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Exhibit 38
SETTLEMENT AGREEMENT
SETTLEMENT AGREEMENT, dated as of March 18, 1998 (the "Agreement"), by and
among American Bankers Insurance Group, Inc., a Florida corporation ("ABIG"),
American International Group, Inc., a Delaware corporation ("AIG") and Cendant
Corporation, a Delaware corporation ("Cendant").
WHEREAS, ABIG, AIG and AIGF, Inc., a wholly owned subsidiary of AIG
("AIGF"), have entered into the Amended and Restated Agreement and Plan of
Merger, dated as of December 21, 1997, as amended and restated as of January 7,
1998, as amended by Amendment No. 1 thereto dated as of January 28, 1998, and
as amended and restated as of February 28, 1998 (the "Amended Merger
Agreement"), pursuant to which, inter alia, ABIG will be merged (the "Merger")
into AIGF and each share of Common Stock, par value $1.00 per share, of ABIG
("ABIG Common Shares") issued and outstanding immediately prior to the
effective time of the Merger will be converted into, and become exchangeable
for, a portion of a share of Common Stock, par value $2.50 per share, of AIG or
cash with a value of $58.00;
WHEREAS, American Bankers and AIG have entered into the Stock Option
Agreement, dated as of December 21, 1997, as amended and restated as of
February 28, 1998 (the "Amended Stock Option Agreement"), pursuant to which,
inter alia, ABIG has granted to AIG an irrevocable option to purchase up to
8,265,626 ABIG Common Shares at a cash purchase price equal to $47.00 per
share;
WHEREAS, on January 27, 1998, AIG gave notice that it exercised its option
to purchase all of the 8,265,626 ABIG Common Shares subject to the Amended
Stock Option Agreement, but as of the date of execution of this Agreement has
not consummated the purchase of any of the ABIG Common Shares subject to the
Amended Stock Option Agreement;
WHEREAS, Season Acquisition Corp., a New Jersey corporation and a wholly
owned subsidiary of Cendant ("Season"), commenced a tender offer on January 27,
1998, to purchase 23,501,260 outstanding ABIG Common Shares at a price of
$58.00 per ABIG Common Share;
WHEREAS, Season revised its tender offer on March 16, 1998, to increase
the price to $67.00 per ABIG Common Share; and
WHEREAS, ABIG, AIG and Cendant believe it is in their respective best
interests and in the best interests of their respective stockholders that the
uncertainty with respect to the possible acquisition of ABIG be resolved as
promptly as practicable.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
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1. Upon execution and delivery of this Settlement Agreement by each
of the parties hereto, AIG will waive, until 2:00 p.m. on March 23, 1998,
clause (iv) of Section 8.3(a) of the Amended Merger Agreement and clause (x) of
the second sentence of Section 8.3(a) of the Amended Merger Agreement, to
permit ABIG to terminate the Amended Merger Agreement pursuant to Section
8.3(a) thereof at any time after the execution and delivery of this Agreement
in order to enter into a definitive acquisition agreement with Cendant, subject
to AIG receiving the payments required by Section 2 of this Agreement
simultaneously with such termination; it being understood and agreed that no
such termination shall be effective unless and until the payments required by
Section 2 hereof have been made. If ABIG does not effectively terminate the
Amended Merger Agreement by 2:00 p.m. on March 23, 1998, all the provisions of
the Amended Merger Agreement, including, without limitation, clause (iv) of
Section 8.3(a) of the Amended Merger Agreement and clause (x) of the second
sentence of Section 8.3(a) of the Amended Merger Agreement, shall apply with
full force and effect.
2. Simultaneously with any termination of the Amended Merger
Agreement as contemplated by Section 1 hereof, (x) ABIG shall pay, by wire
transfer of same day funds to an account to be designated by AIG, (i)
$81,500,000 required to be paid to AIG pursuant to Section 8.5(b) of the
Merger Agreement (the "Termination Fee") and (ii) $18,500,000 in satisfaction
of ABIG's obligation under Section 1(d) of the Amended Stock Option Agreement
(the "Option Cancellation Fee"), (y) upon ABIG and Cendant or any of its
affiliates entering into an agreement regarding a merger or other business
combination, Cendant shall pay, by wire transfer of same day funds to an
account designated by AIG, $5,000,000 to cover AIG's expenses (the "Expense
Reimbursement") and (z) AIG shall terminate the Voting Agreement, dated as of
December 21, 1997, between AIG and the stockholders of ABIG party thereto. In
addition, immediately prior to the consummation of (A) the purchase by Cendant
of a majority of the then outstanding ABIG Common Shares or (B) a merger or
other business combination involving ABIG and Cendant or an affiliate of
Cendant, Cendant shall pay, by wire transfer of same day funds to an account
designated by AIG, an additional $5,000,000 to cover AIG's expenses. AIG agrees
that if AIG receives all of the payments referred to in clause (x) above, (x)
ABIG shall have no further obligation to AIG with respect to the payments
required by Section 8.5 or otherwise of the Amended Merger Agreement and (y)
the Amended Stock Option Agreement shall be deemed to have been terminated and
canceled and AIG shall not be entitled to receive any other cash payments from
ABIG or to purchase any ABIG Common Shares pursuant thereto. ABIG hereby
acknowledges and agrees that execution of this Agreement by AIG shall be deemed
to constitute the request for payment required to be made by AIG pursuant to
Section 1(d) of the Amended Stock Option Agreement.
3. Each of ABIG and Cendant agree that neither ABIG nor Cendant,
nor any of their respective officers, directors, employees, affiliates, agents
or other representatives or advisors, including, without limitation, legal,
investment banking and accounting advisors,
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(all such persons, collectively "Representatives"), will (i) take any actions or
make any claims or encourage or facilitate the taking of any actions or the
making of any claims by others, challenging, or seeking to challenge, the
validity or enforceability of the fees or the other payments referred to in
Section 2 hereof or seeking to modify, reduce or otherwise deprive AIG of such
fees or payments to be paid to it pursuant to this Agreement, the Amended Merger
Agreement or the Amended Stock Option Agreement (any such actions or claims
being hereinafter referred to as "Fee Claims") or (ii) take any positions or
make any oral or written statements publicly or to or before any governmental or
regulatory authority, agency, commission, body, court or other governmental
entity or any other person that are inconsistent with their respective
obligations under this Section 3. ABIG and Cendant each agree that it and its
respective Representatives will cooperate in good faith with AIG in defending
against any Fee Claims.
4. AIG agrees that upon payment of the Termination Fee, the Option
Cancellation Fee and the Expense Reimbursement, it will take all necessary steps
(i) to withdraw from any proceedings or hearings to be held by or before any
insurance regulatory authorities relating to Cendant's Form A applications to
obtain approval to acquire control of ABIG and (ii) to withdraw any Form A
applications that it has pending to obtain approval to acquire control of ABIG
(whether through consummation of the Merger or consummation of the purchase of
the ABIG Common Shares subject to the Amended Stock Option Agreement). AIG
further agrees that neither it nor any of its Representatives shall take,
directly or indirectly, any actions or make any statements intended to frustrate
or delay any transaction that may be agreed between ABIG and Cendant pursuant to
Section 1 hereof or to object to the acceptability of Cendant as a controlling
person of ABIG.
5. Subject to and upon (i) termination of the Amended Merger Agreement as
contemplated by Section 1 hereof and (ii) ABIG entering into an agreement
regarding a merger or other business combination with Cendant or any of its
affiliates, each of the parties hereto absolutely, fully and forever releases
the other parties and their affiliates, their respective Representatives and
shareholders, and their respective successor's and assigns (the "Released
Parties") from any and all claims relating to any proposed or actual acquisition
of ABIG by Cendant, Season, AIG or AIGF that any party hereto ever had, now has
or hereafter can, shall or may have against the Released Parties, from the
beginning of the world to the day of the date of this release, including,
without limitation, any claims asserted or that could have been asserted in
Cendant Corporation et al v. American Bankers Insurance Group, Inc., et al,
pending in the United States District Court for the Southern District of
Florida, Case No. 98-0159; American International Group. Inc., et al. v. Cendant
Corporation, et al., pending in the United States District Court for the
Southern District of Florida, Case No. 98-0247; and Cendant Corporation v.
National Union Fire Insurance Co., et al., pending in the Superior Court of New
Jersey, Xxxxxx County, Civil Action No. L-438-98 (collectively the "Civil
Actions"), provided, however, that this Section 5 shall not include a release or
discharge from any claim to enforce the provisions of this Agreement. Promptly
upon
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termination of the Amended Merger Agreement and ABIG entering into an agreement
regarding a merger or other business combination with Cendant or any of its
affiliates, the parties will enter into and cause to be filed in each of the
Civil Actions a Stipulation of Dismissal With Prejudice and Without Costs of
all claims pending in those actions, in the form attached as Exhibit I.
6. Each of ABIG, AIG and Cendant hereby represents and warrants to each of the
other parties to this Agreement that (i) such party is a corporation duly
organized, validly existing and in good standing under the laws of its state of
organization and has the requisite corporate power and authority to enter into
and perform this Agreement; (ii) the execution and delivery of this Agreement by
such party and the consummation by it of the transactions contemplated hereby
have been duly executed and delivered by a duly authorized officer of such party
and constitutes a valid and binding obligation of such party; and (iii) the
execution and delivery of this Agreement by such party and the consummation by
it of the transactions contemplated hereby do not require the consent, waiver,
approval or authorization of or any filing with any governmental or regulatory
authority, agency, commission, body, court or other governmental entity or any
other person and will not violate, result in a breach of or the acceleration of
any obligation under, or constitute a default under, any provision of such
party's charter or by-laws, or any material indenture, mortgage, lien, lease,
agreement, contract, instrument, order, law, rule, regulation, ordinance,
judgment, decree or restriction by which such party or any of its subsidiaries
or any of their respective properties or assets is bound;
7. This Agreement, together with the Amended Merger Agreement and the
Amended Stock Option and the other documents referred to therein, contains the
entire agreement among the parties hereto with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions. This
Agreement may not be changed, amended or modified orally, but may be changed
only by an agreement in writing signed by each of the parties hereto. This
Agreement, and all of the parties' respective rights and obligations hereunder,
shall survive indefinitely and shall not be affected, altered, abridged or
terminated by virtue of the termination or amendment of the Amended Merger
Agreement or the Amended Stock Option Agreement.
8. AIG agrees that, for a period of 90 days following the earlier of the
consummation of (A) the purchase by Cendant of a majority of the then
outstanding ABIG Common Shares or (B) a merger or other business combination
involving ABIG and Cendant or an affiliate of Cendant, AIG and its subsidiaries
will not hire any employees of ABIG or any of its subsidiaries as employees of
AIG or any of its subsidiaries. AIG further agrees that, for a period of one
year following the earlier of the consummation of (A) the purchase by Cendant
of a majority of the then outstanding ABIG Common Shares or (B) a merger or
other business combination involving ABIG and Cendant or an affiliate of
Cendant, AIG and
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its subsidiaries will not solicit any employee of ABIG or any of its
subsidiaries for employment by AIG or any of its subsidiaries; provided,
however, that AIG and its subsidiaries may engage in general solicitations of
employment not specifically directed to employees of ABIG or any of its
subsidiaries. The restrictions contained in the first two sentences of this
paragraph shall not apply to (i) employees of ABIG or any of its subsidiaries
other than officers and other executive or managerial employees or (ii)
employees of ABIG or any of its subsidiaries who become former employees and
whose employment has been terminated for at least 30 days.
9. This Agreement may be executed in any number of counterparts, each of
which, when executed, shall be deemed to be an original and all of which
together shall constitute one and the same document, provided that this
Agreement shall not become effective until executed by all of the parties
hereto.
10. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware (regardless of the laws that might otherwise
govern under applicable Delaware principles of conflicts of law).
EACH PARTY HERETO AGREES THAT, IN CONNECTION WITH ANY LEGAL SUIT OR
PROCEEDING ARISING WITH RESPECT TO THIS AGREEMENT, IT SHALL SUBMIT TO THE
JURISDICTION OF THE CHANCERY COURT OF DELAWARE AND AGREES TO VENUE IN SUCH
COURT. EACH PARTY HEREBY APPOINTS THE SECRETARY OF SUCH PARTY AS ITS AGENT FOR
SERVICE OF PROCESS FOR PURPOSES OF THE FOREGOING SENTENCE ONLY.
11. Each party hereto will consult with the other parties hereto before
issuing any press release or making any other public statement with respect to
the transactions contemplated by this Agreement; and no party shall issue any
such press release or make any such statement prior to such consultation except
as may be required by law or the applicable rules and regulations of the New
York Stock Exchange.
12. If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
13. The parties hereto agree that any breach of the provisions of this
Agreement would irreparably injure the other parties hereto and that money
damages would be an inadequate remedy therefore. Accordingly, each party hereto
shall be entitled to one or more injunctions enjoining any such breach and
requiring specific performance of this
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Agreement and consent to the entry thereof, in addition to any other remedy to
which that party is entitled at law or in equity.
14. This agreement is for settlement purposes only and will not be used by
the parties hereto in any litigation, other than litigation arising out of this
Agreement.
AMERICAN BANKERS INSURANCE GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: President and Chief Executive
Officer
AMERICAN INTERNATIONAL GROUP, INC.
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Executive Vice President and
Chief Financial Officer
CENDANT CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
Name: Xxxxx X. Xxxxxxx
Title: Senior Executive Vice President
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