agreements and the transactions contemplated by
such agreements and which solicited proxies in favor of the transactions
contemplated by such agreements.
The Original Merger Agreement provided, among other things, that American
Bankers would merge into AIGF and that holders of shares of Common Stock
would receive cash or AIG Common Stock with a value of $47.00 in exchange
for each share of Common Stock.
On January 27, 1998, Cendant Corporation ("Cendant") publicly announced a
proposal to acquire American Bankers for $58.00 per share of Common Stock,
to be paid in cash and common stock of Cendant. On January 28, 1998, Cendant
commenced a tender offer seeking to purchase 23,501,260 shares of Common
Stock, subject to the terms and conditions stated therein, at $58.00 per
share in cash (the "Cendant Offer"). Cendant also commenced a proxy
solicitation seeking proxies to vote against the transactions contemplated
by the Original Merger Agreement. On February 5, 1998, the American Bankers
Board determined that, in light of all the relevant circumstances and
because it had been unable to assess several aspects of the Cendant Offer
due to certain provisions in the Original Merger Agreement, as well as the
lack of certain information which American Bankers expected would be
disclosed in the regulatory process, it was unable to take a position with
respect to the Cendant Offer and made no recommendation at that time with
respect to the Cendant Offer. See "The Merger -- Background of the Merger."
On February 28, 1998, American Bankers, AIG and AIGF entered into the Merger
Agreement and the Stock Option Agreement, which amend certain terms of the
Original Merger Agreement and the Original Stock Option Agreement,
respectively. The Merger Agreement provides, among other things, that
American Bankers will be merged into AIGF and that holders of shares of
Common Stock will receive cash or AIG Common Stock with a value of $58.00 in
exchange for each share of Common Stock.
This Proxy Statement/Prospectus is being distributed on or about March 10,
1998, to the holders of record of Preferred Stock and Common Stock on
January 30, 1998, as a supplement to and restatement of the Original Proxy
Statement/Prospectus in order to describe the Merger Agreement, the Stock
Option Agreement, certain related agreements and the transactions
contemplated by such agreements and to continue the solicitation of proxies
in favor of the transactions contemplated by such agreements.
In connection with the execution of the Merger Agreement and the Stock
Option Agreement, American Bankers determined to postpone the Preferred
Shareholders Special Meeting from March 4, 1998 until March 25, 1998 and to
postpone the Common Shareholders Special
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Meeting from March 6, 1998 until March 27, 1998.
Q: WHY IS AMERICAN BANKERS PROPOSING TO MERGE WITH AIG?
A: The American Bankers Board determined to recommend approval of the Original
Merger Agreement and the merger contemplated thereby 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;
- potential synergies in connection with the merger;
- AIG's historical financial performance, international experience and its
depth of knowledge and experience in regulatory matters;
- the terms and provisions of the Original Merger Agreement and related
agreements;
- the fairness opinion of American Bankers' financial advisor, Salomon Smith
Barney; and
- historical market prices and recent trading activity of the Common Stock.
The American Bankers Board also considered certain countervailing factors
such as AIG's historically high price/earnings ratio and the possible effect
of the recent turmoil in the financial markets in Asia on AIG.
The American Bankers Board considered essentially the same factors it
considered when it determined to recommend the Original Merger Agreement
when it determined to recommend approval of the Merger Agreement and the
Merger, including American Bankers' and AIG's businesses, conditions and
prospects as well as the potential synergies of the transaction. In
addition, the American Bankers Board specifically considered the terms of
the Merger Agreement that had been amended from the Original Merger
Agreement, including:
- that the value of the merger consideration was raised from $47 to $58 per
share of Common Stock;
- the elimination and reduction of certain provisions contained in the
Original Merger Agreement;
- the increases in the termination fee under the Merger Agreement and in the
maximum profit that AIG could obtain pursuant to the Stock Option
Agreement; and
- the option of AIG to restructure its acquisition of American Bankers as a
tender offer.
In addition, the American Bankers Board also considered a new fairness
opinion of its financial advisor, Salomon Smith Barney.
Q: WHAT DO I NEED TO DO NOW?
A: After you have carefully read this Proxy Statement/Prospectus, just indicate
on your green 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 Preferred Shareholders Special Meeting or the Common
Shareholders Special Meeting, as the case may be. If you have previously
signed and mailed the white proxy card sent to you with the Original Proxy
Statement/Prospectus or the gold proxy card sent to you by Cendant, and DO
NOT want to change your vote with respect to the Merger or to vote against
proposal 2 (as described under "The Special Meetings -- Miscellaneous") on
the green proxy card, you do not need to send in another proxy card now.
Your original proxy card is still valid. If you have previously signed and
mailed the white proxy card sent to you with the Original Proxy
Statement/Prospectus or the gold proxy card sent to you by Cendant and DO
want to change your vote with respect to the Merger or to vote against
proposal 2 (as described under "The Special Meetings -- Miscellaneous") on
the green proxy card, you need to sign and mail the enclosed green proxy
card in the enclosed white prepaid return envelope as soon as possible. Only
the latest dated proxy card submitted by you either to American Bankers or
to Cendant will be counted at the Preferred Shareholders Special Meeting or
the Common Shareholders Special Meeting, as applicable.
The Preferred Shareholders Special Meeting will take place on March 25, 1998
at 10:00 a.m., Eastern time, at the Auditorium of the Company's
Headquarters, 11222 Quail Roost Drive, Miami, Florida 33157-6596. The Common
Shareholders Special Meeting will
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take place on March 27, 1998 at 10:00 a.m., Eastern time, at the Auditorium
of the Company's Headquarters, 11222 Quail Roost Drive, Miami, Florida
33157-6596. The American Bankers Board unanimously recommends voting IN
FAVOR OF the proposed Merger.
If you are a holder of Common Stock, also complete, sign and mail the
Election Form in the enclosed brown return envelope marked "Election Form"
as soon as possible, in order to indicate whether you prefer to receive cash
or AIG Common Stock in the Merger for all or any part of your shares of
Common Stock. If you have previously signed and mailed the white Election
Form sent to you with the Original Proxy Statement/Prospectus and DO NOT
want to change your election, you do not need to send in another Election
Form now. Your original Election Form is still valid. If you have previously
signed and mailed the white Election Form sent to you with the Original
Proxy Statement/Prospectus and DO want to change your election, you need to
sign and mail the salmon-colored Election Form in the enclosed brown return
envelope marked "Election Form" as soon as possible. Only the latest dated
Election Form will be valid. In order to be effective, Election Forms must
be submitted to the exchange agent listed on the return envelope no later
than 5:00 p.m. New York City time on the third trading day prior to the date
of the consummation of the Merger (the "Election Deadline") and must be
accompanied by the certificates representing the shares of Common Stock for
which the election is being made or an appropriate guarantee of delivery by
a commercial bank or trust company in the United States or a member of a
registered national securities exchange or the National Association of
Securities Dealers, Inc. The Election Deadline will not occur any earlier
than 5:00 p.m., New York City time, on March 24, 1998. AIG will publicly
announce the Election Deadline not later than 10:00 a.m. on the trading day
preceding the date on which the Election Deadline occurs. Holders who fail
to submit an effective Election Form will be treated as non-electing
shareholders.
If you are a participant in the American Bankers Leveraged Employee Stock
Option Plan (the "LESOP"), please read carefully the accompanying letter
from US Trust Company of California, N.A., as Investment Manager of the
LESOP.
Q: WHY ARE THE PREFERRED SHAREHOLDERS SPECIAL MEETING AND THE COMMON
SHAREHOLDERS SPECIAL MEETING BEING HELD AT SEPARATE TIMES?
A: The Merger Agreement must be approved by both the holders of a majority of
the outstanding shares of Preferred Stock and the holders of a majority of
the outstanding shares of Common Stock, each voting as a separate class. The
Preferred Shareholders Special Meeting has been scheduled to be held prior
to the Common Shareholders Special Meeting so that the holders of Common
Stock will know the result of the vote of the holders of Preferred Stock
prior to the Common Shareholders Special Meeting. As soon as practicable
following the Preferred Shareholders Special Meeting, American Bankers will
publicly announce by means of a press release the results of the vote at
that meeting, and, if the Merger Agreement is not approved by the requisite
vote of the holders of Preferred Stock, will file with the Commission and
mail to the holders of Common Stock a supplement to this Proxy
Statement/Prospectus which contains the results.
In the event that the Merger Agreement is not approved by the requisite vote
of the holders of Preferred Stock, the Common Shareholders Special Meeting
will be postponed to a later date to enable the holders of Common Stock to
evaluate the information contained in the supplement. In addition, the
Merger Agreement provides that if the holders of a majority of the
outstanding shares of Preferred Stock do not approve the Merger Agreement,
the proposed transaction will be restructured without any further action,
including any action by the American Bankers Board. The transaction as
restructured would not require the approval of the holders of Preferred
Stock. It would also be fully taxable to holders of Common Stock. See "The
Merger Agreement -- Alternative Transaction Structure."
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
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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
Preferred Shareholders Special Meeting or Common Shareholders Special
Meeting, as applicable. You can do this in one of three ways. First, you can
send a written notice to the party to whom you submitted your proxy stating
that you would like to revoke your proxy. Second, you can complete and
submit a new proxy card. Only the latest dated proxy card submitted to
either American Bankers or Cendant will be counted at the applicable
shareholders meeting. Third, you can attend the Preferred Shareholders
Special Meeting or Common Shareholders Special Meeting, 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 ELECTION FORM?
A: For holders of Common Stock, yes. An Election Form will not be effective
unless accompanied by certificates representing the shares of Common Stock
for which the election is being made or an appropriate guarantee of delivery
by a commercial bank or trust company in the United States or a member of a
registered national securities exchange or the National Association of
Securities Dealers, Inc. ChaseMellon Shareholder Services, L.L.C., the
Exchange Agent, will hold the certificates on your behalf. If for any reason
the Merger is not consummated, your certificates will be returned to you.
Holders of Preferred Stock should not send in their stock certificates now.
Q: CAN I CHANGE MY ELECTION AFTER I HAVE MAILED MY SIGNED ELECTION FORM?
A: Yes. You can change your election at any time before the Election Deadline
by submitting a written notice of revocation or a later dated Election Form
to the exchange agent. In addition, since you will have already sent in your
stock certificates with your earlier Election Form, any later dated Election
Form changing your election will not be accompanied by stock certificates.
Q: WHAT WILL HOLDERS OF PREFERRED STOCK RECEIVE IN THE MERGER?
A: Holders of Preferred Stock will receive one share of AIG Series C Preferred
Stock in exchange for each share of Preferred Stock. The AIG Series C
Preferred Stock will be governed by terms substantially similar to the terms
of the Preferred Stock (after making appropriate conversion adjustments) and
will be convertible into AIG Common Stock.
Q: WHAT WILL HOLDERS OF COMMON STOCK RECEIVE IN THE MERGER?
A: Subject to the limitation set forth below and to the provisions described
below under "The Merger Agreement -- Optional Tender Offer", holders of
Common Stock that elect to receive cash will receive $58.00 in cash in
exchange for each share of Common Stock. The maximum aggregate amount of
cash that AIG will pay to holders of Common Stock will be equal to 49.9% of
the total value of the consideration paid to all holders of Common Stock in
connection with the Merger (the "Maximum Cash Pool"). If cash elections are
made with respect to more than 49.9% of the outstanding shares of Common
Stock, AIG will make cash payments on a pro rata basis to holders that elect
to receive cash so that the total amount of cash paid equals the Maximum
Cash Pool. The remaining consideration paid to holders of Common Stock that
elect to receive cash will be in the form of AIG Common Stock.
Subject to AIG's election described below, holders of Common Stock that make
no election ("non-electing shareholders") or that elect to receive AIG
Common Stock will receive a portion of a share of AIG Common Stock with a
value equal to $58.00 (as deter-
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mined based on the average of the closing prices per share of AIG Common
Stock on the NYSE for the ten trading days ending on the third trading day
prior to the date that the Merger is consummated, the "Base Period Stock
Price") in exchange for each share of Common Stock. If the Base Period Stock
Price is less than $120.5625 and cash elections have been made with respect
to less than 49.9% of the outstanding shares of Common Stock, AIG will be
entitled, at its election and subject to the limitations set forth below, to
pay in cash a portion of the consideration to be received by holders of
Common Stock that elect to receive AIG Common Stock or that make no
election. The maximum amount of cash that AIG may elect to pay such holders
per share of Common Stock will be equal to $58.00 minus the product of .4811
and the Base Period Stock Price (the "Per Share Cash Top-Up Amount"). In
addition, the maximum aggregate amount of cash that AIG may pay to all
non-electing shareholders will be equal to the Maximum Cash Pool minus the
aggregate amount of cash paid to holders of Common Stock that elect to
receive cash. The maximum aggregate amount of cash that AIG may pay to
holders of Common Stock that elect to receive AIG Common Stock will be equal
to the lesser of (i) the Maximum Cash Pool or (ii) the product of the number
of shares of Common Stock outstanding upon consummation of the Merger and
the Per Share Cash Top-Up Amount, in each case minus the aggregate amount of
cash paid to holders of Common Stock that elect to receive cash or that make
no election.
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 approvals of the holders of Preferred Stock and Common
Stock, we must also obtain certain insurance and other regulatory approvals
that are expected to be obtained following the Common Shareholders Special
Meeting. We expect to receive all of these approvals during March and April
of 1998, although certain of such approvals may be subject to appeal by
Cendant or other persons, which could have the effect of further delaying
completion of the Merger.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER?
A: The Merger generally will not cause federal income tax to be imposed on
holders of Preferred Stock. In addition, the Merger generally will not cause
federal income tax to be imposed on holders of Common Stock to the extent
such holders receive AIG Common Stock. Holders of Common Stock generally
will have to pay federal income taxes on any cash received by such holders
to the extent of any gain they may have on their Common Stock. In general,
such gain will be capital gain. To review the tax consequences to
shareholders in greater detail, see page 43. If, however, the Merger is
restructured because the holders of Preferred Stock do not approve the
Merger, holders of Common Stock generally will have to pay federal income
taxes on any gain they may have on their Common Stock, even if they receive
only AIG Common Stock in the Merger. There will be no immediate federal
income tax consequences to holders of Preferred Stock in such a
circumstance, but a later conversion of the Preferred Stock into AIG Common
Stock would be a taxable transaction. To review in greater detail the
federal income tax consequences to shareholders if the Merger is so
restructured, see page 71.
Q: ARE THERE ANY RISKS ASSOCIATED WITH THE MERGER?
A: The Merger does involve risks. For a discussion of certain risk factors that
should be considered in evaluating the Merger, see "Risk Factors", beginning
on page 24.
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 Preferred Shareholders Special Meeting or the Common Shareholders
Special Meeting.
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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
or
American International Group, Inc.
70 Pine Street
New York, New York 10270
Attention: John T. Wooster, Jr.
Phone Number: (212) 770-3146
If you would like additional copies of the Proxy Statement/Prospectus, you
should contact:
MacKenzie Partners, Inc.
(212) 929-5500 (call collect)
or
Call Toll-Free 1-800-322-2885
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NO PERSON HAS BEEN AUTHORIZED BY AIG OR AMERICAN BANKERS TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY EITHER AIG OR AMERICAN
BANKERS. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER
THAN THE SHARES OF AIG SERIES C PREFERRED STOCK AND AIG COMMON STOCK TO WHICH IT
RELATES OR AN OFFER OR SOLICITATION TO ANY PERSON IN ANY JURISDICTION WHERE SUCH
AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES OFFERED HEREBY
SHALL, UNDER ANY CIRCUMSTANCES, IMPLY OR CREATE ANY IMPLICATION THAT THERE HAVE
NOT BEEN ANY CHANGES IN THE AFFAIRS OF AIG OR AMERICAN BANKERS OR IN THE
INFORMATION SET FORTH OR INCORPORATED BY REFERENCE HEREIN SUBSEQUENT TO THE DATE
HEREOF.
AVAILABLE INFORMATION
AIG and American Bankers are each subject to the information requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by each of AIG and American Bankers may
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices located at Northeast
Regional Office, Seven World Trade Center, Suite 1300, New York, New York 10048
and Midwest Regional Office, Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such materials can also be obtained
from the Public Reference Section of the Commission, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements and
other materials that are filed through the Commission's Electronic Data
Gathering, Analysis and Retrieval ("EDGAR") system. This Web site can be
accessed at http://www.sec.gov. In addition, material filed by each of AIG and
American Bankers can be inspected at the offices of the New York Stock Exchange
(the "NYSE"), at 20 Broad Street, New York, New York 10005.
This Proxy Statement/Prospectus constitutes a part of a registration
statement on Form S-4 (together with all amendments and exhibits thereto, the
"Registration Statement") filed by AIG under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the offering of AIG Series C
Preferred Stock and AIG Common Stock in connection with the Merger. As permitted
by the rules and regulations of the Commission, this Proxy Statement/Prospectus
omits certain information contained or incorporated by reference in the
Registration Statement. Reference is made to the Registration Statement for
further information with respect to AIG, the AIG Series C Preferred Stock, the
AIG Common Stock, American Bankers, and the Merger. Statements contained in this
Proxy Statement/Prospectus as to the contents of any contract or other document
filed as an exhibit to the Registration Statement are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement. Each such statement
is qualified in its entirety by such reference. For further information,
reference is hereby made to the Registration Statement.
As used in this Proxy Statement/Prospectus, the term "American Bankers"
means American Bankers Insurance Group, Inc. and its subsidiaries, and the term
"AIG" means American International Group, Inc. and its consolidated
subsidiaries. All information contained or incorporated by reference in this
Proxy Statement/Prospectus relating to American Bankers was provided by the
management of American Bankers. AIG assumes no responsibility for the accuracy
of such information. All information contained or incorporated by reference in
this Proxy Statement/Prospectus relating to AIG was provided by the management
of AIG. American Bankers assumes no responsibility for the accuracy of such
information.
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<PAGE> 12
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed with the Commission by AIG under File No.
1-8787 and by American Bankers under File No. 0-9633 pursuant to the Exchange
Act are incorporated herein by reference:
(a) (1) AIG's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(2) AIG's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997; and
(3) the description of AIG's Common Stock as contained in Item 1 of
AIG's Registration Statement on Form 8-A dated September 20, 1984;
(b) (1) American Bankers' Annual Report on Form 10-K for the fiscal year
ended December 31, 1996;
(2) American Bankers' Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1997, June 30, 1997 and September 30, 1997;
(3) American Bankers' Current Report on Form 8-K dated January 13,
1998, as amended by the Form 8-K/A dated January 20, 1998;
(4) the description of American Bankers' Series A Participating
Preferred Stock as contained in Item 1 of American Bankers' Registration
Statement on Form 8-A dated March 10, 1988, as amended by the Form 8
dated November 27, 1990;
(5) the description of the Preferred Stock as contained in Item 1
of American Bankers' Registration Statement on Form 8-A filed on July
16, 1996; and
(6) the description of the Common Stock as contained in Item 1 of
American Bankers' Registration Statement on Form 8-A filed on April 20,
1981.
All documents filed by AIG and American Bankers with the Commission
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
January 30, 1998 and prior to the termination of the offering of any securities
offered hereby shall be deemed to be incorporated by reference into this Proxy
Statement/Prospectus and to be a part hereof from the date of filing of such
documents. See "Available Information." Any statement contained herein, or in a
document incorporated or deemed to be incorporated herein by reference, shall be
deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently filed document incorporated or deemed to be incorporated
herein by reference, which statement is also incorporated herein by reference,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS
(EXCLUDING EXHIBITS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE INTO THE INFORMATION INCORPORATED HEREIN) WILL BE PROVIDED BY FIRST
CLASS MAIL WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROXY STATEMENT/PROSPECTUS
IS DELIVERED, INCLUDING ANY BENEFICIAL OWNER OF PREFERRED STOCK OR COMMON STOCK,
UPON WRITTEN OR ORAL REQUEST BY SUCH PERSON AS FOLLOWS: WITH RESPECT TO AIG, TO
AMERICAN INTERNATIONAL GROUP, INC., 70 PINE STREET, NEW YORK, NEW YORK 10270,
ATTENTION: DIRECTOR OF INVESTOR RELATIONS (TELEPHONE: 212-770-7074); AND WITH
RESPECT TO AMERICAN BANKERS, TO AMERICAN BANKERS INSURANCE GROUP, INC., 11222
QUAIL ROOST DRIVE, MIAMI, FLORIDA 33157, ATTENTION: P. BRUCE CAMACHO (TELEPHONE
(305) 252-7060). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, REQUESTS
SHOULD BE MADE BY MARCH 20, 1998.
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<PAGE> 13
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, including possible or assumed future results
of operations of AIG and American Bankers, contained in "The
Merger -- Background of the Merger," "The Merger -- Projections," "The
Merger -- American Bankers' Reasons for the Merger," "The Merger -- Opinion
of American Bankers' Financial Advisor," "The Merger -- Required Regulatory
Filings and Approvals" and "The Merger -- Litigation," including any
forecasts, projections and descriptions of anticipated cost savings or
other synergies referred to therein and any statements regarding the
anticipated timing or outcome of regulatory or judicial proceedings
referred to therein, and certain statements incorporated by reference from
documents filed with the Commission by American Bankers, including any
statements contained herein, or therein regarding the development of
possible or assumed future results of operations of AIG's and American
Bankers' businesses, the markets for AIG's and American Bankers' services
and products, anticipated capital expenditures, regulatory or judicial
developments, competition or the effect of the Merger;
(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/Prospectus cited above
or, in the case of American Bankers, incorporated herein; and
(iii) other statements contained or, in the case of American Bankers,
incorporated by reference, herein 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 hereof
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
AIG or 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. Neither AIG nor American Bankers undertakes any obligation
to release publicly any revisions to such forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
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<PAGE> 14
SUMMARY
This summary highlights certain information from this document, is
qualified by reference thereto 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 at the beginning of this document and the
Appendices hereto. 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
American International Group, Inc.
70 Pine Street
New York, New York 10270
212-770-7000
AIG is a holding company with a market capitalization, as of December 31,
1997, of approximately $76 billion, which through its subsidiaries is primarily
engaged in a broad range of insurance and insurance-related activities and
financial services in the United States and abroad. AIG's primary activities
include both general and life insurance operations.
American Bankers Insurance Group, Inc.
11222 Quail Roost Drive
Miami, Florida 33157-6596
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 American Bankers Board determined to recommend approval and adoption of
the Original Merger Agreement and the merger contemplated thereby 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, potential synergies in connection with the proposed merger, AIG's
international experience and its depth of knowledge and experience in regulatory
matters, the terms and provisions of the Original Merger Agreement and related
agreements, the opinion of American Bankers' financial advisor, Salomon Smith
Barney, historical market prices and recent trading activity of the Common
Stock, and certain countervailing factors such as AIG's historically high
price/earnings ratio and the possible effect of the recent turmoil in the
financial markets in Asia on AIG.
The American Bankers Board considered essentially the same factors it
considered when it determined to recommend the Original Merger Agreement, when
it determined to recommend approval of the Merger Agreement and the Merger,
including American Bankers' and AIG's businesses, conditions and prospects as
well as the potential synergies of the transaction. In addition, the American
Bankers Board specifically considered the terms of the Merger Agreement that had
been amended from the Original Merger Agreement, including that the value of the
merger consideration was raised from $47 to $58 per share of Common Stock; the
elimination and reduction of certain provisions contained in the Original Merger
Agreement; the increases in the termination fee under the Merger Agreement and
in the maximum profit that AIG could obtain pursuant to the Stock Option
Agreement; and the option of AIG to restructure its acquisition of American
Bankers as a tender offer. In addition, the American Bankers Board also
considered a new fairness opinion of its financial advisor, Salomon Smith
Barney. 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 Preferred Shareholders
Special Meeting will be held at 10:00 a.m., Eastern time, on March 25, 1998, at
the Auditorium of the Company's Headquarters, 11222 Quail Roost Drive, Miami,
Florida 33157-6596.
The Common Shareholders Special Meeting will be held at 10:00 a.m., Eastern
time, on March 27, 1998, at the Auditorium of the Company's Headquarters, 11222
Quail Roost Drive, Miami, Florida 33157-6596.
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<PAGE> 15
Purposes of the Special Meetings. At the Special Meetings, holders of
Preferred Stock and Common Stock will 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 January 30, 1998, the Record Date,
are entitled to vote at the Special Meetings.
On the Record Date, there were outstanding 2,300,000 shares of Preferred
Stock allowed to vote at the Preferred Shareholders Special Meeting and
41,934,118 shares of Common Stock allowed to vote at the Common Shareholders
Special Meeting. Holders of Preferred Stock and Common Stock each will have one
vote at the Preferred Shareholders Special Meeting and Common Shareholders
Special Meeting, respectively, for each share of Preferred Stock or Common Stock
held of record on the Record Date.
Votes Required. The affirmative vote of the holders of a majority of the
outstanding shares of Preferred Stock as of the Record Date and a majority of
the outstanding shares of Common Stock as of the Record Date, each 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 no
shares of Preferred Stock that were issued and outstanding as of such date and
4,177,200 shares, or approximately 9.9%, of the shares of Common Stock that were
issued and outstanding as of such date. Each of Messrs. Landon and Gaston who,
as of the Record Date, in the aggregate beneficially owned 3,391,066 shares, or
approximately 8.0%, of the shares of Common Stock, have contractually agreed
with AIG to vote in favor of the Merger Agreement and the consummation of the
Merger and have agreed, if requested by AIG, to execute irrevocable proxies in
connection therewith. See "Related Agreements and Transactions -- Voting
Agreement."
As of the Record Date, there were 6 holders of record of Preferred Stock
and approximately 1,850 holders of record of Common Stock as shown on the
records of American Bankers' transfer agents for shares of such stock. Based on
the 2,300,000 shares of Preferred Stock and 41,934,118 shares of Common Stock
outstanding and entitled to vote on the Record Date, a total of 1,150,001 shares
of Preferred Stock and approximately 20,967,060 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 (i) do not beneficially own
any shares of Preferred Stock and (ii) beneficially own 4,177,200 shares, or
approximately 19.9%, of the 20,967,060 shares of Common Stock required for
approval of the Merger. Messrs. Gaston and Landon, who have contractually agreed
with AIG to vote in favor of the Merger Agreement and the consummation of the
Merger, beneficially own 3,391,066 shares, or approximately 16.1%, of the
20,967,060 shares of Common Stock required for approval of the Merger.
Quorum; Abstentions and Broker Non-Votes. The required quorum for both the
Preferred Shareholders Special Meeting and Common Shareholders Special Meeting
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 Preferred Shareholders Special Meeting and Common Shareholders
Special Meeting for the purpose of determining the presence of a quorum.
Abstentions 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/PROSPECTUS 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.
Alternative Transaction. The Merger Agreement provides that if the holders
of the Preferred Stock do not approve the Merger Agreement and the Merger, the
transaction will be restructured, as described below in "The Merger
Agreement -- Alternative Transaction Structure", without any further action,
including any action by the American Bankers Board. The transaction as
restructured would not require the approval of the holders of Preferred Stock,
but would be taxable for federal income tax purposes to holders of Common Stock
to the extent of any gain they may have on their Common Stock even if such
holders receive only AIG Common Stock in the Merger.
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<PAGE> 16
RECOMMENDATION TO SHAREHOLDERS
The American Bankers Board believes that the Merger is fair to, 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
American Bankers Board considered an opinion, dated February 27, 1998, from its
financial advisor, Salomon Smith Barney, as to the fairness 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/Prospectus. Shareholders are encouraged to read this
opinion in its entirety.
THE MERGER
THE MERGER AGREEMENT IS ATTACHED AS APPENDIX I TO THIS DOCUMENT. THE
AMERICAN BANKERS BOARD 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; Stock
Elections. Holders of Preferred Stock will receive one share of AIG Series C
Preferred Stock in exchange for each share of Preferred Stock. The AIG Series C
Preferred Stock will contain terms substantially similar to the terms of the
Preferred Stock (after making appropriate conversion adjustments) and will be
convertible into AIG Common Stock.
Subject to the limitation set forth below, holders of Common Stock that
elect to receive cash will receive $58.00 in cash in exchange for each share of
Common Stock. The maximum aggregate amount of cash that AIG will pay to holders
of Common Stock will be equal to 49.9% of the total value of the consideration
paid to all holders of Common Stock in connection with the Merger (the "Maximum
Cash Pool"). If cash elections are made with respect to more than 49.9% of the
outstanding shares of Common Stock, AIG will make cash payments on a pro rata
basis to holders that elect to receive cash so that the total amount of cash
paid equals the Maximum Cash Pool. The remaining consideration paid to holders
of Common Stock that elect to receive cash will be in the form of AIG Common
Stock.
Subject to AIG's election set forth below, holders of Common Stock that
make no election ("non-electing shareholders") or that elect to receive AIG
Common Stock will receive a portion of a share of AIG Common Stock with a value
equal to $58.00 (as determined based on the average of the closing prices per
share of AIG Common Stock on the NYSE for the ten trading days ending on the
third trading day prior to the date that the Merger is consummated, the "Base
Period Stock Price") in exchange for each share of Common Stock. If the Base
Period Stock Price is less than $120.5625 and cash elections have been made with
respect to less than 49.9% of the outstanding shares of Common Stock, AIG will
be entitled, at its election and subject to the limitations set forth below, to
pay in cash a portion of the consideration to be received by holders of Common
Stock that elect to receive AIG Common Stock or that make no election. The
maximum amount of cash that AIG may elect to pay such holders per share of
Common Stock will be equal to $58.00 minus the product of .4811 and the Base
Period Stock Price (the "Per Share Cash Top-Up Amount"). In addition, the
maximum aggregate amount of cash that AIG may pay to all non-electing
shareholders will be equal to the Maximum Cash Pool minus the aggregate amount
of cash paid to holders of Common Stock that elect to receive cash. The maximum
aggregate amount of cash that AIG may pay to holders of Common Stock that elect
to receive AIG Common Stock will be equal to the lesser of (i) the Maximum Cash
Pool or (ii) the product of the number of shares of Common Stock outstanding
upon consummation of the Merger and the Per Share Cash Top-Up Amount, in each
case minus the aggregate amount of cash paid to holders of Common Stock that
elect to receive cash or that make no election.
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<PAGE> 17
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 Preferred Stock and a majority of the outstanding
shares of Common Stock, each voting as a separate class;
- 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;
- the receipt of opinions from tax counsel for each company regarding
certain federal income tax consequences of the Merger;
- that AIG's 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; and
- that the shares of AIG Series C Preferred Stock to be issued to holders
of Preferred Stock and the shares of AIG Common Stock to be issued to
holders of Common Stock have been authorized for listing on the NYSE
subject to official notice of issuance.
Certain of the conditions to the Merger may be waived by the party entitled
to assert the condition. In addition, if AIG commences a tender offer, as
described under "Merger Agreement -- Optional Tender Offer," then the parties
have agreed to waive certain conditions as more fully described under "The
Merger Agreement -- Conditions of the Proposed Merger -- Waiver of Certain
Conditions Following Tender Offer."
Termination of the Merger Agreement. AIG 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, 1998;
- a court or other governmental authority permanently prohibits the Merger;
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, AIG can terminate the Merger Agreement if (A) the required
approval of the holders of Common Stock is not received at the Common
Shareholders Special Meeting, (B) American Bankers enters into, or recommends, a
binding agreement for a business combination with a third party, (C) the
American Bankers Board withdraws or adversely modifies its approval or
recommendation of the Merger Agreement or fails to reconfirm its recommendation
of the Merger Agreement or (D) AIG commences a tender offer, as described under
"The Merger Agreement -- Optional Tender Offer," and it is not consummated by
the 60th day following such commencement. American Bankers can terminate the
Merger Agreement (A) at any time following May 20, 1998, if the required
approval of the holders of a majority of Common Stock is not received at the
Common Shareholders Special Meeting or (B) if at any time before the approval of
the holders of a majority of the outstanding shares of each of the Preferred
Stock and Common Stock but after May 20, 1998, the American Bankers Board
authorizes American Bankers to enter into a binding written agreement for a
business combination with a third party and AIG does not make, after at least
five business days' notice of such proposed business combination, an offer that
is at least as favorable as such proposed business combination.
Termination Fee. The Merger Agreement requires American Bankers to pay to
AIG a termination fee of $81.5 million and to reimburse AIG up to $5 million of
its expenses if the Merger Agreement is terminated under certain circumstances.
Regulatory Approvals. The Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), prohibits AIG from consummating the purchase
of the shares of Common Stock subject to the Stock Option Agreement and 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. The companies furnished that information on January 20, 1998 and early
termination of the waiting period was granted on January 30, 1998. How-
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<PAGE> 18
ever, 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 December 1997 and January
1998 AIG made all applicable filings, and in March 1998, AIG amended certain
filings. As of the date hereof, hearings have been scheduled on AIG's Form A
filings by the Florida Department of Insurance for March 17, and 18, 1998, and
by the Arizona Department of Insurance for March 6, 1998, continued to March 26,
and 27, 1998. No hearings in other states have yet been scheduled. As of the
date of this Proxy Statement/Prospectus, no Form A approvals have been obtained
by AIG. AIG expects to obtain all required regulatory approvals in March and
April of 1998; however, certain of such approvals may be subject to appeal by
Cendant or other persons which could have the effect of further delaying
completion of the Merger.
To the best of AIG's knowledge, Cendant has furnished information required
by the HSR Act and the Competition Act of Canada, and the applicable waiting
period pursuant to the HSR Act has expired. To the best of AIG's knowledge, the
Director of Investigation and Research, under the Competition Act of Canada, has
notified Cendant of his view that there are not sufficient grounds to initiate
proceedings with respect to Cendant's offer and proposed merger. To the best of
AIG's knowledge, Cendant and Season Acquisition Corp. ("Season"), a wholly-owned
subsidiary of Cendant, filed Form A applications in six states and Puerto Rico
on January 27, 1998. As of the date hereof, the Florida Department of Insurance
has scheduled a hearing on Cendant's Form A application for March 19, and 20,
1998; to the best of AIG's knowledge, no other state has scheduled a hearing on
Cendant's Form A applications. To the best of AIG's knowledge, as of the date
hereof, no Form A approvals have been obtained by Cendant and Season. If Cendant
and Season are able to obtain insurance regulatory approvals, certain of such
approvals may be subject to appeal by AIG or other persons.
Accounting Treatment. The Merger will be accounted for under the
"purchase" method of accounting whereby the purchase price paid by AIG will be
allocated based on fair values of assets acquired and liabilities assumed. Such
allocations will be made based upon valuations and other studies that have not
been finalized. The excess of such purchase price over the amounts so allocated
will be treated as goodwill.
Federal Income Tax Consequences. The Merger generally will not cause
federal income tax to be imposed on holders of Preferred Stock. In addition, the
Merger generally will not cause federal income tax to be imposed on holders of
Common Stock to the extent such holders receive AIG Common Stock. Holders of
Common Stock generally will have to pay federal income taxes on any cash
received by such holders to the extent of any gain they may have on their Common
Stock. In general, such gain will be capital gain. To review the tax
consequences to shareholders in greater detail, see page 43. If the Merger is
restructured as described below in "The Merger Agreement -- Alternative
Transaction Structure" because the holders of Preferred Stock do not approve the
Merger, holders of Common Stock will generally have to pay federal income taxes
on any gain they may have on their Common Stock, even if they receive only AIG
Common Stock in the Merger. There will be no immediate federal income tax
consequences to holders of Preferred Stock in such a circumstance, but a later
conversion of the Preferred Stock into AIG Common Stock would be a taxable
transaction. To review in greater detail the federal income tax consequences
that would result to shareholders if the Merger is so restructured, see page 71.
TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER TO
SHAREHOLDERS WILL DEPEND ON THEIR INDIVIDUAL CIRCUMSTANCES. SHAREHOLDERS SHOULD
CONSULT THEIR TAX ADVISORS FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES TO
THEM OF THE MERGER.
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.
Listing of AIG Series C Preferred Stock and Common Stock. AIG will list
the shares of AIG Series C Preferred Stock and AIG Common Stock to be issued in
connection with the Merger on the New York Stock Exchange.
OPTIONAL TENDER OFFER
The Merger Agreement provides that AIG at any time may, at its sole option,
elect to cause
16
<PAGE> 19
AIGF to commence a tender offer to acquire up to
100% (or such lesser percentage not less than 49.9% as AIG shall determine) of
the outstanding shares of Common Stock (excluding for all purposes in
calculating such applicable percentage any outstanding shares of Common Stock
owned by AIG or AIGF pursuant to the exercise of AIG's rights under the Stock
Option Agreement) at a purchase price of not less than $58.00 per share of
Common Stock, upon the terms and subject to the conditions set forth in Annex I
to the Merger Agreement and further customary terms. AIG has not as of the date
of this Proxy Statement/Prospectus determined to commence a tender offer. If AIG
does elect to commence a tender offer at a later date, AIGF at that time will
mail to holders of Common Stock offer documents which describe the terms and
conditions of such tender offer as well as any second-step merger pursuant to
which AIG would propose to acquire all of the outstanding shares of Common Stock
not purchased by AIGF in such tender offer. See "The Merger
Agreement -- Optional Tender Offer." If AIG elects to commence a tender offer,
American Bankers will be permitted, at its option, to amend its Rights Agreement
and New Rights Agreement to exempt certain tender offers commenced by Cendant or
other third parties from the otherwise applicable limitations on beneficial
ownership of shares of Common Stock under the Rights Agreement and New Rights
Agreement. See "The Merger -- Certain Other Covenants and Agreements -- Rights
Agreement." If AIG commences and consummates a tender offer, certain of the
conditions to the consummation of the Merger contained in the Merger Agreement
will be waived by AIG, AIGF and American Bankers. See "The Merger
Agreement -- Conditions of the Proposed Merger -- Waiver of Certain Conditions
Following Tender Offer."
RISK FACTORS
In considering whether to approve the Merger Agreement and the consummation
of the Merger, holders of Preferred Stock and Common Stock should carefully
review and consider the information contained below in "Risk Factors."
RECENT DEVELOPMENTS
The Original Proxy Statement/Prospectus, which described the Original
Merger Agreement, the Original Stock Option Agreement, certain related
agreements and the transactions contemplated by such agreements and which
solicits proxies in favor of the transactions contemplated by such agreements,
was distributed in early February to holders of Preferred Stock and Common Stock
of record on January 30, 1998.
On January 27, 1998, Cendant publicly announced a proposal to acquire
American Bankers for $58.00 per share of Common Stock, to be paid in cash and
common stock of Cendant. On January 28, 1998, Cendant commenced the Cendant
Offer. Cendant also commenced a proxy solicitation seeking proxies to vote
against the transactions contemplated by the Original Merger Agreement. On
February 5, 1998, the American Bankers Board determined that, in light of all
the relevant circumstances and because it had been unable to assess several
aspects of the Cendant Offer due to certain provisions in the Original Merger
Agreement, as well as the lack of information which American Bankers expected
would be disclosed in the regulatory process, it was unable to take a position
with respect to the Cendant Offer and made no recommendation at that time with
respect to the Cendant Offer. See "The Merger -- Background of the Merger."
On February 28, 1998, American Bankers, AIG and AIGF entered into the
Merger Agreement and the Stock Option Agreement, which amend certain terms of
the Original Merger Agreement and the Original Stock Option Agreement,
respectively. The Merger Agreement provides, among other things, that American
Bankers will be merged into AIGF and that holders of shares of Common Stock will
receive cash or AIG Common Stock with a value of $58.00 in exchange for each
share of Common Stock.
This Proxy Statement/Prospectus is being distributed on or about March 10,
1998, to the holders of record of Preferred Stock and Common Stock on January
30, 1998, as a supplement to and restatement of the Original Proxy
Statement/Prospectus in order to describe the Merger Agreement, the Stock Option
Agreement, certain related agreements and the transactions contemplated by such
agreements and to continue the solicitation of proxies in favor of the
transactions contemplated by such agreements.
In connection with the execution of the Merger Agreement and the Stock
Option Agreement, American Bankers determined to postpone the Preferred
Shareholders Special Meeting from March 4,
15
<PAGE> 20
1998 until March 25, 1998 and to postpone the Common Shareholders Special
Meeting from March 6, 1998 until March 27, 1998.
STOCK OPTION AGREEMENT
AIG and American Bankers have entered into a Stock Option Agreement under
which American Bankers has granted AIG an option to purchase a number of newly
issued shares of Common Stock equal to approximately 19.9% of the outstanding
shares of Common Stock 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 AIG.
Subsequent to the announcement of Cendant's proposal, AIG on January 27,
1998 sent a notice to American Bankers exercising its option to purchase,
subject to applicable regulatory approvals, all of the shares of Common Stock
subject to issuance under the Stock Option Agreement. As of the date of this
Proxy Statement/Prospectus, AIG has not consummated the purchase of any of such
shares of Common Stock, and will not do so until all required regulatory
approvals for such purchase have been obtained. See "The Merger -- Required
Regulatory Filings and Approvals."
FORWARD LOOKING STATEMENTS MAY PROVE INACCURATE
THE COMPANIES HAVE MADE FORWARD LOOKING STATEMENTS IN THIS DOCUMENT (AND,
IN THE CASE OF AMERICAN BANKERS, 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 AIG OR AMERICAN BANKERS AND ANY STATEMENTS REGARDING THE
ANTICIPATED TIMING OR OUTCOME OF REGULATORY OR JUDICIAL PROCEEDINGS. 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/PROSPECTUS
BY REFERENCE, COULD AFFECT THE FUTURE FINANCIAL AND BUSINESS RESULTS OF AIG AND
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.
16
<PAGE> 21
MARKET PRICE AND DIVIDEND INFORMATION
AIG Common Stock is listed on the NYSE (symbol "AIG"). Common Stock and
Preferred Stock are listed on the NYSE (symbol "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 AIG Common Stock, Common
Stock and Preferred Stock reported on the NYSE 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 AIG Common Stock, Common
Stock and Preferred Stock. All prices are as reported by the National Quotation
Bureau, Incorporated.
<TABLE>
<CAPTION>
AIG AMERICAN BANKERS
COMMON STOCK(1) COMMON STOCK(2)
----------------------------------- --------------------------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
---- --- --------- ------------- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1995:
First Quarter............... 47 15/16 43 1/16 .051 15 5/16 11 3/4 .09
Second Quarter.............. 52 13/16 45 15/16 .051 16 1/8 13 5/16 .095
Third Quarter............... 57 11/16 47 3/4 .057 18 5/8 15 7/16 .095
Fourth Quarter.............. 63 1/4 55 1/16 .057 19 1/2 17 7/16 .095
1996:
First Quarter............... 68 1/2 59 9/16 .057 19 13/16 16 3/4 .095
Second Quarter.............. 65 3/4 58 3/4 .057 21 15/16 16 7/16 .10
Third Quarter............... 67 1/4 60 1/16 .067 25 1/8 19 29/32 .10
Fourth Quarter.............. 76 3/4 67 11/16 .067 25 15/16 23 3/32 .10
1997:
First Quarter............... 85 5/16 71 11/16 .067 29 1/2 24 3/8 .10
Second Quarter.............. 100 3/16 76 .067 34 1/32 25 3/16 .105
Third Quarter............... 106 1/2 94 3/8 .075 38 5/16 33 11/16 .11
Fourth Quarter.............. 111 15/16 98 .075 45 15/16 36 11/16 .11
1998:
First Quarter (through
January 26, 1998)........ 110 1/8 100 1/2 .075(4) 46 1/4 45 5/8 .11(5)
(through February 27,
1998).................. 120 9/16 100 1/2 .075(4) 56 7/16 45 5/8 .11(5)
(through March 6,
1998).................. 121 15/16 100 1/2 .075(4) 62 1/8 45 5/8 .11(5)
<CAPTION>
AMERICAN BANKERS
PREFERRED STOCK(3)
-----------------------------------
HIGH LOW DIVIDENDS
---- --- ---------
<S> <C> <C> <C>
1995:
First Quarter...............
Second Quarter..............
Third Quarter...............
Fourth Quarter..............
1996:
First Quarter...............
Second Quarter..............
Third Quarter............... 59 50 .807
Fourth Quarter.............. 60 1/4 56 1/2 .781
1997:
First Quarter............... 68 1/2 60 5/8 .781
Second Quarter.............. 76 3/4 61 7/8 .781
Third Quarter............... 82 1/2 72 1/2 .781
Fourth Quarter.............. 93 3/8 79 .781
1998:
First Quarter (through
January 26, 1998)........ 96 1/8 93 3/16 .781(6)
(through February 27,
1998).................. 114 5/8 93 1/2 .781(6)
(through March 6,
1998).................. 125 3/4 93 1/2 .781(6)
</TABLE>
- ---------------
(1) All AIG Common Stock information has been adjusted to reflect the stock
splits effected as 50 percent common stock dividends in July 1995 and July
1997.
(2) All Common Stock information has been adjusted to reflect a two-for-one
stock split which was effected in September 1997.
(3) Preferred Stock was not publicly traded prior to July 23, 1996.
(4) Declared on November 17, 1997 to be paid on March 20, 1998 to holders of
record on March 6, 1998.
(5) Declared on February 19, 1998 to be paid on March 13, 1998 to holders of
record on March 2, 1998.
(6) Declared on January 12, 1998 and paid on February 2, 1998 to holders of
record on January 26, 1998.
17
<PAGE> 22
DIVIDEND INFORMATION
Following the Merger, subject to the dividend preference of any of AIG's
Preferred Stock, including the AIG Series C Preferred Stock, which may be
outstanding, the holders of AIG Common Stock will be entitled to receive such
dividends as may be declared by the AIG Board from funds legally available
therefor. Certain restrictions apply under applicable insurance laws to the
payment of dividends to AIG by its insurance subsidiaries.
RECENT CLOSING PRICES
The following table sets forth the closing prices per share of AIG Common
Stock, Common Stock and Preferred Stock on the NYSE on December 19, 1997, the
last trading day before announcement of the execution of the Original Merger
Agreement, on January 26, 1998, the last trading day before the announcement of
Cendant's proposal to acquire American Bankers, on February 27, 1998, the last
trading day before announcement of the execution of the Merger Agreement, and on
March 6, 1998, the latest practicable trading day before the printing of this
Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
AIG AMERICAN BANKERS AMERICAN BANKERS
COMMON STOCK COMMON STOCK PREFERRED STOCK
------------ ---------------- ----------------
<S> <C> <C> <C>
December 19, 1997..................... $104 7/8 $44 1/4 $ 88 7/8
January 26, 1998...................... $108 $46 1/4 $ 96 1/8
February 27, 1998..................... $120 3/16 $56 1/4 $114 1/4
March 6, 1998......................... $121 1/4 $62 1/8 $125 3/4
</TABLE>
BECAUSE THE MARKET PRICE OF AIG COMMON STOCK IS SUBJECT TO FLUCTUATION, THE
MARKET VALUE OF THE SHARES OF AIG COMMON STOCK THAT HOLDERS OF COMMON STOCK WILL
RECEIVE IN THE MERGER MAY INCREASE OR DECREASE FOLLOWING THE MERGER. AMERICAN
BANKERS SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR AIG
COMMON STOCK, COMMON STOCK AND PREFERRED STOCK. NO ASSURANCE CAN BE GIVEN AS TO
THE FUTURE PRICES OR MARKETS FOR AIG COMMON STOCK OR AIG SERIES C PREFERRED
STOCK OR COMMON STOCK OR PREFERRED STOCK.
NUMBER OF SHAREHOLDERS
As of January 30, 1998, there were 6 shareholders of record who held shares
of Preferred Stock and approximately 1,850 shareholders of record who held
shares of Common Stock, as shown on the records of American Bankers' transfer
agents for such shares.
18
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data of AIG as of and for the years
ended December 31, 1996, 1995 and 1994, with the exception of the balance sheet
data for 1994, has been derived from consolidated financial statements of AIG
which have been audited by Coopers & Lybrand L.L.P., independent auditors, and
incorporated by reference into this Proxy Statement/Prospectus. The balance
sheet for 1994 and the selected consolidated financial data of AIG as of and for
the years ended December 31, 1993 and 1992 have been derived from audited
consolidated financial statements previously filed with the Commission but not
incorporated by reference herein. The selected consolidated financial data as of
and for the nine months ended September 30, 1997 and 1996, has been derived from
unaudited consolidated financial statements filed with the Commission and
incorporated by reference herein and include all adjustments (consisting of
normal recurring accruals) which AIG considers necessary for a fair presentation
of the consolidated financial position, results of operations and cash flows.
Operating results for the nine months ended September 30, 1997, are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 1997. Certain accounts in the selected consolidated
financial data for the nine months ended September 30, 1996 have been conformed
to the 1997 presentation. This information is qualified in its entirety by, and
should be read in conjunction with the consolidated financial statements, the
notes thereto, and "Management's Discussion and Analysis of Results of
Operations and Financial Condition" for AIG incorporated by reference in this
Proxy Statement/Prospectus.
SELECTED CONSOLIDATED FINANCIAL DATA OF AIG
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------------------- -----------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------ ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES(a)............... $ 22,651,700 $ 20,584,813 $ 28,205,272 $ 25,874,022 $ 22,358,709 $ 20,068,287 $18,388,627
GENERAL INSURANCE:
Net premiums written.... 10,286,766 9,722,560 12,691,679 11,893,022 10,865,753 10,025,903 9,138,528
Net premiums earned..... 9,297,356 8,763,905 11,854,815 11,405,731 10,286,831 9,566,640 9,209,390
Adjusted underwriting
profit (loss)......... 371,574 340,465 398,944 361,583 147,517 10,391 (195,084)
Net investment income... 1,366,275 1,244,475 1,689,371 1,545,717 1,435,092 1,340,480 1,252,086
Realized capital
gains................. 106,787 50,697 64,985 68,075 52,487 65,264 67,134
Operating income........ 1,844,636 1,635,637 2,153,300 1,975,375 1,635,096 1,416,135 1,124,136
LIFE INSURANCE:
Premium income.......... 7,329,233 6,508,465 8,978,246 8,038,150 6,724,321 5,746,046 4,853,087
Net investment income... 2,147,593 2,046,296 2,675,881 2,264,905 1,748,428 1,499,714 1,313,838
Realized capital
gains................. 12,789 22,600 34,798 32,703 86,706 54,576 43,257
Operating income........ 1,147,289 958,055 1,323,758 1,090,605 952,484 781,611 667,453
Agency and service fee
operating income...... -- -- 52,267 56,909 54,129 60,247 52,570
Financial services
operating income........ 487,434 374,761 523,906 417,741 404,853 390,038 346,442
Equity in income of
minority-owned insurance
operations.............. 84,593 74,322 99,359 81,722 56,005 39,589 27,929
Other realized capital
losses.................. (20,602) (1,072) (11,792) (28,944) (52,340) (12,742) (11,293)
Income before income taxes
and cumulative effect of
accounting changes...... 3,451,245 2,943,850 4,013,222 3,465,883 2,951,979 2,601,081 2,137,048
Income taxes.............. 1,003,497 816,827 1,115,965 955,500 776,464 683,003 512,033
Income before cumulative
effect of accounting
changes................. 2,447,748 2,127,023 2,897,257 2,510,383 2,175,515 1,918,078 1,625,015
Cumulative effect of
accounting changes, net
of tax:
AIG..................... -- -- -- -- -- -- 31,941
Minority-owned insurance
operations............ -- -- -- -- -- 20,695 --
Net income................ 2,447,748 2,127,023 2,897,257 2,510,383 2,175,515 1,938,773 1,656,956
Earnings per common share:
Income before cumulative
effect of accounting
changes............... 3.48 3.01 4.10 3.53 3.05 2.68 2.27
Cumulative effect of
accounting changes,
net of tax:
AIG................... -- -- -- -- -- -- .04
Minority-owned
insurance
operations.......... -- -- -- -- -- .03 --
Net income................ 3.48 3.01 4.10 3.53 3.05 2.71 2.31
Cash dividends per common
share................... .21 .18 .25 .21 .19 .17 .15
Total assets.............. 158,612,085 144,649,284 148,431,002 134,136,398 114,346,117 101,014,848 92,722,182
Long-term debt(b)......... 18,343,000 15,421,257 17,506,359 14,452,851 12,613,907 10,955,963 9,517,595
Capital funds
(shareholders'
equity)................. 23,866,960 21,061,321 22,044,224 19,827,103 16,421,661 15,224,195 12,782,152
</TABLE>
- ---------------
(a) Represents the sum of general net premiums earned, life premium income,
agency commissions, management and other fees, net investment income,
financial services commissions, transaction and other fees, equity in income
of minority-owned insurance operations and realized capital gains (losses).
In 1997, agency operations were insignificant and are presented as a
component of general insurance. Agency operations for the nine months ended
September 30, 1996 have been reclassified to conform to the 1997
presentation.
(b) Including commercial paper and excluding that portion of long-term debt
maturing in less than one year.
Pro forma combined earnings per share of AIG Common Stock for the year
ended December 31, 1996 and for the nine months ended September 30, 1997, when
adjusted to give effect to the Merger and the issuance of an estimated number of
shares of AIG Common Stock and AIG Series C Preferred Stock in connection
therewith, are not expected to differ materially from historical earnings per
share of AIG Common Stock for those periods.
19
<PAGE> 24
The selected financial data of American Bankers for the years 1996, 1995
and 1994, presented below, with the exception of the balance sheet data for
1994, has been derived from the audited consolidated financial statements of
American Bankers incorporated by reference in this Proxy Statement/Prospectus.
The balance sheet data for 1994 and the selected financial data presented below
for 1993 and 1992 has been derived from audited consolidated financial
statements previously filed with the Commission but not incorporated by
reference in this Proxy Statements/Prospectus. Selected financial data for the
nine month periods ended September 30, 1997 and 1996 have been derived from
unaudited consolidated financial statements filed with the Commission and
incorporated by reference in this Proxy Statement/Prospectus and, in the opinion
of American Banker's management, include all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of the results of
operations and financial position for each of the interim periods presented.
Results for the nine months ended September 30, 1997 are not necessarily
indicative of results which may be expected for any other interim period or for
the year as a whole. 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/Prospectus.
SELECTED FINANCIAL DATA OF AMERICAN BANKERS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------- --------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ----------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Net premiums earned................ $1,093,700 $1,052,400 $1,378,500 $1,240,700 $1,094,300 $ 882,000 $ 733,000
Net investment income.............. 99,300 87,200 121,200 99,400 74,400 70,400 67,500
Realized investment gains.......... 9,100 6,300 7,800 700 2,700 5,400 2,800
Gain on insurance settlement....... 5,400
Other income....................... 17,000 15,400 21,500 20,100 15,400 10,100 8,800
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues....................... 1,219,100 1,161,300 1,529,000 1,360,900 1,186,800 973,300 812,100
---------- ---------- ---------- ---------- ---------- ---------- ----------
Benefits and expenses
Benefits, claims, losses, and
settlement expenses.............. 409,300 412,700 523,000 463,100 437,900 349,800 299,800
Commissions........................ 454,000 433,500 571,800 526,500 437,700 358,000 289,400
Operating expenses................. 224,600 204,300 280,800 251,500 220,200 181,700 153,800
Interest expenses.................. 12,100 13,000 17,500 15,600 11,200 8,100 9,600
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total benefits and expenses.......... 1,100,000 1,063,500 1,393,100 1,256,700 1,107,000 897,600 752,600
---------- ---------- ---------- ---------- ---------- ---------- ----------
Pre-tax income from operations..... 119,100 97,800 135,900 104,200 79,800 75,700 59,500
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income tax (expense) benefit
Current............................ (30,500) (17,600) (28,900) (25,200) (14,800) (24,400) (19,000)
Deferred........................... (3,700) (11,900) (12,500) (6,700) (8,500) 2,000 1,800
---------- ---------- ---------- ---------- ---------- ---------- ----------
(34,200) (29,500) (41,400) (31,900) (23,300) (22,400) (17,200)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income before cumulative effect
of change in accounting............ 84,900 68,300 94,500 72,300 56,500 53,300 42,300
Cumulative effect of change in
accounting for income taxes........ (1,000)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income........................... $ 84,900 $ 68,300 $ 94,500 $ 72,300 $ 56,500 $ 52,300 $ 42,300
---------- ---------- ---------- ---------- ---------- ---------- ----------
Per common share data
Primary
Net income before cumulative effect
of change in accounting.......... $ 1.89 $ 1.62 $ 2.20 $ 1.74 $ 1.37 $ 1.43 $ 1.29
Cumulative effect of change in
accounting for income taxes...... (0.03)
Net Income........................... $ 1.89 $ 1.62 $ 2.20 $ 1.74 $ 1.37 $ 1.40 $ 1.29
---------- ---------- ---------- ---------- ---------- ---------- ----------
Fully diluted
Net income before cumulative effect
of change in accounting.......... $ 1.81 $ 1.59 $ 2.16 $ 1.74 $ 1.37 $ 1.39 $ 1.20
Cumulative effect of change in
accounting for income taxes...... (0.03)
Net income........................... $ 1.81 $ 1.59 $ 2.16 $ 1.74 $ 1.37 $ 1.36 $ 1.20
---------- ---------- ---------- ---------- ---------- ---------- ----------
Dividends per common share........... $ 0.32 $ 0.30 $ 0.40 $ 0.38 $ 0.36 $ 0.34 $ 0.30
========== ========== ========== ========== ========== ========== ==========
Total Assets......................... $3,679,000 $3,356,000 $3,469,500 $2,987,700 $2,432,500 $2,160,500 $1,404,300
Notes Payable........................ $ 241,500 $ 245,100 $ 222,500 $ 236,000 $ 197,800 $ 158,900 $ 139,600
Stockholders' Equity................. $ 796,300 $ 678,300 $ 710,200 $ 513,000 $ 405,900 $ 399,300 $ 268,400
</TABLE>
1996 and prior per common share data is restated to reflect stock split
which was effected in September, 1997.
The amounts for 1993 and forward are reported in accordance with Financial
Accounting Standards Board Statement 113.
23
<PAGE> 25
CONSOLIDATED OPERATING RESULTS FOR 1997
American Bankers
On February 5, 1998, American Bankers issued a press release announcing its
consolidated operating results for the year ended December 31, 1997. Net
operating income for the fourth quarter of 1997 was $29.2 million or $.62 per
share on a diluted basis. This compares with net operating income of $25.2
million or $.54 per share for the same period in 1996. Operating results for the
fourth quarter 1997 increased $4.0 million or 16 percent as compared with the
same period in 1996. On a basic earnings per share basis, net operating income
for the fourth quarter of 1997 was $.66 per share compared with $.57 per share
for the same period of 1996.
Gross collected premiums for the fourth quarter of 1997 increased
approximately 10 percent from $652.6 million to $720.2 million. Gross collected
premiums for 1997 were $2.740 billion versus $2.493 billion for 1996. This
represents an increase of approximately 10 percent in 1997 over 1996.
Operating results in the fourth quarter were driven by the growth in net
earned premiums of 10 percent over the same period in 1996, coupled with
consistently good underwriting results and a favorable operating expense ratio.
The ratio of claims and commission expenses to net earned premiums was 78.7
percent, which continues to reflect favorable underwriting trends experienced
throughout 1997. Operating expenses in the quarter totaled $74.2 million or 11.2
percent of gross earned premiums. This compared with an operating expense ratio
of 12.2 percent for the same period in 1996. The quarter also benefited from a
lower effective tax rate of 25.9 percent compared with 31.3 percent in the same
period in 1996. The overall effective tax rate for 1997 was 28 percent compared
with 30.5 percent for 1996.
Net income for the fourth quarter of 1997 was $30.0 million or $.64 per
share on a diluted basis, compared with $26.2 million or $.56 per share for the
same period in 1996. On a basic earnings per share basis, net income for the
fourth quarter of 1997 was $28.2 million or $.68 per share compared with $24.3
million or $.59 per share for the same period in 1996. Fourth quarter net income
includes realized investment gains, net of tax, of $.8 million or $.02 per share
compared with realized investment gains, net of tax, of $1.0 million or $.02 per
share for the same period in 1996.
Weighted average shares outstanding on a diluted basis for the quarter were
47.1 million compared with a split adjusted figure of 46.7 million for the same
period in 1996. American Bankers declared a two-for-one Common Stock split in
August 1997. As a result of the stock split all holders of Common Stock of
record on August 29, 1997 received one additional share for each share they
held.
On a diluted basis net operating income increased $18.6 million or 21
percent in 1997 over 1996. Net operating income for the year ended December 31,
1997 was $108.3 million or $2.31 per share compared with net operating income of
$89.7 million or $2.04 per share in 1996. On a basic earnings per share basis,
net operating income per share for 1997 was $2.44 per share compared with $2.12
per share for 1996.
Adjusted net income for the year ended December 31, 1997 was $115.1 million
or $2.45 per share on a diluted basis, compared with net income of $94.7 million
or $2.16 per share for 1996.
Stockholders' equity was $698.9 million (excluding $115 million of
preferred stock) and book value per common share was $16.83 at December 31,
1997.
Earnings per share for all periods are reported in accordance with
Financial Accounting Standards Board Statement No. 128 "Earnings Per Share."
AIG
On February 10, 1998, AIG issued a press release announcing its
consolidated operating results for the year ended December 31, 1997. AIG's net
income for 1997 increased 5.0 percent to $3.33 billion from $2.90 billion in
1996. For the fourth quarter of 1997, net income totaled $884.6 million, an
increase of 14.8 percent, compared to $770.2 million in the same period of 1996.
Income as adjusted to exclude realized capital gains, net of taxes, was $3.258
billion for the year and $870.8 million for the quarter, up 14.6 percent for
both the
24
<PAGE> 26
year and the quarter, compared to $2.842 billion and $759.9 million in the
respective periods of 1996. On a per share basis, basic net income as adjusted
to exclude realized capital gains, net of taxes, was $4.64 for the year and
$1.24 for the quarter, compared to $4.02 and $1.08 in the respective periods of
1996, up 15.4 percent and 14.8 percent, respectively.
Income before income taxes in 1997 increased 17.1 percent to $4.70 billion
from $4.01 billion reported in 1996. For the fourth quarter of 1997, income
before income taxes amounted to $1.25 billion, an increase of 16.7 percent over
the $1.07 billion reported in 1996. Included in these results were pretax
realized capital gains of $118.5 million and $19.5 million for the year and
fourth quarter of 1997, respectively, compared to gains of $88.0 million and
$15.8 million for the same periods in 1996.
Revenues for 1997 rose 9.5 percent to $30.60 billion from $27.94 billion in
1996. Fourth quarter revenues totaled $7.95 billion, an increase of 8.1 percent
over $7.36 billion in the year earlier quarter.
Foreign exchange rates affected the translation of foreign currency net
premiums written into U.S. dollars, as shown in the following table, which
compares fourth quarter 1997 to fourth quarter 1996:
<TABLE>
<CAPTION>
WORLDWIDE FOREIGN WORLDWIDE
GENERAL GENERAL LIFE
INSURANCE INSURANCE INSURANCE
--------- --------- ---------
<S> <C> <C> <C>
Premium Growth in Original Currency......... 7.3% 10.6% 17.0%
Foreign Exchange Impact..................... (2.2%) (6.6%) (11.9%)
Premium Growth as Reported in U.S. $........ 5.1% 4.0% 5.1%
</TABLE>
At December 31, 1997, AIG's consolidated assets approximated $165 billion,
an increase of 11 percent, compared to $148 billion at the prior year-end. In
1997, shareholders' equity increased to approximately $24 billion, a 9 percent
increase over the $22 billion reported at December 31, 1996. AIG continued its
program to repurchase shares of AIG Common Stock in the open market, purchasing
2.3 million shares in the fourth quarter for approximately $231.9 million. For
the twelve months ended December 31, 1997, repurchases approximated 5.7 million
shares for approximately $502.0 million.
General Insurance. General insurance pretax income before realized capital
gains for 1997 was $2.34 billion, 9.5 percent above the $2.14 billion in 1996.
For the fourth quarter of 1997, general insurance pretax income before realized
capital gains was $605.8 million, an increase of 9.0 percent compared to $555.6
million in 1996.
Worldwide general insurance net premiums written for 1997 amounted to
$13.41 billion, 5.6 percent above the $12.69 billion in 1996. In the fourth
quarter, general insurance net premiums written were $3.12 billion, an increase
of 5.1 percent, compared to $2.97 billion for the fourth quarter of 1996.
General insurance underwriting profit for 1997 totaled $490.2 million, with
combined loss and loss expense ratios of 96.20 for the year, compared to 96.47
in 1996, and 96.46 for the fourth quarter compared to 97.20 in the prior year.
At December 31, 1997, AIG's general insurance net reserves for losses and loss
expenses amounted to approximately $21.2 billion, increases of $131 million for
the quarter and $764 million for the year, respectively.
General insurance net investment income rose 9.6 percent to $1.85 billion
in 1997 and 9.2 percent to $487.2 million in the fourth quarter.
Life Insurance. AIG's worldwide life insurance operations reported pretax
income before realized capital gains of $1.55 billion in 1997, an increase of
20.3 percent, compared to $1.29 billion in 1996. For the fourth quarter, life
insurance pretax income before realized capital gains increased 17.6 percent to
$415.8 million, compared to $353.5 million for the fourth quarter of 1996.
For the year 1997, life insurance premium income rose 10.6 percent to $9.93
billion from $8.98 billion in 1996. Fourth quarter premium income amounted to
$2.60 billion, a gain of 5.1 percent, compared to $2.47 billion in 1996.
22
<PAGE> 27
Life insurance net investment income rose 8.2 percent to $2.90 billion for
the year 1997, compared to $2.68 billion in 1996. For the fourth quarter, net
investment income amounted to $748.9 million, an increase of 18.9 percent,
compared to $629.6 million in the same period in 1996.
Financial Services. Financial services pretax operating income amounted to
$701.3 million for 1997, compared to $523.9 million in 1996, an increase of 33.9
percent. For the fourth quarter, financial services operating income increased
43.4 percent to $213.9 million, compared to $149.1 million in 1996.
Other Operations. AIG's equity in income of minority-owned insurance
operations amounted to $113.6 million for 1997, compared to $99.4 million in
1996. Equity in income of minority-owned insurance operations for the fourth
quarter was $29.0 million, compared to $25.0 million in 1996.
COMPARATIVE PER SHARE DATA
The following table sets forth certain earnings, dividend and book value
per share data for American Bankers and AIG on an historical basis and
historical equivalent basis. The information set forth below should be read in
conjunction with the historical consolidated financial statements of American
Bankers and AIG, including the notes thereto, incorporated by reference or
appearing elsewhere in this Proxy Statement/ Prospectus. See "Available
Information" and "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
-------------------------------- ------------
1997 1996 1996
------------- ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
AMERICAN BANKERS HISTORICAL(1)
Earnings per share.......................... $ 1.81 $ 1.59 $ 2.16
Cash dividends declared per share........... .32 .30 .40
Book value per share........................ 16.39 13.81 14.56
AIG HISTORICAL(2)
Earnings per share.......................... 3.48 3.01 4.10
Cash dividends declared per share........... .21 .18 .25
Book value per share........................ 34.02 29.91 31.31
AIG HISTORICAL EQUIVALENT FOR AMERICAN BANKERS
SHAREHOLDERS(3)
Earnings per share.......................... 1.66 1.44 1.96
Cash dividends declared per share........... .10 .09 .12
Book value per share........................ 16.26 14.30 14.97
</TABLE>
- ---------------
(1) All American Bankers information has been adjusted to reflect a two-for-one
stock split which was effected in September 1997.
(2) All AIG information has been adjusted to reflect the stock split effected as
a 50 percent common stock dividend in July 1997.
(3) Represents AIG Historical information multiplied by a fraction, the
numerator of which is $58.00 and the denominator of which is equal to an
assumed Base Period Stock Price of $121.25 (the closing price of AIG Common
Stock on March 6, 1998).
26
<PAGE> 28
RISK FACTORS
Holders of Preferred Stock and Common Stock should consider carefully all
of the information contained in the Proxy Statement/Prospectus, including the
following factors:
ALLOCATION AND PRO-RATION; AIG TOP-UP ELECTION; MARKET FLUCTUATIONS
The Merger Agreement provides that the maximum aggregate amount of cash
that AIG will pay to holders of Common Stock will not exceed the Maximum Cash
Pool. In the event that Cash Elections (as hereinafter defined) are submitted
with respect to an aggregate number of shares of Common Stock which, except for
the limitation imposed by the Maximum Cash Pool, would require AIG to pay cash
in the aggregate in excess of the Maximum Cash Pool, a pro rata portion of such
shares of Common Stock will be converted into the right to receive the Cash
Election Merger Consideration (as hereinafter defined). Such proration as to
each holder of Common Stock will be based upon the ratio of (i) the Maximum Cash
Pool to (ii) the aggregate number of shares of Common Stock with respect to
which Cash Elections are submitted, multiplied by $58.00. All shares of Common
Stock for which a Cash Election is made but for which the Cash Election Merger
Consideration is not paid because of the limitation imposed by the Maximum Cash
Pool, will be converted into the right to receive the Stock Election Merger
Consideration (as hereinafter defined).
The Merger Agreement further provides that holders of Common Stock who make
a Stock Election (as hereinafter defined) or no election generally will receive
AIG Common Stock with a value of $58.00 (as determined based on the Base Period
Stock Price). In the event, however, that the Base Period Stock Price is below
$120.5625 and the entire Maximum Cash Pool has not been paid to holders of
Common Stock that made Cash Elections, AIG will be entitled, at its election, to
pay in cash a portion of the consideration to be received by holders of Common
Stock that make a Stock Election or no election. The maximum amount of cash that
AIG may elect to pay such holders per share of Common Stock will equal the Per
Share Cash Top-Up Amount. In addition, the aggregate amount of cash that AIG may
elect to pay to holders of Common Stock that make a Stock Election or no
election is subject to certain additional limitations, as described under "The
Merger Agreement -- General; the Election; Merger Consideration." Holders of
Common Stock generally will have to pay federal income taxes on any cash
received by such holders to the extent of any gain they may have on their Common
Stock. See "The Merger -- Certain Federal Income Tax Consequences of the
Merger."
Due to the foregoing, no assurance can be given that holders of Common
Stock will receive all of their Merger Consideration (as hereinafter defined) in
the form elected.
In determining whether to make a Stock Election (or no election), holders
of Common Stock are urged to consider the impact of the fluctuations in the
market price of AIG Common Stock. There is no assurance that the market value of
the portion of a share of AIG Common Stock (plus, if applicable, any Per Share
Cash Top-Up Amount) received for each share of Common Stock will equal $58.00 at
the time of closing of the Merger (or thereafter) since the Base Period Stock
Price used to calculate the exchange ratio will be based on the average of the
closing prices of AIG Common Stock on the NYSE for the ten trading days ending
on the third trading day prior to the date of consummating the Merger.
ALTERNATIVE TRANSACTION STRUCTURE
In the event that the Merger Agreement is not approved by the holders of a
majority of the outstanding shares of Preferred Stock or AIG reasonably
determines that such approval is not likely to be obtained, the Merger Agreement
provides that the Merger Agreement will be amended to restructure the proposed
Merger. The amended Merger Agreement, inter alia, would (i) provide that AIGF
would be merged into American Bankers (in lieu of the proposed merger of
American Bankers into AIGF), (ii) provide that the shares of Preferred Stock
would remain outstanding after the Merger pursuant to their existing terms and
conditions (except that appropriate conversion adjustments would be made and
such shares would become convertible into AIG Common Stock) and (iii) eliminate
certain tax-related covenants and conditions contained in the Merger Agreement.
Such amended Merger Agreement would require the approval of the holders of a
majority of the outstanding shares of Common Stock, but would not require the
approval of the holders of shares of Preferred Stock.
In the event that the amended Merger Agreement is approved by the holders
of Common Stock and the Merger is restructured as described in the prior
paragraph, such holders generally will have to pay federal income tax on all
Merger Consideration, whether in the form of cash or AIG Common Stock, that they
receive in the Merger to the extent of any gain they may have on their Common
Stock. See "The Merger Agreement -- Alternative Transaction Structure."
27
<PAGE> 29
THE SPECIAL MEETINGS
GENERAL; DATES, TIMES AND PLACES
The enclosed proxy is solicited by and on behalf of the American Bankers
Board for use at the Preferred Shareholders Special Meeting and the Common
Shareholders Special Meeting, as applicable. The Preferred Shareholders Special
Meeting, which was originally scheduled to be held on March 4, 1998, was
postponed and will be held on March 25, 1998 at 10:00 A.M., Eastern time, at the
Auditorium of the Company's Headquarters, 11222 Quail Roost Drive, Miami,
Florida 33157-6596, and the Common Shareholders Special Meeting, which was
originally scheduled to be held on March 6, 1998, was postponed and will be held
on March 27, 1998 at 10:00 A.M., Eastern time, at the Auditorium of the
Company's Headquarters, 11222 Quail Roost Drive, Miami, Florida 33157-6596.
Shareholders wishing to grant such proxy may do so by signing and mailing either
the enclosed green proxy card or the white proxy card enclosed with the Original
Proxy Statement/Prospectus.
PURPOSE OF THE SPECIAL MEETINGS
The purpose of the Special Meetings is to consider and vote upon the
approval and adoption of the Merger Agreement and the Merger, and to transact
any other business that is properly brought before the Special Meetings.
REVOCATION OF PROXIES
Any person who has already signed and mailed a proxy or any person who
signs and mails the enclosed proxy may revoke it at any time before it is voted
by giving written notice of revocation, by mailing a later dated proxy which is
received prior to the applicable Special Meeting or by voting in person at the
applicable Special Meeting.
ANY PERSON WHO HAS ALREADY RETURNED THE WHITE PROXY CARD DISTRIBUTED WITH
THE ORIGINAL PROXY STATEMENT/PROSPECTUS OR THE GOLD PROXY CARD DISTRIBUTED BY
CENDANT AND WHO DOES WISH TO CHANGE HIS OR HER VOTE WITH RESPECT TO THE MERGER
AGREEMENT OR TO VOTE AGAINST PROPOSAL 2 ON THE GREEN PROXY CARD, SHOULD SIGN AND
MAIL THE ENCLOSED GREEN PROXY CARD AS SOON AS POSSIBLE.
ANY PERSON WHO HAS ALREADY RETURNED THE WHITE PROXY CARD DISTRIBUTED WITH
THE ORIGINAL PROXY STATEMENT/PROSPECTUS AND WHO DOES NOT WISH TO CHANGE HIS OR
HER VOTE WITH RESPECT TO THE MERGER AGREEMENT OR TO VOTE AGAINST PROPOSAL 2 ON
THE GREEN PROXY CARD, DOES NOT NEED TO SUBMIT ANOTHER PROXY CARD AT THIS TIME.
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 January 30, 1998 (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 (i) at least a majority of the shares of
Preferred Stock outstanding as of the Record Date and (ii) at least a majority
of the shares of Common Stock outstanding as of the Record Date, each voting as
a separate class.
Under 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 Preferred Stock and
Common Stock, outstanding on the Record
28
<PAGE> 30
Date, each voting as a class, 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, directors and executive officers of American Bankers
and their affiliates as a group did not beneficially own 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 4,177,200 shares of
Common Stock, or approximately 9.9% 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 in the aggregate as of the Record Date
approximately 8.0% 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 41,934,118 shares of Common Stock outstanding as of the Record
Date, a total of 20,967,060 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 beneficially
own 4,177,200 shares, or approximately 19.9%, of the 20,967,060 shares of Common
Stock required for approval of the Merger. Messrs. Gaston and Landon, who have
contractually agreed to vote in favor of the Merger, beneficially own 3,391,066
shares, or approximately 16.1%, of the 20,967,060 shares of Common Stock
required for approval of the Merger.
Barnett Bank, N.A., as trustee of the American Bankers Insurance Group,
Inc. Leveraged Employee Stock Ownership Plan (the "LESOP") reported on a
Schedule 13G that it held, as of December 31, 1997, 3,509,652 shares of Common
Stock, of which 3,074,592 shares were allocated to participants' accounts under
the LESOP. Participants in the LESOP will receive separate information from US
Trust Company of California, N.A. ("US Trust"), as investment manager of the
LESOP, regarding the manner in which participants may instruct US Trust
regarding voting on the Merger Agreement with respect to shares allocated to
their accounts under the LESOP. Participants are urged to read such information
carefully.
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
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, MacKenzie
Partners, Inc. ("MacKenzie") has been retained to assist in the solicitation of
proxies. MacKenzie 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. MacKenzie will
receive reasonable and customary compensation for its services (estimated at
$15,000), will be reimbursed for certain reasonable out-
29
<PAGE> 31
of-pocket expenses and will be indemnified against certain liabilities and
expenses in connection therewith, including certain liabilities under the
federal securities laws.
AIG may contact American Bankers' shareholders and encourage such
shareholders to vote in favor of the Merger Agreement and the Merger by
returning proxy cards to American Bankers. The participants in this solicitation
may include AIG, the directors of AIG (M. Bernard Aidinoff, Lloyd M. Bentsen,
Pei-yuan Chia, Marshall A. Cohen, Barber B. Conable, Jr., Martin S. Feldstein,
Leslie L. Gonda, Evan G. Greenberg, M.R. Greenberg, Carla A. Hills, Frank J.
Hoenemeyer, Edward E. Matthews, Dean P. Phypers, Howard I. Smith, Thomas R.
Tizzio, Edmund S.W. Tse and Frank G. Wisner) and the following executive
officers and employees of AIG: Edmund J. Burke (Assistant Manager, Public
Relations); Charlene M. Hamrah (Director of Investor Relations); Joseph M.
Norton, Jr. (Director of Public Relations); David Przywara (Assistant Director
of Investor Relations); and John T. Wooster, Jr. (Vice President,
Communications). Certain of the directors of AIG are also executive officers of
AIG.
As of the date of this Proxy Statement/Prospectus, AIG has no interest,
direct or indirect, in any securities of American Bankers, except that (i) AIG
has given the notice required to exercise its option under the Stock Option
Agreement to purchase up to 19.9% of the outstanding shares of Common Stock,
subject to receipt of required regulatory approvals and (ii) AIG has entered
into the Voting Agreement with certain shareholders of American Bankers. See
"Related Agreements and Transactions -- Stock Option Agreement" and "Related
Agreements and Transactions -- Voting Agreement."
Other than as set forth above, as of the date of this Proxy
Statement/Prospectus, none of AIG or, to the knowledge of AIG, any of the
persons listed above, has any security holdings in American Bankers.
AIG has retained Goldman Sachs to render financial advisory services to AIG
in connection with the Merger Agreement and the transactions contemplated
thereby. AIG and Goldman Sachs have orally agreed that if the Merger is
consummated AIG will pay Goldman Sachs aggregate fees of $4,000,000 for its
financial advisory services in connection with the Merger Agreement and the
transactions contemplated thereby. In connection with Goldman Sachs' engagement
as financial advisor, certain employees of Goldman Sachs, including Peter Kraus,
Dan Jester and Steve McLaughlin, may communicate in person, by telephone or
otherwise with a limited number of institutions, brokers or other persons who
are shareholders of American Bankers. Goldman Sachs will not receive any fee for
or in connection with such activities by their respective employees apart from
the fees they are otherwise entitled to receive as described above. In the
ordinary course of business, Goldman Sachs and its respective affiliates may
actively trade or hold the securities of American Bankers 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. As of the date of this Proxy
Statement/Prospectus, Goldman Sachs does not have any interest, direct or
indirect, in any securities of American Bankers.
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 any Special Meeting, including without limitation a motion to adjourn or
postpone such Special Meeting to another time and/or place for the purpose of,
among other things, permitting dissemination of information regarding material
developments relating to the Merger Agreement and the Merger, or soliciting
additional proxies in favor of the approval of the Merger Agreement and the
Merger, the persons named on the accompanying proxy card will vote the shares
represented by such proxy upon such matters in their discretion; provided,
however, that if American Bankers proposes to adjourn or postpone such Special
Meeting for the purpose of soliciting additional votes in favor of the Merger
Agreement and the Merger, and seeks a vote of shareholders on such proposal, no
proxy that is voted against proposal 2 on the accompanying green proxy card (or
on which a shareholder elects to abstain on such matter) and no proxy that is
voted against the Merger Agreement and Merger on the white proxy card (or on
which a shareholder elects to abstain on such matter) will be voted in favor of
any adjournment or postponement for the purpose of soliciting additional
proxies. Any other proxy will be deemed to have voted FOR such adjournment or
postponement proposal set forth in proposal 2 if such proposal is made. Should
the Special Meeting be reconvened, all proxies will be voted in the same manner
as such proxies would have been voted
27
<PAGE> 32
when the Special Meeting was originally convened, except for proxies effectively
revoked or withdrawn prior to the time proxies are voted at such reconvened
Special Meeting.
As soon as practicable following the Preferred Shareholders Special
Meeting, American Bankers will publicly announce by means of a press release the
results of the vote at that meeting and, if the Merger is not approved by the
requisite vote of the holders of Preferred Stock, will file with the Commission
and mail to the holders of Common Stock a supplement to this Proxy
Statement/Prospectus which contains the results. In that event, the Common
Shareholders Special Meeting will be postponed to a later date, to enable the
holders of Common Stock to evaluate the information contained in the supplement.
Holders of Preferred Stock should not send their stock certificates with
their proxy cards. Holders of Common Stock should send in their proxy cards and
separately should send in the enclosed Election Form properly completed with
their stock certificates. An election to receive cash or stock in the Merger
will not constitute a vote in favor of approval of the Merger.
28
<PAGE> 33
THE MERGER
BACKGROUND OF THE MERGER
In the spring of 1997, Barclays Capital ("Barclays"), in the course of
discussions with a representative of American Bankers concerning banking
matters, raised with American Bankers the possibility of forming a relationship
with AIG. A meeting was arranged among Gerald N. Gaston, Vice Chairman,
President and Chief Executive Officer, and Floyd G. Denison, Executive Vice
President, of American Bankers, representatives of Barclays, and Howard I.
Smith, Executive Vice President and Chief Financial Officer of AIG, and other
members of AIG's management. At that meeting on March 4, 1997, no specific
transaction was discussed and management of American Bankers informed AIG that
the company was not for sale. Following the meeting, however, AIG and American
Bankers entered into a confidentiality agreement, dated April 30, 1997, for the
purpose of exploring a possible relationship between the two companies.
On May 9, 1997, management of American Bankers and representatives of Smith
Barney Inc. (now associated with Salomon Brothers Inc and, collectively with
Salomon Brothers Inc, doing business as and referred to herein as "Salomon Smith
Barney"), met with Mr. Smith and other representatives of AIG, representatives
of Barclays and representatives of Goldman, Sachs & Co. ("Goldman Sachs"), which
had been retained by AIG, to discuss the nature of AIG's interest in American
Bankers and to refine and develop a due diligence list initially prepared by
AIG.
On May 23, 1997, at its regularly scheduled meeting, the American Bankers
Board was informed of the discussions that had taken place with AIG. The
American Bankers Board authorized the Chief Executive Officer, Chairman of the
Board and other appropriate officers of American Bankers to respond to requests
for information regarding American Bankers' business and to review and discuss
with AIG possible forms of joint business arrangements. At that time, the
American Bankers Board informed management that American Bankers was not for
sale. Also at this meeting the American Bankers Board authorized the retention
of Salomon Smith Barney to advise American Bankers regarding a potential
transaction with AIG. American Bankers executed an engagement letter with
Salomon Smith Barney on August 13, 1997.
Maurice R. Greenberg, Chairman and Chief Executive Officer of AIG, and Mr.
Smith met with Mr. Gaston and Mr. Denison during May and June of 1997. Mr.
Greenberg expressed skepticism concerning a possible joint venture or business
combination with American Bankers because AIG estimated that it would realize an
insufficient rate of return on its investment based on 1997 and 1998 earnings
estimates for American Bankers derived from publicly available information
concerning American Bankers. Soon thereafter, however, Mr. Greenberg requested
that Mr. Smith meet with Mr. Denison to study possible synergies and expense
savings that might result from a business combination between AIG and American
Bankers.
On July 9, 1997, the American Bankers Board met and was informed of AIG's
views regarding a possible transaction.
On July 10, 1997, Messrs. Denison and Gaston met with Messrs. Smith and
Louis F. Zearo, Vice President and Deputy Comptroller of AIG. At that meeting,
Mr. Smith reiterated Mr. Greenberg's statement that AIG considered a transaction
between AIG and American Bankers to be unlikely. Notwithstanding Mr. Smith's
statement, possible synergies and expense savings were discussed and Mr. Smith
requested more detailed expense information on American Bankers' operations.
On July 29, 1997, management of American Bankers presented Mr. Smith with a
written analysis regarding possible synergies and expense savings.
In August 1997, AIG requested that management of American Bankers allow
representatives of AIG to visit American Bankers to review American Bankers'
business and to consider possible synergies and expense savings and revenue
enhancement issues. During that month, two groups from AIG visited American
Bankers. The first group, which included Mr. Zearo and certain data processing
and marketing personnel of AIG, met with, among other officers of American
Bankers, R. Kirk Landon, Chairman of the American Bankers Board, and Messrs.
Gaston and Denison. Their visit included a review of American Bankers' data
processing facilities. The second group, comprised of all marketing personnel,
met with Messrs. Gaston, Gene Becker, Chief
32
<PAGE> 34
Marketing Officer of American Bankers, and Jay Fuchs, President of American
Bankers Insurance Company of Florida and American Bankers Life Assurance Company
of Florida, and other marketing personnel from American Bankers, to review
American Bankers' marketing structure.
Throughout August 1997, American Bankers continued to work on refining its
analysis of possible synergies and expense savings. During the months of
September and October, discussions took place as to possible additional visits
by officers of AIG, including Mr. Greenberg, for the purpose of evaluating the
possibility of a business combination.
Subsequently, Mr. Greenberg, in a series of calls to Mr. Gaston, expressed
serious interest in going forward with a business combination and stated that he
would get back to Mr. Gaston sometime immediately after Thanksgiving.
Accordingly, a meeting was arranged for December 5, 1997.
On December 5, 1997, Messrs. Gaston and Denison met with Messrs. Greenberg,
Smith and Edward E. Matthews, Vice Chairman -- Investments and Financial
Services, of AIG, to discuss AIG's interest in a possible business combination.
During the meeting, the basic form of a proposed transaction was discussed.
Following the meeting, Mr. Gaston asked Mr. Greenberg to prepare written
materials for presentation to the American Bankers Board. Mr. Gaston again
emphasized that American Bankers was not for sale but said that he would advise
the American Bankers Board of AIG's proposal and subsequently respond to AIG.
On December 6, 1997, Mr. Matthews delivered to Mr. Gaston a list containing
certain terms of AIG's proposal to acquire American Bankers by exchanging $45.51
in AIG Common Stock for each share of Common Stock.
On December 13, 1997, James F. Jorden, a director of American Bankers,
presented the proposed transaction to the American Bankers Board and reviewed in
detail the history of the discussions with AIG. In addition, at that meeting
Salomon Smith Barney discussed its preliminary analysis of the proposed
transaction, including its detailed financial and other analyses of American
Bankers and AIG, and management of American Bankers discussed its views of the
growth prospects for American Bankers. After these presentations, the American
Bankers Board directed management of American Bankers to enter into negotiations
with AIG with a view to combining the two corporations.
On December 15, 1997, Messrs. Greenberg, Matthews and Smith met with
Messrs. Gaston and Denison to discuss the terms of AIG's proposal. On December
16, 1997, AIG indicated that it was prepared to increase its offer to $46.00 in
AIG Common Stock for each share of Common Stock. Mr. Gaston indicated that he
would inform the American Bankers Board regarding AIG's proposal.
Over the next several days, negotiations concerning the terms of a possible
transaction continued. Those negotiations included, in addition to continuing
discussions on the price per share to be received by holders of Common Stock,
discussions regarding AIG paying a portion of the consideration to be paid to
holders of Common Stock in cash, the treatment of the Preferred Stock in the
transaction and the nature and amount of any termination fees. AIG also proposed
that American Bankers grant AIG an option to purchase up to 19.9% of the
outstanding Common Stock, and that certain officers of American Bankers enter
into agreements to vote in favor of the transaction. AIG indicated that it would
not enter into any transaction that did not include a termination fee and
agreements similar to those contained in the Voting Agreement and the Original
Stock Option Agreement. American Bankers indicated to AIG that it would consider
granting such an option, but only if the amount which could be realized by AIG
with respect to it, in conjunction with any amount realized with respect to the
termination fee, was capped. In addition, during this period AIG and American
Bankers each continued their due diligence reviews of the other.
On December 18, 1997, Sullivan & Cromwell, counsel to AIG delivered to
Dewey Ballantine LLP, counsel to American Bankers and Jorden Burt Boros
Cicchetti Berenson & Johnson LLP, counsel to American Bankers, drafts of the
Original Merger Agreement, Original Stock Option Agreement and Voting Agreement.
On December 19 through 21, AIG, American Bankers, Goldman Sachs, Salomon Smith
Barney, Sullivan & Cromwell, Dewey Ballantine LLP and Jorden Burt Boros
Cicchetti Berenson & Johnson LLP negotiated the terms of those agreements. AIG
and American Bankers discussed an increase in the proposed
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<PAGE> 35
merger consideration to $47.50 per share of Common Stock but ultimately agreed
upon $47.00 in connection with finalizing all of the terms of the Original
Merger Agreement.
On December 19, 1997 the AIG Board approved the proposed transaction.
Also on December 19, 1997, American Bankers amended the Rights Agreement
(as hereinafter defined) to provide that the execution, delivery or consummation
of the transactions contemplated by the Original Merger Agreement, the Original
Stock Option Agreement and the Voting Agreement will not cause the rights
contemplated by the Rights Agreement to become exercisable.
At a meeting held on December 21, 1997, the American Bankers Board received
from Mr. Jorden an update on the discussions with AIG that had occurred since
its last meeting. The American Bankers Board also received a detailed due
diligence review concerning AIG from Mr. Denison. Dewey Ballantine LLP reviewed
for the American Bankers Board its fiduciary duties, and described the principal
terms of the Original Merger Agreement, Original Stock Option Agreement and
Voting Agreement. Salomon Smith Barney presented its fairness opinion, and
described for the American Bankers Board the detailed analysis conducted by
Salomon Smith Barney in reaching its conclusions. The American Bankers Board
asked numerous questions of management of American Bankers, Salomon Smith Barney
and Dewey Ballantine LLP. Thereafter, following further discussion, the American
Bankers Board unanimously determined that the merger contemplated by the
Original Merger Agreement was fair to, 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
Original Merger Agreement and the merger contemplated thereby, the Original
Stock Option Agreement and the Voting Agreement, 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
Original Merger Agreement and the merger contemplated thereby.
Later on December 21, 1997, the Original Merger Agreement and Original
Stock Option Agreement were executed by American Bankers and AIG, and the Voting
Agreement was executed by Messrs. Gaston and Landon and AIG.
On January 27, 1998, Cendant publicly announced its proposal to acquire
American Bankers for $58 per share of Common Stock, to be paid in cash and
common stock of Cendant, and communicated such proposal in a letter to the
members of the American Bankers Board. On January 28, 1998, Cendant also
commenced a tender offer seeking to purchase 23,501,260 shares of Common Stock,
subject to the terms and conditions stated therein, at $58 per share (the
"Cendant Offer"). According to Cendant's public filings, Cendant contemplates
that after consummation of the Cendant Offer, American Bankers would be merged
with and into a subsidiary of Cendant (the "Cendant Merger") and all shares not
tendered in the Cendant Offer would be converted into that number of shares of
Cendant common stock having a value equal to $58. Cendant also contemplates that
in such merger, each outstanding share of Preferred Stock would be converted
into one share of a new series of convertible preferred stock of Cendant having
similar terms, except that such shares would be convertible into shares of
Cendant common stock in accordance with the terms of the Preferred Stock.
The Cendant Offer is subject to a number of conditions, including (a) there
being validly tendered and not properly withdrawn prior to the expiration of the
Cendant Offer a number of shares of Common Stock which, together with shares of
Common Stock owned by Cendant, constitute at least 51% of the shares of Common
Stock outstanding on a fully diluted basis; (b) Cendant being satisfied, in its
reasonable discretion, that the provisions of Section 607.0901(2) of the FBCA
are inapplicable to the Cendant Merger; (c) Cendant being satisfied, in its
reasonable discretion, that the provisions of Section 607.0902 of the FBCA
continue to be inapplicable to the acquisition of shares of Common Stock
pursuant to the Cendant Offer; (d) the purchase of shares of Common Stock
pursuant to the Cendant Offer having been approved for purposes of rendering the
supermajority vote requirement of the American Bankers Articles inapplicable to
Cendant; (e) the Rights (as hereinafter defined) having been redeemed by the
American Bankers Board, or Cendant being satisfied, in its reasonable
discretion, that the Rights are invalid or otherwise inapplicable to the Cendant
Offer and to the Cendant Merger; (f) the option contemplated by the Stock Option
Agreement having been terminated or
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<PAGE> 36
invalidated without any shares of Common Stock having been issued thereunder;
and (g) Cendant having obtained all insurance regulatory approvals necessary for
their acquisition of control of American Bankers' insurance subsidiaries on
terms and conditions satisfactory to Cendant, in its reasonable discretion.
In connection with its proposal, on January 27, 1998, Cendant commenced
litigation against American Bankers, members of the American Bankers Board of
Directors, AIG and AIGF in the United States District Court for the Southern
District of Florida. See "-- Litigation".
Subsequent to the announcement of the Cendant Offer, AIG on January 27,
1998, exercised its right to purchase 8,265,626 shares of Common Stock issuable
pursuant to the Original Stock Option Agreement. The consummation of such
purchase is subject to receipt of applicable regulatory approvals. See "The
Merger -- Required Regulatory Filings and Approvals."
On January 28, 1998, the American Bankers Board met telephonically to
review the terms of the Cendant Offer. The Board was apprised of the nature of
the litigation commenced by Cendant and others. Members of the American Bankers
Board were also advised as to their fiduciary duties with respect to the Cendant
Offer and the proposed merger with AIG as well as American Bankers' contractual
obligations under the Original Merger Agreement. The American Bankers Board
determined to meet again on February 5, 1998, at which time it would consider
fully the Cendant Offer and the advice of its legal and financial advisors.
Thereafter, representatives of Salomon Smith Barney, Dewey Ballantine LLP
and Jorden Burt Boros Cicchetti Berenson & Johnson LLP had periodic discussions
with representatives of Goldman Sachs and Sullivan & Cromwell to discuss AIG's
position with respect to the Cendant Offer.
At its meeting on February 5, 1998, the American Bankers Board, along with
its legal and financial advisors, fully considered the Cendant Offer, as well as
the fiduciary duties of the American Bankers Board and its obligations under
Florida law to consider the impact of the Cendant Offer on other constituencies
such as policyholders, accounts and employees, and determined that, in light of
all the relevant circumstances and for the reasons set forth below, it was
unable to take a position with respect to the Cendant Offer and made no
recommendation at that time with respect to the Cendant Offer.
The American Bankers Board, along with its legal and financial advisors,
considered the fact that the Cendant Offer contemplated a price of $58 per share
of Common Stock, a 23% premium over the then proposed merger consideration of
$47 per share of Common Stock offered by AIG. However, because of the provisions
of the Original Merger Agreement which prohibited American Bankers from engaging
in negotiations with or having discussions with Cendant concerning the Cendant
Offer as well as the lack of certain information which American Bankers expected
would be disclosed in the regulatory process, the American Bankers Board had
been unable to assess several aspects of the Cendant Offer, including the
following:
- Cendant's relatively high level of financial leverage, which would be
further increased by the indebtedness it intends to incur to finance the
Cendant Offer, and the effect of such leverage on the operations of
American Bankers;
- Cendant's proposed business plans for American Bankers following the
Cendant Offer if the Cendant Offer were successful, including treatment
of accounts, employees and policyholders;
- Cendant's experience in owning and operating insurance companies;
- The ability of Cendant to provide licensed facilities outside of the
United States to permit international distribution of American Bankers'
products;
- The ability of Cendant to realize the synergies that Cendant has
indicated will be achieved;
- Whether increased revenue levels projected by Cendant require additional
capital infusions in American Bankers' operating subsidiaries and the
source of such capital;
- Cendant's plans with respect to intercompany transactions with American
Bankers' insurance subsidiaries involving intercompany royalties and
fees;
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<PAGE> 37
- The potential reaction of American Bankers' producers and reinsurers to
Cendant; and
- The potential volatility of the Cendant common stock.
On February 6, 1998, American Bankers filed with the Commission a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Cendant Schedule
14D-9") disclosing such determination and reasons.
On February 5, 1998, at its meeting the American Bankers Board also
unanimously approved an amendment to the Rights Agreement (as defined below)
which provided that the American Bankers Board may extend a Distribution Date
(as defined in the Rights Agreement) and consequently the time in which the
rights contemplated by the Rights Agreement become exercisable under the terms
of the Rights Agreement beyond the dates set forth in the Rights Agreement, upon
approval of a majority of the Continuing Directors (as defined in the Rights
Agreement). In addition, pursuant to the Rights Agreement, as so amended, the
American Bankers Board resolved that a Distribution Date would not occur as a
result of the Cendant Offer until such date as may be determined by action of
the American Bankers Board in accordance with the terms of the Rights Agreement,
as amended.
On February 19, 1998, the American Bankers Board met and approved another
amendment to the Rights Agreement which clarified that although, pursuant to the
Rights Agreement, as it has been amended, AIG, AIGF or their affiliates will not
be deemed to be an Acquiring Person (as defined in the Rights Agreement) solely
by reason of the execution, delivery or consummation of the transactions
contemplated by the Original Merger Agreement, the Original Stock Option
Agreement and the Voting Agreement, any acquisition of shares of Common Stock by
AIG, AIGF or any of their affiliates other than pursuant to the Original Merger
Agreement, the Original Stock Option Agreement, and the Voting Agreement would
cause such entity to become an Acquiring Person (as defined in the Rights
Agreement).
The Rights Agreement expired in accordance with its terms on March 10,
1998. At its meeting on February 19, 1998, the American Bankers Board also
approved and adopted a new shareholders rights plan (the "New Rights Agreement")
in which preferred stock purchase rights ("New Rights") will be distributed as a
dividend at a rate of one New Right for each share of Common Stock held by
shareholders of record on the close of business on March 10, 1998. The New
Rights Agreement is substantially identical to the existing Rights Agreement, as
it has been amended, except the exercise price has been set at $75 and the
expiration date is March 10, 2003.
On February 24, 1998, American Bankers submitted to the Florida Department
of Insurance a letter which raised questions and solicited information from
Cendant in connection with Cendant's application before the Florida Department
of Insurance to acquire control of American Bankers' Florida insurance
subsidiaries. Copies of the letter were also sent to the Insurance Departments
of the states of Arizona, Georgia, New York, South Carolina and Texas.
During the last week in February representatives of Goldman Sachs and
Sullivan & Cromwell contacted representatives of Salomon Smith Barney and Dewey
Ballantine LLP regarding a proposal from AIG to enter into a revised transaction
between AIG and American Bankers in which, among other things, the merger
consideration would be raised. Over the next several days the terms of the
Merger Agreement, including the amount of consideration to be received per share
of Common Stock, and Stock Option Agreement were negotiated. In addition, AIG
and American Bankers agreed to delete the provision of the Original Merger
Agreement which had prevented American Bankers, until April 20, 1998, from
providing information to or engaging in negotiations or discussions with another
person, and from recommending another Acquisition Proposal (as defined in the
Original Merger Agreement) to the shareholders of American Bankers. On February
26, 1998, the Executive Committee of the AIG Board approved the transactions
contemplated by the Merger Agreement and the Stock Option Agreement.
On February 27, 1998, the American Bankers Board met to discuss the revised
proposal from AIG. Dewey Ballantine LLP again reviewed for the American Bankers
Board its fiduciary duties and described the principal terms of the Merger
Agreement and Stock Option Agreement that had been amended from the Original
Merger Agreement and Original Stock Option Agreement. Salomon Smith Barney
presented its fairness opinion regarding the new AIG proposal. Thereafter,
following a discussion and deliberation by the
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<PAGE> 38
American Bankers Board, the American Bankers Board unanimously determined that
the Merger is fair to, and in the best interest of, American Bankers
shareholders (including holders of Preferred Stock and Common Stock).
Accordingly, the American Bankers Board unanimously approved the Merger
Agreement and the Stock Option Agreement and the Merger and resolved unanimously
to recommend that shareholders of American Bankers (including holders of
Preferred Stock and Common Stock) vote for the approval and adoption of the
Merger Agreement and the Merger.
In addition, at that meeting, the American Bankers Board determined to
postpone the Preferred Shareholders Special Meeting and the Common Shareholders
Special Meeting until March 25, 1998 and March 27, 1998, respectively, to permit
additional time to distribute this Proxy Statement/Prospectus to shareholders of
American Bankers.
On February 28, 1998, the Merger Agreement and Stock Option Agreement were
executed by American Bankers and AIG. For a detailed summary of the Merger
Agreement and the Stock Option Agreement, see "The Merger Agreement" and
"Related Agreements and Transaction -- Stock Option Agreement"
On March 2, 1998, American Bankers received from Cendant a request for
certain documents and information. On March 4, 1998, American Bankers entered
into a confidentiality agreement with Cendant, which contains terms
substantially equivalent to the terms contained in the confidentiality agreement
entered into with AIG.
PROJECTIONS
As part of its due diligence review of American Bankers, on May 22, 1997,
AIG received from American Bankers certain non-public information. The
non-public information included, among other things, American Bankers'
projections of the financial condition and results of operations for American
Bankers for the years 1997 through 2001 (the "May Projections"). The May
Projections did not include the impact of any possible synergies or expense
savings which might be realized in connection with the Merger.
The following table sets forth certain information contained in the May
Projections.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1997 1998 1999 2000 2001
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue...................... $1,708,229 $1,918,836 $2,199,299 $2,531,388 $2,926,727
Net Income................... 109,785 121,934 142,570 168,306 200,271
</TABLE>
In December 1997, in connection with its consideration of the original
proposed merger, management of American Bankers prepared revised projections of
American Bankers' financial condition and results of operations for the
five-year period (the "December Projections", and collectively with the May
Projections, the "Projections") that differ from the May Projections primarily
in that they reflect lower estimated revenue and net income for the years in the
period following 1999 as a result of management's using different assumptions
regarding the prospects for revenue growth for those years. The December
Projections were prepared in response to hypothetical questions from members of
the American Bankers Board concerning the prospects of American Bankers assuming
slower growth than American Bankers had historically achieved. The December
Projections were not provided to AIG, but were provided to Salomon Smith Barney
in connection with the preparation of its fairness opinion dated December 21,
1997.
The following table sets forth certain information contained in the
December Projections.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1997 1998 1999 2000 2001
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue...................... $1,676,272 $1,805,348 $1,977,735 $2,135,418 $2,306,112
Net Income................... 108,246 124,417 138,475 152,484 167,666
</TABLE>
American Bankers has advised AIG that it does not as a matter of course
disclose its internal projections. The Projections were not prepared with a view
to public disclosure or compliance with published guidelines of
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<PAGE> 39
the Commission or the American Institute of Certified Public Accountants for
prospective financial information. The inclusion of information from the
Projections in this Proxy Statement/Prospectus should not be regarded as an
indication that American Bankers, AIG or their respective financial advisors or
their respective officers and directors consider such information to be accurate
or reliable and none of such persons assumes any responsibility for the accuracy
thereof. The Projections included in this Proxy Statement/ Prospectus have been
prepared by, and are the responsibility of, American Bankers' management. Price
Waterhouse LLP has neither examined nor compiled these Projections, and
accordingly, Price Waterhouse LLP does not express an opinion or any other form
of assurance with respect thereto. The Price Waterhouse LLP report incorporated
by reference in this Proxy Statement/Prospectus relates to the American Bankers
historical financial data. It does not extend to the Projections and should not
be read to do so. The Projections were prepared for internal use and capital
budgeting and other management decision-making purposes and are subjective in
many respects and thus susceptible to various interpretations and periodic
revision based upon actual experience and business development. In addition,
because the assumptions underlying the Projections are inherently subject to
significant economic and competitive uncertainties and contingencies, which are
difficult or impossible to predict accurately and are beyond the control of
American Bankers and AIG, there can be no assurance that the results
contemplated by the Projections set forth above will be realized. Accordingly,
there may be differences between actual results and the results contemplated by
the Projections, and actual results may be materially higher or lower than those
set forth above.
REASONS FOR THE MERGER; RECOMMENDATION OF THE AMERICAN BANKERS BOARD
In reaching its determination to recommend approval and adoption of the
Original Merger Agreement and the merger proposed thereby, the American Bankers
Board consulted with American Bankers management, as well as Dewey Ballantine
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 proposed 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 dominant 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) Potential Synergies. The American Bankers Board considered that
a combination with AIG would allow access to AIG's considerable
international experience and substantial resources, at a time of industry
consolidation, which would enable American Bankers to expand beyond the
domestic market. The American Bankers Board also considered that a
combination with AIG would allow American Bankers to enjoy opportunities
for operating efficiencies and synergies as a result of the proposed
merger, particularly in the international distribution of American Bankers'
products.
(iii) AIG's Business, Condition and Prospects. The American Bankers
Board considered information with respect to the financial condition,
results of operations and business of AIG. Management of American Bankers
and Salomon Smith Barney made presentations to and provided the American
Bankers Board with information regarding AIG's financial condition and
prospects after conducting due diligence with representatives of AIG.
Salomon Smith Barney also advised the American Bankers Board concerning
research analysts' views of AIG. In evaluating AIG's prospects, the
American Bankers Board considered, among other things, its international
experience and its depth of knowledge and experience in regulatory matters.
The American Bankers Board also considered that AIG's long-term debt rating
and
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<PAGE> 40
the claims paying ratings of AIG's insurance subsidiaries were
substantially higher than the comparable ratings of American Bankers. The
American Bankers Board believed that such higher long-term debt rating
would enable American Bankers to have access to capital on more favorable
terms and such higher claims-paying ratings would enhance sales of American
Bankers' insurance products.
(iv) Terms of the Proposed Merger. The American Bankers Board
considered the terms and provisions of the Original Merger Agreement, the
Original Stock Option Agreement and the Voting Agreement. The American
Bankers Board considered the fact that the terms of the proposed merger
permitted holders of Common Stock to continue to hold a common equity
interest in AIG following the proposed merger, thus enabling holders of
Common Stock to participate in the synergies expected to result from the
combination of the two companies. The American Bankers Board considered the
terms of the Original Merger Agreement that permitted 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 AIG pursuant to the termination fee and
the Original Stock Option Agreement was capped at $66 million. The American
Bankers Board found reasonable the views of Dewey Ballantine LLP and
Salomon Smith Barney that a $66 million termination fee was within the
range of fees payable in comparable transactions and that the fee, in
conjunction with the Original 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 exercise by AIG of
the option contemplated by the Original Stock Option Agreement would
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 AIG had stated that it would not enter into a
transaction which did not include provisions similar to the termination
fee, Original Stock Option Agreement and Voting Agreement. The American
Bankers Board also considered the fact that under the terms of the Original
Merger Agreement, the holders of Preferred Stock would receive AIG Series C
Preferred Stock with substantially similar terms as the Preferred Stock
(after making appropriate conversion adjustments), except that the AIG
Series C Preferred Stock would be convertible into shares of AIG Common
Stock. The American Bankers Board further considered that the proposed
merger (unless it was restructured as described below in "The Merger
Agreement -- Alternative Transaction Structure" following a failure of the
holders of Preferred Stock to approve the Original Merger Agreement and the
proposed merger) generally was not expected to result in federal income
taxes to the extent that holders of Common Stock receive AIG Common Stock
(although the Board did note that any cash received by holders of Common
Stock would be taxable to such holders, as described below in "The
Merger -- Certain Tax Consequences" to the extent of any gain that such
holders may have on their Common Stock). The American Bankers Board noted
the "cash election" feature of the proposed merger, which allowed, subject
to certain limitations, holders of Common Stock to elect to receive either
cash or shares of AIG Common Stock. Finally, the American Bankers Board
considered AIG's agreement to appoint all of the existing directors of
American Bankers to the Board of Directors of the Surviving Corporation
immediately following consummation of the proposed merger.
(v) Opinion of Salomon Smith Barney. The American Bankers Board
considered the oral opinion delivered on December 21, 1997 by Salomon Smith
Barney (which it subsequently confirmed by delivery of a written opinion
dated December 21, 1997) that as of the date of such opinion, and based
upon and subject to certain matters stated therein, the Common Stock merger
consideration that would have been payable in the proposed merger was fair,
from a financial point of view, to the holders of Common Stock and the
Preferred Stock merger consideration that would have been payable in the
proposed merger was 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."
(vi) 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 recent trading
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<PAGE> 41
activity of the Common Stock, and noted that the Common Stock was trading
in general in the period preceding the announcement of the proposed merger
at historically high levels. The American Bankers Board considered the fact
that the value to be received per share of Common Stock represented a
significant premium over the trading levels of the Common Stock during the
six-month period preceding the public announcement of the proposed merger.
The American Bankers Board also considered the fact that the Original
Merger Agreement fixed a value of $47.00 for each share of Common Stock
outstanding, so that holders of Common Stock were not at risk if the market
price of AIG Common Stock were to decline between the date of the Original
Merger Agreement and the Effective Time.
(vii) Countervailing Considerations. The American Bankers Board
considered certain factors that might be characterized as countervailing
factors, including:
(a) The fact that AIG's price/earnings ratio was at an historically
high level. The American Bankers Board noted that it might be
problematic for AIG to maintain this high level, and that if the high
level is not maintained by AIG, it is possible that the market price of
the AIG Common Stock could drop in the future from its current levels.
(b) The recent turmoil in the financial markets in Asia, which may
have a negative effect on the business of AIG and could have a negative
effect on the price of AIG Common Stock. In this regard the American
Bankers Board noted the large amount of business conducted in Asia by
AIG.
(c) The fact that under the terms of the Original Merger Agreement,
under certain circumstances described below in "The Merger Agreement," a
portion of the consideration paid to holders of Common Stock could be
paid in cash at the election of AIG, and that such cash consideration
would be taxable to the holders of Common Stock.
(d) The fact that, if the Original Merger Agreement and the merger
proposed thereby were not approved by the holders of Preferred Stock,
the Original Merger Agreement provided that the transaction would be
restructured, as described below in "The Merger Agreement -- Alternative
Transaction Structure," without any further action, including any action
by the American Bankers Board. In that regard, the American Bankers
Board noted that the transaction as restructured would not require the
approval of the holders of the Preferred Stock, but would still require
the approval of the holders of Common Stock. The American Bankers Board
further noted that the transaction as restructured would be taxable to
holders of Common Stock to the extent of any gain they may have on their
Common Stock, as described more fully below in "The Merger
Agreement -- Alternative Transaction Structure."
(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 proposed merger and the value which it
presented to holders of Preferred Stock and Common Stock.
In reaching its determination to recommend approval and adoption of the
Merger Agreement and the Merger, the American Bankers Board considered
essentially the same factors it considered in connection with its approval of
the Original Merger Agreement, including American Bankers' and AIG's businesses,
conditions and prospects as well as the potential synergies of the transaction.
The American Bankers Board also considered a number of additional factors
including the following:
(i) Terms of the Merger Agreement. The Board considered the terms of
the Merger Agreement and the Stock Option Agreement and the Merger. For a
detailed summary of the terms of the Merger Agreement and the Stock Option
Agreement, see "The Merger Agreement" and "Related Agreements and
Transactions -- Stock Option Agreement." The American Bankers Board
specifically considered the terms of the Merger Agreement and the Stock
Option Agreement that had been amended from the Original Merger Agreement
and the Original Stock Option Agreement including that:
- The value of the per share consideration that each holder of Common Stock
will be entitled to receive in the Merger was raised from $47 to $58.
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- In lieu of proceeding to acquire American Bankers by the contemplated
statutory merger, AIG, at its option, will be permitted to effect the
acquisition of American Bankers through a tender offer for at least $58
in cash followed by a second step merger between American Bankers and
AIGF in which American Bankers shareholders would receive, at AIG's
election, either cash or, if non-taxable, AIG Common Stock with a value
equal to the amount paid for each share of Common Stock in the tender
offer. See "The Merger Agreement -- Optional Tender Offer."
- If AIG consummates such a tender offer, AIG will be entitled to designate
two members of the American Bankers Board.
- The provision contained in the Original Merger Agreement which prohibited
American Bankers from providing information to third parties, engaging in
negotiations or discussions with third parties or recommending an
Acquisition Proposal (as defined in the Original Merger Agreement) to the
shareholders of American Bankers for a period of 120 days following the
execution of the Original Merger Agreement was eliminated.
- The provision contained in the Original Merger Agreement which prohibited
the American Bankers Board from terminating the Original Merger Agreement
in certain circumstances for a period of 180 days following the execution
of the Original Merger Agreement, was amended to reduce such period of
time to 150 days.
- The $66 million termination fee was increased to $81.5 million plus an
amount equal to AIG's expenses incurred in connection with the Merger
since January 27, 1998 up to a maximum of $5 million.
- The circumstances under which the Merger Agreement may be terminated and
in which such termination fee is payable by American Bankers were
amended. Such circumstances include AIG having commenced a tender offer
and such tender offer not having been consummated by the 60th day from
the date of commencement thereof.
- The maximum profit that AIG could obtain on its option pursuant to the
Stock Option Agreement was amended to be $100 million. Such amount would
still be reduced by the amount of any termination fee paid by American
Bankers under the Merger Agreement. The Stock Option Agreement also
provides that, at AIG's option, if the Merger Agreement is terminated at
a time when regulatory approval for AIG to consummate the purchase of the
Common Stock subject to the option has not yet been obtained, AIG's prior
exercise of such option may be settled in cash.
- In the event that AIG has exercised its option to commence a tender offer
(as described above), and in the event that another person has commenced
a tender offer to acquire at least 49.9% of the outstanding shares of
Common Stock for not less than $58 in cash per share and such person has
proposed to follow such tender offer with a second step merger in which
American Bankers shareholders would receive consideration with a value
equal to not less than the value paid by such person pursuant to the
tender offer, then American Bankers would be entitled to amend or modify
the Rights Agreement and the New Rights Agreement in a manner consistent
with the amendments made by American Bankers to the Rights Agreement with
respect to the Merger to exempt any such other person and such other
tender offer from causing the Rights and the New Rights to become
exercisable. In addition, in such event American Bankers would also be
entitled to grant such approvals and take such action to eliminate or
minimize the effect of any state anti-takeover statutes on such other
tender offer.
- AIG agreed to maintain the corporate headquarters of American Bankers in
Miami at its current location for the foreseeable future and, in any
event, for not less than 5 years following consummation of the Merger. In
addition, AIG agreed to ensure, to the extent within its reasonable
control, that the public school and day care facility operated on or
adjacent to American Bankers' headquarters in Miami will remain in
operation at their current locations for as long as the corporate
headquarters of American Bankers shall be maintained at its current
location.
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(ii) Opinion of Salomon Smith Barney. The American Bankers Board
considered the oral opinion delivered on February 27, 1998 by Salomon Smith
Barney (which it subsequently confirmed by delivery of a written opinion dated
February 27, 1998) that as of the date of such opinion, and based upon and
subject to certain matters stated therein, the Revised Common Stock
Consideration (as defined in such opinion) was fair, from a financial point of
view, to the holders of Common Stock and the Revised Preferred Stock Merger
Consideration (as defined in such opinion) was fair, from a financial point of
view, to the holders of Preferred Stock. The American Bankers Board also
considered the oral presentation made to it by Salomon Smith Barney. See "The
Merger -- Opinion of American Bankers' Financial Advisor." A copy of Salomon
Smith Barney's written opinion to the American Bankers Board, dated February 27,
1998, which sets forth the assumptions made, matters considered and limitations
on the review undertaken, is attached as Appendix IV to this Proxy
Statement/Prospectus and is incorporated herein by reference.
THE AMERICAN BANKERS BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT,
HAS DETERMINED THAT THE MERGER IS FAIR TO, 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 December 21, 1997, at a meeting
of the American Bankers Board held to evaluate the merger contemplated by the
Original Merger Agreement, Salomon Smith Barney delivered an oral opinion
(subsequently confirmed by delivery of a written opinion dated December 21,
1997) 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 merger consideration that would have been payable in the proposed merger
was fair, from a financial point of view, to the holders of Common Stock, and
the Preferred Stock merger consideration that would have been payable in the
proposed merger was fair, from a financial point of view, to the holders of
Preferred Stock. On February 27, 1998, at a meeting of the American Bankers
Board to evaluate the Merger, Salomon Smith Barney delivered an oral opinion
(subsequently confirmed by delivery of a written opinion dated February 27,
1998) 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
Revised Common Stock Consideration was fair, from a financial point of view, to
the holders of Common Stock, and the Revised Preferred Stock Merger
Consideration was fair, from a financial point of view, to the holders of
Preferred Stock.
In arriving at its opinion dated February 27, 1998, 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 and certain senior officers and other representatives and advisors of
AIG concerning the businesses, operations and prospects of American Bankers and
AIG. Salomon Smith Barney examined certain publicly available business and
financial information relating to American Bankers and AIG as well as certain
financial forecasts for American Bankers (including both the May Projections and
the December Projections) and other information and data for American Bankers
and AIG which were provided to or otherwise discussed with Salomon Smith Barney
by the respective managements of American Bankers and AIG, including information
relating to certain strategic implications and operational benefits anticipated
to result from the Merger. 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 and AIG Common Stock; (ii) the historical and projected earnings
and other operating data of American Bankers and AIG; and (iii) the
capitalization and financial condition of American Bankers and AIG. Salomon
Smith Barney also considered, to the extent publicly available, the financial
terms of
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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 the businesses
of other companies whose operations Salomon Smith Barney considered relevant in
evaluating those of American Bankers and AIG. Salomon Smith Barney also
evaluated the potential pro forma financial impact of the Merger on AIG. 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 dated February 27, 1998, 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 and the strategic implications and operational benefits
anticipated to result from the Merger. Salomon Smith Barney's opinion, as set
forth therein, relates to the relative values of American Bankers and AIG.
Salomon Smith Barney did not express any opinion as to what the value of the AIG
Common Stock or AIG Series C Preferred Stock actually will be when issued
pursuant to the Merger or the price at which the AIG Common Stock or AIG Series
C Preferred Stock will trade subsequent to the consummation of the Merger.
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 or AIG nor did Salomon Smith Barney make any physical
inspection of the properties or assets of American Bankers or AIG. Salomon Smith
Barney was not requested to and did not approach third parties or hold
discussions with third parties to solicit indications of interest in the
possible acquisition of American Bankers. 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.
As noted above, in arriving at its opinions dated December 21, 1997 and
February 27, 1998 to the American Bankers Board, Salomon Smith Barney reviewed
and considered many things, including both the May Projections and the December
Projections. Salomon Smith Barney used the December Projections in performing
the material financial analyses summarized below because the December
Projections, which were prepared more than six months after the May Projections,
reflected management's then current best estimates and judgments as to American
Banker's future financial performance. Salomon Smith Barney has informed
American Bankers that Salomon Smith Barney would have delivered its opinions to
the American Bankers Board if it had used the May Projections rather than the
December Projections in performing those analyses. In determining that it would
have delivered those opinions to the American Bankers Board if it had used the
May Projections in performing those analyses, Salomon Smith Barney assessed the
cumulative affect of using the May Projections on all of its analyses and
concluded that any variation would not have affected its overall conclusion as
to fairness.
In preparing its opinion dated February 27, 1998 to the American Bankers
Board, Salomon Smith Barney performed a variety of financial and comparative
analyses, including those described below performed by Salomon Smith Barney in
connection with its opinion dated December 21, 1997. The summary of such
analyses 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
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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, AIG,
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of American
Bankers and AIG. 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 businesses or
securities actually may be sold. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty. Salomon Smith Barney's opinion
dated February 27, 1998 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.
In connection with its opinion dated February 27, 1998, Salomon Smith
Barney updated certain of the analyses it performed in preparing its opinion
dated December 21, 1997, and reviewed the assumptions on which such analyses
were based and the factors considered in such analyses. The following is a
summary of the material financial analyses performed by Salomon Smith Barney in
connection with its opinion dated December 21, 1997. In addition, to the extent
Salomon Smith Barney updated any of these material financial analyses in
connection with its opinion dated February 27, 1998, the following summarizes
such updated analyses.
Selected Insurance Transactions Analysis. Using publicly available
information, Salomon Smith Barney analyzed the purchase price and implied
transaction multiples paid in eight selected transactions in the insurance
industry consisting of (target/acquiror): CapMAC Holdings, Inc./MBIA Inc., Omni
Insurance Group/The Hartford Financial Services Group, Inc., Titan Holdings
Inc./USF&G Corporation, Colonial Penn Group Inc./GE Capital Corp., American
States Financial Corp./Safeco Corp., Johnson & Higgins/Marsh & McLennan
Companies, Inc., AVEMCO Corporation/HCC Insurance Holdings, Inc. and Alexander &
Alexander Services Inc./Aon Corporation (collectively, the "Selected
Transactions"). Salomon Smith Barney compared the purchase prices in such
transactions as multiples of, among other things, net income for the last 12
months computed in accordance with generally accepted accounting principles
("GAAP"), estimated GAAP net income for the next year and 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. Applying
a range of selected multiples for the Selected Transactions of GAAP net income
for the last 12 months, estimated GAAP net income for the next year and most
recent book value of 16.0x to 21.0x, 15.0x to 19.0x and 2.20x to 2.90x,
respectively, to corresponding financial data for American Bankers resulted in
an average equity reference range for American Bankers of approximately $40.35
to $48.82 per share on a fully diluted basis.
Selected Public Company Analysis. Using publicly available information,
Salomon Smith Barney analyzed, among other things, the market values and trading
multiples of American Bankers, AIG and eight selected publicly traded property
and casualty insurance companies, consisting of: Allstate Corp., General Re
Corp., HCC Insurance Holdings, Inc., MBIA Inc., Markel Corp., MGIC Investment
Corp., Progressive Corp. and Vesta Insurance Group Inc. (collectively, the
"Selected Companies"). Salomon Smith Barney compared, among other things, market
values of the Selected Companies as multiples of, among other things, estimated
calendar 1997 and calendar 1998 net operating income computed in accordance with
GAAP, and GAAP book value as of September 30, 1997. Net income projections for
the Selected Companies, American Bankers and AIG were based on estimates of
selected investment banking firms. All multiples were based on closing stock
prices as of December 19, 1997. Applying a range of selected multiples for the
Selected Companies of estimated calendar 1997 and 1998 GAAP net operating income
and GAAP book value as of September 30, 1997, of 18.0x to 22.0x, 16.0x to 19.0x
and 2.20x to 3.00x, respectively, to corresponding financial data of American
Bankers resulted in equity reference ranges for American Bankers of
approximately $42.46 to $49.88 per share on a fully diluted basis. In connection
with its opinion dated February 27, 1998, Salomon Smith Barney updated the
Selected Companies analysis based on closing stock prices of the Selected
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Companies as of February 26, 1998. It compared the market values for the
Selected Companies based on such stock prices as multiples of, among other
things, estimated calendar 1997 and 1998 GAAP net operating income and GAAP book
value as of September 30, 1997. Applying a range of selected multiples for the
Selected Companies of estimated calendar 1997 and 1998 GAAP net operating income
and GAAP book value as of September 30, 1997, of 18.0x to 22.5x, 16.0x to 20.0x
and 2.50x to 3.25x, respectively, to corresponding financial data of American
Bankers resulted in equity reference ranges for American Bankers of
approximately $42.46 to $51.47 per share on a fully 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
Companies with that of American Bankers.
No transaction, company or business used as a comparison in the "Selected
Insurance Transactions Analysis" or "Selected Public Company Analysis" is
identical to American Bankers, AIG 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 Transactions, Selected Companies
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 net income of American Bankers
for fiscal years 1998 through 2002, 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 15.0x to 17.0x to American Bankers' projected
2003 net income, representing American Bankers' estimated value at December 31,
2002. The terminal value of American Bankers and projected dividendable net
income of American Bankers for the five-year period were discounted to December
31, 1997 using rates ranging from 11% to 15%. This analysis resulted in an
equity reference range for American Bankers of approximately $33.30 to $44.17
per share on a fully diluted basis.
Pro Forma Merger Analysis. Salomon Smith Barney analyzed certain pro forma
effects resulting from the Merger, including, among other things, the impact of
the Merger on the projected earnings per share ("EPS") of AIG for the fiscal
years ending 1998 through 2002, based on internal estimates of the management of
American Bankers and estimates of selected investment banking firms. The results
of the pro forma merger analysis suggested that the Merger could be accretive to
AIG's EPS in each of the fiscal years analyzed. The actual results achieved by
AIG following the Merger may vary from projected results and the variations may
be material.
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 and AIG; (ii) the
history of trading prices and volume for the Common Stock and AIG Common Stock;
(iii) premiums paid in selected stock-for-stock transactions in the insurance
industry; and (iv) the pro forma ownership of the combined company.
Pursuant to the terms of Salomon Smith Barney's engagement, American
Bankers has agreed to pay Salomon Smith Barney for its services in connection
with the Merger: (i) a retainer fee (the "Retainer Fee") of $100,000, which has
been paid; and (ii) an additional fee of $1,000,000 (an "Opinion Fee"), which
becomes payable upon delivery by Salomon Smith Barney of an opinion (whether
oral or written, as requested by American Bankers) to the American Bankers Board
as to whether the consideration to be received by American Bankers or its
shareholders, as the case may be, in connection with either the transaction
contemplated by the Merger Agreement or the Cendant Offer or a similar
transaction with a party other than AIG or Cendant (each, a "Transaction") is
fair to American Bankers or such shareholders from a financial point of view
(provided, however, that the aggregate Opinion Fees payable shall not exceed
$2,000,000). Aggregate Opinion Fees of $2,000,000 have become payable for the
opinions of Salomon Smith Barney delivered on December 21, 1997 and February 27,
1998, of which $1,000,000 has been paid. 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
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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 this 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 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 AIG 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 AIG unrelated to the
Merger, for which services Salomon Smith Barney has received compensation. In
addition, Salomon Smith Barney and its affiliates (including Travelers Group
Inc. and its affiliates) may maintain relationships with American Bankers and
AIG.
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 FEBRUARY
27, 1998, 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. SALOMON SMITH BARNEY HAS CONSENTED TO THE USE
OF ITS OPINION IN THIS PROXY STATEMENT/PROSPECTUS. 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 REVISED COMMON STOCK CONSIDERATION AND
REVISED PREFERRED STOCK MERGER 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 MEETINGS OR AS TO WHETHER ANY HOLDER OF COMMON STOCK SHOULD
ELECT TO RECEIVE CASH OR AIG COMMON STOCK PURSUANT TO THE MERGER. THE SUMMARY OF
THE OPINION OF SALOMON SMITH BARNEY SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following summary discusses the material federal income tax
consequences of the Merger. The summary is based upon the Internal Revenue Code
of 1986, as amended (the "Code"), applicable Treasury regulations thereunder and
administrative rulings and judicial authority as of the date hereof. All of the
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foregoing are subject to change, possibly with retroactive effect, and any such
change could affect the continuing validity of the discussion. The discussion
assumes that holders of shares of Common Stock and Preferred Stock hold such
shares as capital assets. Further, the 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, such as dealers in securities,
banks, insurance companies, tax-exempt organizations, non-United States persons,
shareholders who acquired shares of Common Stock or Preferred Stock through the
exercise of options, grants of performance shares under American Bankers'
equity-based compensation plans or otherwise as compensation or through a
tax-qualified retirement plan or holders that actually or constructively own
more than 1% of the total outstanding common stock of AIG. This discussion does
not address any consequences arising under the laws of any state, locality or
foreign jurisdiction. Shareholders subject to such special treatment are urged
to consult their own federal income tax advisors.
Neither AIG nor American Bankers has requested a ruling from the Internal
Revenue Service (the "IRS") with regard to any of the federal income tax
consequences of the Merger and the opinions of counsel as to such federal income
tax consequences set forth below are not binding on the IRS.
This discussion assumes that the tender offer described below under "The
Merger Agreement -- Optional Tender Offer" will not be commenced. If, however,
the tender offer is commenced and consummated, the federal income tax
consequences of the Merger may differ from those described in this discussion.
In that case, the federal income tax consequences to all American Bankers'
shareholders, not merely those that tender their shares of Common Stock in the
tender offer, would be affected. Therefore, if the tender offer is commenced,
all American Bankers' shareholders should carefully review the discussion of the
federal income tax consequences of the tender offer and any second step merger
that will be included in the tender offer materials.
(i) General. It is intended that the Merger constitute a "reorganization"
pursuant to Section 368(a) of the Code, unless the Merger is restructured as
described below under "The Merger Agreement -- Alternative Transaction
Structure". If the Merger is not so restructured, the respective obligations of
the parties to consummate the Merger are conditioned on (a) the receipt by AIG,
prior to the effective date of the Registration Statement, of an opinion of
Sullivan & Cromwell to the effect that the Merger will qualify as a
"reorganization" within the meaning of Section 368(a) of the Code and that each
of AIG, American Bankers and AIGF will be a party to the "reorganization" within
the meaning of Section 368(b) of the Code, (b) the reconfirmation of such
opinion by Sullivan & Cromwell as of the Closing Date, (c) the receipt by
American Bankers, prior to the effective date of the Registration Statement, of
an opinion of Jorden Burt Boros Cicchetti Berenson & Johnson LLP to the effect
that the Merger will qualify as a "reorganization" within the meaning of Section
368(a) of the Code and that each of AIG, American Bankers and AIGF will be a
party to the "reorganization" within the meaning of Section 368(b) of the Code,
and (d) the reconfirmation of such opinion by Jorden Burt Boros Cicchetti
Berenson & Johnson LLP as of the Closing Date. Such opinions will be based upon,
among other things (i) representations of American Bankers, AIG and certain
shareholders of American Bankers customarily given in transactions of this type
and (ii) the assumption that the Merger will be consummated in accordance with
the terms of the Merger Agreement and will not be restructured as described
below in "The Merger Agreement -- Alternative Transaction Structure". THE
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AS SO RESTRUCTURED WOULD DIFFER
MATERIALLY FROM THOSE DESCRIBED IN THIS DISCUSSION. SEE "THE MERGER
AGREEMENT -- ALTERNATIVE TRANSACTION STRUCTURE" FOR A DISCUSSION OF THE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AS SO RESTRUCTURED.
The discussion below summarizes the material federal income tax
consequences of the Merger, assuming that the Merger will qualify as a
"reorganization" within the meaning of Section 368(a) of the Code.
(ii) Consequences to Holders of Preferred Stock. No gain or loss will be
recognized by holders of Preferred Stock on the surrender of their shares of
Preferred Stock in exchange for shares of AIG Series C Preferred Stock pursuant
to the Merger. The aggregate tax basis of the shares of AIG Series C Preferred
Stock received in the Merger will be the same as the aggregate tax basis of the
shares of Preferred Stock surrendered in exchange therefor. The holding period
of the shares of AIG Series C Preferred Stock received will include the holding
period of shares of Preferred Stock surrendered in exchange therefor.
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(iii) Consequences to Holders of Common Stock.
(a) Holders Receiving Only AIG Common Stock. No gain or loss will be
recognized by a holder of Common Stock as a result of the surrender of
shares of Common Stock in exchange for shares of AIG Common Stock pursuant
to the Merger, if such holder receives no cash pursuant to the Merger
(except as discussed below with respect to cash received in lieu of
fractional shares of AIG Common Stock). The aggregate tax basis of the
shares of AIG Common Stock received in the Merger (including any fractional
shares of AIG Common Stock deemed received) will be the same as the
aggregate tax basis of the shares of Common Stock surrendered in exchange
therefor. The holding period of the shares of AIG Common Stock received
will include the holding period of shares of Common Stock surrendered in
exchange therefor.
(b) Holders Receiving Only Cash. A holder of Common Stock that is not
also a holder of Preferred Stock and that does not receive any AIG Common
Stock pursuant to the Merger will recognize gain or loss equal to the
difference between the amount of cash received and the holder's adjusted
tax basis in the shares of Common Stock exchanged in the Merger. Such gain
or loss will generally be a capital gain or loss, and will generally be a
long-term capital gain or loss to the extent that, at the Effective Time,
the holder has a holding period for federal income tax purposes in such
Common Stock of more than one year. For an individual holder, long-term
capital gain is generally subject to a maximum federal income tax rate of
28% in respect of property with a holding period of more than one year and
to a maximum rate of 20% in respect of property with a holding period of
more than 18 months.
(c) Holders Receiving Both Cash and AIG Common Stock or AIG Series C
Preferred Stock. If a holder of Common Stock receives both AIG Common
Stock and cash (other than cash in lieu of a fractional interest in AIG
Common Stock) in the Merger, or if a holder of Common Stock is also a
holder of Preferred Stock and receives cash (other than cash in lieu of a
fractional interest in AIG Common Stock) in the Merger, whether or not such
holder also receives AIG Common Stock in the Merger, such holder will
recognize gain equal to the lesser of (i) the amount of cash received
(other than cash in lieu of a fractional interest in AIG Common Stock) and
(ii) the amount by which the sum of the amount of cash received (other than
cash in lieu of a fractional interest in AIG Common Stock) and the value of
the AIG Common Stock received (including any fractional shares of AIG
Common Stock deemed received), determined as of the Effective Time, exceeds
the holder's adjusted tax basis in the shares of Common Stock exchanged in
the Merger. Such a holder will not recognize loss. Under Section 356 of the
Code, such gain will generally be capital gain unless the holder's exchange
of Common Stock for cash and AIG Common Stock "has the effect of the
distribution of a dividend" after giving effect to the constructive
ownership rules of the Code (which provide that a holder may be treated as
owning stock actually owned, and in some cases constructively owned, by
certain individuals or entities related to the holder and stock that the
holder had the right to acquire by the exercise of an option or conversion
right, including the conversion rights with respect to the Preferred Stock
and the AIG Series C Preferred Stock). Under these rules, a holder is
treated as exchanging all his Common Stock for AIG Common Stock and
receiving cash in redemption of a portion of such AIG Common Stock deemed
received. Such gain should generally be capital gain to a holder of Common
Stock that, following the Merger, actually or constructively owns only a
small percentage of the total outstanding AIG Common Stock. The capital
gain recognized will be long term capital gain to the extent that, at the
Effective Time, the holder has a holding period for federal income tax
purposes in the Common Stock exchanged in the Merger of more than one year.
For an individual holder, long-term capital gain is generally subject to a
maximum tax rate of 28% in respect of property with a holding period of
more than one year and to a maximum rate of 20% in respect of property with
a holding period of more than 18 months. The aggregate tax basis to such a
holder of the shares of AIG Common Stock received in the Merger (including
any fractional shares of AIG Common Stock deemed received) will be the same
as the aggregate tax basis of the shares of Common Stock surrendered in
exchange therefor in the Merger, increased by the amount of gain recognized
and reduced by the amount of cash received. The holding period of the
shares of AIG Common Stock received will include the holding period of
shares of Common Stock surrendered in exchange therefor.
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(d) Fractional Shares. If a holder of shares of Common Stock receives
cash in lieu of a fractional share interest in AIG Common Stock in the
Merger, such fractional share interest will be treated as having been
distributed to the holder, and such cash amount will be treated as received
in redemption of the fractional share interest. Under present IRS ruling
policy, the holder will generally recognize capital gain or loss equal to
the cash amount received for the fractional share of AIG Common Stock
reduced by the portion of the holder's tax basis in shares of Common Stock
surrendered that is allocable to the fractional share interest in AIG
Common Stock. The capital gain or loss will be long term capital gain or
loss if the holder's holding period in the fractional share interest for
federal income tax purposes is more than one year.
(e) Backup Withholding and Information Reporting. Payments of cash to
a holder surrendering shares of Common Stock will be subject to information
reporting and "backup" withholding (whether or not the holder also receives
AIG Common Stock) 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. See the Election Form and
Letter of Transmittal accompanying this Proxy Statement/Prospectus for a
discussion of the certification requirements to establish an exemption from
backup withholding. 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.
REQUIRED 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. AIG
and American Bankers each filed notification and report forms under the HSR Act
with the FTC and the Antitrust Division on January 20, 1998. The FTC granted
early termination of the waiting period under the HSR Act on January 30, 1998.
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 AIG or American Bankers. Such action could include seeking to enjoin
the consummation of the Merger or seeking divestiture of American Bankers or
businesses of AIG or American Bankers by AIG. Private parties may also seek to
take legal action under the antitrust laws under certain circumstances.
In addition, AIG has requested and has received an advance ruling
certificate under The Competition Act of Canada.
To the best of AIG's knowledge, Cendant has furnished information required
by the HSR Act and the Competition Act of Canada. To the best of AIG's
knowledge, Cendant's applicable waiting period pursuant to the HSR Act has
expired. To the best of AIG's knowledge, the Director of Investigation and
Research, under the Competition Act of Canada, has notified Cendant of his view
that there are not sufficient grounds to initiate proceedings with respect to
Cendant's offer and proposed merger.
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Insurance. The Merger is also subject to the receipt of necessary
approvals from various state and foreign insurance regulatory authorities. In
December 1997 and January 1998, AIG 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 six states and Puerto
Rico where such filings were required and made filings in various foreign
jurisdictions, and certain departments of insurance requested that AIG submit
additional information. AIG has submitted additional information to such
departments of insurance. In March 1998, AIG filed an Amendment No. 1 to its
Form A in the six states and Puerto Rico.
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 or merger described in a
Form A filing. As of the date hereof, hearings on AIG's Form A applications have
been scheduled by the Florida Department of Insurance for March 17 and 18, 1998,
and by the Arizona Department of Insurance for March 6, 1998, continued to March
26 and 27, 1998. No hearings in other states have yet been scheduled. In the
states that do not require a hearing prior to approval (New York and Texas), AIG
would be entitled to a hearing in the event the state insurance department
proposed not to grant the approval. As of the date hereof, no Form A approvals
have been obtained by AIG.
In February 1998, Cendant and Season, a wholly owned subsidiary of Cendant,
filed petitions in Florida, Arizona, New York, and South Carolina, respectively,
seeking to intervene in AIG's Form A proceedings and to consolidate AIG's Form A
proceedings with Cendant's Form A proceedings in such states. In Florida and New
York, Cendant and Season also requested that hearings be held on AIG's Form A
application and that the hearing not be scheduled before the American Bankers
shareholders voted on AIG's proposed acquisition of American Bankers. In
Arizona, Cendant and Season requested that the hearing on AIG's Form A
application in Arizona be deferred until after the American Bankers
shareholders' vote.
AIG opposed Cendant's and Season's petitions in Florida, and the Florida
Department of Insurance denied their request to consolidate review of AIG's Form
A application with Cendant's Form A application and initiated separate hearings
on AIG's and Cendant's Form A applications. The Florida Department of Insurance
granted petitions to intervene in AIG's proceeding filed by Cendant and Season,
American Bankers and certain of its subsidiaries, and certain American Bankers
shareholders.
Both the Arizona Department of Insurance and AIG opposed Cendant's and
Season's petition as to their requests to defer, consolidate and intervene in
the Arizona hearing, but did not oppose Cendant's and Season's participation as
"affected" persons in accordance with A.R.S. sec. 20-481.07. On February 25,
1998, Administrative Law Judge Lewis Kowal denied Cendant's and Season's
requests to defer, consolidate and intervene in AIG's Form A hearing, holding
that because they were not "parties" to the proceeding, Cendant and Season did
not have standing to request a continuance, consolidation or deferral of the
proceeding on AIG's Form A application.
AIG has opposed Cendant's and Season's petitions in New York and South
Carolina; the Departments of Insurance for New York and South Carolina,
respectively, have not yet rendered rulings with respect to such petitions.
In addition to the Form A filings, in January 1998 AIG 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 "Form
E") in 21 states where such filings were required. Similar information has also
been submitted in Arizona and Florida upon Departmental request. 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 applicable time periods
expired prior to the date hereof in 17 states and remain pending in the few
remaining states in which AIG submitted additional information pursuant to
Departmental request.
AIG expects to obtain all required regulatory approvals in March and April,
1998; however, certain of such approvals may be subject to appeal by Cendant or
other persons, which could have the effect of further
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delaying the consummation of the Merger. 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.
To the best of AIG's knowledge, Cendant and Season filed Form A
applications in six states and Puerto Rico on January 27, 1998. A hearing on
Cendant's Florida Form A application is scheduled for March 19 and 20, 1998, and
the Florida Department of Insurance granted petitions to intervene in Cendant's
proceeding filed by AIG, American Bankers, and certain of their subsidiaries. To
the best of AIG's knowledge, no state other than Florida has scheduled a hearing
on Cendant's Form A applications, and as of the date hereof, no Form A approvals
have been obtained by Cendant and Season. If Cendant and Season are able to
obtain insurance regulatory approvals, certain of such approvals may be subject
to appeal by AIG or other persons.
As discussed above in "The Merger -- Background of the Merger," on February
5, 1998, the American Bankers Board determined that it lacked information
regarding Cendant that the American Bankers Board expected would be disclosed in
the insurance regulatory process. On February 6, 1998, American Bankers
requested a hearing before the Florida Department of Insurance in connection
with Cendant's Form A application to obtain such information. More specifically,
the American Bankers Board's concerns included Cendant's relatively high level
of financial leverage which would be further increased by the indebtedness it
intends to incur to finance the Cendant Offer, Cendant's lack of experience in
owning and operating insurance companies, Cendant's proposed business plans for
American Bankers, and Cendant's plans with respect to intercompany transactions
with American Bankers' insurance subsidiaries involving intercompany royalties
and fees, as well as other factors. See "The Merger -- Background of the
Merger."
On February 12, 1998, AIG submitted a letter to the insurance commissioners
in six states, the American Bankers Board, and Cendant opposing the application
of Cendant to acquire control of American Bankers, expressing AIG's belief that
Cendant's acquisition of American Bankers would be extremely prejudicial to the
policyholders and financial strength of the American Bankers' insurance
subsidiaries and urging the insurance commissioners to investigate vigorously
the matters set forth in such letter to protect American Bankers' policyholders
and to disapprove Cendant's and Season's acquisition of American Bankers.
On February 24, 1998, American Bankers submitted a letter to the
Commissioner of the Florida Department of Insurance which raised questions and
solicited further information from Cendant in connection with its application to
acquire control of American Bankers' Florida insurance subsidiaries. Cendant has
responded to certain of such questions.
On February 12, 1998, Cendant announced that it had commenced distributing
proxy materials to American Bankers shareholders to solicit their vote against
the merger contemplated by the Original Merger Agreement. Under the insurance
holding company statutes in Florida, Arizona, Georgia, New York, South Carolina,
and Texas, respectively, no person may acquire control of a domestic insurer
unless the person has filed a Form A application and such application has
received the prior approval of the insurance commissioner; in the latter five
states "control" is presumed to exist if a person owns, controls, holds with the
power to vote or holds proxies representing 10% or more of the voting securities
of another person.
Accordingly, on February 13, 1998, AIG submitted letters to the insurance
commissioners in Arizona, Georgia, New York, South Carolina, and Texas,
respectively, expressing AIG's belief that Cendant's mailing of proxy
solicitation material to induce American Bankers' shareholders to furnish
officers of Cendant proxies to vote against the merger contemplated by the
Original Merger Agreement constituted an intentional violation of the respective
states' insurance holding company statutes by seeking to obtain proxies for more
than 10% of the Common Stock or the Preferred Stock without seeking the
requisite prior approval for holding or voting proxies as to 10% or more of such
shares (when aggregated with Cendant's existing ownership of such shares). AIG
requested that the respective insurance departments take all appropriate
regulatory action to prevent Cendant from holding or voting proxies in
connection with the Special Meetings to consider the merger contemplated by the
Original Merger Agreement in such amount as would equal or exceed the 10%
threshold (when aggregated with Cendant's existing ownership interests) because
Cendant has not been approved as a "controlling" person of American Bankers. In
addition, AIG expressed its belief that Cendant's willful violation of the
respective states' insurance holding company statutes was, in itself, sufficient
grounds to deny Cendant's application to acquire control of American Bankers. As
discussed below in "-- Litigation,"
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AIG has also brought suit against Cendant and Season based on the aforesaid
mailing of proxy solicitation material. Cendant has responded to and disputed
such allegations.
On February 19, 1998, the Arizona Attorney General's office advised Cendant
that it would be in violation of Arizona law if, without receiving prior Form A
approval, it proceeded to vote proxies being solicited by Cendant with regard to
the merger contemplated by the Original Merger Agreement upon obtaining proxies
which provided it with the power to vote 10% or more of American Bankers' voting
stock; the Arizona Attorney General's office also advised that such failure to
obtain prior approval would, inter alia, constitute a Class I misdemeanor. One
day later, Cendant submitted a letter in response to the Attorney General's
office's advisory letter, and by letter to Cendant dated February 23, 1998, the
Attorney General's office advised, inter alia, that it would reconsider its
position prior to deciding whether to take any action. Cendant also has made
submissions to certain insurance departments expressing its belief that AIG has
violated "control" provisions in certain state insurance holding company
statutes, and AIG has responded to and disputed such allegations.
LITIGATION
Cendant, et al. v. American Bankers, et al.
On January 27, 1998, Cendant and Season filed a complaint against American
Bankers, members of the American Bankers Board, AIG and AIGF in the United
States District Court for the Southern District of Florida. The complaint
alleged that the directors of American Bankers breached their fiduciary duties
by agreeing to the merger contemplated by the Original Merger Agreement, the
Original Stock Option Agreement, the 120 day so-called "No-Shop" provision, the
180-day non-termination provision, the $66 million termination fee, the Voting
Agreement, and by exempting the merger contemplated by the Original Merger
Agreement from the provisions of the Rights Agreement. The complaint further
alleges that AIG and AIGF conspired with the American Bankers Board in the
breach of their fiduciary duties, and that AIG violated Section 13(d) of the
Exchange Act, by failing to disclose in the Schedule 13D that it filed with the
Commission on January 16, 1998 that AIG's Chairman and Chief Executive Officer
was a "controlling person" of AIG. The complaint sought, among other things,
preliminary and permanent injunctive relief enjoining implementation or
effectuation of the Original Merger Agreement unless and until the conduct
alleged to constitute the breaches of fiduciary duties is remedied.
On February 2, 1998, Cendant and Season filed an amended complaint
asserting all of the claims in the original complaint and new claims that
American Bankers and AIG violated Sections 14(a) and 14(e) of the Exchange Act
by making materially false and misleading statements in the Original Proxy
Statement/ Prospectus.
On February 3, 1998, AIG moved to dismiss the amended complaint for failure
to state a claim. On February 9, 1998, American Bankers and members of the
American Bankers Board moved to dismiss the amended complaint for failure to
state a claim and for failure to comply with Rule 23.1 of the Federal Rules of
Civil Procedure. AIGF joined in the motions to dismiss. The court has not yet
ruled on the motions to dismiss.
American International Group, Inc., et al. v. Cendant, et al.
On February 5, 1998, AIG and AIGF filed a complaint against Cendant and
Season in the United States District Court for the Southern District of Florida
alleging that defendants had violated Sections 14(a) and 14(e) of the Exchange
Act by making materially false and misleading statements to American Bankers'
shareholders about the Cendant proposal to acquire American Bankers and by
touting the alleged superiority of the Cendant proposal without filing a
registration statement as required by Section 5 of the Securities Act of 1933.
The complaint sought, among other things, preliminary and permanent injunctive
relief requiring Cendant to make prompt corrective disclosures and prohibiting
Cendant from making any statements about the merger contemplated by the Original
Merger Agreement or the Cendant proposal until Cendant filed a registration
statement with the Commission and delivered a prospectus to American Bankers'
shareholders. On February 13, 1998, Cendant and Season filed a motion to dismiss
the complaint for failure to state a claim.
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On February 20, 1998, Cendant filed with the Commission a registration
statement, although the prospectus included in such registration statement has
not been distributed to the shareholders of American Bankers.
On February 17, 1998, AIG filed an amended complaint asserting all of the
claims in the original complaint and adding claims that Cendant and Season had
violated Sections 14(a) and 14(e) of the Exchange Act by failing to disclose to
American Bankers' shareholders that under the laws of five of the six states in
which the insurance subsidiaries of American Bankers are domiciled, Cendant
cannot solicit proxies in excess of 10% of the outstanding shares of Common
Stock without first obtaining regulatory approval from the state insurance
departments.
On February 17, 1998, AIG also moved for a preliminary injunction seeking,
among other things, to enjoin Cendant and Season (i) from soliciting, holding or
voting any proxies from American Bankers' shareholders in excess of 10% of the
outstanding shares of Common Stock without first obtaining approval from the
state insurance departments and (ii) from making any statement about their
proposal to acquire American Bankers or the merger contemplated by the Original
Merger Agreement until they file a registration statement and deliver a
prospectus to American Bankers' shareholders. On February 18, 1998, Cendant and
Season moved to dismiss the amended complaint for failure to state a claim. The
court has not yet issued an order on any of the pending motions.
Goodman v. American Bankers Insurance Group, Inc., et al.
On or about January 27, 1998, a putative class action complaint, on behalf
of the American Bankers' shareholders, was filed in the Circuit Court of the
Eleventh Judicial District in and for Dade County Florida against American
Bankers, the members of the American Bankers Board, and AIG (the "Goodman State
Court Action"). The complaint in the Goodman State Court Action alleges that the
directors of American Bankers breached their fiduciary duties by agreeing to the
merger contemplated by the Original Merger Agreement, the Original Stock Option
Agreement, the 120 day so-called "No-Shop" provision, the $66 million
termination fee, the Voting Agreement, and by failing to maximize shareholder
value. The complaint further alleges that American Bankers and AIG aided and
abetted the directors of American Bankers in the breach of their fiduciary
duties. The complaint seeks declaratory and injunctive relief, as well as
unspecified damages and attorneys' fees.
On or about January 28, 1998, a putative class action complaint, on behalf
of the American Bankers' shareholders, was filed in the United States District
Court for the Southern District of Florida against American Bankers, the members
of the American Bankers Board, and AIG (the "Goodman Federal Court Action"). The
complaint in the Goodman Federal Court Action alleged that the directors of
American Bankers breached their fiduciary duties by agreeing to the merger
contemplated by the Original Merger Agreement, the Original Stock Option
Agreement, the 120 day so-called "No-Shop" provision, the 180-day
non-termination provision, the $66 million termination fee, and by exempting the
merger contemplated by the Original Merger Agreement from the provisions of the
Rights Agreement. The complaint further alleged that AIG aided and abetted the
directors of American Bankers in the breach of their fiduciary duties, and that
AIG violated Section 13(d) of the Exchange Act, by failing to disclose in the
Schedule 13D that it filed with the Commission on January 16, 1998 that AIG's
Chairman and Chief Executive Officer was a "controlling person" of AIG. The
complaint sought declaratory and injunctive relief including an order requiring
defendants to make corrective disclosure and enjoining the consummation of the
merger, as well as unspecified damages and attorneys' fees.
On February 17, 1998, the plaintiff in the Goodman Federal Court Action
filed an amended complaint asserting all of the claims in the original complaint
and new claims that American Bankers and AIG violated Sections 14(a) and 14(e)
of the Exchange Act by making materially false and misleading statements in the
Original Proxy Statement/Prospectus. The amended complaint seeks substantially
the same relief as the original complaint.
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Lopate v. Landon, et al.
On or about January 28, 1998, a putative class action complaint, on behalf
of the American Bankers' shareholders, was filed in the United States District
Court for the Southern District of Florida against American Bankers, the members
of the board of directors of American Bankers (except Jack Kemp), AIG and AIGF.
The complaint alleged that the American Bankers Board (except Jack Kemp)
breached their fiduciary duties by agreeing to the merger contemplated by the
Original Merger Agreement, the Original Stock Option Agreement, the 120 day
so-called "No-Shop" provision, the $66 million termination fee, the Voting
Agreement, and by failing to maximize shareholder value. The complaint further
alleged that AIG, AIGF and American Bankers aided and abetted the directors of
American Bankers in the breach of their fiduciary duties, and that AIG violated
Section 13(d) of the Exchange Act, by failing to disclose in the Schedule 13D
that it filed with the Commission on January 16, 1998 that AIG's Chairman and
Chief Executive Officer was a "controlling person" of AIG. The complaint sought
declaratory and injunctive relief including an order requiring defendants to
make corrective disclosure, enjoining the consummation of the merger
contemplated by the Original Merger Agreement, and voiding the Original Merger
Agreement, as well as unspecified damages and attorneys' fees.
On February 9, 1998, the plaintiffs filed an amended complaint asserting
all of the claims in the original complaint and new claims that American Bankers
and AIG violated Sections 14(a) and 14(e) of the Exchange Act by making
materially false and misleading statements in the Original Proxy Statement/
Prospectus. The amended complaint dropped the claim that AIG violated Section
13(d) of the Exchange Act. The amended complaint seeks substantially the same
relief as the original complaint.
Bildstein v. American Bankers Insurance Group, Inc., et al.
On or about February 2, 1998, a putative class action complaint, on behalf
of the American Bankers' shareholders, was filed in the United States District
Court for the Southern District of Florida against American Bankers, the members
of the American Bankers Board and AIG. The complaint alleged that the directors
of American Bankers breached their fiduciary duties by agreeing to the merger
contemplated by the Original Merger Agreement, the Original Stock Option
Agreement, the 120 day so-called "No-Shop" provision, the 180-day
non-termination provision, the $66 million termination fee, the Voting
Agreement, and by exempting the merger contemplated by the Original Merger
Agreement from the provisions of the Rights Agreement. The complaint further
alleges that AIG aided and abetted the directors of American Bankers in the
breach of their fiduciary duties, and that AIG violated Section 13(d) of the
Exchange Act, by failing to disclose in the Schedule 13D that it filed with the
Commission on January 16, 1998 that AIG's Chairman and Chief Executive Officer
was a "controlling person" of AIG. The complaint seeks declaratory and
injunctive relief including an order requiring defendants to make corrective
disclosure and enjoining the consummation of the merger contemplated by the
Original Merger Agreement, as well as unspecified damages and attorneys' fees.
Coffey v. American Bankers Insurance Group, Inc., et al.
On or about February 9, 1998, a putative class action complaint, on behalf
of the American Bankers' shareholders, was filed in the United States District
Court for the Southern District of Florida against American Bankers, the members
of the American Bankers Board and AIG. The complaint alleged that the directors
of American Bankers breached their fiduciary duties by agreeing to the merger
contemplated by the Original Merger Agreement, the Original Stock Option
Agreement, the 120 day so-called "No-Shop" provision, the 180-day
non-termination provision, the $66 million termination fee, the Voting
Agreement, by exempting the merger contemplated by the Original Merger Agreement
from the Rights Agreement, and by failing to maximize shareholder value. The
complaint further alleges that AIG aided and abetted the directors of American
Bankers in the breach of their fiduciary duties, and that AIG violated Section
13(d) of the Exchange Act, by failing to disclose in the Schedule 13D that it
filed with the Commission on January 16, 1998 that AIG's Chairman and Chief
Executive Officer was a "controlling person" of AIG. The complaint seeks
declaratory and injunctive relief including an order requiring defendants to
make corrective disclosure
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and enjoining the consummation of the merger contemplated by the Original Merger
Agreement, as well as unspecified damages and attorneys' fees.
Spector v. Landon, et al.
On or about February 11, 1998, plaintiffs filed a complaint in the United
States District Court for the Southern District of Florida against American
Bankers, R. Kirk Landon, Gerald N. Gaston, AIG and AIGF. The complaint alleged
that Mr. Landon and Mr. Gaston, aided and abetted by American Bankers, AIG and
AIGF, breached their fiduciary duties by agreeing to the merger contemplated by
the Original Merger Agreement, the Original Stock Option Agreement, the 120 day
so-called "No-Shop" provision, the $66 million termination fee, the Voting
Agreement, by exempting the merger contemplated by the Original Merger Agreement
from the Rights Agreement, and by failing to maximize shareholder value. The
complaint further alleges that American Bankers and AIG violated Sections 14(a)
and 14(e) of the Exchange Act by making materially false and misleading
statements in the Original Proxy Statement/Prospectus. The complaint seeks
declaratory and injunctive relief including an order requiring defendants to
make corrective disclosure, enjoining the consummation of the merger
contemplated by the Original Merger Agreement and voiding the Original Merger
Agreement, as well as unspecified damages and attorneys' fees.
RESALE OF AIG SERIES C PREFERRED STOCK AND AIG COMMON STOCK
All shares of AIG Series C Preferred Stock received by holders of Preferred
Stock and all shares of AIG Common Stock received by holders of Common Stock in
the Merger will be freely transferable, except that shares of AIG Series C
Preferred Stock and AIG Common Stock received by persons who are deemed to be
"affiliates" (as such term is defined under the Securities Act) of American
Bankers at the time of the Special Meetings may be resold by them only in
transactions permitted by the resale provisions of Rule 145 promulgated under
the Securities Act (or Rule 144 in the case of such persons who become
affiliates of AIG) or as otherwise permitted under the Securities Act. Persons
who may be deemed to be affiliates of American Bankers or AIG generally include
individuals or entities that control, are controlled by, or are under common
control with, such party and may include certain officers and directors of such
party as well as principal shareholders of such party. The Merger Agreement
requires American Bankers to use its reasonable best efforts to cause each of
its affiliates to execute a written agreement (an "Affiliates Letter") to the
effect that such person will not offer to sell, transfer, or otherwise dispose
of any of the shares of AIG Series C Preferred Stock or AIG Common Stock issued
to such person in or pursuant to the Merger unless such sale, transfer or other
disposition (a) has been registered under the Securities Act, (b) is made in
conformity with Rule 145 under the Securities Act or (c) is exempt from
registration under the Securities Act.
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
Following the merger of American Bankers into AIGF, the Surviving
Corporation will continue the operations of American Bankers as a wholly-owned
subsidiary of AIG. The board of directors of the Surviving Corporation will be
comprised of the members of the current American Bankers Board, plus two
additional members designated by AIG. The officers of American Bankers also will
remain unchanged as a result of the Merger. Messrs. Gaston and Denison have
entered into employment agreements with American Bankers to be effective upon
consummation of the Merger. See "Related Agreements and
Transactions -- Employment Agreements." The shareholders of American Bankers
will become shareholders of AIG, and their rights as shareholders will be
governed by AIG's Amended and Restated Certificate of Incorporation (the "AIG
Certificate") and AIG's bylaws (the "AIG Bylaws") and the laws of the State of
Delaware. See "Comparative Rights of Common Shareholders." AIG has agreed to
maintain the corporate headquarters of the Surviving Corporation at American
Bankers' current Miami location for the foreseeable future, and in any event,
for not less than five years from the Effective Time. AIG also has agreed to
ensure, to the extent within its reasonable control, that the public school and
day care facility operated on or adjacent to American Bankers' current Miami
location shall remain in operation at their current locations for so long as the
Surviving Corporation's corporate headquarters shall be maintained at American
Bankers' current Miami location.
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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.
Employment Agreements. American Bankers has entered into employment
agreements with Mr. Gerald Gaston and Mr. Floyd Denison. Each of such employment
agreements becomes effective commencing on the Effective Time and continues for
five years. Pursuant to such employment agreements, Messrs. Gaston and Denison
will receive severance payments if they are terminated under certain
circumstances. The employment agreements are described more fully below in
"Related Agreements and Transactions -- Employment Agreements." Assuming that
Messrs. Gaston and Denison terminated their employment immediately following the
Merger for Good Reason or without cause (as defined in such employment
agreements), the estimated amounts payable to Mr. Gaston and Mr. Denison
pursuant to such employment agreements as a result of such terminations of
employment would be $4.8 million and $1.5 million, respectively.
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 $23.2 million (which includes
amounts payable to Messrs. Gaston and Denison pursuant to the employment
agreements described above).
Stock Options and Restricted Stock. American Bankers maintains various
plans pursuant to which stock option awards and restricted stock awards are made
to its executive officers. Under the 1994 Senior Management Stock Option Plan
(the "1994 Senior Plan"), the 1991 Stock Option/Restricted Stock Award Plan (the
"1991 Award Plan") and the 1991 Stock Incentive Compensation Plan (the "1991
Incentive Plan"), upon the exercise of a stock option, the optionee is entitled
to receive shares of Common Stock which are subject to restrictions on transfer
("Restricted Stock") (which, in the case of the 1994 Senior Plan and the 1991
Award Plan, are in addition to non-restricted shares of Common Stock received
upon such exercise). Pursuant to the terms of the 1994 Senior Plan, the 1991
Award Plan and the 1991 Incentive Plan, upon a "change in control" (as defined
in such plans), the restrictions applicable to shares of Restricted Stock then
held by executive officers on account of the exercise of options under such
plans will lapse. 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, all outstanding
stock options will become fully vested and exercisable upon a "change in
control" (as defined under the 1997 Incentive Plan). Upon the exercise of an
option under the 1997 Incentive Plan, the optionee is entitled to receive shares
of Restricted Stock (as well as non-restricted shares of Common Stock). The
Merger will constitute a change in control under the 1997 Incentive Plan and,
accordingly, all unvested options under such plan will become immediately vested
and exercisable upon consummation of the Merger and shares of Restricted Stock
then held on account of the exercise of options under the 1997 Incentive Plan
will become fully vested.
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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.
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.
ACCOUNTING TREATMENT
The Merger will be accounted for under the "purchase" method of accounting
whereby the purchase price paid by AIG will be allocated based on fair values of
assets acquired and liabilities assumed. Such allocations will be made based
upon valuations and other studies that have not been finalized. The excess of
such purchase price over the amounts so allocated will be treated as goodwill.
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 alternative transaction
structure described below in "The Merger Agreement -- Alternative Transaction
Structure" is utilized, in which case the Preferred Stock will remain
outstanding and listed on the NYSE and registered under the Exchange Act). AIG
Common Stock currently is listed on the NYSE under the symbol "AIG." Application
will be made for the listing on the NYSE of the shares of AIG Common Stock and
AIG Series C Preferred Stock to be issued in the Merger. The listings on the
NYSE are a condition to the consummation of the Merger. See "The Merger
Agreement -- Conditions of the Proposed Merger."
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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/Prospectus 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/Prospectus but not defined in this Proxy Statement/Prospectus shall
have the meanings attributed to them in the Merger Agreement.
GENERAL; THE ELECTION; MERGER CONSIDERATION
The terms of the Merger are set forth in the Merger Agreement. The Original
Merger Agreement was approved by the American Bankers Board and the AIG Board
and signed by American Bankers, AIG and AIGF on December 21, 1997, was amended
and restated by the parties as of January 7, 1998, and was amended by Amendment
No. 1 thereto dated as of January 28, 1998. The Original Merger Agreement was
then amended and restated as the Merger Agreement as of February 28, 1998. A
copy of the Merger Agreement is attached hereto as Appendix I. Pursuant to the
Merger Agreement, and on the terms and conditions set forth therein, at the
Effective Time, American Bankers will be merged with and into AIGF. AIGF will be
the surviving corporation in the Merger (the "Surviving Corporation") and will
succeed to the business of American Bankers and will assume the name American
Bankers Insurance Group, Inc. As a result of the Merger, each share of Preferred
Stock issued and outstanding immediately prior to the Effective Time (other than
Excluded Preferred Shares) shall be converted into, and become exchangeable for,
one share of AIG Series C Preferred Stock (the "Preferred Stock Merger
Consideration"). The AIG Series C Preferred Stock will contain terms
substantially similar to the terms of the Preferred Stock (after making the
conversion adjustments required to be made pursuant to the American Bankers
Articles) and will be convertible into AIG Common Stock. See "Description of AIG
Capital Stock -- AIG Series C Preferred Stock." As a result of the Merger, each
share of Common Stock issued and outstanding immediately prior to the Effective
Time (as hereinafter defined) (other than Excluded Common Shares) shall be
converted into, and become exchangeable for, such amount of cash, portion of a
share of AIG Common Stock or combination thereof as described in the next four
paragraphs.
Each holder of Common Stock will be entitled to elect with respect to all
or any portion of the shares of Common Stock held by such holder to have such
shares converted at the Effective Time into the right to receive the Cash
Election Merger Consideration (as hereinafter defined) (the "Cash Election") or
the Stock Election Merger Consideration (as hereinafter defined) (the "Stock
Election"). The form for making the Cash Election or Stock Election (the
"Election Form") was mailed to holders of Common Stock on or about February 2,
1998, together with the Original Proxy Statement/Prospectus. An amended Election
Form, reflecting the terms of the Merger Agreement, is being mailed to holders
of Common Stock on or about March 10, 1998, together with this Proxy
Statement/Prospectus. Each holder may make a Cash Election or Stock Election by
properly completing, signing and submitting either the white original Election
Form or the salmon-colored revised Election Form to the Exchange Agent, by 5:00
p.m., New York City time, on the third trading day prior to the date of the
consummation of the Merger (the "Election Deadline"). The Election Deadline will
not occur any earlier than 5:00 p.m., New York City time, on March 24, 1998. AIG
will publicly announce the Election Deadline not later than 10:00 a.m. on the
trading day preceding the date on which the Election Deadline will occur. To be
effective, the Election Form must be accompanied by the certificates
representing the shares of Common Stock as to which an election is being made or
an appropriate guarantee of delivery by a commercial bank or trust company in
the United States or a member of a registered national securities exchange or
the National Association of Securities Dealers, Inc. ("NASD"). An Election Form
which is not effective shall be treated as if no election had been made with
respect to the shares of Common Stock covered by such Election Form and any
holder who does not submit an effective Election Form shall receive the
Non-Election Merger Consideration (as hereinafter defined). AIG will have the
discretion, which it may delegate in whole or in part to the Exchange Agent, to
determine whether Election Forms have been properly completed, signed and
submitted or revoked and to disregard immaterial defects in Election Forms.
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The decisions of AIG or, if delegated, the Exchange Agent shall be conclusive
and binding. Neither AIG, AIGF nor the Exchange Agent will be under any
obligation to notify any person of any defect in an Election Form submitted to
the Exchange Agent. The Exchange Agent shall also make all computations
contemplated by Section 4.1(a) of the Merger Agreement, and all such
computations shall be conclusive and binding on the holders of Common Stock in
the absence of manifest error. AIG and American Bankers each shall use its best
efforts to make the Election Form available to all persons who become holders of
record of Common Stock during the period between the Record Date and the
Election Deadline. A properly completed Election Form must be received by the
Exchange Agent by the Election Deadline in order to be effective. Any Election
Form may be revoked by written notice or a later dated Election Form received by
the Exchange Agent prior to the Election Deadline.
Each share of Common Stock for which the holder of such shares has failed
to make an effective Cash Election or Stock Election shall be converted into,
and become exchangeable for, that portion of a share of AIG Common Stock equal
to the lesser of (i) .4811 (the "Maximum Exchange Ratio") and (ii) the decimal
derived by dividing $58.00 by the average of the closing prices per share of AIG
Common Stock as reported on the NYSE composite transactions reporting system (as
reported in the New York City edition of The Wall Street Journal) for the ten
trading days ending on the third trading day prior to the date of the
consummation of the Merger (the "Base Period Stock Price"); provided, however,
if the Base Period Stock Price is below $120.5625, AIG shall elect to either (i)
pay a cash amount equal to the Per Share Cash Top-Up Amount (as hereinafter
defined) (provided that AIG may not elect to pay the cash amount contemplated by
this clause (i) if the aggregate cash amount so paid would exceed the
Non-Election Cash Pool (as hereinafter defined)) or (ii) (x) increase the
Maximum Exchange Ratio (the "Adjusted Maximum Exchange Ratio") up to a decimal
such that the product of the Adjusted Maximum Exchange Ratio times the Base
Period Stock Price (the "Product") equals or is less than $58.00 and (y) if the
Product is less than $58.00, pay a cash amount equal to the difference between
$58.00 and such Product (provided that AIG may not elect to pay such an
aggregate amount of cash pursuant to this clause (ii) which would exceed the
NonElection Cash Pool (as hereinafter defined)). The foregoing payments shall be
referred to herein as the "Non-Election Merger Consideration." For purposes
hereof, "Per Share Cash Top-Up Amount" means the greater of (i) $0 and (ii)(x)
$58.00 minus (y) the product of (A) the Base Period Stock Price and (B) the
Maximum Exchange Ratio; "Non-Election Cash Pool" means an amount of cash equal
to the Maximum Cash Pool (as hereinafter defined) minus the aggregate amount of
cash paid in the Merger to the holders of shares of Common Stock that make a
Cash Election; and "Maximum Cash Pool" means an amount of cash equal to (i) .499
multiplied by the sum of (x) the Non-Election Merger Consideration, the Cash
Election Merger Consideration (as hereinafter defined) and the Stock Election
Merger Consideration (as hereinafter defined) (collectively, the "Common Stock
Merger Consideration" and, together with the Preferred Stock Merger
Consideration, the "Merger Consideration"), calculated for purposes of this
definition based on the Base Period Stock Price, and, if applicable, (y) the
aggregate amount of cash paid by AIGF pursuant to the Tender Offer (as
hereinafter defined) minus, if applicable, (ii) the aggregate amount of cash
paid by AIGF pursuant to the Tender Offer.
Each share of Common Stock for which the holder of such share has made a
Cash Election shall be converted into, and become exchangeable for, $58.00 in
cash (the "Cash Election Merger Consideration"), provided that in no event shall
holders of shares of Common Stock who have made a Cash Election be entitled to
receive an aggregate amount of cash in excess of the Maximum Cash Pool. In the
event that Cash Elections are submitted with respect to an aggregate number of
shares of Common Stock which, except for the limitation imposed by the Maximum
Cash Pool, would require AIG to pay cash in the aggregate in excess of the
Maximum Cash Pool, a pro rata portion of such shares of Common Stock (rounded
down to the nearest whole share of Common Stock) shall be converted into the
right to receive the Cash Election Merger Consideration, which proration as to
each shareholder shall be based upon the ratio of the (i) Maximum Cash Pool to
(ii) the aggregate number of shares of Common Stock with respect to which Cash
Elections are submitted multiplied by $58.00. All shares of Common Stock for
which a Cash Election is made but which are not converted into the right to
receive the Cash Election Merger Consideration shall be converted into the right
to receive the Stock Election Merger Consideration. BECAUSE OF THE LIMITATIONS
DESCRIBED ABOVE, THERE CAN BE NO ASSURANCE THAT A HOLDER WHO ELECTS TO RECEIVE
CASH WILL IN FACT RECEIVE CASH FOR THE FULL AMOUNT OF CONSIDERATION INTO WHICH
HIS COMMON STOCK IS CONVERTED IN THE MERGER.
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Each share of Common Stock for which the holder of such share has made a
Stock Election shall be converted into, and become exchangeable for, that
portion of a share of AIG Common Stock equal to the lesser of (i) the Maximum
Exchange Ratio and (ii) the decimal derived by dividing $58.00 by the Base
Period Stock Price; provided, however, if the Base Period Stock Price is below
$120.5625, AIG shall elect to either (i) pay a cash amount equal to the Per
Share Cash Top-Up Amount (provided that AIG may not elect to pay the cash amount
contemplated by this clause (i) if the aggregate cash amount paid would exceed
the Stock Election Cash Pool (as hereinafter defined)) or (ii) (x) establish the
Adjusted Maximum Exchange Ratio such that the Product equals or is less than
$58.00 and (y) if the Product is less than $58.00, pay a cash amount equal to
the difference between $58.00 and such Product (provided that AIG may not elect
to pay an aggregate amount of cash pursuant to this clause (ii) which would
exceed the Stock Election Cash Pool (as hereinafter defined)). The foregoing
payments shall be referred to herein as the "Stock Election Merger
Consideration." For purposes hereof, "Stock Election Cash Pool" shall mean an
amount of cash equal to the greater of (i) $0 and (ii) the Aggregate Cash Top-Up
Amount minus the aggregate amount of cash paid in the Merger to the holders of
shares of Common Stock that do not make a Stock Election; and "Aggregate Cash
Top-Up Amount" shall mean the lesser of (i) the product of (x) the Per Share
Cash Top-Up Amount and (y) the number of outstanding shares of Common Stock as
of the Effective Time and (ii) an amount equal to the Maximum Cash Pool. BECAUSE
OF THE AIG ELECTION DESCRIBED ABOVE, THERE CAN BE NO ASSURANCE THAT A HOLDER WHO
ELECTS TO RECEIVE AIG COMMON STOCK WILL IN FACT RECEIVE AIG COMMON STOCK FOR THE
FULL AMOUNT OF CONSIDERATION INTO WHICH HIS COMMON STOCK IS CONVERTED IN THE
MERGER.
AIG may at its option, but is not obligated to, increase the portion of a
share of AIG Common Stock into which each share of Common Stock (for which no
election or a Stock Election is made) may be converted to the extent that in the
reasonable judgment of AIG such increase is necessary to enable the Merger to
qualify as a "reorganization" within the meaning of Section 368(a) of the Code.
OPTIONAL TENDER OFFER
AIG shall be entitled at any time, at its sole option, to cause AIGF to
commence a tender offer (the "Tender Offer") to acquire up to 100% (or such
lesser percentage not less than 49.9% as AIG shall specify in the Tender Offer)
of the outstanding shares of Common Stock (excluding for all purposes in
calculating such applicable percentage any outstanding shares of Common Stock
owned by AIG or AIGF pursuant to the exercise of AIG's rights under the Stock
Option Agreement). If AIG determines to commence such Tender Offer, AIG shall
notify American Bankers of its intention to do so.
AIG and AIGF shall (i) within five business days of delivery of such notice
commence the Tender Offer at a purchase price of not less than $58.00, net to
the seller in cash, without interest thereon, per share of Common Stock, upon
the terms and subject to the conditions set forth in Annex I to the Merger
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 AIGF
in connection with the Tender Offer and (ii) file with the Commission 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. American
Bankers will have the opportunity to review the Schedule 14D-1 prior to its
being filed with the Commission. Without the prior written consent of American
Bankers, AIGF shall not decrease the price per share of Common Stock or change
the form of consideration payable in the Tender Offer, decrease the number of
shares of Common Stock 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 shares of Common Stock. AIG can reduce the Minimum Tender Condition (as
defined in Annex I to the Merger Agreement) to a percentage not less than 35% of
the outstanding shares of Common Stock on a fully-diluted basis (excluding for
all purposes of such dilution calculation shares of Common Stock purchased or
subject to purchase by AIG pursuant to the exercise of AIG's rights under the
Stock Option Agreement). Upon the terms and subject to the conditions of the
Tender Offer, AIGF will accept for payment and will purchase, as soon as
permitted under the terms of the Tender Offer, all shares of Common Stock
validly tendered and not withdrawn prior to the expiration of the Tender Offer.
AIGF 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
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Expiration Date, the conditions to the Tender Offer described in Annex I to the
Merger Agreement shall not have been satisfied or earlier waived, AIGF, at its
sole option, may extend the Expiration Date on one or more occasions for an
additional period or periods of time and, unless the Merger Agreement has been
terminated in accordance with its terms, shall extend it until a date that is
not later than the sixtieth day from the date of commencement of the Tender
Offer (including, for purposes of calculating such 60 days, the date of
commencement of the Tender Offer as the first day) (the "Extended Expiration
Date"), if requested to do so by American Bankers and AIG is otherwise going to
let the Tender Offer expire without the purchase of shares of Common Stock
thereunder. AIG and AIGF shall use their reasonable efforts to consummate the
Tender Offer in accordance with the terms of the Merger Agreement and the
conditions to the Tender Offer set forth in Annex I to the Merger Agreement.
On the same day that AIGF and AIG file with the Commission the Schedule
14D-1, American Bankers will file with the Commission 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 American Bankers Board that the
holders of shares of Common Stock accept the Tender Offer. AIG will have the
opportunity to review the Schedule 14D-9 prior to its being filed with the
Commission. Upon the filing of the Schedule 14D-1, American Bankers shall cancel
the Preferred Shareholders Special Meeting and the Common Shareholders Special
Meeting scheduled for March 25, 1998 and March 27, 1998, respectively, unless
such shareholders meetings shall have already occurred.
Copies of the Schedule 14D-9 (excluding exhibits), shall be enclosed with
the Offer Documents to be mailed by AIGF to the holders of Common Stock in
connection with the Tender Offer. In connection with the Tender Offer, American
Bankers will furnish AIG and AIGF with such information, including lists of the
holders of Common Stock, mailing labels and lists of security positions, and
such assistance as AIG or AIGF or their agents may request in communicating the
Tender Offer to the record and beneficial holders of the shares of Common Stock.
Promptly following AIGF's purchase of and payment for shares of Common
Stock pursuant to the Tender Offer, AIG and AIGF shall be entitled to designate
two members of the American Bankers Board. Accordingly, American Bankers shall,
upon request by AIG or AIGF, promptly increase the size of the American Bankers
Board to the extent permitted by American Bankers' Articles and Bylaws, and
shall thereafter cause AIG's designees promptly to be elected or appointed to
the American Bankers Board.
If the Tender Offer is commenced and consummated and more than 49.9% of the
outstanding shares of Common Stock (excluding for all purposes in calculating
such percentage any outstanding shares of Common Stock owned by AIG or AIGF
pursuant to the exercise of AIG's rights under the Stock Option Agreement) are
purchased by AIGF pursuant to the Tender Offer, each share of Common Stock
issued and outstanding immediately prior to the Effective Time (other than
Excluded Common Shares (as defined in the Merger Agreement)) shall be converted
into, and become exchangeable for, at AIG's election, either (i) provided that
the Merger would still be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that each
of AIG, AIGF and American Bankers would be a party to that reorganization within
the meaning of Section 368(b) of the Code, that portion of a share of AIG Common
Stock determined as set forth in the third paragraph under "-- General; the
Election; Merger Consideration" or (ii) cash in an amount equal to the amount
paid per share of Common Stock in the Tender Offer. In the event that AIG elects
to consummate the Merger as contemplated by clause (ii) in the preceding
sentence or is required by Section 7.4 of the Merger Agreement (as described
under "-- Conditions of the Proposed Merger -- Waiver of Certain Conditions
Following Tender Offer") to consummate the Merger by paying cash to the holders
of shares of Common Stock, the Merger will not be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
each of AIG, AIGF and American Bankers would not be treated as a party to a
reorganization within the meaning of Section 368(b) of the Code, AIG, AIGF and
American Bankers will be deemed to have waived certain covenants and conditions
contained in the Merger Agreement relating to the Merger qualifying as a
reorganization within the meaning of Section 368(a) of the Code, the Merger will
not be treated as a Common Stock Fundamental Change for
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purposes of the Preferred Stock and the Merger shall be consummated by merging
AIGF into American Bankers in lieu of merging American Bankers into AIGF.
If the Tender Offer is consummated at a price per share of Common Stock in
cash that is higher than $58.00, (x) such higher amount shall be deemed to be
inserted in lieu of $58.00 in each place that $58.00 appears in the Merger
Agreement and (y) a fraction equal to such price per share of Common Stock
divided by $120.5625 shall be deemed to be inserted in lieu of .4811 in Section
4.1(a)(i) of the Merger Agreement.
In the event that the Tender Offer is commenced and consummated, holders of
shares of Common Stock shall not be entitled to make a Stock Election or a Cash
Election. In such circumstances, all consideration paid in the Merger to holders
of shares of Common Stock will be paid as described under the third paragraph
and the sixth paragraph under "-- General; the Election; Merger Consideration"
and no consideration will be paid as described under the fourth paragraph or the
fifth paragraph under "-- General; the Election; Merger Consideration".
CLOSING; EFFECTIVE TIME
The Closing of the Merger (the "Closing") will take place on the business
day designated by AIG, which will 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 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 AIG agree in writing (the
"Closing Date"). As soon as practicable following the Closing, American Bankers
and AIG 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 Preferred Stock Merger Consideration or Common Stock Merger Consideration,
as applicable, and the right, if any, to receive cash in lieu of fractional
shares and any distribution or dividend with respect to the AIG Series C
Preferred Stock or AIG Common Stock, each as described below. 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.
FRACTIONAL SHARES
No fractional shares of AIG Common Stock will be issued and any holder of
shares of Common Stock otherwise entitled to receive fractional shares of AIG
Common Stock shall be entitled to receive a cash payment in lieu thereof, in an
amount equal to such fractional share of AIG Common Stock multiplied by the Base
Period Stock Price.
EXCHANGE OF CERTIFICATES
Promptly after the Effective Time, AIG shall deposit, or shall cause to be
deposited, with ChaseMellon Shareholders Services, L.L.C. (the "Exchange
Agent"), for the benefit of the holders of shares of Preferred Stock and Common
Stock, certificates representing the shares of AIG Series C Preferred Stock and
AIG Common Stock and, after the Effective Time, if applicable, any cash,
dividends or other distributions with respect to the AIG Series C Preferred
Stock and AIG Common Stock 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 certificates for shares of AIG
Series C Preferred Stock and AIG Common Stock, together with the amount of
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any cash, dividends or other distributions 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) who did not
submit a valid Election Form prior to the Election Deadline (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 (A)
certificates representing shares of AIG Series C Preferred Stock or AIG Common
Stock, as applicable, and (B) if applicable, any cash, unpaid dividends or other
distributions and cash in lieu of fractional shares. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor (x) a certificate representing that number of whole
shares of AIG Series C Preferred Stock or AIG Common Stock, as applicable, that
such holder is entitled to receive pursuant to the Merger Agreement, (y) a check
in the amount (after giving effect to any required tax withholdings) of (A) any
cash in lieu of fractional shares plus (B) any cash, including unpaid non-stock
dividends and any other dividends or other distributions, that such holder has
the right to receive pursuant to the provisions of 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. If any
certificate for shares of AIG Series C Preferred Stock or AIG Common Stock, as
applicable, is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of such
exchange that the Person requesting such exchange shall pay any transfer or
other taxes required by reason of the issuance of certificates for shares of AIG
Series C Preferred Stock or AIG Common Stock, as applicable, in a name other
than that of the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of AIG or the Exchange Agent that such tax has
been paid or is not applicable.
DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES
All shares of AIG Series C Preferred Stock and AIG Common Stock to be
issued pursuant to the Merger shall be deemed issued and outstanding as of the
Effective Time and whenever a dividend or other distribution is declared by AIG
in respect of the AIG Series C Preferred Stock or AIG Common Stock, as
applicable, the record date for which is at or after the Effective Time, that
declaration shall include dividends or other distributions in respect of all
shares issuable pursuant the Merger Agreement. No dividends or other
distributions in respect of the AIG Series C Preferred Stock or AIG Common
Stock, as applicable, shall be paid to any holder of any unsurrendered
Certificate until such Certificate is surrendered for exchange in accordance
with the Merger Agreement. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be issued and/or paid to the
holder of the certificates representing whole shares of AIG Series C Preferred
Stock and AIG Common Stock, as applicable, issued in exchange therefor, without
interest, (A) at the time of such surrender, the dividends or other
distributions with a record date after the Effective Time theretofore payable
with respect to such whole shares of AIG Series C Preferred Stock or AIG Common
Stock, as applicable, and not paid and (B) at the appropriate payment date, the
dividends or other distributions payable with respect to such whole shares of
AIG Series C Preferred Stock or AIG Common Stock, as applicable, with a record
date after the Effective Time but with a payment date subsequent to surrender.
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.
TERMINATION OF EXCHANGE FUND
Any portion of the Exchange Fund that remains unclaimed by the shareholders
of American Bankers for 180 days after the Effective Time shall be paid to AIG.
Any shareholders of American Bankers shall
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thereafter look only to AIG for payment of their shares of AIG Series C
Preferred Stock or AIG Common Stock, as applicable, and any cash, dividends and
other distributions in respect thereof payable and/or issuable pursuant to the
Merger Agreement upon due surrender of their Certificates (or affidavits of loss
in lieu thereof), in each case, without any interest thereon. None of AIG, the
Surviving Corporation, the Exchange Agent or any other Person shall be liable to
any former holder of shares of Preferred Stock or Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
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 AIG, the posting
by such Person of a bond in customary amount as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Certificate the shares of
AIG Series C Preferred Stock or AIG Common Stock, as applicable, and any cash
payable and any unpaid dividends or other distributions 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, or AIG changes the
number of shares of AIG Common Stock or securities convertible or exchangeable
into or exercisable for shares of AIG 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.
CONDITIONS OF THE PROPOSED MERGER
Mutual Conditions
The obligation of each of American Bankers and AIG 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 Preferred Stock and a majority of the
outstanding shares of Common Stock, each voting separately as a class (the
"American Bankers Requisite Vote"), in accordance with applicable law;
(b) the authorization for listing on the NYSE upon official notice of
issuance of the shares of AIG Series C Preferred Stock issuable to holders
of Preferred Stock and the shares of AIG Common Stock issuable to holders
of Common Stock;
(c) 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 AIG 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, AIG 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, AIG and AIGF and the consummation
of the Merger and the other transactions contemplated thereby shall have
been made or obtained (as the case may be);
(d) 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
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order (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits the consummation of the Merger;
(e) the Registration Statement, of which this Proxy
Statement/Prospectus is a part, having been declared effective and no stop
order suspending the effectiveness of the Registration Statement having
been issued, and no proceedings for that purpose having been initiated or
threatened, by the Commission;
(f) AIG having received all state securities and "blue sky" permits
and approvals, if any, necessary to consummate the transactions
contemplated by the Merger Agreement;
(g) 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;
(h) 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;
(i) 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); and
(j) unless the Merger is restructured as described below under
"-- Alternative Transaction Structure", the receipt by each party of the
opinion of its respective tax counsel regarding the treatment of the Merger
as a "reorganization" under the Code.
Additional Conditions to the Obligations of AIG and AIGF
In addition, the obligations of AIG and AIGF under the Merger Agreement are
subject to (k) the receipt of Affiliates Letters and the (l) effectiveness of
certain employment agreements between persons currently employed by American
Bankers and the Surviving Corporation. See " -- Certain Other Covenants and
Agreements -- Affiliates Letters", "The Merger -- Resale of AIG Common Stock and
Preferred Stock" and "Related Agreements and Transactions -- Employment
Agreements".
Waiver of Certain Conditions Following Tender Offer
If AIG commences and consummates the Tender Offer, (i) the conditions to
AIG's, AIGF's and American Bankers' respective obligations to consummate the
Merger described above in paragraphs (a), (b), (c), (f), (g), (h) (with respect
to the performance by AIG and AIGF of their obligations under the Merger
Agreement), (i), (j) (with respect to the receipt by American Bankers of the
opinion of its tax counsel), (k) and (l) will be deemed to have been waived by
AIG, AIGF and American Bankers in all respects and (ii) if at least one-half of
the members of the American Bankers Board are nominees or designees of AIG, the
condition to AIG's and AIGF's obligations to effect the Merger described above
in paragraph (h) (with respect to the performance by American Bankers of its
obligations under the Merger Agreement) will be deemed to have been waived by
AIG in all respects.
If the Tender Offer is commenced and consummated and either of the
conditions to AIG's, AIGF's and American Bankers' obligations to effect the
Merger described above in paragraphs (e) and (j) (with respect to the receipt by
AIG of the opinion of its tax counsel) are not satisfied at such time as all of
the other conditions to the consummation of the Merger have been satisfied (or
waived), then AIG will consummate the Merger by paying to each holder of a share
of Common Stock cash in an amount equal to the amount of cash paid for each
share of Common Stock pursuant to the Tender Offer.
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 or Insurance Subsidiaries that after the
date of the Original Merger Agreement and prior to the Effective Time (unless
AIG 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
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(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
AIG's 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 Bylaws or amend, modify or terminate the Rights Agreement or
the New 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 $0.11 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; (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 Original Merger Agreement under any of
the American Bankers Stock Plans or upon conversion of the Preferred Stock or
the Convertible Notes); (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 awards made in the normal course under the Management
Incentive Plan in respect of 1997 performance and grants of up to 20,000
restricted shares of Common Stock to be made in January 1998 under the year 2000
Tenure Award Program, or increase the salary, wage, bonus or other compensation
of any employees except increases occurring in the ordinary and usual course of
business (which shall include normal periodic performance reviews and related
compensation and benefit increases); (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 $5 million or
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more in gross written premiums are ceded by the American Bankers Insurance
Subsidiaries to any Person other than American Bankers or any of its
Subsidiaries; (p) neither it nor any of the American Bankers 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.
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 any 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 Original 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 or the New 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 American Bankers 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 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 Original 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 AIG 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 AIG informed, on a
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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; CORPORATE HEADQUARTERS; SCHOOL AND DAY CARE
AIG 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 under the existing employee benefit plans of American
Bankers and its Subsidiaries (other than plans involving the issuance or award
of Common Stock or rights to acquire Common Stock) that are no less favorable in
the aggregate than those currently provided by American Bankers and its
Subsidiaries to such employees. Any such employees will receive credit under any
plans of AIG 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 and vesting. AIG 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 AIG 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 AIG or any of its Subsidiaries shall be subject to the discretion of the
persons or committee administering such plans.
AIG has agreed to maintain the corporate headquarters of the Surviving
Corporation at American Bankers' current Miami location for the foreseeable
future, and in any event, for not less than five years from the Effective Time.
AIG also has agreed to ensure, to the extent within its reasonable control, that
the public school and day care facility operated on or adjacent to American
Bankers' current Miami location shall remain in operation at their current
locations for so long as the Surviving Corporation's corporate headquarters
shall be maintained at American Bankers' current Miami location.
TREATMENT OF STOCK OPTIONS
The Merger Agreement provides that at the Effective Time, each outstanding
option to purchase shares of Common Stock under the American Bankers Stock
Plans, whether vested or unvested, shall be deemed to constitute an option to
acquire, on the same terms and conditions, the same number of shares of AIG
Common Stock as the holder of such option would have been entitled to receive
pursuant to the Merger had such holder exercised such option in full immediately
prior to the Effective Time and assuming that the Common Stock Merger
Consideration consisted entirely of shares of AIG Common Stock (rounded down to
the nearest whole number), at a price per share (rounded up to the nearest whole
cent) equal to (y) the aggregate exercise price for the shares of Common Stock
otherwise purchasable pursuant to such option, divided by (z) the number of full
shares of AIG Common Stock deemed purchasable pursuant to such option; provided
that in the case of any option to which Section 422 of the Code applies, the
option price, the number of shares purchasable pursuant to such option, and the
terms and conditions of the exercise of such option shall be subject to such
adjustments as are necessary in order to satisfy the requirements of Section
424(a) of the Code; provided, further, that to the extent that shares of Common
Stock acquired upon exercise of such option would be subject to vesting or other
restrictions under the terms of the relevant American Bankers Stock Plan under
which such option was issued ("American Bankers Restricted Shares"), the number
of shares of AIG Common Stock to be issued upon exercise of an assumed option in
accordance with the foregoing that bears the same ratio to the total shares of
AIG Common Stock deemed purchasable pursuant to such assumed option as the
number of American Bankers Restricted Shares bears to the total number of shares
of Common Stock issuable under such option shall be subject to the same vesting
and other restrictions as would be applicable to the American Bankers Restricted
Shares.
At or prior to the Effective Time, American Bankers shall make all
necessary arrangements with respect to the American Bankers Stock Plans to
permit the assumption by AIG of the unexercised options to purchase
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shares of Common Stock in accordance with the above. Effective at the Effective
Time, AIG shall assume each option to purchase shares of Common Stock under the
American Bankers Stock Plans in accordance with the terms of the relevant
American Bankers Stock Plan under which the option was issued and the stock
option agreement by which the option is evidenced.
At or prior to the Effective Time, AIG shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of AIG Common
Stock for delivery upon exercise of options to purchase shares of Common Stock
assumed by AIG and shall, as soon as practicable after the Effective Time, file
a registration statement on Form S-3 or Form S-8 with respect to AIG Common
Stock subject to such options to purchase shares of Common Stock (or shall cause
such options to purchase shares of Common Stock to be deemed to be options
issued pursuant to an AIG Stock Plan for which shares of AIG Common Stock have
previously been registered pursuant to an appropriate registration form) and
shall use its reasonable best efforts to maintain the effectiveness of such
registration statements for so long as such options remain outstanding.
TAX MATTERS
The Merger Agreement provides that, subject to the provisions described
under " -- Agreement Not to Solicit Other Offers" and to the possible
restructuring of the Merger described below under "-- Alternative Transaction
Structure", neither AIG nor American Bankers shall take or cause to be taken any
action, before or after the Effective Time, that would disqualify the Merger as
a "reorganization" within the meaning of Section 368(a) of the Code. AIG is not
obligated, however, to increase the portion of a share of AIG Common Stock into
which a share of Common Stock (for which no election or a Stock Election is
made) is converted in order to ensure that the Merger qualifies as a
"reorganization" within the meaning of Section 368(a) of the Code. AIG and
American Bankers also have agreed to use all reasonable efforts to cure any
impediment to the qualification of the Merger as such. See "-- Conditions to the
Proposed Merger" and "The Merger -- Certain Federal Income Tax Consequences of
the Merger".
CERTAIN OTHER COVENANTS AND AGREEMENTS
Information; Filings
American Bankers and AIG have agreed (i) to supply accurate, complete and
updated information in connection with the preparation of the Proxy
Statement/Prospectus and the Registration Statement and, if applicable, any
Offer Documents, Schedule 14D-1 and Schedule 14D-9, (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 the Proxy Statement/Prospectus, the Registration
Statement and, if applicable, any Offer Documents, Schedule 14D-1 and Schedule
14D-9 and any other filing, notice or application made in connection with the
Merger or, if applicable, the Tender Offer 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 or AIG and its
Subsidiaries taken as a whole, as the case may be. American Bankers and AIG have
agreed to promptly prepare and file the Proxy Statement/Prospectus with the
Commission and AIG has agreed to promptly prepare and file the Registration
Statement with the Commission. Both parties have agreed to use all reasonable
efforts to have the Registration Statement declared effective as promptly as
practicable after filing and promptly thereafter to mail the Proxy
Statement/Prospectus to the shareholders of American Bankers. AIG also agreed to
obtain all required "blue sky" approvals and to pay all expenses incident
thereto. American Bankers and AIG further agreed to cooperate with one another
and to use their respective 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, if applicable, the
Tender Offer 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
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and/or any Governmental Entity in connection with, as a result of or in order to
consummate the Merger, if applicable, the Tender Offer or any of the other
transactions contemplated by the Merger Agreement, including, without
limitation, upon request of AIG, all material consents required in connection
with the consummation of the Merger and if applicable, the Tender Offer,
provided, however, that nothing in the foregoing requires AIG, 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 AIG 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
judgment of the AIG Board, materially and adversely impact the economic or
business benefits to AIG of the transactions contemplated by the Merger
Agreement.
Access
American Bankers has agreed to provide AIG's 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 AIG 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. AIG has agreed to provide American Bankers' officers,
employees, counsel, accountants and other authorized representatives such access
as it reasonably requests (giving due consideration to the size and
capitalization of, and availability of public information concerning, AIG and
the pricing and other terms of the Merger Agreement) to a limited number of
AIG's management personnel and all relevant books and records throughout the
period prior to the Effective Time, provided that such access may be denied in
order to prevent the disclosure of trade secrets of third parties or the breach
of confidentiality obligations of AIG that, in the reasonable judgment of AIG,
would otherwise result. No investigation made by American Bankers or AIG
pursuant to the foregoing shall affect or be deemed to modify any representation
or warranty made by the other party.
Special Meetings
American Bankers has agreed to take all action necessary to convene the
Preferred Shareholders Special Meeting and the Common Shareholders Special
Meeting on March 25, 1998 and March 27, 1998, respectively. Unless AIG exercises
its option to commence the Tender Offer, American Bankers will not cancel,
adjourn or postpone these scheduled Special Meetings without AIG's prior written
consent. 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.
In the event that the Special Meetings are cancelled in connection with the
commencement of the Tender Offer, American Bankers will take, in accordance with
the American Bankers Articles and By-laws, all action necessary to convene
meetings of holders of shares of Preferred Stock and Common Stock as promptly as
practicable, but in no event more than 45 days, after a post-effective amendment
to the Registration Statement is declared effective, to consider and vote upon
the approval of the Merger. Subject to fiduciary obligations under applicable
law, the American Bankers Board shall recommend such approval, shall not
withdraw or modify such recommendation and shall take all lawful action to
solicit such approval. Without limiting the generality of the foregoing, in the
event that the American Bankers Board withdraws or modifies its recommendation,
American Bankers nonetheless shall cause such Special Meetings to be convened
and a vote taken with respect to the Merger and the American Bankers Board of
Directors shall communicate to
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American Bankers' shareholders its basis for such withdrawal or modification as
contemplated by Section 607.1103(2)(a) of the FBCA.
Directors and Officers of the Surviving Corporation
The Merger Agreement provides that, immediately following the Effective
Time, the directors of American Bankers who are willing to serve as directors of
the Surviving Corporation shall be appointed as directors of the Surviving
Corporation and that AIG shall designate and appoint two additional 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
AIG has agreed 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. AIG 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 Time, subject to certain maximum required premium
amounts. See "The Merger -- Interests of Certain Persons in the Merger".
Dividends
The parties have agreed to coordinate the declaration, setting of record
dates and payment dates of dividends on Preferred Stock and Common Stock to
ensure that (i) holders thereof do not receive dividends in respect of any
calendar quarter on both Preferred Stock and AIG Series C Preferred Stock or on
both Common Stock and AIG Common Stock, as applicable, or (ii) holders thereof
do not fail to receive dividends in respect of any calendar quarter on either
Preferred Stock or AIG Series C Preferred Stock or on either Common Stock or AIG
Common Stock, as applicable.
Affiliates Letters
American Bankers has agreed to deliver to AIG prior to the earlier of the
date of consummation of the Tender Offer and the date of the Special Meetings, a
list of names and addresses of those persons who will be deemed to be
"affiliates" (as such term is defined under the Securities Act) of American
Bankers, in the opinion of American Bankers, as of the time of the Preferred
Shareholders Special Meeting and the Common Shareholders Special Meeting, which
list shall be updated with the names of persons who may be so deemed and are
subsequently so identified as affiliates. American Bankers has further agreed to
use its reasonable best efforts to deliver or cause to be delivered to AIG prior
to the earlier of the date of consummation of the Tender Offer and the date of
the Special Meetings, an Affiliates Letter from each affiliate identified in the
foregoing list. AIG shall not be obligated to maintain the effectiveness of the
Registration Statement or any other registration statement for the purposes of
resale by such affiliates of AIG Common Stock or AIG Series C Preferred Stock.
See "The Merger -- Resale of AIG Common Stock and AIG Series C Preferred Stock".
Listing and Registration
AIG has agreed to use its best efforts to cause the shares of AIG Common
Stock and the shares of AIG Series C Preferred Stock to be issued in the Merger
to be approved for listing on the NYSE subject to official notice of issuance,
prior to the Closing Date. The Surviving Corporation shall use its reasonable
best efforts to cause the Common Stock and the Preferred Stock to be delisted
from the NYSE and deregistered under the Exchange Act as soon as practicable
following the Effective Time.
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Repayment of the Convertible Notes
American Bankers has agreed to repay, at par, the aggregate principal
amount outstanding under the Convertible Notes and cancel such Convertible Notes
in their entirety if they are outstanding as of the Effective Time.
Rights Agreement
American Bankers has agreed that, if requested by AIG at least three
business days prior to the Expiration Date or the Effective Time, as the case
may be, the American Bankers Board will take all necessary action to terminate
or redeem all of the outstanding Rights and New Rights and to terminate the
Rights Agreement and the New Rights Agreement, effective immediately before the
Expiration Date or the Effective Time, as the case may be. See "Related
Agreements and Transactions -- Amendment to American Bankers' Rights Agreement".
If AIGF commences the Tender Offer, prior to the expiration of any other
tender offer which (i) is made by any person to acquire not less than 49.9% of
the outstanding shares of Common Stock (excluding for all purposes of such
calculation shares of Common Stock purchased by AIG pursuant to the Stock Option
Agreement) for not less than $58.00 in cash per share of Common Stock and (ii)
is proposed by such person to be followed by a merger in which such person will
acquire all of the remaining outstanding shares of Common Stock for cash or
other consideration with a value per share of Common Stock equal to not less
than the value per share of Common Stock paid by such person pursuant to such
tender offer (the value of such other consideration to be determined in the good
faith judgment of American Bankers Board after receipt of advice from its
financial advisors), American Bankers shall be entitled, at its option, to amend
or modify the Rights Agreement and New Rights Agreement to provide, in a manner
consistent with the amendments to the Rights Agreement made with respect to AIG
and the Tender Offer, that the person making such tender offer shall not be
deemed an Acquiring Person (as defined in the Rights Agreement and the New
Rights Agreement, respectively), the Distribution Date (as defined in the Rights
Agreement and the New Rights Agreement, respectively) shall not be deemed to
occur and the Rights and the New Rights will not separate from the shares of
Common Stock, as a result of such person's consummating the tender offer.
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 earlier of the
consummation of the Tender Offer and the Effective Time, amendments to the
respective severance agreements currently effective between such parties. See
"Related Agreements and Transactions -- Amendments to Severance Agreements".
REPRESENTATIONS AND WARRANTIES
Mutual Representations and Warranties
American Bankers, AIG and AIGF have made representations relating to, among
other things: (a) each of American Bankers', AIG's and AIGF's capitalization and
organization and similar corporate matters; (b) authorization, execution,
delivery, performance and enforceability of the Merger Agreement and the Stock
Option Agreement and related matters; (c) conflicts under governing documents,
required consents or approvals, and violations of any agreements or law; (d)
documents filed with the Commission and applicable insurance regulatory
authorities and the accuracy of information contained therein; (e) absence of
certain material adverse events, changes or effects; (f) brokers and finders;
(g) certain tax matters; and (h) compliance with insurance laws and regulations
and related insurance matters.
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
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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 and the New Rights Agreement; and
(j) the adequacy of reserves and related matters.
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 and by the sole shareholder of
Surviving Corporation, by mutual written consent of American Bankers and AIG;
(ii) by American Bankers or AIG, 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, 1998 (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 Tender Offer or the Merger to be consummated);
(iii) by AIG if (x) 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 or (y) AIGF shall have
commenced the Tender Offer and the Tender Offer shall not have been consummated
by the sixtieth day from the date of commencement of the Tender Offer
(including, for purposes of calculating such 60 days, the date of commencement
of the Tender Offer as the first day); (iv) by American Bankers, any time after
150 days following the date of the Original Merger Agreement, 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; (v) by American Bankers or AIG if any Order permanently
restraining, enjoining or otherwise prohibiting consummation of the Tender Offer
or the Merger shall become final and non-appealable; (vi) by American Bankers,
any time before the approval of the holders of a majority of the outstanding
shares of Preferred Stock and the holders of a majority of the outstanding
shares of Common Stock, each voting as a separate class, 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 AIG, (y) AIG
failing to make, prior to the later of five business days after receipt of
American Bankers' written notice of its intention to enter into a binding
agreement for a Superior Proposal and 150 days following the date of the
Original Merger Agreement, 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 (z) American Bankers
paying to AIG prior to termination of the Merger Agreement the fees described
under "-- Expenses and Termination Fees"; (vii) by American Bankers or AIG 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 AIG at
any time prior to the Effective Time, whether before or after consummation of
the Tender Offer or the approval of the holders of a majority of the outstanding
shares of Preferred Stock and the holders of a majority of the outstanding
shares of Common Stock, each voting as a separate class, if American Bankers
enters into a binding agreement for, or recommends, 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 the Original Proxy
Statement/Prospectus or the Offer Documents, fails to reconfirm its
recommendation within ten business days after a written request by AIG to do so.
EXPENSES AND TERMINATION FEES
The Merger Agreement provides that the Surviving Corporation shall pay all
expenses arising in connection with the exchange of Preferred Stock for AIG
Series C Preferred Stock and the exchange of Common Stock for the Common Stock
Merger Consideration. Except as described below, whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Merger
Agreement, the Tender Offer, the Merger and the other transactions contemplated
by the Merger Agreement shall be paid by
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the party incurring such expenses, except that the filing fee for the
Registration Statement and expenses incurred in connection with the printing and
mailing of the Offer Documents, the Schedule 14D-1, the Schedule 14D-9, the
Original Proxy Statement/Prospectus, this Proxy Statement/Prospectus and the
Registration Statement shall be shared equally by AIG and American Bankers.
The Merger Agreement provides that if it is terminated by American Bankers
in the manner described in clause (iv) or clause (vi) under "-- Termination" or
by AIG in the manner described in clause (iii) or clause (viii) under
"-- Termination" or by either AIG or American Bankers 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 any of its shareholders), then American
Bankers shall, not later than immediately prior to the time of such termination
or not later than immediately prior to the time of entering into an agreement
concerning a transaction that constitutes an Acquisition Proposal, pay AIG a
termination fee of $81.5 million plus an amount equal to AIG's charges and
expenses incurred in connection with the transactions contemplated by the Merger
Agreement since January 27, 1998, up to a maximum of $5 million.
In the event the Merger Agreement is terminated by American Bankers or AIG
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 shall promptly, but in no event later than
two business days after AIG shall have requested payment of its charges and
expenses incurred in connection with the transactions contemplated by the Merger
Agreement ("Expenses"), pay to AIG the amount of such Expenses up to a maximum
of $5 million and, if within 18 months of such termination, American Bankers
enters into an agreement concerning a transaction that constitutes an
Acquisition Proposal, American Bankers at the time of entering into such
agreement, shall pay to AIG the termination fee of $81.5 million.
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.
ALTERNATIVE TRANSACTION STRUCTURE
The Merger Agreement provides that if the vote of the holders of a majority
of the outstanding shares of Preferred Stock is not obtained at the Preferred
Shareholders Special Meeting or AIG reasonably determines that such vote is not
likely to be obtained, AIG shall, subject to the vote of the holders of a
majority of the outstanding shares of Common Stock and the other terms and
conditions of the Merger Agreement (other than the covenant relating to actions
that would disqualify the Merger as a "reorganization" under the Code and the
provision of opinions of counsel as to the treatment of the Merger as a
"reorganization" under the Code), merge AIGF with and into American Bankers such
that the separate corporate existence of AIGF shall cease and American Bankers
shall continue as the Surviving Corporation. American Bankers agrees to take all
actions reasonably requested by AIG to effect the above alternative transaction
structure, including, without limitation, promptly entering into an amendment to
the Merger Agreement to provide, inter alia, that the Preferred Stock shall
remain outstanding after the Merger pursuant to its current terms and conditions
except that it shall be convertible into AIG Common Stock.
Under the alternative transaction structure described above, the Merger
would not qualify as a "reorganization" under the Code. The exchange of Common
Stock for Common Stock Merger Consideration pursuant to the Merger therefore
would be fully taxable for federal income tax purposes. A holder of Common Stock
would generally recognize gain or loss equal to the difference between (i) the
amount of cash and, in the case of holders receiving AIG Common Stock, the value
(determined as of the Effective Time) of AIG Common Stock, that the holder
receives as a result of the Merger and (ii) the holder's adjusted tax basis in
the shares of Common Stock that the holder exchanges in the Merger. Such gain or
loss would be calculated
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separately for each block of Common Stock exchanged by the holder. Such gain or
loss would generally be capital gain or loss if a block of Common Stock is held
as a capital asset and would generally be long-term capital gain or loss to the
extent that, at the Effective Time, the holder has a holding period for federal
income tax purposes in such block of Common Stock of more than one year.
Because under the above alternative transaction structure the Preferred
Stock would remain outstanding following the Merger, the Merger would have no
immediate federal income tax consequences to holders of Preferred Stock. Prior
to the Merger, a conversion of Preferred Stock into Common Stock pursuant to the
terms of the Preferred Stock would not result in the recognition of gain or loss
for federal income tax purposes. If the Merger is not restructured, after the
Merger a conversion of AIG Series C Preferred Stock into AIG Common Stock would
also be tax free. If, however, the Merger is restructured, a future conversion
of Preferred Stock into AIG Common 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. THUS, HOLDERS OF COMMON
STOCK AND 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
TO TAKE PLACE PURSUANT TO THE ALTERNATIVE TRANSACTION STRUCTURE 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 AIG to enter into the Original Merger Agreement,
American Bankers entered into the Original Stock Option Agreement. The Original
Stock Option Agreement was amended and restated as the Stock Option Agreement as
of February 28, 1998. Pursuant to the Stock Option Agreement, AIG has the option
(the "Option"), under the circumstances described below, to acquire up to
8,265,626 shares of authorized but unissued Common Stock (the "Option Shares")
(or approximately 19.9% of the outstanding Common Stock as of November 3, 1997
prior to giving effect to the exercise of such Option), including the associated
rights under the Rights Agreement or the New Rights Agreement, at a price of
$47.00 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 be exercised by AIG, 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. AIG 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 AIG's 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 AIG specifies in such notice.
In addition, if, after delivery by AIG of a notice exercising its option to
pay the Option Price and receive the Option Shares but prior to the receipt of
all regulatory approvals for the consummation of the purchase of the Option
Shares, AIG or American Bankers determines to terminate the Merger Agreement,
the party intending to terminate must provide prior notice thereof to the other
party. If AIG then so requests, American Bankers shall pay to AIG, not later
than immediately prior to such termination, cash in an aggregate amount equal to
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 (as
defined below) and (y) the closing prices of shares of Common Stock on the NYSE
Composite Tape on the last trading day immediately prior to the termination of
the Merger Agreement, over (ii) the Option Price, multiplied by the number of
Option Shares subject to AIG's prior exercise notice, less any termination fees
paid by American Bankers to AIG pursuant to the Merger Agreement.
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 AIG 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 AIG or its Subsidiaries) shall have publicly
announced or delivered to American
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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 AIG or any of its Subsidiaries) to effect or provide for an
Acquisition Transaction; (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 AIG 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 AIG exercises the Option but neither AIG 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 AIG all (but not less
than all) of the Option Shares previously purchased by AIG 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 AIG exercises the Option, at any time prior to the first
anniversary of the termination of the Merger Agreement, AIG shall have the right
to sell to American Bankers all (but not less than all) of the Option Shares
previously purchased by AIG 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 AIG gives notice of its
intention to exercise such right.
The Stock Option Agreement further provides that if AIG 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 AIG 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 AIG.
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, in no
event shall AIG's Total Profit (as defined below) exceed $100 million.
"Total Profit" means the aggregate amount (before taxes) of (i) any
termination fees received by AIG pursuant to the Merger Agreement, (ii) any cash
payments as described under the second and third paragraphs under "-- The
Option" above that are received by AIG pursuant to the Stock Option Agreement,
(iii) any amount of cash received by AIG for the repurchase of the Option Shares
by American Bankers less the purchase price paid by AIG for such shares and (iv)
any net cash amounts received by AIG pursuant to the sale of the Option Shares
to an unaffiliated party less the purchase price paid by AIG for such shares.
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 Original Stock Option Agreement. If the Option cannot be exercised
or the Option Shares cannot be delivered to AIG 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
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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.
Exercise of Option
Subsequent to the announcement of Cendant's proposal, AIG on January 27,
1998 sent a notice to American Bankers exercising its option to purchase the
8,265,626 shares of Common Stock issuable under the Stock Option Agreement. The
consummation of such purchase is subject to applicable regulatory approvals.
Issuance of the shares subject to the Stock Option Agreement may delay or make
more difficult an acquisition of American Bankers by a person other than AIG.
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 AIG to enter into the Original 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 AIG
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, except that disposals of Shares or New Shares by each Shareholder for
proceeds not exceeding certain specified dollar amounts are permitted.
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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, 1998.
AMENDMENT TO AMERICAN BANKERS' RIGHTS AGREEMENT
On December 19, 1997, American Bankers and ChaseMellon Shareholder
Services, L.L.C., a New York banking corporation (as successor to Manufacturers
Hanover Trust Company) ("Chase"), entered into an amendment to the Rights
Agreement dated as of November 24, 1988, as Amended and Restated as of November
14, 1990 (the "Rights Agreement") which provided that the execution, delivery or
consummation of the transactions contemplated by the Original Merger Agreement,
the Original Stock Option Agreement and the Voting Agreement would not cause the
rights contemplated by the Rights Agreement to become exercisable.
On February 5, 1998, American Bankers entered into a further amendment to
the Rights Agreement which provided that a Distribution Date under the Rights
Agreement will be the Close of Business (as defined in the Rights Agreement) on
the day (or such later date as may be determined by action of the American
Bankers Board, upon approval by a majority of the Continuing Directors (as
defined in the Rights Agreement)) which is the earlier of (i) the tenth day
after the first date of public announcement by American Bankers or an Acquiring
Person (as defined in the Rights Agreement) that an Acquiring Person has become
such or (ii) the tenth business day after the date that a tender or exchange
offer by any person (other than American Bankers and certain exempted persons)
is first published or sent or given within the meaning of Rule 14d-2(a), if upon
consummation thereof, such person would become the beneficial owner of fifteen
percent or more of the shares of Common Stock then outstanding. Pursuant to the
Rights Agreement, as so amended, the American Bankers Board resolved that the
Distribution Date will not occur until such date as may be determined by action
of the American Bankers Board in accordance with the terms of the Rights
Agreement, as amended.
On February 19, 1998, American Bankers entered into a further amendment to
the Rights Agreement which clarified that although, pursuant to the Rights
Agreement, as it has been amended, AIG, AIGF or their affiliates will not be
deemed to be an Acquiring Person (as defined in the Rights Agreement) solely by
reason of the execution, delivery or consummation of the transactions,
contemplated by the Original Merger Agreement, the Original Stock Option
Agreement and the Voting Agreement, any acquisition of shares of Common Stock by
AIG, AIGF or any of their affiliates other than pursuant to the Original Merger
Agreement, the Original Stock Option Agreement, and the Voting Agreement would
cause such entity to become an Acquiring Person (as defined in the Rights
Agreement).
The Rights Agreement expired in accordance with its terms on March 10,
1998. On February 19, 1998, American Bankers adopted the New Rights Agreement
pursuant to which the New Rights will be distributed as a dividend at a rate of
one New Right for each share of Common Stock held by shareholders of record on
the close of business on March 10, 1998. The New Rights Agreement is
substantially identical to the existing Rights Agreement, as it has been
amended, except the exercise price has been set at $75 and the expiration date
is March 10, 2003.
EMPLOYMENT AGREEMENTS
American Bankers has entered into employment agreements with Mr. Gerald
Gaston (the "Gaston Employment Agreement"), and Mr. Floyd Denison (the "Denison
Employment Agreement") (collectively, the "Employment Agreements"). Each of Mr.
Gaston and Mr. Denison are referred to herein as "executives". The Employment
Agreements become effective commencing on the Effective Time and continue for
five years. Pursuant to the terms of the Gaston Employment Agreement and the
Denison Employment Agreement, respectively, Mr. Gaston will serve as President
and Chief Executive Officer of American Bankers, and Mr. Denison will serve as
American Bankers's Executive Vice President -- Finance. During the
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term of the Employment Agreements, each executive will be allowed to participate
in all general employee benefit plans and programs (including incentive and
other executive compensation plans from time to time in effect for senior
executives of American Bankers).
Pursuant to the Employment Agreements, in the event of a termination of
employment by American Bankers other than for Cause (as defined in the
Employment Agreements), or a termination of employment by the executive for Good
Reason (as defined in the Employment Agreements), the executive will be entitled
to receive an amount equal to the maximum amount that would not constitute a
"parachute payment" (as defined in Section 280G of the Code, or any successor
provision), as determined by American Bankers's independent auditors as of the
executive's date of termination.
The Employment Agreements provide that (i) in the event of termination of
employment due to the death of the executive prior to the expiration of the
term, American Bankers will pay to such executive's designated beneficiary or
estate an amount equal to one hundred and fifty (150%) percent of executive's
base annual salary in effect on the date of termination, and (ii) in the event
of termination of employment due to the disability (as defined in the Employment
Agreements) of the executive prior to the expiration of the term, American
Bankers will pay to such executive's designated beneficiary or estate an amount
equal to fifty (50%) percent of executive's base annual salary in effect on the
date of termination.
The Employment Agreements provide that during the term of executive's
employment and for the three-year period thereafter, each executive agrees that
he will not, directly or indirectly, own, manage, operate, control, be employed
by, advise or in any manner participate or engage in any business competitive
with any business in which American Bankers or any of its affiliates is engaged
at the time of executive's termination or thereafter. In addition, the
Employment Agreements provide that during the term of executive's employment and
for the two-year period thereafter, each executive agrees that he will not,
directly or indirectly, on behalf of executive or any other person, (i) solicit
for employment by other than American Bankers any person who is at such time
employed by American Bankers or its affiliates (or who was so employed at any
time during the one-year period prior to executive's date of termination), or
(ii) solicit or accept business from (x) any customer of American Bankers or its
affiliates, if such customer had dealings with American Bankers or its
affiliates at any time during the one-year period immediately preceding
executive's date of termination, or (y) any customer prospect of American
Bankers or its affiliates, if such customer prospect had been the subject of
solicitations by American Bankers or its affiliates at any time during the
one-year period immediately preceding executive's date of termination.
On and after the Effective Time, the Employment Agreements will supersede
the severance agreements currently in effect between American Bankers and the
executives.
AMENDMENTS TO SEVERANCE AGREEMENTS
American Bankers is currently a party to severance agreements (the
"Severance Agreements") with Messrs. Michael Ray, Stephen T. Williams, Leonardo
F. Garcia, Jason J. Israel, Thomas Hayes, Arthur Heggen, R. Kirk Landon, Jay
Fuchs, Eugene Becker, Sanford Neubarth, and Philip Bruce Camacho (each, an
"Officer", and collectively "Officers"). Pursuant to the Merger Agreement,
American Bankers has agreed to use its best efforts to cause the Officers to
agree to amendments to the Severance Agreements.
Severance Agreements that were entered into prior to 1989 (the "Prior
Severance Agreements") provide that an Officer is entitled to receive payment of
an amount (the "Designated Amount") equal to twice the Officer's Current Annual
Salary (as defined in the Severance Agreement) in the event that American
Bankers is Merged or Sold (as defined in the Severance Agreement), regardless of
whether the Officer had terminated his employment. Under the terms of the Prior
Severance Agreements, American Bankers would be treated as having been Merged or
Sold as a result of the consummation of the Merger, and the Officers would be
entitled to payment of an amount equal to the Designated Amount. The proposed
amendment to the Prior Severance Agreements would provide (i) that no payment
will be due to an Officer solely as a result of American Bankers being Merged or
Sold, and (ii) that upon the termination of the employment of the Officer for
Good Reason (as defined in the proposed amendment) or under certain other
circumstances during the 24-month period following the date on which American
Bankers is Merged or Sold (as defined in the Severance Agreement), the Officer
would be entitled to receive payment of an amount equal to the Designated
Amount.
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Severance Agreements that were entered into after 1988 (the "Recent
Severance Agreements") provide that if, within 24 months following a Change of
Control (as defined in the Recent Severance Agreements) of American Bankers, an
Officer in good faith determines that there has been a significant adverse
change in circumstances affecting such 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 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 Bankers's independent auditors. The Recent Severance Agreements also
provide that within fifteen (15) business days following the occurrence of a
Change in Control (as defined in the Recent Severance Agreements) of American
Bankers, American Bankers is required to deposit with an escrow agent an amount
(the "Escrow Deposit") equal to the Maximum Amount calculated as of the date of
such Change in Control. The proposed amendment to the Recent 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 Recent
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
Recent 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).
INFORMATION REGARDING AIG
AIG is a holding company with a market capitalization, as of December 31,
1997, of approximately $76 billion, which through its subsidiaries is primarily
engaged in a broad range of insurance and insurance-related activities and
financial services in the United States and abroad. AIG's primary activities
include both general and life insurance operations. The principal insurance
company subsidiaries are American Home Assurance Company, National Union Fire
Insurance Company of Pittsburgh, Pa., New Hampshire Insurance Company, Lexington
Insurance Company, American International Underwriters Overseas, Ltd., American
Life Insurance Company, American International Assurance Company, Limited, Nan
Shan Life Insurance Company, Ltd., The Philippine American Life and General
Insurance Company, American International Reinsurance Company, Ltd. and United
Guaranty Residential Insurance Company.
AIG's general insurance subsidiaries are multiple line companies writing
substantially all lines of property and casualty insurance. One or more of these
companies is licensed to write substantially all of these lines in all states of
the United States and in more than 100 foreign countries.
AIG's life insurance subsidiaries offer a wide range of traditional
insurance and financial and investment products. One or more of these
subsidiaries is licensed to write life insurance in all states in the United
States and in over 70 foreign countries.
AIG operations which contribute to financial services income include
primarily A.I. Credit Corp. ("AICCO"), AIG Financial Products Corp. and its
subsidiary companies ("AIGFP"), AIG Trading Group Inc. and its subsidiaries
("AIGTG"), International Lease Finance Corporation ("ILFC") and UeberseeBank AG.
AICCO's business is principally in premium financing. AIGFP structures financial
transactions, including long-dated interest rate and currency swaps and
structures borrowings through notes, bonds and guaranteed investment agreements.
AIGTG engages in various commodities trading, foreign exchange trading and
market making activities. ILFC is engaged primarily in the acquisition of new
and used commercial jet aircraft and the leasing and remarketing of such
aircraft to airlines around the world. UeberseeBank AG operates as a Swiss bank.
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.
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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 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.
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DESCRIPTION OF AIG CAPITAL STOCK
The following description does not purport to be complete and is qualified
in its entirety by reference to the AIG Certificate, the AIG Bylaws and the
Delaware General Corporation Law ("DGCL").
GENERAL
The authorized capital stock of AIG consists of 1,000,000,000 shares of
Common Stock and 6,000,000 shares of Serial Preferred Stock, par value $5.00 per
share ("AIG Preferred Stock"). As of December 31, 1997, there were 699,518,281
shares of AIG Common Stock outstanding, and no shares of AIG Preferred Stock
outstanding.
AIG COMMON STOCK
All of the outstanding shares of AIG Common Stock are fully paid and
nonassessable. Subject to the prior rights of the holders of AIG Preferred Stock
that may be issued and outstanding, the holders of AIG Common Stock are entitled
to receive dividends as and when declared by the AIG Board out of funds legally
available therefor, and, in the event of the dissolution of AIG, to share
ratably in all assets remaining after payment of liabilities and satisfaction of
the liquidation preferences, if any, of then outstanding shares of AIG Preferred
Stock, as provided in the AIG Certificate. Each holder of AIG Common Stock is
entitled to one vote for each share held of record on all matters presented to a
vote at a shareholders meeting, including the election of directors. Holders of
AIG Common Stock have no cumulative voting rights or preemptive rights to
purchase or subscribe for any stock or other securities and there are no
conversion rights or redemption or sinking fund provisions with respect to such
stock. Additional authorized shares of AIG Common Stock may be issued without
shareholder approval.
AIG PREFERRED STOCK
The authorized but unissued shares of AIG Preferred Stock are available for
issuance from time to time at the discretion of the AIG Board without
shareholder approval (except that the holders of the shares of AIG Series C
Preferred Stock shall have the right to vote on any issuance of AIG Preferred
Stock to the extent that such issuance would cause the total number of
outstanding shares of AIG Preferred Stock to exceed 3,500,000 and in the
circumstances described below under "-- Voting Rights"). The AIG Board has the
authority to determine for each series of AIG Preferred Stock it establishes the
number, designation, preferences, limitations, and relative rights of the shares
of such series, subject to applicable law and the provisions of any outstanding
series of AIG Preferred Stock (including the AIG Series C Preferred Stock). The
terms of any series of AIG Preferred Stock, including without limitation the
dividend rate, redemption price, liquidation rights, sinking fund provisions,
conversion rights and voting rights, and any corresponding effect on other
shareholders, will be dependent largely on factors existing at the time of
issuance. Such terms and effects could include restrictions on dividends on the
AIG Common Stock if dividends on the AIG Preferred Stock are in arrears,
dilution of the voting power of other shareholders to the extent a series of the
AIG Preferred Stock has voting rights, and reduction of amounts available for
liquidation as a result of any liquidation preference granted to any series of
AIG Preferred Stock.
AIG SERIES C PREFERRED STOCK
The description set forth below of the AIG Series C Preferred Stock is
qualified in its entirety by reference to the Certificate of Designation for the
AIG Series C Preferred Stock, a copy of which is attached as Appendix V to this
Proxy Statement/Prospectus. A copy of the Certificate of Designation for the
Preferred Stock is attached as Appendix VI to this Proxy Statement/Prospectus.
The AIG Series C Preferred Stock has been authorized as a new series of AIG
Preferred Stock, consisting of 2,300,000 shares.
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Dividends
Holders of shares of AIG Series C Preferred Stock will be entitled to
receive, when, as and if declared by the AIG Board out of funds legally
available therefor, cash dividends at an annual rate of $3.125 per share,
payable quarterly in arrears on February 1, May 1, August 1 and November 1 of
each year, commencing on the date designated for payment following the quarterly
period in which the Merger closes (such dividend to accrue from the first day of
such quarterly period), except that if any such date is a Saturday, Sunday or
legal holiday then such dividend will be payable on the next day that is not a
Saturday, Sunday or legal holiday. Dividends will accrue and be cumulative from
such date of initial issuance and will be payable to holders of record as they
appear on the stock transfer books on such record dates as are fixed by the AIG
Board (provided that no record date shall be later than (a) the sixth business
day prior to the date fixed for any redemption of the AIG Series C Preferred
Stock or, (b) in the case of the dividend payment date occurring on August 1,
2000, the tenth business day prior to such date).
The AIG Series C Preferred Stock will have priority as to dividends over
the AIG Common Stock and any other series or class of AIG's stock hereafter
authorized over which the AIG Series C Preferred Stock has preference or
priority in the payment of dividends, when and if issued (collectively, "Junior
Dividend Stock"), and no dividend (other than dividends payable solely in stock
that is Junior Dividend Stock and that ranks junior to the AIG Series C
Preferred Stock as to distributions of assets upon liquidation, dissolution or
winding up of AIG, whether voluntary or involuntary (such stock that is junior
as to liquidation rights, "Junior Liquidation Stock") (the AIG Common Stock and
any other capital stock of AIG that is both Junior Dividend Stock and Junior
Liquidation Stock, "Junior Stock")) may be paid on any Junior Dividend Stock,
and no payment may be made on account of the purchase, redemption, retirement,
or other acquisition of Junior Dividend Stock or Junior Liquidation Stock (other
than in exchange solely for Junior Stock), unless all accrued and unpaid
dividends on the AIG Series C Preferred Stock for the then current period and
all dividend payment periods ending on or before the date of payment of such
dividends on Junior Dividend Stock, or such payment for such Junior Dividend
Stock or Junior Liquidation Stock, as the case may be, have been paid or
declared and set apart for payment. AIG may not pay dividends on the AIG Series
C Preferred Stock unless it has paid or declared and set apart for payment or
contemporaneously pays or declares and sets apart for payment all accrued and
unpaid dividends for all dividend payment periods on any class or series of
stock having parity with the AIG Series C Preferred Stock as to dividends
("Parity Dividend Stock") ratably, so that the amount of dividends declared and
paid per share on the AIG Series C Preferred Stock and such Parity Dividend
Stock will bear to each other the same ratio that the accrued and unpaid
dividends to the date of payment on AIG Series C Preferred Stock and such Parity
Dividend Stock bear to each other. No payment may be made on account of the
purchase, redemption, retirement or other acquisition of shares of Parity
Dividend Stock or other class or series of AIG's capital stock ranking on a
parity with the AIG Series C Preferred Stock as to distributions of assets upon
liquidation, dissolution or winding up of AIG, whether voluntary or involuntary
(such stock that has parity with the AIG Series C Preferred Stock as to
liquidation rights, "Parity Liquidation Stock") (other than such acquisitions
pursuant to employee or director or incentive or benefit plans or arrangements,
or in exchange solely for Junior Stock) unless all accrued and unpaid dividends
on the AIG Series C Preferred Stock for all dividend payment periods ending on
or before the date of payment on account of such acquisition of such Parity
Dividend Stock or Parity Liquidation Stock shall have been paid or declared and
set apart for payment.
The amount of dividends payable per share of AIG Series C Preferred Stock
for each quarterly dividend period will be computed by dividing the annual
dividend amount by four. The amount of dividends payable for any period shorter
than a full quarterly dividend period will be computed on the basis of a 360-day
year of twelve 30-day months. No interest will be payable in respect of any
dividend payment on the AIG Series C Preferred Stock which may be in arrears.
Under Delaware law, dividends (as well as other distributions) may be paid
on the capital stock of AIG only out of its capital surplus (that is, the excess
of AIG's net assets over the aggregate par value of all shares of capital stock
issued by AIG) or out of its net profits for the year in which the dividend is
declared and for the preceding year. See "Comparative Rights of Common
Shareholders -- Dividends." As AIG is a holding company with no significant
business operations, its primary sources of cash are dividends from its
insurance
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subsidiaries. Its insurance subsidiaries' ability to pay dividends without prior
regulatory approval is limited by applicable laws and regulations.
Liquidation Rights
In the case of the voluntary or involuntary liquidation, dissolution or
winding up of AIG, holders of shares of AIG Series C Preferred Stock are
entitled to receive the liquidation preference of $50 per share, plus an amount
equal to any accrued and unpaid dividends to the payment date, before any
payment or distribution is made to the holders of AIG Common Stock or any Junior
Liquidation Stock, but the holders of the shares of the AIG Series C Preferred
Stock will not be entitled to receive the liquidation preference of such shares
until the liquidation preference of any other series or class of stock hereafter
issued that ranks senior as to liquidation rights to the AIG Series C Preferred
Stock ("Senior Liquidation Stock") has been paid in full. The holders of AIG
Series C Preferred Stock and all series or classes of stock hereafter issued
that rank on a parity as to distributions of assets upon such liquidation,
dissolution or winding up of AIG with the AIG Series C Preferred Stock are
entitled to share ratably, in accordance with the respective preferential
amounts payable on such stock, in any distribution (after payment of the
liquidation preference of the Senior Liquidation Stock) which is not sufficient
to pay in full the aggregate of the amounts payable thereon. After payment in
full of the liquidation preference on shares of the AIG Series C Preferred
Stock, the holders of such shares will not be entitled to any further
participation in any distribution of assets by AIG. Neither a consolidation nor
merger of AIG with another corporation nor a sale or transfer of all or
substantially all of AIG's property or assets will be considered a liquidation,
dissolution or winding up of AIG.
Voting Rights
The holders of the AIG Series C Preferred Stock will not have voting rights
except as described below or as required by law. In exercising any such vote,
each outstanding share of AIG Series C Preferred Stock will be entitled to one
vote, excluding shares held by AIG or any entity controlled by AIG, which shares
shall have no voting rights.
Whenever dividends on the AIG Series C Preferred Stock or any outstanding
shares of Parity Dividend Stock have not been paid in an aggregate amount equal
to as least six quarterly dividends on such shares (whether or not consecutive),
the number of members of the AIG Board will be increased by two, and the holders
of the AIG Series C Preferred Stock, voting separately as a class with the
holders of Parity Dividend Stock on which like voting rights have been conferred
and are exercisable, will be entitled to elect such two additional directors who
shall continue to serve so long as such dividends remain in arrears. Such voting
rights will terminate when all such dividends accrued and unpaid have been
declared and paid or set apart for payment. The term of office of all directors
so elected will terminate immediately upon the termination of such voting rights
and the number of members of the AIG Board will be reduced by two.
In addition, so long as any AIG Series C Preferred Stock is outstanding,
AIG will not, without the affirmative vote or consent of the holders of at least
66 2/3% of all outstanding shares of AIG Series C Preferred Stock and
outstanding Parity Dividend Stock (voting as a single class), (i) amend, alter
or repeal (by merger or otherwise) any provision of the AIG Certificate or the
AIG Bylaws so as to affect adversely the relative rights, preferences,
qualifications, limitations, or restrictions of the AIG Series C Preferred
Stock, (ii) effect any reclassification of the AIG Series C Preferred Stock, or
(iii) issue shares of AIG Preferred Stock to the extent that doing so would
cause the total number of shares of AIG Preferred Stock outstanding after giving
effect to such issuance to exceed 3,500,000.
In addition to voting rights (if any) to which shares of AIG Series C
Preferred Stock are entitled pursuant to the DGCL, the holders of the
outstanding shares of AIG Series C Preferred Stock shall be entitled to vote as
a class if shareholder voting of the AIG Series C Preferred Stock would be
required by the FBCA (assuming AIG were then incorporated under the FBCA) upon a
proposed amendment to the AIG Certificate (or upon a plan of merger or share
exchange if such plan contains any provision that would, if contained in a
proposed amendment to the AIG Certificate, entitle such holders to vote as a
class as described in this paragraph), if the amendment would: (a) increase or
decrease the aggregate number of authorized
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shares of AIG Preferred Stock; (b) effect an exchange or reclassification of all
or part of the shares of AIG Preferred Stock into shares of another class; (c)
effect an exchange or reclassification, or create a right of exchange, of all or
part of the shares of another class into shares of AIG Preferred Stock; (d)
change the designation, rights, preferences, or limitations of all or part of
the shares of AIG Preferred Stock; (e) change the shares of all or part of the
AIG Preferred Stock into a different number of shares of AIG Preferred Stock;
(f) create a new class of shares having rights or preferences with respect to
distributions or to dissolution that are prior, superior, or substantially equal
to the shares of AIG Preferred Stock; (g) increase the rights, preferences, or
number of authorized shares of any class that, after giving effect to the
amendment, have rights or preferences with respect to distributions or to
dissolution that are prior, superior, or substantially equal to the shares of
AIG Preferred Stock; (h) limit or deny an existing preemptive right of all or
part of the shares of AIG Preferred Stock; or (i) cancel or otherwise affect
rights to distributions or dividends that have accumulated but not yet been
declared on all or part of the shares of AIG Preferred Stock.
If a proposed amendment to the AIG Certificate would affect the shares of
AIG Series C Preferred Stock in one or more of the ways described in the
preceding paragraph, the shares of AIG Series C Preferred Stock shall be
entitled to vote as a separate class on the proposed amendment. If a proposed
amendment to the AIG Certificate that would entitle the shares of AIG Series C
Preferred Stock and one or more other series of AIG Preferred Stock to vote as
separate classes as described in the preceding sentence or paragraph (assuming
AIG were then incorporated under the FBCA) would affect shares of AIG Series C
Preferred Stock and such one or more other series of AIG Preferred Stock in the
same or a substantially similar way, the shares of AIG Series C Preferred Stock
and the shares of such one or more other series of AIG Preferred Stock so
affected shall vote together as a single class on the proposed amendment. The
shares of AIG Series C Preferred Stock shall also be entitled to any other
voting rights afforded by Florida law (assuming AIG were then incorporated under
the FBCA).
Redemption at Option of AIG
The AIG Series C Preferred Stock may not be redeemed prior to August 7,
2000. On or after such date, the AIG Series C Preferred Stock may be redeemed by
AIG, at its option, in whole or in part at any time, subject to the limitations,
if any, imposed by the FBCA (assuming AIG were then incorporated under the
FBCA), at a cash redemption price of $51.88 per share, plus accrued and unpaid
dividends to but excluding the redemption date, if redeemed on or prior to
August 6, 2001, and at the following redemption prices per share, if redeemed
during the 12-month period ending August 6:
<TABLE>
<CAPTION>
REDEMPTION
PRICE
YEAR PER SHARE
---- ----------
<S> <C>
2002.............................................. $51.56
2003.............................................. 51.25
2004.............................................. 50.94
2005.............................................. 50.63
2006.............................................. 50.31
</TABLE>
and thereafter at $50 per share plus, in each case, accrued and unpaid dividends
to but excluding the redemption date. If fewer than all the outstanding shares
of AIG Series C Preferred Stock are to be redeemed, AIG will select those shares
to be redeemed pro rata or by lot or in such other manner as the AIG Board may
determine to be fair. There is no mandatory redemption or sinking fund
obligation with respect to the AIG Series C Preferred Stock. If at any time
dividends on the AIG Series C Preferred Stock are in arrears, AIG may not redeem
less than all of the then outstanding shares of the AIG Series C Preferred Stock
until all accrued dividends for all past dividend periods have been paid in
full.
Notice of redemption will be mailed at least 30 days but not more than 90
days before the date fixed for redemption to each holder of record of shares of
AIG Series C Preferred Stock to be redeemed at the address shown on the stock
transfer books. No fractional shares of AIG Series C Preferred Stock will be
issued upon a redemption of less than all of the AIG Series C Preferred Stock,
but in lieu thereof, an appropriate amount
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will be paid in cash based on the value for the shares of AIG Series C Preferred
Stock as determined in good faith by the AIG Board. After the date fixed for
redemption, dividends will cease to accrue on the shares of AIG Series C
Preferred Stock called for redemption and other rights of the holders of such
shares will terminate, except the right to receive the redemption price without
interest, and all conversion privileges will terminate on the business day prior
to the date fixed for redemption.
Conversion Rights
The holder of any shares of AIG Series C Preferred Stock will have the
right, at the holder's option, to convert any or all shares into AIG Common
Stock at any time at a conversion rate (subject to adjustment as described
below) equal to $50 divided by a conversion price (the "conversion price") of
$25.0325 (such conversion price to be adjusted following the Merger (assuming
the Merger is deemed a Common Stock Fundamental Change under the terms of the
Preferred Stock) by multiplying it by a fraction of which the numerator shall be
the Purchaser Stock Price and the denominator shall be the Applicable Price
(each as defined) except that if the AIG Series C Preferred Stock is called for
redemption, the conversion right will terminate at 5:00 p.m. New York City time
on the business day prior to the date fixed for such redemption and if not
exercised prior to such time, such conversion right will be lost, unless AIG
defaults in making the payment due upon redemption. Except as provided in the
next paragraph, no payment or adjustment will be made upon any conversion of any
share of AIG Series C Preferred Stock or on account of any dividends on the AIG
Common Stock issued upon conversion (except that if a converting holder of AIG
Series C Preferred Stock is eligible for a dividend on both the AIG Series C
Preferred Stock and AIG Common Stock issued upon conversion, the holder is
entitled to the higher of such dividend amounts). Following conversion, the
holder will no longer have any right to payment of dividends on the shares
surrendered for conversion. No fractional shares of AIG Common Stock will be
issued upon conversion but, in lieu thereof, an appropriate amount will be paid
in cash based on the reported last sale price for the shares of AIG Common Stock
on the NYSE on the day of such conversion.
If AIG, by dividend or otherwise, declares or makes a distribution on the
AIG Common Stock referred to in clause (iv) or (v) of the next following
paragraph, the holders of the AIG Series C Preferred Stock, upon the conversion
thereof subsequent to the close of business on the date fixed for the
determination of shareholders entitled to receive such distribution and prior to
the effectiveness of the conversion price adjustment in respect of such
distribution, will be entitled to receive for each share of AIG Common Stock
into which each such share of AIG Series C Preferred Stock is converted the
portion of the shares of AIG Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash and assets so distributed applicable
to one share of AIG Common Stock; provided, however, that AIG may, with respect
to all holders so converting, in lieu of distributing any portion of such
distribution not consisting of cash or securities of AIG, pay such holder cash
equal to the fair market value thereof (as determined by the AIG Board).
The conversion price will be subject to adjustment in certain events
including, without duplication: (i) dividends (and other distributions) payable
in AIG Common Stock on any class of capital stock of AIG; (ii) the issuance to
all holders of AIG Common Stock of rights or warrants entitling holders of such
rights or warrants to subscribe for or purchase AIG Common Stock at less than
the then current market price (as defined); (iii) subdivisions and combinations
of AIG Common Stock; (iv) distributions to all holders of AIG Common Stock of
evidences of indebtedness of AIG, shares of capital stock, cash or assets
(including securities, but excluding those rights, warrants, dividends and
distributions referred to above and dividends and distributions paid exclusively
in cash); and (v) distributions consisting of cash, excluding (A) cash that is
part of a distribution referred to in (iv) above, and (B) any cash representing
an amount per share of AIG Common Stock of any quarterly cash dividend to the
extent it does not exceed the amount per share of AIG Common Stock of the next
preceding quarterly cash dividend (as adjusted to reflect any of the events
referred to in clauses (i) through (v) of this sentence) or all of such
quarterly cash dividends if the amount thereof per share of AIG Common Stock
multiplied by four does not exceed 15% of the current market price (as defined)
of AIG Common Stock on the trading day (as defined) next preceding the date of
declaration of such
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dividend. Following certain adjustments to the conversion price, notice of such
event will be mailed to the holders of the AIG Series C Preferred Stock.
In the event AIG adopts a shareholder rights plan that affords holders of
AIG Common Stock the right to purchase shares of AIG Common Stock, or shares of
common stock of a corporation that enters into certain business combinations or
other transactions with AIG, following the occurrence of certain triggering
events, the adoption of such plan and the distribution of such rights shall not
require any of the adjustments contemplated by the preceding paragraph, provided
that (a) if and so long as such rights are attached to shares of AIG Common
Stock pursuant to the terms of such rights plan, shares of AIG Common Stock
issued upon the conversion of shares of AIG Series C Preferred Stock shall have
attached to them such rights in the amount then attached to each outstanding
share of AIG Common Stock, and (b) in the event that such rights separate from
the AIG Common Stock and become exercisable pursuant to such rights plan, there
shall then be deemed to have occurred an issuance of rights for which adjustment
would be made as described in the preceding paragraph.
The foregoing adjustments to the conversion price are designed to
compensate the holders of the AIG Series C Preferred Stock for the value of the
cash, securities or other assets that they would have otherwise received had
they converted their AIG Series C Preferred Stock into shares of AIG Common
Stock prior to such distribution. Such adjustment would generally result in a
reduced conversion price, which would entitle the holders of AIG Series C
Preferred Stock to receive a greater number of shares of AIG Common Stock upon
conversion of the AIG Series C Preferred Stock into AIG Common Stock.
AIG from time to time may reduce the conversion price by any amount for any
period of time of at least 20 days, in which case AIG shall give at least 15
days' notice of such reduction, if the AIG Board has made a determination that
such reduction would be in the best interest of AIG, which determination shall
be conclusive.
In the event that AIG is a party to any transaction (including, without
limitation, a merger, consolidation, sale of all or substantially all of AIG's
assets, recapitalization or reclassification of the AIG Common Stock (each of
the foregoing being referred to as an "AIG Transaction")), in each case (except
in the case of a Common Stock Fundamental Change (as defined)) as a result of
which shares of AIG Common Stock shall be converted into the right to receive
securities, cash or other property, each share of the AIG Series C Preferred
Stock shall thereafter be convertible into the kind and amount of securities,
cash and other property receivable upon the consummation of such AIG Transaction
by a holder of that number of shares of AIG Common Stock into which one share of
the AIG Series C Preferred Stock was convertible immediately prior to such AIG
Transaction (or in the case of a Common Stock Fundamental Change, common stock
of the kind received by the holders of AIG Common Stock as a result of such
Common Stock Fundamental Change) (but after giving effect to any adjustment
discussed in the next paragraph relating to a Fundamental Change (as defined) if
such AIG Transaction constitutes a Fundamental Change, and subject to funds
being legally available for such purpose under applicable law at the time of
such conversion).
Notwithstanding any other provision in the preceding paragraphs to the
contrary, if any Fundamental Change occurs, then the conversion price in effect
will be adjusted immediately after such Fundamental Change as described below.
In addition, in the event of a Common Stock Fundamental Change, each share of
the AIG Series C Preferred Stock shall be convertible solely into common stock
of the kind received by holders of AIG Common Stock as the result of such Common
Stock Fundamental Change. For purposes of calculating any adjustment to be made
pursuant to this paragraph in the event of a Fundamental Change, immediately
after such Fundamental Change:
(i) in the case of a Non-Stock Fundamental Change (as defined), the
conversion price of the AIG Series C Preferred Stock will thereupon become
the lower of (A) the conversion price in effect immediately prior to such
Non-Stock Fundamental Change, but after giving effect to any other prior
adjustments, and (B) the result obtained by multiplying the greater of the
Applicable Price or the then applicable Reference Market Price (as defined)
by a fraction of which the numerator will be $50 and the denominator will
be the then current redemption price per share (or, for periods prior to
August 7, 2000, an amount per share determined in accordance with the AIG
Certificate); and
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(ii) in the case of a Common Stock Fundamental Change, the conversion
price of the AIG Series C Preferred Stock in effect immediately prior to
such Common Stock Fundamental Change, but after giving effect to any other
prior adjustments, will thereupon be adjusted by multiplying such
conversion price by a fraction, of which the numerator will be the
Purchaser Stock Price and the denominator will be the Applicable Price;
provided, however, that in the event of a Common Stock Fundamental Change
in which (A) 100% of the value of the consideration received by a holder of
AIG Common Stock is common stock of the successor, acquiror or other third
party (and cash, if any, is paid with respect to any fractional interests
in such common stock resulting from such Common Stock Fundamental Change)
and (B) all of the AIG Common Stock will have been exchanged for, converted
into, or acquired for, common stock (and cash with respect to fractional
interests) of the successor, acquiror or other third party, the conversion
price of the AIG Series C Preferred Stock in effect immediately prior to
such Common Stock Fundamental Change will thereupon be adjusted by dividing
such conversion price by the number of shares of common stock of the
successor, acquiror, or other third party received by a holder of one share
of AIG Common Stock as a result of such Common Stock Fundamental Change.
The foregoing conversion price adjustments in the event of a Non-Stock
Fundamental Change will apply in situations whereby all or substantially all of
the AIG Common Stock is acquired in a transaction in which 50% or less of the
value received by holders of AIG Common Stock consists of common stock that has
been admitted for listing on a national securities exchange or quoted on the
Nasdaq National Market. If the market price of the AIG Common Stock immediately
prior to a Non-Stock Fundamental Change is lower than the applicable conversion
price of the AIG Series C Preferred Stock then in effect, the conversion price
will be adjusted as described in (i) above and the holders of the AIG Series C
Preferred Stock will be entitled to receive the amount and kind of consideration
that would have been received if the AIG Series C Preferred Stock had been
converted into AIG Common Stock prior to the Non-Stock Fundamental Change after
giving effect to such adjustment.
The foregoing conversion price adjustments in the event of a Common Stock
Fundamental Change will apply in situations whereby more than 50% of the value
received by holders of AIG Common Stock consists of common stock of another
company that has been admitted for listing on a national securities exchange or
quoted on the Nasdaq National Market, in which case the AIG Series C Preferred
Stock will become convertible into shares of common stock of the other company.
If consideration for the AIG Common Stock consists partly of common stock of
another company and partly of other securities, cash or property, each share of
AIG Series C Preferred Stock will be convertible solely into a number of shares
of such common stock determined so that the initial value of such shares
(measured as described in the definition of Purchaser Stock Price below) equals
the value of the shares of AIG Common Stock into which such share of AIG Series
C Preferred Stock Price was convertible immediately before the transaction
(measured as described in the definition of Applicable Price below). If
consideration for AIG Common Stock is solely common stock of another company,
each share of AIG Series C Preferred Stock will be convertible into the same
number of shares of such common stock receivable by a holder of the number of
shares of AIG Common Stock into which such share of AIG Series C Preferred Stock
was convertible immediately before such transaction.
Depending upon whether the Fundamental Change is a Non-Stock Fundamental
Change or a Common Stock Fundamental Change, a holder may receive significantly
different consideration upon conversion. In the event of a Non-Stock Fundamental
Change, the holder has the right to convert each share of the AIG Series C
Preferred Stock into the kind and amount of shares of stock and other securities
or property or assets receivable by a holder of the number of shares of AIG
Common Stock issuable upon conversion of such share of the AIG Series C
Preferred Stock immediately prior to such Non-Stock Fundamental Change, but
after giving effect to the adjustment described above. However, in the event of
a Common Stock Fundamental Change in which less than 100% of the value of the
consideration received by a holder of AIG Common Stock is common stock of the
acquiror or other third party, a holder of a share of the AIG Series C Preferred
Stock who converts a share following the Common Stock Fundamental Change will
receive consideration in the form of such common stock only, whereas a holder
who has converted his share prior to the Common Stock Fundamental Change will
receive consideration in the form of common stock as well as any other
securities or assets (which may include cash) receivable thereupon by a holder
of the number of shares of AIG Common
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Stock issuable upon conversion of such share of AIG Series C Preferred Stock
immediately prior to such Common Stock Fundamental Change.
The term "Applicable Price" means (i) in the event of a Non-Stock
Fundamental Change in which the holders of the AIG Common Stock receive only
cash, the amount of cash received by the holder of one share of AIG Common Stock
and (ii) in the event of any other Non-Stock Fundamental Change or any Common
Stock Fundamental Change, the average of the Closing Prices (as defined) for the
AIG Common Stock during the ten trading days prior to and including the record
date for the determination of the holders of AIG Common Stock entitled to
receive cash, securities, property or other assets in connection with such Non-
Stock Fundamental Change or Common Stock Fundamental Change, or, if there is no
such record date, the date upon which the holders of the AIG Common Stock shall
have the right to receive such cash, securities, property or other assets, in
each case, as adjusted in good faith by the AIG Board to reflect appropriately
any of the events referred to in clauses (i) through (v) of the third paragraph
of this Conversion Rights subsection.
The term "Closing Price" of any common stock means on any day the last
reported sale price regular way on such day or in case no sale takes place on
such day, the average of the reported closing bid and asked prices regular way
in each case on the New York Stock Exchange or, if the common stock is not
listed or admitted to trading on such Exchange, on the principal national
securities exchange or quotation system on which the common stock is listed or
admitted to trading or quoted, or, if not listed or admitted to trading or
quoted on any national securities exchange or quotation system, the average of
the closing bid and asked prices in the over-the-counter market on such day as
reported by the National Quotation Bureau Incorporated, or a similarly generally
accepted reporting service, or, if not so available in such manner, as furnished
by any New York Stock Exchange Member firm selected by AIG for that purpose.
The term "Common Stock Fundamental Change" means any Fundamental Change in
which more than 50% of the value (as determined in good faith by the AIG Board)
of the consideration received by holders of AIG Common Stock consists of common
stock that for each of the ten consecutive trading days referred to in the
second preceding paragraph has been admitted for listing or admitted for listing
subject to notice of issuance on a national securities exchange or quoted on the
Nasdaq National Market, provided, however, that a Fundamental Change shall not
be a Common Stock Fundamental Change unless either (i) AIG continues to exist
after the occurrence of such Fundamental Change and the outstanding shares of
AIG Series C Preferred Stock continue to exist as outstanding AIG Series C
Preferred Stock, or (ii) not later than the occurrence of such Fundamental
Change, the outstanding shares of AIG Series C Preferred Stock are converted
into or exchanged for shares of convertible preferred stock of a corporation
succeeding to the business of AIG, which convertible preferred stock has powers,
preferences and relative, participating, optional or other rights, and
qualifications, limitations and restrictions, substantially similar to those of
the AIG Series C Preferred Stock.
The term "Fundamental Change" means the occurrence of any transaction or
event in connection with a plan pursuant to which all or substantially all of
the AIG Common Stock shall be exchanged for, converted into, acquired for or
constitute solely the right to receive cash, securities, property or other
assets (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise) provided, in the case of a plan involving more than one such
transaction or event, for purposes of adjustment of the conversion price, such
Fundamental Change shall be deemed to have occurred when substantially all of
the AIG Common Stock shall be exchanged for, converted into, or acquired for or
constitute solely the right to receive cash, securities, property or other
assets, but the adjustment shall be based upon the highest weighted average per
share consideration which a holder of AIG Common Stock could have received in
such transactions or events as a result of which more than 50% of the AIG Common
Stock shall have been exchanged for, converted into, or acquired for or
constitute solely the right to receive cash, securities, property or other
assets.
The term "Non-Stock Fundamental Change" means any Fundamental Change other
than a Common Stock Fundamental Change.
The term "Purchaser Stock Price" means, with respect to any Common Stock
Fundamental Change, the average of the Closing Prices for the common stock
received in such Common Stock Fundamental Change for
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the ten consecutive trading days prior to and including the record date for the
determination of the holders of AIG Common Stock entitled to receive such common
stock, or if there is no such record date, the date upon which the holders of
the AIG Common Stock shall have the right to receive such common stock, in each
case, as adjusted in good faith by the AIG Board to appropriately reflect any of
the events referred to in clauses (i) through (v) of the third paragraph of this
subsection; provided, however,that if no such Closing Prices exist, the
Purchaser Stock Price shall be set at a price determined in good faith by the
AIG Board.
The term "Reference Market Price" shall mean $13.46 and in the event of any
adjustment to the conversion price other than as a result of a Fundamental
Change, the Reference Market Price shall also be adjusted so that the ratio of
the Reference Market Price to the conversion price after giving effect to any
such adjustment shall always be the same ratio of $13.46 to the initial
conversion price specified in the first sentence of this subsection.
Notwithstanding the foregoing provisions, the issuance of any shares of AIG
Common Stock pursuant to any plan providing for the reinvestment of dividends or
interest payable on securities of AIG and the investment of additional optional
amounts in shares of AIG Common Stock under any such plan, and the issuance of
any shares of AIG Common Stock or options or rights to purchase such shares
pursuant to any employee benefit plan or program of AIG or pursuant to any
option, warrant, right or exercisable, exchangeable or convertible security
outstanding as of the date the AIG Series C Preferred Stock was first designated
(other than the occurrence of certain events under a shareholder rights plan),
and any issuance of rights under a shareholder rights plan shall not be deemed
to constitute an issuance of AIG Common Stock or exercisable, exchangeable or
convertible securities by AIG to which any of the adjustment provisions
described above applies. There shall also be no adjustment of the conversion
price in case of the issuance of any stock (or securities convertible into or
exchangeable for stock) of AIG, except as specifically described above. If any
action would require adjustment of the conversion price pursuant to more than
one of the provisions described above, only one adjustment shall be made and
such adjustment shall be the amount of adjustment which has the highest absolute
value to holders of the AIG Series C Preferred Stock. No adjustment in the
conversion price will be required unless such adjustment would require an
increase or decrease of at least 1% of the conversion price, but any adjustment
that would otherwise be required to be made shall be carried forward and taken
into account in any subsequent adjustment.
Lack of Established Market for the AIG Series C Preferred Stock
There is currently no public market for the AIG Series C Preferred Stock.
Although an application will be made prior to the Effective Time for the listing
of the AIG Series C Preferred Stock on the NYSE, there can be no assurance that
an active market for the AIG Series C Preferred Stock will develop or that, if
the AIG Series C Preferred Stock is approved for such listing, such listing will
continue while the AIG Series C Preferred Stock is outstanding. Future trading
prices for the AIG Series C Preferred Stock will depend on many factors,
including, among others, AIG's financial results, the market for similar
securities and the volume of trading activity in the AIG Series C Preferred
Stock.
COMPARATIVE RIGHTS OF COMMON SHAREHOLDERS
AIG is incorporated under the laws of the State of Delaware. American
Bankers is incorporated under the laws of the State of Florida. The holders of
shares of Common Stock whose rights as shareholders are currently governed by
Florida law, the American Bankers Articles, and the American Bankers Bylaws,
will, upon the exchange of their shares pursuant to the Merger, become holders
of shares of AIG Common Stock, and their rights as such will be governed by
Delaware law, the AIG Certificate and the AIG Bylaws. The material differences
between the rights of holders of shares of Common Stock and the rights of
holders of shares of AIG Common Stock, which result from differences in their
governing corporate documents and differences in Delaware and Florida corporate
law, are summarized below.
The following summary is not intended to be complete and is qualified in
its entirety by reference to the FBCA, the DGCL, the American Bankers Articles,
the American Bankers Bylaws, the AIG Certificate and the AIG Bylaws, as
appropriate. The identification of specific differences is not meant to indicate
that other
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equally or more significant differences do not exist. Copies of the American
Bankers Articles, the American Bankers Bylaws, the AIG Certificate and the AIG
Bylaws are incorporated by reference herein and will be sent to holders of
Common Stock upon request. See "Incorporation of Certain Documents by Reference"
and "Available Information."
AUTHORIZED CAPITAL
The American Bankers Articles provide for authorized stock consisting of
100,000,000 shares of Common Stock, $1.00 par value and 10,000,000 shares of
Preferred Stock, no par value, of which (i) 350,000 have been authorized as
Series A Participating Preferred Stock and (ii) 2,300,000 have been authorized
as $3.125 Series B Cumulative Convertible Preferred Stock.
The AIG Certificate provides for authorized stock consisting of
1,000,000,000 shares of AIG Common Stock, $2.50 par value, and 6,000,000 shares
of AIG Preferred Stock, $5.00 par value, of which 2,300,000 shares have been
authorized as AIG Series C Preferred Stock.
ELECTION AND SIZE OF BOARD OF DIRECTORS
The FBCA requires that a board of directors consist of one or more natural
persons, or as set forth in a corporation's articles of incorporation or bylaws.
The FBCA permits staggered boards of directors of up to three separate classes
if authorized in the articles of incorporation. The American Bankers Articles
provide for a classified board of directors, consisting of three classes of
directors: Class I, Class II, and Class III. The American Bankers Articles state
that the number of directors in each class shall be as nearly equal in number as
possible. Each class is elected in successive years for a term of three years.
The American Bankers Articles fix the number of directors at not less than
twelve nor more than eighteen. Currently, there are 15 directors. The American
Bankers Articles provide that the number of directors shall be increased by two
directors elected by the holders of the Preferred Stock if quarterly dividends
are in arrears for six quarters or more, whether consecutive or not.
Nominations for the American Bankers Board may be made by the American
Bankers Board or by any shareholder entitled to vote for the election of
directors and who complies with certain notice provisions in the American
Bankers Articles.
Under Delaware law, directors, unless their terms are staggered, are
elected at each annual shareholder meeting. Vacancies on the board of directors
may be filled by the shareholders or directors, unless the certificate of
incorporation or a bylaw provides otherwise. The certificate of incorporation
may authorize the election of certain directors by one or more classes or series
of shares, and the certificate of incorporation, an initial bylaw or a bylaw
adopted by a vote of the shareholders may provide for staggered terms for the
directors. The certificate of incorporation or the bylaws also may allow the
shareholders or the board of directors to fix or change the number of directors,
but a corporation must have at least one director. Under Delaware law,
shareholders do not have cumulative voting rights unless the certificate of
incorporation so provides.
The AIG Bylaws provide that directors are elected by a plurality of votes
at annual meetings and hold office until the annual meeting of shareholders next
succeeding their election until successors are elected and qualified or until
their earlier resignation or removal.
The AIG Certificate provides that the number of directors shall be fixed in
the manner provided in the AIG Bylaws. The AIG Bylaws fix the number of
directors at not less than seven nor more than 21. Currently there are 17
directors. The AIG Bylaws provide that the size of the AIG Board may be
increased by the vote of a majority of directors then in office, although less
than a quorum, or by the affirmative vote of the holders of a majority of the
outstanding shares of all classes of stock entitled to vote thereon.
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REMOVAL OF DIRECTORS
The FBCA entitles shareholders to remove directors either for cause or
without cause, unless the articles of incorporation provide that removal may be
for cause only. Directors elected by a particular voting group may only be
removed by the shareholders of that voting group. The American Bankers Articles
provide that any director may be removed, but only for cause and at a regular
shareholders meeting or a shareholders meeting called for that express purpose,
by a vote of the holders of 75% or more of the outstanding shares of the capital
stock of American Bankers then entitled to vote at an election of directors. No
decrease in the number of directors shall shorten the term of any incumbent
director.
Under the DGCL, a director of a corporation that does not have a classified
board of directors or cumulative voting may be removed (with or without cause)
with the approval of a majority of the outstanding shares entitled to vote. The
AIG Bylaws provide that any director may be removed, with or without cause, by
the holders of a majority of the shares entitled to vote at an election of
directors.
VACANCIES ON THE BOARD OF DIRECTORS
The FBCA provides that, unless the articles provide otherwise, vacancies
arising on the board of directors may be filled by a majority of the remaining
directors, even if no quorum remains, or by the shareholders. When directors are
divided into classes, vacancies may be filled by the shareholders or, if at
least one director remains in the class, by the remaining directors of that
class. Where a vacancy will be known to occur at some point in the future, it
may be filled in advance, although the new director will not take office until
the vacancy actually occurs. The American Bankers Articles provide that any
vacancies on the American Bankers Board occurring for any reason or from the
creation of new directorships shall be filled by the affirmative vote of a
majority of the remaining directors in the class in which the vacancy occurs,
or, if none so remain, by a majority vote of the directors of the other two
classes. Directors so appointed hold office until the next regularly scheduled
election of directors for that class.
Under Delaware law, the board of directors of a corporation may fill any
vacancy on the board, including vacancies resulting from an increase in the
number of directors. The AIG Bylaws provide that any vacancy created by the
removal of directors with or without cause by holders of a majority of shares
entitled to vote at an election of directors may be filled by the same majority
(or by a majority of the holders of a class or series of shares where such class
or series is entitled to elect one or more of the directors of the class from
which directors were so removed.) Other vacancies and newly created
directorships resulting from any increase in the authorized number of directors
elected by all of the shareholders having a right to vote as a single class or
from any other cause may be filled by a majority of directors then in office,
although less than a quorum, or by the sole remaining director. Whenever the
holders of any class or series of stock are entitled to elect one or more
directors, vacancies and newly created directorships of such class or series
may, unless otherwise provided in the AIG Certificate, be filled by a majority
of the directors elected by such class or series thereof then in office, or by
the sole remaining director so elected.
ACTION BY WRITTEN CONSENT
The FBCA allows shareholders or all of the directors to take action without
a meeting through the use of a written consent unless provided otherwise in the
articles of incorporation. The American Bankers Articles provide that action of
shareholders may only be taken at properly called annual or special meetings of
shareholders and that shareholders may not act by written consent.
Delaware law provides that, unless limited by the certificate of
incorporation, any action that could be taken by shareholders at a meeting may
be taken without a meeting if a consent (or consents) in writing, setting forth
the action so taken, is signed by the holders of record of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted. The AIG Bylaws provide that any action which is
required by law to be taken or which may be taken at any meeting of
shareholders, may be taken without a meeting, without prior notice and without a
vote, by consent in writing of shareholders having not less than the minimum
number of votes that would be necessary to take the action at a meeting. Prompt
notice of an action
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taken by written consent which is not unanimous is required to be given to those
shareholders who do not consent.
AMENDMENTS TO CHARTER
Any amendment, alteration, change or repeal of the articles dealing with
the composition of the American Bankers Board (Article V), the approval of
certain business combinations (Article VIII), meetings of shareholders (Article
IX) and the amendment procedure (Article X), require the approval of at least
85% of the shares eligible to vote, including at least 50% of the shares
eligible to vote other than those held by a 30% Shareholder (as defined in the
American Bankers Articles), except where such change has been recommended to the
shareholders by at least a majority of the American Bankers Board and by at
least two-thirds of the continuing directors. Amendments to any other sections
of the American Bankers Articles are governed by the FBCA, which generally
requires approval by a majority of the shareholders entitled to vote thereon.
Under Delaware law, unless a higher vote is required in the certificate of
incorporation, an amendment to the certificate of incorporation of a corporation
may be approved by a majority of the outstanding shares entitled to vote upon
the proposed amendment. The AIG Certificate provides AIG with the right to
amend, alter, change or repeal any provision contained in the AIG Certificate in
the manner prescribed by law and states that the rights and powers conferred
therein on shareholders, directors and officers are subject to such reserved
power.
AMENDMENTS TO BYLAWS
Under the FBCA, bylaws may be amended by the directors or the shareholders
unless the articles of incorporation expressly provide that only shareholders
may do so. Bylaws adopted by the shareholders may provide that they may not be
amended or repealed by the directors. The American Bankers Bylaws may be
repealed or amended and new bylaws may be adopted by either the majority vote of
the full American Bankers Board or by the holders of a majority of the
outstanding stock entitled to vote thereon. The American Bankers Board may not
amend or repeal any bylaw adopted by the shareholders if the shareholders
specifically provide that it is not subject to amendment or repeal by the
American Bankers Board.
The DGCL provides that a corporation's bylaws may be amended by that
corporation's shareholders, or, if so provided in the corporation's certificate
of incorporation, the power to amend the corporation's bylaws may also be
conferred on the corporation's directors. The AIG Certificate gives its
directors the power to make, alter, amend, change, add to or repeal the AIG
Bylaws. The AIG Bylaws provide that they may be amended or repealed, and new
bylaws may be adopted, by the affirmative vote of a majority of the AIG Board,
but the holders of a majority of the shares then entitled to vote may adopt
additional bylaws and may amend or repeal any bylaw whether or not adopted by
them.
SPECIAL MEETINGS OF SHAREHOLDERS
Under the FBCA, a special meeting of shareholders may be called by a
corporation's board of directors or any other person authorized to do so in the
articles of incorporation or bylaws. Special meetings may also be called on
demand of at least 10% of all shares eligible to vote on the matter to be
considered, although this percentage may be increased in the articles of
incorporation to a maximum of 50%. Only business within the purpose of the
special meeting notice may be conducted at such meeting. The American Bankers
Articles provide that special meetings may be called by the holders of at least
75% of the Voting Shares (as defined in the American Bankers Articles) or as
otherwise provided in the bylaws. The American Bankers Bylaws provide that
special meetings of shareholders may be held at any place within or without the
State of Florida, and may be called by the American Bankers Board, the Executive
Committee, the Chief Executive Officer or when requested in writing by the
holders of 75% of the Voting Shares, as defined in the American Bankers
Articles.
Delaware law provides that special meetings of the shareholders of a
corporation may be called by the corporation's board of directors or by such
other persons as may be authorized in the corporation's certificate
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of incorporation or bylaws. The AIG Bylaws provide that special meetings of
shareholders may be held at any place within or without the State of Delaware,
and may be called by the Chairman, a Vice Chairman, if any, the President, if
any, the Secretary or the AIG Board and shall be called by the Secretary upon
the written request of shareholders who together own of record 25% or more of
the outstanding shares of each class of stock entitled to vote at such meeting.
VOTE ON EXTRAORDINARY CORPORATE TRANSACTIONS
Under the FBCA, and subject to certain exceptions (including those
described in "--Business Combination Restrictions"), the approval of a merger,
plan of liquidation or sale of all or substantially all of a corporation's
assets other than in the regular course of business requires the recommendation
of the corporation's board of directors and an affirmative vote of at least 50%
of the shareholders eligible to vote thereon. The American Bankers Articles
require, in addition to the approvals mandated by law, the approval by the
holders of at least 85% of the outstanding shares of capital stock eligible to
vote, which shall include the affirmative vote of at least 50% of the Voting
Shares (as defined in the American Bankers Articles) held by shareholders other
than any 30% Shareholder, to approve any of the following transactions:
- Any merger or consolidation of American Bankers or a subsidiary thereof
with a 30% Shareholder or any corporation that would be an affiliate of a
30% Shareholder;
- Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition to or with any 30% Shareholder of any assets with a value of
$5,000,000 or more;
- The issuance or transfer by American Bankers or a subsidiary thereof of
any stock or securities to any 30% Shareholder with a value in $5,000,000
or more;
- The adoption of any proposal or plan of liquidation or dissolution; or
- Any reclassification of securities, recapitalization, reorganization,
merger or other consolidation or any similar transaction which has the
effect of increasing the proportionate shares owned directly or
indirectly by any 30% Shareholder.
The American Bankers Articles eliminate this shareholder approval
requirement where the American Bankers Board has, by at least a 75% vote of the
members then in office, approved the 30% Shareholders' acquisition of 30% or
more of the outstanding shares of Common Stock or has approved the business
combination prior to the 30% Shareholder having become a 30% Shareholder.
Alternatively, the shareholder approval described above is not required when a
series of conditions, including the mailing of a proxy statement to the holders
of all shares eligible to vote, are met. Because the American Bankers Board
approved the Merger Agreement, the Stock Option Agreement, the Voting Agreement,
the Merger and the Tender Offer, this provision will not be applicable thereto.
Delaware law provides that, unless otherwise specified in a corporation's
certificate of incorporation or unless the provisions of Delaware law relating
to business combinations discussed below under "-- Business Combination
Restrictions" are applicable, a sale or other disposition of all or
substantially all of the corporation's assets, a merger or consolidation of the
corporation with another corporation or a dissolution of the corporation
requires the affirmative vote of the board of directors (except in certain
limited circumstances) plus, with certain exceptions, the affirmative vote of a
majority of the outstanding stock entitled to vote thereon. The foregoing
provisions apply to AIG. The AIG Certificate does not contain vote requirements
for extraordinary corporate transactions in addition to the approvals mandated
by law.
INSPECTION OF DOCUMENTS
Under the FBCA, a shareholder is entitled to inspect and copy the articles
of incorporation, bylaws, certain board and shareholder resolutions, certain
written communications to shareholders, a list of the names and business
addresses of the corporation's directors and officers, and the corporation's
most recent annual report, during regular business hours if the shareholder
gives at least five business days' prior written notice to the corporation. In
addition, a shareholder of a Florida corporation is entitled to inspect and copy
other books
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and records of the corporation during regular business hours if the shareholder
gives at least five business days' prior written notice to the corporation and
(1) the shareholder's demand is made in good faith and for a proper purpose, (2)
the demand describes with particularity its purpose and the records to be
inspected or copied and (3) the requested records are directly connected with
such purpose. The FBCA also provides that a corporation may deny any demand for
inspection if the demand was made for an improper purpose or if the demanding
shareholder has, within two years preceding such demand, sold or offered for
sale any list of shareholders of the corporation or any other corporation, has
aided or abetted any person in procuring a list of shareholders for such purpose
or has improperly used any information secured through any prior examination of
the records of the corporation or any other corporation.
The DGCL allows any shareholder, upon written demand under oath stating the
purpose thereof, the right during the usual hours for business to inspect for
any proper purpose the corporation's stock ledger, a list of its shareholders,
and its other books and records, and to make copies or extracts therefrom. A
proper purpose means a purpose reasonably related to such person's interest as a
shareholder.
DIVIDENDS
The FBCA permits a corporation's board of directors to make distributions
to its shareholders so long as the corporation is not left unable to pay its
debts as they become due in the ordinary course of business, or the corporation
is not left with total assets that are less than the sum of the corporation's
total liabilities plus its obligations upon dissolution to satisfy preferred
shareholders whose preferential rights are superior to those receiving the
distribution. Under the FBCA, a corporation's redemption of its own capital
stock is deemed to be a distribution.
The American Bankers Articles provide that the Preferred Stock is entitled
to receive, when, as and if declared by the American Bankers Board, dividends at
the rate of $3.125 per annum per share, which are fully cumulative. No dividends
or other distributions, other than stock dividends, may be paid on shares of
Common Stock, unless and until all accrued and unpaid dividends for the
Preferred Stock for all dividend periods are paid or set aside and declared for
payment.
Subject to any restrictions contained in a corporation's certificate of
incorporation, Delaware law generally provides that a corporation may declare
and pay dividends out of "surplus" (defined as the excess, if any, of net assets
(total assets less total liabilities) over capital) or, when no surplus exists,
out of net profits for the fiscal year in which the dividend is declared and/or
the preceding fiscal year, except that dividends may not be paid out of net
profits if the capital of the corporation is less than the amount of capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. In accordance with the DGCL,
"capital" is determined by the board of directors and shall not be less than the
aggregate par value of the outstanding capital stock of the corporation having
par value.
The AIG Bylaws provide that the AIG Board may, out of funds legally
available and at any regular or special meeting, declare dividends upon the
capital stock of AIG as and when it deems expedient. All outstanding classes of
AIG Preferred Stock, including the AIG Series C Preferred Stock, shall rank
senior to the AIG Common Stock in respect of the right to receive dividends.
APPRAISAL RIGHTS OF DISSENTING SHAREHOLDERS
The FBCA provides that unless a corporation's articles of incorporation
provide otherwise, which American Banker's Articles do not, a shareholder does
not have dissenters' rights with respect to a plan of merger, share exchange or
proposed sale or exchange of property if the shares held by the shareholder are
either registered on a national securities exchange or designated as a national
market systems security on an interdealer quotation system designated by the
NASD or held of record by 2,000 or more shareholders. Consequently, appraisal
rights are not available to holders of Common Stock or Preferred Stock in
connection with the Merger. See "The Merger -- Absence of Appraisal Rights."
Under Delaware law, in certain circumstances a shareholder of a Delaware
corporation is generally entitled to demand appraisal and obtain payment of the
judicially determined fair value of his or her shares in
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the event of any plan of merger or consolidation to which the corporation, the
shares of which he or she holds, is a party, provided such shareholder
continuously holds such shares through the effective date of the merger,
otherwise complies with the requirement of Delaware law for the perfection of
appraisal rights and does not vote in favor of the merger. However, this right
to demand appraisal does not apply to shareholders if: (1) they are shareholders
of a surviving corporation and if a vote of the shareholders of such corporation
is not necessary to authorize the merger or consolidation; and (2) the shares
held by the shareholders are of a class or series registered on the NYSE or the
American Stock Exchange (the "ASE"), designated as a national market system
security on an interdealer quotation system by the NASD or are held of record by
more than 2,000 shareholders on the date set to determine the shareholders
entitled to vote on the merger or consolidation. Notwithstanding the above,
appraisal rights are available for the shares of any class or series of stock of
a Delaware corporation if the holders thereof are required by the terms of an
agreement of merger or consolidation to accept for their stock anything except:
(i) shares of stock of the corporation surviving or resulting from the merger or
consolidation; (ii) shares of stock of any other corporation which at the
effective date of the merger or consolidation will be listed on the NYSE or the
ASE, designated as a national market system security on an interdealer quotation
system by the NASD or held of record by more than 2,000 shareholders; (iii) cash
in lieu of fractional shares of the corporations described in (i) and (ii); or
(iv) any combination of the shares of stock and cash in lieu of fractional
shares described in (i), (ii) and (iii).
A Delaware corporation may provide in its certificate of incorporation that
appraisal rights shall be available for the shares of any class or series of its
stock as the result of an amendment to its certificate of incorporation, any
merger or consolidation to which the corporation is a party or a sale of all or
substantially all of the assets of the corporation. The AIG Certificate does not
contain any provision regarding appraisal rights.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The FBCA permits a corporation to indemnify officers, directors, employees
and agents for actions taken in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation, and
with respect to any criminal action, which they had no reasonable cause to
believe was unlawful. The FBCA provides that a corporation may advance
reasonable expenses of defense (upon receipt of an undertaking to reimburse the
corporation if indemnification is ultimately determined not to be appropriate)
and must reimburse a successful defendant for expenses, including attorneys'
fees, actually and reasonably incurred. The FBCA also permits a corporation to
purchase liability insurance for its directors, officers, employees and agents.
The FBCA provides that indemnification may not be made for any claim, issue or
matter as to which a person has been adjudged by a court of competent
jurisdiction to be liable to the corporation, unless and only to the extent a
court determines that the person is entitled to indemnity for such expenses as
the court deems proper. In the Merger Agreement, AIG has agreed to continue the
indemnification rights of officers and directors of American Bankers with
respect to matters existing or occurring prior to the Effective Time and to
continue directors and officers liability insurance coverage, as described above
in "The Merger Agreement -- Certain Other Covenants." The American Bankers
Articles provide for indemnification for any present or former director or
officer to the fullest extent permitted by the FBCA.
Under Delaware law, a corporation may indemnify any person made a party or
threatened to be made a party to any type of proceeding (other than an action by
or in the right of the corporation) because he is or was an officer, director,
employee or agent of the corporation or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
entity, against expenses, judgments, costs and amounts paid in settlement
actually and reasonably incurred in connection with such proceeding: (1) if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation; or (2) in the case of a
criminal proceeding, he had no reasonable cause to believe that his conduct was
unlawful. A corporation may indemnify any person made a party or threatened to
be made a party to any threatened, pending or completed action or suit brought
by or in the right of the corporation because he was an officer, director,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
other entity, against expenses actually and reasonably incurred in connection
with such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation,
except that there may be no
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such indemnification if the person is found liable to the corporation unless, in
such a case, the court determines the person is entitled thereto. A corporation
must indemnify a director, officer, employee or agent against expenses actually
and reasonably incurred by him who successfully defends himself in a proceeding
to which he was a party because he was a director, officer, employee or agent of
the corporation. Expenses incurred by an officer or director (or other employees
or agents as deemed appropriate by the board of directors) in defending a civil
or criminal proceeding may be paid by the corporation in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the corporation. The
Delaware law indemnification and expense advancement provisions are not
exclusive of any other rights which may be granted by the bylaws, a vote of
shareholders or disinterested directors, agreement or otherwise.
The AIG Certificate provides for the indemnification to the fullest extent
permitted by law of any person made, or threatened to be made, a party to an
action, suit or proceeding (whether, civil, criminal, administrative or
investigative) by reason of the fact that he or his testator or intestate is or
was a director, officer or employee of AIG or serves or served any other
enterprise at the request of AIG.
LIMITATION OF LIABILITY
The FBCA provides that a director is not personally liable for monetary
damages to the corporation or any other person for any statement, vote,
decision, or failure to act, regarding corporate management or policy unless the
director breached or failed to perform his statutory duties as a director and
such breach or failure (1) constitutes a violation of criminal law, unless the
director had reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful, (2) constitutes a
transaction from which the director derived an improper personal benefit, (3)
results in an unlawful distribution, (4) in a derivative action or an action by
a shareholder, constitutes conscious disregard for the best interests of the
corporation or willful misconduct or (5) in a proceeding other than a derivative
action or an action by a shareholder, constitutes recklessness or an act or
omission which was committed in bad faith or with malicious purpose or in a
manner exhibiting wanton and willful disregard of human rights, safety or
property.
Delaware law permits a corporation to adopt a provision in its certificate
of incorporation eliminating or limiting the personal liability of a director to
the corporation or its shareholders for monetary damages for beach of fiduciary
duty as a director, except that such provision shall not limit the liability of
a director for (i) any breach of the director's duty of loyalty to the
corporation or its shareholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
liability under Section 174 of the DGCL for unlawful payment of dividends or
stock purchases or redemptions, or (iv) any transaction from which the director
derived an improper personal benefit. The AIG Certificate provides that no
director of AIG shall be liable to it or its shareholders for monetary damages
for breach of fiduciary duly as a director, except to the extent such an
exemption from liability or limitation thereof is not permitted under the DGCL.
PREEMPTIVE RIGHTS
Under the FBCA, shareholders of a corporation have no preemptive rights
unless provided for in the articles of incorporation. The American Bankers
Articles contain no provision for preemptive rights.
Delaware law does not provide (except in limited instances) for preemptive
rights to acquire a corporation's unissued stock. However, such right may be
expressly granted to the shareholders in a corporation's certificate or articles
of incorporation. The AIG Certificate provides that holders of AIG Common Stock
and AIG Series C Preferred Stock are not entitled to preemptive rights.
SPECIAL REDEMPTION PROVISIONS
The FBCA permits a corporation to acquire its own shares. Shares of
Preferred Stock are subject to optional redemption by American Bankers at any
time after August 7, 2000.
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Under the DGCL, a corporation may purchase or redeem shares of any class of
its capital stock, but subject generally to the availability of sufficient
lawful funds therefor and provided that at all times, at the time of any such
redemption, the corporation shall have outstanding shares of one or more classes
or series of capital stock which have full voting rights that are not subject to
redemption. The AIG Certificate contains no provision for special redemptions of
shares of its capital stock.
PREFERRED STOCK PURCHASE RIGHTS
The American Bankers Board has adopted the Rights Agreement, pursuant to
which one preferred stock purchase right (a "Right" or "Rights") was issued with
respect to each share of Common Stock. As a result of the two-for-one split of
Common Stock paid on September 12, 1997, one-half of a Right is associated with
each share of Common Stock. Each right entitles the registered holder thereof to
purchase 1/100th of a share of Series A Participating Preferred Stock at a price
of $33.00 per share, subject to adjustment (the "Purchase Price").
The Rights are represented by the Common Stock share certificates and are
not exercisable until a Distribution Date and will expire at the close of
business on March 10, 1998. A Distribution Date is defined as the earlier of the
following: (i) ten (10) days following the date of public announcement by
American Bankers or an Acquiring Person (as defined below) that an Acquiring
Person has become such or (ii) ten (10) business days after the date that a
tender or exchange offer by any person is first published or given within the
meaning of Rule 14d-2(a) of General Rules and Regulation under the Exchange Act,
if upon consummation thereof such person would be the beneficial owner of 15% or
more of the shares of Common Stock then outstanding. An Acquiring Person is any
person who or which, together with all Affiliates and Associates of such person
(as defined in the Rights Agreement), is the beneficial owner of 15% or more of
the shares of Common Stock then outstanding. The Rights will first become
exercisable on a Distribution Date, unless earlier redeemed or exchanged, and
may then begin trading separately.
Each holder of a Right (other than those owned by the Acquiring Person,
which shall be void) will have the right to receive upon exercise that number of
shares of Common Stock (or, if applicable, common stock of the entity surviving
any business combination with American Bankers or which acquires American
Bankers) having a market value of two times the then current Purchase Price of
one Right in the event of certain mergers, acquisitions and other transactions
as specified in the Rights Agreement.
On December 19, 1997, February 5, 1998 and February 19, 1998 the Rights
Agreement was amended as described above in "Related Agreements and
Transactions -- Amendment to American Bankers' Rights Agreement". Therefore, the
Rights Agreement will be inapplicable to the Original Merger Agreement, the
Original Stock Option Agreement, the Voting Agreement and the merger, although
any acquisition of shares of Common Stock by AIG or any of its affiliates other
than pursuant to such agreements would cause such entity to become an Acquiring
Person (as defined in the Rights Agreement). In addition, the American Bankers
Board has resolved that the Distribution Date (as defined in the Rights
Agreement) will not occur until such date as may be determined by action of the
American Bankers Board in accordance with the terms of the Rights Agreement, as
amended. Furthermore, in the Original Merger Agreement, American Bankers has
agreed, if requested by AIG prior to the Effective Time, that the American
Bankers Board will take all necessary action to terminate or redeem all of the
outstanding Rights and to terminate the Rights Agreement, effective immediately
prior to the Effective Time.
The Rights Agreement expired in accordance with its terms on March 10,
1998. On February 19, 1998, American Bankers adopted the New Rights Agreement
pursuant to which the New Rights will be distributed as a dividend at a rate of
one New Right for each share of Common Stock held by shareholders of record on
the close of business on March 10, 1998. The New Rights Agreement is
substantially identical to the existing Rights Agreement, as it has been
amended, except the exercise price has been set at $75 and the expiration date
is March 10, 2003.
Delaware case law authorizes Delaware corporations to issue stock purchase
rights. The AIG Board has not adopted a shareholder rights agreement.
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SHAREHOLDER SUITS
Under the FBCA, a person may not bring a derivative action unless the
person was a shareholder of the corporation at the time of the challenged
transaction or unless the person acquired his shares by operation of law from a
person who was a shareholder at such time.
Under Delaware law, a shareholder may institute a lawsuit against one or
more directors, either on his own behalf, or derivatively on behalf of the
corporation. An individual shareholder may also commence a lawsuit on behalf of
himself and other similarly situated shareholders when the requirements for
maintaining a class action under Delaware law have been met.
BUSINESS COMBINATION RESTRICTIONS
Section 607.0901 of the FBCA provides that the approval of the holder of
two-thirds of the voting shares of a company, other than the shares beneficially
owned by an Interested Shareholder (as defined below), would be required to
effectuate certain transactions, including without limitation a merger,
consolidation, certain sales of assets, certain sales of shares, liquidation or
dissolution of the corporation, and reclassification of securities involving a
corporation and an Interested Shareholder (an "Affiliated Transaction"). An
"Interested Shareholder" is defined as the beneficial owner of more than 10% of
the voting shares outstanding. The foregoing special voting requirement is in
addition to the vote required by any other provision of the FBCA or the
provision in American Bankers Articles described above.
The special voting requirement does not apply in any of the following
circumstances: (i) the Affiliated Transaction is approved by a majority of the
corporation's disinterested directors; (ii) the Interested Shareholder has owned
at least 80% of the corporation's voting stock for five years; (iii) the
Interested Shareholder owns more than 90% of the corporation's voting shares;
(iv) the corporation has not had more than 300 shareholders of record at any
time during the three years preceding the announcement of the event; (v) the
corporation is an investment company registered under the Investment Company Act
of 1940; (vi) all of the following conditions are met: (a) the cash and fair
value of other consideration to be paid per share to all holders of voting
shares equals the highest per share price paid by the Interested Shareholder;
(b) the consideration to be paid in the Affiliated Transaction is in the same
form as previously paid by the Interested Shareholder (or certain alternative
benchmarks if higher); (c) during the portion of the three years proceeding the
announcement date that the Interested Shareholder has been an Interested
Shareholder, except as approved by a majority of the disinterested directors,
there shall have been no default in payment of any full periodic dividends, no
decrease in common stock dividends, no increase in the voting shares owned by
the Interested Shareholder, (d) during such three year period no benefit to the
Interested Shareholder in the form of loans, guaranties or other financial
assistance or tax advantages provided by the corporation, and (e) unless
approved by a majority of the disinterested directors, a proxy shall have been
mailed to holders of voting shares at least 25 days prior to the consummation of
the Affiliated Transaction. Because the American Bankers Board unanimously
approved the Merger Agreement, the Stock Option Agreement, the Voting Agreement,
the Merger and the Tender Offer, this provision will not be applicable thereto.
The American Bankers Bylaws provide that the Florida Control Share
Acquisitions Statute (FBCA sec.607.0902) does not apply to control-share
acquisitions of stock of American Bankers occurring on or after November 14,
1990.
In general, Section 203 of the DGCL prevents an "Interested Shareholder"
(defined generally as a person with 15% or more of a corporation's outstanding
voting stock, with the exception of any person who owned and has continued to
own shares in excess of the 15% limitation since December 23, 1987) from
engaging in a Business Combination with a Delaware corporation for three years
following the date such person became an Interested Shareholder. The term
"Business Combination" includes mergers or consolidations with an Interested
Shareholder and certain other transactions with an Interested Shareholder,
including, without limitation: (i) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (except proportionately as a shareholder of such
corporation) to or with the Interested Shareholder of assets (except
proportionately as a shareholder of the corporation) having an aggregate market
value equal to 10% or more of the aggregate market value of all assets of the
corporation or of certain subsidiaries thereof determined on a
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consolidated basis or the aggregate market value of all the outstanding stock of
the corporation; (ii) any transaction which results in the issuance or transfer
by the corporation or by certain subsidiaries thereof of stock of the
corporation or such subsidiary to the Interested Shareholder, except pursuant to
certain transfers in a conversion or exchange or pro rata distribution to all
shareholders of the corporation or certain other transactions, none of which
increase the Interested Shareholder's proportionate ownership of any class or
series of the corporation's or such subsidiary's stock; (iii) any transaction
involving the corporation or certain subsidiaries thereof which has the effect,
directly or indirectly, of increasing the proportionate share of the stock of
any class or series, or securities convertible into stock of the corporation or
any subsidiary which is owned by the Interested Shareholder (except as a result
of immaterial changes due to fractional share adjustments or as a result of any
purchase or redemption of any shares of stock not caused directly or indirectly
by the Interested Shareholder); or (iv) any receipt by the Interested
Shareholder of the benefit (except proportionately as a shareholder of such
corporation) of any loans, advances, guarantees, pledges, or other financial
benefits provided by or through the corporation or certain subsidiaries.
The three-year moratorium may be avoided if: (i) before such person became
an Interested Shareholder, the board of directors of the corporation approved
either the Business Combination or the transaction in which the Interested
Shareholder became an Interested Shareholder, or (ii) upon consummation of the
transaction which resulted in the shareholder becoming an Interested
shareholder, the shareholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced (excluding shares
held by directors who are also officers of the corporation and by employee stock
ownership plans that do not provide employees with the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer); or (iii) on or following the date on which such
person became an Interested Shareholder, the Business Combination is approved by
the board of directors of the corporation and authorized at an annual or special
meeting of shareholders (not by written consent) by the affirmative vote of the
shareholders of at least 66 2/3% of the outstanding voting stock of the
corporation not owned by the Interested Shareholder.
The Business Combination restrictions described above do not apply if,
among other things: (i) the corporation's original certificate of incorporation
contains a provision expressly electing not to be governed by the statute; (ii)
the corporation by action by the holders of a majority of the voting stock of
the corporation approves an amendment to its certificate of incorporation or
bylaws expressly electing not to be governed by the statute (effective twelve
(12) months after the amendment's adoption), which amendment shall not be
applicable to any business combination with a person who was an Interested
Shareholder at or prior to the time of the amendment; or (iii) the corporation
does not have a class of voting stock that is (a) listed on a national
securities exchange, (b) authorized for quotation on Nasdaq or a similar
quotation system; or (c) held of record by more than 2,000 shareholders. The
statute also does not apply to certain Business Combinations with an Interested
Shareholder when such combination is proposed after the public announcement of,
and before the consummation or abandonment of, a merger or consolidation, a sale
of 50% or more of the aggregate market value of the assets of the corporation on
a consolidated basis or the aggregate market value of all outstanding shares of
the corporation, or a tender offer for 50% or more of the outstanding voting
shares of the corporation, if the triggering transaction is with or by a person
who either was not an Interested Shareholder during the previous three years or
who became an Interested Shareholder with Board of Director approval, and if the
transaction is approved or not opposed by a majority of the current directors
who were also directors prior to any person becoming an Interested Shareholder
during the previous three years. AIG is subject to the Business Combination
restrictions described above. The AIG Certificate does not contain a provision
electing not to be governed by the Business Combination restrictions.
LEGAL MATTERS
The validity of the shares of AIG Series C Preferred Stock and AIG Common
Stock to be issued in connection with the Merger will be passed upon for AIG by
Kathleen E. Shannon, Esq., Vice President and Associate General Counsel of AIG.
106
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Sullivan & Cromwell, counsel to AIG, and Jorden Burt Boros Cicchetti
Berenson & Johnson LLP, counsel to American Bankers, will deliver opinions
concerning certain federal income tax consequences of the Merger.
EXPERTS
The consolidated financial statements and schedules of AIG at December 31,
1996 and 1995 and for the three year period ended December 31, 1996 incorporated
by reference in this Proxy Statement/Prospectus have been audited by Coopers &
Lybrand L.L.P., independent auditors, as set forth in their report thereon
included in AIG's Annual Report on Form 10-K for the year ended December 31,
1996 and incorporated herein by reference. Such consolidated financial
statements and schedules are incorporated herein by reference in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements incorporated in this Proxy
Statement/Prospectus by reference to the Annual Report on Form 10-K of American
Bankers for the year ended December 31, 1996, have been so incorporated in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in accounting and auditing.
107
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APPENDIX I
<PAGE> 105
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
AMERICAN BANKERS INSURANCE GROUP, INC.,
AMERICAN INTERNATIONAL GROUP, INC.
AND
AIGF, INC.
DATED AS OF DECEMBER 21, 1997,
AS AMENDED AND RESTATED
AS OF JANUARY 7, 1998,
AS AMENDED BY AMENDMENT
NO. 1 DATED AS OF
JANUARY 28, 1998, AND
AS AMENDED AND RESTATED
AS OF FEBRUARY 28, 1998
<PAGE> 106
TABLE OF CONTENTS
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RECITALS
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME
1.1. The Merger.................................................. I-1
1.2. Closing..................................................... I-1
1.3. Effective Time.............................................. I-2
1.4. Optional Tender Offer....................................... I-2
1.5. The Tender Offer............................................ I-2
(a) Conditions; Consideration; Schedule 14D-1.............. I-2
(b) Expiration Date........................................ I-2
(c) Schedule 14D-9; Meetings Of Stockholders............... I-3
(d) Mailing and Content of Offer Documents and Schedule
14D-9....................................................... I-3
(e) Directors.............................................. I-3
ARTICLE II
CHARTER AND BY-LAWS
OF THE SURVIVING CORPORATION
2.1. The Charter................................................. I-3
2.2. The By-Laws................................................. I-3
ARTICLE III
OFFICERS AND DIRECTORS
OF THE SURVIVING CORPORATION
3.1. Directors................................................... I-3
3.2. Officers.................................................... I-3
ARTICLE IV
EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES
4.1. Effect on Capital Stock..................................... I-4
(a) Common Stock Merger Consideration...................... I-4
(b) Preferred Stock Merger Consideration................... I-6
(c) Cancellation of Shares................................. I-6
(d) Merger Subsidiary...................................... I-6
(e) Election Form.......................................... I-6
(f) Tender Offer........................................... I-7
4.2. Exchange of Certificates for Shares......................... I-7
(a) Exchange Agent......................................... I-7
(b) Exchange Procedures.................................... I-7
(c) Distributions with Respect to Unexchanged Shares....... I-8
(d) Transfers.............................................. I-8
(e) Fractional Shares...................................... I-8
(f) Termination of Exchange Fund........................... I-8
(g) Lost, Stolen or Destroyed Certificates................. I-8
(h) Affiliates............................................. I-8
4.3. Dissenters' Rights.......................................... I-8
4.4. Adjustments to Prevent Dilution............................. I-9
4.5. Treatment of the Convertible Notes.......................... I-9
</TABLE>
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Company............... I-9
(a) Organization, Good Standing and Qualification.......... I-9
(b) Capital Structure...................................... I-9
(c) Corporate Authority; Approval and Fairness............. I-10
(d) Governmental Filings; No Violations.................... I-11
(e) Company Reports; Financial Statements.................. I-11
(f) Absence of Certain Changes............................. I-12
(g) Litigation and Liabilities............................. I-13
(h) Employee Benefits...................................... I-13
(i) Compliance with Laws; Permits......................... I-14
(j) Takeover Statutes..................................... I-15
(k) Environmental Matters.................................. I-15
(l) Tax Matters........................................... I-16
(m) Taxes................................................... I-16
(n) Labor Matters.......................................... I-17
(o) Intellectual Property.................................. I-17
(p) Material Contracts..................................... I-18
(q) Rights Plan............................................ I-18
(r) Brokers and Finders.................................... I-19
(s) Insurance Matters...................................... I-19
(t) Liabilities and Reserves............................... I-20
(u) Investment Company..................................... I-21
Representations and Warranties of Parent and Merger
5.2. Subsidiary.................................................. I-21
(a) Capitalization of Merger Subsidiary.................... I-21
(b) Organization, Good Standing and Qualification.......... I-21
(c) Capital Structure...................................... I-21
(d) Corporate Authority.................................... I-21
(e) Governmental Filings; No Violations.................... I-22
(f) Parent Reports; Financial Statements................... I-22
(g) Absence of Certain Changes............................. I-23
(h) Tax Matters............................................ I-23
(i) Brokers and Finders................................... I-23
(j) Insurance Matters..................................... I-23
ARTICLE VI
COVENANTS
6.1. Interim Operations.......................................... I-24
6.2. Acquisition Proposals....................................... I-25
6.3. Information Supplied........................................ I-26
6.4. Stockholders Meetings....................................... I-27
6.5. Filings; Other Actions; Notification........................ I-27
6.6. Taxation.................................................... I-28
6.7. Access...................................................... I-28
6.8. Affiliates.................................................. I-29
6.9. Stock Exchange Listing and De-listing....................... I-29
6.10. Publicity................................................... I-29
</TABLE>
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Benefits; Corporate Headquarters; School and Day Care
6.11. Facility.................................................... I-30
(a) Stock Options.......................................... I-30
(b) Employee Benefits...................................... I-30
(c) Corporate Headquarters................................. I-31
(d) School and Day Care Facility........................... I-31
6.12. Expenses.................................................... I-31
6.13. Indemnification; Directors' and Officers' Insurance......... I-31
6.14. Convertible Notes........................................... I-32
6.15. Other Actions by the Company and Parent..................... I-32
(a) Rights................................................. I-32
(b) Takeover Statute....................................... I-32
(c) Dividends.............................................. I-33
ARTICLE VII
CONDITIONS
Conditions to Each Party's Obligation to Effect the
7.1. Merger...................................................... I-33
(a) Stockholder Approval................................... I-33
(b) Listing................................................ I-33
(c) Regulatory Consents.................................... I-33
(d) Litigation............................................. I-33
(e) S-4.................................................... I-33
(f) Blue Sky Approvals..................................... I-33
7.2. Conditions to Obligations of Parent and Merger Subsidiary... I-33
(a) Representations and Warranties......................... I-33
(b) Performance of Obligations of the Company.............. I-34
(c) Consents............................................... I-34
(d) Tax Opinion............................................ I-34
(e) Affiliates Letters..................................... I-34
7.3. Conditions to Obligation of the Company..................... I-34
(a) Representations and Warranties......................... I-34
(b) Performance of Obligations of Parent and Merger
Subsidiary.................................................. I-34
(c) Consents Under Agreements.............................. I-35
(d) Tax Opinion............................................ I-35
Waiver of Conditions Following Consummation of Tender
7.4. Offer....................................................... I-35
ARTICLE VIII
TERMINATION
8.1. Termination by Mutual Consent............................... I-35
8.2. Termination by Either Parent or the Company................. I-35
8.3. Termination by the Company.................................. I-36
8.4. Termination by Parent....................................... I-36
8.5. Effect of Termination and Abandonment....................... I-36
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1. Survival.................................................... I-37
9.2. Modification or Amendment................................... I-37
9.3. Waiver of Conditions........................................ I-37
9.4. Counterparts................................................ I-37
9.5. GOVERNING LAW; WAIVER OF JURY TRIAL......................... I-38
9.6. Notices..................................................... I-38
9.7. Entire Agreement; No Other Representations.................. I-39
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9.8. No Third Party Beneficiaries................................ I-39
9.9. Obligations of Parent and of the Company.................... I-39
9.10. Severability................................................ I-39
9.11. Interpretation.............................................. I-39
9.12. Assignment.................................................. I-40
9.13. Alternative Transaction Structure........................... I-40
</TABLE>
Exhibit A -- Stock Option Agreement
Exhibit B -- Voting Agreement
Exhibit C -- Form of Affiliate Letter
Exhibit D -- Amendment of Severance Agreement (Form A)
Exhibit E -- Amendment of Severance Agreement (Form B)
iv
<PAGE> 110
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, DATED AS OF DECEMBER 21,
1997, AS AMENDED AND RESTATED AS OF JANUARY 7, 1998, AS AMENDED BY AMENDMENT NO.
1 DATED AS OF JANUARY 28, 1998, AND AS AMENDED AND RESTATED AS OF FEBRUARY 28,
1998 (AS SO AMENDED AND RESTATED, HEREINAFTER THIS "AGREEMENT"), AMONG AMERICAN
BANKERS INSURANCE GROUP, INC., A FLORIDA CORPORATION (THE "COMPANY"), AMERICAN
INTERNATIONAL GROUP, INC., A DELAWARE CORPORATION ("PARENT"), AND AIGF, INC., A
FLORIDA CORPORATION AND A WHOLLY-OWNED SUBSIDIARY OF PARENT ("MERGER
SUBSIDIARY," THE COMPANY AND MERGER SUBSIDIARY SOMETIMES BEING HEREINAFTER
COLLECTIVELY REFERRED TO AS THE "CONSTITUENT CORPORATIONS.")
RECITALS
WHEREAS, the respective boards of directors of each of Parent, Merger
Subsidiary and the Company have determined that the merger of the Company with
and into Merger Subsidiary (the "Merger") upon the terms and subject to the
conditions set forth in this Agreement is advisable and have approved the
Merger;
WHEREAS, it is intended that, for federal income tax purposes, the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code");
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Parent's willingness to enter into this
Agreement, the Company and Parent have entered into a Stock Option Agreement
dated as of the date of this Agreement and attached hereto as Exhibit A (the
"Stock Option Agreement"), pursuant to which the Company has granted Parent an
option to purchase shares of common stock of the Company under certain
circumstances;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Parent's willingness to enter into this
Agreement, certain stockholders of the Company and Parent have entered into a
Voting Agreement dated as of the date of this Agreement and attached hereto as
Exhibit B (the "Voting Agreement"), pursuant to which such stockholders have
agreed, among other things, to vote their shares of common stock of the Company
in favor of the Merger; and
WHEREAS, the Company, Parent and Merger Subsidiary desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME; OPTIONAL TENDER OFFER
1.1. The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, at the Effective Time (as defined in Section 1.3) the Company
shall be merged with and into Merger Subsidiary and the separate corporate
existence of the Company shall thereupon cease. Merger Subsidiary shall be the
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation"), and the separate corporate existence of Merger
Subsidiary with all its rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger, except as set forth in Article III. The
Merger shall have the effects specified in the Florida Business Corporation Act,
as amended (the "FBCA").
1.2. Closing. The closing of the Merger (the "Closing") shall take place
(i) at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New York
at 9:00 A.M. on the business day designated by Parent, which shall be not
earlier than the first business day on which, and not later than the fifth
business day following the first business day on which, the last to be fulfilled
or waived of the conditions set forth in
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<PAGE> 111
Article VII (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions) shall be satisfied or waived in accordance with this Agreement or
(ii) at such other place and time and/or on such other date as the Company and
Parent may agree in writing (the "Closing Date").
1.3. Effective Time. As soon as practicable following the Closing, the
Company and Parent will cause Articles of Merger (the "Articles of Merger") to
be executed, acknowledged and filed with the Secretary of State of the State of
Florida (the "Secretary") as provided in Section 607.1105 of the FBCA. The
Merger shall become effective at the time the Secretary accepts for record the
Articles of Merger or at such later time agreed by the parties and established
under the Articles of Merger (the "Effective Time").
1.4. Optional Tender Offer. Parent shall be entitled at any time after
the date hereof, at its sole option, to cause Merger Subsidiary to commence a
tender offer (the "Tender Offer") to acquire up to 100% (or such lesser
percentage not less than 49.9% as Parent shall specify in the Tender Offer) of
the outstanding Common Shares (as defined in Section 4.1(a)) (excluding for all
purposes in calculating such applicable percentage any outstanding Common Shares
owned by Parent or Merger Subsidiary pursuant to the exercise of Parent's rights
under the Stock Option Agreement). If Parent determines to commence such Tender
Offer after the date hereof, Parent shall notify the Company of its intention to
do so in accordance with the notice requirements of Section 9.6.
1.5. The Tender Offer. (a) Conditions; Consideration; Schedule
14D-1. Parent and Merger Subsidiary shall (i) within five business days of
delivery of the notice described in Section 1.4 commence (within the meaning of
Rule 14d-2(a) of the Exchange Act) the Tender Offer for up to 100% (or such
lesser percentage not less than 49.9% as Parent shall specify in the Tender
Offer) of the outstanding Common Shares (excluding for all purposes in
calculating such applicable percentage any outstanding Common Shares owned by
Parent or Merger Subsidiary pursuant to the exercise of Parent's rights under
the Stock Option Agreement), together with the associated New Rights (as defined
in Section 5.1(q)) issued pursuant to the New Rights Agreement (as defined in
Section 5.1(b)), at a purchase price of not less than $58.00, net to the seller
in cash, without interest thereon, per Common Share, upon the terms and subject
to the conditions set forth in Annex I to this Agreement and such further
customary terms as may be set forth in an Offer to Purchase and Letter of
Transmittal (the "Offer Documents") to be mailed by Merger Subsidiary in
connection with the Tender Offer and (ii) file with the SEC a Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1") with respect to the Tender
Offer which will contain the Offer Documents as exhibits. The Company shall have
the opportunity to review the Schedule 14D-1 prior to its being filed with the
SEC. Without the prior written consent of the Company, Merger Subsidiary shall
not decrease the price per Common Share or change the form of consideration
payable in the Tender Offer, decrease the number of Common Shares sought, impose
additional conditions to the Tender Offer or amend any other term of the Tender
Offer in any manner adverse to the holders of Common Shares; it being understood
that Parent can reduce the Minimum Tender Condition (as defined in Annex I) to a
percentage not less than 35% of the outstanding Common Shares on a fully-diluted
basis (excluding for all purposes of such dilution calculation Common Shares
purchased or subject to purchase by Parent pursuant to the exercise of Parent's
rights under the Stock Option Agreement). Upon the terms and subject to the
conditions of the Tender Offer, Merger Subsidiary will accept for payment and
will purchase, as soon as permitted under the terms of the Tender Offer, all
Common Shares validly tendered and not withdrawn prior to the expiration of the
Tender Offer.
(b) Expiration Date. Parent and Merger Subsidiary agree that, except as
provided thereby, Merger Subsidiary shall not terminate or withdraw the Tender
Offer prior to the expiration date thereof, which shall be a date at least 20
business days from the date of commencement thereof (the "Expiration Date"). If,
at the Expiration Date, the conditions to the Tender Offer described in Annex I
hereto shall not have been satisfied or earlier waived, Merger Subsidiary, at
its sole option, may extend the Expiration Date on one or more occasions for an
additional period or periods of time and, unless this Agreement has been
terminated in accordance with its terms, shall extend it until a date that is
not later than the sixtieth day from the date of commencement of the Tender
Offer (including, for purposes of calculating such 60 days, the date of
commencement of the Tender Offer as the first day) (the "Extended Expiration
Date"), if requested to do so by the Company and Parent is otherwise going to
let the Tender Offer expire without the purchase of
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Common Shares thereunder. Parent and Merger Subsidiary shall use their
reasonable efforts to consummate the Tender Offer in accordance with the terms
of this Agreement and the conditions to the Tender Offer set forth in Annex I.
(c) Schedule 14D-9; Meetings of Stockholders. The Company agrees that it
shall, on the same day that Merger Subsidiary and Parent file with the SEC the
Schedule 14D-1, file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Tender Offer (including exhibits, and as
amended from time to time, the "Schedule 14D-9"), which shall contain, subject
to applicable law regarding fiduciary duties, the recommendation of the
Company's board of directors that the holders of Common Shares accept the Tender
Offer. Parent and Merger Subsidiary shall have the opportunity to review the
Schedule 14D-9 prior to its being filed with the SEC. Upon the filing of the
Schedule14D-1, the Company shall cancel the meetings of stockholders referred to
in Section 6.4(a) unless such meetings shall have already occurred.
(d) Mailing and Content of Offer Documents and Schedule 14D-9. The Company
agrees that copies of the Schedule 14D-9 (excluding exhibits), shall be enclosed
with the Offer Documents to be mailed by Merger Subsidiary to the stockholders
of the Company in connection with the Tender Offer. In connection with the
Tender Offer, the Company will furnish Parent and Merger Subsidiary with such
information, including lists of the stockholders of the Company, mailing labels
and lists of security positions, and such assistance as Parent or Merger
Subsidiary or their agents may request in communicating the Tender Offer to the
record and beneficial holders of the Common Shares.
(e) Directors. Promptly following Merger Subsidiary's purchase of and
payment for Common Shares pursuant to the Tender Offer, Parent and Merger
Subsidiary shall be entitled to designate two members of the board of directors
to the Company. Accordingly, the Company shall, upon request by Parent or Merger
Subsidiary, promptly increase the size of the board of directors of the Company
to the extent permitted by the Company's charter and by-laws, and shall
thereafter cause Parent's designees promptly to be elected or appointed to the
board of directors of the Company.
ARTICLE II
CHARTER AND BY-LAWS OF THE SURVIVING CORPORATION
2.1. The Charter. The Articles of Incorporation of Merger Subsidiary as
in effect immediately prior to the Effective Time shall be the charter of the
Surviving Corporation (the "Charter"), until duly amended as provided therein or
by applicable law.
2.2. The By-Laws. The by-laws of Merger Subsidiary in effect at the
Effective Time shall be the by-laws of the Surviving Corporation (the
"By-Laws"), until thereafter amended as provided therein or by applicable law.
ARTICLE III
OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION
3.1. Directors. The directors of Merger Subsidiary at the Effective Time
shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Charter and the By-Laws. Parent shall cause all of the directors of the
Surviving Corporation to resign immediately following the Effective Time and
shall thereafter cause to be appointed as directors of the Surviving Corporation
each person that was a director of the Company immediately prior to the
Effective Time who is willing to serve as a director of the Surviving
Corporation plus two additional persons designated by Parent.
3.2. Officers. The officers of the Company at the Effective Time shall,
from and after the Effective Time, be the officers of the Surviving Corporation
until their successors have been duly elected or appointed
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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. Effect on Capital Stock. At the Effective Time, as a result of the
Merger and without any action on the part of the holder of any capital stock of
the Company:
(a) Common Stock Merger Consideration. (i) Subject to paragraphs (ii),
(iii) and (iv) below, each share of Common Stock, par value $1.00 per share, of
the Company (a "Common Share" or, collectively, the "Common Shares") issued and
outstanding immediately prior to the Effective Time (other than Common Shares
owned by Parent, Merger Subsidiary or any other direct or indirect subsidiary of
Parent (collectively, the "Parent Companies") or Common Shares that are owned by
the Company or any direct or indirect subsidiary of the Company and in each case
not held on behalf of third parties (collectively, "Excluded Common Shares"))
shall be converted into, and become exchangeable for, that portion of a share of
Common Stock, par value $2.50 per share, of Parent ("Parent Common Stock") equal
to the lesser of (i) .4811 (the "Maximum Exchange Ratio") and (ii) the decimal
derived by dividing $58.00 by the average of the closing prices per share of
Parent Common Stock as reported on the NYSE composite transactions reporting
system (as reported in the New York City edition of the Wall Street Journal) for
the ten trading days ending on the third trading day prior to the date of the
consummation of the Merger (the "Base Period Stock Price"); provided, however,
if the Base Period Stock Price is below $120.5625, Parent shall elect to either
(i) pay a cash amount equal to the Per Share Cash Top-Up Amount (provided that
Parent may not elect to pay the cash amount contemplated by this clause (i) if
the aggregate cash amount so paid would exceed the Non-Election Cash Pool) or
(ii) (x) increase the Maximum Exchange Ratio (the "Adjusted Maximum Exchange
Ratio") up to a decimal such that the product of the Adjusted Maximum Exchange
Ratio times the Base Period Stock Price (the "Product") equals or is less than
$58.00 and (y) if the Product is less than $58.00, pay a cash amount equal to
the difference between $58.00 and such Product (provided that Parent may not
elect to pay such an aggregate amount of cash pursuant to this clause (ii) which
would exceed the Non-Election Cash Pool); provided, further, however, if the
Tender Offer is commenced and consummated and more than 49.9% of the outstanding
Common Shares (excluding for all purposes in calculating such percentage any
outstanding Common Shares owned by Parent or Merger Subsidiary pursuant to the
exercise of Parent's rights under the Stock Option Agreement) are purchased by
Merger Subsidiary pursuant to the Tender Offer, each Common Share issued and
outstanding immediately prior to the Effective Time (other than Excluded Common
Shares) shall be converted into, and become exchangeable for, at Parent's
election, either (i) provided that the Merger would still be treated for Federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code, and that each of Parent, Merger Subsidiary and the Company would be a
party to that reorganization within the meaning of Section 368(b) of the Code,
that portion of a share of Parent Common Stock determined as set forth above or
(ii) cash in an amount equal to the amount paid per Common Share in the Tender
Offer. In the event that Parent elects to consummate the Merger as contemplated
by clause (ii) in the preceding sentence or is required by Section 7.4 to
consummate the Merger by paying cash to the holders of Common Shares, the
parties to this Agreement acknowledge and agree that the Merger will not be
treated for Federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, each of Parent, Merger Subsidiary and the Company
would not be treated as a party to a reorganization within the meaning of
Section 368(b) of the Code, the parties to this Agreement will be deemed to have
waived the covenant contained in Section 6.6 and the conditions to the
consummation of the Merger contained in Section 7.2(d) and Section 7.3(d), the
Merger will not be treated as a Common Stock Fundamental Change for purposes of
the Preferred Shares and the Merger shall be consummated by merging Merger
Subsidiary into the Company in lieu of merging the Company into Merger
Subsidiary. The payments referred to in this Section 4.1(a)(i) shall be referred
to as the "Non-Election Merger Consideration". If the Tender Offer is
consummated at a price per Common Share in cash that is higher than $58.00, it
is agreed that (x) such higher amount shall be deemed to be inserted in lieu of
$58.00 in
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each place that $58.00 appears in this Section 4.1 and (y) a fraction equal to
such price per Common Share divided by $120.5625 shall be deemed to be inserted
in lieu of .4811 in this Section 4.1(a)(i);
(ii) Subject to Section 4.1(f), Common Shares for which the holder of such
shares has made a Cash Election shall be converted into, and become exchangeable
for, $58.00 in cash (the "Cash Election Merger Consideration"), provided that in
no event shall holders of Common Shares who have made a Cash Election be
entitled to receive an aggregate amount of cash in excess of the Maximum Cash
Pool. In the event that Cash Elections are submitted with respect to an
aggregate number of Common Shares which, except for the limitation imposed by
the Maximum Cash Pool, would require Parent to pay cash in the aggregate in
excess of the Maximum Cash Pool, a pro rata portion of such Common Shares
(rounded down to the nearest whole Common Share) shall be converted into the
right to receive the Cash Election Merger Consideration, which proration as to
each shareholder shall be based upon the ratio of the (i) Maximum Cash Pool to
(ii) the aggregate number of Common Shares with respect to which Cash Elections
are submitted multiplied by $58.00. All Common Shares which are not converted
into the right to receive the Cash Election Merger Consideration as a result of
this paragraph shall be converted into the right to receive the Stock Election
Merger Consideration;
(iii) Subject to Section 4.1(f), Common Shares for which a holder has made
a Stock Election shall be converted into, and become exchangeable for, that
portion of a share of Parent Common Stock equal to the lesser of (i) the Maximum
Exchange Ratio and (ii) the decimal derived by dividing $58.00 by the Base
Period Stock Price; provided, however, if the Base Period Stock Price is below
$120.5625, Parent shall elect to either (i) pay a cash amount equal to the Per
Share Cash Top-Up Amount (provided that Parent may not elect to pay the cash
amount contemplated by this clause (i) if the aggregate cash amount paid would
exceed the Stock Election Cash Pool) or (ii) (x) establish the Adjusted Maximum
Exchange Ratio such that the Product equals or is less than $58.00 and (y) if
the Product is less than $58.00, pay a cash amount equal to the difference
between $58.00 and such Product (provided that Parent may not elect to pay an
aggregate amount of cash pursuant to this clause (ii) which would exceed the
Stock Election Cash Pool). The foregoing payments shall be referred to herein as
the "Stock Election Merger Consideration" and, together with the Non-Election
Merger Consideration and the Cash Election Merger Consideration, the "Common
Stock Merger Consideration."
(iv) Parent may at its option, but shall not be obliged to, increase the
portion of a share of Parent Common Stock into which each share of Common Stock
may be converted pursuant to Section 4.1(a)(i) and (if applicable) Section
4.1(a)(iii) to the extent that in the reasonable judgment of Parent such
increase is necessary to enable the Merger to qualify as a "reorganization"
within the meaning of Section 368(a) of the Code.
(v) For purposes of this Agreement the following terms shall have the
following meanings:
"Maximum Cash Pool" means an amount of cash equal to (i) .499
multiplied by the sum of (x) the amount of the Common Stock Merger
Consideration, calculated for purposes of this definition based on the Base
Period Stock Price, and, if applicable, (y) the aggregate amount of cash
paid by Merger Subsidiary pursuant to the Tender Offer minus, if
applicable, (ii) the aggregate amount of cash paid by Merger Subsidiary
pursuant to the Tender Offer.
"Non-Election Cash Pool" means an amount of cash equal to the Maximum
Cash Pool minus the aggregate amount of cash paid in the Merger to the
holders of Common Shares that make a Cash Election.
"Stock Election Cash Pool" means an amount of cash equal to the
greater of (i) $0 and (ii) the Aggregate Cash Top-Up Amount minus the
aggregate amount of cash paid in the Merger to the holders of Common Shares
that do not make a Stock Election.
"Per Share Cash Top-Up Amount" means the greater of (i) $0 and (ii)
(x) $58.00 minus (y) the product of (A) the Base Period Stock Price and (B)
the Maximum Exchange Ratio.
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"Aggregate Cash Top-Up Amount" means the lesser of (i) the product of
(x) the Per Share Cash Top-Up Amount and (y) the number of outstanding
Common Shares as of the Effective Time and (ii) an amount equal to the
Maximum Cash Pool.
(b) Preferred Stock Merger Consideration. Each share of $3.125 Series B
Convertible Preferred Stock, no par value, of the Company (a "Preferred Share"
or, collectively, the "Preferred Shares" and, together with the Common Shares,
the "Shares") issued and outstanding immediately prior to the Effective Time
(other than Preferred Shares owned by Parent Companies or Preferred Shares that
are owned by the Company or any direct or indirect subsidiary of the Company and
in each case not held on behalf of third parties (collectively, "Excluded
Preferred Shares" and, together with the Excluded Common Shares, the "Excluded
Shares") shall be converted into, and become exchangeable for one share (the
"Preferred Stock Merger Consideration," and, together with the Common Stock
Merger Consideration, the "Merger Consideration"), of Series C Preferred Stock,
par value $5.00 per share, of Parent ("Parent Preferred Stock") which shall
contain terms substantially similar to the terms of the Preferred Shares (after
making the conversion adjustments required to be made for a Common Stock
Fundamental Change pursuant to the Company's Third Amended and Restated Articles
of Incorporation as a result of the Merger) and shall be convertible into Parent
Common Stock.
(c) Cancellation of Shares. At the Effective Time, all Shares shall no
longer be outstanding and shall be canceled and retired and shall cease to
exist, and each certificate (a "Certificate") formerly representing any of such
Shares (other than Excluded Shares) shall thereafter represent only the right to
the Merger Consideration and the right, if any, to receive pursuant to Section
4.2(e) cash in lieu of fractional shares into which such Shares have been
converted pursuant to this Section 4.1(c) and any distribution or dividend
pursuant to Section 4.2(c). Each Share issued and outstanding immediately prior
to the Effective Time and owned by any of the Parent Companies or owned by the
Company or any direct or indirect subsidiary of the Company (in each case other
than Shares that are owned on behalf of third parties), shall, by virtue of the
Merger and without any action on the part of the holder thereof, cease to be
outstanding, shall be canceled and retired without payment of any consideration
therefore and shall cease to exist.
(d) Merger Subsidiary. At the Effective Time, each share of Common Stock,
par value $.01 per share, of Merger Subsidiary issued and outstanding
immediately prior to the Effective Time shall be converted into one share of
common stock of the Surviving Corporation.
(e) Election Form. Each holder of Common Shares will be entitled to elect
with respect to all or any portion of the Common Shares held by such holder to
have such shares converted at the Effective Time into the right to receive the
Stock Election Merger Consideration (the "Stock Election") or the Cash Election
Merger Consideration (the "Cash Election"). The form for making the Stock
Election and Cash Election (the "Election Form") shall be determined by mutual
agreement between Parent and the Company and shall be mailed to holders of
Common Shares on the record date for the Common Stockholders Meeting together
with the related Prospectus/Proxy Statement (as hereinafter defined). To be
effective, the Election Form must be properly completed, signed and submitted by
the Election Deadline (as hereinafter defined) to the Exchange Agent (as
hereinafter defined) and accompanied by the certificates representing the Common
Shares as to which an Election is being made or an appropriate guarantee of
delivery by a commercial bank or trust company in the United States or a member
of a registered national securities exchange or the National Association of
Securities Dealers, Inc.). An Election Form which is not effective shall be
treated as if no election had been made with respect to the Common Shares
covered by such Election Form and any holder who does not submit an effective
Election Form shall receive the Non-Election Merger Consideration. Parent will
have the discretion, which it may delegate in whole or in part to the Exchange
Agent, to determine whether Election Forms have been properly completed, signed
and submitted or revoked and to disregard immaterial defects in Election Forms.
The decisions of Parent or, if delegated, of the Exchange Agent shall be
conclusive and binding. Neither Parent, Merger Subsidiary nor the Exchange Agent
will be under any obligation to notify any person of any defect in an Election
Form submitted to the Exchange Agent. The Exchange Agent shall also make all
computations contemplated by Section 4.1(a) hereof, and all such computations
shall be conclusive and binding on the holders of Common Shares in the absence
of manifest error.
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Parent and the Company each shall use its best efforts to make the Election
Form available to all persons who become holders of record of Common Shares
during the period between the record date for the Common Stockholders Meeting
and 5:00 P.M., New York City time, on the third trading day prior to the date of
the consummation of the Merger (the "Election Deadline"). Parent will publicly
announce the Election Deadline not later than 10:00 A.M. on the trading day
preceding the date on which the Election Deadline occurs.
(f) Tender Offer. In the event that the Tender Offer is commenced and
consummated, Section 4.1(e) shall be of no force and effect and holders of
Common Shares therefore shall not be entitled to make a Stock Election or a Cash
Election. In such circumstances, all consideration paid in the Merger to holders
of Common Shares will be paid in accordance with Section 4.1(a)(i) and Section
4.1(a)(iv) and no consideration will be paid in accordance with Section
4.1(a)(ii) or (iii).
4.2. Exchange of Certificates for Shares.
(a) Exchange Agent. Promptly after the Effective Time, Parent shall
deposit, or shall cause to be deposited, with an exchange agent selected by
Parent with the Company's prior approval, which shall not be unreasonably
withheld (the "Exchange Agent"), for the benefit of the holders of Shares,
certificates representing the shares of Parent Common Stock and Parent Preferred
Stock and, after the Effective Time, if applicable, any cash, dividends or other
distributions with respect to the Parent Common Stock and Parent Preferred Stock
to be issued or paid pursuant to this Agreement in exchange for Shares
outstanding immediately prior to the Effective Time upon due surrender of the
Certificates (or affidavits of loss in lieu thereof) pursuant to the provisions
of this Article IV (such certificates for shares of Parent Common Stock and
Parent Preferred Stock, together with the amount of any cash, dividends or other
distributions payable with respect thereto, being hereinafter referred to as the
"Exchange Fund").
(b) Exchange Procedures. Promptly after the Effective Time, the Surviving
Corporation shall cause the Exchange Agent to mail to each holder of record of
Shares (other than holders of Excluded Shares) (i) a letter of transmittal
specifying that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates (or affidavits
of loss in lieu thereof) to the Exchange Agent, such letter of transmittal to be
in such form and have such other provisions as Parent and the Company may
reasonably agree, and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for (A) certificates representing shares of Parent
Common Stock or Parent Preferred Stock, as applicable, and (B) if applicable,
any cash, unpaid dividends or other distributions and cash in lieu of fractional
shares. Subject to Section 4.2(h), upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor (x) a certificate representing that number of whole shares of
Parent Common Stock or Parent Preferred Stock, as applicable, that such holder
is entitled to receive pursuant to this Article IV, (y) a check in the amount
(after giving effect to any required tax withholdings) of (A) any cash in lieu
of fractional shares plus (B) any cash, including unpaid non-stock dividends and
any other dividends or other distributions, that such holder has the right to
receive pursuant to the provisions of this Article IV, and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
any amount payable upon due surrender of the Certificates. In the event of a
transfer of ownership of Shares that is not registered in the transfer records
of the Company, a certificate representing the proper number of shares of Parent
Common Stock or Parent Preferred Stock, as applicable, together with a check for
any cash to be paid upon due surrender of the Certificate and any other
dividends or distributions in respect thereof, may be issued and/or paid to such
a transferee if the Certificate formerly representing such Shares is presented
to the Exchange Agent, accompanied by all documents required to evidence and
effect such transfer and to evidence that any applicable stock transfer taxes
have been paid. If any certificate for shares of Parent Common Stock or Parent
Preferred Stock, as applicable, is to be issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it shall
be a condition of such exchange that the Person (as defined below) requesting
such exchange shall pay any transfer or other taxes required by reason of the
issuance of certificates for shares of Parent Common Stock or Parent Preferred
Stock, as applicable, in a name other than that of the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of Parent or the
Exchange Agent that such tax has been paid or is not applicable.
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For the purposes of this Agreement, the term "Person" shall mean any
individual, corporation (including not-for-profit), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity (as defined in Section 5.1(d)) or
other entity of any kind or nature.
(c) Distributions with Respect to Unexchanged Shares. All shares of Parent
Common Stock and Parent Preferred Stock to be issued pursuant to the Merger
shall be deemed issued and outstanding as of the Effective Time and whenever a
dividend or other distribution is declared by Parent in respect of the Parent
Common Stock or Parent Preferred Stock, as applicable, the record date for which
is at or after the Effective Time, that declaration shall include dividends or
other distributions in respect of all shares issuable pursuant to this
Agreement. No dividends or other distributions in respect of the Parent Common
Stock or Parent Preferred Stock, as applicable, shall be paid to any holder of
any unsurrendered Certificate until such Certificate is surrendered for exchange
in accordance with this Article IV. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be issued and/or paid
to the holder of the certificates representing whole shares of Parent Common
Stock and Parent Preferred Stock, as applicable, issued in exchange therefor,
without interest, (A) at the time of such surrender, the dividends or other
distributions with a record date after the Effective Time theretofore payable
with respect to such whole shares of Parent Common Stock and Parent Preferred
Stock, as applicable, and not paid and (B) at the appropriate payment date, the
dividends or other distributions payable with respect to such whole shares of
Parent Common Stock and Parent Preferred Stock, as applicable, with a record
date after the Effective Time but with a payment date subsequent to surrender.
(d) Transfers. After the Effective Time, there shall be no transfers on
the stock transfer books of the Company of the Shares that were outstanding
immediately prior to the Effective Time.
(e) Fractional Shares. Notwithstanding any other provision of this
Agreement, no fractional shares of Parent Common Stock will be issued. Each
holder of Common Shares who would be entitled to receive a fractional share of
Parent Common Stock but for this Section 4.2(e) shall be entitled to receive, in
lieu thereof, a cash payment in an amount equal to such fractional share of
Parent Common Stock multiplied by the Base Period Stock Price.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
(including the proceeds of any investments thereof and any Parent Common Stock
and Parent Preferred Stock) that remains unclaimed by the stockholders of the
Company for 180 days after the Effective Time shall be paid to Parent. Any
stockholders of the Company who have not theretofore complied with this Article
IV shall thereafter look only to Parent for payment of their shares of Parent
Common Stock and Parent Preferred Stock, as applicable, and any cash, dividends
and other distributions in respect thereof payable and/or issuable pursuant to
Section 4.1 and Section 4.2(c) upon due surrender of their Certificates (or
affidavits of loss in lieu thereof), in each case, without any interest thereon.
Notwithstanding the foregoing, none of Parent, the Surviving Corporation, the
Exchange Agent or any other Person shall be liable to any former holder of
Shares for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(g) Lost, Stolen or Destroyed Certificates. In the event any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Certificate to be lost, stolen or
destroyed and, if required by Parent, the posting by such Person of a bond in
customary amount as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Certificate the shares of Parent Common Stock or
Parent Preferred Stock, as applicable, and any cash payable and any unpaid
dividends or other distributions in respect thereof pursuant to Section 4.1 and
4.2(c) upon due surrender of and deliverable in respect of the Shares
represented by such Certificate pursuant to this Agreement.
(h) Affiliates. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any "affiliate" (as determined pursuant
to Section 6.8) of the Company shall not be exchanged until Parent has received
a written agreement from such Person as provided in Section 6.8 hereof.
4.3. Dissenters' Rights. In accordance with Section 607.1302 of the FBCA,
no appraisal rights shall be available to holders of Shares in connection with
the Merger.
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4.4. Adjustments to Prevent Dilution. In the event that the Company
changes the number of Shares or securities convertible or exchangeable into or
exercisable for Shares, or Parent changes the number of shares of Parent Common
Stock or securities convertible or exchangeable into or exercisable for shares
of Parent Common Stock, issued and outstanding prior to the Effective Time as a
result of a reclassification, stock split (including a reverse split), stock
dividend or distribution, recapitalization, merger, subdivision or other similar
transaction, the Merger Consideration shall be equitably adjusted.
4.5. Treatment of the Convertible Notes. The Convertible Notes (as
defined in Section 5.1(b)) shall be treated as set forth in Section 6.14.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Representations and Warranties of the Company. (i) Except as set
forth in the corresponding sections or subsections of the disclosure letter
delivered to Parent by the Company on or prior to entering into this Agreement
(the "Company Disclosure Letter") or in any Company Report (as hereinafter
defined) filed prior to the date hereof, the Company hereby represents and
warrants to Parent and Merger Subsidiary that:
(a) Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida and each of its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of organization and each of the Company and its
Subsidiaries has all requisite corporate or similar power and authority to own
and operate its properties and assets and to carry on its business as presently
conducted and is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership or operation of its
properties or conduct of its business requires such qualification, except where
the failure to be so qualified or in good standing, when taken together with all
other such failures, is not reasonably likely to have a Company Material Adverse
Effect (as defined below). The Company has made available to Parent a complete
and correct copy of the Company's and its Subsidiaries' charter and by-laws,
each as amended to date. The Company's and its Subsidiaries' charter and by-laws
so delivered are in full force and effect.
As used in this Agreement, the term (i) "Subsidiary" means, with respect to
the Company, Parent or Merger Subsidiary, as the case may be, any entity,
whether incorporated or unincorporated, of which at least a majority of the
securities or ownership interests having by their terms ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions is directly or indirectly owned or controlled by such party or by one
or more of its respective Subsidiaries or by such party and any one or more of
its respective Subsidiaries, and (ii) "Company Material Adverse Effect" means a
material adverse effect on the financial condition, properties, business or
results of operations of the Company and its Subsidiaries taken as a whole.
The Company conducts its insurance operations through the Subsidiaries set
forth on Section 5.1(a) of the Company Disclosure Letter (collectively, the
"Company Insurance Subsidiaries"). Each of the Company Insurance Subsidiaries is
(i) duly licensed or authorized as an insurance company and, where applicable, a
reinsurer in its jurisdiction of incorporation, (ii) duly licensed or authorized
as an insurance company and, where applicable, a reinsurer in each other
jurisdiction where it is required to be so licensed or authorized, and (iii)
duly authorized in its jurisdiction of incorporation and each other applicable
jurisdiction to write each line of business reported as being written in the
Company SAP Statements (as hereinafter defined), except, in any such case, where
the failure to be so licensed or authorized is not reasonably likely to have a
Company Material Adverse Effect. The Company has made all required filings under
applicable insurance holding company statutes except where the failure to file
is not reasonably likely to have a Company Material Adverse Effect.
(b) Capital Structure. The authorized stock of the Company consists of
100,000,000 Common Shares, of which 41,535,807 Common Shares were outstanding as
of the close of business on November 3, 1997, and 10,000,000 shares of Preferred
Stock, no par value, of which (i) 350,000 shares have been authorized as
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Series A Participating Preferred Stock, none of which were outstanding as of
December 21, 1997 and (ii) 2,300,000 shares have been authorized as Preferred
Shares, of which 2,300,000 Preferred Shares were outstanding as of December 21,
1997. All of the outstanding Common Shares and Preferred Shares have been duly
authorized and are validly issued, fully paid and nonassessable. The Company has
no commitments to issue or deliver Common Shares, except that, as of December
21, 1997, there were approximately 5,630,610 (but no more than 5,664,193) Common
Shares subject to issuance (i) pursuant to the Company's 1997 Equity Incentive
Plan, 1994 Amended and Restated Directors' Deferred Compensation Plan, 1994 Key
Executive Debenture Plan, 1994 Non-Employee Directors' Stock Option Plan, 1994
Senior Management Stock Option Plan, 1991 Stock Option/Restricted Stock Plan,
1991 Stock Incentive Plan, and 1987 Executive Stock Option/Dividend Accrual Plan
(collectively, the "Company Stock Plans") and (ii) upon conversion of the
Preferred Shares and the Company's convertible debenture bonds due May 24, 1999
("Convertible Notes"). The Company has no commitments to issue or deliver
preferred shares, except that as of December 21, 1997, there were shares of
Series A Participating Preferred Stock subject to issuance pursuant to the
Rights Agreement, as amended and restated as of November 14, 1990, and as
further amended, between the Company and ChaseMellon Shareholder Services, LLC
(as successor to Manufacturers Hanover Trust Company), as Rights Agent (the
"Rights Agreement") and as of February 28, 1998, there were shares of Series C
Participating Preferred Stock subject to issuance pursuant to the Rights
Agreement, dated as of February 19, 1998, between the Company and ChaseMellon
Shareholder Services, LLC, as Rights Agent (the "New Rights Agreement"). The
Company Disclosure Letter contains a correct and complete list of each
outstanding option to purchase or acquire Common Shares under each of the
Company Stock Plans (each a "Company Option"), including the plan, the holder,
date of grant, exercise price and number of Shares subject thereto. Each of the
outstanding shares of capital stock or other securities of each of the Company's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and owned by the Company or a direct or indirect wholly-owned subsidiary of the
Company, free and clear of any lien, pledge, security interest, claim or other
encumbrance. Except as set forth above and in the Stock Option Agreement, there
are no preemptive or other outstanding rights, options, warrants, conversion
rights, stock appreciation rights, redemption rights, repurchase rights,
agreements, arrangements or commitments to issue or sell any shares of capital
stock or other securities of the Company or any of its Subsidiaries or any
securities or obligations convertible or exchangeable into or exercisable for,
or giving any Person a right to subscribe for or acquire, any securities of the
Company or any of its Subsidiaries, and no securities or obligations evidencing
such rights are authorized, issued or outstanding. Except for the Convertible
Notes, the Company does not have outstanding any bonds, debentures, notes or
other obligations the holders of which have the right to vote (or, except as
referred to in this subsection (b), convertible into or exercisable for
securities having the right to vote) with the stockholders of the Company on any
matter ("Voting Debt").
(c) Corporate Authority; Approval and Fairness. (i) The Company has all
requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement and the Stock Option Agreement and to consummate, subject only to
approval of the Merger by the holders of at least a majority of the outstanding
Common Shares voting separately as a class (the "Company Common Stock Requisite
Vote") and a majority of the outstanding Preferred Shares voting separately as a
class (the "Company Preferred Stock Requisite Vote" and, together with the
Company Common Stock Requisite Vote, the "Company Requisite Vote"), the Merger.
This Agreement and the Stock Option Agreement are the valid and binding
agreements of the Company enforceable against the Company in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles (the "Bankruptcy
and Equity Exception").
(ii) The board of directors of the Company (A) has declared that the
Agreement, the Stock Option Agreement, the Tender Offer, the Merger and the
other transactions contemplated hereby and thereby are advisable and in the best
interests of the Company, (B) has authorized, approved and adopted in all
respects the Agreement, the Stock Option Agreement, the Tender Offer, the Merger
and the other transactions contemplated hereby and thereby, and (C) has received
the opinion of its financial advisors, Salomon Smith Barney, to the effect that
the consideration to be received by the holders of the Shares in the Tender
Offer and the Merger, taken together, is fair from a financial point of view to
such holders.
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(d) Governmental Filings; No Violations. (i) Other than the filings and/or
notices (A) pursuant to Section 1.3, (B) under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and the Securities Act of 1933, as
amended (the "Securities Act"), (C) to comply with state securities or
"blue-sky" laws, (D) required to be made with the NYSE or Nasdaq, and (E) the
filing of appropriate documents with, and approval of, the respective
Commissioners of Insurance or similar regulatory authorities of Arizona,
Florida, Georgia, New York, South Carolina, Texas, Puerto Rico, Mexico, Cayman
Islands, Argentina, Turks & Caicos, Dominican Republic and the United Kingdom
and such notices and consents as may be required under the antitrust
notification insurance laws of any state in which the Company, Parent or any of
their respective subsidiaries is domiciled or does business, no notices, reports
or other filings are required to be made by the Company with, nor are any
consents, registrations, approvals, permits or authorizations required to be
obtained by the Company from, any governmental or regulatory authority, agency,
commission, body or other governmental entity ("Governmental Entity"), in
connection with the execution and delivery of this Agreement and the Stock
Option Agreement by the Company and the consummation by the Company of the
Merger and the other transactions contemplated hereby and thereby, except those
that the failure to make or obtain are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect or prevent,
materially delay or materially impair the ability of the Company to consummate
the transactions contemplated by this Agreement and the Stock Option Agreement.
(ii) The execution, delivery and performance of this Agreement and the
Stock Option Agreement by the Company do not, and the consummation by the
Company of the Merger and the other transactions contemplated hereby and thereby
will not, constitute or result in (A) a breach or violation of, or a default
under, the charter or by-laws of the Company or the comparable governing
instruments of any of its Subsidiaries, (B) a breach or violation of, or a
default under, the acceleration of any obligations or the creation of a lien,
pledge, security interest or other encumbrance on the assets of the Company or
any of its Subsidiaries (with or without notice, lapse of time or both) pursuant
to, any agreement, lease, contract, note, mortgage, indenture, arrangement or
other obligation ("Contracts") binding upon the Company or any of its
Subsidiaries or (provided, as to consummation, the filings and notices are made,
and approvals are obtained, as referred to in Section 5.1(d)(i)), any Law (as
defined in Section 5.1(i)) or governmental or non-governmental permit or license
to which the Company or any of its Subsidiaries is subject or (C) any change in
the rights or obligations of any party under any of the Contracts, except, in
the case of clause (B) or (C) above, for any breach, violation, default,
acceleration, creation or change that, individually or in the aggregate, is not
reasonably likely to have a Company Material Adverse Effect or prevent,
materially delay or materially impair the ability of the Company to consummate
the transactions contemplated by this Agreement or the Stock Option Agreement.
Section 5.1(d) of the Company Disclosure Letter sets forth, to the knowledge of
the executive officers of the Company, a correct and complete list of Contracts
of the Company and its Subsidiaries pursuant to which consents or waivers are or
may be required prior to consummation of the transactions contemplated by this
Agreement and the Stock Option Agreement (whether or not subject to the
exception set forth with respect to clauses (B) and (C) above), except those the
failure to obtain, individually or in the aggregate, is not reasonably likely to
have a Company Material Adverse Effect.
(e) Company Reports; Financial Statements. (i) The Company has made
available to Parent each registration statement, report, proxy statement or
information statement prepared by it since December 31, 1994 including (i) the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 (the
"Audit Date"), and (ii) the Company's Quarterly Reports on Form 10-Q for the
periods ended March 31, 1997, June 30, 1997 and September 30, 1997, each in the
form (including exhibits, annexes and any amendments thereto) filed with the
Securities and Exchange Commission (the "SEC") (collectively, including any such
reports filed subsequent to the date hereof, the "Company Reports"). As of their
respective dates, the Company Reports did not, and any Company Reports filed
with the SEC subsequent to the date hereof will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading. Each of the consolidated
balance sheets included in or incorporated by reference into the Company Reports
(including the related notes and schedules) fairly presents, or will fairly
present, the consolidated financial position of the Company and its Subsidiaries
as of its date and each of the
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consolidated statements of income and of changes in financial position included
in or incorporated by reference into the Company Reports (including any related
notes and schedules) fairly presents, or will fairly present, the results of
operations, retained earnings and changes in financial position, as the case may
be, of the Company and its Subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to notes and normal year-end
audit adjustments that will not be material in amount or effect), in each case
in accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except as may be noted
therein.
(ii) The Company has made available to Parent true and complete copies of
the annual and quarterly statements of each of the Company Insurance
Subsidiaries as filed with the applicable insurance regulatory authorities for
the years ended December 31, 1994, 1995 and 1996 and the quarterly periods ended
March 31, 1997, June 30, 1997 and September 30, 1997, including all exhibits,
interrogatories, notes, schedules and any actuarial opinions, affirmations or
certifications or other supporting documents filed in connection therewith
(collectively, the "Company SAP Statements"). The Company SAP Statements were
prepared in conformity with statutory accounting practices prescribed or
permitted by the applicable insurance regulatory authority consistently applied
for the periods covered thereby and present fairly the statutory financial
position of such Company Insurance Subsidiaries as at the respective dates
thereof and the results of operations of such Subsidiaries for the respective
periods then ended. The Company SAP Statements complied in all material respects
with all applicable laws, rules and regulations when filed, and, to the
knowledge of the executive officers of the Company, no material deficiency has
been asserted with respect to any Company SAP Statements by the applicable
insurance regulatory body or any other governmental agency or body. The
statutory balance sheets and income statements included in the Company SAP
Statements have been audited by Price Waterhouse LLP, and the Company has made
available to Parent true and complete copies of all audit opinions related
thereto. The Company has made available to Parent true and complete copies of
all examination reports of insurance departments and any insurance regulatory
agencies since January 1, 1994 relating to the Company Insurance Subsidiaries.
The term "knowledge" when used in this Agreement with respect to the executive
officers of the Company shall mean the actual knowledge, after reasonable
inquiry, of the executive officers of the Company.
(f) Absence of Certain Changes. Except as disclosed in the Company Reports
filed prior to the date hereof, since the Audit Date the Company and its
Subsidiaries have conducted the businesses of the Company and its Subsidiaries,
taken as a whole, only in, and have not engaged in any material transaction
other than according to, the ordinary and usual course of such businesses and
there has not been (i) any change in the financial condition, management,
properties, prospects, business or results of operations of the Company and its
Subsidiaries or, to the knowledge of the executive officers of the Company, any
development or combination of developments which, individually or in the
aggregate, has had or is reasonably likely to have a Company Material Adverse
Effect; (ii) any material damage, destruction or other casualty loss with
respect to any material asset or property owned, leased or otherwise used by the
Company or any of its Subsidiaries, whether or not covered by insurance; (iii)
any declaration, setting aside or payment of any dividend or other distribution
in respect of the stock of the Company, except for regular quarterly cash
dividends on its Common Shares publicly announced prior to the date hereof and
regular quarterly cash dividends on its Preferred Shares paid in accordance with
the Company's Articles of Incorporation prior to the date hereof; (iv) any
change by the Company in accounting principles, practices or methods other than
those required by GAAP or SAP; (v) any material addition, or any development
involving a prospective material addition, to the Company's consolidated
reserves for future policy benefits or other policy claims and benefits; or (vi)
any material change in the accounting, actuarial, investment, reserving,
underwriting or claims administration policies, practices, procedures, methods,
assumptions or principles of any Company Insurance Subsidiary. Since the Audit
Date, except as provided for herein or as disclosed in the Company Reports filed
prior to the date hereof, there has not been any increase in the compensation
payable or that could become payable by the Company or any of its Subsidiaries
to officers or key employees or any amendment of any of the Compensation and
Benefit Plans (as hereinafter defined) other than increases or amendments in the
ordinary course and increases or amendments approved by Parent.
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(g) Litigation and Liabilities. Except as disclosed in the Company Reports
filed prior to the date hereof, there are no (i) civil, criminal or
administrative actions, suits, claims, hearings, investigations or proceedings
pending or, to the knowledge of the executive officers of the Company,
threatened against the Company or any of its Subsidiaries, directors or officers
or (ii) obligations or liabilities of any nature, whether or not accrued,
contingent or otherwise and whether or not required to be disclosed, including
those relating to environmental and occupational safety and health matters, or
any other facts or circumstances of which the executive officers of the Company
have knowledge that could result in any claims against, or obligations or
liabilities of, the Company or any of its affiliates, except for those that are
not, individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect or prevent or materially burden or materially impair the
ability of the Company to consummate the transactions contemplated by this
Agreement.
(h) Employee Benefits.
(i) A copy of each bonus, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus,
stock purchase, restricted stock, stock option, employment, termination,
severance, change of control, compensation, medical, health or other plan,
agreement, policy or arrangement that covers employees, directors, former
employees or former directors of the Company and its Subsidiaries (the
"Compensation and Benefit Plans") and any trust agreement or insurance
contract forming a part of such Compensation and Benefit Plans has been
made available to Parent prior to the date hereof. The Compensation and
Benefit Plans are listed in Section 5.1(h) of the Company Disclosure Letter
and any "change of control" or similar provisions therein are specifically
identified in Section 5.1(h) of the Company Disclosure Letter.
(ii) All Compensation and Benefit Plans are in substantial compliance
with all applicable law, including the Code and the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). Each Compensation and
Benefit Plan that is an "employee pension benefit plan" within the meaning
of Section 3(2) of ERISA (a "Pension Plan") and that is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service (the "IRS") with
respect to "TRA" (as defined in Section 1 of Rev. Proc. 93-39), and the
Company is not aware of any circumstances reasonably likely to result in
revocation of any such favorable determination letter. There is no pending
or, to the knowledge of the executive officers of the Company, threatened
material litigation relating to the Compensation and Benefit Plans. Neither
the Company nor any of its Subsidiaries has engaged in a transaction with
respect to any Compensation and Benefit Plan that, assuming the taxable
period of such transaction expired as of the date hereof, would subject the
Company or any of its Subsidiaries to a material tax or penalty imposed by
either Section 4975 of the Code or Section 502 of ERISA.
(iii) No liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by the Company or any Subsidiary with respect
to any ongoing, frozen or terminated "single-employer plan", within the
meaning of Section 4001(a)(5) of ERISA, currently or formerly maintained by
any of them, or the single-employer plan of any entity which is considered
one employer with the Company under Section 4001 of ERISA or Section 414 of
the Code (an "ERISA Affiliate"). The Company and its Subsidiaries have not
contributed, or been obligated to contribute, to a multiemployer plan under
Subtitle E of Title IV of ERISA at any time since September 26, 1980. No
notice of a "reportable event", within the meaning of Section 4043 of ERISA
for which the 30-day reporting requirement has not been waived, has been
required to be filed for any Pension Plan or by any ERISA Affiliate within
the 12-month period ending on the date hereof.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan as of the date hereof have been timely made
or have been reflected on the most recent consolidated balance sheet filed
or incorporated by reference in the Company Reports prior to the date
hereof. Neither any Pension Plan nor any single-employer plan of an ERISA
Affiliate has an "accumulated funding deficiency" (whether or not waived)
within the meaning of Section 412 of the Code or Section 302 of ERISA.
Neither the Company nor its Subsidiaries has provided, or is required to
provide, security to any
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Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant
to Section 401(a)(29) of the Code.
(v) Under each Pension Plan which is a single-employer plan, as of the
last day of the most recent plan year ended prior to the date hereof, the
actuarially deter mined present value of all "benefit liabilities", within
the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of
the actuarial assumptions contained in the Pension Plan's most recent
actuarial valuation), did not exceed the then current value of the assets
of such Pension Plan, and there has been no material change in the
financial condition of such Pension Plan since the last day of the most
recent plan year.
(vi) Neither the Company nor its Subsidiaries have any obligations for
retiree health and life benefits under any Compensation and Benefit Plan,
except as set forth in the Company Disclosure Letter. The Company or its
Subsidiaries may amend or terminate any such plan under the terms of such
plan at any time without incurring any material liability thereunder.
(vii) The consummation of the Merger and the other transactions
contemplated by this Agreement, either alone or in connection with a
subsequent termination of employment, will not (x) entitle any employees of
the Company or its Subsidiaries to severance pay, (y) accelerate the time
of payment or vesting or trigger any payment of compensation or benefits
under, increase the amount payable or trigger any other material obligation
pursuant to, any of the Compensation and Benefit Plans or (z) result in any
breach or violation of, or a default under, any of the Compensation and
Benefit Plans.
(viii) All Compensation and Benefit Plans covering current or former
non-U.S. employees or former employees of the Company and its Subsidiaries
comply in all material respects with applicable local law. The Company and
its Subsidiaries have no material unfunded liabilities with respect to any
Pension Plan that covers such non-U.S. employees.
(ix) No amount that could be received (whether in cash or property or
the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer, director or
independent contractor of the Company who is a "disqualified individual"
(as such term is defined in proposed Treasury Regulation Section 1.280G-1)
under any employment arrangement would be treated as an "excess parachute
payment" (as such term is defined in Section 280G(b)(1) of the Code).
Schedule 5.1(h)(ix) contains a true and complete list of each such
employment arrangement in existence as of the date hereof. To the extent
that any employment arrangement set forth on Schedule 5.1(h)(ix) has been
superseded, the new arrangement is not materially different than the
superseded arrangement.
(i) Compliance with Laws; Permits. (i) The business and operations of the
Company and the Company Insurance Subsidiaries have been conducted in compliance
with all applicable statutes and regulations regulating the business of
insurance and all applicable orders and directives of insurance regulatory
authorities and market conduct recommendations resulting from market conduct
examinations of insurance regulatory authorities (collectively, "Insurance
Laws"), except where the failure to so conduct such business and operations is
not, individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect. Notwithstanding the generality of the foregoing, except
where the failure to do so would not, individually or in the aggregate, be
reasonably likely to have a Company Material Adverse Effect, each Company
Insurance Subsidiary and, to the knowledge of the executive officers of the
Company, its agents have marketed, sold and issued insurance products in
compliance, in all material respects, with Insurance Laws applicable to the
business of such Company Insurance Subsidiary and in the respective
jurisdictions in which such products have been sold, including, without
limitation, in compliance with (i) all applicable prohibitions against
"redlining" or withdrawal of business lines, (ii) all applicable requirements
relating to the disclosure of the nature of insurance products as policies of
insurance and (iii) all applicable requirements relating to insurance product
projections and illustrations. In addition, (i) there is no pending or, to the
knowledge of the executive officers of the Company, threatened charge by any
insurance regulatory authority that any of the Company Insurance Subsidiaries
has violated, nor any pending or, to the knowledge of the executive officers of
the Company, threatened investigation by any insurance regulatory authority with
respect to possible violations of, any applicable Insurance Laws where such
violations are, individually or in the
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aggregate, reasonably likely to have a Company Material Adverse Effect; (ii)
none of the Company Insurance Subsidiaries is subject to any order or decree of
any insurance regulatory authority relating specifically to such Company
Insurance Subsidiary (as opposed to insurance companies generally) which is,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect; and (iii) the Company Insurance Subsidiaries have filed all
reports required to be filed with any insurance regulatory authority on or
before the date hereof as to which the failure to file such reports is,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect.
In addition to Insurance Laws, except as set forth in the Company Reports
filed prior to the date hereof, the businesses of each of the Company and its
Subsidiaries have not been, and are not being, conducted in violation of any
federal, state, local or foreign law, statute, ordinance, rule, regulation,
judgment, order, injunction, decree, arbitration award, agency requirement,
license or permit of any Governmental Entity (collectively with Insurance Laws,
"Laws"), except for violations or possible violations that are not, individually
or in the aggregate, reasonably likely to have a Company Material Adverse Effect
or prevent or materially burden or materially impair the ability of the Company
to consummate the transactions contemplated by this Agreement. Except as set
forth in the Company Reports filed prior to the date hereof, no investigation or
review by any Governmental Entity with respect to the Company or any of its
Subsidiaries is pending or, to the knowledge of the executive officers of the
Company, threatened, nor, to the knowledge of the executive officers of the
Company, has any Governmental Entity indicated an intention to conduct the same,
except for those the outcome of which are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect or prevent or
materially burden or materially impair the ability of the Company to consummate
the transactions contemplated by this Agreement. To the knowledge of the
executive officers of the Company, no material change is required in the
Company's or any of its Subsidiaries' processes, properties or procedures in
connection with any such Laws, and the Company has not received any notice or
communication of any material noncompliance with any such Laws that has not been
cured as of the date hereof. The Company and its Subsidiaries each has all
permits, licenses, trademarks, patents, trade names, copyrights, service marks,
franchises, variances, exemptions, orders and other governmental authorizations,
consents and approvals necessary to conduct its business as presently conducted
except those the absence of which are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect or prevent or
materially burden or materially impair the ability of the Company to consummate
the Merger and the other transactions contemplated by this Agreement, the Stock
Option Agreement or the Voting Agreement.
(j) Takeover Statutes. The Company has taken all actions necessary such
that no restrictive provision of any "fair price," "moratorium," "control share
acquisition," "interested shareholder" or other similar anti-takeover statute or
regulation (including, without limitation, Sections 607.0901 and 607.0902 of the
FBCA) (each a "Takeover Statute") or restrictive provision of any applicable
anti-takeover provision in the charter or by-laws of the Company (including
Article VIII of the Company's Third Amended and Restated Articles of
Incorporation) is, or at the Effective Time will be, applicable to the Company,
Parent, the Shares, the Tender Offer, the Merger or any other transaction
contemplated by this Agreement, the Stock Option Agreement or the Voting
Agreement.
(k) Environmental Matters. Except as disclosed in the Company Reports
filed prior to the date hereof and except for such matters as are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect: (i) the Company and its Subsidiaries have complied with all
applicable Environmental Laws; (ii) the properties currently owned or operated
by the Company (including soils, groundwater, surface water, buildings or other
structures) are not contaminated with any Hazardous Substances; (iii) the
properties formerly owned or operated by the Company or any of its Subsidiaries
were not contaminated with Hazardous Substances during the period of ownership
or operation by the Company or any of its Subsidiaries; (iv) neither the Company
nor any of its Subsidiaries is subject to liability for any Hazardous Substance
disposal or contamination on any third party property; (v) neither the Company
nor any of its Subsidiaries has been associated with any release or threat of
release of any Hazardous Substance; (vi) neither the Company nor any of its
Subsidiaries has received any notice, demand, letter, claim or request for
information alleging that the Company or any of its Subsidiaries may be in
violation of or liable under any Environmental Law;
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(vii) neither the Company nor any of its Subsidiaries is subject to any orders,
decrees, injunctions or other arrangements with any Governmental Entity or is
subject to any indemnity or other agreement with any third party relating to
liability under any Environmental Law or relating to Hazardous Substances; and
(viii) there are no circumstances or conditions involving the Company or any of
its Subsidiaries that could reasonably be expected to result in any claims,
liability, investigations, costs or restrictions on the ownership, use, or
transfer of any property of the Company pursuant to any Environmental Law.
As used herein, the term "Environmental Law" means any federal, state,
local or foreign law, statute, ordinance, regulation, judgment, order, decree,
arbitration award, agency requirement, license, permit, authorization or
opinion, relating to: (A) the protection, investigation or restoration of the
environment, health and safety, or natural resources, (B) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance or
(C) noise, odor, wetlands, pollution, contamination or any injury or threat of
injury to persons or property.
As used herein, the term "Hazardous Substance" means any substance that is:
(A) listed, classified or regulated pursuant to any Environmental Law; (B) any
petroleum product or by-product, asbestos-containing material, lead-containing
paint polychlorinated biphenyls, radioactive materials or radon; or (C) any
other substance which may be the subject of regulatory action by any Government
Authority pursuant to any Environmental Law.
(l) Tax Matters. As of the date hereof, neither the Company nor any of its
Affiliates has taken or agreed to take any action, nor do the executive officers
of the Company have any knowledge of any fact or circumstance, that would
prevent the Merger and the other transactions contemplated by this Agreement
from qualifying as a "reorganization" within the meaning of Section 368(a) of
the Code.
(m) Taxes. Except as provided in Section 5.1(m) of the Company Disclosure
Letter and except for such matters as are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect:
(i) the Company and each of its Subsidiaries have filed completely and
correctly all Tax Returns (as defined below) that are required by all
applicable laws to be filed by them, and (x) have paid, or made adequate
provision for the payment of, all Taxes (as defined below) which have or
may become due and payable pursuant to those Tax Returns, have paid all
estimated Taxes due and (y) have paid all other charges, claims and
assessments received to date other than those charges, claims and
assessments for Taxes being contested in good faith for which adequate
provision has been made on the most recent balance sheet included in the
Company Reports;
(ii) all Taxes which the Company and its Subsidiaries are required by
law to withhold and collect have been duly withheld and collected, and have
been paid over, in a timely manner, to the proper Taxing Authorities (as
defined below) to the extent due and payable;
(iii) neither the Company nor any of its Subsidiaries have executed
any waiver to extend, or otherwise taken or failed to take any action that
would have the effect of extending, the applicable statute of limitations
in respect of any Tax liabilities of the Company or its Subsidiaries for
the fiscal years prior to and including the most recent fiscal year;
(iv) the Company and its Subsidiaries have never been members of any
consolidated group for income tax purposes other than the consolidated
group of which the Company is the common parent; and the Company and its
Subsidiaries are not parties to any tax sharing agreement or arrangement,
other than with each other;
(v) no liens for Taxes exist with respect to any of the assets or
properties of the Company or its Subsidiaries, except for statutory liens
for Taxes not yet due or payable or that are being contested in good faith;
(vi) all of the income Tax Returns filed by or on behalf of each of
the Company and its Subsidiaries have been examined by and settled with the
Internal Revenue Service or appropriate Taxing Authority, or
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the statute of limitations with respect to the relevant Tax liability
expired, for all taxable periods through and including the period ending on
the date on which the Effective Time occurs;
(vii) all Taxes due with respect to any completed and settled audit,
examination or deficiency litigation with any Taxing Authority have been
paid in full;
(viii) there is no audit, examination, deficiency, or refund
litigation pending with respect to any Taxes and during the past three
years no Taxing Authority has given written notice of the commencement of
any audit, examination, deficiency or refund litigation, with respect to
any Taxes;
(ix) the Company is not bound by any currently effective private
ruling, closing agreement or similar agreement with any Taxing Authority
relating to a material amount of Taxes;
(x) the Company shall not be required to include in a taxable period
ending after the Effective Time, any taxable income attributable to income
that economically accrued in a prior taxable period as a result of Section
481 of the Code, the installment method of accounting or any comparable
provision of state or local Tax law;
(xi) (A) no material amount of property of the Company is "tax exempt
property" within the meaning of Section 168(h) of the Code, (B) no material
amount of assets of the Company is subject to a lease under Section 7701(h)
of the Code, and (C) the Company is not a party to any material lease made
pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect prior to the date of enactment of the Tax Equity and
Fiscal Responsibility Act of 1982; and
(xii) immediately following the Merger, the Company will not have any
material amount of income or gain that has been deferred under Treasury
Regulation Section 1.1502-13, or any material excess loss account in a
Subsidiary under Treasury Regulation Section 1.1502-19; and
(xiii) the Company is not a "consenting corporation" within the
meaning of Section 341(f) of the Code.
As used in this Agreement, (i) the term "Tax" (including, with correlative
meaning, the terms "Taxes" and "Taxable") shall mean, with respect to any
Person, (a) all taxes, domestic or foreign, including without limitation any
income (net, gross or other, including recapture of any tax items such as
investment tax credits), alternative or add-on minimum tax, gross income, gross
receipts, premium, gains, sales, use, ad valorem, transfer, recording,
franchise, profits, property (real or personal, tangible or intangible), fuel,
license, withholding (whether on amounts paid to or by such Person), payroll,
employment, unemployment, social security, excise, severance, stamp, occupation,
or environmental tax, customs, duties, or other like assessments or governmental
charges of any kind whatsoever, together with any interest, penalties, additions
or additional amounts imposed with respect thereto (including, without
limitation, penalties for failure to file Tax Returns), (b) any joint or several
liability of such Person with any other Person for the payment of any amounts of
the type described in clause (a) hereof and (c) any liability of such Person for
the payment of any amounts of the type described in (a) as a result of any
express or implied obligation to indemnify any other Person; (ii) the term "Tax
Return(s)" shall mean all returns, consolidated or otherwise (including without
limitation information returns), required to be filed with any Taxing Authority;
and (iii) the term "Taxing Authority" shall mean any authority responsible for
the imposition, collection or administration of any Tax.
(n) Labor Matters. Neither the Company nor any of its Subsidiaries is a
party to or otherwise bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization.
(o) Intellectual Property.
(i) The Company and/or each of its Subsidiaries owns, or is licensed or
otherwise possesses legally enforceable rights to use all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
technology, know-how, computer software programs or applications, and tangible
or intangible proprietary information or materials that are used in the business
of the Company and its Subsidiaries as currently conducted, except for any such
failures to own, be licensed or possess that are not, individually or in
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the aggregate, reasonably likely to have a Company Material Adverse Effect, and
to the knowledge of the executive officers of the Company all patents,
trademarks, trade names, service marks and copyrights held by the Company and/or
its Subsidiaries are valid and subsisting.
(ii) Except as disclosed in Company Reports filed prior to the date hereof
or as are not, individually or in the aggregate, reasonably likely to have a
Company Material Adverse Effect:
(A) the Company is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations
hereunder, in violation of any licenses, sublicenses and other agreements
as to which the Company is a party and pursuant to which the Company is
authorized to use any third-party patents, trademarks, service marks, and
copyrights ("Third-Party Intellectual Property Rights");
(B) no claims with respect to (I) the patents, registered and material
unregistered trademarks and service marks, registered copyrights, trade
names, and any applications therefor owned by the Company or any its
Subsidiaries (the "Company Intellectual Property Rights"); (II) any trade
secret material to the Company; or (III) Third-Party Intellectual Property
Rights are currently pending or, to the knowledge of the executive officers
of the Company, are threatened by any Person;
(C) the executive officers of the Company do not know of any valid
grounds for any bona fide claims (I) to the effect that the sale, licensing
or use of any product as now used, sold or licensed or proposed for use,
sale or license by the Company or any of its Subsidiaries, infringes on any
copyright, patent, trademark, service mark or trade secret; (II) against
the use by the Company or any of its Subsidiaries, of any trademarks, trade
names, trade secrets, copyrights, patents, technology, know-how or computer
software programs and applications used in the business of the Company or
any of its Subsidiaries as currently conducted or as proposed to be
conducted; (III) challenging the ownership, validity or effectiveness of
any of the Company Intellectual Property Rights or other trade secret
material to the Company; or (IV) challenging the license or legally
enforceable right to use of the Third-Party Intellectual Rights by the
Company or any of its Subsidiaries; and
(D) to the knowledge of the executive officers of the Company, there
is no unauthorized use, infringement or misappropriation of any of the
Company Intellectual Property Rights by any third party, including any
employee or former employee of the Company or any of its Subsidiaries.
(p) Material Contracts. All of the material contracts of the Company and
its Subsidiaries that are required to be described in the Company Reports or to
be filed as exhibits thereto are described in the Company Reports or filed as
exhibits thereto and are in full force and effect. True and complete copies of
all such material contracts have been delivered or have been made available by
the Company to Parent. Neither the Company nor any of its Subsidiaries nor any
other party is in breach of or in default under any such contract except for
such breaches and defaults as are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect. Neither the Company
nor any of its Subsidiaries is party to any agreement containing any provision
or covenant limiting in any material respect the ability of the Company or any
of its Subsidiaries or, except as specifically identified on Section 5.1(p) of
the Company Disclosure Letter, assuming the consummation of the transactions
contemplated by this Agreement, Parent or any of its Subsidiaries to (A) sell
any products or services of or to any other person, (B) engage in any line of
business or (C) compete with or to obtain products or services from any person
or limiting the ability of any person to provide products or services to the
Company or any of its Subsidiaries.
(q) Rights Plan. (i) The Company has taken all actions necessary such
that, for all purposes under the Rights Agreement and the New Rights Agreement,
Parent shall not be deemed an Acquiring Person (as defined in the Rights
Agreement and the New Rights Agreement, respectively), the Distribution Date (as
defined in the Rights Agreement and the New Rights Agreement, respectively)
shall not be deemed to occur and the rights issuable pursuant to the Rights
Agreement (the "Rights") and the rights issuable pursuant to the New Rights
Agreement (the "New Rights") will not separate from the Common Shares, as a
result of Parent's entering into this Agreement or the Stock Option Agreement or
consummating the Tender Offer, the Merger and/or the other transactions
contemplated hereby or thereby.
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(ii) The Company has taken all necessary action with respect to all of the
outstanding Rights and New Rights so that, as of immediately prior to the
Effective Time and immediately prior to the consummation of the Tender Offer,
(A) neither the Company nor Parent will have any obligations under the Rights or
the Rights Agreement or under the New Rights or the New Rights Agreement and (B)
the holders of the Rights will have no rights under the Rights or the Rights
Agreement and the holders of New Rights will have no rights under the New Rights
or the New Rights Agreement.
(r) Brokers and Finders. Neither the Company nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders, fees in connection
with the Merger or the other transactions contemplated in this Agreement except
that the Company has employed Salomon Smith Barney as its financial advisor, the
arrangements with which have been disclosed to Parent prior to the date hereof.
(s) Insurance Matters. (i) Except as otherwise are not, individually or in
the aggregate, reasonably likely to have a Company Material Adverse Effect, all
policies, binders, slips, certificates, annuity contracts and participation
agreements and other agreements of insurance, whether individual or group, in
effect as of the date hereof (including all applications, supplements,
endorsements, riders and ancillary agreements in connection therewith) that are
issued by the Company Insurance Subsidiaries (the "Company Insurance Contracts")
and any and all marketing materials, are, to the extent required under
applicable law, on forms approved by applicable insurance regulatory authorities
or which have been filed and not objected to by such authorities within the
period provided for objection, and such forms comply in all material respects
with the insurance statutes, regulations and rules applicable thereto and, as to
premium rates established by the Company or any Company Insurance Subsidiary
which are required to be filed with or approved by insurance regulatory
authorities, the rates have been so filed or approved, the premiums charged
conform thereto in all material respects, and such premiums comply in all
material respects with the insurance statutes, regulations and rules applicable
thereto.
(ii) All reinsurance and coinsurance treaties or agreements, including
retrocessional agreements, to which the Company or any Company Insurance
Subsidiary is a party or under which the Company or any Company Insurance
Subsidiary has any existing rights, obligations or liabilities are in full force
and effect, except for such treaties or agreements the failure to be in full
force and effect of which are not, individually or in the aggregate, reasonably
likely to have a Company Material Adverse Effect. Neither the Company nor any
Company Insurance Subsidiary, nor, to the knowledge of the executive officers of
the Company, any other party to a reinsurance or coinsurance treaty or agreement
to which the Company or any Company Insurance Subsidiary is a party, is in
default in any material respect as to any provision thereof, and no such
agreement contains any provision providing that the other party thereto may
terminate such agreement by reason of the transactions contemplated by this
Agreement. The Company has not received any notice to the effect that the
financial condition of any other party to any such agreement is impaired with
the result that a default thereunder may reasonably be anticipated, whether or
not such default may be cured by the operation of any offset clause in such
agreement. No insurer or reinsurer or group of affiliated insurers or reinsurers
accounted for the direction to the Company and the Company Insurance
Subsidiaries or the ceding by the Company and the Company Insurance Subsidiaries
of insurance or reinsurance business in an aggregate amount equal to two percent
or more of the consolidated gross premium income of the Company and the Company
Insurance Subsidiaries for the year ended December 31, 1996.
(iii) Prior to the date hereof, the Company has delivered or made available
to Parent a true and complete copy of any actuarial reports prepared by
actuaries, independent or otherwise, with respect to the Company or any Company
Insurance Subsidiary since December 31, 1994, and all attachments, addenda,
supplements and modifications thereto (the "Company Actuarial Analyses"). The
information and data furnished by the Company or any Company Insurance
Subsidiary to its independent actuaries in connection with the preparation of
the Company Actuarial Analyses were accurate in all material respects.
Furthermore, to the knowledge of the executive officers of the Company, each
Company Actuarial Analysis was based upon an accurate inventory of policies in
force for the Company and the Company Insurance Subsidiaries, as the case may
be, at the relevant time of preparation, was prepared using appropriate modeling
procedures accurately
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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 Company is a "modified endowment contract" within the meaning of
section 7702A of the Code unless and to the extent that the holders of the
policies have been notified of their classification; (C) each annuity contract
issued, entered into or sold by any Company Insurance Subsidiary qualifies as an
annuity under federal tax law; (D) each annuity contract meets the requirements
of, and has been administered consistent with section 817(h) and 72 of the Code
including but not limited to section 72(s) of the Code (except for those
contracts specifically excluded from such requirement pursuant to section
72(s)(5) of the Code); (E) each annuity contract intended to qualify under
sections 130, 403(a), 403(b) or 408(b) of the Code contains all provisions
required for qualification under such sections of the Code; (F) each annuity
contract marketed as, or in connection with, plans that are intended to qualify
under section 401, 403, 408 or 457 of the Code complies with the requirements of
such section; and (G) none of the Company Insurance Subsidiaries have entered
into any agreement or are involved in any discussions or negotiations and there
are no audits, examinations, investigations or other proceedings with the IRS
with respect to the failure of any life insurance policy under section 7702 or
817(h) of the Code or the failure of any annuity contract to meet the
requirements of section 72(s) of the Code. There are no "hold harmless"
indemnification agreements respecting the tax qualification or treatment of any
product or plan sold, issued, entered into or administered by the Company
Insurance Subsidiaries, and there have been no claims asserted by any Person
under such "hold harmless" indemnification agreements so set forth.
(t) Liabilities and Reserves. (i) The reserves carried on the Company SAP
Statements of each Company Insurance Subsidiary for future insurance policy
benefits, losses, claims and similar purposes were, as of the respective dates
of such Company SAP Statements, in compliance in all material respects with the
requirements for reserves established by the insurance departments of the state
of domicile of such Company Insurance Subsidiary, were determined in all
material respects in accordance with generally accepted actuarial standards and
principles consistently applied, and were fairly stated in all material respects
in accordance with sound actuarial and statutory accounting principles. Such
reserves were adequate in the aggregate to cover the total amount of all
reasonably anticipated liabilities of the Company and each Company Insurance
Subsidiary under all outstanding insurance, reinsurance and other applicable
agreements as of the respective dates of such Company SAP Statements. The
admitted assets of each Company Insurance Subsidiary as determined under
applicable Laws are in an amount at least equal to the minimum amounts required
by applicable Laws. In addition, the Company has delivered or made available to
Parent copies of all work papers used as the basis for establishing the reserves
for the Company and the Company Insurance Subsidiaries at December 31, 1995 and
December 31, 1996, respectively.
(ii) Except for regular periodic assessments in the ordinary course of
business or assessments based on developments which are publicly known within
the insurance industry, to the knowledge of the executive officers of the
Company, no claim or assessment is pending or threatened against any Company
Insurance Subsidiary which is peculiar or unique to such Company Insurance
Subsidiary by any state insurance guaranty associations in connection with such
association's fund relating to insolvent insurers which if determined adversely,
would, individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect.
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(u) Investment Company. None of the Company Insurance Subsidiaries
maintains any separate accounts. Neither the Company nor any of its Subsidiaries
conducts activities of or is otherwise deemed under applicable law to control an
"investment advisor" as such term is defined in Section 2(a)(20) of the 1940
Act, whether or not registered under the Investment Advisers Act of 1940, as
amended. Neither the Company nor any of its Subsidiaries is an "investment
company" as defined under the 1940 Act, and neither the Company nor any of its
Subsidiaries sponsors any Person that is such an investment company.
5.2. Representations and Warranties of Parent and Merger
Subsidiary. Except as set forth in the corresponding sections or subsections of
the disclosure letter delivered to the Company by Parent on or prior to entering
into this Agreement (the "Parent Disclosure Letter") or in any Parent Report (as
hereinafter defined) filed prior to the date hereof, Parent and Merger
Subsidiary each hereby represent and warrant to the Company that:
(a) Capitalization of Merger Subsidiary. The authorized stock of Merger
Subsidiary consists of 1,000 shares of Common Stock, par value $.01 per share,
100 of which are duly authorized, validly issued and outstanding, fully paid and
non-assessable. All of the issued and outstanding stock of Merger Subsidiary is,
and at the Effective Time will be, owned by Parent, and there are (i) no other
shares of stock or voting securities of Merger Subsidiary, (ii) no securities of
Merger Subsidiary convertible into or exchangeable for shares of stock or voting
securities of Merger Subsidiary and (iii) no options or other rights to acquire
from Merger Subsidiary, and no obligations of Merger Subsidiary to issue or
deliver, any stock, voting securities or securities convertible into or
exchangeable for stock or voting securities of Merger Subsidiary. Merger
Subsidiary has not conducted any business prior to the date hereof and has no,
and prior to the Effective Time will have no, assets, liabilities or obligations
of any nature other than those incident to its formation and pursuant to this
Agreement and the Merger and the other transactions contemplated by this
Agreement.
(b) Organization, Good Standing and Qualification. (i) Each of Parent and
Merger Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own and operate its properties and
assets and to carry on its business as presently conducted and is qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction where the ownership or operation of its properties or conduct of
its business requires such qualification, except where the failure to be so
qualified or in such good standing, is not reasonably likely, individually or in
the aggregate, to have a Parent Material Adverse Effect (as defined below).
Parent has made available to the Company a complete and correct copy of Parent's
and Merger Subsidiary's charter and by-laws, each as amended to the date hereof.
Parent's and Merger Subsidiary's charter and by-laws so delivered are in full
force and effect.
As used in this Agreement, the term "Parent Material Adverse Effect" means
a material adverse effect on the financial condition, properties, business or
results of operations of Parent and its Subsidiaries taken as a whole.
(c) Capital Structure. The authorized capital stock of Parent consists of
1,000,000,000 shares of Parent Common Stock, of which 701,493,275 shares were
outstanding as of the close of business on September 30, 1997, and 6,000,000
shares of Serial Preferred Stock, par value $5.00 per share, none of which was
outstanding as of the close of business on December 21, 1997. All of the
outstanding shares of Parent Common Stock are duly authorized, validly issued,
fully paid and nonassessable.
(d) Corporate Authority.
(i) Each of the Parent and Merger Subsidiary has all requisite
corporate power and authority and has taken all corporate action necessary
in order to execute, deliver and perform its obligations under this
Agreement and to consummate the Tender Offer and the Merger. This Agreement
is a valid and binding agreement of Parent and Merger Subsidiary,
enforceable against each of Parent and Merger Subsidiary in accordance with
its terms, subject to the Bankruptcy and Equity Exception.
(ii) Prior to the Effective Time, Parent will have taken all necessary
action to permit it to issue the number of shares of Parent Common Stock
and Parent Preferred Stock required to be issued pursuant to Article IV.
The Parent Common Stock and Parent Preferred Stock, when issued, will be
duly authorized,
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validly issued, fully paid and nonassessable, and no stockholder of Parent
will have any preemptive right of subscription or purchase in respect
thereof. The Parent Common Stock and Parent Preferred Stock, when issued,
will be registered under the Securities Act and Exchange Act and registered
or exempt from registration under any applicable state securities or "blue
sky" laws.
(e) Governmental Filings; No Violations. (i) Other than the filings and/or
notices (A) pursuant to Section 1.3, (B) under the HSR Act, the Securities Act
and the Exchange Act, (C) to comply with state securities or "blue sky" laws,
(D) required to be made with the NYSE or Nasdaq, and (E) the filing of
appropriate documents with, and approval of, the respective Commissioners of
Insurance of the states of Arizona, Florida, Georgia, New York, South Carolina,
Texas, Puerto Rico, Mexico, Cayman Islands, Argentina, Turks & Caicos, Dominican
Republic and the United Kingdom, and such notices and consents as may be
required under the antitrust notification insurance laws of any state in which
the Company, Parent or any of their respective subsidiaries is domiciled or does
business, no notices, reports or other filings are required to be made by Parent
or Merger Subsidiary with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by Parent or Merger Subsidiary
from, any Governmental Entity, in connection with the execution and delivery of
this Agreement by Parent and Merger Subsidiary and the consummation by Parent
and Merger Subsidiary of the Merger and the other transactions contemplated
hereby, except those that the failure to make or obtain are not, individually or
in the aggregate, reasonably likely to have a Parent Material Adverse Effect or
prevent, materially delay or materially impair the ability of Parent or Merger
Subsidiary to consummate the transactions contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement by Parent
and Merger Subsidiary do not, and the consummation by Parent and Merger
Subsidiary of the Merger and the other transactions contemplated hereby will
not, constitute or result in (A) a breach or violation of, or a default under,
the certificate or by-laws of Parent and Merger Subsidiary or the comparable
governing instruments of any of its Subsidiaries, (B) a breach or violation of,
or a default under, the acceleration of any obligations or the creation of a
lien, pledge, security interest or other encumbrance on the assets of Parent or
any of its Subsidiaries (with or without notice, lapse of time or both) pursuant
to, any Contracts binding upon Parent or any of its Subsidiaries or (provided,
as to consummation, the filings and notices are made, and approvals are
obtained, as referred to in Section 5.2(e)(i)) or any Law or governmental or
non-governmental permit or license to which Parent or any of its Subsidiaries is
subject or (C) any change in the rights or obligations of any party under any of
the Contracts, except, in the case of clause (B) or (C) above, for breach,
violation, default, acceleration, creation or change that is not, individually
or in the aggregate, reasonably likely to have a Parent Material Adverse Effect
or prevent, materially delay or materially impair the ability of Parent or
Merger Subsidiary to consummate the transactions contemplated by this Agreement.
(f) Parent Reports; Financial Statements. Parent has made available to the
Company each report or proxy statement prepared by it since December 31, 1994,
including (i) Parent's Annual Report on Form 10-K for the year ended December
31, 1996 (the "Parent Audit Date"), and (ii) Parent's Quarterly Reports on Form
10-Q for the periods ended March 31, 1997, June 30, 1996 and September 30, 1997,
each in the form (including exhibits, annexes and any amendments thereto) filed
with the SEC (collectively, including any such reports filed subsequent to the
date hereof, the "Parent Reports"). As of their respective dates, the Parent
Reports did not, and any Parent Reports filed with the SEC subsequent to the
date hereof will not, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading. Each of the consolidated balance sheets included in or
incorporated by reference into the Parent Reports (including the related notes
and schedules) fairly presents, or will fairly present, the consolidated
financial position of Parent and its Subsidiaries as of its date and each of the
consolidated statements of income and of changes in financial position included
in or incorporated by reference into the Parent Reports (including any related
notes and schedules) fairly presents, or will fairly present, the results of
operations, retained earnings and changes in financial position, as the case may
be, of Parent and its Subsidiaries for the periods set forth therein (subject,
in the case of unaudited statements, to notes and normal year-end audit
adjustments that will not be material in amount or effect), in each case in
accordance with GAAP consistently applied during the periods involved, except as
may be noted therein.
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(ii) The annual and quarterly statements of each Subsidiary through which
Parent conducts its insurance operations (the "Parent Insurance Subsidiaries")
as filed with the applicable insurance regulatory authorities for the years
ended December 31, 1994, 1995 and 1996 and the quarterly periods ended March 31,
1997, June 30, 1997 and September 30, 1997, including all exhibits,
interrogatories, notes, schedules and any actuarial opinions, affirmations or
certifications or other supporting documents filed in connection therewith
(collectively, the "Parent SAP Statements") were prepared in conformity with
statutory accounting practices prescribed or permitted by the applicable
insurance regulatory authority consistently applied for the periods covered
thereby and present fairly the statutory financial position of such Parent
Insurance Subsidiaries as at the respective dates thereof and the results of
operations of such Subsidiaries for the respective periods then ended. The
Parent SAP Statements complied in all material respects with all applicable
laws, rules and regulations when filed, and no deficiency that is material to
Parent and its Subsidiaries, taken as a whole, has been asserted with respect to
any Parent SAP Statements by the applicable insurance regulatory body or any
other governmental agency or body.
(g) Absence of Certain Changes. Except as disclosed in the Parent Reports
filed prior to the date hereof, since the Parent Audit Date Parent and its
Subsidiaries have conducted the business of Parent and its Subsidiaries, taken
as a whole, only in, and have not engaged in any transaction material to the
Company and its Subsidiaries, taken as a whole, other than according to, the
ordinary and usual course of such businesses and there has not been (i) any
change in the financial condition, management, properties, prospects, business
or results of operations of Parent and its Subsidiaries or any development or
combination of developments of which management of Parent has knowledge that,
individually or in the aggregate, is reasonably likely to have a Parent Material
Adverse Effect; (ii) any material damage, destruction or other casualty loss
with respect to any material asset or property owned, leased or otherwise used
by Parent or any of its Subsidiaries, whether or not covered by insurance that,
individually or in the aggregate, is reasonably likely to have a Parent Material
Adverse Affect; (iii) any declaration, setting aside or payment of any dividend
or other distribution in respect of the capital stock of Parent, except for
dividends or other distributions on its capital stock publicly announced prior
to the date hereof or declared and paid consistent with past practice (including
customary increases); or (iv) any material addition, or any development
involving a prospective material addition, to Parent's consolidated reserves for
future policy benefits.
(h) Tax Matters. As of the date hereof, neither Parent nor any of its
Affiliates has taken or agreed to take any action, nor do the officers of Parent
have any knowledge of any fact or circumstance, that would prevent the Merger
and the other transactions contemplated by this Agreement from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code.
(i) Brokers and Finders. Neither Parent nor any of its officers, directors
or employees has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders, fees in connection with the Merger or
the other transactions contemplated by this Agreement, except that Parent has
employed Goldman, Sachs & Co. and Barclays as its financial advisors.
(j) Insurance Matters. The business and operations of the Parent Insurance
Subsidiaries have been conducted in compliance with all Insurance Laws, except
where the failure to so conduct such business and operations is not,
individually or in the aggregate, reasonably likely to have a Parent Material
Adverse Effect. Notwithstanding the generality of the foregoing, except where
the failure to do so would not, individually or in the aggregate, be reasonably
likely to have a Parent Material Adverse Effect, each Parent Insurance
Subsidiary and, to the knowledge of Parent's executive officers, its agents have
marketed, sold and issued insurance products in compliance, in all material
respects, with Insurance Laws applicable to the business of such Parent
Insurance Subsidiary and in the respective jurisdictions in which such products
have been sold, including, without limitation, in compliance with (i) all
prohibitions against "redlining" or withdrawal of business lines, (ii) all
applicable requirements relating to the disclosure of the nature of insurance
products as policies of insurance and (iii) all applicable requirements relating
to insurance product projections and illustrations. In addition, (i) there is no
pending or, to the knowledge of the executive officers of Parent, threatened
charge by any insurance regulatory authority that any of the Parent Insurance
Subsidiaries has violated, nor any pending or, to the knowledge of the executive
officers of the Parent, threatened investigation by any insurance regulatory
authority with respect to possible violations of, any applicable Insurance Laws
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where such violations are, individually or in the aggregate, reasonably likely
to have a Parent Material Adverse Effect; (ii) none of the Parent Insurance
Subsidiaries is subject to any order or decree of any insurance regulatory
authority relating specifically to such Parent Insurance Subsidiary (as opposed
to insurance companies generally) which is, individually or in the aggregate,
reasonably likely to have a Parent Material Adverse Effect; and (iii) the Parent
Insurance Subsidiaries have filed all reports required to be filed with any
insurance regulatory authority on or before the date hereof as to which failure
to file such reports is, individually or in the aggregate, reasonably likely to
have a Parent Material Adverse Effect.
Except as otherwise are not, individually or in the aggregate, reasonably
likely to have a Parent Material Adverse Effect, all policies, binders, slips,
certificates, annuity contracts and participation agreements and other
agreements of insurance, whether individual or group, in effect as of the date
hereof (including all applications, supplements, endorsements, riders and
ancillary agreements in connection therewith) that are issued by the Parent
Insurance Subsidiaries and any and all marketing materials, are, to the extent
required under applicable law, on forms approved by applicable insurance
regulatory authorities or which have been filed and not objected to by such
authorities within the period provided for objection, and such forms comply in
all material respects with the insurance statutes, regulations and rules
applicable thereto and, as to premium rates established by Parent or the Parent
Insurance Subsidiaries which are required to be filed with or approved by
insurance regulatory authorities, the rates have been so filed or approved, the
premiums charged conform thereto in all material respects, and such premiums
comply in all material respects with the insurance statutes, regulations and
rules applicable thereto.
ARTICLE VI
COVENANTS
6.1. Interim Operations. The Company covenants and agrees as to itself
and its Subsidiaries that, after the date hereof and prior to the Effective Time
(unless Parent shall otherwise approve in writing, and except as otherwise
expressly contemplated by this Agreement or the Stock Option Agreement or set
forth in Section 6.1 of the Company Disclosure Schedule):
(a) its and its Subsidiaries's businesses shall be conducted in the
ordinary and usual course (it being understood and agreed that nothing
contained herein shall permit the Company to enter into or engage in
(through acquisition, product extension or otherwise) the business of
selling any products or services materially different from existing
products or services of the Company and its Subsidiaries or to enter into
or engage in new lines of business without Parent's prior written
approval);
(b) to the extent consistent with (a) above it and its Subsidiaries
shall use their respective reasonable best efforts to preserve its business
organization intact and maintain its existing relations and goodwill with
customers, suppliers, reinsurers, distributors, creditors, lessors,
employees and business associates;
(c) it shall not (i) issue, sell, pledge, dispose of or encumber any
capital stock owned by it in any of its Subsidiaries; (ii) amend its
charter or by-laws or amend, modify or terminate the Rights Agreement or
New Rights Agreement; (iii) split, combine or reclassify its outstanding
shares of capital stock; (iv) authorize, declare, set aside or pay any
dividend payable in cash, stock or property in respect of any capital stock
other than dividends from its direct or indirect wholly-owned Subsidiaries
and other than regular quarterly dividends paid by the Company on its
Common Shares not in excess of $0.11 per share and regular quarterly
dividends paid by the Company on its Preferred Shares in accordance with
the Company's Articles of Incorporation; or (v) repurchase, redeem or
otherwise acquire, except in connection with any of the Company Stock
Plans, or permit any of its Subsidiaries to purchase or otherwise acquire,
any shares of its stock or any securities convertible into or exchangeable
or exercisable for any shares of its stock;
(d) neither it nor any of its Subsidiaries shall (i) issue, sell,
pledge, dispose of or encumber any shares of, or securities convertible
into or exchangeable or exercisable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of its capital
stock of any class or any other
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property or assets (other than Shares issuable pursuant to options
outstanding on the date hereof under any of the Company Stock Plans or upon
conversion of the Preferred Shares or Convertible Notes); (ii) other than
in the ordinary and usual course of business, transfer, lease, license,
guarantee, sell, mortgage, pledge, dispose of or encumber any other
property or assets (including capital stock of any of its Subsidiaries) or
incur or modify any material indebtedness or other liability; or (iii) make
or authorize or commit for any capital expenditures other than in amounts
not exceeding $5 million in the aggregate or, by any means, make any
acquisition of, or investment in, assets or stock of any other Person or
entity, including by way of assumption reinsurance, in excess of $2 million
individually or $5 million in the aggregate (other than in connection with
ordinary course investment activities);
(e) neither it nor any of its Subsidiaries shall terminate, establish,
adopt, enter into, make any new grants or awards under, amend or otherwise
modify, any Compensation and Benefit Plans, other than awards made in the
normal course under the Management Incentive Plan in respect of 1997
performance and grants of up to 20,000 restricted Common Shares to be made
in January 1998 under the year 2000 Tenure Award Program, or increase the
salary, wage, bonus or other compensation of any employees except increases
occurring in the ordinary and usual course of business (which shall include
normal periodic performance reviews and related compensation and benefit
increases);
(f) neither it nor any of its Subsidiaries shall pay, discharge,
settle or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction of claims, liabilities or obligations
legally due and payable and arising in the ordinary and usual course of
business, claims arising under the terms of products, contracts or policies
issued by the Company Insurance Subsidiaries in the ordinary and usual
course of business and such other claims, liabilities or obligations as
shall not exceed $5 million in the aggregate;
(g) neither it nor any of its Subsidiaries shall make or change any
Tax election, settle any material audit, file any amended tax returns or
permit any insurance policy naming it as a beneficiary or loss-payable
payee to be canceled or terminated except in the ordinary and usual course
of business;
(h) neither it nor any of its Subsidiaries shall enter into any
agreement containing any provision or covenant limiting in any material
respect the ability of the Company or any Subsidiary or affiliate to (A)
sell any products or services of or to any other person, (B) engage in any
line of business or (C) compete with or to obtain products or services from
any person or limiting the ability of any person to provide products or
services to the Company or any of its Subsidiaries or affiliates;
(i) neither it nor any of its Subsidiaries shall enter into any new
quota share or other reinsurance transaction (A) which does not contain
standard cancellation and termination provisions, (B) which, except in the
ordinary course of business, materially increases or reduces the Company
Insurance Subsidiaries' consolidated ratio of net written premiums to gross
written premiums or (C) pursuant to which $5 million or more in gross
written premiums are ceded by the Company Insurance Subsidiaries to any
Person other than the Company or any of its Subsidiaries;
(j) neither it nor any of the Company Insurance Subsidiaries will
alter or amend in any material respect their existing investment guidelines
or policies;
(k) neither it nor any of its Subsidiaries shall take any action or
omit to take any action that would cause any of its representations and
warranties herein to become untrue in any material respect; and
(l) neither it nor any of its Subsidiaries will authorize or enter
into an agreement to do any of the foregoing.
6.2. Acquisition Proposals. The Company will not, and will not permit or
cause any of its Subsidiaries or any of the officers and directors of it or its
Subsidiaries to, and shall direct its and its Subsidiaries' employees, agents
and representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly,
initiate, solicit, encourage or otherwise facilitate any inquiries or the making
of any proposal or offer with respect to a merger, reorganization, share
exchange, consolidation or similar transaction involving, or any purchase of 15%
or more of the assets or any equity
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securities of, the Company or any of its Subsidiaries (any such proposal or
offer being hereinafter referred to as an "Acquisition Proposal"). The Company
will not, and will not permit or cause any of its Subsidiaries or any of the
officers and directors of it or its Subsidiaries to and shall direct its and its
Subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) not
to, directly or indirectly, engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
Person relating to an Acquisition Proposal, whether made before or after the
date of this Agreement, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal (including, without limitation, by means of an
amendment to the Rights Agreement or the New Rights Agreement); provided,
however, that nothing contained in this Agreement shall prevent the Company or
its Board of Directors from (i) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to an Acquisition Proposal or (ii) at any time prior to
the approval of the Merger by the Company Requisite Vote (A) providing
information in response to a request therefor by a Person who has made an
unsolicited bona fide written Acquisition Proposal if the Board of Directors
receives from the Person so requesting such information an executed
confidentiality agreement on terms substantially equivalent to those contained
in the Confidentiality Agreement (as defined in Section 9.7); (B) engaging in
any negotiations or discussions with any Person who has made an unsolicited bona
fide written Acquisition Proposal; or (C) recommending such an Acquisition
Proposal to the stockholders of the Company, if and only to the extent that, (i)
in each such case referred to in clause (A), (B) or (C) above, the Board of
Directors of the Company determines in good faith after consultation with
outside legal counsel that such action is necessary in order for its directors
to comply with their respective fiduciary duties under applicable law and (ii)
in each case referred to in clause (B) or (C) above, the Board of Directors of
the Company determines in good faith (after consultation with its financial
advisor) that such Acquisition Proposal, if accepted, is reasonably likely to be
consummated, taking into account all legal, financial and regulatory aspects of
the proposal and the Person making the proposal and would, if consummated,
result in a more favorable transaction than the transaction contemplated by this
Agreement, taking into account the long-term prospects and interests of the
Company and its stockholders (any such more favorable Acquisition Proposal being
referred to in this Agreement as a "Superior Proposal"). The Company will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. The Company agrees that it will take the necessary
steps to promptly inform the individuals or entities referred to in the first
sentence hereof of the obligations undertaken in this Section 6.2 and in the
Confidentiality Agreement (as defined in Section 9.7). The Company will notify
Parent immediately if any such inquiries, proposals or offers are received by,
any such information is requested from, or any such discussions or negotiations
are sought to be initiated or continued with, any of its representatives
indicating, in connection with such notice, the name of such Person and the
material terms and conditions of any proposals or offers and thereafter shall
keep Parent informed, on a current basis, on the status and terms of any such
proposals or offers and the status of any such negotiations or discussions. The
Company also will promptly request each Person that has heretofore executed a
confidentiality agreement in connection with its consideration of an Acquisition
Proposal to return all confidential information heretofore furnished to such
Person by or on behalf of it or any of its Subsidiaries.
6.3. Information Supplied. The Company and Parent each agrees, as to
itself and its Subsidiaries, that none of the information supplied or to be
supplied by it or its Subsidiaries for inclusion or incorporation by reference
in (i) the Offer Documents, the Schedule 14D-1 and the Schedule 14D-9 will, at
the time of filing thereof and at the time of distribution thereof, contain any
untrue statement of material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading, (ii) the
Registration Statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock and Parent
Preferred Stock in the Merger (including the proxy statement and prospectus (the
"Prospectus/Proxy Statement") constituting a part thereof) (the "S-4
Registration Statement") will, at the time the S-4 Registration Statement
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (iii) the Prospectus/Proxy Statement
and any amendment or supplement thereto will, at the date of mailing to
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stockholders and at the times of the meetings of stockholders of the Company to
be held in connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
6.4. Stockholders Meetings. (a) The Company will take, in accordance with
its charter and by-laws, all action necessary to convene a meeting of holders of
Common Shares (the "Common Stockholders Meeting") on March 27, 1998, and a
meeting of holders of Preferred Shares (the "Preferred Stockholders Meeting"
and, together with the Common Stockholders Meeting, the "Stockholders Meetings")
on March 25, 1998, to consider and vote upon the approval of the Merger. It is
agreed that, except as provided in Section 1.5(c), the Company will not cancel,
adjourn or postpone the Stockholders Meetings without the prior written consent
of Parent. Subject to fiduciary obligations under applicable law, the Company's
board of directors shall recommend such approval, shall not withdraw or modify
such recommendation and shall take all lawful action to solicit such approval.
Without limiting the generality of the foregoing, in the event that the
Company's board of directors withdraws or modifies its recommendation, the
Company nonetheless shall cause the Stockholders Meetings to be convened and a
vote taken with respect to the Merger and the board of directors shall
communicate to the Company's stockholders its basis for such withdrawal or
modification as contemplated by Section 607.1103(2)(a) of the FBCA.
(b) In the event that the Stockholders Meetings contemplated by Section
6.4(a) are cancelled pursuant to Section 1.5(c) in connection with the
commencement of the Tender Offer, the Company will take, in accordance with its
charter and by-laws, all action necessary to convene meetings of holders of
Shares as promptly as practicable, but in no event more than 45 days, after a
post-effective amendment to the S-4 Registration Statement is declared
effective, to consider and vote upon the approval of the Merger. Subject to
fiduciary obligations under applicable law, the Company's board of directors
shall recommend such approval, shall not withdraw or modify such recommendation
and shall take all lawful action to solicit such approval. Without limiting the
generality of the foregoing, in the event that the Company's board of directors
withdraws or modifies its recommendation, the Company nonetheless shall cause
such stockholders meetings to be convened and a vote taken with respect to the
Merger and the board of directors shall communicate to the Company's
stockholders its basis for such withdrawal or modification as contemplated by
Section 607.1103(2)(a) of the FBCA.
6.5. Filings; Other Actions; Notification. (a) Parent and the Company
shall promptly prepare and file with the SEC the Prospectus/Proxy Statement, and
Parent shall prepare and file with the SEC the S-4 Registration Statement as
promptly as practicable. Parent and the Company each shall use all reasonable
efforts to have the S-4 Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing, and promptly
thereafter mail the Prospectus/Proxy Statement to the stockholders of the
Company. Parent shall also use all reasonable efforts to obtain prior to the
effective date of the S-4 Registration Statement all necessary state securities
law or "blue sky" permits and approvals required in connection with the Merger
and to consummate the other transactions contemplated by this Agreement and will
pay all expenses incident thereto.
(b) The Company and Parent shall cooperate with each other and use (and
shall cause their respective Subsidiaries to use) all best efforts (i) to cause
to be done all things, necessary, proper or advisable on its part under this
Agreement and applicable Laws to consummate and make effective the Tender Offer,
the Merger and the other transactions contemplated by this Agreement as soon as
practicable, including preparing and filing as promptly as practicable all
documentation to effect all necessary notices, reports and other filings, and
(ii) to obtain as promptly as practicable all consents, registrations,
approvals, permits and authorizations necessary or advisable to be obtained from
any third party and/or any Governmental Entity in connection with, as a result
of or in order to consummate the Tender Offer, the Merger or any of the other
transactions contemplated by this Agreement, including, without limitation, upon
request of Parent, all material consents required in connection with the
consummation of the Tender Offer, the Merger; provided, however, that nothing in
this Section 6.5 shall require, or be construed to require, Parent, in
connection with the receipt of any regulatory approval, to proffer to, or agree
to (i) sell or hold separate and agree to sell or to discontinue to or limit,
before or after the Effective Time, any assets, businesses, or interest in any
assets or businesses of
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Parent, the Company or any of their respective Affiliates (or to consent to any
sale, or agreement to sell, or discontinuance or limitation by the Company of
any of its assets or businesses) or (ii) agree to any conditions relating to, or
changes or restriction in, the operations of any such asset or businesses which,
in either case, could, in the judgment of the Board of Parent, materially and
adversely impact the economic or business benefits to Parent of the transactions
contemplated by this Agreement. Subject to applicable laws relating to the
exchange of information, Parent and the Company shall have the right to review
in advance, and to the extent practicable each will consult the other on, all
the information relating to Parent or the Company, as the case may be, and any
of their respective Subsidiaries, that appear in any filing made with, or
written materials submitted to, any third party and/or any Governmental Entity
in connection with the Tender Offer, the Merger and the other transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
Company and Parent shall act reasonably and as promptly as practicable.
(c) The Company and Parent each shall, upon request by the other, furnish
the other with all information concerning itself, its Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with the Offer Documents, the Schedule 14D-1, the
Schedule 14D-9, the Prospectus/Proxy Statement, the S-4 Registration Statement
or any other statement, filing, notice or application made by or on behalf of
Parent, the Company or any of their respective Subsidiaries to any third party
and/or any Governmental Entity in connection with the Tender Offer, the Merger
and the other transactions contemplated by this Agreement.
(d) The Company and Parent each shall keep the other apprised of the status
of matters relating to completion of the transactions contemplated hereby,
including promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be, or any of
its Subsidiaries, from any third party and/or any Governmental Entity with
respect to the Tender Offer, the Merger and the other transactions contemplated
by this Agreement. The Company and Parent each shall give prompt notice to the
other of any change that is reasonably likely to result in a Company Material
Adverse Effect or Parent Material Adverse Effect, respectively.
(e) The Company shall use its best efforts to cause the Company and each of
the persons listed in Section 6.5(e) of the Company Disclosure Schedule to enter
into prior to the earlier of the consummation of the Tender Offer and the
Effective Time an Amendment of Severance Agreement in the form attached hereto
as Exhibit D or E, as applicable.
6.6. Taxation. Subject to Section 6.2, neither Parent nor the Company
shall take or cause to be taken any action, whether before or after the
Effective Time, that would disqualify the Merger as a "reorganization" within
the meaning of Section 368(a) of the Code. Each of Parent and the Company agrees
to use all reasonable efforts to cure any impediment to the qualification of the
Merger as a "reorganization" within the meaning of Section 368(a) of the Code,
provided that this Section 6.6 shall not oblige Parent to increase the portion
of a share of Parent Common Stock into which a share of Common Stock is
converted pursuant to Parent's right under Section 4.1(a)(iv).
6.7. Access. (a) Upon reasonable notice, and except as may otherwise be
required by applicable law, the Company shall (and shall cause its Subsidiaries
to) afford Parent's officers, employees, counsel, accountants and other
authorized representatives ("Representatives") access, during normal business
hours throughout the period prior to the Effective Time, to the Company's and
its Subsidiaries' management, properties, books, contracts and records and,
during such period, shall (and shall cause its Subsidiaries to) furnish promptly
to Parent all information concerning the Company's and its Subsidiaries'
business, properties and personnel as may reasonably be requested, provided that
no investigation pursuant to this Section shall affect or be deemed to modify
any representation or warranty made by the Company, and provided, further, that
the foregoing shall not require the Company to permit any inspection, or to
disclose any information, that in the reasonable judgment of the Company would
result in the disclosure of any trade secrets of third parties or violate any of
its obligations with respect to confidentiality if the Company shall have used
all reasonable efforts to obtain the consent of such third party to such
inspection or disclosure. All requests for information made pursuant to this
Section 6.7(a) shall be directed to an executive officer of the Company or such
Person
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as may be designated by the Company's officers. All such information shall be
governed by the terms of the Confidentiality Agreement (as hereinafter defined).
(b) Upon reasonable notice, and except as may otherwise be required by
applicable law, Parent shall afford the Company's Representatives such access as
is reasonably requested (giving due consideration to the size and capitalization
of, and availability of public information concerning, Parent and the pricing
and other terms contained in this Agreement), during normal business hours
throughout the period prior to the Effective Time, to a limited number of
Parent's management personnel and all relevant books and records, provided that
no investigation pursuant to this Section shall affect or be deemed to modify
any representation or warranty made by Parent, and provided, further, that the
foregoing shall not require Parent to permit any inspection, or to disclose any
information, that in the reasonable judgment of Parent would result in the
disclosure of any trade secrets of third parties or violate any of its
obligations with respect to confidentiality. All requests for information made
pursuant to this Section 6.7(b) shall be directed to an executive officer of
Parent or such Person as may be designated by Parent's officers. All such
information shall be governed by the terms of the Confidentiality Agreement (as
hereinafter defined).
6.8. Affiliates. Prior to the earlier of the date of consummation of the
Tender Offer and the date of the Stockholders Meetings, the Company shall
deliver to Parent a list of names and addresses of those Persons who will be, in
the opinion of the Company, as of the time of the Stockholders Meetings referred
to in Section 6.4, "affiliates" of the Company within the meaning of Rule 145
under the Securities Act. There shall be added to such list the names and
addresses of any other Person subsequently identified by either Parent or the
Company as a Person who may be deemed to be such an affiliate of the Company;
provided, however, that no such Person identified by Parent shall be added to
the list of affiliates of the Company unless Parent delivers to the Company, on
or before the earlier of the date of consummation of the Tender Offer and the
date of the Stockholders Meetings, an opinion of counsel reasonably satisfactory
to the Company to the effect that such Person is such an affiliate. The Company
shall exercise its reasonable best efforts to deliver or cause to be delivered
to Parent, prior to the earlier of the date of the consummation of the Tender
Offer and the date of the Stockholders Meetings, from each affiliate of the
Company identified in the foregoing list (as the same may be supplemented as
aforesaid), a letter dated as of the date of consummation of the Tender Offer or
the date of the Stockholders Meetings, as applicable, substantially in the form
attached as Exhibit C (the "Affiliates Letter"). Parent shall not be required to
maintain the effectiveness of the S-4 Registration Statement or any other
registration statement under the Securities Act for the purposes of resale of
Parent Common Stock or Parent Preferred Stock by such affiliates received in the
Merger and the certificates representing Parent Common Stock and Parent
Preferred Stock received by such affiliates shall bear a customary legend
regarding applicable Securities Act restrictions and the provisions of this
Section.
6.9. Stock Exchange Listing and De-listing. Parent shall use its
reasonable best efforts to cause (i) the shares of Parent Common Stock to be
issued in the Merger to be approved for listing on the NYSE subject to official
notice of issuance and (ii) the shares of Parent Preferred Stock to be issued in
the Merger to be approved for listing on the NYSE subject to official notice of
issuance, prior to the Closing Date. The Surviving Corporation shall use its
best efforts to cause (i) the Common Shares to be de-listed from the NYSE and
de-registered under the Exchange Act as soon as practicable following the
Effective Time and (ii) the Preferred Shares to be de-listed from the NYSE and
de-registered under the Exchange Act as soon as practicable following the
Effective Time.
6.10. Publicity. The initial press release shall be a joint press release
and thereafter the Company and Parent each shall consult with each other prior
to issuing any press releases or otherwise making public announcements with
respect to the Tender Offer, the Merger and the other transactions contemplated
by this Agreement and prior to making any filings with any third party and/or
any Governmental Entity (including any national securities exchange) with
respect thereto, except as may be required by law or by obligations pursuant to
any listing agreement with or rules of any national securities exchange
interdealer quotation service.
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6.11. Benefits; Corporate Headquarters; School and Day Care Facility.
(a) Stock Options.
(i) At the Effective Time, each Company Option whether vested or
unvested, shall be deemed to constitute an option to acquire, on the same
terms and conditions as were applicable under such Company Option, the same
number of shares of Parent Common Stock as the holder of such Company
Option would have been entitled to receive pursuant to the Merger had such
holder exercised such option in full immediately prior to the Effective
Time and assuming that the Common Stock Merger Consideration consisted
entirely of Parent Common Stock (rounded down to the nearest whole number),
at a price per share (rounded up to the nearest whole cent) equal to (y)
the aggregate exercise price for the Common Shares otherwise purchasable
pursuant to such Company Option divided by (z) the number of full shares of
Parent Common Stock deemed purchasable pursuant to such Company Option in
accordance with the foregoing; provided, however, that in the case of any
Company Option to which Section 422 of the Code applies, the option price,
the number of shares purchasable pursuant to such option and the terms and
conditions of exercise of such option shall be determined in accordance
with the foregoing, subject to such adjustments as are necessary in order
to satisfy the requirements of Section 424(a) of the Code; provided,
further, that to the extent that Common Shares acquired upon exercise of a
Company Option would be subject to vesting or other restrictions under the
terms of the relevant Company Stock Plan under which such Company Option
was issued ("Company Restricted Shares"), the number of shares of Parent
Common Stock to be issued upon exercise of an assumed Company Option in
accordance with the foregoing that bears the same ratio to the total shares
of Parent Common Stock deemed purchasable pursuant to such assumed Company
Option as the number of Company Restricted Shares bears to the total number
of Company Shares issuable under such Company Option shall be subject to
the same vesting and other restrictions as would be applicable to the
Company Restricted Shares. At or prior to the Effective Time, the Company
shall make all necessary arrangements with respect to the Company Stock
Plans to permit the assumption of the unexercised Company Options by Parent
pursuant to this Section.
(ii) Effective at the Effective Time, Parent shall assume each Company
Option in accordance with the terms of the relevant Company Stock Plan
under which it was issued and the stock option agreement by which it is
evidenced. At or prior to the Effective Time, Parent shall take all
corporate action necessary to reserve for issuance a sufficient number of
shares of Parent Common Stock for delivery upon exercise of Company Options
assumed by it in accordance with this Section. As soon as practicable after
the Effective Time, Parent shall file a registration statement on Form S-3
or Form S-8, as the case may be (or any successor or other appropriate
forms), or another appropriate form (or shall cause such Company Option to
be deemed to be an option issued pursuant to a Parent Stock Plan for which
shares of Parent Common Stock have previously been registered pursuant to
an appropriate registration form) with respect to the Parent Common Stock
subject to such Company Options, and shall use its reasonable best efforts
to maintain the effectiveness of such registration statements (and maintain
the current status of the prospectus or prospectuses contained therein) for
so long as such Company Options remain outstanding.
(b) Employee Benefits. Parent agrees that, during the period commencing at
the Effective Time and ending on the first anniversary thereof, the employees of
the Company and its Subsidiaries will continue to be provided with benefits
under the Company's and its Subsidiaries' existing employee benefit plans (other
than plans involving the issuance or award of Shares or rights to acquire
Shares) that are no less favorable in the aggregate than those currently
provided by the Company and its Subsidiaries to such employees. Any such
employees will receive credit under any plans of Parent or any of its
Subsidiaries for service with the Company or any of its Subsidiaries or
predecessors (to the extent service with such predecessors was credited under
the Compensation and Benefit Plans disclosed in the Company Disclosure Letter)
prior to the Effective Time for the purpose of determining eligibility and
vesting; and Parent shall cause any and all pre-existing condition limitations
(to the extent such limitations did not apply to a pre-existing condition under
the Compensation and Benefit Plans) and eligibility waiting periods under group
health plans of the Parent or any of its Subsidiaries to be waived with respect
to such participants and their eligible dependents. All discretionary
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awards and benefits under any employee benefit plans of Parent or any of its
Subsidiaries shall be subject to the discretion of the persons or committee
administering such plans.
(c) Corporate Headquarters. Parent shall maintain the corporate
headquarters of the Surviving Corporation at the Company's current Miami
location for the foreseeable future, and in any event, for not less than five
years from the Effective Time.
(d) School and Day Care Facility. Parent shall ensure, to the extent
within its reasonable control, that the public school and day care facility
operated on or adjacent to the Company's current Miami location shall remain in
operation at their current locations for so long as the Surviving Corporation's
corporate headquarters shall be maintained at the Company's current Miami
location.
6.12. Expenses. The Surviving Corporation shall pay all charges and
expenses, including those of the Exchange Agent, in connection with the
transactions contemplated in Article IV. Except as otherwise provided in Section
8.5(b), whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the Tender Offer, the Merger and
the other transactions contemplated by this Agreement shall be paid by the party
incurring such expense, except that expenses incurred in connection with the
filing fee for the S-4 Registration Statement and printing and mailing the Offer
Documents, the Schedule 14D-1, the Schedule 14D-9, the Prospectus/Proxy
Statement and the S-4 Registration Statement shall be shared equally by Parent
and the Company.
6.13. Indemnification; Directors' and Officers' Insurance. (a) From and
after the Effective Time, Parent agrees that it will indemnify and hold harmless
each present and former director and officer of the Company, (when acting in
such capacity) determined as of the Effective Time (each, an Indemnified Party
and, collectively, the "Indemnified Parties"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that the Company would have been
permitted under Florida law and its charter or by-laws in effect on the date
hereof to indemnify such Person (and Parent shall also advance expenses as
incurred to the fullest extent permitted under applicable law provided the
Person to whom expenses are advanced provides a written affirmation of his or
her good faith belief that the standard of conduct necessary for indemnification
has been met), and an undertaking to repay such advances if it is ultimately
determined that such Person is not entitled to indemnification).
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 6.13, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Parent thereof, but the
failure to so notify shall not relieve Parent of any liability it may have to
such Indemnified Party if such failure does not materially prejudice the
indemnifying party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) Parent
or the Surviving Corporation shall have the right to assume the defense thereof
and Parent shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if
Parent or the Surviving Corporation elects not to assume such defense or counsel
for the Indemnified Parties advises that there are issues which raise conflicts
of interest between Parent or the Surviving Corporation and the Indemnified
Parties, the Indemnified Parties may retain counsel satisfactory to them, and
Parent or the Surviving Corporation shall pay all reasonable fees and expenses
of such counsel for the Indemnified Parties promptly as statements therefor are
received; provided, however, that Parent shall be obligated pursuant to this
paragraph (b) to pay for only one firm of counsel for all Indemnified Parties in
any jurisdiction unless the use of one counsel for such Indemnified Parties
would present such counsel with a conflict of interest, (ii) the Indemnified
Parties will cooperate in the defense of any such matter and (iii) Parent shall
not be liable for any settlement effected without its prior written consent; and
provided, further, that Parent shall not have any obligation hereunder to any
Indemnified Party if and when a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
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(c) The Surviving Corporation shall maintain the Company's existing
officers' and directors' liability insurance ("D&O Insurance") or D&O Insurance
that is substantially comparable to the Company's existing D&O Insurance for a
period of two years after the Effective Time so long as the annual premium
therefor is not in excess of 200% of the last annual premium paid prior to the
date hereof (such last annual premium being hereinafter referred to as the
"Current Premium"); provided, however, that if the existing D&O Insurance or
substantially comparable D&O Insurance cannot be acquired during the two-year
period for not in excess of 200% of the Current Premium, then the Surviving
Corporation will obtain as much D&O Insurance as can be obtained for the
remainder of such period for a premium not in excess (on an annualized basis) of
200% of the Current Premium. If the D&O Insurance is terminated prior to the end
of the sixth anniversary of the Effective Time, the Surviving Corporation will
purchase extended reporting coverage under D&O Insurance covering claims made
during the remainder of such period with respect to acts which occurred prior to
the Effective Time.
(d) The provisions of this Section are intended to be for the benefit of,
and shall be enforceable by, each of the Indemnified Parties, their heirs and
their representatives.
6.14. Convertible Notes. The Company shall repay, at par, the aggregate
principal amount outstanding under the Convertible Notes and cancel such
Convertible Notes in their entirety if they are outstanding as of the Effective
Time.
6.15. Other Actions by the Company and Parent.
(a) Rights. If requested by Parent at least three business days prior to
the Expiration Date or the Effective Time, as the case may be, the board of
directors of the Company shall take all necessary action to terminate or redeem
all of the outstanding Rights and New Rights and to terminate the Rights
Agreement and the New Rights Agreement, effective immediately prior to the
Expiration Date or the Effective Time, as the case may be.
Notwithstanding anything in this Agreement (including, without limitation,
Section 6.1(c)) to the contrary, if Merger Subsidiary shall commence the Tender
Offer, prior to the expiration of any other tender offer which (i) is made by
any person to acquire not less than 49.9% of the outstanding Common Shares
(excluding for all purposes of such calculation Common Shares purchased by
Parent pursuant to the Stock Option Agreement) for not less than $58.00 in cash
per Common Share and (ii) is proposed by such person to be followed by a merger
in which such person will acquire all of the remaining outstanding Common Shares
for cash or other consideration with a value per Common Share equal to not less
than the value per Common Share paid by such person pursuant to such tender
offer (the value of such other consideration to be determined in the good faith
judgment of the Company's board of directors after receipt of advice from its
financial advisors), the Company shall be entitled, at its option, to amend or
modify the Rights Agreement and New Rights Agreement to provide, in a manner
consistent with the amendments to the Rights Agreement made with respect to
Parent and the Tender Offer, that the person making such tender offer shall not
be deemed an Acquiring Person (as defined in the Rights Agreement and the New
Rights Agreement, respectively), the Distribution Date (as defined in the Rights
Agreement and the New Rights Agreement, respectively) shall not be deemed to
occur and the Rights and the New Rights will not separate from the Common
Shares, as a result of such person's consummating the tender offer.
(b) Takeover Statute. If any Takeover Statute is or may become applicable
to the Tender Offer, the Merger or the other transactions contemplated by this
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
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offer with respect to which the Company has amended or modified the Rights
Agreement or New Rights Agreement in accordance with the second paragraph of
Section 6.15(a).
(c) Dividends. The Company shall coordinate with Parent the declaration,
setting of record dates and payment dates of dividends on Common Shares and
Preferred Shares so that holders of Common Shares and Preferred Shares do not
receive dividends on (i) both Common Shares and Parent Common Stock received in
the Merger or (ii) both Preferred Shares and Parent Preferred Stock received in
the Merger in respect of any calendar quarter or portion thereof or fail to
receive a dividend on (i) either Common Shares or Parent Common Stock received
in the Merger or on (ii) either Preferred Shares or Parent Preferred Stock
received in the Merger in respect of any calendar quarter.
ARTICLE VII
CONDITIONS
7.1. Conditions to Each Party's Obligation to Effect the Merger. Except
as provided in Section 7.4, the respective obligation of each party to effect
the Merger is subject to the satisfaction or waiver at or prior to the Effective
Time of each of the following conditions:
(a) Stockholder Approval. The Merger shall have been duly approved by
holders of Shares constituting the Company Requisite Vote and shall have been
duly approved by the sole stockholder of Merger Subsidiary in accordance with
applicable law.
(b) Listing. The shares of Parent Common Stock issuable to the holders of
Common Shares pursuant to this Agreement shall have been authorized for listing
on the NYSE upon official notice of issuance. The shares of Parent Preferred
Stock issuable to the holders of Preferred Shares pursuant to this Agreement
shall have been authorized for listing on the NYSE upon official notice of
issuance.
(c) Regulatory Consents. The waiting period applicable to the consummation
of the Merger under the HSR Act shall have expired or been terminated, and,
other than the filing provided for in Section 1.3, all notices, reports and
other filings required to be made prior to the Effective Time by the Company or
Parent or any of their respective Subsidiaries with, and all consents,
registrations, approvals, permits and authorizations required to be obtained
prior to the Effective Time by the Company or Parent or any of their respective
Subsidiaries from, any Governmental Entity (collectively, "Governmental
Consents"), in connection with the execution and delivery of this Agreement and
the consummation of the Merger and the other transactions contemplated hereby
shall have been made or obtained (as the case may be).
(d) Litigation. No court or Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any law, statute,
ordinance, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and restrains,
enjoins or otherwise prohibits consummation of the Merger (collectively, an
"Order").
(e) S-4. The S-4 Registration Statement shall have become effective under
the Securities Act. No stop order suspending the effectiveness of the S-4
Registration Statement shall have been issued, and no proceeding for that
purpose shall have been initiated or be threatened, by the SEC.
(f) Blue Sky Approvals. Parent shall have received all state securities
and "blue sky" permits and approvals, if any, necessary to consummate the
transactions contemplated hereby.
7.2. Conditions to Obligations of Parent and Merger Subsidiary. Except as
provided in Section 7.4, the obligations of Parent and Merger Subsidiary to
effect the Merger are also subject to the satisfaction or waiver by Parent at or
prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement; and the representations and
warranties of the Company set forth in this Agreement shall be true and correct
as of the Closing Date as though made on and as of the Closing Date (except to
the extent any such representation or warranty expressly speaks as of an earlier
date) except where the failure of such representations and warranties
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to be so true and correct (without giving effect to any qualifications as to
"Company Material Adverse Effect", "material" or similar qualifications) are
not, individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect, and Parent shall have received a certificate signed on
behalf of the Company by an executive officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent shall have
received a certificate signed on behalf of the Company by an executive officer
of the Company to such effect.
(c) Consents. The Company shall have obtained the consent or approval of
each Person whose consent or approval shall be required under any Contract to
which the Company or any of its Subsidiaries is a party, except those for which
the failure to obtain such consents or approvals is not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect or is
not, individually or in the aggregate, reasonably likely to prevent or to
materially burden or materially impair the ability of the Company to consummate
the transactions contemplated by this Agreement; and no such consent or
approval, and no Governmental Consent shall impose any condition or conditions
relating to, or requiring changes or restrictions in, the operations of any
asset or businesses of the Company, Parent or their respective Subsidiaries
which could, in the judgment of the Board of Parent, individually or in the
aggregate, materially and adversely impact the economic or business benefits to
Parent and its Subsidiaries of the transactions contemplated by this Agreement.
(d) Tax Opinion. Parent shall have received, prior to the effective date
of the S-4 Registration Statement, the opinion of Sullivan & Cromwell, counsel
to Parent, to the effect that the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
and that each of Parent, Merger Subsidiary and the Company will be a party to
that reorganization within the meaning of Section 368(b) of the Code, and such
firm shall have reconfirmed such opinion as of the Closing Date. In rendering
such opinion, Sullivan & Cromwell may rely upon and require such certificates of
the Company, Parent and Merger Subsidiary and/or their officers or principal
stockholders as are customary for such opinions.
(e) Affiliates Letters. Parent shall have received an Affiliates Letter
from each Person identified as an affiliate of the Company pursuant to Section
6.8.
(f) Employment Agreements. The employment agreements entered into as of
December 21, 1997 between the Company and Messrs. Gaston and Dennison,
respectively, shall be in full force and effect.
7.3. Conditions to Obligation of the Company. Except as provided in
Section 7.4, the obligation of the Company to effect the Merger is also subject
to the satisfaction or waiver by the Company at or prior to the Effective Time
of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Parent and Merger Subsidiary set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement, and the
representations and warranties of Parent and Merger Subsidiary set forth in this
Agreement shall be true and correct as of the Closing Date as though made on and
as of the Closing Date (except to the extent any such representation or warranty
expressly speaks as of an earlier date) except where the failure of such
representations and warranties to be so true and correct (without giving effect
to any qualifications as to "Parent Material Adverse Effect", "material" or
similar qualifications) are not, individually or in the aggregate, reasonably
likely to have a Parent Material Adverse Effect, and the Company shall have
received a certificate signed on behalf of Parent by an executive officer of
Parent and on behalf of Merger Subsidiary by an executive officer of Merger
Subsidiary to such effect.
(b) Performance of Obligations of Parent and Merger Subsidiary. Each of
Parent and Merger Subsidiary shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and the Company shall have received a certificate signed on
behalf of Parent by an executive officer of Parent and on behalf of Merger
Subsidiary by an executive officer of Merger Subsidiary to such effect.
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(c) Consents Under Agreements. Parent shall have obtained the consent or
approval of each Person whose consent or approval shall be required in order to
consummate the transactions contemplated by this Agreement under any Contract to
which Parent or any of its Subsidiaries is a party, except those for which
failure to obtain such consents or approvals is not, individually or in the
aggregate, reasonably likely to have a Parent Material Adverse Effect or is not,
individually or in the aggregate, reasonably likely to prevent or to materially
burden or materially impair the ability of Parent to consummate the transactions
contemplated by this Agreement.
(d) Tax Opinion. The Company shall have received, prior to the effective
date of the S-4 Registration Statement, the opinion of Jorden Burt Berenson &
Johnson LLP, counsel to the Company, to the effect that the Merger will be
treated for Federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, and that each of Parent, Merger Subsidiary and
the Company will be a party to that reorganization within the meaning of Section
368(b) of the Code, and such firm shall have reconfirmed such opinion as of the
Closing Date. In rendering such opinion, Jorden Burt Berenson & Johnson LLP may
rely upon and require such certificates of the Company, Parent and Merger
Subsidiary and/or their officers or principal stockholders as are customary for
such opinions.
7.4. Waiver of Conditions Following Consummation of Tender Offer. Parent,
Merger Subsidiary and the Company acknowledge and agree that if the Tender Offer
shall be commenced and consummated, (i) the conditions to their respective
obligations to effect the Merger contained in Section 7.1(a), (b), (c), and (f),
Section 7.2(a), (c), (e), and (f) and Section 7.3(a), (b), (c) and (d) shall be
deemed to be waived in all respects and (ii) if at least one-half of the members
of the board of directors of the Company are nominees or designees of Parent,
the condition to Parent's and Merger Subsidiary's obligations to effect the
Merger contained in Section 7.2(b) shall be deemed to be waived in all respects.
Parent, Merger Subsidiary and the Company further acknowledge and agree that if
the Tender Offer shall be commenced and consummated and the conditions to their
respective obligations to effect the Merger contained in Section 7.1(e) or
7.2(d) are not satisfied at such time as all of the other conditions to the
consummation of the Merger have been satisfied (or waived as contemplated by the
first sentence of this Section 7.4 or otherwise), then Parent shall consummate
the Merger by paying to each holder of a Common Share cash in amount equal to
the amount of cash paid for each Common Share pursuant to the Tender Offer.
ARTICLE VIII
TERMINATION
8.1. Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by stockholders of the Company and Parent referred
to in Section 7.1(a), by mutual written consent of the Company and Parent by
action of their respective Boards of Directors.
8.2. Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned (i) by action of the Board of
Directors of either Parent or the Company if the Merger shall not have been
consummated by September 30, 1998, whether such date is before or after the date
of approval by the stockholders of the Company (the "Termination Date"), (ii) by
action of the Board of Directors of Parent if (x) the Company Common Stock
Requisite Vote shall not have been obtained at a meeting duly convened therefor
or at any adjournment or postponement thereof or (y) Merger Subsidiary shall
have commenced the Tender Offer and the Tender Offer shall not have been
consummated by the sixtieth day from the date of commencement of the Tender
Offer (including, for purposes of calculating such 60 days, the date of
commencement of the Tender Offer as the first day), (iii) by action of the Board
of Directors of the Company at any time after 150 days from December 21, 1997,
if the Company Common Stock Requisite Vote shall not have been obtained at a
meeting duly convened therefor or at any adjournment or postponement thereof or
(iv) by action of the Board of Directors of either Parent or the Company if any
Order permanently restraining, enjoining or otherwise prohibiting consummation
of the Tender Offer or the Merger shall become final and non-appealable (whether
before or after the approval by the stockholders of the Company or Parent);
provided, that the right to terminate this Agreement pursuant to clause (i)
above shall
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not be available to any party that has breached in any material respect its
obligations under this Agreement in any manner that shall have proximately
contributed to the occurrence of the failure of the Tender Offer or the Merger
to be consummated.
8.3. Termination by the Company. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, by action of
the Board of Directors of the Company:
(a) if (i) the Company is not in material breach of any of the terms
of this Agreement, (ii) the Merger shall not have been approved by the
Company Requisite Vote, (iii) the Board of Directors of the Company
authorizes the Company, subject to complying with the terms of this
Agreement, to enter into a binding written agreement concerning a
transaction that constitutes a Superior Proposal and the Company notifies
Parent in writing that it intends to enter into such an agreement,
attaching the most current version of such agreement to such notice, (iv)
Parent does not make, prior to the later of (x) five business days after
receipt of the Company's written notification of its intention to enter
into a binding agreement for a Superior Proposal (the "Alternative
Transaction Notice"), or (y) the Section 8.3 Termination Date (as
hereinafter defined), an offer that the Board of Directors of the Company
determines, in good faith after consultation with its financial advisors,
is at least as favorable, as the Superior Proposal, taking into account the
long term prospects and interests of the Company and its stockholders, and
(v) the Company prior to such termination pays to Parent in immediately
available funds the fees required to be paid pursuant to Section 8.5.
Without limiting the generality of the foregoing, the Company agrees and
acknowledges (x) that it cannot terminate this Agreement pursuant to this
Section 8.3(a) in order to enter into a binding agreement referred to in
clause (iii) above until at least the date falling 150 days from December
21, 1997 (the "Section 8.3 Termination Date") or, if later, five business
days after receipt of the Alternative Transaction Notice and (y) to notify
Parent promptly if its intention to enter into a written agreement referred
to in its Alternative Transaction Notice shall change at any time after
giving such notification.
(b) if there has been a material breach by Parent or Merger Subsidiary
of any representation, warranty, covenant or agreement contained in this
Agreement that is not curable or, if curable, is not cured within 20 days
after written notice of such breach is given by the Company to the party
committing such breach.
8.4. Termination by Parent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after the consummation of the Tender Offer or the approval by the
stockholders of Parent referred to in Section 7.1(a), by action of the Board of
Directors of Parent if (a) the Company enters into a binding agreement for, or
recommends, a Superior Proposal or the Board of Directors of the Company shall
have withdrawn or adversely modified its approval or recommendation of this
Agreement or, after the mailing of the Prospectus/Proxy Statement or the Offer
Documents, failed to reconfirm its recommendation of this Agreement within ten
business days after a reasonable written request by Parent to do so, or (b)
there has been a material breach by the Company of any representation, warranty,
covenant or agreement contained in this Agreement that is not curable or, if
curable, is not cured within 20 days after written notice of such breach is
given by Parent to the party committing such breach.
8.5. Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article VIII, this Agreement (other than as set forth in Section 9.1) shall
become void and of no effect with no liability (other than the liabilities
arising under the provisions, including this Section 8.5, set forth in Section
9.1) on the part of any party hereto (or of any of its directors, officers,
employees, agents, legal and financial advisors or other representatives);
provided, however, except as otherwise provided herein, no such termination
shall relieve any party hereto of any liability or damages resulting from any
breach of this Agreement.
(b) In the event that this Agreement is terminated (i) by the Company
pursuant to Section 8.2(iii) or Section 8.3(a) or (ii) by Parent pursuant to
Section 8.2(ii) or Section 8.4(a) or (iii) by either Parent or the Company
pursuant to Section 8.2(i) (and at the time of such termination pursuant to
Section 8.2(i) any Person shall then be making or proposing an Acquisition
Proposal to the Company or any of its Subsidiaries or any of its stockholders),
then the Company shall, not later than immediately prior to the time of such
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termination or not later than immediately prior to the time of entering into an
agreement concerning a transaction that constitutes an Acquisition Proposal, pay
Parent a termination fee of $81.5 million plus an amount equal to Parent's
charges and expenses incurred in connection with the transactions contemplated
by this Agreement since January 27, 1998, up to a maximum of $5,000,000, in each
case by wire transfer of same day funds. In order to facilitate the timely
making of the foregoing payment, in the event that Parent elects to terminate
this Agreement, Parent shall notify the Company thereof not later than 10:00
a.m. (New York City time) on the business day immediately preceding the date of
such termination. In the event that Parent fails to provide such advance notice
of its election to terminate this Agreement, the Company shall be obligated to
make the foregoing payment not later than 12:00 p.m. (New York City time) on the
business day immediately following the date of such termination. The Company
acknowledges that the agreements contained in this Section 8.5(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Parent and Merger Subsidiary would not have entered
into this Agreement initially, or entered into the amendment and restatement of
this Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to this Section 8.5(b), and, in order to obtain such payment, Parent or
Merger Subsidiary commences a suit which results in a judgment against the
Company for the fee set forth in this paragraph (b), the Company shall pay to
Parent or Merger Subsidiary its costs and expenses (including attorneys' fees)
in connection with such suit, together with interest from the date of
termination of this Agreement on the amounts owed at the prime rate of The Chase
Manhattan Bank, in effect from time to time during such period plus two percent.
(c) In the event this Agreement is terminated (i) by the Company or Parent
pursuant to Section 8.2(i) and at the time of such termination no Person is then
making or proposing an Acquisition Proposal to the Company or any of its
Subsidiaries or any of its stockholders, then the Company shall promptly, but in
no event later than two business days after Parent shall have requested payment
of its charges and expenses incurred in connection with the transactions
contemplated hereby ("Expenses"), pay to Parent the amount of such Expenses up
to a maximum of $5,000,000 and, if within 18 months of such termination, the
Company enters into an agreement concerning a transaction that constitutes an
Acquisition Proposal, the Company at the time of entering into such agreement,
shall pay to Parent the termination fee of $81.5 million, in each case payable
by wire transfer of same day funds.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1. Survival. This Article IX and the agreements of the Company, Parent
and Merger Subsidiary contained in Sections 6.11 (Benefits) and 6.13
(Indemnification; Directors' and Officers' Insurance) shall survive the
consummation of the Merger. This Article IX, the agreements of the Company,
Parent and Merger Subsidiary contained in Section 6.7 (Access), insofar as it
relates to the Company's and Parent's respective confidentiality obligations,
Section 6.12 (Expenses) and Section 8.5 (Effect of Termination and Abandonment)
shall survive the termination of this Agreement. All other representations,
warranties, covenants and agreements in this Agreement shall not survive the
consummation of the Merger or the termination of this Agreement.
9.2. Modification or Amendment. Subject to the provisions of applicable
law, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties.
9.3. Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
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.
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9.5. GOVERNING LAW; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT SHALL BE
DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND
GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT
REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF, EXCEPT THAT MATTERS RELATING
TO THE VALIDITY AND EFFECTS OF THE MERGER AND THE FIDUCIARY OBLIGATIONS OF THE
DIRECTORS OF THE COMPANY REFERRED TO IN SECTION 6.2 AND 6.4 HEREOF SHALL BE
GOVERNED BY THE APPLICABLE PROVISIONS OF THE FLORIDA BUSINESS CORPORATION LAW.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.5.
(c) THE COMPANY AND MERGER SUBSIDIARY EACH AGREES THAT, IN CONNECTION WITH
ANY LEGAL SUIT OR PROCEEDING ARISING WITH RESPECT TO THIS AGREEMENT, IT SHALL
SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT
OF DELAWARE AND AGREES TO VENUE IN SUCH COURTS. THE COMPANY AND MERGER
SUBSIDIARY EACH HEREBY APPOINTS THE SECRETARY OF THE COMPANY AND MERGER
SUBSIDIARY, RESPECTIVELY, AS ITS AGENT FOR SERVICE OF PROCESS FOR PURPOSES OF
THE FOREGOING SENTENCE ONLY.
9.6. Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:
if to Parent or Merger Subsidiary
American International Group, Inc.
70 Pine Street
New York, New York 10270
Attention: General Counsel
fax: (212) 785-1584
(with a copy to James C. Morphy, Esq.,
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
fax: (212) 558-3588)
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if to the Company
American Bankers Insurance Group, Inc.
11222 Quail Roost Drive
Miami, Florida 33157
Attention: Chief Executive Officer
fax: (305) 252-7068
(with a copy to Josephine Cicchetti, Esq.,
Jorden Burt Berenson & Johnson LLP
777 Brickell Avenue, Suite 500
Miami, Florida 33131
fax: (305) 372-9928
and
Jonathan L. Freedman, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
fax: (212) 259-6333)
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
9.7. Entire Agreement; No Other Representations. This Agreement
(including any exhibits hereto), the Company Disclosure Letter, the Parent
Disclosure Letter, the Stock Option Agreement and the Confidentiality Agreement
between Parent and the Company (the "Confidentiality Agreement") constitute the
entire agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof.
9.8. No Third Party Beneficiaries. Except as provided in Section 6.13
(Indemnification; Directors' and Officers' Insurance), this Agreement is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
9.9. Obligations of Parent and of the Company. Whenever this Agreement
requires a Subsidiary of Parent to take any action, such requirement shall be
deemed to include an undertaking on the part of Parent to cause such Subsidiary
to take such action. Whenever this Agreement requires a Subsidiary of the
Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
9.10. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
9.11. Interpretation. The table of contents and headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section or Exhibit, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. Whenever the words "include,"
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"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
9.12. Assignment. This Agreement shall not be assignable by operation of
law or otherwise; provided, however, that Parent may designate, by written
notice to the Company, another wholly-owned direct or indirect Subsidiary to be
a Constituent Corporation in lieu of Merger Subsidiary, in which event all
references herein to Merger Subsidiary shall be deemed references to such other
Subsidiary, except that all representations and warranties made herein with
respect to Merger Subsidiary as of the date of this Agreement shall be deemed
representations and warranties made with respect to such other Subsidiary as of
the date of such designation.
9.13. Alternative Transaction Structure. Notwithstanding anything to the
contrary contained in this Agreement, if the Company Preferred Stock Requisite
Vote is not obtained at the meeting duly convened to consider the Merger or
Parent reasonably determines that the Company Preferred Stock Requisite Vote is
not likely to be obtained pursuant to the Agreement (other than pursuant to this
Section 9.13), Parent shall, subject to the Company Common Stock Requisite Vote
and the other terms and conditions of this Agreement, merge Merger Subsidiary
with and into the Company such that the separate corporate existence of Merger
Subsidiary shall cease and the Company shall continue as the Surviving
Corporation. In connection with the alternative transaction contemplated by the
prior sentence, the Company shall take all actions reasonably requested by
Parent including, without limitation, promptly amending this Agreement, as
Parent may reasonably deem necessary or appropriate, including, if applicable,
to provide that the Preferred Shares shall remain outstanding after the Merger
pursuant to the same terms and conditions as are in effect on the date hereof
(except that the Preferred Shares shall be convertible into Parent Common Stock)
and adding, if applicable, the number of days between the date of the Preferred
Stockholders Meeting and the date of the Common Stockholders Meeting to the time
periods set forth in Section 8.2(i) and (iv) and the Section 8.3 Termination
Date and eliminating the covenant contained in Section 6.6 and the conditions to
closing contained in Sections 7.2(d) and 7.3(d).
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first written
above.
AMERICAN BANKERS INSURANCE GROUP, INC.
By: /s/ GERALD N. GASTON
------------------------------------
Name: Gerald N. Gaston
Title: Vice Chairman,
President and
Chief Executive Officer
AMERICAN INTERNATIONAL GROUP, INC.
By: /s/ HOWARD I. SMITH
------------------------------------
Name: Howard I. Smith
Title: Executive Vice
President
AIGF, INC.
By: /s/ HOWARD I. SMITH
------------------------------------
Name: Howard I. Smith
Title: President
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ANNEX I
Certain Conditions of the Tender Offer. The capitalized terms used in this
Annex I have the meanings set forth in the attached Agreement. Notwithstanding
any other provision of the Tender Offer, Merger Subsidiary shall not be required
to accept for payment or, subject to any applicable rules and regulations of the
SEC, including Rule 14e-1(c) under the Exchange Act (relating to Merger
Subsidiary's obligation to pay for or return tendered Common Shares promptly
after termination or withdrawal of the Tender Offer), pay for, or may delay the
acceptance for payment of or payment for, any tendered Common Shares, or may, in
its sole discretion, terminate or amend the Tender Offer as to any Common Shares
not then paid for if (a) prior to the Expiration Date (i) there shall not have
been tendered and not withdrawn at least that number of Common Shares that would
represent at least 49.9% of all outstanding Common Shares on the date of
purchase (excluding for all purposes in calculating such 49.9% any outstanding
Common Shares owned by Parent or Merger Subsidiary pursuant to the exercise of
Parent's rights under the Stock Option Agreement) (the "Minimum Tender
Condition"), (ii) any waiting period applicable to the consummation of the
Tender Offer and the Merger under the HSR Act shall not have expired or been
terminated, (iii) other than the filing provided for in Section 1.3 of the
Agreement, any notices, reports and other filings required to be made prior to
the Effective Time by the Company or Parent or any of their respective
Subsidiaries with, and all consents, registrations, approvals, permits and
authorizations required to be obtained prior to the Effective Time by the
Company or Parent or any of their respective Subsidiaries from, any Governmental
Entity, in connection with the execution and delivery of the Agreement and the
consummation of the Tender Offer and the Merger and the other transactions
contemplated by the Agreement shall not have been made or obtained (as the case
may be), or (iv) the Company shall not have obtained the consent or approval of
each Person whose consent or approval shall be required under any Contract to
which the Company or any of its Subsidiaries is a party, except those for which
the failure to obtain such consents or approvals is not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect or is
not, individually or in the aggregate, reasonably likely to prevent or to
materially burden or materially impair the ability of the Company to consummate
the transactions contemplated by the Agreement; or any such consent or approval,
or any Governmental Consent, imposes any condition or conditions relating to, or
requires changes or restrictions in, the operations of any asset or businesses
of the Company, Parent or their respective Subsidiaries which could, in the
judgment of the board of directors of Parent, individually or in the aggregate,
materially and adversely impact the economic or business benefits to Parent and
its Subsidiaries of the transactions contemplated by the Agreement; or (b) at or
before the time of payment for any of such Common Shares (whether or not any
Common Shares have theretofore been accepted for payment), any of the following
events shall occur:
(i) any court or Governmental Entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any law, statute,
ordinance, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Tender Offer
or the Merger, or which makes the acceptance for payment of, or payment
for, any Common Shares in the Tender Offer illegal;
(ii) the representations and warranties of the Company set forth in
the Agreement shall not be true and correct in all material respects as of
December 21, 1997; or such representations and warranties shall not be true
and correct as of the Expiration Date as though made on and as of the
Expiration Date (except to the extent any such representation or warranty
expressly speaks as of an earlier date) except where the failure of such
representations and warranties to be so true and correct (without giving
effect to any qualifications as to "Company Material Adverse Effect",
"material" or similar qualifications set forth in the Agreement) are not,
individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect, or Parent shall not have received a certificate on
the Expiration Date signed on behalf of the Company by an executive officer
of the Company to such effect;
(iii) the Company shall not have performed in all material respects
all obligations required to be performed by it under the Agreement at or
prior to the Expiration Date; or
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(iv) the Agreement shall have been terminated in accordance with its
terms prior to the Expiration Date; or Parent, Merger Subsidiary and the
Company shall have otherwise agreed that Merger Subsidiary may amend,
terminate or withdraw the Tender Offer;
which, in the sole judgment of Parent and Merger Subsidiary, in any such case,
and regardless of the circumstances (including any action or inaction by Parent
or Merger Subsidiary) giving rise to any such conditions, makes it inadvisable
to proceed with the Tender Offer and/or with such acceptance for payment of or
payment for Common Shares.
The foregoing conditions are for the sole benefit of Parent and Merger
Subsidiary and may be asserted by Parent or Merger Subsidiary regardless of the
circumstances (including any action or inaction by Parent or Merger Subsidiary)
giving rise to such condition or may be waived by Parent or Merger Subsidiary,
by express and specific action to that effect, in whole or in part at any time
and from time to time in their sole discretion. Any determination by Parent and
Merger Subsidiary concerning any event described in this Annex I shall be final
and binding upon all holders of Common Shares. The failure by Merger Subsidiary
at any time to exercise any of the foregoing rights shall not be deemed a waiver
of any such right, the waiver of any such right with respect to particular facts
and other circumstances shall not be deemed a waiver with respect to any other
facts and circumstances, and each such right shall be deemed an ongoing right
that may be asserted at any time and from time to time.
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APPENDIX II
<PAGE> 153
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 21, 1997, as amended and
restated as of February 28, 1998 (the "Agreement"), between AMERICAN
INTERNATIONAL GROUP, INC., a Delaware corporation (the "Grantee"), and AMERICAN
BANKERS INSURANCE GROUP, INC., a Florida corporation (the "Grantor").
WHEREAS, the Grantee, AIGF, INC., a Florida corporation and a wholly owned
subsidiary of the Grantee ("Newco"), and the Grantor are entering into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), which provides, among other things, for the merger of the Grantor
with and into Newco (the "Merger");
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, the Grantee and Newco have requested that the Grantor grant to the
Grantee an option to purchase up to 8,265,626 shares of Common Stock, par value
$1.00 per share, of the Grantor (the "Common Stock"), upon the terms and subject
to the conditions hereof; and
WHEREAS, in order to induce the Grantee and Newco to enter into the Merger
Agreement, the Grantor is willing to grant the Grantee the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. The Option; Exercise; Adjustments; Payment of Spread. (a)
Contemporaneously herewith the Grantee, Newco and the Grantor are entering into
the Merger Agreement. Subject to the other terms and conditions set forth
herein, the Grantor hereby grants to the Grantee an irrevocable option (the
"Option") to purchase up to 8,265,626 shares of Common Stock (the "Shares") at a
cash purchase price equal to $47.00 per share (the "Purchase Price"). The Option
may be exercised by the Grantee, in whole or in part, at any time, or from time
to time, following the occurrence of one of the events set forth in Section 2(d)
hereof, and prior to the termination of the Option in accordance with the terms
of this Agreement.
(b) In the event the Grantee wishes to exercise the Option, the Grantee
shall send a written notice to the Grantor (the "Stock Exercise Notice")
specifying a date (subject to the HSR Act (as defined below) and applicable
insurance regulatory approvals) not later than 10 business days and not earlier
than three business days following the date such notice is given for the closing
of such purchase. In the event of any change in the number of issued and
outstanding shares of Common Stock by reason of any stock dividend, stock split,
split-up, recapitalization, merger or other change in the corporate or capital
structure of the Grantor, the number of Shares subject to this Option and the
purchase price per Share shall be appropriately adjusted to restore the Grantee
to its rights hereunder, including its right to purchase Shares representing
19.9% of the capital stock of the Grantor entitled to vote generally for the
election of the directors of the Grantor which is issued and outstanding
immediately prior to the exercise of the Option at an aggregate purchase price
equal to the Purchase Price multiplied by 8,265,626.
(c) If at any time the Option is then exercisable pursuant to the terms of
Section 1(a) hereof, the Grantee may elect, in lieu of exercising the Option to
purchase Shares provided in Section 1(a) hereof, to send a written notice to the
Grantor (the "Cash Exercise Notice") specifying a date not later than 20
business days and not earlier than 10 business days following the date such
notice is given on which date the Grantor shall pay to the Grantee an amount in
cash equal to the Spread (as hereinafter defined) multiplied by all or such
portion of the Shares subject to the Option as Grantee shall specify. As used
herein "Spread" shall mean the excess, if any, over the Purchase Price of the
higher of (x) if applicable, the highest price per share of Common Stock
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid or proposed to be paid by any person pursuant to one of the
transactions enumerated in Section 2(d) hereof (the "Alternative Purchase
Price") or (y) the closing price of the shares of Common Stock on the NYSE
Composite Tape on the last trading day immediately prior to the date of the Cash
Exercise Notice (the "Closing Price") or, if Section 1(d) is applicable, on the
last trading day immediately prior to termination of the Merger Agreement. If,
in the case of clause (x) above, the Alternative Purchase Price can be
calculated by reference to an all cash amount paid or proposed to be paid for
any shares of Common Stock outstanding,
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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
1(d) is applicable, ending on the last trading day immediately prior to
termination of the Merger Agreement, shall be used to calculate the fair market
value of such property. If such other property consists of something other than
cash or securities with an existing public trading market and, as of the payment
date for the Spread, agreement on the value of such other property has not been
reached, the Alternative Purchase Price shall be deemed to equal the Closing
Price. Upon exercise of its right to receive cash pursuant to this Section 1(c),
the obligations of the Grantor to deliver Shares pursuant to Section 3 shall be
terminated with respect to such number of Shares for which the Grantee shall
have elected to be paid the Spread.
(d) Notwithstanding anything in the foregoing to the contrary, it is agreed
that if after the delivery by Grantee of the Stock Exercise Notice, which was
delivered to Grantor on January 27, 1998, with respect to all 8,265,626 Shares,
but prior to the receipt of all regulatory approvals required for the
consummation of the purchase of the Shares subject to such Stock Exercise
Notice, Grantor or Grantee intends to terminate the Merger Agreement pursuant to
the terms thereof, the party intending to so terminate the Merger Agreement
shall provide at least one full business days' notice of such intention to the
other party and, if requested to do so by Grantee, Grantor shall take such steps
as may be necessary so as to pay to Grantee, not later than immediately prior to
such termination, cash by wire transfer in immediately available funds in an
aggregate amount equal to the Spread (as defined in Section 1(c) above)
multiplied by the number of Shares subject to the Stock Exercise Notice, less
any amounts paid to Grantee by Grantor pursuant to Section 8.5 of the Merger
Agreement.
2. Conditions to Delivery of Shares. The Grantor's obligation to deliver
Shares upon exercise of the Option is subject only to the conditions that:
(a) No preliminary or permanent injunction or other order issued by
any federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") shall have expired or
been terminated; and
(c) Any approval required to be obtained prior to the delivery of the
Shares under the insurance laws of any state or foreign jurisdiction shall
have been obtained and be in full force and effect; and
(d) (i) any person (other than Grantee or any of its subsidiaries)
shall have commenced (as such term is defined in Rule 14d-2 under the
Securities Exchange Act of 1934 (the "Exchange Act") a tender offer, or
shall have filed a registration statement under the Securities Act of 1933
(the "Securities Act") with respect to an exchange offer, to purchase any
shares of Common Stock such that, upon consummation of such offer, such
person or a "group" (as such term is defined under the Exchange Act) of
which such person is a member shall have acquired beneficial ownership (as
such term is defined in rule 13d-3 of the Exchange Act), or the right to
acquire beneficial ownership, of 15 percent or more of the then outstanding
Common Stock; (ii) any person (other than Grantee or any of its
subsidiaries) shall have publicly announced or delivered to Grantor a
proposal, or disclosed publicly or to Grantor an intention to make a
proposal, to purchase 15% or more of the assets or any equity securities
of, or to engage in a merger, reorganization, tender offer, share exchange,
consolidation or similar transaction involving the Grantor or any of its
subsidiaries (an "Acquisition Transaction"); (iii) Grantor or any of its
subsidiaries shall have authorized, recommended, proposed or publicly
announced an intention to authorize, recommend or propose, or entered into,
an agreement, including without limitation, an agreement in principle, 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
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opposition to the Merger, the Merger Agreement or any related transactions
or (z) relating to an Acquisition Transaction (other than solicitations of
stockholders seeking approval of the Merger, the Merger Agreement or any
related transactions); or (v) any person (other than Grantee or any of its
subsidiaries) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 under the Exchange Act) or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under the
Exchange Act) shall have been formed which beneficially owns or has the
right to acquire beneficial ownership of, shares of Common Stock (other
than trust account shares) aggregating 15 percent or more of the then
outstanding Common Stock. As used in this Agreement, "person" shall have
the meaning specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
3. The Closing. (a) Except as otherwise provided in Section 1(d), any
closing hereunder shall take place on the date specified by the Grantee in its
Stock Exercise Notice or Cash Exercise Notice, as the case may be, at 9:00 A.M.,
local time, at the offices of Sullivan & Cromwell, 125 Broad Street, New York,
New York, or, if the conditions set forth in Section 2(a), (b) or (c) have not
then been satisfied, on the second business day following the satisfaction of
such conditions, or at such other time and place as the parties hereto may agree
(the "Closing Date"). On the Closing Date, (i) in the event of a closing
pursuant to Section 1(b) hereof, the Grantor will deliver to the Grantee a
certificate or certificates, representing the Shares in the denominations
designated by the Grantee in its Stock Exercise Notice and the Grantee will
purchase such Shares from the Grantor at the price per Share equal to the
Purchase Price or (ii) in the event of a closing pursuant to Section 1(c) or
Section 1(d) hereof, as the case may be, the Grantor will deliver to the Grantee
cash in an amount determined pursuant to Section 1(c) or Section 1(d) hereof, as
the case may be. Except as otherwise provided in Section 1(d), any payment made
by the Grantee to the Grantor, or by the Grantor to the Grantee, pursuant to
this Agreement shall be made by certified or official bank check or by wire
transfer of federal funds to a bank designated by the party receiving such
funds.
(b) The certificates representing the Shares shall bear an appropriate
legend relating to the fact that such Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act").
4. Representations and Warranties of the Grantor. The Grantor represents
and warrants to the Grantee that (a) the Grantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and has the requisite corporate power and authority to enter into and
perform this Agreement; (b) the execution and delivery of this Agreement by the
Grantor and the consummation by it of the transactions contemplated hereby have
been duly authorized by the Board of Directors of the Grantor and this Agreement
has been duly executed and delivered by a duly authorized officer of the Grantor
and constitutes a valid and binding obligation of the Grantor, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles; (c)
the Grantor has taken all necessary corporate action to authorize and reserve
the Shares issuable upon exercise of the Option and the Shares, when issued and
delivered by the Grantor upon exercise of the Option and paid for by Grantee as
contemplated hereby, will be duly authorized, validly issued, fully paid and
non-assessable and free of preemptive rights; (d) except as otherwise required
by the HSR Act and applicable insurance laws, the execution and delivery of this
Agreement by the Grantor and the consummation by it of the transactions
contemplated hereby do not require the consent, waiver, approval or
authorization of or any filing with any person or public authority and will not
violate, result in a breach of or the acceleration of any obligation under, or
constitute a default under, any provision of Grantor's charter or by-laws, or
any material indenture, mortgage, lien, lease, agreement, contract, instrument,
order, law, rule, regulation, judgment, ordinance, or decree, or restriction by
which the Grantor or any of its subsidiaries or any of their respective
properties or assets is bound; (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
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Grantee or any of its Affiliates or Associates (as such terms are defined in the
Rights Agreement and New Rights Agreement) pursuant to the Rights Agreement, as
amended and restated on November 14, 1990, as amended on December 19, 1997,
between the Grantor and ChaseMellon Shareholder Services, LLC (as successor to
Manufacturers Hanover Trust Company), as Rights Agent (the "Rights Agreement")
or pursuant to the Rights Agreement, dated as of February 19, 1998, between the
Grantor and ChaseMellon Shareholder Services, LLC, as Rights Agent (the "New
Rights Agreement").
5. Representations and Warranties of the Grantee. The Grantee represents
and warrants to the Grantor that (a) the execution and delivery of this
Agreement by the Grantee and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Grantee and this Agreement has been duly executed and
delivered by a duly authorized officer of the Grantee and constitutes a valid
and binding obligation of Grantee; and (b) the Grantee is acquiring the Option
and, if and when it exercises the Option, will be acquiring the Shares issuable
upon the exercise thereof for its own account and not with a view to
distribution or resale in any manner which would be in violation of the
Securities Act.
6. Listing of Shares; Filings; Governmental Consents. Subject to
applicable law and the rules and regulations of the New York Stock Exchange,
Inc. (the "NYSE"), the Grantor will promptly file an application to list the
Shares on the NYSE and will use its reasonable best efforts to obtain approval
of such listing and to effect all necessary filings by the Grantor under the HSR
Act and the applicable insurance laws of each state and foreign jurisdiction;
provided, however, that if the Grantor is unable to effect such listing on the
NYSE by the Closing Date, the Grantor will nevertheless be obligated to deliver
the Shares upon the Closing Date. Each of the parties hereto will use its
reasonable best efforts to obtain consents of all third parties and governmental
authorities, if any, necessary to the consummation of the transactions
contemplated.
7. Repurchase of Shares. If by the date that is the first anniversary of
the date the Merger Agreement was terminated pursuant to the terms thereof (the
"Merger Termination Date"), neither the Grantee nor any other Person has
acquired more than fifty percent (excluding the Shares) of the shares of
outstanding Common Stock, then the Grantor has the right to purchase (the
"Repurchase Right") all, but not less than all, of the Shares at the greater of
(i) the Purchase Price or (ii) the average of the last sales prices for shares
of Common Stock on the five trading days ending five days prior to the date the
Grantor gives written notice of its intention to exercise the Repurchase Right.
If the Grantor does not exercise the Repurchase Right within thirty days
following the end of the one year period after the Merger Termination Date, the
Repurchase Right lapses. In the event the Grantor wishes to exercise the
Repurchase Right, the Grantor shall send a written notice to the Grantee
specifying a date (not later than 20 business days and not earlier than 10
business days following the date such notice is given) for the closing of such
purchase.
8. Sale of Shares. At any time prior to the first anniversary of the
Merger Termination Date, the Grantee shall have the right to sell (the "Sale
Right") to the Grantor all, but not less than all, of the Shares at the greater
of (i) the Purchase Price, or (ii) the average of the last sales prices for
shares of Common Stock on the five trading days ending five days prior to the
date the Grantee gives written notice of its intention to exercise the Sale
Right. If the Grantee does not exercise the Sale Right prior to the first
anniversary of the Merger Termination Date, the Sale Right terminates. In the
event the Grantee wishes to exercise the Sale Right, the Grantee shall send a
written notice to the Grantor specifying a date not later than 20 business days
and not earlier than 10 business days following the date such notice is given
for the closing of such sale.
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
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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
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 would be caused to the Grantee for which money
damages would not be an adequate remedy. In such event, the Grantor agrees that
the Grantee shall have the right, in addition to any other rights it may have,
to specific performance of this Agreement. Accordingly, if the Grantee should
institute an action or proceeding seeking specific enforcement of the provisions
hereof, the Grantor hereby waives the claim or defense that the Grantee has an
adequate remedy at law and hereby agrees not to assert in any such action or
proceeding the claim or defense that such a remedy at law exists. The Grantor
further agrees to waive any requirements for the securing or posting of any bond
in connection with obtaining any such equitable relief.
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12. Notice. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended or delivered
by registered or certified mail, return receipt requested, or if sent by
facsimile transmission, upon receipt of oral confirmation that such transmission
has been received, to the person at the address set forth below, or such other
address as may be designated in writing hereafter, in the same manner, by such
person:
If to the Grantee:
American International Group, Inc.
70 Pine Street
New York, New York 10270
Attn: General Counsel
Telecopy: (212) 785-1584
With a copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Attn: James C. Morphy, Esq.
Telecopy: (212) 558-3588
If to the Grantor:
American Bankers Insurance Group, Inc.
11222 Quail Roost Drive
Miami, Florida 33157
Attn: Chief Executive Officer
Telecopy: (305) 252-7068
With a copy to:
Jorden Burt Berenson & Johnson LLP
777 Brickell Avenue
Suite 500
Miami, Florida 33131
Attn: Josephine Cicchetti
Telecopy: (305) 372-9928
and
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Attn: Jonathan L. Freedman
Telecopy: (212) 259-6333
13. Parties in Interest. This Agreement shall inure to the benefit of and
be binding upon the parties named herein and their respective successors and
assigns; provided, however, that such successor in interest or assigns shall
agree to be bound by the provisions of this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any person other than
the Grantor or the Grantee, or their successors or assigns, any rights or
remedies under or by reason of this Agreement.
14. Entire Agreement; Amendments. This Agreement, together with the
Merger Agreement and the other documents referred to therein, contains the
entire agreement between the parties hereto with respect to the subject 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.
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15. Assignment. No party to this Agreement may assign any of its rights
or obligations under this Agreement without the prior written consent of the
other party hereto, except that the Grantee may assign its rights and
obligations hereunder to any of its direct or indirect wholly owned subsidiaries
(including Newco), but no such transfer shall relieve the Grantee of its
obligations hereunder if such transferee does not perform such obligations.
16. Headings. The section headings herein are for convenience only and
shall not affect the construction of this Agreement.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (regardless of the laws that
might otherwise govern under applicable Delaware principles of conflicts of
law).
THE GRANTOR AGREES THAT, IN CONNECTION WITH ANY LEGAL SUIT OR PROCEEDING
ARISING WITH RESPECT TO THIS AGREEMENT, IT SHALL SUBMIT TO THE JURISDICTION OF
THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE AND AGREES TO
VENUE IN SUCH COURTS. THE GRANTOR HEREBY APPOINTS THE SECRETARY OF THE GRANTOR
AS ITS AGENT FOR SERVICE OF PROCESS FOR PURPOSES OF THE FOREGOING SENTENCE ONLY.
19. Termination. The right to exercise the Option granted pursuant to
this Agreement shall terminate at the earlier of (i) the Effective Time (as
defined in the Merger Agreement); (ii) 90 days after the Merger Termination Date
(the date referred to in clause (ii) being hereinafter referred to as the
"Option Termination Date") and, (iii) 18 months after the date hereof; provided
that, if the Option cannot be exercised or the Shares cannot be delivered to
Grantee upon such exercise because the conditions set forth in Section 2(a), (b)
or (c) hereof have not yet been satisfied, the Option Termination Date shall be
extended until thirty days after such impediment to exercise or delivery has
been removed.
All representations and warranties contained in this Agreement shall
survive delivery of and payment for the Shares.
20. Profit Limitation. (a) Notwithstanding any other provision of this
Agreement, in no event shall the Grantee's Total Profit (as hereinafter defined)
exceed $100 million and, if it otherwise would exceed such amount, the Grantee,
at its sole election, shall either (a) reduce the number of shares of Common
Stock required to be delivered by Grantor pursuant to the Stock Exercise Notice,
(b) deliver to the Grantor for cancellation Shares previously purchased by
Grantee, (c) reduce the cash payable to Grantee pursuant to Section 1(c) or 1(d)
hereof, (d) pay cash or other consideration to the Grantor or (e) undertake any
combination thereof, so that Grantee's Total Profit shall not exceed $100
million after taking into account the foregoing actions.
As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount of cash received by Grantee
pursuant to Section 8.5 of the Merger Agreement and Section 1(c) and Section
1(d) hereof, (ii) (x) the amount of cash received by Grantee pursuant to the
Grantor's repurchase of Shares pursuant to Sections 7 or 8 hereof, less (y) the
Grantee's purchase price for such Shares, and (iii) (x) the net cash amounts
received by Grantee pursuant to the sale of Shares (or any other securities into
which such Shares are converted or exchanged) to any unaffiliated party, less
(y) the Grantee's purchase price for such Shares.
21. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
II-7
<PAGE> 160
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.
/s/ GERALD N. GASTON
--------------------------------------
By: Gerald N. Gaston
Title: Vice Chairman, President, and
Chief Executive Officer
AMERICAN INTERNATIONAL GROUP, INC.
/s/ HOWARD I. SMITH
--------------------------------------
By: Howard I. Smith
Title: Executive Vice President
II-8
<PAGE> 161
APPENDIX III
<PAGE> 162
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") is entered into as of December 21,
1997, between the undersigned stock holders (the "Stockholders") of AMERICAN
BANKERS INSURANCE GROUP, INC., a Florida corporation (the "Company"), and
AMERICAN INTERNATIONAL GROUP, INC., a Delaware corporation ("Parent").
WHEREAS, concurrently with the execution and delivery of this Agreement,
AIGF, INC., a Florida corporation and a wholly owned subsidiary of Parent
("Newco"), Parent and the Company have entered into an Agreement and Plan of
Merger dated as of December 21, 1997 (the "Merger Agreement"), providing for the
merger of the Company with and into Newco (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 Common
Stock 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, but excluding any shares
of Company Common Stock which such Stockholder has the right to obtain upon
the exercise of stock options and upon the conversion of Convertible Notes
(as defined in the Merger Agreement) outstanding on the date hereof except,
in the case of Mr. Landon for Shares subject to an option granted prior to
the date hereof to a third party;
(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.
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.
III-1
<PAGE> 163
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. 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 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 Newco.
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 in
accordance with the terms of the Merger Agreement, (b) directly or indirectly
encourage, initiate or cooperate in a stock holders' vote or action by consent
of the Company's stockholders in opposition to or in competition with the
consummation of the Merger, 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; 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 shareholders 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 $5,000,000, and (ii) Shares or New Shares
Transferred pursuant to any court order or 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 December 21, 1997, among the Stockholders
named therein and American International Group, Inc., which, among other
things, (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."
III-2
<PAGE> 164
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
such 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) 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.
(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.
III-3
<PAGE> 165
(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) September 30, 1998.
(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 Newco, 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> 166
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
AMERICAN INTERNATIONAL GROUP, INC.
By: /s/ HOWARD I. SMITH
------------------------------------
Name: Howard I. Smith
Title: Executive Vice President
THE STOCKHOLDERS:
/s/ GERALD N. GASTON
--------------------------------------
Name: Gerald N. Gaston
/s/ R. KIRK LANDON
--------------------------------------
Name: R. Kirk Landon
R. Kirk/B. Landon
Foundation
/s/ R. KIRK LANDON
--------------------------------------
By: R. Kirk Landon
R. Kirk Landon Revocable Trust
/s/ R. KIRK LANDON
--------------------------------------
By: R. Kirk Landon, Trustee
Landon Corporation
/s/ R. KIRK LANDON
--------------------------------------
By: R. Kirk Landon
III-5
<PAGE> 167
(EXHIBIT A)
STOCKHOLDERS
<TABLE>
<CAPTION>
NAME: NUMBER OF SHARES: TYPE OF OWNERSHIP:
----- ----------------- ------------------
<S> <C> <C>
R. Kirk Landon 865,388 Direct
81,000 Directly, subject to restriction under 1991
Stock Option/Restricted Stock Award Plan
1,370,450 Landon Corporation
132,000 Through R. Kirk/B. Landon Foundation
129,824 Through R. Kirk Landon Revocable Trust
14,102 Allocated under Company's Leveraged Employee
Stock Ownership Plan ("LESOP")
52,380 Options
27,586 Acquirable under the 1994 Amended and Restated
Deferred Compensation Plan
160,000 Acquirable upon conversion of Convertible
Debenture
Gerald N. Gaston 482,436 Direct
14,100 Allocated under LESOP
140,000 Acquirable upon conversion of Convertible
Debenture
</TABLE>
III-6
<PAGE> 168
APPENDIX IV
<PAGE> 169
[SALOMON SMITH BARNEY LETTERHEAD]
February 27, 1998
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 Amended
and Restated Agreement and Plan of Merger, to be dated as of February 28, 1998
(the "Restated Merger Agreement"), by and among American International Group,
Inc. ("AIG"), a wholly owned subsidiary of AIG ("Merger Sub"), and American
Bankers. The Restated Merger Agreement amends and restates an Agreement and Plan
of Merger, dated as of December 21, 1997, among AIG, Merger Sub and American
Bankers, as amended and restated as of January 7, 1998 and amended as of January
28, 1998. As more fully described in the Restated Merger Agreement, (A) American
Bankers will be merged with and into Merger Sub (the "Merger"), (B) each
outstanding share of ABI Common Stock will be valued at $58.00 and will be
converted into the right to receive, at the option of the holder thereof
(subject to certain exceptions and limitations specified in the Restated Merger
Agreement), (i) $58.00 in cash or (ii) shares of common stock, par value $2.50
per share, of AIG ("AIG Common Stock"), calculated by dividing $58.00 by the
average closing price of AIG Common Stock for the ten trading days ending on the
third trading day before the closing date of the Merger, provided that if such
calculation would require AIG to issue more than 0.4811 of a share of AIG Common
Stock per share of ABI Common Stock, AIG may elect to issue not more than 0.4811
of a share of AIG Common Stock and pay the balance of the purchase price per
share of ABI Common Stock in cash (the "Revised Common Stock Consideration"),
and (C) each outstanding share of ABI Preferred Stock will be converted into the
right to receive one share of Series C Preferred Stock, par value $5.00 per
share, of AIG ("AIG Preferred Stock") having the terms described in the Restated
Merger Agreement (the "Revised Preferred Stock Merger Consideration").
The Restated Merger Agreement further provides that AIG, at its election, may
cause Merger Sub to commence a cash tender offer for up to 100% (but not less
than 49.9%) of the outstanding ABI Common Stock at a purchase price of not less
than $58.00 per share. Revised Common Stock Consideration also shall refer
herein to the purchase price per share payable in such a tender offer. If Merger
Sub purchases more than 49.9% of the outstanding ABI Common Stock in such a
tender offer, the Restated Merger Agreement provides that each remaining
outstanding share of ABI Common Stock will be converted in the Merger into the
right to receive Revised Common Stock Consideration as described in clause (B)
of the preceding paragraph, provided that AIG will have the right to elect
(subject to certain limitations) whether such consideration will be in the form
of AIG Common Stock or cash.
In arriving at our opinion, we reviewed the Restated Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of American Bankers and certain senior officers and other
representatives and advisors of AIG concerning the businesses, operations and
prospects of American Bankers and AIG. We examined certain publicly available
business and financial information relating to American Bankers and AIG as well
as certain financial forecasts for American Bankers and other information and
data for American Bankers and AIG which were provided to or otherwise discussed
with us by the respective managements of American Bankers and AIG, including
information relating to certain strategic implications and operational benefits
anticipated to result from the Merger. We reviewed the financial terms of the
Merger as set forth in the Restated Merger Agreement in relation to, among other
<PAGE> 170
The Board of Directors
American Bankers Insurance Group, Inc.
February 27, 1998
Page 2
things: current and historical market prices and trading volumes of the ABI
Common Stock and the AIG Common Stock; the historical and projected earnings and
other operating data of American Bankers and AIG; and the capitalization and
financial condition of American Bankers and AIG. 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 the businesses of other companies whose operations we considered
relevant in evaluating those of American Bankers and AIG. We also evaluated the
potential pro forma financial impact of the Merger on AIG. In connection with
our engagement, we were not requested to and did not approach, or hold
discussions with, third parties to solicit indications of interest in the
possible acquisition of American Bankers. In addition to the foregoing, we
conducted such other analyses and examinations and 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 Restated 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 judgments of the
management of American Bankers as to the future financial performance of
American Bankers and the strategic implications and operational benefits
anticipated to result from the Merger. Our opinion, as set forth herein, relates
to the relative values of American Bankers and AIG. We are not expressing any
opinion as to what the value of the AIG Common Stock or the AIG Preferred Stock
actually will be when issued pursuant to the Merger or the price at which the
AIG Common Stock or the AIG Preferred Stock will trade subsequent to the Merger.
We have not made or been provided with an independent evaluation or appraisal of
the assets or liabilities (contingent or otherwise) of American Bankers and AIG
nor have we made any physical inspection of the properties or assets of American
Bankers and AIG. 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.
Smith Barney Inc. and Salomon Brothers Inc, collectively doing business as
Salomon Smith Barney, have acted as financial advisors to American Bankers in
connection with the proposed Merger and will receive a fee for such services, a
significant portion of which is contingent upon the consummation of the Merger.
We also will receive a fee in connection with the delivery of this opinion. We
may have in the past provided investment banking services to American Bankers
and AIG, 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 AIG 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 Travelers Group
Inc. and its affiliates) may maintain relationships with American Bankers and
AIG.
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. Our opinion may not be published or otherwise used
or referred to, nor shall any public reference to Salomon Smith Barney be made,
without our prior written consent.
<PAGE> 171
The Board of Directors
American Bankers Insurance Group, Inc.
February 27, 1998
Page 3
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 Revised Common Stock Consideration
is fair, from a financial point of view, to the holders of ABI Common Stock and
(ii) the Revised Preferred Stock Merger Consideration is fair, from a financial
point of view, to the holders of ABI Preferred Stock.
Very truly yours,
SALOMON SMITH BARNEY
<PAGE> 172
APPENDIX V
<PAGE> 173
CERTIFICATE OF DESIGNATION OF AIG $3.125 CUMULATIVE CONVERTIBLE SERIAL PREFERRED
STOCK, SERIES C
Section I. Designation of Series and Number of Shares to be Initially
Issuable Therein. This series of Preferred Stock shall be designated "$3.125
Cumulative Convertible Serial Preferred Stock, Series C" (hereinafter called the
"Series C Preferred Stock"), $5.00 par value, of which 2,300,000 shares shall be
initially issuable.
Section II. Rank. All shares of Series C Preferred Stock shall rank
prior, both as to payment of dividends and as to distributions of assets upon
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, to all Junior Stock.
Section III. Dividends. The holders of Series C Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds at the time legally available therefor, dividends at the rate of $3.125
per annum per share, and no more, which shall be fully cumulative, shall accrue
without interest from [February 1, 1998]* (on a daily basis whether or not such
amounts would be available at that time for distribution to holders of shares of
Series C Preferred Stock) and shall be payable in cash quarterly in arrears on
February 1, May 1, August 1 and November 1 of each year commencing [May 1,
1998]* (with respect to the period from [February 1, 1998 to May 1, 1998]*)
(except that if any such date is not a Business Day, then such dividend shall be
payable on the next Business Day) to holders of record as they appear upon the
stock transfer books of the Company on such record dates, not more than sixty
days nor less than ten days preceding the payment dates for such dividends, as
are fixed by the Board of Directors (or, to the extent permitted by applicable
law, a duly authorized committee thereof). In no event shall any such dividend
record date be fixed less than (a) six Business Days prior to any date fixed for
the redemption of the Series C Preferred Stock or (b) with respect to the
dividend payment date occurring on August 1, 2000 less than ten Business Days
prior to any date fixed for such redemption. Subject to the next paragraph of
this Section III, dividends on account of arrears for any past dividend period
may be declared and paid at any time, without reference to any regular dividend
payment date. The amount of dividends payable per share of Series C Preferred
Stock for each quarterly dividend period shall be computed by dividing the
annual dividend amount by four. The amount of dividends payable for any period
shorter than a full quarterly period shall be computed on the basis of a 360-day
year of twelve 30-day months. No interest shall be payable in respect of any
dividend payment on the Series C Preferred Stock which may be in arrears.
No dividends or other distributions, other than dividends payable solely in
shares of Junior Stock, shall be declared, paid or set apart for payment on
shares of Junior Dividend Stock, unless and until all accrued and unpaid
dividends on the Series C Preferred Stock for all dividend payment periods
ending on or before the payment date of such dividends or other distributions on
Junior Dividend Stock shall have been paid or declared and set apart for
payment.
No payment on account of the purchase, redemption, retirement or other
acquisition of shares of Junior Dividend Stock or Junior Liquidation Stock shall
be made unless and until all accrued and unpaid dividends on the Series C
Preferred Stock for the then current period and all dividend payment periods
ending on or before such payment for such Junior Dividend Stock or Junior
Liquidation Stock shall have been paid or declared and set apart for payment;
provided, however, that the restrictions set forth in this sentence shall not
apply to the purchase, redemption, retirement, or other acquisition of Junior
Stock in exchange solely for Junior Stock.
No full dividends shall be declared, paid or set apart for payment on
shares of Parity Dividend Stock for any period unless full cumulative dividends
have been, or contemporaneously are, paid or declared and set apart for such
payment on the Series C Preferred Stock for all dividend payment periods ending
on or before the payment date of such dividends on Parity Dividend Stock. No
dividends shall be paid on Parity Dividend Stock except on dates on which
dividends are paid on the Series C Preferred Stock. All dividends paid or
declared and set apart for payment on the Series C Preferred Stock and the
Parity Dividend Stock shall be
- ---------------
* The first dividend payment will be paid in respect of the full quarterly
period in which closing occurs.
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paid or declared and set apart for payment pro rata so that the amount of
dividends paid or declared and set apart for payment per share on the Series C
Preferred Stock and the Parity Dividend Stock on any date shall in all cases
bear to each other the same ratio that accrued and unpaid dividends to the date
of payment on the Series C Preferred Stock and the Parity Dividend Stock bear to
each other.
No payment on account of the purchase, redemption, retirement or other
acquisition of shares of Parity Dividend Stock or Parity Liquidation Stock shall
be made, and, other than dividends to the extent permitted by the preceding
paragraph, no distributions shall be declared, paid or set apart for payment on
shares of Parity Dividend Stock or Parity Liquidation Stock, unless and until
all accrued and unpaid dividends on the Series C Preferred Stock for all
dividend payment periods ending on or before such payment for, or the payment
date of such distributions on, such Parity Dividend Stock or Parity Liquidation
Stock shall have been paid or declared and set apart for payment; provided,
however, that the restrictions set forth in this sentence shall not apply to the
purchase, redemption, retirement, or other acquisition of Parity Dividend Stock
or Parity Liquidation Stock either (A) pursuant to any employee or director
incentive or benefit plan or arrangement (including any employment, severance or
consulting agreement) of the Company or any subsidiary of the Company hereafter
adopted or (B) in exchange solely for Junior Stock.
Any reference to "distribution" contained in this Section III shall not be
deemed, except as expressly stated, to include any distribution made in
connection with any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary.
Section IV. Liquidation Preference. In the event of a liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, the
holders of shares of Series C Preferred Stock shall be entitled to receive out
of the assets of the Company available for distribution to stockholders an
amount equal to the dividends accrued and unpaid on such shares on the date of
final distribution to such holders, whether or not earned or declared, without
interest, plus a sum equal to $50 per share, and no more, before any payment
shall be made or any assets distributed to the holders of shares of Junior
Stock; provided, however, that such rights shall accrue to the holders of shares
of Series C Preferred Stock only with respect to assets (if any) remaining after
the Company's payment obligations with respect to the liquidation preferences of
the shares of any class or series of the Company's capital stock hereafter
issued ranking prior to the Series C Preferred Stock as to distributions of
assets upon such liquidation, dissolution or winding up ("Senior Liquidation
Stock") are fully met. The entire assets of the Company available for
distribution to stockholders after the liquidation preferences of the shares of
Senior Liquidation Stock are fully met shall be distributed ratably among the
holders of the Series C Preferred Stock and any Parity Liquidation Stock in
proportion to the respective preferential amounts to which each is entitled (but
only to the extent of such preferential amounts). After payment in full of the
liquidation preferences of the shares of the Series C Preferred Stock, the
holders of such shares shall not be entitled to any further participation in any
distribution of assets by the Company. The voluntary sale, lease, exchange or
transfer of all or substantially all of the Company's property or assets to, or
its consolidation or merger with one or more corporations shall not be deemed to
be considered a voluntary or involuntary liquidation, dissolution or winding up
of the Company.
Section V. Redemption at Option of the Company. The Series C Preferred
Stock may not be redeemed by the Company prior to August 7, 2000. On and after
such date, the Series C Preferred Stock may be redeemed by the Company, at its
option on any date set by the Board of Directors, in whole or in part at any
time, subject to the limitations, if any, imposed by the Florida Business
Corporation Act (the "FBCA") (assuming the Company were then incorporated under
the FBCA), for an amount in cash equal to the Redemption Price.
In case of the redemption of less than all of the then outstanding Series C
Preferred Stock, the Company shall designate by lot, or in such other manner as
the Board of Directors may determine to be fair, the shares to be redeemed, or
shall effect such redemption pro rata. Notwithstanding the foregoing, the
Company shall not redeem less than all of the Series C Preferred Stock at any
time outstanding until all dividends accrued and in arrears upon all Series C
Preferred Stock then outstanding shall have been paid in full for all past
dividend periods.
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Not more than ninety nor less than thirty days prior to the date fixed for
redemption by the Board of Directors, notice thereof by first class mail,
postage prepaid, shall be given to the holders of record of the shares of Series
C Preferred Stock to be redeemed, addressed to such holders at their last
addresses as shown upon the stock transfer books of the Company. Each such
notice of redemption shall specify the date fixed for redemption, the Redemption
Price, the place or places of payment, that payment will be made upon
presentation and surrender of the shares of Series C Preferred Stock, that on
and after the date fixed for redemption dividends will cease to accrue on such
shares, the then-effective conversion price pursuant to Section VI, and that the
right of holders to convert shares of Series C Preferred Stock shall terminate
at 5:00 p.m. New York City time on the Business Day prior to the date fixed for
redemption and if such conversion right is not exercised prior to such time,
such conversion right will be lost (unless the Company defaults in the payment
of the Redemption Price).
Any notice that is mailed as herein provided shall be conclusively presumed
to have been duly given, whether or not the holder of shares of Series C
Preferred Stock receives such notice; and failure to give such notice by mail,
or any defect in such notice, to the holders of any shares designated for
redemption shall not affect the validity of the proceedings for the redemption
of any other shares of Series C Preferred Stock. On or after the date fixed for
redemption as stated in such notice, each holder of the shares called for
redemption shall surrender the certificate evidencing such shares to the Company
at the place designated in such notice and shall thereupon be entitled to
receive payment of the Redemption Price. If less than all the shares evidenced
by any such surrendered certificate are redeemed, a new certificate shall be
issued evidencing the unredeemed shares.
No fractional shares of Series C Preferred Stock shall be issued upon
redemption of less than all Series C Preferred Stock. If more than one
certificate evidencing shares of Series C Preferred Stock shall be held at one
time by the same holder, the number of full shares issuable upon redemption of
less than all of such shares of Series C Preferred Stock shall be computed on
the basis of the aggregate number of shares of Series C Preferred Stock so held.
Instead of any fractional share of Series C Preferred Stock that would otherwise
be issuable to a holder upon redemption of less than all shares of Series C
Preferred Stock, the Company shall pay a cash adjustment in respect of such
fractional share in an amount equal to the same fraction of the fair value per
share of Series C Preferred Stock (as determined in good faith by the Board of
Directors or in any manner prescribed by the Board of Directors) at the close of
business on the date fixed for redemption.
Notice having been given as aforesaid, if, on the date fixed for
redemption, funds necessary for the redemption shall be available therefor and
shall have been deposited with a bank or trust company with irrevocable
instructions and authority to pay the Redemption Price to the holders of the
Series C Preferred Stock, then, notwithstanding that the certificates evidencing
any shares so called for redemption shall not have been surrendered, dividends
with respect to the shares so called shall cease to accrue on and after the date
fixed for redemption, such shares shall no longer be deemed outstanding, the
holders thereof shall cease to be stockholders of the Company and all rights
whatsoever with respect to the shares so called for redemption (except the right
of the holders to receive the Redemption Price without interest upon surrender
of their certificates therefor) shall terminate. If funds legally available for
such purpose are not sufficient for redemption of the shares of Series C
Preferred Stock which were to be redeemed, then the certificates evidencing such
shares shall be deemed not to be surrendered, such shares shall remain
outstanding, and the right of holders of shares of Series C Preferred Stock
thereafter shall continue to be only those of a holder of shares of the Series C
Preferred Stock.
Upon an optional redemption by the Company, if at any time the Company does
not pay amounts sufficient to redeem all Series C Preferred Stock, then such
funds which are paid shall be applied to redeem such shares of Series C
Preferred Stock as the Company may designate by lot or in such other manner as
the Board of Directors may determine to be fair, or such redemption shall be
effected pro rata.
The shares of Series C Preferred Stock shall not be subject to the
operation of any mandatory purchase, retirement or sinking fund.
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Section VI. Conversion Privilege.
(a) Right of Conversion. Each share of Series C Preferred Stock shall be
convertible at the option of the holder thereof, at any time prior to 5:00 p.m.
New York City time on the Business Day prior to the date fixed for redemption of
such share as herein provided, into fully paid and nonassessable shares of
Common Stock, at the rate of that number of shares of Common Stock for each full
share of Series C Preferred Stock that is equal to $50 divided by the conversion
price applicable per share of Common Stock, or into such additional or other
securities, cash or property and at such other rates as required in accordance
with the provisions of this Section VI. For purposes of this resolution, the
"conversion price" applicable per share of Common Stock shall initially be equal
to $ __ * and shall be adjusted from time to time in accordance with the
provisions of this Section VI.
(b) Conversion Procedures. Any holder of shares of Series C Preferred
Stock desiring to convert such shares into Common Stock shall surrender the
certificate or certificates evidencing such shares of Series C Preferred Stock
at the office of the transfer agent for the Series C Preferred Stock, which
certificate or certificates, if the Company shall so require, shall be duly
endorsed to the Company or in blank, or accompanied by proper instruments of
transfer to the Company or in blank, accompanied by irrevocable written notice
to the Company that the holder elects so to convert such shares of Series C
Preferred Stock and specifying the name or names (with address or addresses) in
which a certificate or certificates evidencing shares of Common Stock are to be
issued.
No payments or adjustments in respect of dividends on shares of Series C
Preferred Stock surrendered for conversion or on account of any dividend on the
Common Stock issued upon conversion shall be made upon the conversion of any
shares of Series C Preferred Stock; provided, however, that:
(i) if a dividend record date fixed for the Series C Preferred Stock
as established herein results in a holder who undertakes conversion being
eligible to receive on any dividend payment date both a dividend on the
Series C Preferred Stock and a dividend on the Common Stock issued upon
conversion thereof, then such holder shall be entitled to receive only the
higher of such dividend amounts; and
(ii) if the Company shall, by dividend or otherwise, declare or make a
distribution on its Common Stock referred to in Section VI(c)(iv) or
VI(c)(v) (including, without limitation, dividends or distributions
referred to in the last sentence of Section VI(c)(iv)), the holder of each
share of Series C Preferred Stock, upon the conversion thereof subsequent
to the close of business on the date fixed for the determination of
stockholders entitled to receive such distribution and prior to the
effectiveness of the conversion price adjustment in respect of such
distribution, shall also be entitled to receive for each share of Common
Stock into which such share of Series C Preferred Stock is converted, the
portion of the shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash and assets so distributed
applicable to one share of Common Stock; provided, however, that at the
election of the Company (whose election shall be evidenced by a resolution
of the Board of Directors) with respect to all holders so converting, the
Company may, in lieu of distributing to such holder any portion of such
distribution not consisting of cash or securities of the Company, pay such
holder an amount in cash equal to the fair market value thereof (as
determined in good faith by the Board of Directors, whose determination
shall be conclusive and described in a resolution of the Board of
Directors). If any conversion of a share of Series C Preferred Stock
described in the immediately preceding sentence occurs prior to the payment
date for a distribution to holders of Common Stock which the holder of the
share of Series C Preferred Stock so converted is entitled to receive in
accordance with the immediately preceding sentence, the Company may elect
(such election to be evidenced by a resolution of the Board of Directors)
to distribute to such holder a due bill for the shares of Common Stock,
rights, warrants, evidences of indebtedness, shares of capital stock, cash
or assets to which such holder is so entitled, provided that such due bill
(x) meets any applicable requirements of the principal national securities
exchange or other market on which the Common Stock is then traded and (y)
requires payment or delivery of such shares of Common Stock, rights,
warrants, evidences of indebtedness, shares of capital stock, cash or
assets no later than the date of payment or delivery thereof to holders of
shares of Common Stock receiving such distribution.
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* Insert number that is equal to 25.0325 multiplied by a fraction the numerator
of which is Purchaser Stock Price and the denominator of which is the
Applicable Price, pursuant to Section VI(h)(ii) .
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The Company shall, as soon as practicable after such deposit of
certificates evidencing shares of Series C Preferred Stock accompanied by the
written notice and compliance with any other conditions herein contained,
deliver at such office of such transfer agent to the person for whose account
such shares of Series C Preferred Stock were so surrendered, or to the nominee
or nominees of such person, certificates evidencing the number of full shares of
Common Stock to which such person shall be entitled as aforesaid, together with
a cash adjustment in respect of any fraction of a share of Common Stock as
hereinafter provided. Such conversion shall be deemed to have been made as of
the date of such surrender of the shares of Series C Preferred Stock to be
converted, and the person or persons entitled to receive the Common Stock
deliverable upon conversion of such Series C Preferred Stock shall be treated
for all purposes as the record holder or holders of such Common Stock on such
date.
(c) Adjustment of Conversion Price. The conversion price at which a share
of Series C Preferred Stock is convertible into Common Stock shall be subject to
adjustment from time to time as follows:
(i) In case the Company shall pay or make a dividend or other
distribution on its Common Stock exclusively in Common Stock or shall pay
or make a dividend or other distribution on any other class or series of
capital stock of the Company which dividend or distribution includes Common
Stock, the conversion price in effect at the opening of business on the day
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying
such conversion price by: A/(A + B), where:
A = the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination; and
B = the total number of shares of Common Stock constituting such
dividend or other distribution,
such reduction to become effective immediately after the opening of
business on the day following the date fixed for such determination. For
purposes of this subparagraph (i), the number of shares of Common Stock at
any time outstanding shall not include shares held in the treasury of the
Company.
(ii) In case the Company shall pay or make a dividend or other
distribution on its Common Stock consisting exclusively of, or shall
otherwise issue to all holders of its Common Stock, rights or warrants
entitling the holders thereof to subscribe for or purchase shares of Common
Stock at a price per share less than the Current Market Price Per Share of
the Common Stock on the date fixed for the determination of stockholders
entitled to receive such rights or warrants, the conversion price in effect
at the opening of business on the day following the date fixed for such
determination shall be reduced by multiplying such conversion price by:
(A + B)/(A + C), where:
A = the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination,
B = the number of shares of Common Stock which the aggregate of the
offering price of the total number of shares of Common Stock so
offered for subscription or purchase would purchase at such Current
Market Price Per Share, and
C = the number of shares of Common Stock so offered for subscription or
purchase,
such reduction to become effective immediately after the opening of
business on the day following the date fixed for such determination.
In case any rights or warrants referred to in this subparagraph (ii)
in respect of which an adjustment shall have been made shall expire
unexercised within 45 days after the shares shall have been distributed or
issued by the Company the conversion price shall be readjusted at the time
of such expiration to the conversion price that would have been in effect
if no adjustment had been made on account of the distribution or issuance
of such expired rights or warrants. In the event the Company adopts a
stockholder rights plan (a "rights plan") that affords stockholders of the
Company rights ("plan purchase rights") to purchase shares of Common Stock,
or shares of common stock of a corporation that enters into certain
business combinations or other transactions with the Company, following the
occurrence of certain
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triggering events (each, a "triggering event"), then for the purposes of
this Section VI(c)(ii) if both the separation of the plan purchase rights
from shares of Common Stock and a triggering event shall have occurred, the
later to occur of such events shall be deemed to constitute an issuance of
rights to purchase shares of the related common stock.
(iii) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the conversion price in
effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and
conversely, in case outstanding shares of Common Stock shall be combined
into a smaller number of shares of Common Stock, the conversion price in
effect at the opening of business on the day following the day upon which
such combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(iv) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock evidences of its indebtedness, shares of
any class or series of capital stock, cash or assets (including securities,
but excluding any rights or warrants referred to in subparagraph (ii) of
this Section VI(c), any dividend or distribution paid exclusively in cash
and any dividend or distribution referred to in subparagraph (i) of this
Section VI(c)), the conversion price shall be reduced so that the same
shall equal the price determined by multiplying the conversion price in
effect immediately prior to the effectiveness of the conversion price
reduction contemplated by this subparagraph (iv) by: (A -- B)/A, where:
A = the Current Market Price Per Share of the Common Stock on the date
fixed for the payment of such distribution (the "Reference Date"),
and
B = the fair market value (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in
a resolution of the Board of Directors), on the Reference Date, of
the portion of the evidence of indebtedness, shares of capital
stock, cash and assets so distributed applicable to one share of
Common Stock,
such reduction to become effective immediately prior to the opening of
business on the day following the Reference Date, provided, however, that
for purposes of this subparagraph (iv), any dividend or distribution that
includes shares of Common Stock or rights or warrants to subscribe for or
purchase shares of Common Stock shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, cash, assets or
shares of capital stock other than such shares of Common Stock or rights or
warrants (making any further conversion price reduction required by this
subparagraph (iv)) immediately followed by (2) a dividend or distribution
of such shares of Common Stock or such rights or warrants (making any
further conversion price reduction required by subparagraph (i) or (ii) of
this Section VI(c), except (A) the Reference Date of such dividend or
distribution as defined in this subparagraph (iv) shall be substituted as
"the date fixed for the determination of stockholders entitled to receive
such dividend or other distribution", "the date fixed for the determination
of stockholders entitled to receive such rights or warrants" and "the date
fixed for such determination" within the meaning of subparagraph (i) and
(ii) of this Section VI(c) and (B) any shares of Common Stock included in
such dividend or distribution shall not be deemed "outstanding at the close
of business on the date fixed for such determination" within the meaning of
subparagraph (i) of this Section VI(c)). If the Board of Directors
determines the fair market value of any distribution for purposes of this
subparagraph (iv) by reference to the actual or when issued trading market
for any securities comprising such distribution, it must in doing so
consider the prices in such market over the same period used in computing
the Current Market Price Per Share of Common Stock.
(v) In case the Company shall pay or make a dividend or other
distribution on its Common Stock exclusively in cash (excluding (A) cash
that is part of the distribution referred to in (iv) above and, (B) in the
case of any quarterly cash dividend on the Common Stock, the portion
thereof that does not exceed the per share amount of the next preceding
quarterly cash dividend on the Common Stock (as adjusted to appropriately
reflect any of the events referred to in subparagraph (i), (ii), (iii),
(iv) and
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(v) of this Section VI(c)), or all of such quarterly cash dividend if the
amount thereof per share amount of Common Stock multiplied by four does not
exceed 15% of the Current Market Price Per Share of the Common Stock on the
Trading Day next preceding the date of declaration of such dividend), the
conversion price shall be reduced so that the same shall equal the
conversion price in effect immediately prior to the effectiveness of the
conversion price reduction contemplated by this subparagraph (v) by:
(A -- B)/A, where:
A = the Current Market Price Per Share of the Common Stock on the date
fixed for the payment of such distribution, and
B = the amount of cash so distributed and not excluded as provided above
applicable to one share of Common Stock,
such reduction to become effective immediately prior to the opening of
business on the day following the date fixed for the payment of such
distribution.
(vi) No adjustment in the conversion price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
conversion price; provided, however, that any adjustments which by reason
of this subparagraph (vi) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
(vii) Whenever the conversion price is adjusted as herein provided:
(1) the Company shall compute the adjusted conversion price and shall
prepare a certificate signed by the Treasurer of the Company setting forth
the adjusted conversion price and showing in reasonable detail the facts
upon which such adjustment in based, and such certificate shall forthwith
be filed with the transfer agent for the Series C Preferred Stock; and (2)
a notice stating that the conversion price has been adjusted and setting
forth the adjusted conversion price shall forthwith be required, and as
soon as practicable after it is required, such notice shall be mailed by
the Company to all record holders of shares of Series C Preferred Stock at
their last addresses as they shall appear upon the stock transfer books of
the Company.
(viii) The Company from time to time may reduce the conversion price
by any amount for any period of time if the period is at least twenty days,
the reduction is irrevocable during the period and the Board of Directors
of the Company shall have made a determination that such reduction would be
in the best interest of the Company, which determination shall be
conclusive. Whenever the conversion price is reduced pursuant to the
preceding sentence, the Company shall mail to holders of record of the
Series C Preferred Stock a notice of the reduction at least fifteen days
prior to the date the reduced conversion price takes effect, and such
notice shall state the reduced conversion price and the period it will be
in effect.
(d) No Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of Series C Preferred Stock. If more than one certificate
evidencing shares of Series C Preferred Stock shall be surrendered for
conversion at one time by the same holder, the number of full shares issuable
upon conversion thereof shall be computed on the basis of the aggregate number
of shares of Series C Preferred Stock so surrendered. Instead of any fractional
share of Common Stock that would otherwise be issuable to a holder upon
conversion of any shares of Series C Preferred Stock, the Company shall pay a
cash adjustment in respect of such fractional share in an amount equal to the
same fraction of the market price per share of Common Stock (as determined by
the Board of Directors or in any manner prescribed by the Board of Directors,
which, so long as the Common Stock is listed on the New York Stock Exchange or
quoted on the Nasdaq National Market System, shall be the reported last sale
price regular way) at the close of business on the day of conversion.
(e) Reclassification, Consolidation, Merger or Sale of Assets. In the
event that the Company shall be a party to any transaction (including without
limitation any recapitalization or reclassification of the Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination of the Common
Stock), any consolidation of the Company with, or merger of the Company into,
any other person, any merger of another person into the Company (other than a
merger which does not result in a reclassification, conversion, exchange or
cancellation of outstanding shares
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of Common Stock of the Company), any sale or transfer of all or substantially
all of the assets of the Company or any share exchange) pursuant to which the
Common Stock is converted into the right to receive other securities, cash or
other property, then lawful provisions shall be made as part of the terms of
such transaction whereby the holder of each share of Series C Preferred Stock
then outstanding shall have the right thereafter to convert such share only into
(i) in the case of any such transaction other than a Common Stock Fundamental
Change and subject to funds being legally available for such purpose under
applicable law at the time of such conversion, the kind and amount of
securities, cash and other property receivable upon such transaction by a holder
of the number of shares of Common Stock of the Company into which such share of
Series C Preferred Stock might have been converted immediately prior to such
transaction, after giving effect, in the case of any Non-Stock Fundamental
Change, to any adjustment in the conversion price required by the provisions of
Section VI(h), and (ii) in the case of a Common Stock Fundamental Change, common
stock of the kind received by holders of Common Stock as a result of such Common
Stock Fundamental Change in an amount determined pursuant to the provisions of
Section VI(h). The Company or the person formed by such consolidation or
resulting from such merger or which acquires such assets or which acquires the
Company's shares, as the case may be, shall make provisions in its certificate
or articles of incorporation or other constituent document to establish such
right. Such certificate or articles of incorporation or other constituent
document shall provide for adjustments which, for events subsequent to the
effective date of such certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section VI. The above provisions shall
similarly apply to successive transactions of the foregoing type.
(f) Reservation of Shares; Etc. The Company shall at all times reserve and
keep available, free from preemptive rights out of its authorized and unissued
stock, solely for the purpose of effecting the conversion of the Series C
Preferred Stock, such number of shares of its Common Stock as shall from time to
time be sufficient to effect that conversion of all shares of Series C Preferred
Stock from time to time outstanding. The Company shall from time to time, in
accordance with the laws of the State of Delaware, in good faith and as
expeditiously as possible endeavor to cause the authorized number of shares of
Common Stock to be increased if at any time the number of shares of authorized
and unissued Common Stock shall not be sufficient to permit the conversion of
all the then-outstanding shares of Series C Preferred Stock.
If any shares of Common Stock required to be reserved for purposes of
conversion of the Series C Preferred Stock hereunder require registration with
or approval of any governmental authority under any Federal or State law before
such shares may be issued upon conversion, the Company will in good faith and as
expeditiously as possible endeavor to cause such shares to be duly registered or
approved as the case may be. If the Common Stock is listed on the New York Stock
Exchange or any other national securities exchange or traded through the Nasdaq
National Market, the Company will, if permitted by the rules of such exchange or
market, list and keep listed on such exchange or make and keep eligible for
trading on such market (as the case may be), upon official notice of issuance,
all shares of Common Stock issuable upon conversion of the Series C Preferred
Stock; provided, however, that such shares of Common Stock may be delisted from
such exchange or may cease to be eligible for trading through such market (as
the case may be) if, prior to or concurrent with such delisting or cessation of
eligibility for trading, the Company causes such shares of Common Stock to be
listed on or eligible for trading through any other such exchange or market.
(g) Prior Notice of Certain Events. In case:
(i) the Company shall (1) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend payable in
shares of Common Stock or (B) a dividend payable in cash out of its
retained earnings other than any special or nonrecurring or other
extraordinary dividend or (2) declare or authorize a redemption or
repurchase of in excess of 10% of the then-outstanding shares of Common
Stock; or
(ii) the Company shall authorize the granting to all holders of Common
Stock of rights or warrants to subscribe for or purchase any shares of
stock of any class or series or of any other rights or warrants; or
(iii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change in
par value, or from par value to no par value, or from no par
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value to par value), or of any consolidation or merger to which the Company
is a party and for which approval of any shareholders of the Company shall
be required, or of the sale or transfer of all or substantially all of the
assets of the Company or of any share exchange whereby the Common Stock is
converted into other securities, cash or other property; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed with the transfer agent for the Series
C Preferred Stock, and shall cause to be mailed to the holders of record of the
Series C Preferred Stock, at their last addresses as they shall appear upon the
stock transfer books of the Company, at least ten days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record (if any) is to be taken for the purpose of such dividend,
distribution, redemption, repurchase, rights or warrants or, if a record is not
to be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding up
is expected to become effective and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up (but no failure to mail such notice or
any defect therein or in the mailing thereof shall affect the validity of the
corporate action required to be specified in such notice).
(h) Adjustments in Case of Fundamental Changes. Notwithstanding any other
provision in this Section VI to the contrary, if any Fundamental Change occurs,
then the conversion price in effect will be adjusted immediately after such
Fundamental Change as described below. In addition, in the event of a Common
Stock Fundamental Change, each share of Series C Preferred Stock shall be
convertible solely into common stock of the kind received by holders of Common
Stock as the result of such Common Stock Fundamental Change.
For purposes of calculating any adjustment to be made pursuant to this
Section VI(h) in the event of a Fundamental Change, immediately after such
Fundamental Change:
(i) In the case of a Non-Stock Fundamental Change, the conversion
price of the Series C Preferred Stock shall thereupon become the lower of
(1) the conversion price in effect immediately prior to such Non-Stock
Fundamental Change, but after giving effect to any other prior adjustments
effected pursuant to this Section VI, and (2) the result of A x $50/B,
where:
A = the greater of the Applicable Price or the then applicable Reference
Market Price, and
B = (x) the then-current Redemption Price per share of Series C
Preferred Stock or (y) for any Non-Stock Fundamental Change that
occurs before the Series C Preferred Stock becomes redeemable by the
Company pursuant to Section V, the applicable price per share set
forth for the date of such Non-Stock Fundamental Change in the
following table:
<TABLE>
<CAPTION>
DATE OF NON-STOCK FUNDAMENTAL CHANGE PRICE
------------------------------------ ------
<S> <C>
After date of original issuance of Series C Preferred Stock
and on or before August 6, 1998............................. $52.81
After August 7, 1998 and on or before August 6, 1999........ $52.50
After August 7, 1999 and on or before August 6, 2000........ $52.19
</TABLE>
plus, in any case referred to in this clause (y), an amount equal to all
per share dividends on the Series C Preferred Stock accrued and unpaid
thereon, whether or not declared, to but excluding the date of such
Non-Stock Fundamental Change; and
(ii) In the case of a Common Stock Fundamental Change, the conversion
price of the Series C Preferred Stock in effect immediately prior to such
Common Stock Fundamental Change, but after giving effect to any other prior
adjustments effected pursuant to this Section VI, shall thereupon be
adjusted by multiplying such conversion price by a fraction of which the
numerator shall be the Purchaser
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<PAGE> 182
Stock Price and the denominator shall be the Applicable Price; provided,
however, that in the event of a Common Stock Fundamental Change in which
(A) 100% by value of the consideration received by a holder of Common Stock
is common stock of the successor, acquiror or other third party (and cash,
if any, is paid with respect to any fractional interests in such common
stock resulting from such Common Stock Fundamental Change) and (B) all of
the Common Stock shall have been exchanged for, converted into or acquired
for common stock (and cash with respect to fractional interests) of the
successor, acquiror or other third party, the conversion price of the
Convertible Serial Preferred Stock in effect immediately prior to such
Common Stock Fundamental Change shall thereupon be adjusted by dividing
such conversion price by the number of shares of common stock of the
successor, acquiror, or other third party received by a holder of one share
of Common Stock as a result of such Common Stock Fundamental Change.
(i) Dividend or Interest Reinvestment Plans. Notwithstanding the foregoing
provisions, the issuance of any shares of Common Stock pursuant to any plan
providing for the reinvestment of dividends or interest payable on securities of
the Company and the investment of additional optional amounts in shares of
Common Stock under any such plan, and the issuance of any shares of Common Stock
or options or rights to purchase such shares pursuant to any employee benefit
plan or program of the Company or pursuant to any option, warrant, right or
exercisable, exchangeable or convertible security outstanding as of the date the
Series C Preferred Stock was first designated (except as expressly provided in
Section VI(c)(ii) with respect to a separation of plan purchase rights from the
Common Stock or the occurrence of a triggering event under a rights plan), and
any issuance of plan purchase rights, shall not be deemed to constitute an
issuance of Common Stock or exercisable, exchangeable or convertible securities
by the Company to which any of the adjustment provisions described above
applies. There shall also be no adjustment of the conversion price in case of
the issuance of any stock (or securities convertible into or exchangeable for
stock) of the Company except as specifically described in this Section VI. If
any action would require adjustment of the conversion price pursuant to more
than one of the provisions described above, only one adjustment shall be made
and such adjustment shall be the amount of adjustment which has the highest
absolute value to holders of Series C Preferred Stock.
(j) Plan Purchase Rights. If and so long as any plan purchase rights are
attached to the outstanding shares of Common Stock, each share of Common Stock
issued upon conversion of the shares of Series C Preferred Stock prior to the
earliest of any separation of such plan purchase rights from the Common Stock in
accordance with the provisions of the rights plan, the date of redemption of
such plan purchase rights or the date of expiration of such plan purchase rights
shall be issued with plan purchase rights in an amount equal to the amount of
plan purchase rights then attached to each such outstanding share of Common
Stock.
Section VII. Voting Rights.
(a) General. (i) The holders of shares of Series C Preferred Stock shall
not have any voting rights except as set forth below or as otherwise from time
to time required by law. In connection with any right to vote, each holder of a
share of Series C Preferred Stock shall have one vote for each share held. Any
shares of Series C Preferred Stock owned, directly or indirectly, by any entity
of which the Company owns, directly or indirectly, a majority of the shares
entitled to vote for directors, shall not have voting rights hereunder and shall
not be counted in determining the presence of a quorum.
So long as any shares of the Company's Series C Preferred Stock are
outstanding, the Company will not, without the affirmative vote or consent of
the holders of at least 66 2/3% of the outstanding shares of Series C Preferred
Stock and outstanding Parity Dividend Stock, voting or consenting (as the case
may be) as a single class (A) amend, alter or repeal (by merger or otherwise)
any provision of the Company's Certificate of Incorporation, as may be amended
or restated from time to time, or the by-laws so as to affect adversely the
relative rights, preferences, qualifications, limitations or restrictions of the
Series C Preferred Stock, (B) effect any reclassification of the Series C
Preferred Stock, or (C) issue shares of Serial Preferred Stock to the extent
that doing so would cause the total number of shares of Serial Preferred Stock
outstanding (without giving effect to any depositary receipts or other similar
instruments through which such shares could be owned or
V-10
<PAGE> 183
held under Florida law assuming the Company were then incorporated under the
FBCA) after giving effect to such issuance to exceed 3,500,000.
(ii) In addition to the voting rights (if any) to which holders of Series C
Preferred Stock are entitled pursuant to the Delaware General Corporation Law,
the holders of the outstanding shares of Series C Preferred Stock shall be
entitled to vote as a class as described in paragraphs (iii) and (iv) below if
stockholder voting of the Series C Preferred Stock would be required by the FBCA
(assuming the Company were then incorporated under the FBCA) upon a proposed
amendment to the Certificate of Incorporation of the Company (or upon a plan of
merger or share exchange if such plan contains any provision that would, if
contained in a proposed amendment to the Certificate of Incorporation of the
Company, entitle such holders to vote as a class under this Section VII(a)(ii))
if the amendment would:
(A) increase or decrease the aggregate number of authorized shares of
Serial Preferred Stock;
(B) effect an exchange or reclassification of all or part of the
shares of Serial Preferred Stock into shares of another class;
(C) effect an exchange or reclassification, or create a right of
exchange, of all or part of the shares of another class into shares of
Serial Preferred Stock;
(D) change the designation, rights, preferences, or limitations of all
or part of the shares of Serial Preferred Stock;
(E) change the shares of all or part of the Serial Preferred Stock
into a different number of shares of Serial Preferred Stock;
(F) create a new class of shares having rights or preferences with
respect to distributions or to dissolution that are prior, superior, or
substantially equal to the shares of Serial Preferred Stock;
(G) increase the rights, preferences, or number of authorized shares
of any class that, after giving effect to the amendment, have rights or
preferences with respect to distributions or to dissolution that are prior,
superior, or substantially equal to the shares of Serial Preferred Stock;
(H) limit or deny an existing preemptive right of all or part of the
shares of Serial Preferred Stock;
(I) cancel or otherwise affect rights to distributions or dividends
that have accumulated but not yet been declared on all or part of the
shares of Serial Preferred Stock;
(iii) If a proposed amendment to the Certificate of Incorporation of the
Company would affect the shares of Series C Preferred Stock in one or more of
the ways described in subsection (ii) of this Section VII, the shares of Series
C Preferred Stock shall be entitled to vote as a separate class on the proposed
amendment.
(iv) If a proposed amendment to the Certificate of Incorporation of the
Company that would entitle the shares of Series C Preferred Stock and one or
more other series of shares of Serial Preferred Stock to vote as separate
classes under subsections (ii) or (iii) of this Section VII (assuming the
Company were then incorporated under the FBCA) would affect shares of Series C
Preferred Stock and such one or more other series of Serial Preferred Stock in
the same or a substantially similar way, the shares of Series C Preferred Stock
and the shares of such one or more other series of Serial Preferred Stock so
affected shall vote together as a single class on the proposed amendment.
(v) The shares of Series C Preferred Stock shall also be entitled to any
other voting rights afforded by Florida law (assuming the Company were then
incorporated under the FBCA).
(b) Default Voting Rights. Notwithstanding any other provision of the
Company's Certificate of Incorporation, whenever dividends on the Series C
Preferred Stock or any other class or series of Parity Dividend Stock shall be
in arrears in an aggregate amount equal to at least six quarterly dividends
(whether or not consecutive), (i) the number of members of the Board of
Directors of the Company shall be increased by two, effective at the time of
election of such directors as hereinafter provided and (ii) the holders of
shares of Series C Preferred Stock (voting separately as a class with all other
affected classes or series of Parity Dividend Stock upon which like voting
rights have been conferred and are exercisable) shall have the exclusive right
to vote for and elect such two additional directors of the Company who shall
continue to serve
V-11
<PAGE> 184
during the period such dividends remain in arrears. The right of the holders of
shares of Series C Preferred Stock to vote for such two additional directors
shall terminate when all accrued and unpaid dividends on the Series C Preferred
Stock and all other affected classes or series of Parity Dividend Stock have
been declared and paid or set apart for payment. The term of office of all
directors so elected shall terminate immediately upon the termination of the
right of the holders of shares of Series C Preferred Stock and such Parity
Dividend Stock to vote for such two additional directors, and the number of
directors of the Board of Directors of the Company shall immediately thereafter
be reduced by two.
The foregoing right of the holders of shares of Series C Preferred Stock
with respect to the election of two directors may be exercised at any annual
meeting of shareholders or at any special meeting of shareholders held for such
purpose. If the right to elect directors shall have accrued to the holders of
shares of Series C Preferred Stock more than ninety days preceding the date
established for the next annual meeting of stockholders, the President of the
Company shall, within twenty days after the delivery to the Company at its
principal office of a written request for a special meeting signed by the
holders of at least 10% of all outstanding shares of Series C Preferred Stock,
call a special meeting of the holders of Series C Preferred Stock to be held
within sixty days after the delivery of such request for the purpose of electing
such additional directors.
Notwithstanding any other provision of the Company's Certificate of
Incorporation, the holders of shares of Series C Preferred Stock and any Parity
Dividend Stock referred to above voting as a class shall have the right to
remove, without cause and at any time, and replace any directors such holders
shall have elected pursuant to this Section VII.
Section VIII. Outstanding Shares. For purposes of this amendment, all
shares of Series C Preferred Stock issued by the Company shall be deemed
outstanding except (i) from the date fixed for redemption pursuant to Section V,
all shares of Series C Preferred Stock that have been so called for redemption
under Section V, to the extent provided thereunder; (ii) from the date of
surrender of certificates evidencing shares of Series C Preferred Stock, all
shares of Series C Preferred Stock converted into Common Stock; and (iii) from
the date of registration of transfer, all shares of Series C Preferred Stock
owned, directly or indirectly, by any entity of which the Company owns, directly
or indirectly, a majority of the shares entitled to vote for directors.
Section IX. Miscellaneous.
(a) Whenever possible, each provision hereof shall be interpreted in a
manner as to be effective and valid under applicable law, but if any provision
hereof is held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating or otherwise adversely affecting the remaining
provisions hereof. If a court of competent jurisdiction should determine that a
provision hereof would be valid or enforceable if a period of time were extended
or shortened or a particular percentage were increased or decreased, then such
court may make such change as shall be necessary to render the provision in
question effective and valid under applicable law.
(b) The Company shall pay any and all stock transfer and documentary stamp
taxes that may be payable in respect of any issuance or delivery of shares of
Series C Preferred Stock or shares of Common Stock or other securities issued on
account of Series C Preferred Stock pursuant hereto or certificates or
instruments evidencing such shares or securities. The Company shall not,
however, be required to pay any such tax which may be payable in respect of any
transfer involved in the issuance or delivery of shares of Series C Preferred
Stock or Common Stock or other securities in a name other than that in which the
shares of Series C Preferred Stock with respect to which such shares or other
securities are issued or delivered were registered, or in respect of any payment
to any person with respect to any such shares or securities other than a payment
to the registered holder thereof, and shall not be required to make any such
issuance, delivery or payment unless and until the person otherwise entitled to
such issuance, delivery or payment has paid to the Company the amount of any
such tax or has established, to the satisfaction of the Company, that such tax
has been paid or is not payable.
V-12
<PAGE> 185
(c) In the event that a holder of shares of Series C Preferred Stock shall
not by written notice designate the name in which shares of Common Stock to be
issued upon conversion of such shares should be registered or to whom payment
upon redemption of shares of Series C Preferred Stock should be made or the
address to which the certificates or instruments evidencing such shares or such
payment should be sent, the Company shall be entitled to register such shares
and make such payment, in the name of the holder of such Series C Preferred
Stock as shown on the records of the Company and to send the certificates or
instruments evidencing such shares or such payment, to the address of such
holder shown on the records of the Company.
Section X. Definitions. The following definitions shall apply to terms
used in connection with the Series C Preferred Stock:
a. "Applicable Price" shall mean (i) in the event of a Non-Stock
Fundamental Change in which the holders of the Common Stock receive only cash,
the amount of cash received by the holder of one share of Common Stock and (ii)
in the event of any other Non-Stock Fundamental Change or any Common Stock
Fundamental Change, the average of the daily Closing Prices of the Common Stock
for the ten consecutive Trading Days prior to and including the record date for
the determination of the holders of Common Stock entitled to receive cash,
securities, property or other assets in connection with such Non-Stock
Fundamental Change or Common Stock Fundamental Change, or, if there is no such
record date, the date upon which the holders of the Common Stock shall have the
right to receive such cash, securities, property or other assets, in each case,
as adjusted in good faith by the Board of Directors of the Company to
appropriately reflect any of the events referred to in subparagraphs (i), (ii),
(iii), (iv) and (v) of Section VI(c).
b. "Business Day" shall mean any day other than a Saturday, Sunday or any
day on which banking institutions are authorized to close in New York, New York.
c. "Closing Price" of any common stock on any day shall mean the last
reported sale price regular way on such day or, in case no such sale takes place
on such day, the average of the reported closing bid and asked prices regular
way of the common stock in each case on the New York Stock Exchange, or, if the
common stock is not listed or admitted to trading on such Exchange, on the
principal national securities exchange or quotation system on which the common
stock is listed or admitted to trading or quoted, or, if not listed or admitted
to trading or quoted on any national securities exchange or quotation system,
the average of the closing bid and asked prices of the common stock in the
over-the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similarly generally accepted reporting
service, or, if not so available in such manner, as furnished by any New York
Stock Exchange member firm selected from time to time by the Board of Directors
of the Company for that purpose.
d. "Common Stock" shall mean the Company's now or hereafter issued Common
Stock.
e. "Common Stock Fundamental Change" shall mean any Fundamental Change in
which more than 50% by value (as determined in good faith by the Board of
Directors of the Company) of the consideration received by holders of Common
Stock consists of common stock that for each of the ten consecutive Trading Days
referred to with respect to such Fundamental Change in Section X(a) above has
been admitted for listing or admitted for listing subject to notice of issuance
on a national securities exchange or quoted on the Nasdaq National Market;
provided, however, that a Fundamental Change shall not be a Common Stock
Fundamental Change unless either (i) the Company continues to exist after the
occurrence of such Fundamental Change and the outstanding shares of Series C
Preferred Stock continue to exist as outstanding shares of Series C Preferred
Stock, or (ii) not later than the occurrence of such Fundamental Change, the
outstanding shares of Series C Preferred Stock are converted into or exchanged
for shares of convertible preferred stock of a corporation succeeding to the
business of the Company, which convertible preferred stock has powers,
preferences and relative, participating, optional or other rights, and
qualifications, limitations and restrictions, substantially similar to those of
the Series C Preferred Stock.
V-13
<PAGE> 186
f. "Current Market Price Per Share" shall mean, as to the Common Stock on
any date in question, the average of the daily Closing Prices for the five
consecutive Trading Days prior to and including the date in question; provided,
however, that:
(1) if the Ex Date for any event (other than the issuance or
distribution requiring such computation) that required an adjustment to the
conversion price pursuant to subparagraphs (i), (ii), (iii), (iv), or (v)
of Section VI(c) ("Other Event") occurs after the fifth Trading Day prior
to the day in question and prior to the Ex Date for the issuance or
distribution requiring such computation (the "Current Event"), the Closing
Price for each Trading Day prior to the Ex Date for such Other Event shall
be adjusted by multiplying such Closing Price by the same fraction by which
the conversion price is so required to be adjusted as a result of such
Other Event,
(2) if the Ex Date for any Other Event occurs after the Ex Date for
the Current Event and on or prior to the date in question, the Closing
Price for each Trading Day on and after the Ex Date for such Other Event
shall be adjusted by multiplying such Closing Price by the reciprocal of
the fraction by which the conversion price is so required to be adjusted as
a result of such Other Event,
(3) if the Ex Date for any Other Event occurs on the Ex Date for the
Current Event, one of those events, as determined by the Company, shall be
deemed for purposes of clauses (1) and (2) of this proviso to have an Ex
Date occurring prior to the Ex Date for the other of those events, and
(4) if the Ex Date for the Current Event is on or prior to the date in
question, then after taking into account any adjustment required pursuant
to clause (2) of this proviso, the Closing Price for each Trading Day on or
after such Ex Date shall be adjusted by adding thereto the amount of any
cash and the fair market value on the date in question (as determined in
good faith by the Board of Directors in a manner consistent with any
determination of such value for purposes of paragraph (iv) or (v) of
Section VI(c), whose determination shall be conclusive and described in a
resolution of the Board of Directors) of the portion of the rights,
warrants, evidences of indebtedness, shares of capital stock or assets
being distributed applicable to one share of Common Stock.
g. "Ex Date" shall mean (1) when used with respect to any issuance or
distribution, the first date on which the Common Stock trades regular way on the
relevant exchange or in the relevant market from which the Closing Price was
obtained without the right to receive such issuance or distribution and (2) when
used with respect to any subdivision or combination of shares of Common Stock,
the first date on which the Common Stock trades regular way on such exchange or
in such market after the time at which such subdivision or combination becomes
effective.
h. "Fundamental Change" shall mean the occurrence of any transaction or
event in connection with a plan pursuant to which all or substantially all of
the Common Stock shall be exchanged for, converted into, or acquired for or
constitute solely the right to receive cash, securities, property or other
assets (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise); provided, however, in the case of a plan involving more than one
such transaction or event, for purposes of adjustment of the conversion price,
such Fundamental Change shall be deemed to have occurred when substantially all
of the Common Stock of the Company shall be exchanged for, converted into, or
acquired for or constitute solely the right to receive cash, securities,
property or other assets, but the adjustment shall be based upon the highest
weighted average of consideration per share which a holder of Common Stock could
have received in such transactions or events as a result of which more than 50%
of the Common Stock of the Company shall have been exchanged for, converted
into, or acquired for or constitute solely the right to receive cash,
securities, property or other assets.
i. "Junior Dividend Stock" shall mean the Junior Stock and any other
capital stock of the Company ranking junior as to dividends to the Series C
Preferred Stock.
j. "Junior Liquidation Stock" shall mean the Junior Stock and any other
class or series of the Company's capital stock ranking junior to the Series C
Preferred Stock as to distributions of assets upon liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary.
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<PAGE> 187
k. "Junior Stock" shall mean the Common Stock and any other class of stock
of the Company hereafter authorized over which the Serial Preferred Stock has
preference or priority in the payment of dividends or in the distribution of
assets on any liquidation, dissolution or winding up of the Company.
l. "Nasdaq National Market" shall mean the National Association of
Securities Dealers Automated Quotation National Market.
m. "Non-Stock Fundamental Change" shall mean any Fundamental Change other
than a Common Stock Fundamental Change.
n. "Parity Dividend Stock" shall mean any class or series of the Company's
capital stock hereafter issued ranking, as to dividends, on a parity with the
Series C Preferred Stock.
o. "Parity Liquidation Stock" shall mean any class or series of the
Company's capital stock ranking on a parity with the Series C Preferred Stock as
to distributions or assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary.
p. "Purchaser Stock Price" shall mean, with respect to any Common Stock
Fundamental Change, the average of the daily Closing Prices of the common stock
received in such Common Stock Fundamental Change for the ten consecutive Trading
Days prior to and including the record date for the determination of the holders
of Common Stock entitled to receive such common stock, or, if there is no such
record date, the date upon which the holders of the Common Stock shall have the
right to receive such common stock, in each case, as adjusted in good faith by
the Board of Directors of the Company to appropriately reflect any of the events
referred to in subparagraphs, (i), (ii), (iii), (iv) and (v) of Section VI(c);
provided, however, if no such Closing Prices of the common stock for such
Trading Days exist, then the Purchaser Stock Price shall be set at a price
determined in good faith by the Board of Directors of the Company.
q. "Redemption Price" shall mean the applicable price per share set forth
for the date fixed for redemption in the following table:
<TABLE>
<CAPTION>
DATE FIXED FOR REDEMPTION PRICE
------------------------- ------
<S> <C>
On or after August 7, 2000 and on or before August 6,
2001...................................................... $51.88
After August 7, 2001 and on or before August 6, 2002........ $51.56
After August 7, 2002 and on or before August 6, 2003........ $51.25
After August 7, 2003 and on or before August 6, 2004........ $50.94
After August 7, 2004 and on or before August 6, 2005........ $50.63
After August 7, 2005 and on or before August 6, 2006........ $50.31
Any date after August 7, 2006............................... $50.00
</TABLE>
plus, in each case, an amount in cash equal to all per share dividends on the
Series C Preferred Stock accrued and unpaid thereon, whether or not declared, to
but excluding the date fixed for redemption.
r. "Reference Market Price" shall initially mean $13.46, and in the event
of any adjustment to the conversion price other than as a result of a
Fundamental Change, the Reference Market Price shall also be adjusted so that
the ratio of the Reference Market Price to the conversion price after giving
effect to any such adjustment shall always be the same as the ratio of $13.46 to
the initial conversion price per share set forth in the last sentence of Section
VI(a).
s. "Trading Day" shall mean a day on which securities traded on the
national securities exchange or quotation system or in the over-the-counter
market used to determine the Closing Price.
V-15
<PAGE> 188
APPENDIX VI
<PAGE> 189
CERTIFICATE OF DESIGNATION OF AMERICAN BANKERS
$3.125 CUMULATIVE CONVERTIBLE SERIES B PREFERRED STOCK
Section I. Designation of Series and Number of Shares to be Initially
Issuable Therein. This series of Preferred Stock shall be designated "$3.125
Series B Cumulative Convertible Preferred Stock" (hereinafter called the
"Convertible Preferred Stock"), no par value, of which 2,300,000 shares shall be
initially issuable.
Section II. Rank. All shares of Convertible Preferred Stock shall rank
prior, both as to payment of dividends and as to distributions of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, to all Junior Stock.
Section III. Dividends. The holders of Convertible Preferred Stock shall
be entitled to receive, when, as and if declared by the Board of Directors out
of funds at the time legally available therefor, dividends at the rate of $3.125
per annum per share, and no more, which shall be fully cumulative, shall accrue
without interest from the date of initial issuance of such shares of Convertible
Preferred Stock (on a daily basis whether or not such amounts would be available
at that time for distribution to holders of shares of Convertible Preferred
Stock) and shall be payable in cash quarterly in arrears on February 1, May 1,
August 1 and November 1 of each year commencing November 1, 1996 (with respect
to the period from such date of initial issuance to November 1, 1996) (except
that if any such date is not a Business Day, then such dividend shall be payable
on the next Business Day) to holders of record as they appear upon the stock
transfer books of the Corporation on such record dates, not more than sixty days
nor less than ten days preceding the payment dates for such dividends, as are
fixed by the Board of Directors (or, to the extent permitted by applicable law,
a duly authorized committee thereof). In no event shall any such dividend record
date be fixed less than (a) six Business Days prior to any date fixed for the
redemption of the Convertible Preferred Stock or (b) with respect to the
dividend payment date occurring on August 1, 2000 less than ten Business Days
prior to any date fixed for such redemption. Subject to the next paragraph of
this Section III, dividends on account of arrears for any past dividend period
may be declared and paid at any time, without reference to any regular dividend
payment date. The amount of dividends payable per share of Convertible Preferred
Stock for each quarterly dividend period shall be computed by dividing the
annual dividend amount by four. The amount of dividends payable for the initial
dividend period and any period shorter than a full quarterly period shall be
computed on the basis of a 360-day year of twelve 30-day months. No interest
shall be payable in respect of any dividend payment on the Convertible Preferred
Stock which may be in arrears.
No dividends or other distributions, other than dividends payable solely in
shares of Junior Stock, shall be declared, paid or set apart for payment on
shares of Junior Dividend Stock, unless and until all accrued and unpaid
dividends on the Convertible Preferred Stock for all dividend payment periods
ending on or before the payment date of such dividends or other distributions on
Junior Dividend Stock shall have been paid or declared and set apart for
payment.
No payment on account of the purchase, redemption, retirement or other
acquisition of shares of Junior Dividend Stock or Junior Liquidation Stock shall
be made unless and until all accrued and unpaid dividends on the Convertible
Preferred Stock for all dividend payment periods ending on or before such
payment for such Junior Dividend Stock or Junior Liquidation Stock shall have
been paid or declared and set apart for payment; provided, however, that the
restrictions set forth in this sentence shall not apply to the purchase,
redemption, retirement, or other acquisition of Junior Dividend Stock or Junior
Liquidation Stock either (A) pursuant to any employee or director incentive or
benefit plan or arrangement (including any employment, severance or consulting
agreement) of the Corporation or any subsidiary of the Corporation heretofore or
hereafter adopted or (B) in exchange solely for Junior Stock.
No full dividends shall be declared, paid or set apart for payment on
shares of Parity Dividend Stock for any period unless full cumulative dividends
have been, or contemporaneously are, paid or declared and set apart for such
payment on the Convertible Preferred Stock for all dividend payment periods
ending on or before the payment date of such dividends on Parity Dividend Stock.
No dividends shall be paid on Parity Dividend Stock except on dates on which
dividends are paid on the Convertible Preferred Stock. All dividends paid or
declared and set apart for payment on the Convertible Preferred Stock and the
Parity Dividend Stock shall be paid or declared and set apart for payment pro
rata so that the amount of dividends paid or declared
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and set apart for payment per share on the Convertible Preferred Stock and the
Parity Dividend Stock on any date shall in all cases bear to each other the same
ratio that accrued and unpaid dividends to the date of payment on the
Convertible Preferred Stock and the Parity Dividend Stock bear to each other.
No payment on account of the purchase, redemption, retirement or other
acquisition of shares of Junior Stock, Parity Dividend Stock or Parity
Liquidation Stock shall be made, and, other than dividends to the extent
permitted by the preceding paragraph, no distributions shall be declared, paid
or set apart for payment on shares of Parity Dividend Stock or Parity
Liquidation Stock, unless and until all accrued and unpaid dividends on the
Convertible Preferred Stock for all dividend payment periods ending on or before
such payment for, or the payment date of such distributions on, such Parity
Dividend Stock or Parity Liquidation Stock shall have been paid or declared and
set apart for payment; provided, however, that the restrictions set forth in
this sentence shall not apply to the purchase, redemption, retirement, or other
acquisition of Parity Dividend Stock or Parity Liquidation Stock either (A)
pursuant to any employee or director incentive or benefit plan or arrangement
(including any employment, severance or consulting agreement) of the Corporation
or any subsidiary of the Corporation hereafter adopted or (B) in exchange solely
for Junior Stock.
Any reference to "distribution" contained in this Section III shall not be
deemed, except as expressly stated, to include any distribution made in
connection with any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary.
Section IV. Liquidation Preference. In the event of a liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of shares of Convertible Preferred Stock shall be entitled to
receive out of the assets of the Corporation available for distribution to
shareholders an amount equal to the dividends accrued and unpaid on such shares
on the date of final distribution to such holders, whether or not declared,
without interest, plus a sum equal to $50 per share, and no more, before any
payment shall be made or any assets distributed to the holders of shares of
Junior Liquidation Stock; provided, however, that such rights shall accrue to
the holders of shares of Convertible Preferred Stock only with respect to assets
(if any) remaining after the Corporation's payment obligations with respect to
the liquidation preferences of the shares of any class or series of the
Corporation's capital stock hereafter issued ranking prior to the Convertible
Preferred Stock as to distributions of assets upon such liquidation, dissolution
or winding up ("Senior Liquidation Stock") are fully met. The entire assets of
the Corporation available for distribution to shareholders after the liquidation
preferences of the shares of Senior Liquidation Stock are fully met shall be
distributed ratably among the holders of the Convertible Preferred Stock and any
Parity Liquidation Stock in proportion to the respective preferential amounts to
which each is entitled (but only to the extent of such preferential amounts).
After payment in full of the liquidation preferences of the shares of
Convertible Preferred Stock, the holders of such shares shall not be entitled to
any further participation in any distribution of assets by the Corporation. The
voluntary sale, lease, exchange or transfer of all or substantially all of the
Corporation's property or assets to, or its consolidation or merger with one or
more corporations shall not be deemed to be considered a voluntary or
involuntary liquidation, dissolution or winding up of the Corporation.
Section V. Redemption at Option of the Corporation. The Convertible
Preferred Stock may not be redeemed by the Corporation prior to August 7, 2000.
On and after such date, the Convertible Preferred Stock may be redeemed by the
Corporation, at its option on any date set by the Board of Directors, in whole
or in part at any time, subject to the limitations, if any, imposed by the
Florida Business Corporation Act, for an amount in cash equal to the Redemption
Price.
In case of the redemption of less than all of the then outstanding
Convertible Preferred Stock, the Corporation shall designate by lot, or in such
other manner as the Board of Directors may determine to be fair, the shares to
be redeemed, or shall effect such redemption pro rata. Notwithstanding the
foregoing, the Corporation shall not redeem less than all of the Convertible
Preferred Stock at any time outstanding until all dividends accrued and in
arrears upon all Convertible Preferred Stock then outstanding shall have been
paid in full for all past dividend periods.
Not more than ninety nor less than thirty days prior to the date fixed for
redemption by the Board of Directors, notice thereof by first class mail,
postage prepaid, shall be given to the holders of record of the shares of
Convertible Preferred Stock to be redeemed, addressed to such holders at their
last addresses as
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shown upon the stock transfer books of the Corporation. Each such notice of
redemption shall specify the date fixed for redemption, the Redemption Price,
the place or places of payment, that payment will be made upon presentation and
surrender of the shares of Convertible Preferred Stock, that on and after the
date fixed for redemption dividends will cease to accrue on such shares, the
then-effective conversion price pursuant to Section VI, and that the right of
holders to convert shares of Convertible Preferred Stock shall terminate at 5:00
p.m. New York City time on the Business Day prior to the date fixed for
redemption and if such conversion right is not exercised prior to such time,
such conversion right will be lost (unless the Corporation defaults in the
payment of the Redemption Price).
Any notice that is mailed as herein provided shall be conclusively presumed
to have been duly given, whether or not the holder of shares of Convertible
Preferred Stock receives such notice; and failure to give such notice by mail,
or any defect in such notice, to the holders of any shares designated for
redemption shall not affect the validity of the proceedings for the redemption
of any other shares of Convertible Preferred Stock. On or after the date fixed
for redemption as stated in such notice, each holder of the shares called for
redemption shall surrender the certificate evidencing such shares to the
Corporation at the place designated in such notice and shall thereupon be
entitled to receive payment of the Redemption Price. If less than all the shares
evidenced by any such surrendered certificate are redeemed, a new certificate
shall be issued evidencing the unredeemed shares.
No fractional shares of Convertible Preferred Stock shall be issued upon
redemption of less than all Convertible Preferred Stock. If more than one
certificate evidencing shares of Convertible Preferred Stock shall be held at
one time by the same holder, the number of full shares issuable upon redemption
of less than all of such shares of Convertible Preferred Stock shall be computed
on the basis of the aggregate number of shares of Convertible Preferred Stock so
held. Instead of any fractional share of Convertible Preferred Stock that would
otherwise be issuable to a holder upon redemption of less than all shares of
Convertible Preferred Stock, the Corporation shall pay a cash adjustment in
respect of such fractional share in an amount equal to the same fraction of the
fair value per share of Convertible Preferred Stock (as determined in good faith
by the Board of Directors or in any manner prescribed by the Board of Directors)
at the close of business on the date fixed for redemption.
Notice having been given as aforesaid, if, on the date fixed for
redemption, funds necessary for the redemption shall be available therefor and
shall have been deposited with a bank or trust corporation with irrevocable
instructions and authority to pay the Redemption Price to the holders of the
Convertible Preferred Stock, then, notwithstanding that the certificates
evidencing any shares so called for redemption shall not have been surrendered,
dividends with respect to the shares so called shall cease to accrue on and
after the date fixed for redemption, such shares shall no longer be deemed
outstanding, the holders thereof shall cease to be shareholders of the
Corporation and all rights whatsoever with respect to the shares so called for
redemption (except the right of the holders to receive the Redemption Price
without interest upon surrender of their certificates therefor) shall terminate.
If funds legally available for such purpose are not sufficient for redemption of
the shares of Convertible Preferred Stock which were to be redeemed, then the
certificates evidencing such shares shall be deemed not to be surrendered, such
shares shall remain outstanding, and the right of holders of shares of
Convertible Preferred Stock thereafter shall continue to be only those of a
holder of shares of the Convertible Preferred Stock.
Upon an optional redemption by the Corporation, if at any time the
Corporation does not pay amounts sufficient to redeem all Convertible Preferred
Stock, then such funds which are paid shall be applied to redeem such shares of
Convertible Preferred Stock as the Corporation may designate by lot or in such
other manner as the Board of Directors may determine to be fair, or such
redemption shall be effected pro rata.
The shares of Convertible Preferred Stock shall not be subject to the
operation of any mandatory purchase, retirement or sinking fund.
Section VI. Conversion Privilege.
(a) Right of Conversion. Each share of Convertible Preferred Stock shall
be convertible at the option of the holder thereof, at any time prior to 5:00
p.m. New York City time on the Business Day prior to the date
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fixed for redemption of such share as herein provided, into fully paid and
nonassessable shares of Common Stock, at the rate of that number of shares of
Common Stock for each full share of Convertible Preferred Stock that is equal to
$50 divided by the conversion price applicable per share of Common Stock, or
into such additional or other securities, cash or property and at such other
rates as required in accordance with the provisions of this Section VI. For
purposes of this resolution, the "conversion price" applicable per share of
Common Stock shall initially be equal to $50.065 and shall be adjusted from time
to time in accordance with the provisions of this Section VI.
(b) Conversion Procedures. Any holder of shares of Convertible Preferred
Stock desiring to convert such shares into Common Stock shall surrender the
certificate or certificates evidencing such shares of Convertible Preferred
Stock at the office of the transfer agent for the Convertible Preferred Stock,
which certificate or certificates, if the Corporation shall so require, shall be
duly endorsed to the Corporation or in blank, or accompanied by proper
instruments of transfer to the Corporation or in blank, accompanied by
irrevocable written notice to the Corporation that the holder elects so to
convert such shares of Convertible Preferred Stock and specifying the name or
names (with address or addresses) in which a certificate or certificates
evidencing shares of Common Stock are to be issued.
No payments or adjustments in respect of dividends on shares of Convertible
Preferred Stock surrendered for conversion or on account of any dividend on the
Common Stock issued upon conversion shall be made upon the conversion of any
shares of Convertible Preferred Stock; provided, however, that:
(i) if a dividend record date fixed for the Convertible Preferred
Stock as established herein results in a holder who undertakes conversion
being eligible to receive on any dividend payment date both a dividend on
the Convertible Preferred Stock and a dividend on the Common Stock issued
upon conversion thereof, then such holder shall be entitled to receive only
the higher of such dividend amounts; and
(ii) if the Corporation shall, by dividend or otherwise, declare or
make a distribution on its Common Stock referred to in Section VI(c)(iv) or
VI(c)(v) (including, without limitation, dividends or distributions
referred to in the last sentence of Section VI(c)(iv)), the holder of each
share of Convertible Preferred Stock, upon the conversion thereof
subsequent to the close of business on the date fixed for the determination
of shareholders entitled to receive such distribution and prior to the
effectiveness of the conversion price adjustment in respect of such
distribution, shall also be entitled to receive for each share of Common
Stock into which such share of Convertible Preferred Stock is converted,
the portion of the shares of Common Stock, rights, warrants, evidences of
indebtedness, shares of capital stock, cash and assets so distributed
applicable to one share of Common Stock; provided, however, that at the
election of the Corporation (whose election shall be evidenced by a
resolution of the Board of Directors) with respect to all holders so
converting, the Corporation may, in lieu of distributing to such holder any
portion of such distribution not consisting of cash or securities of the
Corporation, pay such holder an amount in cash equal to the fair market
value thereof (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the
Board of Directors). If any conversion of a share of Convertible Preferred
Stock described in the immediately preceding sentence occurs prior to the
payment date for a distribution to holders of Common Stock which the holder
of the share of Convertible Preferred Stock so converted is entitled to
receive in accordance with the immediately preceding sentence, the
Corporation may elect (such election to be evidenced by a resolution of the
Board of Directors) to distribute to such holder a due bill for the shares
of Common Stock, rights, warrants, evidences of indebtedness, shares of
capital stock, cash or assets to which such holder is so entitled, provided
that such due bill (i) meets any applicable requirements of the principal
national securities exchange or other market on which the Common Stock is
then traded and (ii) requires payment or delivery of such shares of Common
Stock, rights, warrants, evidences of indebtedness, shares of capital
stock, cash or assets no later than the date of payment or delivery thereof
to holders of shares of Common Stock receiving such distribution.
The Corporation shall, as soon as practicable after such deposit of
certificates evidencing shares of Convertible Preferred Stock accompanied by the
written notice and compliance with any other conditions
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herein contained, deliver at such office of such transfer agent to the person
for whose account such shares of Convertible Preferred Stock were so
surrendered, or to the nominee or nominees of such person, certificates
evidencing the number of full shares of Common Stock to which such person shall
be entitled as aforesaid, together with a cash adjustment in respect of any
fraction of a share of Common Stock as hereinafter provided. Such conversion
shall be deemed to have been made as of the date of such surrender of the shares
of Convertible Preferred Stock to be converted, and the person or persons
entitled to receive the Common Stock deliverable upon conversion of such
Convertible Preferred Stock shall be treated for all purposes as the record
holder or holders of such Common Stock on such date.
(c) Adjustment of Conversion Price. The conversion price at which a share
of Convertible Preferred Stock is convertible into Common Stock shall be subject
to adjustment from time to time as follows:
(i) In case the Corporation shall pay or make a dividend or other
distribution on its Common Stock exclusively in Common Stock or shall pay
or make a dividend or other distribution on any other class or series of
capital stock of the Corporation which dividend or distribution includes
Common Stock, the conversion price in effect at the opening of business on
the day following the date fixed for the determination of shareholders
entitled to receive such dividend or other distribution shall be reduced by
multiplying such conversion price by: A/(A + B), where:
A = the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination; and
B = the total number of shares of Common Stock constituting such
dividend or other distribution,
such reduction to become effective immediately after the opening of
business on the day following the date fixed for such determination. For
purposes of this subparagraph (i), the number of shares of Common Stock at
any time outstanding shall not include shares held in the treasury of the
Corporation. The Corporation shall not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the
Corporation.
(ii) In case the Corporation shall pay or make a dividend or other
distribution on its Common Stock consisting exclusively of, or shall
otherwise issue to all holders of its Common Stock, rights or warrants
entitling the holders thereof to subscribe for or purchase shares of Common
Stock at a price per share less than the Current Market Price Per Share of
the Common Stock on the date fixed for the determination of shareholders
entitled to receive such rights or warrants, the conversion price in effect
at the opening of business on the day following the date fixed for such
determination shall be reduced by multiplying such conversion price by:
(A + B)/(A + C), where:
A = the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination,
B = the number of shares of Common Stock which the aggregate of the
offering price of the total number of shares of Common Stock so
offered for subscription or purchase would purchase at such Current
Market Price Per Share, and
C = the number of shares of Common Stock so offered for subscription or
purchase, such reduction to become effective immediately after the
opening of business on the day following the date fixed for such
determination.
In case any rights or warrants referred to in this subparagraph (ii) in
respect of which an adjustment shall have been made shall expire
unexercised within 45 days after the shares shall have been distributed or
issued by the Corporation the conversion price shall be readjusted at the
time of such expiration to the conversion price that would have been in
effect if no adjustment had been made on account of the distribution or
issuance of such expired rights or warrants. For the purposes of this
Section VI(c)(ii), if both (A) a Distribution Date (as defined in Section
3(a) of the Rights Agreement) and (B) an event set forth in Section
11(a)(ii) or 13(a) of the Rights Agreement shall have occurred, then the
later to occur of such events shall be deemed to constitute an issuance of
rights to purchase shares of the related common stock.
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(iii) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the conversion price in
effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and
conversely, in case outstanding shares of Common Stock shall be combined
into a smaller number of shares of Common Stock, the conversion price in
effect at the opening of business on the day following the day upon which
such combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(iv) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its
indebtedness, shares of any class or series of capital stock, cash or
assets (including securities, but excluding any rights or warrants referred
to in subparagraph (ii) of this Section VI(c), any dividend or distribution
paid exclusively in cash and any dividend or distribution referred to in
subparagraph (i) of this Section VI(c)), the conversion price shall be
reduced so that the same shall equal the price determined by multiplying
the conversion price in effect immediately prior to the effectiveness of
the conversion price reduction contemplated by this subparagraph (iv) by:
(A - B)/A, where:
A = the Current Market Price Per Share of the Common Stock on the date
fixed for the payment of such distribution (the "Reference Date"),
and
B = the fair market value (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in
a resolution of the Board of Directors), on the Reference Date, of
the portion of the evidence of indebtedness, shares of capital
stock, cash and assets so distributed applicable to one share of
Common Stock,
such reduction to become effective immediately prior to the opening of
business on the day following the Reference Date, provided, however, that
for purposes of this subparagraph (iv), any dividend or distribution that
includes shares of Common Stock or rights or warrants to subscribe for or
purchase shares of Common Stock shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, cash, assets or
shares of capital stock other than such shares of Common Stock or rights or
warrants (making any further conversion price reduction required by this
subparagraph (iv)) immediately followed by (2) a dividend or distribution
of such shares of Common Stock or such rights or warrants (making any
further conversion price reduction required by subparagraph (i) or (ii) of
this Section VI(c), except (A) the Reference Date of such dividend or
distribution as defined in this subparagraph (iv) shall be substituted as
"the date fixed for the determination of shareholders entitled to receive
such dividend or other distribution", "the date fixed for the determination
of shareholders entitled to receive such rights or warrants" and "the date
fixed for such determination" within the meaning of subparagraph (i) and
(ii) of this Section VI(c) and (B) any shares of Common Stock included in
such dividend or distribution shall not be deemed "outstanding at the close
of business on the date fixed for such determination" within the meaning of
subparagraph (i) of this Section VI(c)). If the Board of Directors
determines the fair market value of any distribution for purposes of this
subparagraph (iv) by reference to the actual or when issued trading market
for any securities comprising such distribution, it must in doing so
consider the prices in such market over the same period used in computing
the Current Market Price Per Share of Common Stock.
(v) In case the Corporation shall pay or make a dividend or other
distribution on its Common Stock exclusively in cash (excluding (A) cash
that is part of the distribution referred to in (iv) above and, (B) in the
case of any quarterly cash dividend on the Common Stock, the portion
thereof that does not exceed the per share amount of the next preceding
quarterly cash dividend on the Common Stock (as adjusted to appropriately
reflect any of the events referred to in subparagraph (i), (ii), (iii),
(iv) and (v) of this Section VI(c)), or all of such quarterly cash dividend
if the amount thereof per share amount of Common Stock multiplied by four
does not exceed 15% of the Current Market Price Per Share of the Common
Stock on the Trading Day next preceding the date of declaration of such
dividend), the conversion price shall be reduced so that the same shall
equal the conversion price in effect immediately
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prior to the effectiveness of the conversion price reduction contemplated
by this subparagraph (v) by: (A - B)/A, where:
A = the Current Market Price Per Share of the Common Stock on the date
fixed for the payment of such distribution, and
B = the amount of cash so distributed and not excluded as provided above
applicable to one share of Common Stock,
such reduction to become effective immediately prior to the opening of
business on the day following the date fixed for the payment of such
distribution.
(vi) No adjustment in the conversion price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
conversion price; provided, however, that any adjustments which by reason
of this subparagraph (vi) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
(vii) Whenever the conversion price is adjusted as herein provided:
(1) the Corporation shall compute the adjusted conversion price and shall
prepare a certificate signed by the Treasurer of the Corporation setting
forth the adjusted conversion price and showing in reasonable detail the
facts upon which such adjustment in based, and such certificate shall
forthwith be filed with the transfer agent for the Convertible Preferred
Stock; and (2) a notice stating that the conversion price has been adjusted
and setting forth the adjusted conversion price shall forthwith be
required, and as soon as practicable after it is required, such notice
shall be mailed by the Corporation to all record holders of shares of
Convertible Preferred Stock at their last addresses as they shall appear
upon the stock transfer books of the Corporation.
(viii) The Corporation from time to time may reduce the conversion
price by any amount for any period of time if the period is at least twenty
days, the reduction is irrevocable during the period and the Board of
Directors of the Corporation shall have made a determination that such
reduction would be in the best interest of the Corporation, which
determination shall be conclusive. Whenever the conversion price is reduced
pursuant to the preceding sentence, the Corporation shall mail to holders
of record of the Convertible Preferred Stock a notice of the reduction at
least fifteen days prior to the date the reduced conversion price takes
effect, and such notice shall state the reduced conversion price and the
period it will be in effect.
(d) No Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of Convertible Preferred Stock. If more than one
certificate evidencing shares of Convertible Preferred Stock shall be
surrendered for conversion at one time by the same holder, the number of full
shares issuable upon conversion thereof shall be computed on the basis of the
aggregate number of shares of Convertible Preferred Stock so surrendered.
Instead of any fractional share of Common Stock that would otherwise be issuable
to a holder upon conversion of any shares of Convertible Preferred Stock, the
Corporation shall pay a cash adjustment in respect of such fractional share in
an amount equal to the same fraction of the market price per share of Common
Stock (as determined by the Board of Directors or in any manner prescribed by
the Board of Directors, which, so long as the Common Stock is listed on the New
York Stock Exchange or quoted on the Nasdaq National Market System, shall be the
reported last sale price regular way) at the close of business on the day of
conversion.
(e) Reclassification, Consolidation, Merger or Sale of Assets. In the
event that the Corporation shall be a party to any transaction (including
without limitation any recapitalization or reclassification of the Common Stock
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination of the
Common Stock), any consolidation of the Corporation with, or merger of the
Corporation into, any other person, any merger of another person into the
Corporation (other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Corporation), any sale or transfer of all or substantially all of the assets
of the Corporation or any share exchange) pursuant to which the Common Stock is
converted into the right to receive other securities, cash or other property,
then lawful provisions shall be made as part of the terms of
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such transaction whereby the holder of each share of Convertible Preferred Stock
then outstanding shall have the right thereafter to convert such share only into
(i) in the case of any such transaction other than a Common Stock Fundamental
Change and subject to funds being legally available for such purpose under
applicable law at the time of such conversion, the kind and amount of
securities, cash and other property receivable upon such transaction by a holder
of the number of shares of Common Stock of the Corporation into which such share
of Convertible Preferred Stock might have been converted immediately prior to
such transaction, after giving effect, in the case of any Non-Stock Fundamental
Change, to any adjustment in the conversion price required by the provisions of
Section VI(h), and (ii) in the case of a Common Stock Fundamental Change, common
stock of the kind received by holders of Common Stock as a result of such Common
Stock Fundamental Change in an amount determined pursuant to the provisions of
Section VI(h). The Corporation or the person formed by such consolidation or
resulting from such merger or which acquires such assets or which acquires the
Corporation's shares, as the case may be, shall make provisions in its
certificate or articles of incorporation or other constituent document to
establish such right. Such certificate or articles of incorporation or other
constituent document shall provide for adjustments which, for events subsequent
to the effective date of such certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section VI. The above provisions shall
similarly apply to successive transactions of the foregoing type.
(f) Reservation of Shares; Etc. The Corporation shall at all times reserve
and keep available, free from preemptive rights out of its authorized and
unissued stock, solely for the purpose of effecting the conversion of the
Convertible Preferred Stock, such number of shares of its Common Stock as shall
from time to time be sufficient to effect that conversion of all shares of
Convertible Preferred Stock from time to time outstanding. The Corporation shall
from time to time, in accordance with the laws of the State of Florida, in good
faith and as expeditiously as possible endeavor to cause the authorized number
of shares of Common Stock to be increased if at any time the number of shares of
authorized and unissued Common Stock shall not be sufficient to permit the
conversion of all the then-outstanding shares of Convertible Preferred Stock.
If any shares of Common Stock required to be reserved for purposes of
conversion of the Convertible Preferred Stock hereunder require registration
with or approval of any governmental authority under any Federal or State law
before such shares may be issued upon conversion, the Corporation will in good
faith and as expeditiously as possible endeavor to cause such shares to be duly
registered or approved as the case may be. If the Common Stock is listed on the
New York Stock Exchange or any other national securities exchange or traded
through the Nasdaq National Market, the Corporation will, if permitted by the
rules of such exchange or market, list and keep listed on such exchange or make
and keep eligible for trading on such market (as the case may be), upon official
notice of issuance, all shares of Common Stock issuable upon conversion of the
Convertible Preferred Stock; provided, however, that such shares of Common Stock
may be delisted from such exchange or may cease to be eligible for trading
through such market (as the case may be) if, prior to or concurrent with such
delisting or cessation of eligibility for trading, the Corporation causes such
shares of Common Stock to be listed on or eligible for trading through any other
such exchange or market.
(g) Prior Notice of Certain Events. In case:
(i) the Corporation shall (1) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend payable in
shares of Common Stock or (B) a dividend payable in cash out of its
retained earnings other than any special or nonrecurring or other
extraordinary dividend or (2) declare or authorize a redemption or
repurchase of in excess of 10% of the then-outstanding shares of Common
Stock; or
(ii) the Corporation shall authorize the granting to all holders of
Common Stock of rights or warrants to subscribe for or purchase any shares
of stock of any class or series or of any other rights or warrants; or
(iii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change in
par value, or from par value to no par value, or from no par value to par
value), or of any consolidation or merger to which the Corporation is a
party and for which approval of any shareholders of the Corporation shall
be required, or of the sale or transfer of all or
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substantially all of the assets of the Corporation or of any share exchange
whereby the Common Stock is converted into other securities, cash or other
property; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;
then the Corporation shall cause to be filed with the transfer agent for the
Convertible Preferred Stock, and shall cause to be mailed to the holders of
record of the Convertible Preferred Stock, at their last addresses as they shall
appear upon the stock transfer books of the Corporation, at least ten days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record (if any) is to be taken for the purpose
of such dividend, distribution, redemption, repurchase, rights or warrants or,
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution, redemption, rights or
warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up is expected to become effective and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer, share
exchange, dissolution, liquidation or winding up (but no failure to mail such
notice or any defect therein or in the mailing thereof shall affect the validity
of the corporate action required to be specified in such notice).
(h) Adjustments in Case of Fundamental Changes. Notwithstanding any other
provision in this Section VI to the contrary, if any Fundamental Change occurs,
then the conversion price in effect will be adjusted immediately after such
Fundamental Change as described below. In addition, in the event of a Common
Stock Fundamental Change, each share of Convertible Preferred Stock shall be
convertible solely into common stock of the kind received by holders of Common
Stock as the result of such Common Stock Fundamental Change.
For purposes of calculating any adjustment to be made pursuant to this
Section VI(h) in the event of a Fundamental Change, immediately after such
Fundamental Change:
(i) In the case of a Non-Stock Fundamental Change, the conversion
price of the Convertible Preferred Stock shall thereupon become the lower
of (1) the conversion price in effect immediately prior to such Non-Stock
Fundamental Change, but after giving effect to any other prior adjustments
effected pursuant to this Section VI, and (2) the result of A x $50/B,
where:
A = the greater of the Applicable Price or the then applicable Reference
Market Price, and
B = (x) the then-current Redemption Price per share of Convertible
Preferred Stock or (y) for any Non-Stock Fundamental Change that
occurs before the Convertible Preferred Stock becomes redeemable by
the Corporation pursuant to Section V, the applicable price per
share set forth for the date of such Non-Stock Fundamental Change in
the following table:
<TABLE>
<CAPTION>
DATE OF NON-STOCK FUNDAMENTAL CHANGE PRICE
------------------------------------ ------
<S> <C>
After date of original issuance of Convertible Preferred
Stock and on or before August 6, 1997..................... $53.13
After August 7, 1997 and on or before August 6, 1998........ $52.81
After August 7, 1998 and on or before August 6, 1999........ $52.50
After August 7, 1999 and on or before August 6, 2000........ $52.19
</TABLE>
plus, in any case referred to in this clause (y), an amount equal to all
per share dividends on the Convertible Preferred Stock accrued and unpaid
thereon, whether or not declared, to but excluding the date of such
Non-Stock Fundamental Change; and
(ii) In the case of a Common Stock Fundamental Change, the conversion
price of the Convertible Preferred Stock in effect immediately prior to
such Common Stock Fundamental Change, but after giving effect to any other
prior adjustments effected pursuant to this Section VI, shall thereupon be
adjusted by multiplying such conversion price by a fraction of which the
numerator shall be the Purchaser Stock Price and the denominator shall be
the Applicable Price; provided, however, that in the event of a Common
Stock Fundamental Change in which (A) 100% by value of the consideration
received by a holder of Common Stock is common stock of the successor,
acquiror or other third party (and cash, if
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any, is paid with respect to any fractional interests in such common stock
resulting from such Common Stock Fundamental Change) and (B) all of the
Common Stock shall have been exchanged for, converted into or acquired for
common stock (and cash with respect to fractional interests) of the
successor, acquiror or other third party, the conversion price of the
Convertible Preferred Stock in effect immediately prior to such Common
Stock Fundamental Change shall thereupon be adjusted by dividing such
conversion price by the number of shares of common stock of the successor,
acquiror, or other third party received by a holder of one share of Common
Stock as a result of such Common Stock Fundamental Change.
(i) Dividend or Interest Reinvestment Plans. Notwithstanding the foregoing
provisions, the issuance of any shares of Common Stock pursuant to any plan
providing for the reinvestment of dividends or interest payable on securities of
the Corporation and the investment of additional optional amounts in shares of
Common Stock under any such plan, and the issuance of any shares of Common Stock
or options or rights to purchase such shares pursuant to any employee benefit
plan or program of the Corporation or pursuant to any option, warrant, right or
exercisable, exchangeable or convertible security outstanding as of the date the
Convertible Preferred Stock was first designated (except as expressly provided
in Section VI(c)(ii) with respect to certain events under the Rights Agreement),
and any issuance of Rights, shall not be deemed to constitute an issuance of
Common Stock or exercisable, exchangeable or convertible securities by the
Corporation to which any of the adjustment provisions described above applies.
There shall also be no adjustment of the conversion price in case of the
issuance of any stock (or securities convertible into or exchangeable for stock)
of the Corporation except as specifically described in this Section VI. If any
action would require adjustment of the conversion price pursuant to more than
one of the provisions described above, only one adjustment shall be made and
such adjustment shall be the amount of adjustment which has the highest absolute
value to holders of Convertible Preferred Stock.
(j) Series A Preferred Stock Purchase Rights. So long as Rights are
attached to the outstanding shares of Common Stock of the Corporation, each
share of Common Stock issued upon conversion of the shares of Convertible
Preferred Stock prior to the earliest of any Distribution Date (as defined in
Section 3(a) of the Rights Agreement), the date of redemption of the Rights or
the date of expiration of the Rights shall be issued with Rights in an amount
equal to the amount of Rights then attached to each such outstanding share of
Common Stock.
Section VII. Voting Rights.
(a) General. The holders of shares of Convertible Preferred Stock shall
not have any voting rights except as set forth below or as otherwise from time
to time required by law. In connection with any right to vote, each holder of a
share of Convertible Preferred Stock shall have one vote for each share held.
Any shares of Convertible Preferred Stock owned, directly or indirectly, by any
entity of which the Corporation owns, directly or indirectly, a majority of the
shares entitled to vote for directors, shall not have voting rights hereunder
and shall not be counted in determining the presence of a quorum.
So long as any shares of the Corporation's Convertible Preferred Stock are
outstanding, the Corporation will not, without the affirmative vote or consent
of the holders of at least 66 2/3% of the outstanding shares of Convertible
Preferred Stock and outstanding Parity Dividend Stock, voting or consenting (as
the case may be) as a single class (i) amend, alter or repeal (by merger or
otherwise) any provision of the Corporation's Third Amended and Restated
Articles of Incorporation, as may be amended or restated from time to time, or
the by-laws so as to affect adversely the relative rights, preferences,
qualifications, limitations or restrictions of the Convertible Preferred Stock
or (ii) effect any reclassification of the Convertible Preferred Stock.
(b) Default Voting Rights. Notwithstanding any other provision of the
Corporation's Third Amended and Restated Articles of Incorporation, whenever
dividends on the Convertible Preferred Stock or any other class or series of
Parity Dividend Stock shall be in arrears in an aggregate amount equal to at
least six quarterly dividends (whether or not consecutive), (i) the number of
members of the Board of Directors of the Corporation shall be increased by two,
effective as the time of election of such directors as hereinafter provided and
(ii) the holders of shares of Convertible Preferred Stock (voting separately as
a class with all other affected classes or series of Parity Dividend Stock upon
which like voting rights have been conferred and are exercisable) shall have the
exclusive right to vote for and elect such two additional directors of the
VI-10
<PAGE> 199
Corporation who shall continue to serve during the period such dividends remain
in arrears. The right of the holders of shares of Convertible Preferred Stock to
vote for such two additional directors shall terminate when all accrued and
unpaid dividends on the Convertible Preferred Stock and all other affected
classes or series of Parity Dividend Stock have been declared and paid or set
apart for payment. The term of office of all directors so elected shall
terminate immediately upon the termination of the right of the holders of shares
of Convertible Preferred Stock and such Parity Dividend Stock to vote for such
two additional directors, and the number of directors of the Board of Directors
of the Corporation shall immediately thereafter be reduced by two.
The foregoing right of the holders of shares of Convertible Preferred Stock
with respect to the election of two directors may be exercised at any annual
meeting of shareholders or at any special meeting of shareholders held for such
purpose. If the right to elect directors shall have accrued to the holders of
shares of Convertible Preferred Stock more than ninety days preceding the date
established for the next annual meeting of stockholders, the President of the
Corporation shall, within twenty days after the delivery to the Corporation at
its principal office of a written request for a special meeting signed by the
holders of at least 10% of all outstanding shares of Convertible Preferred
Stock, call a special meeting of the holders of Convertible Preferred Stock to
be held within sixty days after the delivery of such request for the purpose of
electing such additional directors.
Notwithstanding any other provision of the Corporation's Third Amended and
Restated Articles of Incorporation, the holders of shares of Convertible
Preferred Stock and any Parity Dividend Stock referred to above voting as a
class shall have the right to remove, without cause and at any time, and replace
any directors such holders shall have elected pursuant to this Section VII.
Section VIII. Outstanding Shares. For purposes of this amendment, all
shares of Convertible Preferred Stock issued by the Corporation shall be deemed
outstanding except (i) from the date fixed for redemption pursuant to Section V,
all shares of Convertible Preferred Stock that have been so called for
redemption under Section V, to the extent provided thereunder; (ii) from the
date of surrender of certificates evidencing shares of Convertible Preferred
Stock, all shares of Convertible Preferred Stock converted into Common Stock;
and (iii) from the date of registration of transfer, all shares of Convertible
Preferred Stock owned, directly or indirectly, by any entity of which the
Corporation owns, directly or indirectly, a majority of the shares entitled to
vote for directors.
Section IX. Miscellaneous.
(a) Whenever possible, each provision hereof shall be interpreted in a
manner as to be effective and valid under applicable law, but if any provision
hereof is held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating or otherwise adversely affecting the remaining
provisions hereof. If a court of competent jurisdiction should determine that a
provision hereof would be valid or enforceable if a period of time were extended
or shortened or a particular percentage were increased or decreased, then such
court may make such change as shall be necessary to render the provision in
question effective and valid under applicable law.
(b) The Corporation shall pay any and all stock transfer and documentary
stamp taxes that may be payable in request of any issuance or delivery of shares
of Convertible Preferred Stock or shares of Common Stock or other securities
issued on account of Convertible Preferred Stock pursuant hereto or certificates
or instruments evidencing such shares or securities. The Corporation shall not,
however, be required to pay any such tax which may be payable in respect of any
transfer involved in the issuance or delivery of shares of Convertible Preferred
Stock or Common Stock or other securities in a name other than that in which the
shares of Convertible Preferred Stock with respect to which such shares or other
securities are issued or delivered were registered, or in respect of any payment
to any person with respect to any such shares or securities other than a payment
to the registered holder thereof, and shall not be required to make any such
issuance, delivery or payment unless and until the person otherwise entitled to
such issuance, delivery or payment has paid to the Corporation the amount of any
such tax or has established, to the satisfaction of the Corporation, that such
tax has been paid or is not payable.
VI-11
<PAGE> 200
(c) In the event that a holder of shares of Convertible Preferred Stock
shall not by written notice designate the name in which shares of Common Stock
to be issued upon conversion of such shares should be registered or to whom
payment upon redemption of shares of Convertible Preferred Stock should be made
or the address to which the certificates or instruments evidencing such shares
or such payment should be sent, the Corporation shall be entitled to register
such shares and make such payment, in the name of the holder of such Convertible
Preferred Stock as shown on the records of the Corporation and to send the
certificates or instruments evidencing such shares or such payment, to the
address of such holder shown on the records of the Corporation.
Section X. Definitions. The following definitions shall apply to terms
used in connection with the Convertible Preferred Stock:
a. "Applicable Price" shall mean (i) in the event of a Non-Stock
Fundamental Change in which the holders of the Common Stock receive only cash,
the amount of cash received by the holder of one share of Common Stock and (ii)
in the event of any other Non-Stock Fundamental Change or any Common Stock
Fundamental Change, the average of the daily Closing Prices of the Common Stock
for the ten consecutive Trading Days prior to and including the record date for
the determination of the holders of Common Stock entitled to receive cash,
securities, property or other assets in connection with such Non-Stock
Fundamental Change or Common Stock Fundamental Change, or, if there is no such
record date, the date upon which the holders of the Common Stock shall have the
right to receive such cash, securities, property or other assets, in each case,
as adjusted in good faith by the Board of Directors of the Corporation to
appropriately reflect any of the events referred to in subparagraphs (i), (ii),
(iii), (iv) and (v) of Section VI(c).
b. "Business Day" shall mean any day other than a Saturday, Sunday or any
day on which banking institutions are authorized to close in New York, New York.
c. "Closing Price" of any common stock on any day shall mean the last
reported sale price regular way on such day or, in case no such sale takes place
on such day, the average of the reported closing bid and asked prices regular
way of the common stock in each case on the New York Stock Exchange, or, if the
common stock is not listed or admitted to trading on such Exchange, on the
principal national securities exchange or quotation system on which the common
stock is listed or admitted to trading or quoted, or, if not listed or admitted
to trading or quoted on any national securities exchange or quotation system,
the average of the closing bid and asked prices of the common stock in the
over-the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similarly generally accepted reporting
service, or, if not so available in such manner, as furnished by any New York
Stock Exchange member firm selected from time to time by the Board of Directors
of the Corporation for that purpose.
d. "Common Stock" shall mean the Corporation's now or hereafter issued
Common Stock.
e. "Common Stock Fundamental Change" shall mean any Fundamental Change in
which more than 50% by value (as determined in good faith by the Board of
Directors of the Corporation) of the consideration received by holders of Common
Stock consists of common stock that for each of the ten consecutive Trading Days
referred to with respect to such Fundamental Change in Section X(a) above has
been admitted for listing or admitted for listing subject to notice of issuance
on a national securities exchange or quoted on the Nasdaq National Market;
provided, however, that a Fundamental Change shall not be a Common Stock
Fundamental Change unless either (i) the Corporation continues to exist after
the occurrence of such Fundamental Change and the outstanding shares of
Convertible Preferred Stock continue to exist as outstanding shares of
Convertible Preferred Stock, or (ii) not later than the occurrence of such
Fundamental Change, the outstanding shares of Convertible Preferred Stock are
converted into or exchanged for shares of convertible preferred stock of a
corporation succeeding to the business of the Corporation, which Convertible
Preferred Stock has powers, preferences and relative, participating, optional or
other rights, and qualifications, limitations and restrictions, substantially
similar to those of the Convertible Preferred Stock.
VI-12
<PAGE> 201
f. "Current Market Price Per Share" shall mean, as to the Common Stock on
any date in question, the average of the daily Closing Prices for the five
consecutive Trading Days prior to and including the date in question; provided,
however, that:
(1) if the Ex Date for any event (other than the issuance or
distribution requiring such computation) that required an adjustment to the
conversion price pursuant to subparagraphs (i), (ii), (iii), (iv), or (v)
of Section VI(c) ("Other Event") occurs after the fifth Trading Day prior
to the day in question and prior to the Ex Date for the issuance or
distribution requiring such computation (the "Current Event"), the Closing
Price for each Trading Day prior to the Ex Date for such Other Event shall
be adjusted by multiplying such Closing Price by the same fraction by which
the conversion price is so required to be adjusted as a result of such
Other Event,
(2) if the Ex Date for any Other Event occurs after the Ex Date for
the Current Event and on or prior to the date in question, the Closing
Price for each Trading Day on and after the Ex Date for such Other Event
shall be adjusted by multiplying such Closing Price by the reciprocal of
the fraction by which the conversion price is so required to be adjusted as
a result of such Other Event,
(3) if the Ex Date for any Other Event occurs on the Ex Date for the
Current Event, one of those events, as determined by the Corporation, shall
be deemed for purposes of clauses (1) and (2) of this proviso to have an Ex
Date occurring prior to the Ex Date for the other of those events, and
(4) if the Ex Date for the Current Event is on or prior to the date in
question, then after taking into account any adjustment required pursuant
to clause (2) of this proviso, the Closing Price for each Trading Day on or
after such Ex Date shall be adjusted by adding thereto the amount of any
cash and the fair market value on the date in question (as determined in
good faith by the Board of Directors in a manner consistent with any
determination of such value for purposes of paragraph (iv) or (v) of
Section VI(c), whose determination shall be conclusive and described in a
resolution of the Board of Directors) of the portion of the rights,
warrants, evidences of indebtedness, shares of capital stock or assets
being distributed applicable to one share of Common Stock.
g. "Ex Date" shall mean (1) when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades regular way
on the relevant exchange or in the relevant market from which the Closing Price
was obtained without the right to receive such issuance or distribution and (2)
when used with respect to any subdivision or combination of shares of Common
Stock, means the first date on which the Common Stock trades regular way on such
exchange or in such market after the time at which such subdivision or
combination becomes effective.
h. "Fundamental Change" shall mean the occurrence of any transaction or
event in connection with a plan pursuant to which all or substantially all of
the Common Stock shall be exchanged for, converted into, or acquired for or
constitute solely the right to receive cash, securities, property or other
assets (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise); provided, however, in the case of a plan involving more than one
such transaction or event, for purposes of adjustment of the conversion price,
such Fundamental Change shall be deemed to have occurred when substantially all
of the Common Stock of the Corporation shall be exchanged for, converted into,
or acquired for or constitute solely the right to receive cash, securities,
property or other assets, but the adjustment shall be based upon the highest
weighted average of consideration per share which a holder of Common Stock could
have received in such transactions or events as a result of which more than 50%
of the Common Stock of the Corporation shall have been exchanged for, converted
into, or acquired for or constitute solely the right to receive cash,
securities, property or other assets.
i. "Junior Dividend Stock" shall mean the Junior Stock and any other
capital stock of the Corporation ranking junior as to dividends to the
Convertible Preferred Stock.
j. "Junior Liquidation Stock" shall mean the Junior Stock and any other
class or series of the Corporation's capital stock ranking junior to the
Convertible Preferred Stock as to distributions of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary.
k. "Junior Stock" shall mean the Common Stock, the Series A Preferred
Stock, and the Corporation's hereafter issued capital stock ranking junior to
the Convertible Preferred Stock both as to the payment of
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<PAGE> 202
dividends and as to distributions of assets upon liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, when and if
issued.
l. "Nasdaq National Market" shall mean the National Association of
Securities Dealers Automated Quotation National Market.
m. "Non-Stock Fundamental Change" shall mean any Fundamental Change other
than a Common Stock Fundamental Change.
n. "Parity Dividend Stock" shall mean any class or series of the
Corporation's capital stock hereafter issued ranking, as to dividends, on a
parity with the Convertible Preferred Stock.
o. "Parity Liquidation Stock" shall mean any class or series of the
Corporation's capital stock ranking on a parity with the Convertible Preferred
Stock as to distributions or assets upon liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary.
p. "Purchaser Stock Price" shall mean, with respect to any Common Stock
Fundamental Change, the average of the daily Closing Prices of the common stock
received in such Common Stock Fundamental Change for the ten consecutive Trading
Days prior to and including the record date for the determination of the holders
of Common Stock entitled to receive such common stock, or, if there is no such
record date, the date upon which the holders of the Common Stock shall have the
right to receive such common stock, in each case, as adjusted in good faith by
the Board of Directors of the corporation to appropriately reflect any of the
events referred to in subparagraphs, (i), (ii), (iii), (iv) and (v) of Section
VI(c); provided, however, if no such Closing Prices of the common stock for such
Trading Days exist, then the Purchaser Stock Price shall be set at a price
determined in good faith by the Board of Directors of the Corporation.
q. "Redemption Price" shall mean the applicable price per share set forth
for the date fixed for redemption in the following table:
<TABLE>
<CAPTION>
DATE FIXED FOR REDEMPTION PRICE
------------------------- ------
<S> <C>
On or after August 7, 2000 and on or before August 6,
2001...................................................... $51.88
After August 7, 2001 and on or before August 6, 2002........ $51.56
After August 7, 2002 and on or before August 6, 2003........ $51.25
After August 7, 2003 and on or before August 6, 2004........ $50.94
After August 7, 2004 and on or before August 6, 2005........ $50.63
After August 7, 2005 and on or before August 6, 2006........ $50.31
Any date after August 7, 2006............................... $50.00
</TABLE>
plus, in each case, an amount in cash equal to all per share dividends on the
Convertible Preferred Stock accrued and unpaid thereon, whether or not declared,
to but excluding the date fixed for redemption.
r. "Reference Market Price" shall initially mean $26.92 (which is an amount
equal to 66 2/3% of the reported last sale price for the Common Stock quoted on
the Nasdaq National Market on July 23, 1996), and in the event of any adjustment
to the conversion price other than as a result of a Fundamental Change, the
Reference Market Price shall also be adjusted so that the ratio of the Reference
Market Price to the conversion price after giving effect to any such adjustment
shall always be the same as the ratio of $26.92 to the initial conversion price
per share set forth in the last sentence of Section VI(a).
s. "Rights" shall have the meaning ascribed to such term in the Rights
Agreement.
t. "Rights Agreement" shall mean the Rights Agreement dated as of February
24, 1988, as amended, between the Corporation and the Rights Agent named
therein.
u. "Series A Preferred Stock" shall mean the Corporation's Series A
Participating Preferred Stock, when and if issued.
v. "Trading Day" shall mean a day on which securities traded on the
national securities exchange or quotation system or in the over-the-counter
market used to determine the Closing Price.
VI-14
