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EXHIBIT 10.43
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SECURITIES PURCHASE AGREEMENT
BETWEEN
AMERICAN FINANCIAL GROUP, INC.,
PURCHASER
AND
AMERICAN EAGLE GROUP, INC.,
SELLER
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TABLE OF CONTENTS
Page
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
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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
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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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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
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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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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
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PURCHASER:
AMERICAN FINANCIAL GROUP, INC.
By: Carl H. Lendner
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Its: Co-President
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