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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1996 or
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition period from ______________to _________________
Commission file number 1-12922
AMERICAN EAGLE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2100622
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12801 North Central Expressway,
Suite 800, Dallas, Texas 75243
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 448-1400
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last year.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ -------
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of November 8, 1996, the number of shares outstanding of each of the
issuer's classes of common stock was as follows:
Common Stock . . . . . . . . . . 7,047,398 shares, par value $.01 per share
- --------------------------------------------------------------------------------
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AMERICAN EAGLE GROUP, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated balance sheets as of
September 30, 1996 (unaudited) and
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . 3
Condensed consolidated statements of income
for the periods ended September 30, 1996
(unaudited) and September 30, 1995 (unaudited) . . . . . . . 4
Condensed consolidated statements of cash flows
for the periods ended September 30, 1996
(unaudited) and September 30, 1995 (unaudited) . . . . . . . 5
Notes to condensed consolidated financial
statements (unaudited) . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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AMERICAN EAGLE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
(Unaudited)
ASSETS December 31, September 30,
1995 1996
-------- --------
<S> <C> <C>
Cash and investments $106,792 $ 69,178
Accounts receivable 56,890 55,229
Reinsurance recoverable, net 101,125 87,670
Deferred policy acquisition costs 15,296 14,670
Deferred reinsurance premiums 29,355 22,594
Other assets 18,337 15,969
-------- --------
Total assets $327,795 $265,310
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserve for losses and loss adjustment expenses $136,528 $123,203
Unearned premiums 79,605 65,996
Other policy liabilities 29,722 1,180
Agency payables to insurance companies, net 1,736 751
Note payable 11,250 13,250
Accounts payable and other liabilities 13,859 12,195
-------- --------
Total liabilities 272,700 216,575
-------- --------
Commitments and contingent liabilities
Series B Cumulative Preferred Stock, $.01 par value; 162,857 shares
authorized, 162,857 shares issued and outstanding 1,629 1,629
Stockholders' equity:
Common Stock, $.01 par value, 21,000,000 shares authorized, 7,121,380 shares
issued 71 71
Additional paid-in-capital 45,532 45,555
Unrealized apprec.(deprec.) on investment securities, net of deferred taxes 1,029 (252)
Retained earnings 6,921 1,819
Less - 73,882 shares of common stock held in the treasury, at cost (87) (87)
-------- --------
Total stockholders' equity 53,466 47,106
-------- --------
Total liabilities and stockholders' equity $327,795 $265,310
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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AMERICAN EAGLE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1995 1996 1995 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues
Earned premiums, net of reinsurance $27,171 $27,634 $72,415 $93,965
Agency operations, net 215 225 507 172
Investment income, net 1,351 1,031 4,161 3,478
Realized investment gains (losses), net 452 (46) 458 52
--------- --------- --------- ---------
Total revenues 29,189 28,844 77,541 97,667
--------- --------- --------- ---------
Expenses
Losses and loss adjustment expenses, net of
reinsurance 16,347 17,596 45,594 66,255
Policy acquisition and other underwriting
expenses 9,109 12,371 23,614 36,845
Interest expense 256 299 733 834
--------- --------- --------- ---------
Total expenses 25,712 30,266 69,941 103,934
--------- --------- --------- ---------
Income (loss) before income tax expense 3,477 (1,422) 7,600 (6,267)
Income tax expense (benefit) 1,078 (263) 2,358 (1,800)
--------- --------- --------- ---------
Net income (loss) $2,399 ($1,159) $5,242 ($4,467)
========= ========= ========= =========
Net income (loss) available for common stockholders (1) $2,375 ($1,183) $5,169 ($4,540)
========= ========= ========= =========
Weighted average number of common shares
outstanding 7,052,898 7,048,498 7,053,698 7,049,098
========= ========= ========= =========
Net income (loss) per share of common stock (1) $0.34 ($0.17) $0.73 ($0.64)
</TABLE>
(1) After deduction of preferred dividends
The accompanying notes are an integral part of these financial statements.
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AMERICAN EAGLE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, September 30,
1995 1996
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<S> <C> <C>
Cash and cash equivalents derived from:
Total provid)doperating activities $ 2,198 $(35,521)
Investing activities-
Net proceeds (purchases) of short-term investments (3,917) 24,743
Purchases of fixed income securities (18,345) (23,715)
Proceeds from sales of fixed income securities 16,862 26,882
Proceeds from maturities of fixed income securities 3,009 6,885
Purchases of property and equipment (1,308) (1,049)
-------- --------
Total provided by investing activities (3,699) 33,746
-------- --------
Financing activities-
Dividends paid on Series B and C Cumulative Preferred Stock (73) (73)
Dividends paid on common stock (635) (846)
Proceeds of note payable 2,000 2,000
Increase in common stock outstanding 26 --
-------- --------
Total provided by financing activities 1,318 1,081
-------- --------
Net change in cash and cash equivalents (183) (694)
Cash and cash equivalents, beginning of period 1,530 2,922
-------- --------
Cash and cash equivalents, end of period $ 1,347 $ 2,228
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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AMERICAN EAGLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED
SEPTEMBER 30, 1995 AND 1996
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
American Eagle Group, Inc. (the "Company") and subsidiaries for the periods
ended September 30, 1995 and 1996 have been prepared in accordance with the
instructions to the Form 10-Q and do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
In the opinion of management, all adjustments (consisting of only normal
recurring accruals) considered necessary for a fair presentation of the
results for the interim period have been included. Operating results for
the periods ended September 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996. These
statements should be read in conjunction with the financial statements and
notes thereto for the year ended December 31, 1995 included in the
Company's Annual Report.
SUBSEQUENT EVENT
On November 6, 1996, the Company announced the terms of a $35 million
investment in the Company and the formation of a strategic alliance with
American Financial Group, Inc. ("American Financial Group").
Under the capital terms of the strategic alliance, American Financial Group
has agreed to purchase 350,000 shares of the Company's Series D Preferred
Stock for $35 million. This security will have a 9% dividend, with an
option for the first five years to pay the dividends in kind with
additional shares of Series D Preferred Stock. The preferred stock is
convertible at a conversion price of $5.25 per share into common stock of
the Company. At the time of issuance, the Series D Preferred Stock will be
convertible into approximately 48% of the outstanding common stock
(calculated on a fully converted basis). The preferred stock matures in 20
years with mandatory redemption of 10% of principal per year beginning in
year eleven. The preferred stock is callable at par at any time. In the
event that the preferred stock is called prior to the seventh anniversary
of its issuance, the holder will receive warrants to purchase the Company's
common stock at $5.25 per share exercisable any time during the period
between the call date and the seventh anniversary of the issuance of the
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preferred stock. The preferred stock carries limited voting rights equal to
20% of the total votes eligible to be cast on matters submitted to holders
of common stock. Until the seventh anniversary of the issuance of the
preferred stock, American Financial Group has the right to nominate for
election to the Company's Board of Directors 30% of the number of
directors. As part of the overall transaction, the Company has granted to
American Financial Group warrants for 800,000 shares of the Company's
common stock with an exercise price of $3.45 per share. Such warrants will
become exercisable in the event that the Company terminates its agreement
with American Financial Group and enters into a competing transaction with
another party. These warrants will be canceled upon closing of the
transaction with American Financial Group.
Proceeds from the transaction will be utilized to contribute capital to the
Company's insurance company subsidiary, to reduce bank debt, and for other
general corporate purposes.
In connection with the transaction, the company would record, at the time
of closing of the transaction, a recapitalization charge of $15 million
before federal income tax. This recapitalization charge will provide
additional strengthening of American Eagle's balance sheet and overall
reserve levels and is intended to cover contingencies and estimated
exposures associated with various previously reported strategic actions and
product line discontinuations.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIRD QUARTER OF 1996 COMPARED TO THE THIRD QUARTER OF 1995
Gross Premiums Produced
Gross premiums produced for the third quarter of 1996 compared to the third
quarter of 1995 were as follows (in millions):
<TABLE>
<CAPTION>
THIRD QUARTER
1995 1996
---- ----
<S> <C> <C>
Gross premiums produced $48.0 $37.4
For other companies (4.9) (7.4)
Assumed from other companies 2.0 4.6
----- -----
Gross premiums written 45.1 34.6
Ceded premiums (15.0) (7.7)
----- -----
Net premiums written $30.1 $26.9
===== =====
</TABLE>
Gross premiums produced decreased 22.1% to $37.4 million for the third
quarter of 1996 from $48.0 million in the third quarter of 1995. Of this
decrease, 14.0% was in the Aviation Division and 8.5% was in the Property &
Casualty Division (the "P&C Division"), while the Marine Division had an
increase of 0.4%. The decreases in the Aviation and P&C Divisions' gross
premiums produced resulted primarily from previously announced actions
taken during 1995 and the first nine months of 1996 to eliminate
unprofitable segments of the operations. In addition, in the Aviation
Division, primarily in the airport segment, certain insureds require
insurance written by an insurer with an A.M. Best Company rating of "A-" or
better, which resulted in a portion of the decrease in gross premiums
produced. The Company is completing arrangements and regulatory filings
that will permit it to offer insureds the financial security of an insurer
rated "A-" or better. The increase in the Marine Division's gross premiums
produced is due to an increase in policies in force.
The gross premiums produced for other companies increased 51.0% to $7.4
million in the third quarter of 1996 from $4.9 million in the third quarter
of 1995. This increase is primarily a result of the increased use of
arrangements that provide the Company the ability to offer its insureds the
financial security of insurance companies with an A.M. Best Company rating
of "A-" or better.
The gross premiums assumed from other companies increased 130.0% to $4.6
million in the third quarter of 1996 from $2.0 million in the third quarter
of 1995 primarily as a result of the increase in business produced for
other companies.
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<PAGE> 9
Gross premiums written decreased 23.3% to $34.6 million in the third
quarter of 1996 from $45.1 million in the third quarter of 1995 as a result
of the decrease in gross premiums produced.
Ceded premiums decreased 48.7% to $7.7 million in the third quarter of
1996, compared to $15.0 million in the third quarter of 1995. This
decrease is primarily a result of a decline in business written in the
airport segment that is reinsured with other companies under a facultative
reinsurance agreement and, also, a decrease in ceded excess of loss
reinsurance premiums for both Aviation and P&C Divisions.
Net premiums written decreased 10.6% to $26.9 million in the third quarter
of 1996, compared to $30.1 million in the third quarter of 1995.
Revenues
Earned premiums, net of reinsurance, increased 1.5% to $27.6 million in the
third quarter of 1996 from $27.2 million in the third quarter of 1995. Of
this increase, 0.4% was in the P&C Division and 2.6% in the Marine
Division, while the Aviation Division had a decrease of 1.5%. The growth
in earned premiums, net of reinsurance, in comparison to the decline in net
premiums written, is due to a higher level of written premiums in earlier
quarters, which is now becoming earned premiums.
Agency operations, net, increased 5% in the third quarter of 1996 from a
minimal gain in the third quarter of 1995.
Investment income, net, decreased 23.7% to $1.0 million in the third
quarter of 1996 from $1.4 million in the third quarter of 1995. The net
tax-effected investment yield on average invested assets for the third
quarter of 1996 increased to 6.0% from 5.6% in the comparable quarter of
1995. Average invested assets decreased $27.7 million in the third quarter
of 1996, compared to the third quarter of 1995, primarily as a result of
cash flow used in operating activities, as discussed below.
Realized investment gains (losses), net, were insignificant in the third
quarter of 1996 as compared to a gain of $0.5 million in the third quarter
of 1995.
Operating Expenses
Losses and loss adjustment expenses, net of reinsurance, were 63.7% of
earned premiums, net of reinsurance, in the third quarter of 1996, compared
to 60.2% in the third quarter of 1995. The results in the third quarter of
1996 were negatively affected by a continued high level of reported claims
for the transportation segment of the P&C Division. The Aviation Division
loss ratio decreased 13.1 percentage points to 45.0% in the third quarter
1996, from 58.1% in the third quarter of 1995, and the P&C Division loss
ratio increased 32.3 percentage points to 94.5% in the third quarter of
1996, from 62.2% in the third quarter of
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1995. The Marine Division loss ratio in the third quarter of 1996 was
117.4% as a result of substantial storm- related losses. In the third
quarter of 1996 the Aviation and Marine Divisions incurred storm losses of
$0.8 million before income tax benefits.
Policy acquisition and other underwriting expenses were 44.8% of earned
premiums in the third quarter of 1996 and 33.5% of earned premiums in the
third quarter of 1995. The increase in the expense ratio in the third
quarter of 1996 results from the increased amortization of previously
deferred acquisition costs due to the decline in the level of net premiums
written in the third quarter of 1996 compared to the third quarter of 1995
and an adjustment of estimated reinsurance ceding commission income to
actual.
The Company's combined ratio increased 14.8 percentage points to 108.5% in
the third quarter of 1996 from 93.7% in the third quarter of 1995 as a
result of the factors discussed above. A combined ratio below 100%
generally indicates profitable underwriting prior to the consideration of
investment income.
Interest expense increased 16.8% to $0.30 million in the third quarter of
1996, from $0.26 million in the third quarter of 1995, due primarily to an
increase in the Company's note payable of $2.0 million.
Income
The income tax benefit was 18.5% of loss before tax benefit in the third
quarter of 1996 and income tax expense was 31.0% of income before tax
expense in the third quarter of 1995. The decrease in the effective tax
rate in the third quarter of 1996 is due, in part, to adjusting the
year-end estimated tax provision to equal the actual filed 1995 federal
income tax return.
The third quarter of 1996 net loss was $1.2 million, as compared to net
income of $2.4 million in the third quarter of 1995.
Net income (loss) available for common stockholders in the third quarter of
1996 was ($1.2) million, or ($0.17) per share, as compared to net income of
$2.4 million, or $0.34 per share, in the third quarter of 1995.
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FIRST NINE MONTHS OF 1996 COMPARED TO THE FIRST NINE MONTHS OF 1995
Gross Premiums Produced
Gross premiums produced for the first nine months of 1996 as compared to
the first nine months of 1995 were as follows (in millions):
<TABLE>
<CAPTION>
FIRST NINE MONTHS
1995 1996
---- ----
<S> <C> <C>
Gross premiums produced $138.7 $121.1
For other companies (12.4) (13.4)
Assumed from other companies 5.1 8.8
------ ------
Gross premiums written 131.4 116.5
Ceded premiums (42.8) (29.2)
------ ------
Net premiums written $ 88.6 $ 87.3
====== ======
</TABLE>
Gross premiums produced decreased 12.7% to $121.1 million for the first
nine months of 1996 from $138.7 million in the first nine months of 1995.
Of this decrease, 8.4% was in the Aviation Division, and 6.2% was in the
P&C Division. The Marine Division gross premium produced increased 1.9%.
The decreases in the Aviation and P&C Divisions' gross premiums produced
result primarily from previously announced actions taken during 1995 and
the first nine months of 1996 to eliminate unprofitable segments of the
operations. In addition, in the Aviation Division, primarily in the airport
segment, certain insureds require insurance written by an insurer with an
A.M. Best Company rating of "A-" or better, which resulted in a portion of
the decrease in gross premiums produced. The Company is completing
arrangements and regulatory filings that will permit it to offer insureds
the financial security of an insurer rated "A-" or better. The increase in
the Marine Division's gross premiums produced is due to an increase in
policies in force.
The gross premiums produced for other companies increased 8.1% to $13.4
million in the first nine months of 1996 from $12.4 million in the first
nine months of 1995. This increase is primarily a result of the increased
use of arrangements that provide the Company the ability to offer its
insureds the financial security of insurance companies with an A.M. Best
Company rating of "A-" or better.
The gross premiums assumed from other companies increased 72.5% to $8.8
million in the first nine months of 1996 from $5.1 million in the first
nine months of 1995, primarily as a result of the increase in business
produced for other companies.
Gross premiums written decreased 11.3% to $116.5 million in the first nine
months of 1996 from $131.4 million in the first nine months of 1995
primarily as a result of the decrease in gross premiums produced.
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Ceded premiums decreased 31.8% to $29.2 million in the first nine months of
1996, compared to $42.8 million in the first nine months of 1995. This
decrease is a result of a decline in business written in the airport
segment that is reinsured with other companies under a facultative
reinsurance agreement and, also, a decrease in ceded excess of loss
reinsurance premiums for both Aviation and P&C Divisions.
Net premiums written decreased 1.5% to $87.3 million in the first nine
months of 1996, compared to $88.6 million in the first nine months of 1995,
as a result of the decrease in gross premiums.
Revenues
Earned premiums, net of reinsurance, increased 29.8% to $94.0 million in
the first nine months of 1996 from $72.4 million in the first nine months
of 1995. Of this increase, 22.4% was related to the Aviation Division,
3.3% to the Marine Division, and 4.1% to the P&C Division. The growth in
earned premiums, net of reinsurance, in comparison to the decline in net
written premiums, is due to a higher level of written premiums in earlier
quarters, which is now becoming earned premiums.
Agency operations, net, decreased 66.1% to a minimal gain in the first nine
months of 1996 from a gain of $0.5 million in the first nine months of
1995.
Investment income, net, decreased 16.4% to $3.5 million in the first nine
months of 1996 from $4.2 million in the first nine months of 1995. The net
tax-effected investment yield on average invested assets for the first nine
months of 1996 decreased to 4.3% from 4.4% for the comparable period in
1995. This decrease was a result of a decrease of $14.4 million in average
invested assets in the first nine months of 1996 compared to the first nine
months of 1995 primarily as a result of cash flow used in operating
activities, as described below, and a general market decline in investment
yields for fixed maturities.
Realized investment gains, net, were insignificant in the first nine months
of 1996 as compared to a gain of $0.5 million in the first nine months of
1995.
Operating Expenses
Losses and loss adjustment expenses, net of reinsurance, were 70.5% of
earned premiums, net of reinsurance, in the first nine months of 1996,
compared to 63.0% in the first nine months of 1995. The Aviation Division
loss ratio decreased 4.4 percentage points to 57.6% in the first nine
months 1996, from 62.0% in the first nine months of 1995, and the P&C
Division loss ratio increased 36.2 percentage points to 100.4% in the first
nine months of 1996 from 64.2% in the first nine months of 1995. The
increase in the P&C Division loss ratio is driven primarily by a high level
of reported claims for the transportation segment of the P&C Division. The
Marine Division loss ratio for the first nine months of 1996 was 74.4%.
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Policy acquisition and other underwriting expenses were 39.2% of earned
premiums in the first nine months of 1996 and 32.6% of earned premiums in
the first nine months of 1995. The increase in the expense ratio in the
first nine months of 1996 results from the increased amortization of
previously deferred policy acquisition costs due to the decline in the
level of net premiums written in the first nine months of 1996, compared to
1995, and an adjustment of estimated reinsurance ceding commission income
to actual.
The Company's combined ratio increased 14.1 percentage points to 109.7% in
the first nine months of 1996 from 95.6% in the first nine months of 1995
as a result of the factors discussed above. A combined ratio below 100%
generally indicates profitable underwriting prior to the consideration of
investment income.
Interest expense increased 13.8% to $0.83 million in the first nine months
of 1996 from $0.73 million in the first nine months of 1995 due primarily
to an increase in the Company's note payable of $2.0 million.
Income
The income tax benefit was 28.7% of loss before tax benefit in the first
nine months of 1996, and income tax expense was 31.0% of income before tax
expense in the first nine months of 1995. The decrease in the effective
tax rate in the third quarter of 1996 is due to adjusting the year-end
estimated tax provision to equal the actual filed 1995 federal income tax
return.
Net loss for the first nine months of 1996 was $4.5 million, compared to
net income of $5.2 million in the first nine months of 1995. The decrease
resulted from the factors discussed above. Operating income (loss), defined
as net income (loss) less net realized investment gains or losses, net of
the associated income tax effect, was a loss of $4.5 million in the first
nine months of 1996, compared to income of $4.9 million in the first nine
months of 1995.
Net income (loss) available for common stockholders was ($4.5) million, or
($0.64) per share in the first nine months of 1996, compared to $5.2
million, or $0.73 per share, in the first nine months of 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated cash flow used in operations was $35.5 million
in the first nine months of 1996, compared to cash flow provided by
operations of $2.2 million in the first nine months of 1995. The funds
used in the first nine months of 1996 relate primarily to the settlement of
a large claim incurred in 1995 and the payment of prior periods'
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retrospectively rated reinsurance premiums and the reduction in written
premiums, which was not offset by an equal reduction in claim payments.
As described in the Notes to Condensed Consolidated Financial Statements
(Pages 6 and 7), the Company announced the terms of a $35 million
investment in the Company's Series D Preferred Stock and the formation of a
strategic alliance with American Financial Group, Inc.
The Company and its bank have amended the Company's credit facility to,
among other things, revise certain financial covenants so that no default
would occur thereunder at September 30, 1996, and to add certain covenant
and default provisions requiring the Company to close the transaction with
American Financial Group by March 31, 1997. In addition, the new covenants
require that, upon closing of such transaction, the principal amount of the
loan will be reduced to $10 million, that additional principal payments
will reduce the bank's commitment by an equal amount, and that the Company
must hold $10 million of proceeds from such transaction for use only to pay
loan obligations, dividends and redemptions required by the terms of the
Company's Series B Cumulative Preferred Stock and operating expenses.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Index to Exhibits attached hereto and incorporated herein
by reference.
(b) Reports on Form 8-K
On November 7, 1996, American Eagle filed a Form 8-K regarding
the agreement to sell Series D Preferred Stock to American
Financial Group, Inc., as discussed above. There were no
financial statements filed with the Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN EAGLE GROUP, INC.
Date: November 13, 1996 By: /s/ M. Philip Guthrie
--------------------------------------------
M. Philip Guthrie, Chairman of the Board and
Chief Executive Officer
Date: November 13, 1996 By: /s/ Richard M. Kurz
--------------------------------------------
Richard M. Kurz, Senior Vice President and
Chief Financial Officer (Principal
Financial and Accounting Officer)
16
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INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ------- -------
4.1 -- Specimen Certificate for shares of Common Stock, $.01
par value, of American Eagle (Previously filed on May
11, 1994 with Registrant's Amendment No. 2 to
Registration Statement on Form S-1, File No. 33-75490,
and incorporated herein by reference).
4.2 -- Registration Rights Agreement, dated as of March 21,
1995, by and among American Eagle, Mason Best and Nelson
Hurst (Previously filed on March 29, 1994 with
Registrant's Amendment No. 1 to Registration Statement
on Form S-1, File No. 33-75490, and incorporated herein
by reference).
4.3 -- Warrant Registration Rights Agreement, dated as of
November 5, 1996, by and between American Eagle and
American Financial Group, Inc.
10.1 -- American Eagle Group, Inc. 1991 Non-Qualified Stock
Option Plan (Previously filed on February 18, 1994 with
Registrant's Registration Statement on Form S-1, File
No. 33-75490, and incorporated herein by reference).
10.2 -- Amended and Restated P&C Stock Option Plan - Wise
(Previously filed on February 18, 1994 with Registrant's
Registration Statement on Form S-1, File No. 33-75490,
and incorporated herein by reference).
10.3 -- Amended and Restated P&C Stock Option Plan - Hill
(Previously filed on February 18, 1994 with Registrant's
Registration Statement on Form S-1, File No. 33-75490,
and incorporated herein by reference).
10.4 -- Amended and Restated P&C Stock Option Plan - Perkins
(Previously filed on February 18, 1994 with Registrant's
Registration Statement on Form S-1, File No. 33-75490,
and incorporated herein by reference).
10.5 -- Amendment No. 1 to Amended and Restated P&C Stock Option
Plan - Perkins, dated as of August 16, 1994, between
American Eagle and J.B. Perkins (Previously filed on
March 30, 1995 with Registrant's Annual Report on Form
10-K, File No. 1-12922, and incorporated herein by
reference).
10.6 -- American Eagle Group, Inc. 1994 Stock Incentive Plan
(Previously filed on March 29, 1994 with Registrant's
Amendment No. 1 to Registration Statement on Form S-1,
File No. 33-75490, and incorporated herein by
reference).
10.7 -- American Eagle Group, Inc. 1994 Directors' Stock Option
Plan, as amended. (Previously filed on November 11,
1995 with Registrant's Quarterly Report on Form 10-Q,
File No. 1-12922, and incorporated herein by reference.)
10.8 -- American Eagle Group, Inc. 1994 Employee Restricted
Stock Plan (Previously filed on March 29, 1994 with
Registrant's Amendment No. 1 to Registration Statement
on Form S-1, File No. 33-75490, and incorporated herein
by reference).
10.9 -- American Eagle Group, Inc. Employee Profit Sharing and
Savings Plan (Previously filed on February 18, 1994 with
Registrant's Registration Statement on Form S-1, File
No. 33-75490, and incorporated herein by reference).
10.10 -- American Eagle Group, Inc. Employee Stock Purchase Plan
(Previously filed on March 30, 1995 with Registrant's
Annual Report on Form 10-K, File No. 1-12922, and
incorporated herein by reference.
17
<PAGE> 18
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ------ -------
10.11 -- Amended and Restated Credit Agreement dated as of
December 29, 1994 (the "Restated Credit Agreement"),
among American Eagle, the Lenders and The First National
Bank of Chicago, as Agent (Previously filed on March 30,
1995 with Registrant's Annual Report on Form 10-K, File
No. 1- 12922, and incorporated herein by reference).
10.12 -- Amendment to the Restated Credit Agreement dated as of
February 23, 1996 by and between American Eagle and The
First National Bank of Chicago, individually and as
agent. (Previously filed on March 28, 1996 with
Registrant's Annual Report on Form 10-K, File No.
1-12922, and incorporated herein by reference).
10.13 -- Employment Agreement, dated as of December 31, 1994,
between American Eagle and M. Philip Guthrie (Previously
filed on March 30, 1995 with Registrant's Annual Report
on Form 10-K, File No. 1- 12922, and incorporated herein
by reference).
10.14 -- Employment Agreement, dated as of August 15, 1996,
between American Eagle and Robert W. Conrey.
10.15 -- Employment Agreement, dated as of December 31, 1994,
between AEIC and George C. Hill (Previously filed on
March 30, 1995 with Registrant's Annual Report on Form
10-K, File No. 1-12922, and incorporated herein by
reference).
10.16 -- Employment Agreement, dated as of December 31, 1994,
between AEIC and David O. Daniels (Previously filed on
March 30, 1995 with Registrant's Annual Report on Form
10-K, File No. 1- 12922, and incorporated herein by
reference).
10.17 -- Employment Agreement, dated as of December 31, 1994,
between American Eagle and Frederick G. Anderson
(Previously filed on March 30, 1995 with Registrant's
Annual Report on Form 10-K, File No. 1-12922, and
incorporated herein by reference).
10.18 -- Employment Agreement, dated as of December 31, 1994,
between American Eagle and Richard M. Kurz (Previously
filed on March 30, 1995 with Registrant's Annual Report
on Form 10-K, File No. 1- 12922, and incorporated herein
by reference).
10.19 -- Employment Agreement, dated as of December 31, 1994,
between American Eagle and Allen N. Walton III
(Previously filed on March 30, 1995 with Registrant's
Annual Report on Form 10-K, File No. 1- 12922, and
incorporated herein by reference).
10.20 -- Consulting Agreement, dated as of December 24, 1992,
between American Eagle and Don D. Hutson (Previously
filed on February 18, 1994 with Registrant's
Registration Statement on Form S-1, File No. 33-75490,
and incorporated herein by reference).
10.21 -- Agreement dated as of February 15, 1991, between Luther
King Capital Management Corporation and AEIC (Previously
filed on February 18, 1994 with Registrant's
Registration Statement on Form S-1, File No. 33-75490,
and incorporated herein by reference).
10.22 -- Investment Management Agreement, dated as of June 17,
1994, between American Eagle Insurance Company and Aon
Advisors, Inc. (Previously filed on March 30, 1995 with
Registrant's Annual Report on Form 10-K, File No.
1-12922, and incorporated herein by reference).
18
<PAGE> 19
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ------- -------
10.23 -- Agreement for the Purchase of all of the Outstanding
Capital Stock of Aviation Office of America, Inc. and
American Eagle Insurance Company dated as of May 7,
1986, among Folmar Corporation, Crum and Forster, Inc.
and United States Fire Insurance Company (the "Purchase
Agreement") (Previously filed on March 29, 1994 with
Registrant's Amendment No. 1 to Registration Statement
on Form S-1, File No. 33-75490, and incorporated herein
by reference).
10.24 -- Amendment to Purchase Agreement dated as of June 6, 1987
(Previously filed on March 29, 1994 with Registrant's
Amendment No. 1 to Registration Statement on Form S-1,
File No. 33-75490, and incorporated herein by
reference).
10.25 -- Amendment to Purchase Agreement dated as of December 11,
1987 (Previously filed on March 29, 1994 with
Registrant's Amendment No. 1 to Registration Statement
on Form S-1, File No. 33-75490, and incorporated herein
by reference).
10.26 -- First through Fifth General Aviation Liability Excess of
Loss Reinsurance Agreement AR #4222 1994 Final Placement
Slip (Previously filed on March 30, 1995 with
Registrant's Annual Report on Form 10-K, File No.
1-12922, and incorporated herein by reference).
10.27 -- Casualty First and Second Excess of Loss Reinsurance
Agreement AR #4038-94 1994 Final Placement Slip
(Previously filed on March 30, 1995 with Registrant's
Annual Report on Form 10-K, File No. 1-12922, and
incorporated herein by reference).
10.28 -- Special Underlying General Aviation Liability Excess of
Loss Reinsurance Agreement AR #4221 1994 Final Placement
Slip (Previously filed on March 30, 1995 with
Registrant's Annual Report on Form 10-K, File No.
1-12922, and incorporated herein by reference).
10.29 -- General Aviation Hull Special Underlying Excess of Loss
Reinsurance Agreement AR #4227 1994 Final Placement Slip
(Previously filed on March 30, 1995 with Registrant's
Annual Report on Form 10-K, File No. 1-12922, and
incorporated herein by reference).
10.30 -- First Through Fifth General Aviation Liability Excess of
Loss Reinsurance Agreement AR #4222 1995 Final Placement
Slip (Previously filed on March 28, 1996 with
Registrant's Annual Report on Form 10-K, File No.
1-12922, and incorporated herein by reference).
10.31 -- Special Underlying General Aviation Liability Excess of
Loss Reinsurance Agreement AR #4221 1995 Final Placement
Slip (Previously filed on March 28, 1996 with
Registrant's Annual Report on Form 10-K, File No.
1-12922, and incorporated herein by reference).
10.32 -- General Aviation Hull Special Underlying Excess of Loss
Reinsurance Agreement AR #4227 1995 Final Placement Slip
(Previously filed on March 28, 1996 with Registrant's
Annual Report on Form 10-K, File No. 1-12922, and
incorporated herein by reference).
10.33 -- First and Second Property Excess of Loss Reinsurance
Agreement--ARA #4039-91 (subject to a request for
confidential treatment) (Previously filed on March 28,
1996 with Registrant's Annual Report on Form 10-K, File
No. 1-12922, and incorporated herein by reference).
19
<PAGE> 20
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ------- -------
10.34 -- First and Second Casualty Excess of Loss Reinsurance
Agreement--ARA #4038-91 (subject to a request for
confidential treatment) (Previously filed on March 28,
1996 with Registrant's Annual Report on Form 10-K, File
No. 1-12922, and incorporated herein by reference).
10.35 -- Casualty First and Second Excess of Loss Reinsurance
Agreement--AR #4038-95 (subject to a request for
confidential treatment) (Previously filed on March 28,
1996 with Registrant's Annual Report on Form 10-K, File
No. 1-12922, and incorporated herein by reference).
10.36 -- First and Second Casualty Excess of Loss Reinsurance
Agreement--AR #4038-95 (subject to a request for
confidential treatment) (Previously filed on March 28,
1996 with Registrant's Annual Report on Form 10-K, File
No. 1-12922, and incorporated herein by reference).
10.37 -- General Aviation Hill Special Underlying Excess of Loss
Reinsurance Agreement--AR #4227-94 (subject to a request
for confidential treatment) (Previously filed on March
28, 1996 with Registrant's Annual Report on Form 10-K,
File No. 1-12922, and incorporated herein by reference).
10.38 -- Special Underlying General Aviation Liability Excess of
Loss Reinsurance Agreement--AR #4221-94 (subject to a
request for confidential treatment) (Previously filed on
March 28, 1996 with Registrant's Annual Report on Form
10-K, File No. 1-12922, and incorporated herein by
reference).
10.39 -- First Through Fifth General Aviation Liability Excess of
Loss Reinsurance Agreement--AR #4222-94 (subject to a
request for confidential treatment) (Previously filed on
March 28, 1996 with Registrant's Annual Report on Form
10-K, File No. 1-12922, and incorporated herein by
reference).
10.40 -- Amendment to the Restated Credit Agreement, as amended,
dated as of March 18, 1996, by and between American
Eagle and The First National Bank of Chicago,
individually and as Agent (Previously filed on March 28,
1996 with Registrant's Annual Report on Form 10-K, File
No. 1- 12922, and incorporated herein by reference).
10.41 -- Amendment to the Restated Credit Agreement, as amended,
dated as of May 3, 1996, by and between American Eagle
and The First National Bank of Chicago, individually and
as Agent (Previously filed on May 10, 1996 with
Registrant's Report on Form 10-Q for the period ended
March 31, 1996, File No. 1-12922, and incorporated
herein by reference).
10.42 -- Amendment to the Restated Credit Agreement, dated as of
November 5, 1996, by and between American Eagle and The
First National Bank of Chicago, individually and as
agent.
10.43 -- Securities Purchase Agreement, dated as of November 5,
1996, by and between American Eagle and American
Financial Group, Inc.
10.44 -- Warrant Subscription Agreement, dated as of November 5,
1996, by and between American Eagle and American
Financial Group, Inc.
10.45 -- Warrant to Purchase Common Stock, dated as of November
5, 1996, issued by American Eagle to American Financial
Group, Inc.
20
<PAGE> 21
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ------- -------
10.46 -- Special Underlying General Aviation Liability Excess of
Loss Reinsurance Agreement -- AR #4221 -- 1996 Final
Placement Slip (subject to a request for confidential
treatment).
10.47 -- First through Fifth General Aviation Liability Excess of
Loss Reinsurance Agreement -- AR #4222 - - 1996 Final
Placement Slip (subject to a request for confidential
treatment).
10.48 -- General Aviation Hull Special Underlying Excess of Loss
Reinsurance Agreement -- AR #4227 -- 1996 Final
Placement Slip (subject to a request for confidential
treatment).
27 -- Financial Data Schedule.
21
<PAGE> 1
EXHIBIT 4.3
WARRANT REGISTRATION RIGHTS AGREEMENT
THIS WARRANT REGISTRATION RIGHTS AGREEMENT entered into this 5th day of
November, 1996 between American Eagle Group, Inc., a Delaware corporation
("Company"), and American Financial Group, Inc., an Ohio corporation
("Holder").
W I T N E S S E T H:
WHEREAS, pursuant to a Warrant Subscription Agreement and Warrant to
Purchase Common Stock (the "Warrant"), Holder has the right to acquire 800,000
shares of the Company's Common Stock, .01 par value per share (the "Warrant
Shares");
WHEREAS, in connection with the issuance of the Warrant to Holder, the
Company agreed to provide Holder with certain rights to require Company to
register the Warrant and the Warrant Shares (collectively the "Registrable
Securities") with the Securities and Exchange Commission (the "Commission") and
applicable state securities agencies in order to permit the free
transferability and sale of the Registrable Securities by Holder.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties agree as follows:
1. Demand Registration Rights.
1.1 At any time on any three (3) separate occasions, upon the
written request of the Holder, the Company will prepare and file, promptly
after such request and in no case more than Sixty (60) days after receipt of
such notice, and thereafter use its best efforts to cause to become effective a
registration statement ("Registration Statement") on a proper form to be
selected by the Company under and complying with the Securities Act of 1933, as
amended (the "Act"), covering such number of Warrants and Warrant Shares as
shall be specified in the Holder's request; provided, however, that the Company
shall, in no event (including by reason of any assignment of rights by a
Holder), be subject to more than Three (3) demand registrations under this
Agreement and shall not be obligated at any time to register the lesser of (i)
25% of the total number of Warrants or Warrant Shares outstanding or (ii)
Warrant Shares with a market value (based on the market value of the underlying
shares of Common Stock) of less than One Million and 00/100 Dollars
($1,000,000.00) pursuant to any such request.
1.2 Within seven (7) business days of receipt of a written
request for registration under Section 1.1, the Company shall notify all other
persons or entities who beneficially own Registrable Securities at their
respective addresses as shown on the books of the Company of a proposed
registration and such persons or entities shall have the opportunity for a
period of ten (10) business days after receipt of such notice to notify the
Company in writing of their intention to have included in such registration
such number of Registrable Securities as shall be specified in their response.
<PAGE> 2
-2-
1.3 If the Holder so requests, the offering or distribution of
Registrable Securities under this Section shall be pursuant to a firm
underwriting. The managing underwriter shall be a nationally recognized
investment banking firm recommended by the Holder for the Company's reasonable
consideration and approval. The Company will enter into an underwriting
agreement with such managing underwriter containing representations, warranties
and agreements not substantially different from those customarily included by
an issuer in underwriting agreements with respect to secondary distributions;
provided, however, that the Holder shall be entitled to negotiate the
underwriting discounts and commission and other fees of such underwriter.
1.4 No securities to be sold by the Company or any security
holder of the Company shall be included in any Registration Statement filed
pursuant to this Section, unless (i) the offering is pursuant to a firm
underwriting and the managing or principal underwriter for the Holder shall
have consented to the inclusion of such other securities and (ii) all the
Registrable Securities requested to be included by the Holder are so included.
1.5 The Company shall be entitled to postpone the filing of
any Registration Statement otherwise required to be prepared and filed by it
pursuant to this Section if, at the time it receives a request for
registration, counsel for the Company is reasonably of the opinion (which
opinion shall be expressed in writing) that a material pending transaction of
the Company or any of its subsidiaries render the effecting of such
Registration Statement inappropriate at the time; provided, that the duration
of such delay shall not exceed One Hundred Eighty (180) days; provided further,
that the Company shall promptly make such filing as soon as the conditions
which permit it to delay such filing no longer exist; and provided further that
in the event of any such deferral, the Holder shall have the right to withdraw
its request for Registration and such withdrawn request shall not be considered
one of the Holder's permitted requests for registration under Section 1.1.
2. Piggy-Back Registration Rights.
2.1 If the Company or any security holder of the Company (the
"Initiating Securityholder") shall propose to file a Registration Statement for
the purpose of effecting a primary or secondary offering under the Act on Form
S-1, S-2 or S-3 or any equivalent general form for registration of equity
securities under the Act with respect to a public offering of any Company
equity security, the Company shall as promptly as practicable, but in no event
later than Thirty (30) days prior to the proposed filing date, give notice of
such intention to the Holder and shall include in such Registration Statement
all Warrant and Warrant Shares as the Holder shall request within Ten (10) days
of the giving of such notice, subject to the following limitations:
2.1.1 If the offering to be made pursuant to this
Section is initiated by the Company or by a holder pursuant to any other
registration rights agreement with the Company (a "Demanding Holder"), the
inclusion of the Registrable Securities may be conditioned or restricted
if, in the good faith opinion of the managing underwriter (or underwriters)
of the securities to be sold (or, in the absence thereof, of the principal
investment banker acting on behalf of the Company or the Demanding Holder
in effecting such sale) for which such Registration Statement is being
filed, such inclusion will have a material adverse
<PAGE> 3
-3-
impact on the offering of the securities being so registered. If the
number of Registrable Securities is so restricted, then no securities of
other securityholders shall be included in the offering unless all
securities which the Company or the Demanding Holder, as the case may be,
is attempting to sell are included therein, and any reduction required
thereafter is made among the selling securityholders pro rata based on the
number of securities held.
2.2 The Company may, without the consent of the Holder,
withdraw any Registration Statement filed pursuant to this Section 2 and
abandon any such proposed offering in which the Holder requested to
participate. The Holder may withdraw any or all of the Registrable Securities
held by the Holder from a Registration Statement filed or proposed to be filed
pursuant to this Section 2 at any time prior to the effectiveness of such
Registration Statement.
2.3 The notice from the Company to the Holder under Section 2
shall specify whether the securities to be included in such registration for a
sale by the Company are to be sold through underwriters in a firm commitment
offering. If Shares of the Holder are included in such an offering, they shall
be included on the same terms (including the same underwriting discount or
commission) applicable to the securities of the Company.
2.4 Anything in this Agreement to the contrary
notwithstanding, if at the time the Company receives a request pursuant to
Section 1.1, it gives notice to the requesting Holders that it intends within
180 calendar days of the date of such notice to make a public offering of
shares of its Common Stock pursuant to a firm underwriting, such request shall
be deemed to be a request by such Holder to participate in such public offering
by the Company pursuant to Section 2.1 rather than a request pursuant to
Section 1.1 of this Agreement; provided, however, that if such proposed public
offering shall not have occurred within such 180 days, or such additional
period not to exceed 90 days as the Company considers appropriate, such Holders
may renew such Request and the Company shall comply with its obligations under
this Agreement without giving effect to this Section 2.4.
3. Covenants of the Holder.
Any request for registration made by the Holder shall specify the
number of Registrable Securities as to which such request relates, express the
Holder's present intention to offer such Registrable Securities for
distribution and contain an undertaking to provide all such information and
materials and take all such actions and execute all such documents as may be
required in order to permit the Company to comply with all applicable
requirements of the Commission and to obtain acceleration of the effective date
of the Registration Statement.
4. Covenants of the Company.
So long as the Company is under an obligation pursuant to the
provisions of Section 1, the Company shall:
4.1 Prepare and file with the Commission such amendments and
supplements to
<PAGE> 4
-4-
such Registration Statement and the prospectus forming part of such
Registration Statement as may be necessary to keep such Registration Statement
effective for such period as shall be necessary to complete the marketing of
the Registrable Securities included therein, but in no event for longer than
One (1) year after the date the Registrable Securities may first be sold, not
including any period during which the Holder is prohibited from selling any
Registrable Securities;
4.2 Furnish to the Holder such number of copies of a
prospectus, including, without limitation, a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents as the
Holder may reasonably request in order to facilitate the public sale or other
disposition of such Registrable Securities;
4.3 Use its best efforts to register or qualify, not later
than the effective date of any Registration Statement filed pursuant to this
Agreement, the Registrable Securities covered by such Registration Statement
under the securities or Blue Sky laws of such jurisdictions within the United
States as the Holder may reasonably request and do any and all other acts or
things which may be necessary or advisable to enable the Holder to consummate
the public sale or other disposition in such jurisdiction of such Registrable
Securities; provided, however, that the Company shall not be required to
qualify as a foreign corporation or to execute a general service of process in
any such jurisdiction;
4.4 Promptly notify the Holder, at any time when a prospectus
relating to the Registrable Securities being distributed is required to be
delivered under the Act, of the happening of any event as a result of which the
prospectus included in such Registration Statement, as then in effect, includes
an untrue statement of material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing and, at the request of the
Holder, promptly prepare, file with the Commission and furnish to the Holder a
reasonable number of copies of a supplement to, or an amendment of, such
prospectus as may be necessary, or make any other appropriate filing with the
Commission pursuant to the Securities Exchange Act of 1934, as amended, which
will be incorporated by reference into the Registration Statement so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing;
4.5 Use its best efforts to furnish, at the request of the
Holder or any underwriter of any distribution of the Registrable Securities, an
opinion of legal counsel to the Company, covering such matters as are typically
covered by opinions of issuer's counsel in underwritten offerings under the
Act;
4.6 Enter into an agreement with the underwriters for such
offering in which the Company shall provide indemnities similar to those
described in Section 6 hereof to the underwriters and in which the Company
shall make the usual representations and warranties made by issuers of equity
securities to underwriters.
<PAGE> 5
-5-
4.7 Use its best efforts to cause all of the Warrants and
Warrant Shares as to which the Holder shall have requested registration to be
listed on any recognized securities exchange, including, without limitation,
the National Association of Securities Dealers Automated Quotation System, on
which the Common Stock is then listed and to maintain the currency and
effectiveness of any such listings.
5. Costs and Expenses.
Except for expenses referred to in the following sentence, with respect
to the first two registrations pursuant to Section 1 and any registrations
pursuant to Section 2, the Company shall bear the entire cost and expense of
any such registration, including, without limitation, all registration and
filing fees, printing expenses, the fees and expenses of the Company's counsel
and its independent accountants and all other out-of-pocket expenses incident
to the preparation, printing and filing under the Act of the Registration
Statements and all amendments and supplements thereto, the cost of furnishing
copies of each preliminary prospectus, each final prospectus and each amendment
or supplement thereto to underwriters, brokers and dealers and other purchasers
of the securities so registered, and the costs and expenses incurred in
connection with the qualification of the securities so registered under "blue
sky" or other state securities laws. Notwithstanding the foregoing, the
Company shall not be liable or responsible for the fees and expenses of counsel
and accountants of the Holder, all underwriting discounts and commissions
attributable to Registrable Securities registered at the request of the Holder,
and in any registration made pursuant to Section 2, all filing fees
attributable to Registrable Securities registered at the request of the Holder.
All such fees and expenses not paid by the Company shall be paid by the Holder
or, if appropriate, prorated among all selling securityholders.
6. Indemnification.
6.1 Indemnity to the Holder. The Company will indemnify the
Holder, its officers, directors and each underwriter of Registrable Securities
as well as any person who controls the Holder or such underwriters against all
claims, losses, damages, liabilities and expenses resulting from any untrue
statement or alleged untrue statement of a material fact contained in a
prospectus or in any related Registration Statement, notification or similar
filing under the securities laws of any jurisdiction or from any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
the same may have been based upon information furnished in writing to the
Company by the Holder or such underwriter expressly for use therein and used in
accordance with such writing.
6.2 Indemnity to the Company. The Holder, by requesting any
such registration, agrees to furnish to the Company such information concerning
it as may be requested by the Company and which is necessary or required by
then applicable securities laws and the rules and regulations thereunder in
connection with any Registration or qualification of the Registrable Securities
and to indemnify the Company, its officers, directors and any person who
controls the Company, against all claims, losses, damages, liabilities and
expenses resulting from the utilization of such information furnished in
writing to the Company expressly for use therein and used in
<PAGE> 6
-6-
accordance with such writing.
6.3 Indemnification Procedures. If any action is brought or
any claim is made against any party entitled to be indemnified pursuant to this
Section 6 in respect of which indemnity may be sought against the indemnitor
pursuant to Section 6 hereof, such party shall promptly notify the indemnitor
in writing of the institution of such action or the making of such claim and
the indemnitor shall assume the defense of such action or claim, including the
employment of counsel and payment of expenses. Such indemnified party shall
have the right to employ its or their own counsel in any such case, but the
fees and expenses of such counsel shall be at the expense of such party unless
the employment of such counsel shall have been authorized in writing by the
indemnitor in connection with the defense of such action or claim or such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional to
those available to the indemnitor (in which case the indemnitor shall not have
the right to direct any different or additional defense of such action or claim
on behalf of the indemnified party or parties), in any of which events such
fees and expenses of not more than one additional counsel for the indemnified
parties shall be borne by the indemnitor. Except as expressly provided above,
if the indemnitor shall not previously have assumed the defense of any such
action or claim, at such time as the indemnitor does assume the defense of such
action or claim, the indemnitor shall thereafter be liable to any person
indemnified pursuant to this Agreement for any legal or other expenses
subsequently incurred by such person in investigating, preparing or defending
against such action or claim. Anything in this paragraph to the contrary
notwithstanding, the indemnitor shall not be liable for any settlement of any
such claim or action effected without its written consent.
7. Miscellaneous.
7.1 Notices.
Notices given under this Agreement shall
be deemed given when received and the addresses for the parties set forth below
and may be delivered by telex or other telecommunications device producing a
document setting forth such notice.
If to the Company: American Eagle Group, Inc.
12801 N. Central Parkway
Suite 800
Dallas, Texas 75243
Attn: Chief Executive Officer
Facsimile No.: (972) 448-1401
If to the Holder: American Financial Group, Inc.
One East Fourth Street, Suite 919
Cincinnati, Ohio 45202
Attn: Samuel J. Simon
Facsimile No: (513) 579-2113
<PAGE> 7
-7-
7.2 Binding Agreement. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
successors and assigns.
7.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware.
7.4 Assignability. The rights and obligations of the Holder
hereunder may be assigned by it to any corporation or corporations, or other
entity or entities controlled by it or controlling it or to which it may
transfer any Registrable Securities. Upon such transfer, each transferee shall
be deemed for all purposes of this Agreement to be the "Holder."
7.5 Succeeding Securities. If the Registrable Securities of
the Company covered by this Agreement are converted into any other security of
the Company or any other corporation, the terms of this Agreement shall apply
with full force and effect to any such other security and the obligations of
the Company to effect registration shall include such other filings,
qualifications, notices and similar acts as may be necessary to enable the
Holder to realize the benefits of registration provided by this Agreement.
7.6 Counterparts. This Agreement may be executed in Two (2)
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
7.7 Other Registration Rights. Nothing in this Agreement
shall prohibit the Company from granting registration rights on its securities
in the future.
<PAGE> 8
-8-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
AMERICAN FINANCIAL GROUP, INC.
BY: Carl H. Lindner
ITS: Co-President
-------------------------------
AMERICAN EAGLE GROUP, INC.
BY: M. Philip Guthrie
ITS: Chairman of the Board, CEO
and President
-------------------------------
<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
This Agreement, entered into as of August 15, 1996, is between
AMERICAN EAGLE GROUP, INC., a Delaware corporation (the "Employer"), and Robert
W. Conrey, (the "Employee").
The Employer desires to employ the Employee and the Employee is
willing to serve the Employer on the terms and conditions provided in this
Agreement. Therefore, the parties hereby agree as follows:
1. EMPLOYMENT. The Employer agrees to employ the Employee as Senior
Vice President or in any other position with substantially similar title,
duties and responsibilities to which Employee may be elected or appointed by
the Board of Directors of the Employer. Employee agrees to serve in any such
capacity and perform the duties prescribed from time to time by the Bylaws, the
Board of Directors of the Employer or the officer to whom Employee reports,
upon the terms and conditions set forth in this Agreement.
2. TERM.
(a) Unless sooner terminated in accordance with the provisions
hereof, the term of employment shall continue for a period of three years from
the date hereof.
(b) On each anniversary of this Agreement, the term of this
Agreement shall be automatically extended for a period of one additional year
unless at least 60 days before any such anniversary either party provides the
other party written notice that the automatic extension shall be terminated.
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3. COMPENSATION.
(a) The Employee shall receive the following compensation for
his services:
(i) Annual cash compensation of not less than
$112,500, with such increases as the Board of
Directors of the Employer, in its sole discretion,
may approve, which will be paid periodically
pursuant to the Employer's normal salary payment
policy;
(ii) Such annual bonuses in amounts up to 50% of the
Employee's annual cash compensation under Section
3(a)(i), as the Board of Directors of the
Employer, in its sole discretion, may approve; and
(iii) Participation in the employee benefit plans
maintained by the Employer for its employees
generally, as such plans are in effect from time
to time in accordance with their terms.
(b) As additional compensation for the Employee's services,
the Employee may be granted additional options, awards, rights or
participations under present or future incentive compensation or other plans,
in each case as and to the extent approved or determined by the Board of
Directors of the Employer or an appropriate committee thereof.
(c) The Employer may offset against any compensation due the
Employee under this Agreement any compensation paid to the Employee by
subsidiaries of the Employer for services rendered by the Employee to the
subsidiary.
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4. REIMBURSEMENT OF BUSINESS EXPENSES. The Employer shall reimburse
the Employee for all reasonable business expenses incurred by the Employee in
accordance with the policies of the Employer in effect from time to time, upon
presentation of proper supporting documentation therefor.
5. EXTENT OF SERVICE. The Employee shall devote substantially all
of his time, attention and energy to the business of the Employer and its
subsidiaries and shall not, during the term of this Agreement, be actively
engaged in any other business activity for gain, profit, or other pecuniary
advantage. This Section shall not prohibit the Employee from making personal
passive investments in other business entities.
6. TERMINATION.
(a) The employment of Employee shall terminate upon the
occurrence of any of the following:
(i) The death of the Employee;
(ii) The delivery by the Employer to the Employee of
written notice of termination of employment due to
the disability of the Employee, where "disability"
shall mean the Employee's inability, because of
injury or illness, whether physical or mental, to
perform the material services to the Employer
contemplated by this Agreement for a continuous
period of 150 days or for 180 days out of a
continuous period of 300 days;
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(iii) The delivery by the Employer to the Employee of
written notice of termination of employment due to
conduct by the Employee constituting (a) an act
that the Board of Directors of the Employer deems
to be materially injurious to the Employer; or (b)
continuing poor performance of the Employee's
duties hereunder after the Company has given the
Employee written notice of his poor performance,
specifying the performance criteria that the
Employee is performing poorly, and has given the
Employee at least three months to improve his
performance to an acceptable level;
(iv) The delivery by the Employer to the Employee of
written notice of termination of employment due to
conduct by the Employee constituting (a) a willful
and knowing violation of any law, rule or
regulation, or causing the Employer to willfully
and knowingly violate any law, rule or regulation,
which in either case is materially and
demonstrably injurious to the Employer; (b) fraud;
(c) misappropriation of the Employer's property;
or (d) an act of moral turpitude;
(v) The willful material breach by the Employee of any
duty or obligation hereunder; or
(vi) The retirement, resignation or other termination
of employment by the Employee for any reason other
than good reason (as defined below).
(b) The Employee may terminate his employment for good reason
following a Change of Control (as defined below). For purposes of this
Agreement, "good reason" means
4
<PAGE> 5
that, because of a Change of Control, the Employee is required to relocate
without his consent, or the Employee is required to accept a diminished
position or diminished responsibilities with the Employer. The Employee must
deliver to the Employer written notice of termination for good reason, in which
event his employment will terminate 30 days after the date of the notice.
(c) Upon termination of employment of the Employee for any
reason, the Employer shall pay the Employee or his legal representative the
compensation accrued and unpaid at the date of termination. Except as provided
in Section 6(d) below, the Employer shall have no further obligation to the
Employee or his legal representative.
(d) Upon the termination of employment of the Employee for any
reason other than those set forth in Section 6(a) hereof, or in the event of a
Change of Control (as defined below), upon the subsequent termination of
employment by the Employee for good reason or by the Employer for any reason
other than those set forth in Sections 6(a) (i), (ii), (iv), (v) or (vi)
hereof, the Employer shall have no further obligation to the Employee or his
legal representative except that the Employee or his legal representative shall
be entitled to receive the amounts that would have been paid to the Employee at
his then current rate of compensation pursuant to Section 3(a)(i) hereof for
the term of this Agreement remaining pursuant to Section 2 hereof immediately
prior to the date of termination of employment. Such amounts shall be paid as
and when they would have been paid pursuant to Section 3(a)(i) hereof had the
Employee's employment not been terminated.
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(e) For the purposes of this Agreement, the term "Change of
Control" shall mean:
(i) The acquisition, after the effective date of this
Agreement, by an individual, entity or group
(within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act")) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either
(a) the shares of the Common Stock of the
Employer, or (b) the combined voting power of the
voting securities of the Employer entitled to vote
generally in the election of directors (the
"Voting Securities"); provided, however, that the
following shall not constitute a Change of
Control: (w) any such acquisition so long as
Mason Best Company, L.P. continues to own more
shares of the Common Stock and Voting Securities
than does the acquiring individual, entity or
group, but such acquisition shall constitute a
Change of Control once Mason Best Company, L.P.
does not own more such shares than the acquiring
individual, entity or group; or (x) any
distribution by Mason Best Company, L.P. to its
partners of shares of Common Stock; or (y) any
acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the
Employer or any subsidiary, or (z) any acquisition
by any corporation if, immediately following such
acquisition, more than 80% of the then outstanding
shares of common stock of such corporation and the
combined voting power of the then outstanding
voting securities of such
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corporation (entitled to vote generally in the
election of directors), is beneficially owned,
directly or indirectly, by all or substantially
all of the individuals and entities who,
immediately prior to such acquisition, were the
beneficial owners of the Common Stock and the
Voting Securities in substantially the same
proportions, respectively, as their ownership,
immediately prior to such acquisition, of the
Common Stock and Voting Securities;
(ii) Individuals who, as of the effective date of this
Agreement, constitute the Board of Directors of
the Employer (the "Incumbent Board") cease for any
reason to constitute at least a majority of the
Board; provided, however, that any individual
becoming a director subsequent to the effective
date of this Agreement whose election, or
nomination for election by the Employer's
shareholders, was approved by a vote of at least a
majority of the directors then serving and
comprising the Incumbent Board shall be considered
as though such individual were a member of the
Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of
office occurs as a result of either an actual or
threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or
threatened solicitation of proxies or consents; or
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(iii) Approval by the shareholders of the Employer of a
reorganization, merger or consolidation, other
than a reorganization, merger or consolidation
with respect to which all or substantially all of
the individuals and entities who were the
beneficial owners, immediately prior to such
reorganization, merger or consolidation, of the
Common Stock and Voting Securities beneficially
own, directly or indirectly, immediately after
such reorganization, merger or consolidation more
than 80% of the then outstanding common stock and
voting securities (entitled to vote generally in
the election of directors) of the corporation
resulting from such reorganization, merger or
consolidation in substantially the same
proportions as their respective ownership,
immediately prior to such reorganization, merger
or consolidation, of the Common Stock and the
Voting Securities; or
(iv) Approval by the shareholders of the Employer of
(a) a complete liquidation or dissolution of the
Employer, or (b) the sale or other disposition of
all or substantially all of the assets of the
Employer, other than to a subsidiary,
wholly-owned, directly or indirectly, by the
Employer. For purposes of this Agreement, and
without limiting the generality of the preceding
sentence, the sale or other disposition by the
Employer of more than 50% of the common stock or
the voting securities (entitled to vote generally
in the election of directors) of
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American Eagle Insurance Company shall be deemed
to constitute a sale or other disposition of
substantially all the assets of the Employer.
7. EMPLOYEE'S COVENANTS.
(a) During his term of employment and for three years
thereafter:
(i) The Employee acknowledges that information about
the Employer and its affiliates and their
businesses, operations and financial condition
that has not been publicly disclosed by the
Employer constitutes valuable, special and unique
property of the Employer and its affiliates. The
Employee agrees not to disclose to any person or
use for any purpose, any such confidential
information of the Employer or its affiliates
except as may be required by law or in the course
and scope of his employment by the Employer.
(ii) The Employee agrees not to directly or indirectly
solicit or induce in any way any officer,
director, employee, agent or broker of, or any
person having a business relationship with, the
Employer or any of its affiliates to terminate
such person's relationship with the Employer or
its affiliates.
(iii) The Employee agrees not to directly or indirectly
solicit from any customer of the Employer or its
affiliates any insurance business of the same
class or type that such customer conducts with the
Employer or any of its affiliates, unless such
solicitation is on behalf of the Employer or its
affiliates.
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(iv) The Employee agrees not at any time to make
negative or disparaging statements directly or
indirectly concerning or relating to the Employer,
its affiliates or their businesses.
(b) The agreements made in this Section shall be in addition
to, and not in limitation or derogation of, any obligations otherwise imposed
by law or by separate agreement upon the Employee in respect of the matters set
forth in this Section.
8. CONFLICTS AND CODE OF ETHICS. On or before the effective date of
this Agreement, the Employee agrees to execute and deliver to the Employer the
Code of Ethics in the form attached hereto as Attachment 1, and to thereafter
abide by the provisions thereof.
9. INDEPENDENT COVENANTS. The provisions in this Agreement are
independent and separate. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the terms hereof:
(a) in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as a part of
this Agreement a provision as similar in economic and
business terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and
unenforceable; and
(b) the legality, validity and unenforceability of the
remaining provisions hereof shall not in any way be
affected or impaired thereby.
10. INJUNCTIVE RELIEF. In the event of a breach or threatened breach
by the Employee of the provisions of this Agreement, the Employer shall be
entitled to an injunction to prevent irreparable injury to the Employer. The
Employer may also pursue any other
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remedies available to the Employer for such breach or threatened breach,
including the recovery of damages from the Employee.
11. INTEGRATION. This Agreement represents the entire agreement
between the parties with respect to the Employee's employment by Employer, and
all prior agreements between the parties relating to that subject matter are
superseded.
12. AMENDMENT; WAIVER. No modification or amendment of this
Agreement shall be valid and binding, unless it is in writing and signed by the
parties. The waiver of any provision hereof shall be effective only if in
writing and signed by the parties, and then only in the specific instance and
for the particular purpose for which it was given. No failure to exercise, and
no delay in exercising, any right or power hereunder shall operate as a waiver
thereof.
13. BENEFIT. This Agreement shall be binding upon the Employee, his
heirs and personal representatives, and the Employer, its successors and
assigns. Neither this Agreement, nor the rights and obligations created under
it, may be assigned by the Employee without the prior consent of the Employer.
14. GOVERNING LAW. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of Texas.
EXECUTED as of the date first written above.
AMERICAN EAGLE GROUP, INC.
By: /s/ M. PHILIP GUTHRIE
----------------------------------------
Name: M. Philip Guthrie
-------------------------------------
Title: Chairman of the Board
-------------------------------------
/s/ ROBERT W. CONREY
-------------------------------------
Robert W. Conrey
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EXHIBIT 10.42
AMENDMENT
This Amendment (the "Amendment") is entered into as of November 5, 1996
by and between American Eagle Group, Inc. (the "Borrower") and The First
National Bank of Chicago, individually and as Agent.
W I T N E S S E T H :
WHEREAS, the Borrower and The First National Bank of Chicago, as the
sole Lender (the "Lender") and as Agent (in such capacity, the "Agent"), are
parties to that certain Amended and Restated Credit Agreement dated as of
December 29, 1994, as amended from time to time prior to the date hereof (as so
amended; the "Agreement"); and
WHEREAS, the Borrower and the Lender desire to amend certain provisions
of the Agreement as more fully described hereinafter;
NOW, THEREFORE, In consideration of the premises herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise
defined herein shall have the meanings attributed to such terms in the
Agreement.
2. Amendment.
2.1. Article 1 of the Agreement is hereby amended by inserting, in
proper alphabetical order, the following definitions:
"'Equity Issuance' means the issuance by the Borrower of any
shares of any class of stock, warrants or other equity interests of the
Borrower."
"'Required Equity Issuance' means an Equity Issuance consummated
substantially on the terms set forth in that certain Securities Purchase
Agreement dated November 5, 1996 between American Financial Group, Inc. and
the Borrower, or on such other terms and conditions as shall be
satisfactory to the Required Lenders, pursuant to which the Borrower shall
realize gross cash proceeds of not less than $35,000,000."
2.2. Section 2.2 of the Agreement is hereby amended by inserting,
immediately after the table set forth therein, the following sentence:
"In addition to the reductions set forth above, concurrently with
the consummation of the Required Equity Issuance, the Aggregate Commitment
shall be automatically and permanently reduced by $5,000,000. In addition,
concurrently with the payment of any Obligations in accordance with Section
7.29 the Aggregate Commitment shall be automatically and permanently
reduced in an amount equal to any such payment."
<PAGE> 2
2.3. Section 7.10 of the Agreement is hereby ammended to read in its
entirety as follows:
"7.10. Consolidated Tangible Net Worth. The Borrower will
maintain Consolidated Tangible Net Worth of not less that (i) at all
times prior to December 30, 1996, $43,500,000, and (ii) at all times
thereafter, $46,500,000. The amount set forth in the foregoing clause
(ii) shall be increased by $.65 for each $1.00 received by the
Borrower on or after November 5, 1996 from an Equity Issuance,
including without limitation the Required Equity Issuance."
2.4. Section 7.11 of the Agreement is hereby amended by deleting the
period at the end thereof and inserting the following in lieu thereof:
"provided further that the calculation of the Fixed Charge
Coverage Ratio for any period shall be exclusive of operating losses on
an after-tax basis, incurred or taken during such period directly
related to operations of the transportation and dealer lines of
businesses, calculated in accordance with Agreement Accounting
Principles."
2.5. Seciton 7.12 of the Agreement is hereby amended to read in its
entirety as follows:
"7.12. Statutory Capital and Surplus. The Borrower will not
permit the total Statutory Capital and Surplus of American Eagle to be
less than (i) $44,500,000 at any time prior to December 30, 1996 and
(ii) $48,000,000 at any time thereafter. The amount set forth in the
foregoing clause (ii) shall be increased by $.25 for each $1.00
received by American Eagle from any capital contribution made by the
Borrower or any other Person."
2.6. Section 7.13 of the Agreement is hereby amended to read in its
entirety as follows:
"7.13. Combined Ratio. The borrower will cause American Eagle to
maintain, as at the last day of each fiscal quarter ending
during the following periods, a Combined Ratio, calculated for the four
consecutive fiscal quarters ending on such day, not greater that (i)
prior to October 1, 1996, 1.05 to 1.0. and (ii) thereafter, 1.02 to
1.0."
2.7. Section 7.14 of the Agreement is hereby amended to read in its
entirety as follows:
"7.14. Ratio of Net Premiums Written to Statutory Capital and
Surplus. The Borrower will cause American Eagle to maintain as
at the last day of each fiscal quarter ending during the following
periods, a Ratio of Net Premiums Written to Statutory Capital and
Surplus, calculated for the four consecutive fiscal quarters ending on
such day, not greater than (i) prior to October 1, 1996, 2.85 to 1.0
(ii) during the period from October 1, 1996 to (but excluding) the
earlier to occur of (a) March 31, 1997 and (b) the date of consummation
of the Required Equity Issuance 2.75 to 1.0 and (iii) thereafter, 2.25
to 1.0."
2.8. Section 7.21 (ii) of the Agreement is hereby amended by deleting
the period at the end thereof and inserting the following in lieu thereof:
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"; provided that any such investments made with the proceeds of
the Required Equity issuance shall not exceed, in the aggregate, the
excess, if any, of (a) the amount of net cash proceeds realized by the
Borrower from the Required Equity Issuance over (b) $15,000,000."
2.9. Article VII of the Agreement is hereby amended by inserting the
following new Section 7.29 at the end thereof:
"7.29. Proceeds of Required Equity Issuance. The Borrower will
cause not less than $10,000,000 of the proceeds of the Required Equity
Issuance to be held as cash or invested in Cash Equivalents; provided,
however, that the Borrower may also use any or all of such proceeds to
(i) pay any Obligations under the Loan Documents, (ii) to pay mandatory
dividends on or make mandatory redemptions of the Borrow's Series B
Cumulative Preferred Stock, and (iii) to pay operating expenses of the
Borrower in the ordinary course of business."
2.10. Article VIII of the Agreement is hereby amended by inserting the
following new Section 8.13 at the end thereof:
"8.13. The Borrower shall fail to consummate, on or before
March 31, 1997, the Required Equity Issuance."
3. Representations and Warranties. In order to induce the Lender and the
Agent to enter into this Amendment, the Borrower represents and warrants that:
3.1. The representations and warranties set forth in Article VI of the
Agreement are true and correct on the date hereof as if made on and as of the
date hereof, except to the extent any such representation or warranty is stated
to relate solely to an earlier date, in which case such representation or
warranty was true and correct on and as of such earlier date, and there exists
no Default or Unmatured Default on the date hereof.
3.2. The execution and delivery by the Borrower of this Amendment have
been duly authorized by proper corporate proceedings, and this Amendment and
the Agreement, as amended by this Amendment, constitute the legal, valid and
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.
3.3. Neither the execution and delivery by the Borrower of this
Amendment, nor the consummation of the transactions herein contemplated, nor
compliance with the provisions hereof will violate any law, rule, regulation,
order, writ, judgement, injunction, decree or award binding on the Borrower or
any of its Subsidiaries or the Borrower's or any of its Subsidiaries' articles
of incorporation or by-laws or the provisions of any indenture, instrument or
agreement to which the Borrower or any of its Subsidiaries is a party or is
subject, or by which it or its property is bound, or conflict with or
constitute a default thereunder. No consent, approval or authorization of any
Person is required to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, this Amendment or the Agreement, as amended by
this Agreement.
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4. Effective Date. This Amendment shall become effective as of the date
first above written (the "Effective Date") upon receipt by the Agent of the
following:
(i) Counterparts of this Amendment duly executed by the Borrower
and the Lender.
(ii) Copies, certified by the Secretary or an Assistant Secretary of
the Borrower, of its Board of Directors' resolutions
authorizing the execution of this Amendment.
(iii) Such other documents, in each case in form and substance
satisfactory to the Agent, as the Agent may reasonably request.
Notwithstanding the foregoing, upon the receipt of all such documents by the
Agent, the amendments contained in Sections 2.3 through 2.7 hereof shall be
deemed to become effective as of September 30, 1996.
5. Ratification. The Agreement, as amended hereby, shall remain in
full force and effect and is hereby ratified, approved and confirmed in all
respects.
6. Reference to Agreement. From and after the Effective Date, each
reference in the Agreement to "this Agreement", "hereof", or "hereunder" or
words of like import, and all references to the Agreement in any and all
agreements, instruments, documents, notes, certificates and other writings of
every kind and nature shall be deemed to mean the Agreement, as amended by this
Agreement.
7. Costs and Expenses. The Borrower agrees to pay all reasonable
costs, fees and out-of-pocket expenses (including attorneys' fees and time
charges of attorneys for the Agent, which attorneys may be employees of the
Agent) incurred by the Agent in connection with the preparation, execution and
enforcement of this Amendment.
8. CHOICE OF LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS,
BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
9. Execution in Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Borrower, the Lender and the Agent have
executed this Amendment as of the date first above written.
AMERICAN EAGLE GROUP, INC.
By: /s/ M. PHILIP GUTHRIE
---------------------------------
Title: Chairman, CEO and President
------------------------------
THE FIRST NATIONAL BANK OF
CHICAGO, individually and as Agent
By: /s/ THOMAS W. DODDRIDGE
---------------------------------
Title: Vice President
------------------------------
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EXHIBIT 10.43
================================================================================
SECURITIES PURCHASE AGREEMENT
BETWEEN
AMERICAN FINANCIAL GROUP, INC.,
PURCHASER
AND
AMERICAN EAGLE GROUP, INC.,
SELLER
================================================================================
Execution Copy
<PAGE> 2
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TABLE OF CONTENTS
<TABLE>
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Page
<S> <C> <C>
ARTICLE 1 INTERPRETATION
1.1 Definitions . . . . . . . . . . . . . . . . . . . . 1
1.2 Rules of Construction . . . . . . . . . . . . . . . 7
ARTICLE 2 SALE AND PURCHASE OF PURCHASED SECURITIES
2.1 Sale and Purchase of Purchased Securities . . . . . 8
2.2 Purchase Price . . . . . . . . . . . . . . . . . . 8
2.3 Delivery of Warrants . . . . . . . . . . . . . . . 8
2.4 Closing. . . . . . . . . . . . . . . . . . . . . . 8
2.5 Use of Proceeds . . . . . . . . . . . . . . . . . . 8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Corporate Existence . . . . . . . . . . . . . . . . 9
3.2 Corporate Power; Authorization . . . . . . . . . . 9
3.3 Enforceable Obligations . . . . . . . . . . . . . . 9
3.4 No Legal Bar . . . . . . . . . . . . . . . . . . . 9
3.5 Absence of Conflicts . . . . . . . . . . . . . . . 10
3.6 Litigation . . . . . . . . . . . . . . . . . . . . 10
3.7 Financial Condition . . . . . . . . . . . . . . . . 10
3.8 No Change . . . . . . . . . . . . . . . . . . . . . 10
3.9 No Default . . . . . . . . . . . . . . . . . . . . 10
3.10 Compliance with Laws . . . . . . . . . . . . . . . 11
3.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . 11
3.12 ERISA . . . . . . . . . . . . . . . . . . . . . . . 11
3.13 Environmental Matters . . . . . . . . . . . . . . . 11
3.14 Investment Company Act . . . . . . . . . . . . . . 11
3.15 Capitalization of Seller . . . . . . . . . . . . . 11
3.16 Capitalization of Subsidiaries . . . . . . . . . . 11
3.17 Title to Assets; Leases . . . . . . . . . . . . . . 12
3.18 Disclosure . . . . . . . . . . . . . . . . . . . . 12
3.19 Undisclosed Liabilities . . . . . . . . . . . . . . 12
3.20 Compliance with Federal Reserve Regulations . . . . 12
3.21 Survival of Representations and Warranties . . . . 12
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER
4.1 Representations and Warranties of Purchaser . . . . 12
ARTICLE 5 AFFIRMATIVE COVENANTS
5.1 Financial Statements . . . . . . . . . . . . . . . 15
5.2 Conduct of Business and Maintenance of Existence . 16
5.3 Maintenance of Property; Insurance . . . . . . . . 16
5.4 Strategic Alliance. . . . . . . . . . . . . . . . . 16
5.5 Recapitalization Charge . . . . . . . . . . . . . . 16
</TABLE>
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<PAGE> 3
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<TABLE>
<S> <C> <C>
ARTICLE 6 OTHER PROVISIONS
6.1 Shareholder Approval . . . . . . . . . . . . . . . 17
6.2 Regulatory Approvals . . . . . . . . . . . . . . . 17
6.3 Reservation of Shares . . . . . . . . . . . . . . . 17
6.4 Good Faith by Seller . . . . . . . . . . . . . . . 17
6.5 Board of Directors . . . . . . . . . . . . . . . . 18
6.6 Voting Agreement. . . . . . . . . . . . . . . . . . 18
6.7 No Solicitation and Other Actions. . . . . . . . . 18
ARTICLE 7 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
7.1 Conditions Precedent . . . . . . . . . . . . . . . 20
ARTICLE 8 CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
8.1 Conditions Precedent . . . . . . . . . . . . . . . 22
ARTICLE 9 TERMINATION OF AGREEMENT
9.1 Termination . . . . . . . . . . . . . . . . . . . . 23
9.2 Effect of Termination . . . . . . . . . . . . . . . 24
9.3 Default under the Agreement. . . . . . . . . . . . 24
ARTICLE 10 MISCELLANEOUS
10.1 Amendments and Waivers . . . . . . . . . . . . . . 24
10.2 No Waiver; Cumulative Remedies . . . . . . . . . . 24
10.3 Notices . . . . . . . . . . . . . . . . . . . . . . 25
10.4 Successors and Assigns . . . . . . . . . . . . . . 26
10.5 Enforcement Costs . . . . . . . . . . . . . . . . . 26
10.6 Counterparts . . . . . . . . . . . . . . . . . . . 26
10.7 Term . . . . . . . . . . . . . . . . . . . . . . . 26
10.8 Consent to Jurisdiction . . . . . . . . . . . . . . 26
</TABLE>
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EXHIBITS
Exhibit A Amended Registration Rights Agreement
Exhibit B Preferred Stock Designation
Exhibit C Intentionally Omitted
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Warrant
Exhibit F Form of Warrant Registration Rights
Agreement
Exhibit G Form of Mason Best Commitment
SCHEDULES
Schedule 3.2 Consents
Schedule 3.6 Litigation
Schedule 3.8 Absence of Change
Schedule 3.15 Capitalization of Seller
Schedule 3.16 Capitalization of Subsidiaries
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT is made this 5th day of November,
1996, by and between AMERICAN EAGLE GROUP, INC., a Delaware corporation
("Seller"), and AMERICAN FINANCIAL GROUP, INC., an Ohio corporation
("Purchaser").
ARTICLE 1
INTERPRETATION
Section 1.1 Definitions. The following capitalized terms are
defined as follows:
"Affiliate" means any Person which directly or indirectly controls, or
is controlled by, or is under common control with, any Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise. The term
"Affiliate" does not include the Purchaser nor any of its subsidiaries or
affiliates.
"AFG" shall mean American Financial Group, Inc., an Ohio corporation,
and any of its subsidiaries designated to purchase Seller's securities
hereunder.
"Agreement" or "this Agreement" means this Securities Purchase
Agreement (including all exhibits and schedules annexed hereto) as originally
executed, or if supplemented, amended, or restated from time to time, as so
supplemented, amended, or restated.
"Amended Registration Rights Agreement" means the Amended Registration
Rights Agreement in the form of Exhibit A, to be executed by Seller and Mason
Best Company L.P. amending the Registration Rights Agreement between such
parties dated March 21, 1994.
"Bank Debt" means the indebtedness of Seller pursuant to the terms of
an Amended and Restated Credit Agreement dated as of December 29, 1994 among
Seller, the lenders described therein and The First National Bank of Chicago,
as Agent, as amended by Amendments to the Restated Credit Agreement dated as of
February 23, 1996, March 18, 1996, May 3, 1996 and September 20, 1996, and as
may be amended in the future.
"Business Day" means any day, except a Saturday, Sunday or legal
holiday, on which commercial banking institutions are open for business in
Dallas, Texas, Cincinnati, Ohio and New York, New York.
"Capitalized Lease" shall mean any lease the obligation for Rentals
with respect to which is required to be capitalized on a balance sheet of the
lessee in accordance with GAAP.
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"Certificate of Designation" shall mean the Certificate of Designation
of the terms of the Preferred Stock, in the form of Exhibit B, to be executed
and filed by Seller authorizing the issuance of, and setting forth the terms
of, the Preferred Stock.
"Closing Date" means the fifth Business Day following the date on
which all conditions precedent specified in Article 7 hereof shall have been
satisfied in full or waived in writing, but in any event, such date shall be
within one hundred eighty (180) days of the execution of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Commission" shall mean the United States Securities and Exchange
Commission and any successor federal agency having similar powers.
"Common Stock" shall mean the voting Common Stock of the Seller, par
value $.01 per share.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Seller within the meaning
of Section 4001 of ERISA or is part of a group which includes the Seller and
which is treated as a single employer under Section 414 of the Code.
"Competing Proposal" means any proposal or offer to the Seller or the
stockholders of the Seller with respect to (i) any merger, consolidation, share
exchange, business combination, or other similar transaction, (ii) any sale,
lease, exchange, transfer or other disposition of all or substantially all of
the assets of the Seller and its material Subsidiaries, taken as a whole, in a
single transaction or series of related transactions, or (iii) any tender,
exchange or other offer for shares of the Seller's Stock.
"Contractual Obligation" means, with respect to any Person, any
provision or requirement of any security issued by such Person or of any
agreement, instrument or other undertaking to which such Person is a party or
by which it or any of its property is bound.
"Convertible Securities" shall mean evidence of indebtedness, shares
of stock or other securities which are directly or indirectly convertible into
or exchangeable for, with or without payment of additional consideration,
shares of Stock, either immediately or upon the arrival of a specified date or
the happening of a specified event.
"Director Duty" has the meaning set forth in Section 6.7 hereof.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA, other than a Multiemployer Plan.
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"Environmental Laws" means all federal, state and local laws, rules,
regulations, ordinances, permits, orders, writs, judgments, injunctions,
decrees, determinations, awards and consent decrees relating to hazardous
substances and environmental matters applicable to the business, operations or
activities of the Seller or any Subsidiary of the Seller.
"ERISA" means the Employee Retirement Income Security Act of 1974 and
the rules and regulations issued thereunder, as amended from time to time and
any successor statute.
"ERISA Affiliate" means, in relation to any Person, any trade or
business (whether or not incorporated) which is a member of a group of which
that Person is a member and which is under common control within the meaning of
the regulations promulgated under Section 414 of the Code.
"Exchange" means the New York Stock Exchange, Inc.
"Financial Statements" means those audited consolidated financial
statements of Seller and its Subsidiaries for the periods ended December 31,
1995 and those unaudited statements for the nine months ended September 30,
1996, previously delivered to the Purchaser.
"GAAP" means generally accepted accounting principles in the United
States at the time in effect.
"Guarantee Obligation" means, with respect to any Person, any
obligation in the nature of a guaranty, repurchase arrangement, loan or
advancement agreement, reimbursement obligation, comfort letter, hold harmless,
indemnity or counter-indemnity or similar obligation, with respect to any
indebtedness, lease, dividend or other obligations of any other Person,
directly or indirectly, fixed or contingent, matured or unmatured which is
required to be disclosed in the financial statements of Seller under GAAP;
provided, however, that the term shall not include endorsements of instruments
for deposit or collection in the ordinary course of business. The amount of
any Guarantee Obligation shall be deemed to be the maximum amount for which the
guaranteeing person may be liable pursuant to the terms of the instrument
embodying such Guarantee Obligation, or if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof.
"Indebtedness" means, with respect to any Person at any date, (a) all
indebtedness of such Person for borrowed money, (b) indebtedness of such Person
for the deferred purchase price of services or property, which purchase price
is (i) due twelve (12) months or more from the date of incurrence of the
obligation in respect thereof or (ii) is evidenced by a note, bond, debenture
or similar instrument, (c) all obligations of such Person under Capitalized
Leases, (d) all obligations of such Person in respect of acceptances, letters
of credit or similar facilities issued or created for the account of such
Person, and (e) all liabilities secured by any Lien on any property owned by
such Person even though such Person has not assumed or otherwise become liable
for the payment thereof.
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"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any Capitalized Lease having substantially the same
economic effect as any of the foregoing, and the filing of any Financing
Statement under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing). The term "Lien" shall
include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting property.
"Market Price" per share of Common Stock on any date shall be deemed
to be the average of the daily closing prices for the preceding five business
days before the day in question. The closing price for each day shall be the
last reported sale price regular way or, in case no such reported sale takes
place on such day, the average of the reported closing bid and asked prices
regular way, in either case on the Exchange or, if the Common Stock is not
listed or admitted to trading on the Exchange, on the principal national
securities exchange on which the Common Stock is listed or admitted to trading
or, if not listed or admitted to trading on any national securities exchange,
the average of the closing bid and asked prices as reported by the National
Association of Securities Dealers Automated Quotation System.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, property or condition (financial or otherwise) of the
Seller and its Subsidiaries, considered as one entity, (b) the ability of the
Seller to perform its obligations under this Agreement or any other Transaction
Document to which it is a party, or (c) the validity or enforceability of this
Agreement or any of the other Transaction Documents or the rights or remedies
of the Purchaser.
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Obligations" means, the obligations of the Seller to the Purchaser
presently existing or hereafter arising under any Transaction Documents,
including without limitation, the Seller's obligation to redeem or repurchase
the Preferred Stock in accordance with the terms of the Certificate of
Designation.
"Options" shall mean any options or other rights to subscribe for,
purchase or acquire any Stock.
"PBGC" means the Pension Benefit Guaranty Corporation.
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"Permitted Liens" shall mean:
(a) liens securing the Bank Debt;
(b) liens arising by operation of law for taxes not yet
due and payable;
(c) statutory liens of mechanics, materialmen, shippers
and warehousemen for services or materials for which payment is not
yet due and which occur in the ordinary course of business;
(d) liens, charges, encumbrances and priority claims
incidental to the conduct of business or the ownership of properties
and assets or other liens of like general nature incurred in the
ordinary course of business and not in connection with the borrowing
of money, provided in each case, the obligation secured is not overdue
or, if overdue is being contested in good faith and by appropriate and
lawful proceedings promptly initiated and diligently conducted (of
which the Seller has given prior written notice to the Purchaser) and
for which appropriate reserves (in accordance with GAAP) have been
established and so long as levy and execution have been and continue
to be stayed;
(e) liens incurred or pledges or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; and
(f) liens imposed by law, such as carriers',
warehousemen's or mechanics' liens, incurred by it in good faith in
the ordinary course of business, and liens arising out of a judgment
or award against it with respect to which it will currently be
prosecuting an appeal, a stay of execution pending such appeal having
been secured.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
limited liability company, governmental authority or other entity of whatever
nature.
"Preferred Stock" means the shares of Series D Preferred Stock of the
Seller issued pursuant to the terms of the Certificate of Designation.
"Preferred Stock Certificate" means the stock certificate of Seller
representing 350,000 shares of Preferred Stock to be issued to Purchaser.
"Purchased Securities" means the 350,000 shares of Preferred Stock
purchased pursuant to the terms of this Agreement.
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"Registration Rights Agreement" means the Registration Rights
Agreement to be executed between Seller and Purchaser on or before the Closing
in the form of Exhibit D attached hereto.
"Rentals" shall mean and include all fixed rents (including as such
all payments which the lessee is obligated to make to the lessor on termination
of the lease or surrender of the property) payable by the Seller or its
Subsidiaries, as lessee or sublessee under a lease of real or personal
property, but shall be exclusive of any amounts required to be paid by the
Seller or its Subsidiaries (whether or not designated as rents or additional
rents) on account of maintenance, repairs, insurance, taxes and similar
charges.
"Reportable Event" means any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty (30) day
notice period is waived under subsections .13, .14, .16, .18, .19 or .20 of
PBGC Reg. Section 2615.
"Requirements of Law" means, with respect to any Person, the
Certificate of Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of any governmental or political subdivision of any agency,
authority, bureau, central bank, commission, department or any court,
arbitrator, or grand jury, in each case whether foreign or domestic, applicable
to or binding upon such Person or any of its property or to which such Person
or any of its property is subject.
"Responsible Officer" means, with respect to any Person, the (i) chief
executive officer or the president of such Person, and (ii) with respect to
financial matters, the chief financial officer, or any vice president with
financial responsibilities of such Person.
"Stock" shall mean all classes and categories of the capital stock of
the Seller or any of its Subsidiaries whether then issued or issuable,
including without limitation, the Common Stock.
"Stock Purchase Rights" shall mean Options and Convertible Securities.
"Subsidiary" means, with respect to any Person, a corporation,
partnership or other entity of which shares of stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other managers of such corporation, partnership or other entity
are at the time owned, or the management of which is otherwise controlled,
directly or indirectly, through one or more intermediaries, or both, by such
Person. Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to any Subsidiary or all
Subsidiaries of the Seller, whether now in existence or hereafter organized.
"Transaction Documents" means this Agreement, the Warrants, the
Preferred Stock Certificate, the Certificate of Designation, the Warrant
Registration Rights Agreement, the Registration Rights Agreement, the Amended
Registration Rights Agreement, and all other
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documents, instruments, certificates and other agreements in connection with
the sale of the Purchased Securities.
"Underlying Shares" means shares of Common Stock issued or issuable
upon exercise of conversion rights relating to the Preferred Stock or exercise
of warrants issued upon redemption of Preferred Stock.
"Uniform Commercial Code" or "UCC" means the Uniform Commercial Code
in each case in effect in the jurisdiction where the Collateral is located.
"Warrant" or "Warrants" means one or more of the Warrants for the
purchase of 800,000 shares of Common Stock issued by Seller to the Purchaser on
the date hereof, a copy of which is attached hereto as Exhibit E.
"Warrant Holder" and "Warrant Holders" shall mean the Purchaser and
any subsequent holder of the Warrants.
"Warrant Registration Rights Agreement" means the Registration Rights
Agreement executed contemporaneously herewith and attached hereto as Exhibit F.
Section 1.2 Rules of Construction.
(a) Use of Capitalized Terms. For purposes of this
Agreement, unless the context otherwise requires, the capitalized
terms used in this Agreement shall have the meanings herein assigned
to them, and such definitions shall be applicable to both singular and
plural forms of such terms.
(b) Construction. All references in this Agreement to
the single number and neuter gender shall be deemed to mean and
include the plural number and all genders, and vice versa, unless the
context shall otherwise require.
(c) Headings. The underlined headings contained herein
are for convenience only and shall not affect the interpretation of
this Agreement.
(d) Entire Agreement. This Agreement and the other
Transaction Documents shall constitute the entire agreement of the
parties with respect to the subject matter hereof.
(e) Severability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
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and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
(f) Governing Law. This Agreement and the rights and
obligations of the parties under this Agreement shall be governed by,
and construed and interpreted in accordance with, the law of the State
of Delaware.
ARTICLE 2
SALE AND PURCHASE OF PURCHASED SECURITIES
Section 2.1 Sale and Purchase of Purchased Securities. Subject
to all of the terms and conditions hereof and in reliance on the
representations and warranties set forth or referred to herein, the Seller
agrees to issue and sell to the Purchaser, and the Purchaser agrees to
purchase, the Purchased Securities from the Seller on the Closing Date.
Section 2.2 Purchase Price. The aggregate purchase price for the
Purchased Securities is Thirty-Five Million and 00/100 Dollars ($35,000,000.00)
(the "Purchase Price").
Section 2.3 Delivery of Warrants. In consideration for the
execution and delivery of this Agreement by Purchaser; contemporaneously with
the execution of this Agreement, the Seller shall deliver the Warrants and the
Warrant Registration Rights Agreement to Purchaser. If the Seller terminates
this Agreement on or before the Closing Date pursuant to Section 9.1(e) or (f)
hereof, the Warrants shall become immediately exercisable. Upon Closing (as
defined below), the Warrants and the Warrant Registration Rights Agreement will
be cancelled.
Section 2.4 Closing. The Closing of the purchase and sale of the
Purchased Securities (the "Closing") will take place at the offices of the
Seller in Dallas, Texas on the date that all conditions to closing have been
met or waived (the "Closing Date") or such other location and date as the
parties may mutually agree. At the Closing, the Seller will deliver the
Purchased Securities to the Purchaser against payment by the Purchaser of the
Purchase Price in immediately available funds. The Purchased Securities will
be issued to the Purchaser on the Closing Date and registered in the
Purchaser's name on the Seller's records.
Section 2.5 Use of Proceeds. Substantially all proceeds of the
sale of the Purchased Securities shall be used by the Seller to pay transaction
expenses and for general corporate purposes. Seller shall also use such
proceeds to repay Bank Debt to the extent repayment is consistent with banking,
regulatory and rating agency considerations of Seller.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
In order to induce the Purchaser to enter into this Agreement, the
Seller hereby represents and warrants to the Purchaser that:
Section 3.1 Corporate Existence. Each of the Seller and its
Subsidiaries now in existence is a corporation duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, with full power and authority to conduct its respective business
as presently conducted. Each of the Seller and its Subsidiaries is duly
qualified as a foreign corporation and in good standing in all other
jurisdictions in which their respective activities or ownership of property
requires such qualification, except where the failure to be so qualified would
not have a Material Adverse Effect.
Section 3.2 Corporate Power; Authorization. Subject to the
approval of the stockholders of Seller of the transactions contemplated by this
Agreement, the Seller has the corporate power and authority to make, deliver
and perform this Agreement and such other Transaction Documents to which it is
a party and has taken, or by the Closing Date will have taken, all necessary
corporate action to authorize the issuance of the Purchased Securities on the
terms and conditions of this Agreement and to authorize the execution, delivery
and performance of this Agreement and such other Transaction Documents to which
it is a party. No consent or authorization of, or filing with, any Person
(including, without limitation, any governmental authority or agency having
jurisdiction over the Seller or its Subsidiaries), is required to be made or
obtained by Seller in connection with the issuance of the Purchased Securities
or the execution, delivery and performance by the Seller, and the validity or
enforceability (with respect to the Seller) of this Agreement, or such other
Transaction Documents to which Seller is a party, except for consents and
filings referred to or disclosed on Schedule 3.2.
Section 3.3 Enforceable Obligations. This Agreement, the Warrant
and the other Transaction Documents have been, or on or prior to the Closing
Date will be, duly executed and delivered on behalf of the Seller, and
constitute, or will constitute, the legal, valid and binding obligation of the
Seller, enforceable against it in accordance with their terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
Section 3.4 No Legal Bar. Except as set forth on Schedule 3.2,
the execution, delivery and performance of this Agreement, the Warrant and the
other Transaction Documents and the consummation of the transactions
contemplated thereby, will not violate any Requirements of Law or any
Contractual Obligation of the Seller or its Subsidiaries.
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Section 3.5 Absence of Conflicts. Except as set forth on
Schedule 3.2, neither the execution and delivery of this Agreement, the Warrant
or the other Transaction Documents, the consummation of the transactions
contemplated by such documents nor the performance of or compliance with the
terms and conditions of such documents will (i) result in a breach of or a
default under any agreement or instrument to which the Seller or any Subsidiary
of the Seller is a party or by which their properties may be subject or bound,
or (ii) except as contemplated by such documents, result in the creation or
imposition of any Lien upon any property of the Seller or any Subsidiary of the
Seller.
Section 3.6 Litigation. Except as set forth on Schedule 3.6, to
the knowledge of the Seller, no litigation, investigation or proceeding of or
before any arbitrator or governmental authority is pending or threatened by or
against the Seller or against any Subsidiary of the Seller or any of their
properties or revenues, existing or future which could have a Material Adverse
Effect.
Section 3.7 Financial Condition. The Financial Statements
delivered to Purchaser fairly present the assets, liabilities and financial
condition of the Seller and its Subsidiaries, as of the dates thereof and in
accordance with GAAP (except that any unaudited Financial Statements may not
contain any or all of the footnotes required by GAAP and are subject to usual
year-end audit adjustments not materially affecting the results of operations).
The Financial Statements of Seller and its Subsidiaries contain no omissions or
misstatements which are or may be material to the Seller and its Subsidiaries,
treated as one entity. There has been no material adverse change in the
assets, liabilities, business or financial condition of the Seller and its
Subsidiaries, treated as one entity, since the date of such Financial
Statements. Except for trade payables arising in the ordinary course of
business since the dates reflected in such Financial Statements, the Seller and
its Subsidiaries have no Indebtedness and no Guarantee Obligations other than
as reflected in such Financial Statements. The Financial Statements of Seller
and its Subsidiaries, including the related schedules and notes thereto, have
been prepared in accordance with GAAP consistently applied throughout the
periods involved (except that any unaudited Financial Statements may not
contain any or all of the footnotes required by GAAP and are subject to year
end audit adjustments).
Section 3.8 No Change. Except as set forth on Schedule 3.8,
since September 30, 1996 through the date of this Agreement, to the knowledge
of the Seller, there has been no development or event, which has had or could
reasonably be expected to have a Material Adverse Effect, and no dividends or
other distributions have been declared, paid or made upon any shares of the
Stock of the Seller or its Subsidiaries, nor has any of such Stock been
redeemed, retired, purchased or otherwise acquired for value by the Seller or
its Subsidiaries.
Section 3.9 No Default. Neither the Seller nor any Subsidiary of
the Seller is in default under or with respect to any of its Contractual
Obligations in any respect which could reasonably be expected to have a
Material Adverse Effect.
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Section 3.10 Compliance with Laws. Except for any violation
which, individually or in the aggregate, would not have a Material Adverse
Effect, Seller and its Subsidiaries are in compliance with all Requirements of
Law.
Section 3.11 Taxes. The Seller has filed or caused to be filed
all tax returns which are required to be filed by it or any of its Subsidiaries
and all taxes shown to be due and payable on said returns or on any assessments
made against it, any Subsidiary or any of their property, and all other taxes,
fees or other charges imposed on Seller, any Subsidiary of Seller or any of
their property by any governmental authority that are due and payable, have
been paid (other than any taxes, fees or other charges the amount or validity
of which are currently being contested in good faith by appropriate proceedings
and with respect to which adequate reserves in conformity with GAAP have been
provided on the books of the Seller or such Subsidiary); to the knowledge of
Seller, no tax Lien has been filed and no claim is being asserted, with respect
to any such tax, fee or other charge.
Section 3.12 ERISA. Seller and its ERISA Affiliates are in
compliance, in all material respects, with any applicable provisions of ERISA
and the regulations thereunder and the Code, with respect to all Employee
Benefit Plans.
Section 3.13 Environmental Matters. Except for any violation
which, individually or in the aggregate, would not have a Material Adverse
Effect, neither the Seller nor any of its Subsidiaries is in violation of any
Environmental Law.
Section 3.14 Investment Company Act. Neither the Seller nor any
of its Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Section 3.15 Capitalization of Seller. Schedule 3.15 hereto
states the authorized capitalization of the Seller and the number of shares of
each class of Stock of the Seller issued and outstanding thereof. All such
issued and outstanding shares have been duly authorized and validly issued, are
fully paid and nonassessable and free of any claims of preemptive rights.
Other than as created pursuant to this Agreement and stock option plans adopted
prior to the date hereof by Seller, there are no outstanding Stock Purchase
Rights issued by the Seller.
Section 3.16 Capitalization of Subsidiaries. Schedule 3.16
attached hereto contains a list of the Subsidiaries of the Seller, the
jurisdictions of incorporation applicable thereto and the percentage of the
voting common stock or other issued capital stock thereof owned by the Seller
or its Subsidiaries. There are no Stock Purchase Rights issued by any
Subsidiary of the Seller. The Seller or its Subsidiaries, as the case may be,
have good and valid title to all shares they purport to own of the capital
stock of each such Subsidiary, free and clear in each case of any Lien, except
liens securing the Bank Debt. All Stock of each Subsidiary has been duly
issued and is fully paid and non- assessable.
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Section 3.17 Title to Assets; Leases. The Seller and its
Subsidiaries will own all of the assets reflected in the Financial Statements
as of the Closing Date, subject to no Liens other than Permitted Liens except
for assets sold prior thereto in the ordinary course of business. Each of the
Seller and its Subsidiaries enjoys peaceful and undisturbed possession, and is
in compliance with the terms of all leases of real property on which facilities
operated by them are situated and of all leases of personal property, except
where failure to enjoy such possession or such noncompliance would not have a
Material Adverse Effect.
Section 3.18 Disclosure. No representation or warranty made by
the Seller in this Agreement or in any other document furnished in connection
herewith contains any misrepresentation of a material fact or omits to state
any material fact necessary to make the statements herein or therein not
misleading.
Section 3.19 Undisclosed Liabilities. Neither the Seller nor any
Subsidiary of Seller has any material obligation or liability (whether accrued,
absolute, contingent, unliquidated, or otherwise, whether due or to become due)
arising out of transactions entered into at or prior to the Closing Date, or
any action or inaction at or prior to the Closing Date, except liabilities
reflected on the Financial Statements or notes thereto; liabilities incurred
in the ordinary course of business (none of which are liabilities for breach of
contract, breach of warranty, torts, infringements, claims or lawsuits);
liabilities or obligations disclosed in the schedules hereto; and liabilities
or obligations incurred pursuant to the Transaction Documents.
Section 3.20 Compliance with Federal Reserve Regulations. None of
the transactions contemplated in the Agreement will violate or result in a
violation of Section 7 of the Securities Exchange Act of 1934, as amended, or
any regulation issued pursuant thereto, including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R., Chapter II.
Section 3.21 Survival of Representations and Warranties. The
foregoing representations and warranties are made by the Seller with the
knowledge and intention that the Purchaser will rely thereon and shall survive
the execution and delivery of this Agreement until the Closing Date.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 4.1 Representations and Warranties of Purchaser. In
order to induce the Seller to enter into this Agreement, the Purchaser hereby
represents and warrants to the Seller as set forth in this Section 4.1.
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(a) Corporate Existence. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation.
(b) Corporate Power; Authorization.
(i) Authorization and Compliance With Law. The
Purchaser has the corporate power and authority to make,
deliver and perform this Agreement and the other Transaction
Documents to which it is a party. The execution, delivery and
performance of this Agreement by the Purchaser and such other
Transaction Documents to which it is a party, and the
acquisition of the Warrant and the Purchased Securities
pursuant to the terms hereof or thereof, have been duly
authorized by all necessary action, corporate and otherwise,
on the part of the Purchaser. The execution, delivery and
performance of this Agreement by the Purchaser and such other
Transaction Documents to which it is a party, the acquisition
and ownership of the Warrant or the Purchased Securities
issued to the Purchaser and the consummation of the
transactions contemplated by the foregoing, do not and will
not violate any Requirements of Law applicable to the
Purchaser or any Contractual Obligation of the Purchaser.
(ii) Approvals. No authorization, consent,
approval, license or filing with any Person (including,
without limitation, any governmental authority or agency
having jurisdiction over the Purchaser) is or will be
necessary for the valid execution, delivery or performance of
this Agreement by the Purchaser and such other Transaction
Documents to which it is a party, the acquisition and
ownership of the Warrant and/or the Purchased Securities
issued to the Purchaser or the consummation of the
transactions contemplated by the foregoing, or the validity or
enforceability (with respect to the Purchaser) of this
Agreement, or such other Transaction Documents to which the
Purchaser is a party.
(c) Enforceable Obligations. This Agreement and the
other Transaction Documents to which the Purchaser, is a party have
been, or on or prior to the Closing Date will be, duly executed and
delivered on behalf of the Purchaser, and constitute or will
constitute the legal, valid and binding obligation of the Purchaser,
enforceable against it in accordance with their terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement
of creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity
or at law).
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(d) Investment Representations of the Purchaser.
(i) No Distributive Intent; Restricted
Securities. The Purchaser is acquiring the Purchased
Securities and Warrants for its own account with no present
intention of reselling or otherwise distributing any of the
Purchased Securities or the Warrants or participating in a
distribution of such Purchased Securities or Warrants in
violation of the Securities Act, or any applicable state
securities laws. The Purchaser acknowledges that it has been
advised and is aware that (A) the Seller is relying upon an
exception under the Securities Act predicated upon the
Purchaser's representations and warranties contained in this
Agreement in connection with the issuance of the Purchased
Securities and the Warrants pursuant to this Agreement, (B)
the Purchased Securities and the Warrants in the hands of the
Purchaser will be "restricted securities" within the meaning
of Rule 144 promulgated by the Commission pursuant to the
Securities Act and, unless and until registered under the
Securities Act, will be subject to limitations on resale
(including, among others, limitations on the amount of
securities that can be resold and the timing and manner of
resale) set forth in Rule 144 or in administrative
interpretations of the Securities Act by the Commission or in
other rules and regulations promulgated thereunder by the
Commission, in effect at the time of the proposed sale or
other disposition of the Purchased Securities or the Warrants,
and (C) the Purchaser has no registration rights except as
provided for in the Registration Rights Agreement, and the
Seller has no plans to register any securities except in
accordance with those rights.
(e) Survival of Representations and Warranties. The
foregoing representations and warranties are made by the Purchaser
with the knowledge and intention that the Seller will rely thereon and
shall survive the execution and delivery of this Agreement.
Section 4.2 Commissions.
(a) No Commissions of Purchaser. No outside parties have
participated with respect to the negotiation of this Agreement and the
transactions contemplated hereby on behalf of the Purchaser and the
Purchaser shall indemnify and hold the Seller harmless with respect to
any claim for any broker's or finder's fees or commissions with
respect to the transactions contemplated hereby by anyone found to
have been acting on behalf of the Purchaser.
(b) No Commissions of Seller. Seller shall indemnify and
hold the Purchaser harmless with respect to any claim for any broker's
or finder's fees or commissions with respect to the transactions
contemplated hereby by anyone found to have been acting on behalf of
the Seller.
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ARTICLE 5
AFFIRMATIVE COVENANTS
Section 5.1 Financial Statements. So long as any of the Warrants
or Purchased Securities are outstanding, the Seller will comply, and will cause
each of its Subsidiaries, where applicable, to comply, with the following
provisions:
(a) Year End Report. If the Seller has no securities
registered under Section 12 of the Securities Exchange Act of 1934, as
amended, as soon as available, but in any event within ninety (90)
days after the end of each fiscal year of the Seller, Seller shall
deliver to the Purchaser copies of the audited consolidated financial
statements of the Seller and its Subsidiaries including the balance
sheets as at the end of such year and the related statements of income
and retained earnings and of cash flows for such year, in each case
containing in comparative form the figures for the previous year.
Such financial statements shall be accompanied by an opinion of a firm
of independent certified public accountants of nationally recognized
standing reasonably acceptable to the Purchaser, stating that such
financial statements fairly present the respective financial positions
of the Seller and its Subsidiaries, as the case may be, and the
results of operations and changes in financial position for the fiscal
year then ended in conformity with GAAP.
(b) Quarterly Reports. If the Seller has no securities
registered under Section 12 of the Securities Exchange Act of 1934, as
amended, as soon as available, but in any event not later than
forty-five (45) days after the end of each fiscal quarter (except the
last fiscal quarter) of each fiscal year, the Seller shall deliver to
the Purchaser copies of the unaudited consolidated balance sheets of
the Seller and its Subsidiaries as at the end of such quarter and the
related unaudited statements of income and retained earnings and of
cash flows for such quarter and the portion of the fiscal year through
the end of such quarter, setting forth in each case in comparative
form the figures for the previous year, certified by a Responsible
Officer of the Seller as being properly prepared, complete and correct
in all material respects (subject to normal year-end audit
adjustments).
All of such financial statements shall be complete and correct in all material
respects and be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods.
(c) Commission and Other Reports. Promptly upon becoming
available, Seller shall furnish, or if necessary cause its
Subsidiaries to furnish, one copy of each financial statement, report,
notice or proxy statement required to be sent by the Seller or any of
its Subsidiaries to stockholders generally and of each regular or
periodic report filed by the Seller or any of its Subsidiaries with
any securities exchange or the Commission or any
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successor agency, and copies of any orders in any proceedings to which
the Seller or any of its Subsidiaries is a party, issued by any
governmental agency, federal or state, having jurisdiction over the
Seller or any of its Subsidiaries, which could have a Material Adverse
Effect.
Section 5.2 Conduct of Business and Maintenance of Existence.
Prior to the Closing Date, Seller will, and will cause each of its Subsidiaries
to, preserve, renew and keep in full force and effect its corporate existence
and take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its business.
Seller shall, and shall cause each of its Subsidiaries to, comply with all
Contractual Obligations and Requirements of Law, except to the extent the
failure to comply therewith could not be reasonably expected to have a Material
Adverse Effect.
Section 5.3 Maintenance of Property; Insurance. Prior to the
Closing Date, the Seller will maintain, preserve and keep, and will cause its
Subsidiaries to maintain, preserve and keep, its properties which are used or
useful in the conduct of its business (whether owned in fee or a leasehold
interest) in good repair and working order and from time to time make all
necessary repairs, replacements, renewals and additions so that at all times
the efficiency thereof, in all material respects, shall be maintained. Seller
shall maintain, and shall cause each of its Subsidiaries to maintain, with
financially sound and reputable insurance companies, insurance on all of their
real and personal property in such forms and amounts and against such risks as
are usually insured against in the same general area by companies engaged in
the same or a similar business; and furnish to the Purchaser, upon written
request, full information as to the insurance carried.
Section 5.4 Strategic Alliance.
(a) After the Closing, the Purchaser agrees to provide to
Seller a facility that will permit Seller to offer workers
compensation insurance to its aviation insureds.
(b) After the Closing, Purchaser and Seller shall
negotiate, in good faith, the terms of an underwriting management
agreement pursuant to which Seller shall offer to provide underwriting
and claims management services to Purchaser for those lines of
aviation insurance that Seller currently underwrites, and Purchaser
shall offer to provide Seller, where commercially desirable,
underwriting capacity of an insurance carrier rated "A" by A.M. Best
Company.
(c) The Purchaser and Seller agree to fulfill their
respective obligations under this Section through their appropriate
subsidiaries. The Purchaser and Seller agree to negotiate, in good
faith, terms of agreements that are mutually agreeable.
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Section 5.5 Recapitalization Charge. Seller agrees that it will
record a Fifteen Million and 00/100 Dollar ($15,000,000.00) (pre-tax)
recapitalization charge in its financial results for the quarter in which this
transaction is recorded.
ARTICLE 6
OTHER PROVISIONS
Section 6.1 Shareholder Approval. The Seller shall take such
action necessary to obtain shareholder approval of the transactions
contemplated herein as promptly as practicable after the execution of this
Agreement. As soon as practicable following the date hereof, the Purchaser and
the Seller shall cooperate to prepare promptly and file with the SEC a Proxy or
Information Statement with respect to the transactions contemplated by this
Agreement (the "Information Statement"). Promptly after the approval by the
staff of the Commission of the Information Statement, the Seller shall mail the
Information Statement to all holders of the Seller's Common Stock. The
Purchaser and the Seller shall cooperate with each other in the preparation of
the Information Statement and shall advise the other in writing if, prior to
the vote of the shareholders of the Seller, any such party shall obtain
knowledge of any facts that might make it necessary or appropriate to amend or
supplement the Information Statement in order to make the statements contained
or incorporated by reference therein not misleading or to comply with
applicable law. Notwithstanding the foregoing, each party shall be responsible
for the information and disclosures which it makes or incorporates by reference
in all regulatory filings and the Information Statement.
Section 6.2 Regulatory Approvals. Seller and Purchaser shall
promptly apply for and use their commercially reasonable best efforts to obtain
all applicable federal and state regulatory approvals and other approvals
required to effectuate the provisions of this Agreement, including all filings
under Hart-Scott-Rodino and with the appropriate state insurance commissions.
Section 6.3 Reservation of Shares. The Seller agrees to
authorize and reserve for issuance a sufficient number of authorized but
unissued shares of Common Stock and Preferred Stock for the purposes of this
Agreement and to take such action as may be necessary to ensure that all shares
of Common Stock issued upon exercise of the Warrants or upon conversion of the
Preferred Stock will be duly and validly authorized and issued, fully paid and
nonassessable and that all shares of Preferred Stock issued at the Closing or
thereafter issued to Purchaser pursuant to the Certificate of Designation will
be duly and validly authorized and issued, fully paid and nonassessable.
Section 6.4 Good Faith by Seller. The Seller will not, by
amendment to its certificate of incorporation or through any reorganization,
reclassification, or any other means, avoid or seek to avoid the observance or
performance of any of the terms of Articles 6 hereof, but will at all times in
good faith carry out all such terms and take all such action as may be
necessary or appropriate to protect the rights of the Purchaser.
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Section 6.5 Board of Directors. Purchaser shall have the rights
set forth in this Section until the earlier of (i) the time that Purchaser and
its Affiliates no longer own Preferred Stock and Underlying Shares representing
in the aggregate the ownership, or right to acquire ownership, of fifty-one
percent (51%) of the Underlying Shares or (ii) the seventh anniversary of the
Closing Date. Purchaser may nominate for election to Seller's Board of
Directors and the Seller shall place on the proxy sent to its shareholders,
applicable nominees who represent thirty percent (30%) (rounded up to the next
director) of the number of directors serving at any one time, and at least one
of the directors representing the Purchaser shall serve on each of the standing
committees of the Board of Directors. Notwithstanding the foregoing, the
number of directors which the Purchaser shall be entitled to nominate pursuant
to this Section 6.5 shall be reduced to the extent and by the number of
directors the holders of Preferred Stock are entitled to elect as a class under
the terms of the Certificate of Designation. In the event the Purchaser's
representatives fail to be elected as directors, Seller agrees that Purchaser
shall be entitled to have an equal number of representatives in place of such
directors attend each meeting of the Board of Directors. Such representatives
shall be entitled to receive all materials and information provided to Seller's
Board of Directors and shall receive the same notice as is given to the
Seller's Board of Directors.
Section 6.6 Voting Agreement. For so long as Purchaser and its
Affiliates shall beneficially own Preferred Stock or Underlying Shares which
represent in the aggregate the ownership, or right to acquire ownership, of at
least fifty-one percent (51%) of the Underlying Shares, the Purchaser shall and
shall cause its Affiliates, to vote all shares of Preferred Stock and Common
Stock held by Purchaser or its Affiliates as follows:
(a) With respect to any matter on which the holders of
Common Stock have the right to vote, if Purchaser and its Affiliates
hold any combination of Preferred Stock and Common Stock that
represents the right to vote more than 20% of the total votes eligible
to be voted on such matter, then Purchaser agrees to vote all of its
votes in excess of such 20% in proportion to the actual vote of
holders of all remaining votes (including the Purchaser's 20% vote);
(b) The voting agreement contained in this Section will
terminate and expire on the date that is three years and one hundred
eighty (180) days after the Closing Date.
(c) Purchaser agrees that all certificates representing
shares of Preferred Stock or Underlying Shares shall contain a legend
referencing the foregoing restrictions on voting rights for so long as
such restrictions are applicable.
Section 6.7 No Solicitation and Other Actions.
(a) From and after the date of this Agreement and except
as set forth in subsection 6.7(b), the Seller shall not, and the
Seller shall direct and use its reasonable best
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efforts to cause the officers, directors, employees, agents, advisors
and other representatives of the Seller not to, directly or
indirectly, (i) solicit, initiate, knowingly encourage, or participate
in discussions or negotiations regarding, any proposals or offers from
any Person (an "Offeror") relating to any Competing Proposal, or (ii)
furnish to any other Offeror any non-public information or access to
such information with respect to, or otherwise concerning, any
Competing Proposal. The Seller shall immediately cease and cause to
be terminated any existing discussions or negotiations with any Person
conducted heretofore with respect to any proposed Competing Proposal.
(b) Notwithstanding anything to the contrary contained in
this Section 6.7 or in any other provision of this Agreement, until
the Shareholders of the Seller have approved the transactions
contemplated by this Agreement, the Seller shall not be prohibited by
this Agreement from (i) participating in discussions or negotiations
with, and, during such period, the Seller may furnish information to,
an Offeror that seeks to engage in discussions or negotiations,
requests information or makes a proposal to acquire the Seller
pursuant to a Competing Proposal, if the Seller's directors determine
in good faith that such action is required for the discharge of their
fiduciary obligations, after consultation with independent legal and
financial advisors, who may be the Seller's regularly engaged legal
counsel and financial advisors (a "Director Duty"); (ii) complying
with Rule 14d-9 or Rule 14e-2 promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act") with regard to a tender or
exchange offer; (iii) making any disclosure to the Seller's
shareholders in accordance with a Director Duty; (iv) failing to make,
modifying or amending its recommendations, consents or approvals
referred to herein in accordance with a Director Duty; (v) terminating
this Agreement and entering into an agreement providing for a
Competing Proposal in accordance with a Director Duty; or (vi) take
any other action as may be appropriate in order for the Seller's Board
of Directors to act in a manner that is consistent with its fiduciary
obligations under applicable law . In the event that the Seller or
any of its officers, directors, employees, agents, advisors or other
representatives participate in discussions or negotiations with, or
furnish information to an Offeror that seeks to engage in such
discussions or negotiations, requests information or makes a Competing
Proposal, then, subject to any confidentiality requirements of an
Offeror (i) the Seller shall immediately disclose to the Purchaser the
decision of the Seller's directors; (ii) the identity of the Offeror;
and (iii) copies of all information or material not previously
furnished to Purchaser which the Seller, or its agents, provides or
causes to be provided to such Offeror or any of its officers,
directors, employees, agents, advisors or representatives.
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ARTICLE 7
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS
Section 7.1 Conditions Precedent. The obligation of the
Purchaser to purchase the Purchased Securities pursuant to this Agreement on
the Closing Date is subject to the satisfaction or waiver in writing of the
following conditions precedent (in form, substance and action as is reasonably
satisfactory to Purchaser):
(a) Certified Copies of Charter Documents. The Purchaser
shall have received from the Seller and each of its Subsidiaries a
copy, certified by a duly authorized officer of the Seller to be true
and complete on and as of the Closing Date, of each of the charter or
other organization documents and by-laws of the Seller or each
Subsidiary each as in effect on such date of certification (together
with all, if any, amendments thereto);
(b) Proof of Appropriate Action. The Purchaser shall
have received from the Seller a copy, certified by a duly authorized
officer of the Seller to be true and complete on and as of the Closing
Date, of the records of all action taken by the board of directors and
shareholders of the Seller to authorize the execution and delivery of
this Agreement, each of the Transaction Documents and any other
agreements entered into on the Closing Date and to which it is a party
or is to become a party as contemplated or required by this Agreement,
and its performance in all material respects of all of its agreements
and obligations under each of such documents;
(c) Incumbency Certificates. The Purchaser shall have
received from the Seller an incumbency certificate, dated the Closing
Date, signed by a duly authorized officer of the Seller and giving the
name and bearing a specimen signature of each individual who shall be
authorized to sign, in the name and on behalf of the Seller this
Agreement and each of the other Transaction Documents to which such
person is or is to become a party on the Closing Date, and to give
notices and to take other action on behalf of the Seller under such
documents;
(d) Representations and Warranties. Each of the
representations and warranties made by and on behalf of the Seller and
its Subsidiaries to the Purchaser in this Agreement and in the other
Transaction Documents shall be true and correct when made and the
representations and warranties contained in Sections 3.15 and 3.16
hereof shall be true and correct as of the Closing Date;
(e) Transaction Documents. Each of the Transaction
Documents shall have been duly and properly authorized, executed and
delivered to the Purchaser and filed by Seller,
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if required of Seller to be effective and shall be in full force and
effect on and as of the Closing Date;
(f) Legality of Transactions. No change in applicable
law shall have occurred as a consequence of which it shall have become
and continue to be unlawful for the Purchaser to perform any of its
agreements or obligations under this Agreement, or under any of the
other Transaction Documents, or for the Seller or any Subsidiary of
the Seller to perform any of its agreements or obligations under this
Agreement or under any of the other Transaction Documents;
(g) Performance, Etc. The Seller shall have duly and
properly performed, complied with and observed its respective
covenants, agreements and obligations contained in each of the
Transaction Documents in all material respects.
(h) Legal Opinions. The Purchaser shall have received a
written legal opinion of counsel to Seller, addressed to the
Purchaser, dated the Closing Date, which shall be reasonably
acceptable to the Purchaser;
(i) Consents. The Purchaser and Seller shall have
received all consents necessary for the completion of the transactions
contemplated by this Agreement and each of the Transaction Documents,
including any regulatory approvals and all instruments and documents
incidental thereto.
(j) Amended Registration Rights Agreement. Mason Best
Company L.P. and Seller shall have entered into the Amended
Registration Rights Agreement.
(k) Commitment of Mason Best Company L.P. Within five
(5) days after the date hereof, the Purchaser shall have received a
written commitment from Mason Best Company L.P. substantially in the
form of the attached Exhibit "G" that it will vote its shares of
Common Stock in favor of (i) the transactions contemplated herein and
(ii) the representatives of Purchaser to be elected as directors of
the Seller.
(l) Adjustment to Stock Option Exercise Price. The
Seller shall have adjusted the exercise price of existing Stock
Options granted to continuing officers and directors of Seller or its
Subsidiaries pursuant to its 1991 Nonqualified Stock Option Plan, 1994
Stock Incentive Plan and 1994 Directors Option Plan effective on the
Closing Date to the market price on the date of adjustment (the "Reset
Options"). The Reset Options shall have a vesting period of three (3)
years, with one-third ( 1/3) of the Options vesting on each
anniversary of the date of the Reset Options.
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ARTICLE 8
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Section 8.1 Conditions Precedent. The obligation of the Seller
to sell the Purchased Securities pursuant to this Agreement on the Closing Date
is subject to the satisfaction or waiver in writing of the following conditions
precedent (in form, substance and action as is reasonably satisfactory to the
Seller):
(a) Proof of Appropriate Action. The Seller shall have
received from the Purchaser a copy, certified by a duly authorized
officer of the Purchaser to be true and complete on and as of the
Closing Date, of the records of all action taken by the Board of
Directors or Executive Committee of the Purchaser to authorize the
execution and delivery of this Agreement and any other agreements
entered into on the Closing Date and to which it is a party or is to
become a party as contemplated or required by this Agreement, and its
performance of all of its agreements and obligations under each of
such documents;
(b) Incumbency Certificates. The Seller shall have
received from the Purchaser an incumbency certificate, dated the
Closing Date, signed by a duly authorized officer of the Purchaser and
giving the name and bearing a specimen signature of each individual
who shall be authorized (i) to sign, in the name and on behalf of the
Purchaser, this Agreement and each of the other Transaction Documents
to which such person is or is to become a party on the Closing Date,
and (ii) to give notices and to take other action on behalf of the
Purchaser under such documents;
(c) Representations and Warranties. Each of the
representations and warranties made by and on behalf of the Purchaser
to the Seller in this Agreement and in the other Transaction Documents
shall be true and correct when made;
(d) Transaction Documents. Each of the Transaction
Documents shall have been duly and properly authorized, executed and
delivered to the Seller by the respective party or parties thereto and
shall be in full force and effect on and as of the Closing Date;
(e) Legality of Transactions. No changes in applicable
law shall have occurred as a consequence of which it shall have become
and continue to be unlawful (i) for the Purchaser to perform any of
its agreements or obligations under this Agreement, or under any of
the other Transaction Documents, or (ii) for the Seller or any
Subsidiary of the Seller to perform any of its agreements or
obligations under this Agreement or under any of the other Transaction
Documents;
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(f) Approvals and Consents. The Seller shall have
received all approvals and consents necessary for the completion of
the transactions contemplated by the Agreement and each of the
Transaction Documents, including Shareholder approval as contemplated
by Section 6.1 hereof and regulatory consent as contemplated by
Section 6.2 hereof; and
(g) Performance, Etc. The Purchaser shall have duly and
properly performed, complied with and observed its respective
covenants, agreements and obligations contained in each of the
Transaction Documents.
ARTICLE 9
TERMINATION OF AGREEMENT
Section 9.1 Termination. Notwithstanding any other provision of
this Agreement, this Agreement may be terminated at any time prior to the
Closing Date:
(a) by mutual written consent of the Seller and the
Purchaser;
(b) by the Seller or the Purchaser, upon written notice
to the other party, if the Closing shall not have occurred on or prior
to March 31, 1997 (the "Outside Date"), unless such failure of
consummation shall be due to the failure of the party seeking such
termination to perform or observe in all material respects the
covenants and agreements hereof to be performed or observed by such
party;
(c) by the Seller or the Purchaser, upon written notice
to the other party, if a governmental authority of competent
jurisdiction shall have issued an injunction, order or decree
enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement, and such injunction,
order or decree shall have become final and non-appealable or if a
governmental authority has otherwise made a final determination that
any required regulatory consent would not be forthcoming; provided,
however, that the party seeking to terminate this Agreement pursuant
to this clause has used all required efforts to remove such
injunction, order or decree;
(d) by the Seller, if prior to approval by the
Shareholders of the Seller of the transactions contemplated by this
Agreement, the Board of Directors of the Seller determines in
accordance with a Director Duty that such termination is required by
reason of a Competing Proposal; or
(e) by the Seller or the Purchaser, if prior to approval
by the Shareholders of the Seller of the transactions contemplated by
this Agreement, the Board of Directors of the Seller shall have
withdrawn or modified in a manner materially adverse to the Purchaser
its
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approval of the adoption of this Agreement, because the Board of
Directors has determined to recommend to the Seller's shareholders or
approve a Competing Proposal, in accordance with a Director Duty;
provided, however, that any communication that advises that Seller has
received a Competing Offer or is engaging in any activity permitted
under Section 6.7(b) with respect to a Competing Offer shall in no
event be deemed a withdrawal or modification adverse to the Purchaser
of its approval of this Agreement.
Section 9.2 Effect of Termination. In the event that this
Agreement is terminated pursuant to clause 9.1(d) or 9.1(e) hereof, the
Warrants issued to the Purchaser pursuant to Section 2.3 hereof shall become
immediately exercisable and the Purchaser shall have all of the benefits of the
Warrant Registration Rights Agreement and Purchaser shall have no further
rights hereunder. In the event that this Agreement is terminated pursuant to
any other clause of Section 9.1, the Warrants shall be cancelled and neither
party shall have any further rights or obligations under this Agreement, the
Warrant Registration Rights Agreement or the Warrant Subscription Agreement.
Section 9.3 Default under the Agreement. If either party shall
default in the performance of its obligations hereunder, the non-defaulting
party shall retain all rights and remedies, whether arising in equity or at
law, including actions for specific performance and damages, as a result of the
default by the other party under this Agreement.
ARTICLE 10
MISCELLANEOUS
Section 10.1 Amendments and Waivers. The Seller and the Purchaser
may amend this Agreement or the other Transaction Documents to which they are
parties, and the Purchaser may waive future compliance by the Seller with any
provision of this Agreement or such other Transaction Documents, but no such
amendment or waiver shall be effective unless in a written instrument executed
by an authorized officer of the Purchaser and Seller.
Section 10.2 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Purchaser or Seller,
any right, remedy, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The Purchaser or
Seller, as the case may be, shall not be deemed to have waived any of its'
rights hereunder or under any other agreement, instrument or paper signed by it
unless such waiver shall be in writing and signed by the Purchaser or Seller,
as the case may be. The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law, and are supplemental and in addition to such
rights, remedies, powers and privileges provided in Transaction Documents.
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<PAGE> 29
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Section 10.3 Notices. All notices, consents, requests and demands
to or upon the respective parties hereto shall be in writing and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered by hand, or when deposited in the mail, postage prepaid,
or, in the case of telex, telegraphic or telecopy notice, when sent, addressed
as follows:
If to the Purchaser:
American Financial Group, Inc.
One East Fourth Street, Suite 919
Cincinnati, Ohio 45202
Attention: Samuel J. Simon
Telephone: (513) 579-2542
Telecopy: (513) 579-2113
With a copy to:
Keating, Muething & Klekamp, P.L.L.
1800 Provident Tower
Cincinnati, Ohio 45202
Attention: Paul V. Muething
Telephone: (513) 579-6517
Telecopy: (513) 579-6957
If to the Seller:
American Eagle Group, Inc.
12801 North Central Expressway, Suite 800
Dallas, Texas 75243
Attention: Chairman of the Board
Telephone: (972) 448-1460
Telecopy: (972) 448-1401
With a copy to:
Frederick G. Anderson
Senior Vice President and General Counsel
American Eagle Group, Inc.
12801 North Central Expressway, Suite 800
Dallas, Texas 75243
Telephone: (972) 448-1431
Telecopy: (972) 448-1401
Execution Copy
<PAGE> 30
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Notices of changes of address shall be given in the same manner.
Section 10.4 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Seller, the Purchaser and their
respective successors and permitted assigns. For so long as Purchaser has any
rights or obligations specified in Sections 6.5 and 6.6 hereof, the Purchaser
and any of its Affiliates may assign or transfer to any Person (including a
group as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended), the shares of Preferred Stock or Underlying Shares, representing in
the aggregate ownership, or the right to acquire ownership, of at least
fifty-one percent (51%) of the Underlying Shares and all of their rights under
Section 6.5 above, only if such Person assumes all of the obligations under
Section 6.6 above.
Section 10.5 Enforcement Costs. All reasonable costs and expenses
incurred by a party to enforce the terms of this Agreement and performance by
the other party of its obligations hereunder including, without limitation,
stationery and postage, telephone and telegraph, secretarial and clerical
expenses, the fees or salaries of any collection agents utilized, and all
attorneys' fees and legal expenses incurred in connection herewith whether
through judicial proceedings or otherwise, or in enforcing or protecting its
rights and interests under this Agreement or under any other instrument or
document delivered pursuant hereto, or in protecting the rights of any holder
or holders with respect thereto, or in defending or prosecuting any actions or
proceedings arising out of or relating to the transactions contemplated hereby,
shall be paid by the party which does not prevail in such action or proceeding,
upon demand.
Section 10.6 Counterparts. This Agreement may be executed by one
or more of the parties to this Agreement on any number of separate counterparts
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument.
Section 10.7 Term. This Agreement shall terminate upon the latest
of (i) the redemption of all shares of the Preferred Stock, or (ii) seven (7)
years from the Date of Issuance.
Section 10.8 Consent to Jurisdiction. The Seller hereby
absolutely and irrevocably consents and submits to the jurisdiction of the
courts of the State of Ohio and of any federal court located in the said state
in connection with any actions or proceedings brought against the Seller by the
Purchaser arising out of or relating to this Agreement or any other Transaction
Documents. The Seller hereby waives and shall not assert in any such action or
proceeding, in each case, to the fullest extent permitted by applicable law,
any claim that (a) the Seller is not personally subject to the jurisdiction of
any such court, (b) the Seller is immune from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to it or its property, (c) any
such suit, action or proceeding is brought in an inconvenient forum, (d) the
venue of any such suit, action or proceeding is improper, or (e) this Agreement
or any Transaction Documents may not be enforced in or by any such court. In
any such
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<PAGE> 31
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action or proceeding, the Seller hereby absolutely and irrevocably waives
personal service of any summons, complaint, declaration or other process and
hereby absolutely and irrevocably agrees that the service thereof may be made
by certified, registered first-class mail directed to the Seller. Anything
hereinbefore to the contrary notwithstanding, the Purchaser hereof may sue the
Seller in the courts of any other country, state of the United States or place
where the Seller or any of the property or assets may be found or in any other
appropriate jurisdictions.
IN WITNESS WHEREOF, the parties have duly executed this Agreement by
their duly authorized officers as of the date first above written.
SELLER:
AMERICAN EAGLE GROUP, INC.
By: M. Philip Guthrie
------------------------------
Its: Chairman of the Board, CEO
and President
------------------------------
PURCHASER:
AMERICAN FINANCIAL GROUP, INC.
By: Carl H. Lendner
------------------------------
Its: Co-President
------------------------------
Execution Copy
<PAGE> 1
EXHIBIT 10.44
================================================================================
WARRANT SUBSCRIPTION AGREEMENT
BY AND BETWEEN
AMERICAN EAGLE GROUP, INC.
(Company and Warrant Agent)
AND
AMERICAN FINANCIAL GROUP, INC.
(Warrant Agent)
Dated as of November 5, 1996
================================================================================
<PAGE> 2
WARRANT SUBSCRIPTION AGREEMENT
WARRANT SUBSCRIPTION AGREEMENT ("Agreement"), dated as of November 5,
1996 between AMERICAN EAGLE GROUP, INC., a Delaware corporation (the
"Company"), and AMERICAN FINANCIAL GROUP, INC., an Ohio corporation ("AFG").
The Company proposes to issue Common Stock Purchase Warrants, as
hereinafter described (the "Warrants"), to purchase up to an aggregate of
800,000 shares of its Common Stock, no par value, ("Common Stock"), (the shares
of Common Stock issuable on exercise of the Warrants being referred to herein
as the "Warrant Shares"), pursuant to a Securities Purchase Agreement between
the Company and American Financial Group, Inc., an Ohio corporation, dated as
of November 5, 1996 (the "Securities Purchase Agreement"), pursuant to which
the Company will issue certain of its securities, including the Warrants, each
Warrant entitling the holder thereof to purchase one share of Common Stock.
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder of the Company and the registered owners of the Warrants (the
"Holders"), the Company and AFG hereby agree as follows:
SECTION 1. APPOINTMENT OF WARRANT AGENT. Until such time as
the Company receives notification from the Holders of their intent to require
the Company to register the Warrants with the Securities and Exchange
Commission (a "Registration"), the Company agrees to act as the Warrant Agent
(the "Warrant Agent") in accordance with the instructions hereinafter set forth
in this Agreement. Thereafter, the Company shall appoint a successor to act as
Warrant Agent in accordance with Section 17 hereof.
SECTION 2. TRANSFERABILITY AND FORM OF WARRANT.
2.1 REGISTRATION. The Warrants shall be numbered and
shall be registered in a Warrant Register as they are issued. The Company and
the Warrant Agent shall be entitled to treat the Holder of any Warrant as the
owner in fact thereof for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in such Warrant on the part of any
other person, and shall not be liable for any registration of transfer of
Warrants which are registered or to be registered in the name of a fiduciary or
the nominee of a fiduciary unless made with the actual knowledge that a
fiduciary or nominee is committing a breach of trust in requesting such
registration of transfer, or with knowledge of such facts that its
participation therein amounts to bad faith.
2.2 TRANSFER. The Warrants shall be transferable only
on the books of the Company maintained at the principal office of the Warrant
Agent upon delivery thereof duly endorsed by the Holder or by his duly
authorized attorney or representative, or
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<PAGE> 3
accompanied by proper evidence of succession, assignment or authority to
transfer, which endorsement shall be guaranteed by a bank or trust company or a
broker or dealer which is a member of the National Association of Securities
Dealers, Inc. In all cases of transfer by an attorney, the original power of
attorney, duly approved, or a copy thereof, duly certified, shall be deposited
and remain with the Warrant Agent. In case of transfer by executors,
administrators, guardians or other legal representatives, duly authenticated
evidence of their authority shall be produced, and may be required to be
deposited and remain with the Warrant Agent in its discretion. Upon any
registration of transfer, the Warrant Agent shall countersign and deliver a new
Warrant or Warrants to the persons entitled thereto.
2.3 FORM OF WARRANT. The text of the Warrant and of
the Purchase Form shall be substantially as set forth in Exhibit A attached
hereto. The number of warrants, the price per Warrant Share and the number of
Warrant Shares issuable upon exercise of each Warrant are subject to adjustment
upon the occurrence of certain events, all as hereinafter provided. The
Warrants shall be executed on behalf of the Company by its Chairman of the
Board, President or one of its Vice Presidents, under its corporate seal
reproduced thereon attested by its Secretary or an Assistant Secretary. The
signature of any such officers on the Warrants may be manual or facsimile.
Warrants bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any one of them shall
have ceased to hold such offices prior to the delivery of such Warrants or did
not hold such offices on the date of this Agreement.
Warrants shall be dated as of the date of countersignature
thereof by the Warrant Agent either upon initial issuance or upon division,
exchange, substitution or transfer.
SECTION 3. COUNTERSIGNATURE OF WARRANTS. The Warrants shall
be countersigned by the Warrant Agent (or any successor to the Warrant Agent
then acting as warrant agent under this Agreement) and shall not be valid for
any purpose unless so countersigned. Warrants may be countersigned, however,
by the Warrant Agent (or by its successor as warrant agent hereunder) and may
be delivered by the Warrant Agent, notwithstanding that the persons whose
manual or facsimile signatures appear thereon as proper officers of the Company
shall have ceased to be such officers at the time of such countersignature,
issuance or delivery. The Warrant Agent shall, upon written instructions of
the Chairman of the Board, the President, a Vice President, the Treasurer or
the Secretary of the Company, countersign, issue and deliver Warrants entitling
the Holders thereof to
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<PAGE> 4
purchase not more than 800,000 Warrant Shares (subject to adjustment pursuant
to Sections 9 and 10 hereof) and shall countersign and deliver Warrants as
otherwise provided in this Agreement.
SECTION 4. EXCHANGE OF WARRANT CERTIFICATES. Each Warrant
certificate may be exchanged for another certificate or certificates entitling
the Holder thereof to purchase a like aggregate number of Warrant Shares as the
certificate or certificates surrendered then entitle such Holder to purchase.
Any Holder desiring to exchange a Warrant certificate or certificates shall
make such request in writing delivered to the Warrant Agent, and shall
surrender, properly endorsed, the certificate or certificates to be so
exchanged. Thereupon, the Warrant Agent shall countersign and deliver to the
person entitled thereto a new Warrant certificate or certificates, as the case
may be, as so requested.
SECTION 5. TERM OF WARRANTS; EXERCISE OF WARRANTS.
5.1 TERM OF WARRANTS; CANCELLATION. Subject to this
Agreement, each Holder shall have the right to purchase from the Company the
number of fully paid and nonassessable Warrant Shares that the Holder may at
the time be entitled to purchase on exercise of such Warrants. Such right may
be exercised commencing the first business day following the termination of the
Securities Purchase Agreement pursuant to Section 9.1 (d) or (e) thereof. The
Warrants shall thereafter remain exercisable until 5:00 p.m., New York time, on
November 4, 2003. Notwithstanding the foregoing, the Warrants shall be
cancelled and this Agreement terminated simultaneously with a "closing" under
the Securities Purchase Agreement.
5.2 EXERCISE OF WARRANTS. A Warrant may be exercised
upon surrender to the Warrant Agent at its principal office, of the certificate
or certificates evidencing the Warrants to be exercised, together with the form
of election to purchase on the reverse thereof duly filled in and signed, which
signature shall be guaranteed by a bank or trust company or a broker or dealer
which is a member of the National Association of Securities Dealers, Inc., and
upon payment to the Warrant Agent for the account of the Company of the Warrant
Price (as defined in and determined in accordance with the provisions of
Sections 9 and 10 hereof), for the number of Warrant Shares in respect of which
such Warrants are then exercised. Payment of the aggregate Warrant Price shall
be made in cash, by certified or bank cashier's check drawn on a banking
institution chartered by the government of the United States or any state
thereof, or by surrender of outstanding Company debt at its face value
(including accrued interest to the date of exercise) or any combination
thereof.
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<PAGE> 5
Subject to Section 6 hereof, upon such surrender of Warrants
and payment of the Warrant Price as aforesaid, the Warrant Agent shall cause to
be issued and delivered with all reasonable dispatch to or upon the written
order of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of such Warrants, together with cash, as provided in Section
11 hereof, in respect of any fractional Warrant Shares otherwise issuable upon
such surrender. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to have
become a holder of record of such Warrant Shares as of the date of the
surrender of such Warrants and payment of the Warrant Price, as aforesaid. The
rights of purchase represented by the Warrants shall be exercisable, at the
election of the Holders thereof, either in full or from time to time in part
and, in the event that a certificate evidencing Warrants is exercised in
respect of less than all of the Warrant Shares purchasable on such exercise at
any time prior to the date of expiration of the Warrants, a new certificate
evidencing the remaining Warrant or Warrants will be issued, and the Warrant
Agent is hereby irrevocably authorized to countersign and to deliver the
required new Warrant certificate or certificates pursuant to the provisions of
this Section and of Section 3 hereof, and the Company, whenever required by the
Warrant Agent, will supply the Warrant Agent with Warrant certificates duly
executed on behalf of the Company for such purpose.
SECTION 6. PAYMENT OF TAXES. The Company will pay all
documentary stamp taxes, if any, attributable to the initial issuance of
Warrant Shares upon the exercise of Warrants; provided, however, that the
Company shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issue or delivery of any Warrants or
certificates for Warrant Shares in a name other than that of the registered
Holder of Warrants in respect of which such Warrant Shares are issued.
SECTION 7. MUTILATED OR MISSING WARRANTS. In case any of the
certificates evidencing the Warrants shall be mutilated, lost stolen or
destroyed, the Company shall issue, and the Warrant Agent shall countersign and
deliver in exchange and substitution for and upon cancellation of the mutilated
Warrant certificate, or in lieu of and substitution for the Warrant certificate
lost, stolen or destroyed, a new Warrant certificate of like tenor and
representing an equivalent right or interest, but only upon receipt of evidence
reasonably satisfactory to the Company and the Warrant Agent of such loss,
theft or destruction of such Warrant and indemnity or bond, if requested, also
reasonably satisfactory to them. An applicant for such a substitute Warrant
certificate shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company or the Warrant Agent may
prescribe.
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SECTION 8. RESERVATION OF WARRANT SHARES; PURCHASE, CALL AND
CANCELLATION OF WARRANTS.
8.1 RESERVATION OF WARRANT SHARES. There have been
reserved, and the Company shall at all times keep reserved, out of its
authorized Common Stock, a number of shares of Common Stock sufficient to
provide for the exercise of the rights of purchase represented by the
outstanding Warrants. The Transfer Agent for the Common Stock and every
subsequent transfer agent for any shares of the Company's capital stock
issuable upon the exercise of any of the rights of purchase aforesaid will be
irrevocably authorized and directed at all times to reserve such number of
authorized shares as shall be required for such purpose. The Company will keep
a copy of this Agreement on file with the Transfer Agent for the Common Stock
and with every subsequent transfer agent for any shares of the Company's
capital stock issuable upon the exercise of the rights of purchase represented
by the Warrants. The Warrant Agent is hereby irrevocably authorized to
requisition from time to time from such Transfer Agent the stock certificates
required to honor outstanding Warrants upon exercise thereof in accordance with
the terms of this Agreement. The Company will supply such Transfer Agent with
duly executed stock certificates for such purposes and will provide or
otherwise make available any cash which may be payable as provided in Section
11 hereof. All Warrants surrendered in the exercise of the rights thereby
evidenced shall be canceled by the Warrant Agent and shall thereafter be
delivered to the Company.
8.2 PURCHASE OF WARRANTS BY THE COMPANY. The Company
shall have the right, except as limited by law, other agreements or herein, to
purchase or otherwise acquire Warrants at such times, in such manner and for
such consideration as it may deem appropriate.
8.3 CANCELLATION OF WARRANTS. In the event the Company
shall purchase or otherwise acquire Warrants, the same shall thereupon be
delivered to the Warrant Agent and be canceled by it and retired. The Warrant
Agent shall cancel any Warrant surrendered for exchange, substitution, transfer
or exercise in whole or in part.
SECTION 9. WARRANT PRICE. The price per share at which
Warrant Shares shall be purchasable upon exercise of Warrants shall be $3.45
(the "Warrant Price"), subject to adjustment pursuant to Section 10 hereof.
SECTION 10. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF
WARRANT SHARES. The number and kind of securities purchasable upon the
exercise of each Warrant and the Warrant Price shall be subject to adjustment
from time to time upon the happening of certain events, as hereinafter defined.
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<PAGE> 7
10.1 MECHANICAL ADJUSTMENTS. The number of Warrant
Shares purchasable upon the exercise of each Warrant and the Warrant Price
shall be subject to adjustment as follows:
(a) Stock Dividends. In case the Company
shall declare a dividend or other distribution on shares of
Common Stock which is payable in Common Stock, then the Warrant
Price in effect immediately prior to the declaration of such
dividend or distribution shall be reduced to the quotient
obtained by dividing (i) the product of (x) the number of
shares of Common Stock outstanding immediately prior to such
declaration, multiplied by (y) the then effective Warrant
Price, by (ii) the total number of shares of Common Stock
outstanding immediately after such dividend or other
distribution is paid. The registered holder of each Warrant
shall thereafter be entitled to purchase, at the Warrant Price
resulting from such adjustment, the number of shares of Common
Stock obtained by multiplying the Warrant Price in effect
immediately prior to such adjustment by the number of shares of
Common Stock purchasable pursuant hereto immediately prior to
such adjustment and dividing the product thereof by the Warrant
Price resulting from such adjustment.
(b) Stock Splits and Reverse Splits. In case
outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Warrant Price in
effect at the opening of business on the day immediately prior
to the day upon which such subdivision becomes effective shall
be proportionately reduced and the number of Warrant Shares
purchasable pursuant to this Warrant immediately prior to such
subdivision shall be proportionately increased, and,
conversely, in case outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the
Warrant Price in effect at the opening of business on the day
immediately prior to the day upon which such combination
becomes effective shall be proportionately increased and the
number of Warrant Shares purchasable upon the exercise of this
Warrant immediately prior to such combination shall be
proportionately reduced, 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.
(c) Reclassification of Stock. The
reclassification of Common Stock into securities other than
Common Stock (other than any reclassification upon a
consolidation or merger to which Section 10.5 below applies)
shall be
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<PAGE> 8
deemed to involve (x) a distribution of securities other than
Common Stock to all holders of Common Stock (and the effective
date of such reclassification shall be deemed to be the Record
Date within the meaning of subsection (d) below), and (y) a
subdivision or combination, as the case may be, of the number
of shares of Common Stock outstanding immediately prior to such
reclassification into the number of shares of Common Stock
outstanding immediately thereafter (and the effective date of
such reclassification shall be deemed to be "the day upon which
such subdivision becomes effective" and "the day upon which
such combination becomes effective" as the case may be, within
the meaning of subsection (b) above.)
(d) Rights, Options, Warrants and Convertible
Securities. In case the Company shall issue rights, options,
or warrants or shall issue securities convertible or
exchangeable for shares of Common Stock ("Convertible
Securities") to all holders of its outstanding Common Stock,
without any charge to such holders, entitling them (for a
period within forty five (45) days after the record date
mentioned below) to subscribe for or purchase shares of Common
Stock at a price per share which is lower at the record date
fixed for the determination of stockholders entitled to receive
such rights, options, warrants or Convertible Securities (other
than pursuant to a dividend reinvestment plan or pursuant to
any employee or director benefit or stock option plan) (the
"Record Date") than the then current market price per share of
Common Stock (as defined in paragraph (j) below) the number of
Warrant Shares thereafter purchasable upon the exercise of each
Warrant shall be determined by multiplying the number of
Warrant Shares theretofore purchasable upon exercise of each
Warrant by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding at the close of
business on the Record Date of such rights, options, warrants
or Convertible Securities plus the number of additional shares
of Common Stock offered for subscription or purchase, and of
which the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the Record Date
of such rights, options, warrants or Convertible Securities
plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so
offered would purchase at the then current market price per
share (as defined in paragraph (j) below) of Common Stock. Such
adjustment shall be made whenever such rights, options,
warrants or Convertible Securities are issued, and shall become
effective immediately after the opening of business on the day
following the Record Date for the determination of stockholders
entitled to receive such rights,
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<PAGE> 9
options, warrants or Convertible Securities. Upon the
foregoing adjustment having been made, the Warrant Price
payable upon exercise of each Warrant shall be adjusted by
multiplying such Warrant Price in effect immediately prior to
such adjustment by a fraction, of which the numerator shall be
the number of Warrant Shares purchasable upon the exercise of
each Warrant immediately prior to such adjustment, and of which
the denominator shall be the number of Warrant Shares
purchasable immediately thereafter. For the purpose of this
paragraph (d), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of
the Company or issuable pursuant to warrants held in or issued
to treasury but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of
Common Stock.
(e) Extraordinary Events. In case the Company
shall distribute to all holders of its shares of Common Stock
evidences of its indebtedness or assets (excluding cash
dividends or distributions payable out of consolidated earnings
or earned surplus and the extraordinary events referred to in
paragraphs (a) through (c) above) or rights, options or
warrants, or convertible or exchangeable securities containing
the right to subscribe for or purchase evidences of such
indebtedness or assets, then in each case the Warrant Price
shall be reduced by multiplying the Warrant Price in effect
immediately prior to the close of business on the date fixed
for the determination of stockholders entitled to receive such
a distribution by a fraction, of which the numerator shall be
the then current market price per share of Common Stock (as
defined in paragraph (j) below) on the date of such
distribution, less the then fair value (as determined in good
faith by the Board of Directors of the Company, whose
determination shall in the absence of manifest error be
conclusive) of the portion of the assets or evidences of
indebtedness so distributed and of which the denominator shall
be the then current market price per share of Common Stock.
Such adjustment shall be made whenever any such distribution is
made, and shall become effective immediately prior to the
opening of business on the day following the record date for
the determination of stockholders entitled to receive such
distribution.
In the event of a distribution by the Company to
all holders of its shares of Common Stock of capital stock of a
subsidiary or rights, options, warrants or Convertible
Securities for such stock, then in lieu of an adjustment in the
Warrant Price, the Holder of each Warrant, upon the exercise
thereof at any time after such distribution shall be entitled
to receive the stock or other
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<PAGE> 10
securities to which such Holder would have been entitled if
such Holder had exercised such Warrant immediately prior to
such distribution.
(f) Sale of Convertible Securities. In case the
Company shall issue or sell Convertible Securities (excluding
issuances or sales referred to in paragraph (d) above), there shall be
determined the price per share for which shares of Common Stock are
issuable upon the conversion or exchange thereof, such determination
to be made by dividing (a) the total amount received or receivable by
the Company as consideration for the issue or sale of such Convertible
Securities, plus the average of the maximum and minimum aggregate
amount of additional consideration, if any, payable to the Company
upon the conversion or exchange of all such Convertible Securities by
(b) the maximum number of shares of Common Stock of the Company
issuable upon conversion or exchange of all of such Convertible
Securities; and such issue or sale shall be deemed to be an issue or
sale for cash (as of the date of issue or sale of such Convertible
Securities) of such maximum number of shares of Common Stock at the
price per share so determined.
If such Convertible Securities shall by their terms provide
for an increase or increases, with the passage of time, in the amount
of additional consideration, if any, payable to the Company, or in the
rate of exchange, upon the conversion or exchange thereof, the
adjusted Warrant Price shall, forthwith upon any such increase
becoming effective, be readjusted (but to no greater extent than
originally adjusted) to reflect the same.
(g) Rights, Warrants, Options -- Common Stock. In case
the Company shall grant any rights, warrants or options to subscribe
for, purchase or otherwise acquire shares of Common Stock (excluding
grants pursuant to employee or director stock option or benefit plans
and grants referred to in paragraph (d) above), there shall be
determined the minimum price per share for which a share of Common
Stock is issuable upon the exercise of all such rights, warrants or
options, such determination to be made by dividing (a) the total
amount, if any, received or receivable by the Company as consideration
for the granting of such rights, warrants or options, plus the average
of the maximum and minimum aggregate amount of additional
consideration payable to the Company upon the exercise of such rights,
warrants or options by (b) the maximum number of shares of Common
Stock of the Company issuable upon the exercise of all such rights,
warrants or options, and the granting of all such rights, warrants or
options shall be deemed to be an issue or sale for cash (as of the
date of the granting of such rights, warrants or options) of such
maximum number of shares of Common Stock at the price per share so
determined.
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<PAGE> 11
If such rights, warrants or options shall by their terms
provide for an increase or increases, with the passage of time, in the
amount of additional consideration payable to the Company upon the
exercise thereof, the adjusted Warrant Price shall, forthwith upon any
such increase becoming effective, be readjusted (but to no greater
extent than originally adjusted) to reflect the same.
(h) Rights, Warrants, Options -- Convertible
Securities. In case the Company shall grant any rights, warrants or
options to subscribe for, purchase or otherwise acquire Convertible
Securities, such Convertible Securities shall be deemed, for the
purposes of paragraph (f), to have been issued and sold (as of the
actual date of issue or sale of such Convertible Securities) for the
total amount received or receivable by the Company as consideration
for the granting of such rights, warrants or options plus the average
of the maximum and minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of all
such rights, warrants or options.
If such rights, warrants or options shall by their terms
provide for an increase or increases, with the passage of time, in the
amount of additional consideration payable to the Company upon the
exercise thereof, the adjusted Warrant Price shall, forthwith upon
any such increase becoming effective, be readjusted (but to no greater
extent than originally adjusted) to reflect the same.
(i) Sales Below Market Price. In case the Company
shall issue or sell its shares of Common Stock or be deemed to have
issued or sold Common Stock in accordance with the provisions of
paragraphs (f), (g) or (h) above, for a consideration per share which
is below the then current market price per share (as defined in
paragraph (j)) for its shares of Common Stock, then the following
provisions shall apply. An Adjusted Fair Market Value shall be
computed (to the nearest cent, a half cent or more being considered a
full cent) by dividing:
(i) the sum of (x) the result obtained by
multiplying the number of shares of Common Stock of the
Company outstanding immediately prior to such issue or sale by
the then current market price (as defined in paragraph (j)
below), plus (y) the consideration, if any, received by the
Company upon such issue or sale; by
(ii) the number of shares of Common Stock of
the Company outstanding immediately after such issue or sale.
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<PAGE> 12
The resulting number shall be deemed to be the Adjusted Fair
Market Value per share. Thereafter, the Warrant Price shall be
adjusted to be equal to the product of the Warrant Price in effect
immediately prior to such actions, multiplied by a fraction the
numerator of which is the Adjusted Fair Market Value per share and the
denominator of which is the current market price per share,
immediately prior to such actions as determined in paragraph (j)
below. Upon any such adjustment of the Warrant Price hereunder, the
number of shares of Common Stock acquirable upon exercise of this
Warrant will be adjusted to the number of shares determined by
multiplying the Warrant Price in effect immediately prior to such
adjustment by the number of shares of Common Stock acquirable upon
exercise of this Warrant immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
The provisions of this paragraph (i) shall not apply to an
issuance or sale of shares of the Company's Common Stock in connection
with an underwritten public offering for cash, unless the underwritten
public offering is in the form of a transaction exempted from
registration in the United States under Regulation S.
(j) For the purpose of any computation under paragraphs
(d), (e) and (i) of this Section, the current market price per share
of Common Stock at any date shall be the average of the daily closing
prices for thirty (30) consecutive trading days commencing forty five
(45) trading days before the date of such computation. The closing
price for each day shall be the last reported sales price regular way
or, in case no reported sale takes place on such day, the average of
the closing bid and asked prices regular way for such day, in each
case on the New York Stock Exchange or, if the Common Stock is no
longer listed or admitted to trading on the New York Stock Exchange,
on the principal national securities exchange on which the shares of
Common stock are listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange, the average
of the closing bid and asked prices of the Common Stock in the
over-the- counter market as reported by the National Association of
Securities Dealers Automated Quotations National Market System (or any
comparable system) or, if the Common Stock is not quoted on such
National Market System (or any comparable system), the average of the
closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected from
time to time by the Board of Directors for that purpose or, in the
absence of such quotations, such other method of determining market
value as the Board of Directors shall in good faith from time to time
reasonably deem to be fair.
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<PAGE> 13
In the absence of one or more such quotations, the Company shall
determine the current market price on the basis of such quotations as
it considers appropriate.
(k) No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the
number of Warrant Shares purchasable upon the exercise of each
Warrant; provided, however, that any adjustments which by reason of
this paragraph (k) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations shall be made to the nearest one-thousandth of a share.
(l) No adjustment in the number of Warrant Shares
purchasable upon the exercise of each Warrant need be made under
paragraphs (d) and (e) if the Company issues or distributes to each
Holder of Warrants the rights, options, warrants, or convertible or
exchangeable securities, or evidence of indebtedness or assets
referred to in those paragraphs which each Holder of Warrants would
have been entitled to receive had the Warrants been exercised prior to
the happening of such event or the record date with respect thereto.
No adjustment in the number of Warrant Shares purchasable upon the
exercise of each Warrant need be made for sales of Common Stock
pursuant to a Company plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value of the
Warrant Shares. No such adjustment need be made in respect of the
issuance and subsequent exercise of employee or director benefit or
stock option shares of Common Stock.
(m) For the purpose of this subsection 10.1, the term
"shares of Common Stock" shall mean (i) the class of stock designated
as the Common Stock of the Company at the date of this Agreement, or
(ii) any other class of stock resulting from successive changes or
reclassification of such shares consisting solely of changes in par
value, or from par value to no par value, or from no par value to par
value. In the event that at any time, as a result of an adjustment
made pursuant to paragraph (c) above, the Holders shall become
entitled to purchase any shares of the Company other than shares of
Common Stock, thereafter the number of such other shares so
purchasable upon exercise of each Warrant and the Warrant Price of
such shares shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Warrant Shares contained in paragraph
(a) through (i), inclusive, above, and the provisions of Section 5
and subsections 10.2 through 10.4, inclusive, with respect to the
Warrant Shares, shall apply on like terms to any such other shares.
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<PAGE> 14
(n) Upon the expiration of any rights, options,
warrants or conversion or exchange privileges, if any thereof shall
not have been exercised, the Warrant Price and the number of shares of
Common Stock purchasable upon the exercise of each Warrant shall, upon
such expiration, be readjusted and shall thereafter be such as it
would have been had it been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (A) the only
shares of Common Stock so issued were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such rights,
options, warrants or conversion or exchange rights and (B) such shares
of Common Stock, if any, were issued or sold for the consideration, if
any, actually received by the Company for the issuance, sale or grant
of all such rights, options, warrants or conversion or exchange rights
whether or not exercised; provided, further, that no such readjustment
shall have the effect of increasing the Warrant Price by an amount in
excess of the amount of the adjustment initially made in respect to
the issuance, sale of grant of such rights, options, warrants or
conversion or exchange rights.
10.2 DETERMINATION OF CONSIDERATION. Upon any issuance
or sale for a consideration other than cash, or a consideration part of which
is other than cash, of any shares of Common Stock or Convertible Securities or
any rights or options to subscribe for, purchase or otherwise acquire any
shares of Common Stock or Convertible Securities, the amount of the
consideration other than cash received by the Company shall be deemed to be the
fair value of such consideration as determined in good faith by the Board of
Directors of the Company. In case any shares of Common Stock or Convertible
Securities or any rights, options or warrants to subscribe for, purchase or
otherwise acquire any shares of Common Stock or Convertible Securities shall be
issued or sold together with other shares, stock or securities or other assets
of the Company for a consideration which covers both, the consideration for the
issue or sale of such shares of Common Stock or Convertible Securities or such
rights or options shall be deemed to be the portion of such consideration
allocated thereto in good faith by the Board of Directors of the Company.
10.3 NOTICE OF ADJUSTMENT. Whenever the number of
Warrant Shares purchasable upon the exercise of each Warrant or the Warrant
Price of such Warrant Shares is adjusted, as herein provided, the Company shall
cause the Warrant Agent promptly to mail by first class mail, postage prepaid,
to each Holder notice of such adjustment or adjustments and shall deliver to
the Warrant Agent a certificate of a firm of independent public accountants
selected by the Board of Directors of the Company (who may be the regular
accountants employed by the Company) setting forth the number of Warrant Shares
purchasable upon the exercise of each Warrant and the Warrant Price of such
Warrant Shares after such adjustment, setting forth a brief statement of the
facts requiring such
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<PAGE> 15
adjustment and setting forth the computation by which such adjustment was made.
Such certificate shall be conclusive evidence of the correctness of such
adjustment. The Warrant Agent shall in the absence of manifest error be
entitled to rely on such certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the
same, from time to time, to any Holder desiring an inspection thereof during
reasonable business hours. The Warrant Agent shall not at any time be under
any duty or responsibility to any Holders to determine whether any facts exist
which may require any adjustment of the Warrant Price or the number of Warrant
Shares or other stock or property purchasable on exercise thereof, or with
respect to the nature or extent of any such adjustment when made, or with
respect to the method employed in making such adjustment.
10.4 NO ADJUSTMENT OF DIVIDENDS. Except as provided in
subsection 10.1, no adjustment in respect of any dividends shall be made during
the term of a Warrant or upon the exercise of a Warrant.
10.5 PRESERVATION OF PURCHASE RIGHTS ON ACCOUNT OF
RECLASSIFICATION, CONSOLIDATION, ETC. In case of any consolidation of the
Company with or merger of the Company into another corporation or in case of
any sale, transfer or lease to another corporation of all or substantially all
the property of the Company, the Company or such successor or purchasing
corporation, as the case may be, shall execute with the Warrant Agent an
agreement that each Holder shall have the right thereafter upon payment of the
Warrant Price in effect immediately prior to such action to purchase upon
exercise of each Warrant the kind and amount of cash, shares and other
securities and property which he would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale, transfer or
lease had such Warrant been exercised immediately prior to such action;
provided, however, that no adjustment in respect of dividends, interest or
other income on or from such shares or other securities and property shall be
made during the term of a Warrant or upon the exercise of a Warrant. The
Company shall mail by first class mail, postage prepaid, to each Holder, notice
of the execution of any such agreement. Such agreement shall provide for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 10. The provisions of this subsection
10.5 shall similarly apply to successive consolidations, mergers, sales,
transfers or leases. The Warrant Agent shall be under no duty or
responsibility to determine the correctness of any provisions contained in any
such agreement relating to the kind or amount of shares of stock or other
securities or property receivable upon exercise of Warrants or with respect to
the method employed and provided therein for any adjustments and shall be
entitled to rely upon the provisions contained in any such agreement.
10.6 STATEMENT ON WARRANTS. Irrespective of any
adjustments in the Warrant Price or the number or kind of shares purchasable
upon the exercise of the
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<PAGE> 16
Warrants, Warrants theretofore or thereafter issued may continue to express the
same price and number and kind of shares as are stated in the Warrants
initially issuable pursuant to this Agreement.
SECTION 11. FRACTIONAL INTERESTS. The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If
more than one Warrant shall be presented for exercise in full at the same time
by the same Holder, the number of full Warrant Shares which shall be issuable
upon the exercise thereof shall be computed on the basis of the aggregate
number of Warrant Shares purchasable on exercise of the Warrants so presented.
If any fraction of a Warrant Share would, except for the provisions of this
Section 11, be issuable on the exercise of any Warrant (or specified portion
thereof), the Warrant Agent shall pay (and shall be promptly reimbursed by the
Company upon demand therefor) an amount in cash equal to the closing price for
one share of the Common Stock, as defined in paragraph (i) of subsection 10.1,
on the trading day immediately preceding the date the Warrant is presented for
exercise, multiplied by such fraction.
SECTION 12. NO RIGHTS AS STOCKHOLDERS; NOTICES TO HOLDERS.
Nothing contained in this Agreement or in any of the Warrants shall be
construed as conferring upon the Holders or their transferees the right to vote
or to receive dividends or to consent or to receive notice as stockholders in
respect of any meeting of stockholders for the election of directors of the
Company or any other matter, or any rights whatsoever as stockholders of the
Company. If however, at any time prior to the expiration of the Warrants and
prior to their exercise, any of the following events shall occur:
(a) the Company shall declare any dividend payable in
any securities upon its shares of Common Stock or make any
distribution (other than a regular cash dividend) to the holders of
its shares of Common Stock; or
(b) the Company shall offer to the holders of its
shares of Common Stock any additional shares of Common Stock or
securities convertible into shares of Common Stock or any right to
subscribe thereto; or
(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation, merger
transfer or lease of all or substantially all of its property, assets,
and business as an entirety) shall be proposed,
then in any one or more of said events the Company shall give notice in writing
of such event to the Warrant Agent and the Holders as provided in Section 18
hereof, such giving of notice to be completed at least twenty (20) days prior
to the date fixed as a record date or the date
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<PAGE> 17
of closing the transfer books for the determination of the stockholders
entitled to such dividend, distribution, or subscription rights, or for the
determination of stockholders entitled to vote on such proposed dissolution,
liquidation or winding up. Such notice shall specify such record date or the
date of closing the transfer books, as the case may be. Failure to mail such
notice or any defect therein or in the publication or mailing thereof shall not
affect the validity of any action taken in connection with such dividend,
distribution or subscription rights, or such proposed dissolution, liquidation
or winding up.
SECTION 13. DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANTS;
INSPECTION OF WARRANT SUBSCRIPTION AGREEMENT. The Warrant Agent shall account
to the Company with respect to Warrants exercised two business days thereafter
and concurrently pay to the Company all monies received by the Warrant Agent
for the purchase of the Warrant Shares through the exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement and any notices
given or received hereunder available for inspection by the Holders during
normal business hours at its principal office. The Company shall supply the
Warrant Agent from time to time with such numbers of copies of this Agreement
as the Warrant agent may request.
SECTION 14. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF
WARRANT AGENT. Any corporation into which the Warrant Agent may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Warrant Agent shall be a party, or any
corporation succeeding to the corporation trust business of the Warrant Agent,
shall be the successor to the Warrant Agent hereunder without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, provided that such corporation would be eligible for appointment as a
successor Warrant Agent under the provisions of Section 16 hereof. In case at
the time such successor to the Warrant Agent shall succeed to the agency
created by this Agreement, any of the Warrants shall have been countersigned
but not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent and deliver such Warrants so
countersigned; and in case at that time any of the Warrants shall not have been
countersigned, any successor to the Warrant Agent may countersign such Warrants
either in the name of the predecessor Warrant Agent or in the name of the
successor Warrant Agent; and in all such cases Warrants shall have the full
force provided in the Warrants and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignatures under its prior
name and deliver such Warrants so countersigned; and in case at that time any
of the Warrants shall not have been
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<PAGE> 18
countersigned, the Warrant Agent may countersign such Warrants either in its
prior name or in its changed name; and in all such Warrants shall have the full
force provided in the Warrants and in this Agreement.
SECTION 15. LEGEND.
15.1 SECURITIES ACT LEGEND. Each certificate
representing the Warrants may be endorsed with the following legend and any
other legend required by applicable state securities laws:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN
COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT.
The Company need not register a transfer of any Warrant, and
may also instruct its transfer agent not to register the transfer of the
Warrants unless the conditions specified in the foregoing legends are
satisfied.
15.2 REMOVAL OF LEGEND.
(a) Any legend endorsed on a certificate pursuant to
Section 15.1 and the stop transfer instructions with respect to such Warrants
shall be removed and the Company shall issue a certificate without such legend
to any Holder if such Warrants are registered under the Securities Act and a
prospectus meeting the requirements of Section 10 of the Securities Act is
available, if such legend may be properly removed under the terms of Rule 144
promulgated under the Securities Act or if the Holder provides the Company with
an opinion of counsel, reasonably satisfactory to legal counsel for the
Company, to the effect that a sale, transfer or assignment of such Warrants may
be made without registration.
(b) Any legend endorsed on a certificate pursuant to
Section 15.1 and the stop transfer instructions with respect to such Warrants
shall be removed upon receipt by the Company of either a legal opinion
reasonably satisfactory to the Company to the effect that
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<PAGE> 19
such legend may be removed, or appropriate federal or state securities
authority authorizing such removal.
SECTION 16. CONCERNING THE WARRANT AGENT. The Warrant Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the Holders, by
their acceptance of Warrants, shall be bound.
16.1 CORRECTNESS OF STATEMENTS. The statements
contained herein and in the Warrants shall be taken as statements of the
Company and the Warrant Agent assumes no responsibility for the correctness of
any of the same except such as describe the Warrant Agent or action taken by
it. The Warrant Agent assumes no responsibility with respect to the
distribution of the Warrants except as herein otherwise provided.
16.2 BREACH OF COVENANTS. The Warrant Agent shall not
be responsible for any failure of the Company to comply with any of the
covenants contained in this Agreement or in the Warrant to be complied with by
the Company.
16.3 PERFORMANCE OF DUTIES. The Warrant Agent may
execute and exercise any of the rights or powers hereby vested in it or perform
any duty hereunder either itself or by or through its attorneys or agents
(which shall not include its employees) and shall not be responsible for the
misconduct or negligence of any agent appointed with due care.
16.4 RELIANCE ON COUNSEL. The Warrant Agent may consult
at any time with legal counsel satisfactory to it and the Company (who may be
counsel for the Company) and the Warrant Agent shall incur no liability or
responsibility to the Company or to any Holder in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
opinion or the advice of such counsel.
16.5 PROOF OF ACTIONS TAKEN. Whenever in the
performance of its duties under this Agreement the Warrant Agent shall deem it
necessary or desirable that any fact or matter be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed)
may be deemed conclusively to be proved and established by a certificate signed
by the Chairman of the Board or President, a Vice President, the Treasurer or
the Secretary of the Company and delivered to the Warrant Agent; and such
certificate shall be full authorization to the Warrant Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
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<PAGE> 20
16.6 COMPENSATION. The Company agrees to pay the
Warrant Agent reasonable compensation for all services rendered by the Warrant
Agent in the performance of its duties under this Agreement, to reimburse the
Warrant Agent for all expenses, taxes and governmental charges and other
charges of any kind and nature reasonably incurred by the Warrant Agent in the
performance of its duties under this Agreement, and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including
judgments, costs and counsel fees, for anything done or omitted by the Warrant
Agent in the performance of its duties under this Agreement except as a result
of the Warrant Agent's negligence or bad faith.
16.7 LEGAL PROCEEDINGS. The Warrant Agent shall be
under no obligation to institute any action, suit or legal proceeding or to
take any other action likely to involve expense unless the Company or one or
more Holders shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as the
Warrant Agent may consider proper, whether with or without any such security or
indemnity. All rights of action under this Agreement or under any of the
Warrants may be enforced by the Warrant Agent without the possession of any of
the Warrants or the production thereof at any trial or other proceedings
relative thereto, any such action, suit or proceeding instituted by the Warrant
Agent shall be brought in its name as Warrant Agent, and any recovery of
judgment shall be for the ratable benefit of the Holders, as their respective
rights or interests may appear.
16.8 OTHER TRANSACTIONS IN SECURITIES OF COMPANY. The
Warrant Agent and any stockholder, director, officer or employee of the Warrant
Agent may buy, sell or deal in any of the Warrants, or other securities of the
Company or become pecuniarily interested in any transaction in which the
Company may be interested or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Warrant Agent under
this Agreement. Nothing herein shall preclude the Warrant Agent from acting in
any other capacity for the Company or for any other legal entity.
16.9 LIABILITY OF WARRANT AGENT. The Warrant Agent
shall act hereunder solely as agent, and its duties shall be determined solely
by the provisions hereof. The Warrant Agent shall not be liable for anything
which it may do or refrain from doing in connection with this Agreement except
for its own negligence or bad faith.
16.10 RELIANCE ON DOCUMENTS. The Warrant Agent will not
incur any liability or responsibility to the Company or to any Holder for any
action taken in reliance on any notice, resolution, waiver, consent, order,
certificate, or other paper, documents or
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<PAGE> 21
instrument reasonably believed by it to be genuine and to have been signed, set
or presented by the proper party or parties.
16.11 VALIDITY OF AGREEMENT. The Warrant Agent shall not
be under any responsibility in respect of the validity of this Agreement or the
execution and delivery hereof (except the due execution hereof by the Warrant
Agent) or in respect of the validity or execution of any Warrant (except its
countersignature thereof); nor shall the Warrant Agent by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any Warrant Shares (or other stock) to be issued pursuant to
this Agreement or any Warrant, or as to whether any Warrant Shares (or other
stock) will, when issued, be validly issued, fully paid and nonassessable, or
as to the Warrant Price or the number or amount of Warrant Shares or other
securities or other property issuable upon exercise of any Warrant.
16.12 INSTRUCTIONS FROM COMPANY. The Warrant Agent is
hereby authorized and directed to accept instructions with respect to the
performance of its duties hereunder from the Chairman of the Board, the
President, the Secretary or the Treasurer of the Company, and to apply to such
officer for advice or instructions in connection with its duties, and shall not
be liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officer or officers.
SECTION 17. CHANGE OF WARRANT AGENT. The Warrant Agent may
resign and be discharged from its duties under this Agreement by giving to the
Company thirty (30) days notice in writing. The Warrant Agent may be removed
by like notice to the Warrant Agent from the Company. If the Warrant Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Warrant Agent. If the Company shall
fail to make such appointment within a period of thirty (30) days after such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Warrant Agent or by any Holder
(who shall with such notice submit his Warrant for inspection by the Company),
then any Holder may apply to any court of competent jurisdiction for the
appointment of a successor to the Warrant Agent. Any successor warrant agent,
whether appointed by the Company or such a court, shall be a bank or trust
company, in good standing, incorporated under the laws of the United States of
America or any state thereof and having at the time of its appointment as
warrant agent a combined capital and surplus of at least $100,000,000. After
appointment, the successor warrant agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Warrant Agent without further act or deed, but the former Warrant Agent shall
deliver and transfer to the successor warrant agent any property at the time
held by it hereunder, and execute and deliver for further assurance,
conveyance, act or deed necessary for the purpose. Failure to file any notice
provided for in this Section 17,
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<PAGE> 22
however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Warrant Agent or the appointment of the
successor warrant agent, as the case may be. In the event of such resignation
or removal, the successor warrant agent shall mail, by first class mail,
postage prepaid, to each Holder, written notice of such removal or resignation
and the name and address of such successor warrant agent.
SECTION 18. IDENTITY OF TRANSFER AGENT. Forthwith upon the
appointment of any subsequent transfer agent for the Common Stock, or any other
shares of the Company's capital stock issuable upon the exercise of the
Warrants, the Company will file with the Warrant Agent a statement setting
forth name and address of such subsequent transfer agent.
SECTION 19. NOTICES. Any notice pursuant to this Agreement by
the Company or by any Holder to the Warrant Agent, or by the Warrant Agent or
by any Holder to the Company, shall be in writing and shall be delivered in
person or by facsimile transmission, or mailed first class, postage prepaid (a)
to the Company, at its offices at 12801 North Central Expressway, Suite 800,
Dallas, Texas 75243, Attention: Chief Executive Officer; or (b) the Warrant
Agent, to 12801 North Central Expressway, Suite 800, Dallas, Texas 75243,
Attention: Secretary. Each party hereto may from time to time change the
address to which notices to it are to be delivered or mailed hereunder by
notice to the other party.
Any notice mailed pursuant to this Agreement by the Company or the
Warrant Agent to the Holders shall be in writing and shall be mailed first
class, postage prepaid, or otherwise delivered to such Holders at their
respective addresses on the books of the Warrant Agent.
SECTION 20. SUPPLEMENTS AND AMENDMENTS. The Company and the
Warrant Agent may from time to time supplement or amend this Agreement without
the approval of any Holder, in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or to make any other provisions
in regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants and which shall not materially
adversely affect the interests of the Holders. The Holders of a majority of the
Warrants outstanding at the time an amendment is proposed that may be
inconsistent with the provisions of the Warrants or which may materially
adversely affect the interest of the Holders may consent to such an amendment
to this Agreement.
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<PAGE> 23
SECTION 21. SUCCESSORS. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Warrant Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 22. MERGER OR CONSOLIDATION OF THE COMPANY. The
Company will not merge or consolidate with or into, or sell, transfer or lease
all or substantially all of its property to, any other corporation unless the
successor or purchasing corporation, as the case may be (if not the Company),
shall expressly assume, by supplemental agreement satisfactory in form to the
Warrant Agent and executed and delivered to the Warrant Agent, the due and
punctual performance and observance of each and every covenant and condition of
this Agreement to be performed and observed by the Company.
SECTION 23. APPLICABLE LAW. This Agreement and each Warrant
issued hereunder shall be governed by and construed in accordance with the laws
of the State of Delaware, without giving effect to principles of conflict of
laws.
SECTION 24. BENEFITS OF THIS AGREEMENT. Nothing in this
Agreement shall be construed to give to any person or corporation other than
the Company, the Warrant Agent, and the Holders any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Warrant Agent and the Holders of the
Warrants.
SECTION 25. COUNTERPARTS. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
SECTION 26. CAPTIONS. The captions of the Sections and
subsections of this Agreement have been inserted for convenience only and shall
have no substantive effect.
- 22 -
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, all as of the day and year first above written.
AMERICAN EAGLE GROUP, INC.
By: M. Philip Guthrie
--------------------------------
Title: Chairman of the Board, CEO
and President
----------------------------
[SEAL]
Attest:
Frederick G. Anderson
- ---------------------------------------
Title: Senior Vice President/General
Counsel of Secretary
--------------------------------
AMERICAN FINANCIAL GROUP, INC.,
By: Carl H. Lendner
------------------------------
Title: Co-President
----------------------------
[SEAL]
Attest:
Karl J. Grafe
- ---------------------------------------
Title: Assistant Secretary
--------------------------------
- 23 -
<PAGE> 25
EXHIBIT A TO THE WARRANT SUBSCRIPTION AGREEMENT
VOID AFTER 5:00 P.M. NEW YORK TIME, NOVEMBER 4, 2003
No. Warrants to Purchase
800,000 Shares of Common Stock
AMERICAN EAGLE GROUP, INC.
WARRANT TO PURCHASE COMMON STOCK
This certifies that, for value received, American Financial Group, Inc.
or registered assigns (the "Holder"), is entitled to purchase from American
Eagle Group, Inc., a Delaware corporation (the "Company") , at any time after
the date and for the term set forth in Section 5.1 of the Warrant Subscription
Agreement referred to below, at the purchase price of $3.45 per share (the
"Warrant Price"), the number of shares of Common Stock, $.01 par value per
share, of the Company ("Common Stock"), shown above. The number of warrants,
the number of shares purchasable upon exercise of the Warrants and the Warrant
Price are subject to adjustment from time to time as set forth in the Warrant
Subscription Agreement referred to below.
Warrants may be exercised in whole or in part by presentation of this
Warrant Certificate with the Purchase Form on the reverse side hereof duly
executed, which signature shall be guaranteed by a bank or trust company or a
broker or dealer which is a member of the National Association of Securities
Dealers, Inc., and simultaneous payment of the Warrant Price at the principal
office of American Eagle Group, Inc. (the "Warrant Agent"). Payment of such
price shall be made at the option of the Holder hereof in cash, by certified or
bank cashier's check drawn upon a bank chartered by the government of the
United States or any state thereof, by surrender of outstanding Company debt at
its face value (with no regard to accrued interest) or any combination thereof.
This Warrant Certificate is issued under and in accordance with a
Warrant Subscription Agreement dated as of November 5, 1996, between the
Company and the Warrant Agent and is subject to the terms and provisions
contained in the Warrant Subscription Agreement, to all of which the Holder of
this Warrant Certificate by acceptance
- 24 -
<PAGE> 26
hereof consents. A copy of the Warrant Subscription Agreement may be obtained
by the Holder hereof upon written request to the Company.
Upon any partial exercise of the Warrants evidenced by this Warrant
Certificate, there shall be countersigned and issued to the Holder hereof a new
Warrant Certificate for the shares of Common Stock as to which the Warrants
evidenced by this Warrant Certificate shall not have been exercised. This
Warrant Certificate may be exchanged at the office of the Warrant Agent by
surrender of this Warrant Certificate properly endorsed either separately or in
combination with one or more other Warrant Certificates for one or more new
Warrant Certificates evidencing the right of the Holder thereof to purchase the
same aggregate number of shares as were purchasable on exercise of the Warrants
evidenced by the Warrant Certificate or Certificates exchanged. No fractional
shares will be issued upon the exercise of any Warrant, but the Company will
pay the cash value thereof determined as provided in the Warrant Subscription
Agreement. This Warrant Certificate is transferable at the office of the
Warrant Agent in the manner and subject to the limitations set forth in the
Warrant Subscription Agreement.
The Holder hereof may be treated by the Company, the Warrant Agent, and
all other persons dealing with this Warrant Certificate as the absolute owner
hereof for any purpose and as the person entitled to exercise the rights
represented hereby, or to the transfer hereof on the books of the Company any
notice to the contrary notwithstanding, and until such transfer on such books,
the Company may treat the Holder hereof as the owner for all purposes.
Neither the Warrants nor this Warrant Certificate entitle any Holder
hereof to any of the rights of a stockholder of the Company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
- 25 -
<PAGE> 27
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
DATED:
COUNTERSIGNED:
AMERICAN EAGLE GROUP, INC.
as Warrant Agent
By:
---------------------------------
AMERICAN EAGLE GROUP, INC.
Attest: By:
----------------------------- --------------------------------
Secretary Name:
------------------------------
Title:
-----------------------------
- 26 -
<PAGE> 28
AMERICAN EAGLE GROUP, INC.
PURCHASE FORM
(To be executed upon exercise of Warrant)
Warrant Agent
The undersigned hereby irrevocably elects to exercise the right to
purchase _______________ shares of Common Stock evidenced by the within Warrant
Certificate, according to the terms and conditions thereof, and herewith makes
payment of the purchase price in full by tendering cash or certified or bank
cashier's check drawn upon a bank chartered by the government of the United
States or any state thereof or debt of the Company at its principal amount in
the aggregate amount of $__________________________. The undersigned requests
that certificates for such shares of Common Stock shall be issued in the name
of
- --------------------------------------------------------------------------------
(Please print Name, Address and Social Security No.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
and, if said number of shares shall not be all the shares purchasable
thereunder, that a New Warrant Certificate for the balance remaining of the
shares purchasable under the within Warrant Certificate be issued in the name
of the undersigned Warrantholder or his Assignee as below indicated and
delivered to the address stated below.
DATED: , 1996
---------------
Name of Warrantholder or Assignee:
--------------------------------------------------------
(Please Print)
Address:
---------------------------------------
---------------------------------------
Signature:
-------------------------------------
Signature Guaranteed: (The above signature must correspond with the name as
written upon the face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatever, unless this Warrant
Certificate has been assigned.)
<PAGE> 1
EXHIBIT 10.45
VOID AFTER 5:00 P.M. NEW YORK TIME, NOVEMBER 4, 2003
No. Warrants to Purchase
800,000 Shares of Common Stock
AMERICAN EAGLE GROUP, INC.
WARRANT TO PURCHASE COMMON STOCK
This certifies that, for value received, American Financial Group, Inc.
or registered assigns (the "Holder"), is entitled to purchase from American
Eagle Group, Inc., a Delaware corporation (the "Company") , at any time after
the date and for the term set forth in Section 5.1 of the Warrant Subscription
Agreement referred to below, at the purchase price of $3.45 per share (the
"Warrant Price"), the number of shares of Common Stock, $.01 par value per
share, of the Company ("Common Stock"), shown above. The number of warrants,
the number of shares purchasable upon exercise of the Warrants and the Warrant
Price are subject to adjustment from time to time as set forth in the Warrant
Subscription Agreement referred to below.
Warrants may be exercised in whole or in part by presentation of this
Warrant Certificate with the Purchase Form on the reverse side hereof duly
executed, which signature shall be guaranteed by a bank or trust company or a
broker or dealer which is a member of the National Association of Securities
Dealers, Inc., and simultaneous payment of the Warrant Price at the principal
office of American Eagle Group, Inc. (the "Warrant Agent"). Payment of such
price shall be made at the option of the Holder hereof in cash, by certified or
bank cashier's check drawn upon a bank chartered by the government of the
United States or any state thereof, by surrender of outstanding Company debt at
its face value (with no regard to accrued interest) or any combination thereof.
This Warrant Certificate is issued under and in accordance with a
Warrant Subscription Agreement dated as of November 5, 1996, between the
Company and the Warrant Agent and is subject to the terms and provisions
contained in the Warrant Subscription Agreement, to all of which the Holder of
this Warrant Certificate by acceptance hereof consents. A copy of the Warrant
Subscription Agreement may be obtained by the Holder hereof upon written
request to the Company.
Upon any partial exercise of the Warrants evidenced by this Warrant
Certificate, there shall be countersigned and issued to the Holder hereof a new
Warrant Certificate for the shares of Common Stock as to which the Warrants
evidenced by this Warrant Certificate shall not have been exercised. This
Warrant Certificate may be exchanged at the office of the Warrant Agent by
surrender of this Warrant Certificate properly
<PAGE> 2
endorsed either separately or in combination with one or more other Warrant
Certificates for one or more new Warrant Certificates evidencing the right of
the Holder thereof to purchase the same aggregate number of shares as were
purchasable on exercise of the Warrants evidenced by the Warrant Certificate or
Certificates exchanged. No fractional shares will be issued upon the exercise
of any Warrant, but the Company will pay the cash value thereof determined as
provided in the Warrant Subscription Agreement. This Warrant Certificate is
transferable at the office of the Warrant Agent in the manner and subject to
the limitations set forth in the Warrant Subscription Agreement.
The Holder hereof may be treated by the Company, the Warrant Agent, and
all other persons dealing with this Warrant Certificate as the absolute owner
hereof for any purpose and as the person entitled to exercise the rights
represented hereby, or to the transfer hereof on the books of the Company any
notice to the contrary notwithstanding, and until such transfer on such books,
the Company may treat the Holder hereof as the owner for all purposes.
Neither the Warrants nor this Warrant Certificate entitle any Holder
hereof to any of the rights of a stockholder of the Company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
- 2 -
<PAGE> 3
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
DATED:
COUNTERSIGNED:
AMERICAN EAGLE GROUP, INC.
as Warrant Agent
By: M. Philip Guthrie
---------------------------------
AMERICAN EAGLE GROUP, INC.
Attest: Frederick G. Anderson By: M. Philip Guthrie
----------------------------- --------------------------------
Secretary Name: M. Philip Guthrie
------------------------------
Title: Chairman, CEO and President
-----------------------------
- 3 -
<PAGE> 1
EXHIBIT 10.46
AMERICAN EAGLE GROUP
AMERICAN EAGLE INSURANCE COMPANY
SPECIAL UNDERLYING GENERAL AVIATION LIABILITY
EXCESS OF LOSS REINSURANCE AGREEMENT
1996 RENEWAL FINAL PLACEMENT SLIP
<TABLE>
<S> <C>
COMPANY: AMERICAN EAGLE INSURANCE COMPANY
a Texas corporation
and any company now or hereafter affiliated
with American Eagle Group, Inc.
and/or
VIRGINIA SURETY COMPANY, INC.
an Illinois Corporation
(as respects business underwritten by American Eagle Group, Inc.,
and any subsidiaries of American Eagle Group, Inc.)
and/or
THE REINSURANCE CORPORATION OF NEW YORK
a New York corporation
(as respects business underwritten by American Eagle Group, Inc.,
and any subsidiaries of American Eagle Group, Inc.)
and/or
ZURICH REINSURANCE CENTRE, INC.
a New York corporation
(as respects business underwritten by American Eagle Group, Inc.,
and any subsidiaries of American Eagle Group, Inc.)
and/or
TIG INSURANCE COMPANY
a California corporation
(as respects business underwritten by American Eagle Group, Inc.,
and any subsidiaries of American Eagle Group, Inc.)
</TABLE>
Page --1 of 10--
<PAGE> 2
AMERICAN EAGLE INSURANCE COMPANY SPECIAL U/L AVIATION LIABILITY XOL
<TABLE>
<S> <C>
INCEPTION: 12:01 a.m. standard time (as defined in the Company's policies),
July 1, 1994, as respects written and renewal business.
EFFECTIVE: Continuous and to take effect 12:01 a.m. standard time,
July 1, 1996, as respects written and renewal business.
CANCELLATION: Any July 1 by either party via 90 days prior notice by certified or registered mail.
If at any time the Company or any Reinsurer loses the whole or part of its paid up
capital, becomes insolvent, is placed in conservation, rehabilitation, or liquidation, or
has a receiver appointed, or is acquired or controlled by, merged with, or reinsures its
entire business with any other company or corporation, the other party will have the right
to cancel this reinsurance by giving 90 days notice by certified or registered mail.
In the event of cancellation, the Company will have the option of terminating Reinsurers'
liability in force at cancellation date ("cut-off"), or of continuing Reinsurers'
liability ("run-off").
In the event the Company elects run-off, Reinsurers' liability will continue until the
first anniversary date following cancellation, but in no event will Reinsurers' liability
continue for more than 12 months plus odd time, not to exceed 18 months in all. Premium
to Reinsurers for the run-off period calculated at the rates applicable at cancellation
date, applied to the GNEP developed during the run-off period on risks protected
hereunder.
Regardless of the cancellation option elected by the Company, coverage to continue:
1. As respects any policy the Company is unable to cancel due to regulatory action,
until the Company is able to cancel or non-renew such policy.
</TABLE>
Page --2 of 10--
<PAGE> 3
AMERICAN EAGLE INSURANCE COMPANY SPECIAL U/L AVIATION LIABILITY XOL
<TABLE>
<S> <C>
2. As respects aggregate coverage provided by this Agreement, until the next normal
anniversary or renewal date of the policies following cancellation date of this
Agreement.
BUSINESS All business classified by the Company as General Aviation Liability.
COVERED:
EXCLUSIONS: As attached.
TERRITORY: To follow the Company's policies.
LIMIT AND $300,000 each and every risk, each and every occurrence, excess of
RETENTION:
$200,000 each and every risk, each and every occurrence, in turn excess of
an annual aggregate deductible of $3,000,000, or an amount equal to 5.45% of GNEP,
whichever the greater.
The definition of "occurrence" will follow the Company's policy.
Reinsurers' limit and Company's retention to apply on an aggregate loss basis where the
Company's policies provide such aggregate limits for the hazards of Products and Completed
Operations only.
Company will be the sole judge of what constitutes one risk. Any such determination shall
be made by the Company with utmost good faith, giving due consideration to the interest of
the Company and the Reinsurer.
LOSS Prorated in proportion to each party's share of loss and in addition to
EXPENSE: limit hereof except where the Company's policy includes all loss
expenses within the policy limits.
</TABLE>
Page --3 of 10--
<PAGE> 4
AMERICAN EAGLE INSURANCE COMPANY SPECIAL U/L AVIATION LIABILITY XOL
<TABLE>
<S> <C>
WARRANTY: No more than [BLACKOUT] helicopters in total, to be subject to this Agreement, or so
deemed.
REIN- Unlimited free reinstatements. However, helicopter losses will be
STATEMENT: limited to [BLACKOUT] or [BLACKOUT] of GNEP whichever the greater for
each Agreement Year.
PREMIUM, Retrospectively rated (three-year blocks):
REPORTS AND
REMITTANCES: 1. Annual Deposit Premium: [BLACKOUT], payable [BLACKOUT] in equal installments
quarterly in arrears.
2. Ceding Commission: [BLACKOUT] of deposit premium only (no ceding commission to be
taken or returned on retrospective premium adjustment).
3. Retrospective Premium Adjustment: Ultimate reinsurance premium to be based on the
sum of the incurred losses plus [BLACKOUT] of GNEP, subject, however, to the
following:
Provisional Rate: [BLACKOUT] of GNEP
Minimum Rate: [BLACKOUT] of GNEP
Maximum Rate: [BLACKOUT] of GNEP
4. This is the third year of a three-year retrospective rating block which incepted
July 1, 1994, with cumulative interim adjustments annually beginning July 1, 1995,
for the first Agreement Year, and annually thereafter until all losses for the
three-year block are closed. However, there shall be no return premium due (i.e.,
no adjustment of premium below the provisional rate) prior to 48 months from the
inception of each three-year block.
5. Retrospective adjustments to be made within 60 days after the end of each Agreement
year, and recalculated annually thereafter until all losses are settled.
</TABLE>
SUBJECT TO A REQUEST FOR
CONFIDENTIAL TREATMENT
Page --4 of 10--
<PAGE> 5
AMERICAN EAGLE INSURANCE COMPANY SPECIAL U/L AVIATION LIABILITY XOL
<TABLE>
<S> <C>
DEFINITION "Agreement Year" will be the 12-month period beginning each
OF July 1, and will include all premiums earned and losses incurred
AGREEMENT arising from written and renewal policies taking effect during the
YEAR: Agreement year in question.
OTHER Company permitted to purchase facultative and other treaty
REINSURANCE: reinsurance and to deduct the premium thereof if it inures to the
benefit of this Agreement. Company permitted to carry contingency
reinsurance, recoveries under which will inure to its sole benefit.
FUNDING: Letters of Credit and/or Trust Agreements required from unauthorized Reinsurers for
outstanding losses and expenses, recoverables, and IBNR.
AGENCY: For all purposes of this Agreement, the reinsured company that is set forth first in the
"COMPANY" section of this Placement Slip will be deemed the agent of all other reinsured
companies referenced in said section. In no event, however, will any reinsured company be
deemed the agent of another with respect to the terms of the Insolvency Article.
ORIGINAL The liability of the Reinsurers under each and every policy covered
CONDITIONS under this Agreement will be subject in all respects to the same
AND LIABILITY interpretations, terms, conditions, waivers, modifications,
OF REINSURERS: alterations, and cancellations as the respective policies of the
Company to which this Agreement relates.
The Company will be the sole judge as to what will constitute a claim or loss covered
under the Company's policy and as to the Company's liability thereunder, and will at its
sole discretion adjust, settle, or compromise all claims and losses. All such
adjustments, settlements, and compromises will be binding on the Reinsurers in proportion
to their participation, provided they are within the terms and conditions of this
Agreement. Ex Gratia payments made by the Company will be included in this Agreement
subject to the approval of the Lead Reinsurer.
</TABLE>
Page --5 of 10--
<PAGE> 6
AMERICAN EAGLE INSURANCE COMPANY SPECIAL U/L AVIATION LIABILITY XOL
<TABLE>
<S> <C>
While the Reinsurers do not have the duty to investigate or defend claims or suits, they
will nevertheless have the right and the opportunity, with the full cooperation of the
Company, to associate with the Company at the Reinsurers' expense in the defense of any
claim, suit, or proceeding that is likely to involve this Agreement.
OTHER Access to Records Clause
PROVISIONS: Amendments Clause
Aon Re Inc. Intermediary Clause
Arbitration Clause
Aviation Grounding Liability Clause (1988 Amendment)
Currency Clause (U.S. Dollars)
Delays, Errors, or Omissions Clause
Entire Agreement Clause
Extra Contractual Obligations (90%) and
Excess of Policy Limits (90%) Clause
Insolvency Clause (as attached)
Loss and Loss Expense Clause (including the Company's own costs and legal expenses
incurred in direct connection with costs of declaratory judgment actions)
Net Retained Liability Clause
Loss Notices and Settlements Clause
Offset Clause
Service of Suit Clause
Taxes/FET Clauses
ESTIMATED
SUBJECT
GNEP: [BLACKOUT] (Liability only)
* * * * *
</TABLE>
Page --6 of 10--
<PAGE> 7
AMERICAN EAGLE INSURANCE COMPANY SPECIAL U/L AVIATION LIABILITY XOL
In accordance with your instructions, we have placed reinsurance with the
Reinsurer listed hereon, subject to the terms and conditions hereinabove
stated. We ask that you promptly advise us if the terms, conditions, or
Reinsurer vary in any respect from your instructions. Aon Re Inc. will not be
responsible for the financial or other obligations of any Reinsurer. Should
you desire financial information regarding the Reinsurer listed hereon, please
contact us and we will furnish it.
The Reinsurer's obligations under this Agreement are several and not joint and
are limited solely to the extent of their individual participation. The
Reinsurer is not responsible for the participation of any co-subscribing
Reinsurer that for any reason does not satisfy all or part of its obligations.
<TABLE>
<CAPTION>
REINSURED WITH: % PARTICIPATION
---------------
<S> <C> <C>
Zurich Reinsurance Centre, Inc. {06-1325038} [BLACKOUT]
TOTAL PLACEMENT [BLACKOUT]
==========
</TABLE>
Assuming that you find everything in order, please indicate your acceptance and
approval by signing and returning this Final Placement Slip to Aon Re Inc., 201
California Street, Suite 900, San Francisco, California 94111.
ACCEPTED AND
APPROVED BY: /s/ PHILIP GUTHRIE DATED: 8/9/96
------------------------------ ----------------------
Page --7 of 10--
<PAGE> 8
AMERICAN EAGLE INSURANCE COMPANY SPECIAL U/L AVIATION LIABILITY XOL
EXCLUSION LIST
No reinsurance indemnity will be afforded under this Agreement for:
A. Aircraft policies covering aircraft with more than 40
passenger seats, operated by the policy named insured for the
commercial transportation of passengers.
B. Satellite Business.
C. Assumed treaty reinsurance, except as respects intracompany
reinsurance, and not to exclude business assumed from another
insurer where said insurer's policy is issued in place of the
Company's because of licensing or rating reasons.
D. Residual Value Insurance.
E. Unearned Premium Insurance, written as such.
F. Burning Cost Insurance and Profit Commissions.
G. Financial Guarantee.
H. Errors and Omissions Insurance, written as such.
I. Directors' and Officers' Liability.
J. Seepage and Pollution, per Clause AVN46B or its equivalent.
Nevertheless, for the purposes of this Agreement, it is agreed
that in respect of Aviation fueling, defueling, refueling, and
products legal liability policies, paragraph 1(b) of Clause
AVN46B or its equivalent is amended to read "Pollution and
contamination of any kind whatsoever other than pollution and
contamination of a product or products sold or supplied."
K. Hot Air Balloon Liability.
Page --8 of 10--
<PAGE> 9
AMERICAN EAGLE INSURANCE COMPANY SPECIAL U/L AVIATION LIABILITY XOL
Notwithstanding the foregoing, any Exclusion (other than Exclusions A, C, and
J) will not apply when the operations or exposures outlined in those exclusions
are, in the Company's opinion, only incidental to and a comparatively small
part of the original insured's major activities or total operations not to
exceed 15% of the original policy premium. Furthermore, should the judicial
entity having legal jurisdiction invalidate any exclusion of the Company's
policy, any amount of loss for which the Company would not be liable except for
such invalidation shall not be subject to any of the Exclusions of this
Agreement.
Should the Company, by reason of an inadvertent act, error, or omission, be
bound to afford coverage excluded hereunder, or should an existing insured
extend its operations to include coverage excluded hereunder, the Reinsurers
will waive the exclusion(s) with the exception of A, C, and J. The duration of
said waiver will not extend beyond the time that notice of such coverage has
been received by the responsible underwriting authority of the Company plus 60
days thereafter.
The Company may submit to the Reinsurers, for special acceptance hereunder,
business not covered by this Agreement. If said business is accepted by the
Reinsurers, it will be subject to the terms of this agreement, except as such
terms are modified by such acceptance. Any special acceptance business covered
under the reinsurance Agreement being replaced by this Agreement will be
automatically covered hereunder. Further, should Reinsurers become a party to
this Agreement subsequent to the acceptance of any business not normally
covered hereunder, they will automatically accept same as being a part of this
Agreement.
Page --9 of 10--
<PAGE> 10
AMERICAN EAGLE INSURANCE COMPANY SPECIAL U/L AVIATION LIABILITY XOL
INSOLVENCY
In the event of the insolvency of the Company, this reinsurance will be payable
on demand, with reasonable provision for verification, on the basis of claims
allowed against the insolvent Company by any court of competent jurisdiction or
by any liquidator, receiver, or statutory successor of the Company having
authority to allow such claims, without diminution because of such insolvency
or because such liquidator, receiver, or statutory successor has failed to pay
all or a portion of any claims. Such payments by the Reinsurers will be made
directly to the Company or its liquidator, receiver, or statutory successor,
except as provided by Section 4118(a) of the New York Insurance Law or except
(a) where the Agreement specifically provides another payee of such reinsurance
in the event of the insolvency of the Company, or (b) the Reinsurers with the
consent of the direct insured or insureds have assumed such policy obligations
of the Company as direct obligations of the Reinsurers to the payees under such
policies and in substitution for the obligations of the Company to such payees.
It is agreed, however, that the liquidator, receiver, or statutory successor of
the insolvent Company will give written notice to the Reinsurers of the
pendency of a claim against the Company indicating the policy or bond reinsured
which claim would involve a possible liability on the part of the Reinsurers
within a reasonable time after which claim is filed in the insolvency
proceeding, and that during the pendency of such claim, the Reinsurers may
investigate such claim and interpose, at their own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses that they may
deem available to the Company or its liquidator, receiver, or statutory
successor. The expense, thus incurred by the Reinsurers will be chargeable,
subject to the approval of the court, against the Company as part of the
expense of liquidation to the extent of a pro rata share of the benefit which
may accrue to the Company solely as a result of the defense undertaken by the
Reinsurers. Where two or more Reinsurers are involved in the same claim and a
majority in interest elect to interpose defense to such claim, the expense will
be apportioned in accordance with the terms of this Agreement as though such
expense had been incurred by the insolvent Company.
This Article will apply severally to each Company named in the Preamble to this
Agreement. Notwithstanding the foregoing, the American Eagle Insurance Company
(hereinafter called "AEIC") has entered into agreements with The Reinsurance
Corporation of New York (hereinafter called "RECO") and Zurich Reinsurance
Centre (hereinafter called "ZRC") where the AEIC will attach Assumption of
Liability Endorsements to certain policies within the scope of this Agreement,
under which RECO or ZRC will assume the direct policy obligations of the AEIC
to certain insureds (as payees of RECO or ZRC) upon the AEIC's insolvency. In
such event, RECO or ZRC, as the case may be, is considered the payee of the
Reinsurers under this Agreement and payment to RECO or ZRC under this Agreement
will extinguish the Reinsurers' liability hereunder to the extent of such
payment. In no event will the Reinsurers be subject to multiple liability for
any loss or expense payable under this Agreement. Any amount paid by the
Reinsurers to RECO or ZRC will be deemed as payment by the Reinsurers under
this Agreement and will not be recoverable from the Reinsurers under this
Agreement by the AEIC or its liquidator, receiver, or statutory successor.
Page -10 of 10--
<PAGE> 1
EXHIBIT 10.47
AMERICAN EAGLE GROUP
AMERICAN EAGLE INSURANCE COMPANY
FIRST THROUGH FIFTH GENERAL AVIATION LIABILITY
EXCESS OF LOSS REINSURANCE AGREEMENT
<TABLE>
<S> <C>
1996 RENEWAL FINAL PLACEMENT SLIP
---------------------------------
COMPANY: AMERICAN EAGLE INSURANCE COMPANY
Texas corporation
and any company now or hereafter affiliated
with American Eagle Group, Inc.
and/or
VIRGINIA SURETY COMPANY, INC.
an Illinois corporation
(as respects business underwritten by American Eagle Group, Inc.,
and any subsidiaries of American Eagle Group, Inc.)
and/or
REINSURANCE CORPORATION OF NEW YORK (THE)
a New York corporation
(as respects business underwritten by American Eagle Group, Inc.,
and any subsidiaries of American Eagle Group, Inc.)
and/or
ZURICH REINSURANCE CENTRE, INC.
a New York corporation
(as respects business underwritten by American Eagle Group, Inc.,
and any subsidiaries of American Eagle Group, Inc.)
and/or
TIG INSURANCE COMPANY
a California corporation
(as respects business underwritten by American Eagle Group, Inc.,
and any subsidiaries of American Eagle Group, Inc.)
</TABLE>
Page --1 of 14--
<PAGE> 2
AMERICAN EAGLE INSURANCE COMPANY 1ST THROUGH 5TH AVIATION LIABILITY XOL
<TABLE>
<S> <C>
INCEPTION: 12:01 a.m. Standard Time (as defined in the Company's policies),
July 1, 1992, as respects written and renewal business.
EFFECTIVE: Continuous and to take effect 12:01 a.m. standard time, July 1, 1996, as respects written
and renewal business.
CANCELLATION: Any July 1 by either party via 90 days prior notice by certified or registered mail.
If at any time the Company or any Reinsurer loses the whole or part of its paid up
capital, becomes insolvent, is placed in conservation, rehabilitation, or liquidation, or
has a receiver appointed, or is acquired or controlled by, merged with, or reinsures its
entire business with any other company or corporation, the other party will have the right
to cancel this reinsurance by giving 90 days notice by certified or registered mail.
In the event of cancellation, the Company will have the option of terminating Reinsurers'
liability in force at cancellation date ("cut-off"), or of continuing Reinsurers'
liability ("run-off").
In the event the Company elects cut-off, and the Fourth and/or Fifth Layer for the current
Agreement year is not in a deficit position, any minimum premium provision for the Fourth
and/or Fifth Layer will be reduced by 40%.
In the event the Company elects run-off, Reinsurers' liability will continue until the
first anniversary date following cancellation, but in no event will Reinsurers' liability
continue for more than 12 months plus odd time, not to exceed 18 months in all. Premium
to Reinsurers for the run-off period calculated at the rates applicable at cancellation
date, applied to the GNEP developed during the run-off period on risks protected
hereunder.
</TABLE>
Page --2 of 14--
<PAGE> 3
AMERICAN EAGLE INSURANCE COMPANY 1ST THROUGH 5TH AVIATION LIABILITY XOL
<TABLE>
<S> <C>
Regardless of the cancellation option elected by the Company, coverage to continue:
1. As respects any policy the Company is unable to cancel due to regulatory action,
until the Company is able to cancel or non-renew said policy.
2. As respects aggregate coverage provided by this Agreement, until the next normal
anniversary or renewal date of the policies following cancellation date of this
Agreement.
BUSINESS
COVERED: All business classified by the Company as General Aviation Liability
EXCLUSIONS: As attached.
TERRITORY: To follow the Company's policies.
LIMIT AND First Layer:
RETENTION: ------------
$500,000 each and every risk, each and every occurrence, excess of
$500,000 each and every risk, each and every occurrence, in turn excess of
an annual aggregate deductible of $5,000,000 or 9.09% GNEP, whichever is greater.
Second Layer:
-------------
$1,000,000 each and every risk, each and every occurrence, excess of
$1,000,000 each and every risk, each and every occurrence, in turn excess of
an annual aggregate deductible of $2,000,000 or 3.64% of GNEP, whichever is greater.
</TABLE>
Page --3 of 14--
<PAGE> 4
AMERICAN EAGLE INSURANCE COMPANY 1ST THROUGH 5TH AVIATION LIABILITY XOL
<TABLE>
<S> <C>
Third Layer:
------------
$3,000,000 each and every risk, each and every occurrence,
excess of
$2,000,000 each and every risk, each and every occurrence,
in turn excess of
an annual agregate deductible of $3,000,000 or 5.45% of GNEP, whichever is greater.
Fourth Layer:
-------------
$5,000,000 each and every risk, each and every occurrence,
excess of
$5,000,000 each and every risk, each and every occurrence.
Fifth Layer:
------------
$10,000,000 each and every risk, each and every occurrence,
excess of
$10,000,000 each and every risk, each and every occurrence.
Applying to All Layers
----------------------
The definition of "occurrence" will follow the Company's policy.
Reinsurers' limit and Company's retention to apply on an aggregate loss basis where the
Company's policies provide such aggregate limits for the hazards of Products and Completed
Operations only.
Company will be the sole judge of what constitutes one risk. Any such determination shall
be made by the Company with utmost good faith, giving due consideration to the interest of
the Company and the Reinsurers.
LOSS Prorated in proportion to each party's share of loss and in addition to
EXPENSE: limit hereof except where the Company's policy includes all loss
expenses within the policy limits.
</TABLE>
Page --4 of 14--
<PAGE> 5
AMERICAN EAGLE INSURANCE COMPANY 1ST THROUGH 5TH AVIATION LIABILITY XOL
<TABLE>
<S> <C>
WARRANTY: No more than [BLACKOUT] helicopters in total, to be subject to this Agreement, or so
deemed.
REIN- First Layer:
STATEMENT: ------------
Unlimited free reinstatements. However, helicopter losses will be limited to [BLACKOUT]
or [BLACKOUT] of GNEP whichever the greater for each Agreement Year.
Second Layer:
-------------
Unlimited free reinstatements. However, helicopter losses will be limited to [BLACKOUT]
or [BLACKOUT] of GNEP whichever the greater for each Agreement Year.
Third Layer:
------------
Seven full, free, annual reinstatements.
Fourth Layer:
-------------
Two full annual reinstatements, each at additional premium, [BLACKOUT] as to time, pro
rata as to amount.
Fifth Layer:
------------
Two full annual reinstatements, each at additional premium, [BLACKOUT] as to time, pro
rata as to amount.
PREMIUM, First Layer:
REPORTS, AND ------------
REMITTANCES:
Retrospectively rated (three-year blocks):
1. Annual Deposit Premium: [BLACKOUT] payable in equal installments of [BLACKOUT]
quarterly in arrears.
</TABLE>
Page --5 of 14--
<PAGE> 6
AMERICAN EAGLE INSURANCE COMPANY 1ST THROUGH 5TH AVIATION LIABILITY XOL
<TABLE>
<S> <C>
2. Ceding Commission: [BLACKOUT] of deposit premium only (no ceding commission to be
taken or returned on retrospective premium adjustment).
3. Retrospective Premium Adjustment: Ultimate reinsurance
premium to be based on the sum of the incurred losses
multiplied by [BLACKOUT], subject, however, to the following:
Provisional Rate: [BLACKOUT] of GNEP
Minimum Rate: [BLACKOUT] of GNEP
Maximum Rate: [BLACKOUT] of GNEP
4. This is the third year of a three-year retrospective rating block which incepted
July 1, 1994, with cumulative interim adjustments annually beginning July 1, 1995,
for the first Agreement Year, and annually thereafter until all losses for the
three-year block are closed. However, there shall be no return premium due (i.e.,
no adjustment of premium below the provisional rate) prior to 48 months from the
inception of each three-year block.
5. Retrospective adjustments to be made within 60 days after the end of each Agreement
year, and recalculated annually thereafter until all losses are settled.
Second Layer:
-------------
Retrospectively rated (three-year blocks):
1. Annual Deposit Premium: [BLACKOUT] payable in equal installments of [BLACKOUT]
quarterly in arrears.
</TABLE>
Page --6 of 14--
<PAGE> 7
AMERICAN EAGLE INSURANCE COMPANY 1ST THROUGH 5TH AVIATION LIABILITY XOL
<TABLE>
<S> <C>
2. Retrospective Premium Adjustment: Ultimate reinsurance
premium to be based on the sum of the incurred losses
multiplied by [BLACKOUT]; subject, however, to the following:
Provisional Rate: [BLACKOUT] of GNEP
Minimum Rate: [BLACKOUT] of GNEP
Maximum Rate: [BLACKOUT] of GNEP
3. This is the third year of a three-year retrospective rating block which incepted
July 1, 1994, with cumulative interim adjustments annually beginning July 1, 1995,
for the first Agreement Year, and annually thereafter until all losses for the
three-year block are closed. However, there shall be no return premium due (i.e.,
no adjustment of premium below the provisional rate) prior to 48 months from the
inception of each three-year block.
4. Retrospective adjustments to be made within 60 days after the end of each Agreement
year, and recalculated annually thereafter until all losses are settled.
Third Layer:
------------
Retrospectively rated (three year-block):
1. Annual Minimum and Deposit Premium: [BLACKOUT], payable in equal installments of
[BLACKOUT] quarterly in arrears.
2. Retrospective Premium Adjustment: Ultimate reinsurance premium to be based on the
sum of the incurred losses multiplied by [BLACKOUT]; subject, however, to the
following:
Provisional Rate: [BLACKOUT] of GNEP
Minimum Rate: [BLACKOUT] of GNEP
Maximum Rate: [BLACKOUT] of GNEP
</TABLE>
Page --7 of 14--
<PAGE> 8
AMERICAN EAGLE INSURANCE COMPANY 1ST THROUGH 5TH AVIATION LIABILITY XOL
<TABLE>
<S> <C>
3. This is the third year of a three-year retrospective rating block which incepted
July 1, 1994, with cumulative interim adjustments annually beginning July 1, 1995,
for the first Agreement Year, and annually thereafter until all losses for the
three-year block are closed. However, there shall be no return premium due (i.e.,
no adjustment of premium below the provisional rate) prior to 48 months from the
inception of each three-year block.
4. Retrospective adjustments to be made within 60 days after the end of each Agreement
year, and recalculated annually thereafter until all losses are settled.
Fourth Layer:
-------------
1. Minimum and Deposit Premium for the Agreement Year beginning July 1, 1996:
[BLACKOUT] payable in six equal installments of [BLACKOUT] at July 1, 1996, October
1, 1996, January 1, 1997, April 1, 1997, July 1, 1997, and October 1, 1997.
Minimum and deposit premiums for subsequent Agreement Years are to be determined.
2. Rate: [BLACKOUT] of GNEP.
3. First adjustment due within 150 days after the end of each Agreement year, and
adjusted at each July 1 thereafter, until all premiums are earned.
4. In the event of a total paid loss to this layer, the full deposit premium will
immediately become due and payable.
Fifth Layer:
------------
1. Minimum and Deposit Premium for the Agreement year beginning July 1, 1996:
[BLACKOUT] payable in four equal installments of [BLACKOUT] at July 1, 1996,
October 1, 1996, January 1, 1997, and April 1, 1997. Minimum and deposit premiums
for subsequent agreement years are to be determined.
</TABLE>
Page --8 of 14--
<PAGE> 9
AMERICAN EAGLE INSURANCE COMPANY 1ST THROUGH 5TH AVIATION LIABILITY XOL
<TABLE>
<S> <C>
2. Rate: [BLACKOUT] of GNEP.
3. First adjustment due within 60 days after the end of each Agreement year, and
adjusted annually thereafter, until all premiums are earned.
All Layers:
-----------
Quarterly reports of information required by reinsurers for completion of their NAIC
statements.
DEFINITION "Agreement year" will be each 12-month period beginning each
OF July 1, and will include all premiums earned and losses incurred
AGREEMENT arising from written and renewal policies taking effect during the
YEAR Agreement year in question.
OTHER Company permitted to purchase facultative and other treaty
REINSURANCE: reinsurance and to deduct the premium thereof if it inures to the
benefit of this Agreement. Company permitted to carry contingency
reinsurance, recoveries under which will inure to its sole benefit.
FUNDING: Letters of Credit and/or Trust Agreements required from unauthorized Reinsurers for
outstanding losses and expenses, recoverables, and IBNR.
AGENCY: For all purposes of this Agreement, the reinsured company that is set forth first in the
"COMPANY" section of this Placement Slip will be deemed the agent of all other reinsured
companies referenced in said section. In no event, however, will any reinsured company be
deemed the agent of another with respect to the terms of the Insolvency Article.
</TABLE>
Page --9 of 14--
<PAGE> 10
AMERICAN EAGLE INSURANCE COMPANY 1ST THROUGH 5TH AVIATION LIABILITY XOL
<TABLE>
<S> <C>
ORIGINAL The liability of the Reinsurers under each and every policy covered
CONDITIONS under this Agreement will be subject in all respects to the same
AND LIABILITY interpretations, terms, conditions, waivers, modifications, alterations,
OF REINSURERS: and cancellations as the respective policies of the Company to which
this Agreement relates.
The Company will be the sole judge as to what will constitute a claim or loss covered
under the Company's policy and as to the Company's liability thereunder, and will at its
sole discretion adjust, settle, or compromise all claims and losses. All such
adjustments, settlements, and compromises will be binding on the Reinsurers in proportion
to their participation, provided they are within the terms and conditions of this
Agreement. Ex Gratia payments made by the Company will be included in this Agreement
subject to the approval of the Lead Reinsurer.
While the Reinsurers do not have the duty to investigate or defend claims or suits, they
will nevertheless have the right and the opportunity, with the full cooperation of the
Company, to associate with the Company at the Reinsurers' expense in the defense of any
claim, suit, or proceeding that is likely to involve this Agreement.
OTHER Access to Records Clause
PROVISIONS: Amendments Clause
Aon Re Inc. Intermediary Clause
Arbitration Clause
Aviation Grounding Liability Clause (1988 Amendment)
Currency Clause (U.S. Dollars)
Entire Agreement Clause
Extra Contractual Obligations (90%) Clause
Excess of Policy Limits (90%) Clause
Delays, Errors, or Omissions Clause
Insolvency Clause (as attached)
Loss and Loss Expense Clause (including the Company's own costs
and legal expenses incurred in direct connection with costs of
declaratory judgment actions)
Net Retained Liability Clause
Loss Notices and Settlements Clause
Offset Clause (domestic reinsurers only)
Service of Suit Clause
Taxes/FET Clauses
</TABLE>
Page --10 of 14--
<PAGE> 11
AMERICAN EAGLE INSURANCE COMPANY 1ST THROUGH 5TH AVIATION LIABILITY XOL
<TABLE>
<S> <C>
ESTIMATED
SUBJECT
GNEP: [BLACKOUT] (Liability only)
* * * * * * * *
</TABLE>
In accordance with your instructions, we have placed reinsurance with the
Reinsurers listed hereon, subject to the terms and conditions hereinabove
stated. We ask that you promptly advise us if the terms, conditions, or
Reinsurers vary in any respect from your instructions. Aon Re Inc. will not be
responsible for the financial or other obligations of any Reinsurer. Should you
desire financial information regarding the Reinsurers listed hereon, please
contact us and we will furnish it.
The Reinsurers' obligations under this Agreement are several and not joint and
are limited solely to the extent of their individual participation. The
Reinsurers are not responsible for the participation of any co-subscribing
Reinsurer that for any reason does not satisfy all or part of its obligations.
<TABLE>
<CAPTION>
First Second Third Fourth Fifth
Reinsured with: Layer Layer Layer Layer Layer
----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
DOMESTIC COMPANIES
Chartwell Reinsurance Company {41-1353943} [BLACKOUT]
Through F & G Re Inc.
United States Fidelity and
Guaranty Company {52-0515280} [BLACKOUT]
Security Insurance Company of Hartford {06-0529570} [BLACKOUT]
Signet Star Reinsurance Company {47-0574325} [BLACKOUT]
Transatlantic Reinsurance Company {13-5616275} [BLACKOUT]
USF Re Insurance Company {04-1590940} [BLACKOUT]
Zurich Reinsurance Centre, Inc. {06-1325038} [BLACKOUT]
TOTAL DOMESTIC COMPANIES [BLACKOUT]
</TABLE>
Assuming that you find everything in order, please indicate your acceptance and
approval by signing and returning this Final Placement Slip to Aon Re Inc., 201
California Street, Suite 900, San Francisco, California 94111.
ACCEPTED AND
APPROVED BY: /s/ PHILIP GUTHRIE DATED: 8/9/96
--------------------------------- -----------------
Page --11 of 14--
<PAGE> 12
AMERICAN EAGLE INSURANCE COMPANY 1ST THROUGH 5TH AVIATION LIABILITY XOL
EXCLUSION LIST
No reinsurance indemnity will be afforded under this Agreement for:
A. Aircraft policies covering aircraft with more than 40
passenger seats, operated by the policy named insured for the
commercial transportation of passengers.
B. Satellite Business.
C. Assumed treaty reinsurance, except as respects intracompany
reinsurance, and not to exclude business assumed from another
insurer where said insurer's policy is issued in place of the
Company's because of licensing or rating reasons.
D. Residual Value Insurance.
E. Unearned Premium Insurance, written as such.
F. Burning Cost Insurance and Profit Commissions.
G. Financial Guarantee.
H. Errors and Omissions Insurance, written as such.
I. Directors' and Officers' Liability.
J. Seepage and Pollution, per Clause AVN46B or its equivalent.
Nevertheless, for the purposes of this Agreement, it is agreed
that in respect of Aviation fueling, defueling, refueling, and
products legal liability policies, paragraph 1(b) of Clause
AVN46B or its equivalent is amended to read "Pollution and
contamination of any kind whatsoever other than pollution and
contamination of a product or products sold or supplied."
K. Hot Air Balloon Liability.
Page --12 of 14--
<PAGE> 13
AMERICAN EAGLE INSURANCE COMPANY 1ST THROUGH 5TH AVIATION LIABILITY XOL
Notwithstanding the foregoing, any Exclusion (other than Exclusions A, C, and
J) will not apply when the operations or exposures outlined in those exclusions
are, in the Company's opinion, only incidental to and a comparatively small
part of the original insured's major activities or total operations not to
exceed 15% of the original policy premium. Furthermore, should the judicial
entity having legal jurisdiction invalidate any exclusion of the Company's
policy, any amount of loss for which the Company would not be liable except for
such invalidation shall not be subject to any of the Exclusions of this
Agreement.
Should the Company, by reason of an inadvertent act, error, or omission, be
bound to afford coverage excluded hereunder, or should an existing insured
extend its operations to include coverage excluded hereunder, the Reinsurers
will waive the exclusion(s) with the exception of A, C, and J. The duration of
said waiver will not extend beyond the time that notice of such coverage has
been received by the responsible underwriting authority of the Company plus 60
days thereafter.
The Company may submit to the Reinsurers, for special acceptance hereunder,
business not covered by this Agreement. If said business is accepted by the
Reinsurers, it will be subject to the terms of this agreement, except as such
terms are modified by such acceptance. Any special acceptance business covered
under the reinsurance Agreement being replaced by this Agreement will be
automatically covered hereunder. Further, should Reinsurers become a party to
this Agreement subsequent to the acceptance of any business not normally
covered hereunder, they will automatically accept same as being a part of this
Agreement.
Page --13 of 14--
<PAGE> 14
AMERICAN EAGLE INSURANCE COMPANY 1ST THROUGH 5TH AVIATION LIABILITY XOL
INSOLVENCY
In the event of the insolvency of the Company, this reinsurance will be payable
on demand, with reasonable provision for verification, on the basis of claims
allowed against the insolvent Company by any court of competent jurisdiction or
by any liquidator, receiver, or statutory successor of the Company having
authority to allow such claims, without diminution because of such insolvency
or because such liquidator, receiver, or statutory successor has failed to pay
all or a portion of any claims. Such payments by the Reinsurers will be made
directly to the Company or its liquidator, receiver, or statutory successor,
except as provided by Section 4118(a) of the New York Insurance Law or except
(a) where the Agreement specifically provides another payee of such reinsurance
in the event of the insolvency of the Company, or (b) the Reinsurers with the
consent of the direct insured or insureds have assumed such policy obligations
of the Company as direct obligations of the Reinsurers to the payees under such
policies and in substitution for the obligations of the Company to such payees.
It is agreed, however, that the liquidator, receiver, or statutory successor of
the insolvent Company will give written notice to the Reinsurers of the
pendency of a claim against the Company indicating the policy or bond reinsured
which claim would involve a possible liability on the part of the Reinsurers
within a reasonable time after which claim is filed in the insolvency
proceeding, and that during the pendency of such claim, the Reinsurers may
investigate such claim and interpose, at their own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses that they may
deem available to the Company or its liquidator, receiver, or statutory
successor. The expense, thus incurred by the Reinsurers will be chargeable,
subject to the approval of the court, against the Company as part of the
expense of liquidation to the extent of a pro rata share of the benefit which
may accrue to the Company solely as a result of the defense undertaken by the
Reinsurers. Where two or more Reinsurers are involved in the same claim and a
majority in interest elect to interpose defense to such claim, the expense will
be apportioned in accordance with the terms of this Agreement as though such
expense had been incurred by the insolvent Company.
This Article will apply severally to each Company named in the Preamble to this
Agreement. Notwithstanding the foregoing, the American Eagle Insurance Company
(hereinafter called "AEIC") has entered into agreements with The Reinsurance
Corporation of New York (hereinafter called "RECO") and Zurich Reinsurance
Centre (hereinafter called "ZRC") where the AEIC will attach Assumption of
Liability Endorsements to certain policies within the scope of this Agreement,
under which RECO or ZRC will assume the direct policy obligations of the AEIC
to certain insureds (as payees of RECO or ZRC) upon the AEIC's insolvency. In
such event, RECO or ZRC, as the case may be, is considered the payee of the
Reinsurers under this Agreement and payment to RECO or ZRC under this Agreement
will extinguish the Reinsurers' liability hereunder to the extent of such
payment. In no event will the Reinsurers be subject to multiple liability for
any loss or expense payable under this Agreement. Any amount paid by the
Reinsurers to RECO or ZRC will be deemed as payment by the Reinsurers under
this Agreement and will not be recoverable from the Reinsurers under this
Agreement by the AEIC or its liquidator, receiver, or statutory successor.
Page --14 of 14--
<PAGE> 1
EXHIBIT 10.48
AMERICAN EAGLE GROUP, INC.
AMERICAN EAGLE INSURANCE COMPANY
GENERAL AVIATION HULL SPECIAL UNDERLYING
EXCESS OF LOSS REINSURANCE AGREEMENT
1996 RENEWAL FINAL PLACEMENT SLIP
<TABLE>
<S> <C>
COMPANY: AMERICAN EAGLE INSURANCE COMPANY
Texas corporation
and/or any company now or hereafter affiliated
with American Eagle Group, Inc.
and/or
VIRGINIA SURETY COMPANY, INC.
Illinois corporation
(as respects business underwritten by American Eagle Group, Inc.
and any subsidiaries of American Eagle Group, Inc.)
and/or
REINSURANCE CORPORATION OF NEW YORK (THE)
a New York corporation
(as respects business underwritten by American Eagle Group, Inc.
and any subsidiaries of American Eagle Group, Inc.)
and/or
ZURICH REINSURANCE CENTRE, INC.
a New York corporation
(as respects business underwritten by American Eagle Group, Inc.
and any subsidiaries of American Eagle Group, Inc.)
and/or
TIG INSURANCE COMPANY
a California corporation
(as respects business underwritten by American Eagle Group, Inc.
and any subsidiaries of American Eagle Group, Inc.)
INCEPTION: 12:01 a.m. standard time (as defined in the Company's policies),
July 1, 1994, as respects written and renewal business.
</TABLE>
Page --1 of 8--
<PAGE> 2
AMERICAN EAGLE INSURANCE COMPANY HULL SPECIAL U/L EXCESS OF LOSS
<TABLE>
<S> <C>
EFFECTIVE: Continuous and to take effect 12:01 a.m. standard time,
July 1, 1996, as respects written and renewal business.
CANCELLATION: Any July 1 by either party via 90 days prior notice by certified or registered mail.
If at any time any Reinsurer loses the whole or part of its paid up capital, becomes
insolvent, is placed in conservation, rehabilitation, or liquidation, or has a receiver
appointed, or is acquired or controlled by, merged with, or reinsures its entire business
with any other company or corporation, the Company will have the right to cancel said
Reinsurer's participation by giving 90 days notice by certified or registered mail.
In the event of cancellation, the Company will have the option of terminating Reinsurers'
liability in force at cancellation date ("cut-off"), or of continuing Reinsurers'
liability ("run-off"). In the event the Company elects run-off, Reinsurers' liability
will continue until the first anniversary date following cancellation, but in no event
will Reinsurers' liability continue for more than 12 months plus odd time not to exceed 18
months in all. Premium to Reinsurers for the run-off period calculated at the rates
applicable at cancellation date, applied to the GNEP developed during the run-off period
on risks protected hereunder.
Regardless of the cancellation option elected by the Company, as respects any policy the
Company is unable to cancel due to regulatory action, the Company will be permitted to
continue coverage until the Company is able to cancel or non-renew such policy.
BUSINESS
COVERED: All business classified by the Company as General Aviation Hull and Spares.
EXCLUSIONS: As attached.
TERRITORY: To follow the Company's policies.
</TABLE>
Page --2 of 8--
<PAGE> 3
AMERICAN EAGLE INSURANCE COMPANY HULL SPECIAL U/L EXCESS OF LOSS
<TABLE>
<S> <C>
LIMIT AND
RETENTION: $100,000 each and every risk, each and every occurrence,
excess of $150,000 each and every risk, each and every occurrence.
Subject to an occurrence limitation of $400,000.
LOSS EXPENSE: Pro rata in addition to Reinsurers' limit of liability unless loss expense is included
within the policy limits.
PREMIUM, Retrospectively rated (three-year blocks):
REPORTS AND
REMITTANCES: 1. Annual Deposit Premium: [BLACKOUT] payable in equal installments of [BLACKOUT]
quarterly in arrears.
2. Retrospective Premium Adjustment: Ultimate reinsurance premium to be based on the
sum of the incurred losses plus [BLACKOUT] of GNEP, subject, however, to the
following:
Provisional Rate: [BLACKOUT] of GNEP
Minimum Rate: [BLACKOUT] of GNEP
Maximum Rate: [BLACKOUT] of GNEP
3. This is the third year of a three-year retrospective rating block which incepted
July 1, 1994, with cumulative interim adjustments annually beginning July 1, 1995,
for the first Agreement Year, and annually thereafter until all losses for the
three-year block are closed. However, there shall be no return premium due (i.e.,
no adjustment of premium below the provisional rate) prior to 48 months from the
inception of each three-year block.
4. Retrospective adjustments to be made within 60 days after the end of each Agreement
year, and recalculated annually thereafter until all losses are settled.
</TABLE>
Page --3 of 8--
<PAGE> 4
AMERICAN EAGLE INSURANCE COMPANY HULL SPECIAL U/L EXCESS OF LOSS
<TABLE>
<S> <C>
Quarterly reports of information required by reinsurers for completion of their NAIC
statements.
OTHER The Company is permitted to:
REINSURANCE:
A. Purchase other treaty reinsurance and to deduct the premium thereof if it inures to
the benefit of this Agreement;
B. Purchase facultative reinsurance on any subject risk it deems advisable, and the
premium for that portion of the Company's policy reinsured elsewhere will be
deducted from the gross subject premium hereunder; and
C. Carry catastrophe reinsurance, recoveries under which will inure to its sole
benefit.
FUNDING: Letters of Credit and/or Trust Agreements required from unauthorized Reinsurers for
outstanding losses and expenses, recoverables, and IBNR.
WARRANTY: The Company will include their Pollution Exclusions on its policies, or so deemed.
AGENCY: For all purposes of this Agreement, the reinsured company that is set forth first in the
"COMPANY" section of this Placement Slip will be deemed the agent of all other reinsured
companies referenced in said section. In no event, however, will any reinsured company be
deemed the agent of another with respect to the terms of the Insolvency Article.
ORIGINAL The liability of the Reinsurers under each and every policy covered
CONDITIONS under this Agreement will be subject in all respects to the same
AND interpretations, terms, conditions, waivers, modifications, alterations,
LIABILITY OF and cancellations as the respective policies of the Company to which
REINSURERS: this Agreement relates.
</TABLE>
Page --4 of 8--
<PAGE> 5
AMERICAN EAGLE INSURANCE COMPANY HULL SPECIAL U/L EXCESS OF LOSS
<TABLE>
<S> <C>
The Company will be the sole judge as to what will constitute a claim or loss covered
under the Company's policy and as to the Company's liability thereunder, and will at its
sole discretion adjust, settle, or compromise all claims and losses. Any such
determination shall be made by the Company with utmost good faith giving due consideration
to the interests of the Company and the Reinsurers. All such adjustments, settlements,
and compromises will be binding on the Reinsurers in proportion to their participation,
provided they are within the terms and conditions of this Agreement. Ex-gratia payments
made by the Company will be included in this Agreement subject to the approval of the Lead
Reinsurer.
While the Reinsurers do not have the duty to investigate or defend claims or suits, they
will nevertheless have the right and the opportunity, with the full cooperation of the
Company, to associate with the Company at the Reinsurers' expense in the defense of any
claim, suit, or proceeding that is likely to involve this Agreement.
OTHER Access to Records Clause
PROVISIONS: Amendments Clause
Aon Re Inc. Intermediary Clause
Arbitration Clause
Currency Clause (U.S. Dollars)
Entire Agreement Clause
Extra Contractual Obligations (90%) and
Excess of Policy Limits (90%) Clause
Delays, Errors, or Omissions Clause
Insolvency Clause (as attached)
Loss and Loss Expense Clause (including the Company's own costs and legal expenses
incurred in direct connection with costs of declaratory judgment actions)
Loss Notices and Settlements Clause
Net Retained Liability Clause
Occurrence Definition - As per NMA 2244
Offset Clause
Service of Suit Clause
Taxes/FET Clauses
ESTIMATED [BLACKOUT]
SUBJECT
GNEP:
* * * * *
</TABLE>
Page --5 of 8--
<PAGE> 6
AMERICAN EAGLE INSURANCE COMPANY HULL SPECIAL U/L EXCESS OF LOSS
In accordance with your instructions, we have placed reinsurance with the
Reinsurers listed hereon, subject to the terms and conditions hereinabove
stated. We ask that you promptly advise us if the terms, conditions, or
Reinsurers vary in any respect from your instructions. Aon Re Inc. will not be
responsible for the financial or other obligations of any Reinsurer. Should
you desire financial information regarding the Reinsurer listeds hereon, please
contact us and we will furnish it.
The Reinsurers' obligations under this Agreement are several and not joint and
are limited solely to the extent of their individual participations. The
Reinsurers are not responsible for the participation of any co-subscribing
Reinsurer that for any reason does not satisfy all or part of its obligations.
<TABLE>
<CAPTION>
Reinsured with: % Participation
---------------
<S> <C>
Zurich Reinsurance Centre, Inc. [BLACKOUT]
TOTAL PLACEMENT [BLACKOUT]
</TABLE>
Assuming that you find everything in order, please indicate your acceptance and
approval by signing and returning this Final Placement Slip to Aon Re Inc., 201
California Street, Suite 900, San Francisco, California 94111.
ACCEPTED AND
APPROVED BY: /s/ PHILIP GUTHRIE DATED: 8/9/96
-------------------------------- --------------
Page --6 of 8--
<PAGE> 7
AMERICAN EAGLE INSURANCE COMPANY HULL SPECIAL U/L EXCESS OF LOSS
EXCLUSION LIST
No reinsurance indemnity will be afforded under this Agreement for:
A. Hull war business as described in the Common North American
Aviation War Exclusion Clause (CNAAWEC) and/or war, hi-jacking
and other perils exclusion clause (Aviation) (AVN48B) and/or
subsequent like clause, except to include war risks and
related perils writebacks as may be included in the Company's
policy.
B. Aircraft policies covering aircraft with more than 40
passenger seats, operated by the policy named insured for the
commercial transportation of passengers.
C. Satellite business.
D. Assumed treaty reinsurance, except as respects intracompany
reinsurance, and not to exclude business assumed from another
insurer where said insurer's policy is issued in place of the
Company's because of licensing or rating reasons.
E. Helicopter hulls, except that the Company may cede up to 5
helicopter hulls to this Agreement each Agreement year.
Facultative reinsurance will be purchased to remove any
exposure to the Reinsurers from any helicopter hulls written
after the foregoing limitation has been exceeded; however, in
the event that the Company should discover that facultative
reinsurance has not been placed on any such helicopter hull,
then this Agreement will cover said risk for 30 days after
discovery.
Page --7 of 8--
<PAGE> 8
AMERICAN EAGLE INSURANCE COMPANY HULL SPECIAL U/L EXCESS OF LOSS
INSOLVENCY
In the event of the insolvency of the Company, this reinsurance will be payable
on demand, with reasonable provision for verification, on the basis of claims
allowed against the insolvent Company by any court of competent jurisdiction or
by any liquidator, receiver, or statutory successor of the Company having
authority to allow such claims, without diminution because of such insolvency
or because such liquidator, receiver, or statutory successor has failed to pay
all or a portion of any claims. Such payments by the Reinsurers will be made
directly to the Company or its liquidator, receiver, or statutory successor,
except as provided by Section 4118(a) of the New York Insurance Law or except
(a) where the Agreement specifically provides another payee of such reinsurance
in the event of the insolvency of the Company, or (b) the Reinsurers with the
consent of the direct insured or insureds have assumed such policy obligations
of the Company as direct obligations of the Reinsurers to the payees under such
policies and in substitution for the obligations of the Company to such payees.
It is agreed, however, that the liquidator, receiver, or statutory successor of
the insolvent Company will give written notice to the Reinsurers of the
pendency of a claim against the Company indicating the policy or bond reinsured
which claim would involve a possible liability on the part of the Reinsurers
within a reasonable time after which claim is filed in the insolvency
proceeding, and that during the pendency of such claim, the Reinsurers may
investigate such claim and interpose, at their own expense, in the proceeding
where such claim is to be adjudicated, any defense or defenses that they may
deem available to the Company or its liquidator, receiver, or statutory
successor. The expense, thus incurred by the Reinsurers will be chargeable,
subject to the approval of the court, against the Company as part of the
expense of liquidation to the extent of a pro rata share of the benefit which
may accrue to the Company solely as a result of the defense undertaken by the
Reinsurers. Where two or more Reinsurers are involved in the same claim and a
majority in interest elect to interpose defense to such claim, the expense will
be apportioned in accordance with the terms of this Agreement as though such
expense had been incurred by the insolvent Company.
This Article will apply severally to each Company named in the Preamble to this
Agreement. Notwithstanding the foregoing, the American Eagle Insurance Company
(hereinafter called "AEIC") has entered into agreements with The Reinsurance
Corporation of New York (hereinafter called "RECO") and Zurich Reinsurance
Centre (hereinafter called "ZRC") where the AEIC will attach Assumption of
Liability Endorsements to certain policies within the scope of this Agreement,
under which RECO or ZRC will assume the direct policy obligations of the AEIC
to certain insureds (as payees of RECO or ZRC) upon the AEIC's insolvency. In
such event, RECO or ZRC, as the case may be, is considered the payee of the
Reinsurers under this Agreement and payment to RECO or ZRC under this Agreement
will extinguish the Reinsurers' liability hereunder to the extent of such
payment. In no event will the Reinsurers be subject to multiple liability for
any loss or expense payable under this Agreement. Any amount paid by the
Reinsurers to RECO or ZRC will be deemed as payment by the Reinsurers under
this Agreement and will not be recoverable from the Reinsurers under this
Agreement by the AEIC or its liquidator, receiver, or statutory successor.
Page --8 of 8--
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 9/30/95,
12/31/95 AND 8/30/96 CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED
STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
9/30/95, 12/31/95, AND 9/30/96 CONDENSED CONSOLIDATED BALANCE SHEETS AND
CONDENSED CONSOLIDATED STATEMENTS OF INCOME.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> SEP-30-1996 SEP-30-1995
<DEBT-HELD-FOR-SALE> 36,564 58,595
<DEBT-CARRYING-VALUE> 23,530 29,522
<DEBT-MARKET-VALUE> 23,172 29,061
<EQUITIES> 0 0
<MORTGAGE> 0 0
<REAL-ESTATE> 0 0
<TOTAL-INVEST> 60,094 88,117
<CASH> 9,084 16,218
<RECOVER-REINSURE> 87,670 130,187
<DEFERRED-ACQUISITION> 14,670 18,816
<TOTAL-ASSETS> 265,310 350,014
<POLICY-LOSSES> 123,203 138,190
<UNEARNED-PREMIUMS> 65,996 78,282
<POLICY-OTHER> 1,180 17,441
<POLICY-HOLDER-FUNDS> 751 15,895
<NOTES-PAYABLE> 13,250 11,250
1,629 1,629
0 0
<COMMON> 71 71
<OTHER-SE> 47,035 71,234
<TOTAL-LIABILITY-AND-EQUITY> 265,310 350,014
93,965 72,415
<INVESTMENT-INCOME> 3,478 4,161
<INVESTMENT-GAINS> 52 458
<OTHER-INCOME> 172 507
<BENEFITS> 66,255 45,594
<UNDERWRITING-AMORTIZATION> 36,845 23,614
<UNDERWRITING-OTHER> 36,342 29,353
<INCOME-PRETAX> (6,267) 7,600
<INCOME-TAX> (1,800) 2,358
<INCOME-CONTINUING> (4,467) 5,242
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,467) 5,242
<EPS-PRIMARY> (0.64) .73
<EPS-DILUTED> (0.64) .73
<RESERVE-OPEN> 57,852 50,451
<PROVISION-CURRENT> 23,652 13,570
<PROVISION-PRIOR> 30,271 18,565
<PAYMENTS-CURRENT> 32,160 21,562
<PAYMENTS-PRIOR> 38,023 42,348
<RESERVE-CLOSE> 53,923 32,135
<CUMULATIVE-DEFICIENCY> (10,442) (10,462)
</TABLE>
