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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
Among
AMERICAN BANKERS INSURANCE GROUP, INC.,
AMERICAN INTERNATIONAL GROUP, INC.
and
AIGF, INC.
Dated as of December 21, 1997,
as amended and restated as of January 7, 1998
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TABLE OF CONTENTS
Page
RECITALS
ARTICLE I
The Merger; Closing; Effective Time
1.1. The Merger.......................................................2
1.2. Closing..........................................................2
1.3. Effective Time...................................................2
ARTICLE II
Charter and By-Laws
of the Surviving Corporation
2.1. The Charter......................................................3
2.2. The By-Laws......................................................3
ARTICLE III
Officers and Directors
of the Surviving Corporation
3.1. Directors........................................................3
3.2. Officers.........................................................3
ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates
4.1. Effect on Capital Stock..........................................4
(a) Common Stock Merger Consideration............................4
(b) Preferred Stock Merger Consideration.........................6
(c) Cancellation of Shares.......................................6
(d) Merger Subsidiary............................................6
(e) Election Form................................................7
4.2. Exchange of Certificates for Shares..............................8
(a) Exchange Agent...............................................8
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(b) Exchange Procedures..........................................8
(c) Distributions with Respect to Unexchanged Shares.............9
(d) Transfers....................................................9
(e) Fractional Shares............................................9
(f) Termination of Exchange Fund................................10
(g) Lost, Stolen or Destroyed Certificates......................10
(h) Affiliates..................................................10
4.3. Dissenters' Rights..............................................10
4.4. Adjustments to Prevent Dilution.................................10
4.5. Treatment of the Convertible Notes..............................11
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company...................11
(a) Organization, Good Standing and Qualification...............11
(b) Capital Structure...........................................12
(c) Corporate Authority; Approval and Fairness..................13
(d) Governmental Filings; No Violations.........................13
(e) Company Reports; Financial Statements.......................15
(f) Absence of Certain Changes..................................16
(g) Litigation and Liabilities..................................16
(h) Employee Benefits...........................................17
(i) Compliance with Laws; Permits...............................19
(j) Takeover Statutes...........................................20
(k) Environmental Matters.......................................21
(l) Tax Matters.................................................22
(m) Taxes.......................................................22
(n) Labor Matters...............................................24
(o) Intellectual Property.......................................24
(p) Material Contracts..........................................25
(q) Rights Plan.................................................26
(r) Brokers and Finders.........................................26
(s) Insurance Matters...........................................26
(t) Liabilities and Reserves....................................28
(u) Investment Company..........................................29
5.2. Representations and Warranties of Parent and Merger Subsidiary..29
(a) Capitalization of Merger Subsidiary.........................29
(b) Organization, Good Standing and Qualification...............30
(c) Capital Structure...........................................30
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(d) Corporate Authority.........................................30
(e) Governmental Filings; No Violations.........................31
(f) Parent Reports; Financial Statements........................32
(g) Absence of Certain Changes..................................33
(h) Tax Matters.................................................33
(i) Brokers and Finders.........................................33
(j) Corporate Headquarters......................................33
ARTICLE VI
Covenants
6.1. Interim Operations..............................................35
6.2. Acquisition Proposals...........................................37
6.3. Information Supplied............................................38
6.4. Stockholders Meetings...........................................39
6.5. Filings; Other Actions; Notification............................39
6.6. Taxation........................................................40
6.7. Access..........................................................41
6.8. Affiliates......................................................41
6.9. Stock Exchange Listing and De-listing...........................42
6.10. Publicity.......................................................42
6.11. Benefits........................................................42
(a) Stock Options...............................................42
(b) Employee Benefits...........................................44
6.12. Expenses........................................................44
6.13. Indemnification; Directors' and Officers' Insurance.............44
6.14. Convertible Notes...............................................46
6.15. Other Actions by the Company and Parent.........................46
(a) Rights......................................................46
(b) Takeover Statute............................................46
(c) Dividends...................................................46
ARTICLE VII
Conditions
7.1. Conditions to Each Party's Obligation to Effect the Merger......47
(a) Stockholder Approval........................................47
(b) Listing.....................................................47
(c) Regulatory Consents.........................................47
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(d) Litigation..................................................47
(e) S-4.........................................................47
(f) Blue Sky Approvals..........................................47
7.2. Conditions to Obligations of Parent and Merger Subsidiary.......48
(a) Representations and Warranties..............................48
(b) Performance of Obligations of the Company...................48
(c) Consents....................................................48
(d) Tax Opinion.................................................48
(e) Affiliates Letters..........................................49
7.3. Conditions to Obligation of the Company.........................49
(a) Representations and Warranties..............................49
(b) Performance of Obligations of Parent and Merger Subsidiary..49
(c) Consents Under Agreements...................................49
(d) Tax Opinion.................................................50
ARTICLE VIII
Termination
8.1. Termination by Mutual Consent...................................50
8.2. Termination by Either Parent or the Company.....................50
8.3. Termination by the Company......................................51
8.4. Termination by Parent...........................................51
8.5. Effect of Termination and Abandonment...........................52
ARTICLE IX
Miscellaneous and General
9.1. Survival........................................................53
9.2. Modification or Amendment.......................................53
9.3. Waiver of Conditions............................................53
9.4. Counterparts....................................................53
9.5. GOVERNING LAW; WAIVER OF JURY TRIAL.............................53
9.6. Notices.........................................................54
9.7. Entire Agreement; No Other Representations......................55
9.8. No Third Party Beneficiaries....................................56
9.9. Obligations of Parent and of the Company........................56
9.10. Severability....................................................56
9.11. Interpretation..................................................56
9.12. Assignment......................................................56
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9.13. Alternative Transaction Structure. ............................57
Exhibit A -- Stock Option Agreement
Exhibit B -- Voting Agreement
Exhibit C -- Form of Affiliate Letter
Exhibit D -- Amendment of Severance Agreement (Form A)
Exhibit E -- Amendment of Severance Agreement (Form B)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"),
dated as of December 21, 1997, as amended and restated as of January 7, 1998,
among AMERICAN BANKERS INSURANCE GROUP, INC., a Florida corporation (the
"Company"), AMERICAN INTERNATIONAL GROUP, INC., a Delaware corporation
("Parent"), and AIGF, INC., a Florida corporation and a wholly-owned subsidiary
of Parent ("Merger Subsidiary," the Company and Merger Subsidiary sometimes
being hereinafter collectively referred to as the "Constituent Corporations.")
RECITALS
WHEREAS, the respective boards of directors of each of Parent,
Merger Subsidiary and the Company have determined that the merger of the Company
with and into Merger Subsidiary (the "Merger") upon the terms and subject to the
conditions set forth in this Agreement is advisable and have approved the
Merger;
WHEREAS, it is intended that, for federal income tax purposes, the
Merger shall qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code"); and
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Parent's willingness to enter
into this Agreement, the Company and Parent have entered into a Stock Option
Agreement dated as of the date of this Agreement and attached hereto as Exhibit
A (the "Stock Option Agreement"), pursuant to which the Company has granted
Parent an option to purchase shares of common stock of the Company under certain
circumstances;
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Parent's willingness to enter
into this Agreement, certain stockholders of the Company and Parent have entered
into a Voting Agreement dated as of the date of this Agreement and attached
hereto as Exhibit B (the "Voting Agreement"), pursuant to which such
stockholders have agreed, among other things, to vote their shares of common
stock of the Company in favor of the Merger; and
WHEREAS, the Company, Parent and Merger Subsidiary desire to make
certain representations, warranties, covenants and agreements in connection with
this Agreement.
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NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
The Merger; Closing; Effective Time
1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined in Section 1.3) the
Company shall be merged with and into Merger Subsidiary and the separate
corporate existence of the Company shall thereupon cease. Merger Subsidiary
shall be the surviving corporation in the Merger (sometimes hereinafter referred
to as the "Surviving Corporation"), and the separate corporate existence of
Merger Subsidiary with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger, except as set forth in
Article III. The Merger shall have the effects specified in the Florida Business
Corporation Act, as amended (the "FBCA").
1.2. Closing. The closing of the Merger (the "Closing") shall take
place (i) at the offices of Xxxxxxxx & Xxxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx at 9:00 A.M. on the first business day on which the last to be fulfilled or
waived of the conditions set forth in Article VII (other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the
fulfillment or waiver of those conditions) shall be satisfied or waived in
accordance with this Agreement or (ii) at such other place and time and/or on
such other date as the Company and Parent may agree in writing (the "Closing
Date").
1.3. Effective Time. As soon as practicable following the Closing,
the Company and Parent will cause Articles of Merger (the "Articles of Merger")
to be executed, acknowledged and filed with the Secretary of State of the State
of Florida (the "Secretary") as provided in Section 607.1105 of the FBCA. The
Merger shall become effective at the time the Secretary accepts for record the
Articles of Merger or at such later time agreed by the parties and established
under the Articles of Merger (the "Effective Time").
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ARTICLE II
Charter and By-Laws
of the Surviving Corporation
2.1. The Charter. The Articles of Incorporation of Merger Subsidiary
as in effect immediately prior to the Effective Time shall be the charter of the
Surviving Corporation (the "Charter"), until duly amended as provided therein or
by applicable law.
2.2. The By-Laws. The by-laws of Merger Subsidiary in effect at the
Effective Time shall be the by-laws of the Surviving Corporation (the
"By-Laws"), until thereafter amended as provided therein or by applicable law.
ARTICLE III
Officers and Directors
of the Surviving Corporation
3.1. Directors. The directors of Merger Subsidiary at the Effective
Time shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Charter and the By-Laws. Parent shall cause all of the directors of the
Surviving Corporation to resign immediately following the Effective Time and
shall thereafter cause to be appointed as directors of the Surviving Corporation
each person that was a director of the Company immediately prior to the
Effective Time who is willing to serve as a director of the Surviving
Corporation plus two additional persons designated by Parent.
3.2. Officers. The officers of the Company at the Effective Time
shall, from and after the Effective Time, be the officers of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Charter and the By-Laws.
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ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates
4.1. Effect on Capital Stock. At the Effective Time, as a result of
the Merger and without any action on the part of the holder of any capital stock
of the Company:
(a) Common Stock Merger Consideration. (i) Subject to paragraphs
(ii) and (iii) below, each share of Common Stock, par value $1.00 per share, of
the Company (a "Common Share" or, collectively, the "Common Shares") issued and
outstanding immediately prior to the Effective Time (other than Common Shares
owned by Parent, Merger Subsidiary or any other direct or indirect subsidiary of
Parent (collectively, the "Parent Companies") or Common Shares that are owned
by the Company or any direct or indirect subsidiary of the Company and in each
case not held on behalf of third parties (collectively, "Excluded Common
Shares")) shall be converted into, and become exchangeable for, that portion of
a share of Common Stock, par value $2.50 per share, of Parent ("Parent Common
Stock") equal to the lesser of (i) .4495 (the "Maximum Exchange Ratio") and (ii)
the decimal derived by dividing $47.00 by the average of the closing prices
per share of Parent Common Stock as reported on the NYSE composite transactions
reporting system (as reported in the New York City edition of the Wall Street
Journal) for the ten trading days ending on the third trading day prior to the
date of the consummation of the Merger (the "Base Period Stock Price");
provided, however, if the Base Period Stock Price is below $104.5625, Parent
shall elect to either (i) pay a cash amount equal to the Per Share Cash Top-Up
Amount (provided that Parent may not elect to pay the cash amount contemplated
by this clause (i) if the aggregate cash amount so paid would exceed the
Non-Election Cash Pool) or (ii) (x) increase the Maximum Exchange Ratio (the
"Adjusted Maximum Exchange Ratio") up to a decimal such that the product of the
Adjusted Maximum Exchange Ratio times the Base Period Stock Price (the
"Product") equals or is less than $47.00 and (y) if the Product is less than
$47.00, pay a cash amount equal to the difference between $47.00 and such
Product (provided that Parent may not elect to pay such an aggregate amount of
cash pursuant to this clause (ii) which would exceed the Non-Election Cash
Pool). The foregoing payments shall be referred to herein as the "Non-Election
Merger Consideration";
(ii) Common Shares for which the holder of such shares has made a
Cash Election shall be converted into, and become exchangeable for, $47.00 in
cash (the "Cash Election Merger Consideration"), provided that in no event shall
holders of Common Shares who have made a Cash Election be entitled to receive an
aggregate amount of cash in excess of the Maximum Cash Pool. In the event that
Cash Elections are submitted with respect to an aggregate number of Common
Shares which, except for the limitation imposed by the Maximum Cash Pool, would
require Parent to pay cash in the aggregate
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in excess of the Maximum Cash Pool, a pro rata portion of such Common Shares
(rounded down to the nearest whole Common Share) shall be converted into the
right to receive the Cash Election Merger Consideration, which proration as to
each shareholder shall be based upon the ratio of the (i) Maximum Cash Pool to
(ii) the aggregate number of Common Shares with respect to which Cash Elections
are submitted multiplied by $47.00. All Common Shares which are not converted
into the right to receive the Cash Election Merger Consideration as a result of
this paragraph shall be converted into the right to receive the Stock Election
Merger Consideration;
(iii) Common Shares for which a holder has made a Stock Election
shall be converted into, and become exchangeable for, that portion of a share of
Parent Common Stock equal to the lesser of (i) the Maximum Exchange Ratio and
(ii) the decimal derived by dividing $47.00 by the Base Period Stock Price;
provided, however, if the Base Period Stock Price is below $104.5625, Parent
shall elect to either (i) pay a cash amount equal to the Per Share Cash Top-Up
Amount (provided that Parent may not elect to pay the cash amount contemplated
by this clause (i) if the aggregate cash amount paid would exceed the Stock
Election Cash Pool) or (ii) (x) establish the Adjusted Maximum Exchange Ratio
such that the Product equals or is less than $47.00 and (y) if the Product is
less than $47.00, pay a cash amount equal to the difference between $47.00 and
such Product (provided that Parent may not elect to pay an aggregate amount of
cash pursuant to this clause (ii) which would exceed the Stock Election Cash
Pool). The foregoing payments shall be referred to herein as the "Stock Election
Merger Consideration" and, together with the Non-Election Merger Consideration
and the Cash Election Merger Consideration, the "Common Stock Merger
Consideration."
(iv) For purposes of this Agreement the following terms shall have
the following meanings:
"Maximum Cash Pool" means an amount of cash equal to .499 multiplied
by the amount of the Common Stock Merger Consideration, calculated for purposes
of this definition based on the closing price of Parent Common Stock on the NYSE
composite transactions reporting system on the trading day immediately preceding
the Closing Date.
"Non-Election Cash Pool" means an amount of cash equal to the
Maximum Cash Pool minus the aggregate amount of cash paid in the Merger to the
holders of Common Shares that make a Cash Election.
"Stock Election Cash Pool" means an amount of cash equal to the
greater of (i) $0 and (ii) the Aggregate Cash Top-Up Amount minus the aggregate
amount of cash paid in the Merger to the holders of Common Shares that do not
make a Stock Election.
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"Per Share Cash Top-Up Amount" means the greater of (i) $0 and (ii)
(x) $47.00 minus (y) the product of (A) the Base Period Stock Price and (B) the
Maximum Exchange Ratio.
"Aggregate Cash Top-Up Amount" means the lesser of (i) the product
of (x) the Per Share Cash Top-Up Amount and (y) the number of outstanding Common
Shares as of the Effective Time and (ii) an amount equal to the Maximum Cash
Pool.
(b) Preferred Stock Merger Consideration. Each share of $3.125
Series B Convertible Preferred Stock, no par value, of the Company (a "Preferred
Share" or, collectively, the "Preferred Shares" and, together with the Common
Shares, the "Shares") issued and outstanding immediately prior to the Effective
Time (other than Preferred Shares owned by Parent Companies or Preferred Shares
that are owned by the Company or any direct or indirect subsidiary of the
Company and in each case not held on behalf of third parties (collectively,
"Excluded Preferred Shares" and, together with the Excluded Common Shares, the
"Excluded Shares") shall be converted into, and become exchangeable for one
share (the "Preferred Stock Merger Consideration," and, together with the Common
Stock Merger Consideration, the "Merger Consideration"), of Series C Preferred
Stock, par value $5.00 per share, of Parent ("Parent Preferred Stock") which
shall contain terms substantially similar to the terms of the Preferred Shares
(after making the conversion adjustments required to be made for a Common Stock
Fundamental Change pursuant to the Company's Third Amended and Restated Articles
of Incorporation as a result of the Merger) and shall be convertible into Parent
Common Stock.
(c) Cancellation of Shares. At the Effective Time, all Shares shall
no longer be outstanding and shall be canceled and retired and shall cease to
exist, and each certificate (a "Certificate") formerly representing any of such
Shares (other than Excluded Shares) shall thereafter represent only the right to
the Merger Consideration and the right, if any, to receive pursuant to Section
4.2(e) cash in lieu of fractional shares into which such Shares have been
converted pursuant to this Section 4.1(c) and any distribution or dividend
pursuant to Section 4.2(c). Each Share issued and outstanding immediately prior
to the Effective Time and owned by any of the Parent Companies or owned by the
Company or any direct or indirect subsidiary of the Company (in each case other
than Shares that are owned on behalf of third parties), shall, by virtue of the
Merger and without any action on the part of the holder thereof, cease to be
outstanding, shall be canceled and retired without payment of any consideration
therefor and shall cease to exist.
(d) Merger Subsidiary. At the Effective Time, each share of Common
Stock, par value $.01 per share, of Merger Subsidiary issued and outstanding
immediately prior to the Effective Time shall be converted into one share of
common stock of the Surviving Corporation.
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(e) Election Form. Each holder of Common Shares will be entitled to
elect with respect to all or any portion of the Common Shares held by such
holder to have such shares converted at the Effective Time into the right to
receive the Stock Election Merger Consideration (the "Stock Election") or the
Cash Election Merger Consideration (the "Cash Election"). The form for making
the Stock Election and Cash Election (the "Election Form") shall be determined
by mutual agreement between Parent and the Company and shall be mailed to
holders of Common Shares on the record date for the Common Stockholders Meeting
together with the related Prospectus/Proxy Statement (as hereinafter defined).
To be effective, the Election Form must be properly completed, signed and
submitted by the Election Deadline (as hereinafter defined) to the Exchange
Agent (as hereinafter defined) and accompanied by the certificates representing
the Common Shares as to which an Election is being made or an appropriate
guarantee of delivery by a commercial bank or trust company in the United States
or a member of a registered national securities exchange or the National
Association of Securities Dealers, Inc.). An Election Form which is not
effective shall be treated as if no election had been made with respect to the
Common Shares covered by such Election Form and any holder who does not submit
an effective Election Form shall receive the Non-Election Merger Consideration.
Parent will have the discretion, which it may delegate in whole or in part to
the Exchange Agent, to determine whether Election Forms have been properly
completed, signed and submitted or revoked and to disregard immaterial defects
in Election Forms. The decisions of Parent or, if delegated, of the Exchange
Agent shall be conclusive and binding. Neither Parent, Merger Subsidiary nor the
Exchange Agent will be under any obligation to notify any person of any defect
in an Election Form submitted to the Exchange Agent. The Exchange Agent shall
also make all computations contemplated by Section 4.1(a) hereof, and all such
computations shall be conclusive and binding on the holders of Common Shares in
the absence of manifest error.
Parent and the Company each shall use its best efforts to make the
Election Form available to all persons who become holders of record of Common
Shares during the period between the record date for the Common Stockholders
Meeting and 5:00 P.M., New York City time, on the third trading day preceding
such meeting (the "Election Deadline"). If the date of such Common Stockholders
Meeting is postponed or such meeting is adjourned without approval of the
Merger, the Election Deadline shall be postponed until 5:00 P.M., New York City
time, on the tenth trading day preceding the day on which the Merger is actually
approved by the shareholders of the Company. A properly completed Election Form
must be received by the Exchange Agent by the Election Deadline in order to be
effective. Any Election Form may be revoked but only by written notice received
by the Exchange Agent prior to the Election Date.
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4.2. Exchange of Certificates for Shares.
(a) Exchange Agent. Promptly after the Effective Time, Parent shall
deposit, or shall cause to be deposited, with an exchange agent selected by
Parent with the Company's prior approval, which shall not be unreasonably
withheld (the "Exchange Agent"), for the benefit of the holders of Shares,
certificates representing the shares of Parent Common Stock and Parent Preferred
Stock and, after the Effective Time, if applicable, any cash, dividends or other
distributions with respect to the Parent Common Stock and Parent Preferred Stock
to be issued or paid pursuant to this Agreement in exchange for Shares
outstanding immediately prior to the Effective Time upon due surrender of the
Certificates (or affidavits of loss in lieu thereof) pursuant to the provisions
of this Article IV (such certificates for shares of Parent Common Stock and
Parent Preferred Stock, together with the amount of any cash, dividends or other
distributions payable with respect thereto, being hereinafter referred to as the
"Exchange Fund").
(b) Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to each holder of
record of Shares (other than holders of Excluded Shares) (i) a letter of
transmittal specifying that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates (or
affidavits of loss in lieu thereof) to the Exchange Agent, such letter of
transmittal to be in such form and have such other provisions as Parent and the
Company may reasonably agree, and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for (A) certificates representing
shares of Parent Common Stock or Parent Preferred Stock, as applicable, and (B)
if applicable, any cash, unpaid dividends or other distributions and cash in
lieu of fractional shares. Subject to Section 4.2(h), upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor (x) a certificate representing that number of whole
shares of Parent Common Stock or Parent Preferred Stock, as applicable, that
such holder is entitled to receive pursuant to this Article IV, (y) a check in
the amount (after giving effect to any required tax withholdings) of (A) any
cash in lieu of fractional shares plus (B) any cash, including unpaid non-stock
dividends and any other dividends or other distributions, that such holder has
the right to receive pursuant to the provisions of this Article IV, and the
Certificate so surrendered shall forthwith be canceled. No interest will be paid
or accrued on any amount payable upon due surrender of the Certificates. In the
event of a transfer of ownership of Shares that is not registered in the
transfer records of the Company, a certificate representing the proper number of
shares of Parent Common Stock or Parent Preferred Stock, as applicable, together
with a check for any cash to be paid upon due surrender of the Certificate and
any other dividends or distributions in respect thereof, may be issued and/or
paid to such a transferee if the Certificate formerly representing such Shares
is presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to
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evidence that any applicable stock transfer taxes have been paid. If any
certificate for shares of Parent Common Stock or Parent Preferred Stock, as
applicable, is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of such
exchange that the Person (as defined below) requesting such exchange shall pay
any transfer or other taxes required by reason of the issuance of certificates
for shares of Parent Common Stock or Parent Preferred Stock, as applicable, in a
name other than that of the registered holder of the Certificate surrendered, or
shall establish to the satisfaction of Parent or the Exchange Agent that such
tax has been paid or is not applicable.
For the purposes of this Agreement, the term "Person" shall mean any
individual, corporation (including not-for-profit), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity (as defined in Section 5.1(d)) or
other entity of any kind or nature.
(c) Distributions with Respect to Unexchanged Shares. All shares of
Parent Common Stock and Parent Preferred Stock to be issued pursuant to the
Merger shall be deemed issued and outstanding as of the Effective Time and
whenever a dividend or other distribution is declared by Parent in respect of
the Parent Common Stock or Parent Preferred Stock, as applicable, the record
date for which is at or after the Effective Time, that declaration shall include
dividends or other distributions in respect of all shares issuable pursuant to
this Agreement. No dividends or other distributions in respect of the Parent
Common Stock or Parent Preferred Stock, as applicable, shall be paid to any
holder of any unsurrendered Certificate until such Certificate is surrendered
for exchange in accordance with this Article IV. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
issued and/or paid to the holder of the certificates representing whole shares
of Parent Common Stock and Parent Preferred Stock, as applicable, issued in
exchange therefor, without interest, (A) at the time of such surrender, the
dividends or other distributions with a record date after the Effective Time
theretofore payable with respect to such whole shares of Parent Common Stock and
Parent Preferred Stock, as applicable, and not paid and (B) at the appropriate
payment date, the dividends or other distributions payable with respect to such
whole shares of Parent Common Stock and Parent Preferred Stock, as applicable,
with a record date after the Effective Time but with a payment date subsequent
to surrender.
(d) Transfers. After the Effective Time, there shall be no transfers
on the stock transfer books of the Company of the Shares that were outstanding
immediately prior to the Effective Time.
(e) Fractional Shares. Notwithstanding any other provision of this
Agreement, no fractional shares of Parent Common Stock will be issued. Each
holder of Common Shares who would be entitled to receive a fractional share of
Parent Common Stock but for this Section 4.2(e) shall be entitled to receive, in
lieu thereof, a cash
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payment in an amount equal to such fractional share of Parent Common Stock
multiplied by the Base Period Stock Price.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
(including the proceeds of any investments thereof and any Parent Common Stock
and Parent Preferred Stock) that remains unclaimed by the stockholders of the
Company for 180 days after the Effective Time shall be paid to Parent. Any
stockholders of the Company who have not theretofore complied with this Article
IV shall thereafter look only to Parent for payment of their shares of Parent
Common Stock and Parent Preferred Stock, as applicable, and any cash, dividends
and other distributions in respect thereof payable and/or issuable pursuant to
Section 4.1 and Section 4.2(c) upon due surrender of their Certificates (or
affidavits of loss in lieu thereof), in each case, without any interest thereon.
Notwithstanding the foregoing, none of Parent, the Surviving Corporation, the
Exchange Agent or any other Person shall be liable to any former holder of
Shares for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(g) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such Person of a
bond in customary amount as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed Certificate the shares of Parent Common Stock
or Parent Preferred Stock, as applicable, and any cash payable and any unpaid
dividends or other distributions in respect thereof pursuant to Section 4.1 and
4.2(c) upon due surrender of and deliverable in respect of the Shares
represented by such Certificate pursuant to this Agreement.
(h) Affiliates. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any "affiliate" (as determined pursuant
to Section 6.8) of the Company shall not be exchanged until Parent has received
a written agreement from such Person as provided in Section 6.8 hereof.
4.3. Dissenters' Rights. In accordance with Section 607.1302 of the
FBCA, no appraisal rights shall be available to holders of Shares in connection
with the Merger.
4.4. Adjustments to Prevent Dilution. In the event that the Company
changes the number of Shares or securities convertible or exchangeable into or
exercisable for Shares, or Parent changes the number of shares of Parent Common
Stock or securities convertible or exchangeable into or exercisable for shares
of Parent Common Stock, issued and outstanding prior to the Effective Time as a
result of a reclassification, stock split (including a reverse split), stock
dividend or distribution, recapitalization,
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17
merger, subdivision or other similar transaction, the Merger Consideration shall
be equitably adjusted.
4.5. Treatment of the Convertible Notes. The Convertible Notes (as
defined in Section 5.1(b)) shall be treated as set forth in Section 6.14.
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company. (i) Except as
set forth in the corresponding sections or subsections of the disclosure letter
delivered to Parent by the Company on or prior to entering into this Agreement
(the "Company Disclosure Letter") or in any Company Report (as hereinafter
defined) filed prior to the date hereof, the Company hereby represents and
warrants to Parent and Merger Subsidiary that:
(a) Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida and each of its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of organization and each of the Company and its
Subsidiaries has all requisite corporate or similar power and authority to own
and operate its properties and assets and to carry on its business as presently
conducted and is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership or operation of its
properties or conduct of its business requires such qualification, except where
the failure to be so qualified or in good standing, when taken together with all
other such failures, is not reasonably likely to have a Company Material Adverse
Effect (as defined below). The Company has made available to Parent a complete
and correct copy of the Company's and its Subsidiaries' charter and by-laws,
each as amended to date. The Company's and its Subsidiaries' charter and by-laws
so delivered are in full force and effect.
As used in this Agreement, the term (i) "Subsidiary" means, with
respect to the Company, Parent or Merger Subsidiary, as the case may be, any
entity, whether incorporated or unincorporated, of which at least a majority of
the securities or ownership interests having by their terms ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions is directly or indirectly owned or controlled by such party or
by one or more of its respective Subsidiaries or by such party and any one or
more of its respective Subsidiaries, and (ii) "Company Material Adverse Effect"
means a material adverse effect on the financial condition, properties, business
or results of operations of the Company and its Subsidiaries taken as a whole.
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18
The Company conducts its insurance operations through the
Subsidiaries set forth on Section 5.1(a) of the Company Disclosure Letter
(collectively, the "Company Insurance Subsidiaries"). Each of the Company
Insurance Subsidiaries is (i) duly licensed or authorized as an insurance
company and, where applicable, a reinsurer in its jurisdiction of
incorporation, (ii) duly licensed or authorized as an insurance company and,
where applicable, a reinsurer in each other jurisdiction where it is required to
be so licensed or authorized, and (iii) duly authorized in its jurisdiction of
incorporation and each other applicable jurisdiction to write each line of
business reported as being written in the Company SAP Statements (as hereinafter
defined), except, in any such case, where the failure to be so licensed or
authorized is not reasonably likely to have a Company Material Adverse Effect.
The Company has made all required filings under applicable insurance holding
company statutes except where the failure to file is not reasonably likely to
have a Company Material Adverse Effect.
(b) Capital Structure. The authorized stock of the Company consists
of 100,000,000 Common Shares, of which 41,535,807 Common Shares were outstanding
as of the close of business on November 3, 1997, and 10,000,000 shares of
Preferred Stock, no par value, of which (i) 350,000 shares have been authorized
as Series A Participating Preferred Stock, none of which were outstanding as of
December 21, 1997 and (ii) 2,300,000 shares have been authorized as Preferred
Shares, of which 2,300,000 Preferred Shares were outstanding as of December 21,
1997. All of the outstanding Common Shares and Preferred Shares have been duly
authorized and are validly issued, fully paid and nonassessable. The Company has
no commitments to issue or deliver Common Shares, except that, as of December
21, 1997, there were approximately 5,630,610 (but no more than 5,664,193) Common
Shares subject to issuance (i) pursuant to the Company's 1997 Equity Incentive
Plan, 1994 Amended and Restated Directors' Deferred Compensation Plan, 1994 Key
Executive Debenture Plan, 1994 Non-Employee Directors' Stock Option Plan, 1994
Senior Management Stock Option Plan, 1991 Stock Option/Restricted Stock Plan,
1991 Stock Incentive Plan, and 1987 Executive Stock Option/Dividend Accrual Plan
(collectively, the "Company Stock Plans") and (ii) upon conversion of the
Preferred Shares and the Company's convertible debenture bonds due May 24, 1999
("Convertible Notes"). The Company has no commitments to issue or deliver
preferred shares, except that as of December 21, 1997, there were 350,000 shares
of Series A Participating Preferred Stock subject to issuance pursuant to the
Rights Agreement, as amended and restated as of November 14, 1990, and as
further amended on December 19, 1997, between the Company and ChaseMellon
Shareholder Services, LLC (as successor to Manufacturers Hanover Trust Company),
as Rights Agent (the "Rights Agreement"). The Company Disclosure Letter contains
a correct and complete list of each outstanding option to purchase or acquire
Common Shares under each of the Company Stock Plans (each a "Company Option"),
including the plan, the holder, date of grant, exercise price and number of
Shares subject thereto. Each of the outstanding shares of capital stock or other
securities of each of the Company's Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable and owned by the Company or a
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19
direct or indirect wholly-owned subsidiary of the Company, free and clear of any
lien, pledge, security interest, claim or other encumbrance. Except as set forth
above and in the Stock Option Agreement, there are no preemptive or other
outstanding rights, options, warrants, conversion rights, stock appreciation
rights, redemption rights, repurchase rights, agreements, arrangements or
commitments to issue or sell any shares of capital stock or other securities of
the Company or any of its Subsidiaries or any securities or obligations
convertible or exchangeable into or exercisable for, or giving any Person a
right to subscribe for or acquire, any securities of the Company or any of its
Subsidiaries, and no securities or obligations evidencing such rights are
authorized, issued or outstanding. Except for the Convertible Notes, the Company
does not have outstanding any bonds, debentures, notes or other obligations the
holders of which have the right to vote (or, except as referred to in this
subsection (b), convertible into or exercisable for securities having the right
to vote) with the stockholders of the Company on any matter ("Voting Debt").
(c) Corporate Authority; Approval and Fairness. (i) The Company has
all requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement and the Stock Option Agreement and to consummate, subject only to
approval of the Merger by the holders of at least a majority of the outstanding
Common Shares voting separately as a class (the "Company Common Stock Requisite
Vote") and a majority of the outstanding Preferred Shares voting separately as a
class (the "Company Preferred Stock Requisite Vote" and, together with the
Company Common Stock Requisite Vote, the "Company Requisite Vote"), the Merger.
This Agreement and the Stock Option Agreement are the valid and binding
agreements of the Company enforceable against the Company in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles (the "Bankruptcy
and Equity Exception").
(ii) The board of directors of the Company (A) has unanimously
declared that the Agreement, the Stock Option Agreement, the Merger and the
other transactions contemplated hereby and thereby are advisable and in the best
interests of the Company, (B) has authorized, approved and adopted in all
respects the Agreement, the Stock Option Agreement, the Merger and the other
transactions contemplated hereby and thereby, and (C) has received the opinion
of its financial advisors, Xxxxxxx Xxxxx Xxxxxx, to the effect that the
consideration to be received by the holders of the Shares in the Merger is fair
from a financial point of view to such holders.
(d) Governmental Filings; No Violations. (i) Other than the filings
and/or notices (A) pursuant to Section 1.3, (B) under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the Securities Act of
1933, as amended (the
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20
"Securities Act"), (C) to comply with state securities or "blue-sky" laws, (D)
required to be made with the NYSE or Nasdaq, and (E) the filing of appropriate
documents with, and approval of, the respective Commissioners of Insurance or
similar regulatory authorities of Arizona, Florida, Georgia, New York, South
Carolina, Texas, Puerto Rico, Mexico, Cayman Islands, Argentina, Turks & Caicos,
Dominican Republic and the United Kingdom and such notices and consents as may
be required under the antitrust notification insurance laws of any state in
which the Company, Parent or any of their respective subsidiaries is domiciled
or does business, no notices, reports or other filings are required to be made
by the Company with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by the Company from, any governmental or
regulatory authority, agency, commission, body or other governmental entity
("Governmental Entity"), in connection with the execution and delivery of this
Agreement and the Stock Option Agreement by the Company and the consummation by
the Company of the Merger and the other transactions contemplated hereby and
thereby, except those that the failure to make or obtain are not, individually
or in the aggregate, reasonably likely to have a Company Material Adverse Effect
or prevent, materially delay or materially impair the ability of the Company to
consummate the transactions contemplated by this Agreement and the Stock Option
Agreement.
(ii) The execution, delivery and performance of this Agreement and
the Stock Option Agreement by the Company do not, and the consummation by the
Company of the Merger and the other transactions contemplated hereby and thereby
will not, constitute or result in (A) a breach or violation of, or a default
under, the charter or by-laws of the Company or the comparable governing
instruments of any of its Subsidiaries, (B) a breach or violation of, or a
default under, the acceleration of any obligations or the creation of a lien,
pledge, security interest or other encumbrance on the assets of the Company or
any of its Subsidiaries (with or without notice, lapse of time or both) pursuant
to, any agreement, lease, contract, note, mortgage, indenture, arrangement or
other obligation ("Contracts") binding upon the Company or any of its
Subsidiaries or (provided, as to consummation, the filings and notices are made,
and approvals are obtained, as referred to in Section 5.1(d)(i)), any Law (as
defined in Section 5.1(i)) or governmental or non-governmental permit or license
to which the Company or any of its Subsidiaries is subject or (C) any change in
the rights or obligations of any party under any of the Contracts, except, in
the case of clause (B) or (C) above, for any breach, violation, default,
acceleration, creation or change that, individually or in the aggregate, is not
reasonably likely to have a Company Material Adverse Effect or prevent,
materially delay or materially impair the ability of the Company to consummate
the transactions contemplated by this Agreement or the Stock Option Agreement.
Section 5.1(d) of the Company Disclosure Letter sets forth, to the knowledge of
the executive officers of the Company, a correct and complete list of Contracts
of the Company and its Subsidiaries pursuant to which consents or waivers are or
may be required prior to consummation of the transactions contemplated by this
Agreement and the Stock Option Agreement (whether or not subject to the
exception set forth with respect to clauses (B) and (C)
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21
above), except those the failure to obtain, individually or in the aggregate, is
not reasonably likely to have a Company Material Adverse Effect.
(e) Company Reports; Financial Statements. (i) The Company has made
available to Parent each registration statement, report, proxy statement or
information statement prepared by it since December 31, 1994 including (i) the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 (the
"Audit Date"), and (ii) the Company's Quarterly Reports on Form 10-Q for the
periods ended March 31, 1997, June 30, 1997 and September 30, 1997, each in the
form (including exhibits, annexes and any amendments thereto) filed with the
Securities and Exchange Commission (the "SEC") (collectively, including any such
reports filed subsequent to the date hereof, the "Company Reports"). As of their
respective dates, the Company Reports did not, and any Company Reports filed
with the SEC subsequent to the date hereof will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading. Each of the consolidated
balance sheets included in or incorporated by reference into the Company Reports
(including the related notes and schedules) fairly presents, or will fairly
present, the consolidated financial position of the Company and its Subsidiaries
as of its date and each of the consolidated statements of income and of changes
in financial position included in or incorporated by reference into the Company
Reports (including any related notes and schedules) fairly presents, or will
fairly present, the results of operations, retained earnings and changes in
financial position, as the case may be, of the Company and its Subsidiaries for
the periods set forth therein (subject, in the case of unaudited statements, to
notes and normal year-end audit adjustments that will not be material in amount
or effect), in each case in accordance with generally accepted accounting
principles ("GAAP") consistently applied during the periods involved, except as
may be noted therein.
(ii) The Company has made available to Parent true and complete
copies of the annual and quarterly statements of each of the Company Insurance
Subsidiaries as filed with the applicable insurance regulatory authorities for
the years ended December 31, 1994, 1995 and 1996 and the quarterly periods ended
March 31, 1997, June 30, 1997 and September 30, 1997, including all exhibits,
interrogatories, notes, schedules and any actuarial opinions, affirmations or
certifications or other supporting documents filed in connection therewith
(collectively, the "Company SAP Statements"). The Company SAP Statements were
prepared in conformity with statutory accounting practices prescribed or
permitted by the applicable insurance regulatory authority consistently applied
for the periods covered thereby and present fairly the statutory financial
position of such Company Insurance Subsidiaries as at the respective dates
thereof and the results of operations of such Subsidiaries for the respective
periods then ended. The Company SAP Statements complied in all material respects
with all applicable laws, rules and regulations when filed, and, to the
knowledge of the executive
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officers of the Company, no material deficiency has been asserted with respect
to any Company SAP Statements by the applicable insurance regulatory body or any
other governmental agency or body. The statutory balance sheets and income
statements included in the Company SAP Statements have been audited by Price
Waterhouse LLP, and the Company has made available to Parent true and complete
copies of all audit opinions related thereto. The Company has made available to
Parent true and complete copies of all examination reports of insurance
departments and any insurance regulatory agencies since January 1, 1994 relating
to the Company Insurance Subsidiaries. The term "knowledge" when used in this
Agreement with respect to the executive officers of the Company shall mean the
actual knowledge, after reasonable inquiry, of the executive officers of the
Company.
(f) Absence of Certain Changes. Except as disclosed in the Company
Reports filed prior to the date hereof, since the Audit Date the Company and its
Subsidiaries have conducted the businesses of the Company and its Subsidiaries,
taken as a whole, only in, and have not engaged in any material transaction
other than according to, the ordinary and usual course of such businesses and
there has not been (i) any change in the financial condition, management,
properties, prospects, business or results of operations of the Company and its
Subsidiaries or, to the knowledge of the executive officers of the Company, any
development or combination of developments which, individually or in the
aggregate, has had or is reasonably likely to have a Company Material Adverse
Effect; (ii) any material damage, destruction or other casualty loss with
respect to any material asset or property owned, leased or otherwise used by the
Company or any of its Subsidiaries, whether or not covered by insurance; (iii)
any declaration, setting aside or payment of any dividend or other distribution
in respect of the stock of the Company, except for regular quarterly cash
dividends on its Common Shares publicly announced prior to the date hereof and
regular quarterly cash dividends on its Preferred Shares paid in accordance with
the Company's Articles of Incorporation prior to the date hereof; (iv) any
change by the Company in accounting principles, practices or methods other than
those required by GAAP or SAP; (v) any material addition, or any development
involving a prospective material addition, to the Company's consolidated
reserves for future policy benefits or other policy claims and benefits; or (vi)
any material change in the accounting, actuarial, investment, reserving,
underwriting or claims administration policies, practices, procedures, methods,
assumptions or principles of any Company Insurance Subsidiary. Since the Audit
Date, except as provided for herein or as disclosed in the Company Reports filed
prior to the date hereof, there has not been any increase in the compensation
payable or that could become payable by the Company or any of its Subsidiaries
to officers or key employees or any amendment of any of the Compensation and
Benefit Plans (as hereinafter defined) other than increases or amendments in the
ordinary course.
(g) Litigation and Liabilities. Except as disclosed in the Company
Reports filed prior to the date hereof, there are no (i) civil, criminal or
administrative
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23
actions, suits, claims, hearings, investigations or proceedings pending or, to
the knowledge of the executive officers of the Company, threatened against the
Company or any of its Subsidiaries, directors or officers or (ii) obligations or
liabilities of any nature, whether or not accrued, contingent or otherwise and
whether or not required to be disclosed, including those relating to
environmental and occupational safety and health matters, or any other facts or
circumstances of which the executive officers of the Company have knowledge that
could result in any claims against, or obligations or liabilities of, the
Company or any of its affiliates, except for those that are not, individually or
in the aggregate, reasonably likely to have a Company Material Adverse Effect or
prevent or materially burden or materially impair the ability of the Company to
consummate the transactions contemplated by this Agreement.
(h) Employee Benefits.
(i) A copy of each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option, employment, termination,
severance, change of control, compensation, medical, health or other plan,
agreement, policy or arrangement that covers employees, directors, former
employees or former directors of the Company and its Subsidiaries (the
"Compensation and Benefit Plans") and any trust agreement or insurance contract
forming a part of such Compensation and Benefit Plans has been made available to
Parent prior to the date hereof. The Compensation and Benefit Plans are listed
in Section 5.1(h) of the Company Disclosure Letter and any "change of control"
or similar provisions therein are specifically identified in Section 5.1(h) of
the Company Disclosure Letter.
(ii) All Compensation and Benefit Plans are in substantial
compliance with all applicable law, including the Code and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Each Compensation
and Benefit Plan that is an "employee pension benefit plan" within the meaning
of Section 3(2) of ERISA (a "Pension Plan") and that is intended to be qualified
under Section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service (the "IRS") with respect to "TRA" (as defined
in Section 1 of Rev. Proc. 93-39), and the Company is not aware of any
circumstances reasonably likely to result in revocation of any such favorable
determination letter. There is no pending or, to the knowledge of the executive
officers of the Company, threatened material litigation relating to the
Compensation and Benefit Plans. Neither the Company nor any of its Subsidiaries
has engaged in a transaction with respect to any Compensation and Benefit Plan
that, assuming the taxable period of such transaction expired as of the date
hereof, would subject the Company or any of its Subsidiaries to a material tax
or penalty imposed by either Section 4975 of the Code or Section 502 of ERISA.
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24
(iii) No liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by the Company or any Subsidiary with respect
to any ongoing, frozen or terminated "single-employer plan", within the meaning
of Section 4001(a)(15) of ERISA, currently or formerly maintained by any of
them, or the single-employer plan of any entity which is considered one employer
with the Company under Section 4001 of ERISA or Section 414 of the Code (an
"ERISA Affiliate"). The Company and its Subsidiaries have not contributed, or
been obligated to contribute, to a multiemployer plan under Subtitle E of Title
IV of ERISA at any time since September 26, 1980. No notice of a "reportable
event", within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived, has been required to be filed for any
Pension Plan or by any ERISA Affiliate within the 12-month period ending on the
date hereof.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan as of the date hereof have been timely made or
have been reflected on the most recent consolidated balance sheet filed or
incorporated by reference in the Company Reports prior to the date hereof.
Neither any Pension Plan nor any single-employer plan of an ERISA Affiliate has
an "accumulated funding deficiency" (whether or not waived) within the meaning
of Section 412 of the Code or Section 302 of ERISA. Neither the Company nor its
Subsidiaries has provided, or is required to provide, security to any Pension
Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code.
(v) Under each Pension Plan which is a single-employer plan, as of
the last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the Pension Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such Pension
Plan, and there has been no material change in the financial condition of such
Pension Plan since the last day of the most recent plan year.
(vi) Neither the Company nor its Subsidiaries have any obligations
for retiree health and life benefits under any Compensation and Benefit Plan,
except as set forth in the Company Disclosure Letter. The Company or its
Subsidiaries may amend or terminate any such plan under the terms of such plan
at any time without incurring any material liability thereunder.
(vii) The consummation of the Merger and the other transactions
contemplated by this Agreement, either alone or in connection with a subsequent
termination of employment, will not (x) entitle any employees of the Company or
its Subsidiaries to severance pay, (y) accelerate the time of payment or vesting
or trigger any payment of compensation or benefits under, increase the amount
payable or trigger any other material obligation pursuant to, any of the
Compensation and Benefit Plans or
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25
(z) result in any breach or violation of, or a default under, any of the
Compensation and Benefit Plans.
(viii) All Compensation and Benefit Plans covering current or former
non-U.S. employees or former employees of the Company and its Subsidiaries
comply in all material respects with applicable local law. The Company and its
Subsidiaries have no material unfunded liabilities with respect to any Pension
Plan that covers such non- U.S. employees.
(ix) No amount that could be received (whether in cash or property
or the vesting of property) as a result of any of the transactions contemplated
by this Agreement by any employee, officer, director or independent contractor
of the Company who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment arrangement
would be treated as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code). Schedule 5.1(h)(ix) contains a true and
complete list of each such employment arrangement in existence as of the date
hereof. To the extent that any employment arrangement set forth on Schedule
5.1(h)(ix) has been superseded, the new arrangement is not materially different
than the superseded arrangement.
(i) Compliance with Laws; Permits. (i) The business and operations
of the Company and the Company Insurance Subsidiaries have been conducted in
compliance with all applicable statutes and regulations regulating the business
of insurance and all applicable orders and directives of insurance regulatory
authorities and market conduct recommendations resulting from market conduct
examinations of insurance regulatory authorities(collectively, "Insurance
Laws"), except where the failure to so conduct such business and operations is
not, individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect. Notwithstanding the generality of the foregoing, except
where the failure to do so would not, individually or in the aggregate, be
reasonably likely to have a Company Material Adverse Effect, each Company
Insurance Subsidiary and, to the knowledge of the executive officers of the
Company, its agents have marketed, sold and issued insurance products in
compliance, in all material respects, with Insurance Laws applicable to the
business of such Company Insurance Subsidiary and in the respective
jurisdictions in which such products have been sold, including, without
limitation, in compliance with (i) all applicable prohibitions against
"redlining" or withdrawal of business lines, (ii) all applicable requirements
relating to the disclosure of the nature of insurance products as policies of
insurance and (iii) all applicable requirements relating to insurance product
projections and illustrations. In addition, (i) there is no pending or, to the
knowledge of the executive officers of the Company, threatened charge by any
insurance regulatory authority that any of the Company Insurance Subsidiaries
has violated, nor any pending or, to the knowledge of the executive officers of
the Company, threatened investigation by any insurance regulatory authority with
respect to possible violations of, any applicable Insurance Laws
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where such violations are, individually or in the aggregate, reasonably likely
to have a Company Material Adverse Effect; (ii) none of the Company Insurance
Subsidiaries is subject to any order or decree of any insurance regulatory
authority relating specifically to such Company Insurance Subsidiary (as opposed
to insurance companies generally) which is, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect; and (iii) the
Company Insurance Subsidiaries have filed all reports required to be filed with
any insurance regulatory authority on or before the date hereof as to which the
failure to file such reports is, individually or in the aggregate, reasonably
likely to have a Company Material Adverse Effect.
In addition to Insurance Laws, except as set forth in the Company
Reports filed prior to the date hereof, the businesses of each of the Company
and its Subsidiaries have not been, and are not being, conducted in violation of
any federal, state, local or foreign law, statute, ordinance, rule, regulation,
judgment, order, injunction, decree, arbitration award, agency requirement,
license or permit of any Governmental Entity (collectively with Insurance Laws,
"Laws"), except for violations or possible violations that are not, individually
or in the aggregate, reasonably likely to have a Company Material Adverse Effect
or prevent or materially burden or materially impair the ability of the Company
to consummate the transactions contemplated by this Agreement. Except as set
forth in the Company Reports filed prior to the date hereof, no investigation or
review by any Governmental Entity with respect to the Company or any of its
Subsidiaries is pending or, to the knowledge of the executive officers of the
Company, threatened, nor, to the knowledge of the executive officers of the
Company, has any Governmental Entity indicated an intention to conduct the same,
except for those the outcome of which are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect or prevent or
materially burden or materially impair the ability of the Company to consummate
the transactions contemplated by this Agreement. To the knowledge of the
executive officers of the Company, no material change is required in the
Company's or any of its Subsidiaries' processes, properties or procedures in
connection with any such Laws, and the Company has not received any notice or
communication of any material noncompliance with any such Laws that has not been
cured as of the date hereof. The Company and its Subsidiaries each has all
permits, licenses, trademarks, patents, trade names, copyrights, service marks,
franchises, variances, exemptions, orders and other governmental authorizations,
consents and approvals necessary to conduct its business as presently conducted
except those the absence of which are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect or prevent or
materially burden or materially impair the ability of the Company to consummate
the Merger and the other transactions contemplated by this Agreement, the Stock
Option Agreement or the Voting Agreement.
(j) Takeover Statutes. Prior to entering into this Agreement and the
Stock Option Agreement, the Company has taken all actions necessary such that no
restrictive provision of any "fair price," "moratorium," "control share
acquisition,"
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27
"interested shareholder" or other similar anti-takeover statute or regulation
(including, without limitation, Sections 607.0901 and 607.0902 of the FBCA)
(each a "Takeover Statute") or restrictive provision of any applicable
anti-takeover provision in the charter or by-laws of the Company (including
Article VIII of the Company's Third Amended and Restated Articles of
Incorporation) is, or at the Effective Time will be, applicable to the Company,
Parent, the Shares, the Merger or any other transaction contemplated by this
Agreement, the Stock Option Agreement or the Voting Agreement.
(k) Environmental Matters. Except as disclosed in the Company
Reports filed prior to the date hereof and except for such matters as are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect: (i) the Company and its Subsidiaries have complied with all
applicable Environmental Laws; (ii) the properties currently owned or operated
by the Company (including soils, groundwater, surface water, buildings or other
structures) are not contaminated with any Hazardous Substances; (iii) the
properties formerly owned or operated by the Company or any of its Subsidiaries
were not contaminated with Hazardous Substances during the period of ownership
or operation by the Company or any of its Subsidiaries; (iv) neither the Company
nor any of its Subsidiaries is subject to liability for any Hazardous Substance
disposal or contamination on any third party property; (v) neither the Company
nor any of its Subsidiaries has been associated with any release or threat of
release of any Hazardous Substance; (vi) neither the Company nor any of its
Subsidiaries has received any notice, demand, letter, claim or request for
information alleging that the Company or any of its Subsidiaries may be in
violation of or liable under any Environmental Law; (vii) neither the Company
nor any of its Subsidiaries is subject to any orders, decrees, injunctions or
other arrangements with any Governmental Entity or is subject to any indemnity
or other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (viii) there are no
circumstances or conditions involving the Company or any of its Subsidiaries
that could reasonably be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use, or transfer of any
property of the Company pursuant to any Environmental Law.
As used herein, the term "Environmental Law" means any federal,
state, local or foreign law, statute, ordinance, regulation, judgment, order,
decree, arbitration award, agency requirement, license, permit, authorization or
opinion, relating to: (A) the protection, investigation or restoration of the
environment, health and safety, or natural resources, (B) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance or
(C) noise, odor, wetlands, pollution, contamination or any injury or threat of
injury to persons or property.
As used herein, the term "Hazardous Substance" means any substance
that is: (A) listed, classified or regulated pursuant to any Environmental Law;
(B) any petroleum product or by-product, asbestos-containing material,
lead-containing paint polychlorinated biphenyls, radioactive materials or radon;
or (C) any other substance
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which may be the subject of regulatory action by any Government Authority
pursuant to any Environmental Law.
(l) Tax Matters. As of the date hereof, neither the Company nor any
of its Affiliates has taken or agreed to take any action, nor do the executive
officers of the Company have any knowledge of any fact or circumstance, that
would prevent the Merger and the other transactions contemplated by this
Agreement from qualifying as a "reorganization" within the meaning of Section
368(a) of the Code.
(m) Taxes. Except as provided in Section 5.1(m) of the Company
Disclosure Letter and except for such matters as are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect:
(i) the Company and each of its Subsidiaries have filed
completely and correctly all Tax Returns (as defined below) that are required by
all applicable laws to be filed by them, and (x) have paid, or made adequate
provision for the payment of, all Taxes (as defined below) which have or may
become due and payable pursuant to those Tax Returns, have paid all estimated
Taxes due and (y) have paid all other charges, claims and assessments received
to date other than those charges, claims and assessments for Taxes being
contested in good faith for which adequate provision has been made on the most
recent balance sheet included in the Company Reports;
(ii) all Taxes which the Company and its Subsidiaries are
required by law to withhold and collect have been duly withheld and collected,
and have been paid over, in a timely manner, to the proper Taxing Authorities
(as defined below) to the extent due and payable;
(iii) neither the Company nor any of its Subsidiaries have
executed any waiver to extend, or otherwise taken or failed to take any action
that would have the effect of extending, the applicable statute of limitations
in respect of any Tax liabilities of the Company or its Subsidiaries for the
fiscal years prior to and including the most recent fiscal year;
(iv) the Company and its Subsidiaries have never been members
of any consolidated group for income tax purposes other than the consolidated
group of which the Company is the common parent; and the Company and its
Subsidiaries are not parties to any tax sharing agreement or arrangement, other
than with each other;
(v) no liens for Taxes exist with respect to any of the assets
or properties of the Company or its Subsidiaries, except for statutory liens for
Taxes not yet due or payable or that are being contested in good faith;
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(vi) all of the income Tax Returns filed by or on behalf of
each of the Company and its Subsidiaries have been examined by and settled with
the Internal Revenue Service or appropriate Taxing Authority, or the statute of
limitations with respect to the relevant Tax liability expired, for all taxable
periods through and including the period ending on the date on which the
Effective Time occurs;
(vii) all Taxes due with respect to any completed and settled
audit, examination or deficiency litigation with any Taxing Authority have been
paid in full;
(viii)there is no audit, examination, deficiency, or refund
litigation pending with respect to any Taxes and during the past three years no
Taxing Authority has given written notice of the commencement of any audit,
examination, deficiency or refund litigation, with respect to any Taxes;
(ix) the Company is not bound by any currently effective
private ruling, closing agreement or similar agreement with any Taxing Authority
relating to a material amount of Taxes;
(x) the Company shall not be required to include in a taxable
period ending after the Effective Time, any taxable income attributable to
income that economically accrued in a prior taxable period as a result of
Section 481 of the Code, the installment method of accounting or any comparable
provision of state or local Tax law;
(xi) (A) no material amount of property of the Company is "tax
exempt property" within the meaning of Section 168(h) of the Code, (B) no
material amount of assets of the Company is subject to a lease under Section
7701(h) of the Code, and (C) the Company is not a party to any material lease
made pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect prior to the date of enactment of the Tax Equity and
Fiscal Responsibility Act of 1982; and
(xii) immediately following the Merger, the Company will not
have any material amount of income or gain that has been deferred under Treasury
Regulation Section 1.1502-13, or any material excess loss account in a
Subsidiary under Treasury Regulation Section 1.1502-19; and
(xiii)the Company is not a "consenting corporation" within the
meaning of Section 341(f) of the Code.
As used in this Agreement, (i) the term "Tax" (including, with
correlative meaning, the terms "Taxes" and "Taxable") shall mean, with respect
to any Person, (a) all taxes, domestic or foreign, including without limitation
any income (net, gross or other, including recapture of any tax items such as
investment tax credits), alternative or add-on
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minimum tax, gross income, gross receipts, premium, gains, sales, use, ad
valorem, transfer, recording, franchise, profits, property (real or personal,
tangible or intangible), fuel, license, withholding (whether on amounts paid to
or by such Person), payroll, employment, unemployment, social security, excise,
severance, stamp, occupation, or environmental tax, customs, duties, or other
like assessments or governmental charges of any kind whatsoever, together with
any interest, penalties, additions or additional amounts imposed with respect
thereto (including, without limitation, penalties for failure to file Tax
Returns), (b) any joint or several liability of such Person with any other
Person for the payment of any amounts of the type described in clause (a) hereof
and (c) any liability of such Person for the payment of any amounts of the type
described in (a) as a result of any express or implied obligation to indemnify
any other Person; (ii) the term "Tax Return(s)" shall mean all returns,
consolidated or otherwise (including without limitation information returns),
required to be filed with any Taxing Authority; and (iii) the term "Taxing
Authority" shall mean any authority responsible for the imposition, collection
or administration of any Tax.
(n) Labor Matters. Neither the Company nor any of its Subsidiaries
is a party to or otherwise bound by any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization.
(o) Intellectual Property.
(i) The Company and/or each of its Subsidiaries owns, or is licensed or
otherwise possesses legally enforceable rights to use all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
technology, know-how, computer software programs or applications, and tangible
or intangible proprietary information or materials that are used in the business
of the Company and its Subsidiaries as currently conducted, except for any such
failures to own, be licensed or possess that are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect, and to
the knowledge of the executive officers of the Company all patents, trademarks,
trade names, service marks and copyrights held by the Company and/or its
Subsidiaries are valid and subsisting.
(ii) Except as disclosed in Company Reports filed prior to the date hereof
or as are not, individually or in the aggregate, reasonably likely to have a
Company Material Adverse Effect:
(A) the Company is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations
hereunder, in violation of any licenses, sublicenses and other agreements
as to which the Company is a party and pursuant to which the Company is
authorized to use any third-party patents, trademarks, service marks, and
copyrights ("Third-Party Intellectual Property Rights");
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(B) no claims with respect to (I) the patents, registered and material
unregistered trademarks and service marks, registered copyrights, trade
names, and any applications therefor owned by the Company or any its
Subsidiaries (the "Company Intellectual Property Rights"); (II) any trade
secret material to the Company; or (III) Third-Party Intellectual Property
Rights are currently pending or, to the knowledge of the executive
officers of the Company, are threatened by any Person;
(C) the executive officers of the Company do not know of any valid grounds
for any bona fide claims (I) to the effect that the sale, licensing or use
of any product as now used, sold or licensed or proposed for use, sale or
license by the Company or any of its Subsidiaries, infringes on any
copyright, patent, trademark, service xxxx or trade secret; (II) against
the use by the Company or any of its Subsidiaries, of any trademarks,
trade names, trade secrets, copyrights, patents, technology, know-how or
computer software programs and applications used in the business of the
Company or any of its Subsidiaries as currently conducted or as proposed
to be conducted; (III) challenging the ownership, validity or
effectiveness of any of the Company Intellectual Property Rights or other
trade secret material to the Company; or (IV) challenging the license or
legally enforceable right to use of the Third-Party Intellectual Rights by
the Company or any of its Subsidiaries; and
(D) to the knowledge of the executive officers of the Company, there is no
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property Rights by any third party, including any employee or
former employee of the Company or any of its Subsidiaries.
(p) Material Contracts. All of the material contracts of the Company
and its Subsidiaries that are required to be described in the Company Reports or
to be filed as exhibits thereto are described in the Company Reports or filed as
exhibits thereto and are in full force and effect. True and complete copies of
all such material contracts have been delivered or have been made available by
the Company to Parent. Neither the Company nor any of its Subsidiaries nor any
other party is in breach of or in default under any such contract except for
such breaches and defaults as are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect. Neither the Company
nor any of its Subsidiaries is party to any agreement containing any provision
or covenant limiting in any material respect the ability of the Company or any
of its Subsidiaries or, except as specifically identified on Section 5.1(p) of
the Company Disclosure Letter, assuming the consummation of the transactions
contemplated by this Agreement, Parent or any of its Subsidiaries to (A) sell
any products or services of or to any other person, (B) engage in any line of
business or (C) compete with or to obtain products or services from any person
or limiting the ability of any person to provide products or services to the
Company or any of its Subsidiaries.
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(q) Rights Plan. (i) Prior to Parent entering into this Agreement,
the Stock Option Agreement and the Voting Agreement, the Company has taken all
actions necessary such that, for all purposes under the Rights Agreement, Parent
shall not be deemed an Acquiring Person (as defined in the Rights Agreement),
the Distribution Date (as defined in the Rights Agreement) shall not be deemed
to occur and the rights issuable pursuant to the Rights Agreement (the "Rights")
will not separate from the Common Shares, as a result of Parent's entering into
this Agreement, the Stock Option Agreement or the Voting Agreement or
consummating the Merger and/or the other transactions contemplated hereby or
thereby.
(ii) The Company has taken all necessary action with respect to all
of the outstanding Rights so that, as of immediately prior to the Effective
Time, (A) neither the Company nor Parent will have any obligations under the
Rights or the Rights Agreement and (B) the holders of the Rights will have no
rights under the Rights or the Rights Agreement. If requested to do so by
Parent, the Company will take all action as may be necessary to extend the term
of the Rights Agreement beyond March 10, 1998 or (ii) to adopt a new rights
agreement (the "New Rights Agreement") upon expiration of the Rights Agreement
which is identical in all respects to the Rights Agreement, and to provide that
the Rights Agreement or New Rights Agreement shall not expire or terminate prior
to the earlier of the Effective Time and the date that this Agreement is
terminated pursuant to the terms hereof. In the event that the Parent requests
the Company to adopt a New Rights Agreement, the Company will take all action as
may be necessary to ensure that the representations of the Company contained in
this Section 5.1(q) with respect to the Rights Plan are true and correct with
respect to the New Rights Plan as well.
(r) Brokers and Finders. Neither the Company nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders, fees in connection
with the Merger or the other transactions contemplated in this Agreement except
that the Company has employed Xxxxxxx Xxxxx Barney as its financial advisor, the
arrangements with which have been disclosed to Parent prior to the date hereof.
(s) Insurance Matters.(i) Except as otherwise are not, individually
or in the aggregate, reasonably likely to have a Company Material Adverse
Effect, all policies, binders, slips, certificates, annuity contracts and
participation agreements and other agreements of insurance, whether individual
or group, in effect as of the date hereof (including all applications,
supplements, endorsements, riders and ancillary agreements in connection
therewith) that are issued by the Company Insurance Subsidiaries (the "Company
Insurance Contracts") and any and all marketing materials, are, to the extent
required under applicable law, on forms approved by applicable insurance
regulatory authorities or which have been filed and not objected to by such
authorities within the period provided for objection, and such forms comply in
all material respects with the
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insurance statutes, regulations and rules applicable thereto and, as to premium
rates established by the Company or any Company Insurance Subsidiary which are
required to be filed with or approved by insurance regulatory authorities, the
rates have been so filed or approved, the premiums charged conform thereto in
all material respects, and such premiums comply in all material respects with
the insurance statutes, regulations and rules applicable thereto.
(ii) All reinsurance and coinsurance treaties or agreements,
including retrocessional agreements, to which the Company or any Company
Insurance Subsidiary is a party or under which the Company or any Company
Insurance Subsidiary has any existing rights, obligations or liabilities are in
full force and effect, except for such treaties or agreements the failure to be
in full force and effect of which are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect. Neither the Company
nor any Company Insurance Subsidiary, nor, to the knowledge of the executive
officers of the Company, any other party to a reinsurance or coinsurance treaty
or agreement to which the Company or any Company Insurance Subsidiary is a
party, is in default in any material respect as to any provision thereof, and no
such agreement contains any provision providing that the other party thereto may
terminate such agreement by reason of the transactions contemplated by this
Agreement. The Company has not received any notice to the effect that the
financial condition of any other party to any such agreement is impaired with
the result that a default thereunder may reasonably be anticipated, whether or
not such default may be cured by the operation of any offset clause in such
agreement. No insurer or reinsurer or group of affiliated insurers or reinsurers
accounted for the direction to the Company and the Company Insurance
Subsidiaries or the ceding by the Company and the Company Insurance Subsidiaries
of insurance or reinsurance business in an aggregate amount equal to two percent
or more of the consolidated gross premium income of the Company and the Company
Insurance Subsidiaries for the year ended December 31, 1996.
(iii) Prior to the date hereof, the Company has delivered or made
available to Parent a true and complete copy of any actuarial reports prepared
by actuaries, independent or otherwise, with respect to the Company or any
Company Insurance Subsidiary since December 31, 1994, and all attachments,
addenda, supplements and modifications thereto (the "Company Actuarial
Analyses"). The information and data furnished by the Company or any Company
Insurance Subsidiary to its independent actuaries in connection with the
preparation of the Company Actuarial Analyses were accurate in all material
respects. Furthermore, to the knowledge of the executive officers of the
Company, each Company Actuarial Analysis was based upon an accurate inventory of
policies in force for the Company and the Company Insurance Subsidiaries, as the
case may be, at the relevant time of preparation, was prepared using appropriate
modeling procedures accurately applied and in conformity with generally accepted
actuarial standards consistently applied, and the projections contained therein
were properly prepared in accordance with the assumptions stated therein.
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(iv) None of Standard & Poor's Corporation, Xxxxx'x Investors
Service, Inc. or A.M. Best Company has announced that it has under surveillance
or review its rating of the financial strength or claims-paying ability of any
Company Insurance Subsidiary and the Company has no reason to believe that any
rating presently held by the Company Insurance Subsidiaries is likely to be
modified, qualified, lowered or placed under such surveillance for any reason,
including as a result of the transactions contemplated hereby.
(v) Except as would not reasonably be expected to have a Company
Material Adverse Effect, all annuity contracts and life insurance policies
issued by each Company Insurance Subsidiary to an annuityholder domiciled in the
United States meet all definitional or other requirements for qualification
under the Code section applicable (or intended to be applicable) to such annuity
contracts or life insurance policies, including, without limitation, the
following: (A) each life insurance policy meets the requirements of sections
101(f), 817(h) or 7702 of the Code, as applicable; (B) no life insurance
contract issued by any Company Insurance Company is a "modified endowment
contract" within the meaning of section 7702A of the Code unless and to the
extent that the holders of the policies have been notified of their
classification; (C) each annuity contract issued, entered into or sold by any
Company Insurance Subsidiary qualifies as an annuity under federal tax law; (D)
each annuity contract meets the requirements of, and has been administered
consistent with section 817(h) and 72 of the Code including but not limited to
section 72(s) of the Code (except for those contracts specifically excluded from
such requirement pursuant to section 72(s)(5) of the Code); (E) each annuity
contract intended to qualify under sections 130, 403(a), 403(b) or 408(b) of the
Code contains all provisions required for qualification under such sections of
the Code; (F) each annuity contract marketed as, or in connection with, plans
that are intended to qualify under section 401, 403, 408 or 457 of the Code
complies with the requirements of such section; and (G) none of the Company
Insurance Subsidiaries have entered into any agreement or are involved in any
discussions or negotiations and there are no audits, examinations,
investigations or other proceedings with the IRS with respect to the failure of
any life insurance policy under section 7702 or 817(h) of the Code or the
failure of any annuity contract to meet the requirements of section 72(s) of the
Code. There are no "hold harmless" indemnification agreements respecting the tax
qualification or treatment of any product or plan sold, issued, entered into or
administered by the Company Insurance Subsidiaries, and there have been no
claims asserted by any Person under such "hold harmless" indemnification
agreements so set forth.
(t) Liabilities and Reserves. (i) The reserves carried on the
Company SAP Statements of each Company Insurance Subsidiary for future insurance
policy benefits, losses, claims and similar purposes were, as of the respective
dates of such Company SAP Statements, in compliance in all material respects
with the requirements for reserves established by the insurance departments of
the state of domicile of such Company Insurance Subsidiary, were determined in
all material respects in accordance
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with generally accepted actuarial standards and principles consistently applied,
and were fairly stated in all material respects in accordance with sound
actuarial and statutory accounting principles. Such reserves were adequate in
the aggregate to cover the total amount of all reasonably anticipated
liabilities of the Company and each Company Insurance Subsidiary under all
outstanding insurance, reinsurance and other applicable agreements as of the
respective dates of such Company SAP Statements. The admitted assets of each
Company Insurance Subsidiary as determined under applicable Laws are in an
amount at least equal to the minimum amounts required by applicable Laws. In
addition, the Company has delivered or made available to Parent copies of all
work papers used as the basis for establishing the reserves for the Company and
the Company Insurance Subsidiaries at December 31, 1995 and December 31, 1996,
respectively.
(ii) Except for regular periodic assessments in the ordinary course
of business or assessments based on developments which are publicly known within
the insurance industry, to the knowledge of the executive officers of the
Company, no claim or assessment is pending or threatened against any Company
Insurance Subsidiary which is peculiar or unique to such Company Insurance
Subsidiary by any state insurance guaranty associations in connection with such
association's fund relating to insolvent insurers which if determined adversely,
would, individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect.
(u) Investment Company. None of the Company Insurance Subsidiaries
maintains any separate accounts. Neither the Company nor any of its
Subsidiaries conducts activities of or is otherwise deemed under applicable law
to control an "investment advisor" as such term is defined in Section 2(a)(20)
of the 1940 Act, whether or not registered under the Investment Advisers Act
of 1940, as amended. Neither the Company nor any of its Subsidiaries is an
"investment company" as defined under the 1940 Act, and neither the Company
nor any of its Subsidiaries sponsors any Person that is such an investment
company.
5.2. Representations and Warranties of Parent and Merger Subsidiary.
Except as set forth in the corresponding sections or subsections of the
disclosure letter delivered to the Company by Parent on or prior to entering
into this Agreement (the "Parent Disclosure Letter") or in any Parent Report (as
hereinafter defined) filed prior to the date hereof, Parent and Merger
Subsidiary each hereby represent and warrant to the Company that:
(a) Capitalization of Merger Subsidiary. The authorized stock of
Merger Subsidiary consists of 1,000 shares of Common Stock, par value $.01 per
share, 100 of which are duly authorized, validly issued and outstanding, fully
paid and non-assessable. All of the issued and outstanding stock of Merger
Subsidiary is, and at the Effective Time will be, owned by Parent, and there are
(i) no other shares of stock or voting securities of Merger Subsidiary, (ii) no
securities of Merger Subsidiary convertible
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into or exchangeable for shares of stock or voting securities of Merger
Subsidiary and (iii) no options or other rights to acquire from Merger
Subsidiary, and no obligations of Merger Subsidiary to issue or deliver, any
stock, voting securities or securities convertible into or exchangeable for
stock or voting securities of Merger Subsidiary. Merger Subsidiary has not
conducted any business prior to the date hereof and has no, and prior to the
Effective Time will have no, assets, liabilities or obligations of any nature
other than those incident to its formation and pursuant to this Agreement and
the Merger and the other transactions contemplated by this Agreement.
(b) Organization, Good Standing and Qualification. (i) Each of
Parent and Merger Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation and has
all requisite corporate power and authority to own and operate its properties
and assets and to carry on its business as presently conducted and is qualified
to do business and is in good standing as a foreign corporation in each
jurisdiction where the ownership or operation of its properties or conduct of
its business requires such qualification, except where the failure to be so
qualified or in such good standing, is not reasonably likely, individually or in
the aggregate, to have a Parent Material Adverse Effect (as defined below).
Parent has made available to the Company a complete and correct copy of Parent's
and Merger Subsidiary's charter and by-laws, each as amended to the date hereof.
Parent's and Merger Subsidiary's charter and by-laws so delivered are in full
force and effect.
As used in this Agreement, the term "Parent Material Adverse Effect"
means a material adverse effect on the financial condition, properties, business
or results of operations of Parent and its Subsidiaries taken as a whole.
(c) Capital Structure. The authorized capital stock of Parent
consists of 1,000,000,000 shares of Parent Common Stock, of which 701,493,275
shares were outstanding as of the close of business on September 30, 1997, and
6,000,000 shares of Serial Preferred Stock, par value $5.00 per share, none of
which was outstanding as of the close of business on December 21, 1997. All of
the outstanding shares of Parent Common Stock are duly authorized, validly
issued, fully paid and nonassessable.
(d) Corporate Authority.
(i) Each of the Parent and Merger Subsidiary has all requisite
corporate power and authority and has taken all corporate action necessary in
order to execute, deliver and perform its obligations under this Agreement and
to consummate the Merger. This Agreement is a valid and binding agreement of
Parent and Merger Subsidiary, enforceable against each of Parent and Merger
Subsidiary in accordance with its terms, subject to the Bankruptcy and Equity
Exception.
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(ii) Prior to the Effective Time, Parent will have taken all
necessary action to permit it to issue the number of shares of Parent Common
Stock and Parent Preferred Stock required to be issued pursuant to Article IV.
The Parent Common Stock and Parent Preferred Stock, when issued, will be duly
authorized, validly issued, fully paid and nonassessable, and no stockholder of
Parent will have any preemptive right of subscription or purchase in respect
thereof. The Parent Common Stock and Parent Preferred Stock, when issued, will
be registered under the Securities Act and Exchange Act and registered or exempt
from registration under any applicable state securities or "blue sky" laws.
(e) Governmental Filings; No Violations. (i) Other than the filings
and/or notices (A) pursuant to Section 1.3, (B) under the HSR Act, the
Securities Act and the Exchange Act, (C) to comply with state securities or
"blue sky" laws, (D) required to be made with the NYSE or Nasdaq, and (E) the
filing of appropriate documents with, and approval of, the respective
Commissioners of Insurance of the states of Arizona, Florida, Georgia, New York,
South Carolina, Texas, Puerto Rico, Mexico, Cayman Islands, Argentina, Turks &
Caicos, Dominican Republic and the United Kingdom, and such notices and consents
as may be required under the antitrust notification insurance laws of any state
in which the Company, Parent or any of their respective subsidiaries is
domiciled or does business, no notices, reports or other filings are required to
be made by Parent or Merger Subsidiary with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
Parent or Merger Subsidiary from, any Governmental Entity, in connection with
the execution and delivery of this Agreement by Parent and Merger Subsidiary and
the consummation by Parent and Merger Subsidiary of the Merger and the other
transactions contemplated hereby, except those that the failure to make or
obtain are not, individually or in the aggregate, reasonably likely to have a
Parent Material Adverse Effect or prevent, materially delay or materially impair
the ability of Parent or Merger Subsidiary to consummate the transactions
contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement by
Parent and Merger Subsidiary do not, and the consummation by Parent and Merger
Subsidiary of the Merger and the other transactions contemplated hereby will
not, constitute or result in (A) a breach or violation of, or a default under,
the certificate or by-laws of Parent and Merger Subsidiary or the comparable
governing instruments of any of its Subsidiaries, (B) a breach or violation of,
or a default under, the acceleration of any obligations or the creation of a
lien, pledge, security interest or other encumbrance on the assets of Parent or
any of its Subsidiaries (with or without notice, lapse of time or both) pursuant
to, any Contracts binding upon Parent or any of its Subsidiaries or (provided,
as to consummation, the filings and notices are made, and approvals are
obtained, as referred to in Section 5.2(e)(i)) or any Law or governmental or
non-governmental permit or license to which Parent or any of its Subsidiaries is
subject or (C) any change in the rights or obligations of any party under any of
the Contracts, except, in the case of
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clause (B) or (C) above, for breach, violation, default, acceleration, creation
or change that is not, individually or in the aggregate, reasonably likely to
have a Parent Material Adverse Effect or prevent, materially delay or materially
impair the ability of Parent or Merger Subsidiary to consummate the transactions
contemplated by this Agreement.
(f) Parent Reports; Financial Statements. Parent has made available
to the Company each report or proxy statement prepared by it since December 31,
1994, including (i) Parent's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "Parent Audit Date"), and (ii) Parent's Quarterly Reports
on Form 10-Q for the periods ended March 31, 1997, June 30, 1996 and September
30, 1997, each in the form (including exhibits, annexes and any amendments
thereto) filed with the SEC (collectively, including any such reports filed
subsequent to the date hereof, the "Parent Reports"). As of their respective
dates, the Parent Reports did not, and any Parent Reports filed with the SEC
subsequent to the date hereof will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading. Each of the consolidated balance sheets
included in or incorporated by reference into the Parent Reports (including the
related notes and schedules) fairly presents, or will fairly present, the
consolidated financial position of Parent and its Subsidiaries as of its date
and each of the consolidated statements of income and of changes in financial
position included in or incorporated by reference into the Parent Reports
(including any related notes and schedules) fairly presents, or will fairly
present, the results of operations, retained earnings and changes in financial
position, as the case may be, of Parent and its Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to notes and normal
year-end audit adjustments that will not be material in amount or effect), in
each case in accordance with GAAP consistently applied during the periods
involved, except as may be noted therein.
(ii) The annual and quarterly statements of each Subsidiary through
which Parent conducts its insurance operations (the "Parent Insurance
Subsidiaries") as filed with the applicable insurance regulatory authorities for
the years ended December 31, 1994, 1995 and 1996 and the quarterly periods ended
March 31, 1997, June 30, 1997 and September 30, 1997, including all exhibits,
interrogatories, notes, schedules and any actuarial opinions, affirmations or
certifications or other supporting documents filed in connection therewith
(collectively, the "Parent SAP Statements") were prepared in conformity with
statutory accounting practices prescribed or permitted by the applicable
insurance regulatory authority consistently applied for the periods covered
thereby and present fairly the statutory financial position of such Parent
Insurance Subsidiaries as at the respective dates thereof and the results of
operations of such Subsidiaries for the respective periods then ended. The
Parent SAP Statements complied in all material respects with all applicable
laws, rules and regulations when filed, and no deficiency that is material to
Parent and its Subsidiaries, taken as a whole, has been asserted with respect
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to any Parent SAP Statements by the applicable insurance regulatory body or any
other governmental agency or body.
(g) Absence of Certain Changes. Except as disclosed in the Parent
Reports filed prior to the date hereof, since the Parent Audit Date Parent and
its Subsidiaries have conducted the business of Parent and its Subsidiaries,
taken as a whole, only in, and have not engaged in any transaction material to
the Company and its Subsidiaries, taken as a whole, other than according to, the
ordinary and usual course of such businesses and there has not been (i) any
change in the financial condition, management, properties, prospects, business
or results of operations of Parent and its Subsidiaries or any development or
combination of developments of which management of Parent has knowledge that,
individually or in the aggregate, is reasonably likely to have a Parent Material
Adverse Effect; (ii) any material damage, destruction or other casualty loss
with respect to any material asset or property owned, leased or otherwise used
by Parent or any of its Subsidiaries, whether or not covered by insurance that,
individually or in the aggregate, is reasonably likely to have a Parent Material
Adverse Affect; (iii) any declaration, setting aside or payment of any dividend
or other distribution in respect of the capital stock of Parent, except for
dividends or other distributions on its capital stock publicly announced prior
to the date hereof or declared and paid consistent with past practice (including
customary increases); or (iv) any material addition, or any development
involving a prospective material addition, to Parent's consolidated reserves for
future policy benefits.
(h) Tax Matters. As of the date hereof, neither Parent nor any of
its Affiliates has taken or agreed to take any action, nor do the officers of
Parent have any knowledge of any fact or circumstance, that would prevent the
Merger and the other transactions contemplated by this Agreement from qualifying
as a "reorganization" within the meaning of Section 368(a) of the Code.
(i) Brokers and Finders. Neither Parent nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders, fees in connection
with the Merger or the other transactions contemplated by this Agreement, except
that Parent has employed Xxxxxxx, Xxxxx & Co. and Barclays as its financial
advisors.
(j) Corporate Headquarters. It is the intention of Parent that the
corporate headquarters of the Surviving Corporation shall remain in the State of
Florida.
(k) Insurance Matters. The business and operations of the Parent
Insurance Subsidiaries have been conducted in compliance with all Insurance
Laws, except where the failure to so conduct such business and operations is
not, individually or in the aggregate, reasonably likely to have a Parent
Material Adverse Effect. Notwithstanding the generality of the foregoing, except
where the failure to do so would
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not, individually or in the aggregate, be reasonably likely to have a Parent
Material Adverse Effect, each Parent Insurance Subsidiary and, to the knowledge
of Parent's executive officers, its agents have marketed, sold and issued
insurance products in compliance, in all material respects, with Insurance Laws
applicable to the business of such Parent Insurance Subsidiary and in the
respective jurisdictions in which such products have been sold, including,
without limitation, in compliance with (i) all prohibitions against "redlining"
or withdrawal of business lines, (ii) all applicable requirements relating to
the disclosure of the nature of insurance products as policies of insurance and
(iii) all applicable requirements relating to insurance product projections and
illustrations. In addition, (i) there is no pending or, to the knowledge of the
executive officers of Parent, threatened charge by any insurance regulatory
authority that any of the Parent Insurance Subsidiaries has violated, nor any
pending or, to the knowledge of the executive officers of the Parent, threatened
investigation by any insurance regulatory authority with respect to possible
violations of, any applicable Insurance Laws where such violations are,
individually or in the aggregate, reasonably likely to have a Parent Material
Adverse Effect; (ii) none of the Parent Insurance Subsidiaries is subject to any
order or decree of any insurance regulatory authority relating specifically to
such Parent Insurance Subsidiary (as opposed to insurance companies generally)
which is, individually or in the aggregate, reasonably likely to have a Parent
Material Adverse Effect; and (iii) the Parent Insurance Subsidiaries have filed
all reports required to be filed with any insurance regulatory authority on or
before the date hereof as to which failure to file such reports is, individually
or in the aggregate, reasonably likely to have a Parent Material Adverse Effect.
Except as otherwise are not, individually or in the aggregate,
reasonably likely to have a Parent Material Adverse Effect, all policies,
binders, slips, certificates, annuity contracts and participation agreements and
other agreements of insurance, whether individual or group, in effect as of the
date hereof (including all applications, supplements, endorsements, riders and
ancillary agreements in connection therewith) that are issued by the Parent
Insurance Subsidiaries and any and all marketing materials, are, to the extent
required under applicable law, on forms approved by applicable insurance
regulatory authorities or which have been filed and not objected to by such
authorities within the period provided for objection, and such forms comply in
all material respects with the insurance statutes, regulations and rules
applicable thereto and, as to premium rates established by Parent or the Parent
Insurance Subsidiaries which are required to be filed with or approved by
insurance regulatory authorities, the rates have been so filed or approved, the
premiums charged conform thereto in all material respects, and such premiums
comply in all material respects with the insurance statutes, regulations and
rules applicable thereto.
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ARTICLE VI
Covenants
6.1. Interim Operations. The Company covenants and agrees as to
itself and its Subsidiaries that, after the date hereof and prior to the
Effective Time (unless Parent shall otherwise approve in writing, and except as
otherwise expressly contemplated by this Agreement or the Stock Option Agreement
or set forth in Section 6.1 of the Company Disclosure Schedule):
(a) its and its Subsidiaries's businesses shall be conducted in the
ordinary and usual course (it being understood and agreed that nothing contained
herein shall permit the Company to enter into or engage in (through acquisition,
product extension or otherwise) the business of selling any products or services
materially different from existing products or services of the Company and its
Subsidiaries or to enter into or engage in new lines of business without
Parent's prior written approval);
(b) to the extent consistent with (a) above it and its Subsidiaries
shall use their respective reasonable best efforts to preserve its business
organization intact and maintain its existing relations and goodwill with
customers, suppliers, reinsurers, distributors, creditors, lessors, employees
and business associates;
(c) it shall not (i) issue, sell, pledge, dispose of or encumber any
capital stock owned by it in any of its Subsidiaries; (ii) amend its charter or
by-laws or amend, modify or terminate the Rights Agreement except as
contemplated by Section 5.1(q)(ii); (iii) split, combine or reclassify its
outstanding shares of capital stock; (iv) authorize, declare, set aside or pay
any dividend payable in cash, stock or property in respect of any capital stock
other than dividends from its direct or indirect wholly-owned Subsidiaries and
other than regular quarterly dividends paid by the Company on its Common Shares
not in excess of $0.11 per share and regular quarterly dividends paid by the
Company on its Preferred Shares in accordance with the Company's Articles of
Incorporation; or (v) repurchase, redeem or otherwise acquire, except in
connection with any of the Company Stock Plans, or permit any of its
Subsidiaries to purchase or otherwise acquire, any shares of its stock or any
securities convertible into or exchangeable or exercisable for any shares of its
stock;
(d) neither it nor any of its Subsidiaries shall (i) issue, sell,
pledge, dispose of or encumber any shares of, or securities convertible into or
exchangeable or exercisable for, or options, warrants, calls, commitments or
rights of any kind to acquire, any shares of its capital stock of any class or
any other property or assets (other than Shares issuable pursuant to options
outstanding on the date hereof under any of the Company Stock Plans or upon
conversion of the Preferred Shares or Convertible Notes); (ii) other than in the
ordinary and usual course of business, transfer, lease, license,
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guarantee, sell, mortgage, pledge, dispose of or encumber any other property or
assets (including capital stock of any of its Subsidiaries) or incur or modify
any material indebtedness or other liability; or (iii) make or authorize or
commit for any capital expenditures other than in amounts not exceeding $5
million in the aggregate or, by any means, make any acquisition of, or
investment in, assets or stock of any other Person or entity, including by way
of assumption reinsurance, in excess of $2 million individually or $5 million in
the aggregate (other than in connection with ordinary course investment
activities);
(e) neither it nor any of its Subsidiaries shall terminate,
establish, adopt, enter into, make any new grants or awards under, amend or
otherwise modify, any Compensation and Benefit Plans, other than awards made in
the normal course under the Management Incentive Plan in respect of 1997
performance and grants of up to 20,000 restricted Common Shares to be made in
January 1998 under the year 2000 Tenure Award Program, or increase the salary,
wage, bonus or other compensation of any employees except increases occurring in
the ordinary and usual course of business (which shall include normal periodic
performance reviews and related compensation and benefit increases);
(f) neither it nor any of its Subsidiaries shall pay, discharge,
settle or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of claims, liabilities or obligations legally due and
payable and arising in the ordinary and usual course of business, claims arising
under the terms of products, contracts or policies issued by the Company
Insurance Subsidiaries in the ordinary and usual course of business and such
other claims, liabilities or obligations as shall not exceed $5 million in the
aggregate;
(g) neither it nor any of its Subsidiaries shall make or change any
Tax election, settle any material audit, file any amended tax returns or permit
any insurance policy naming it as a beneficiary or loss-payable payee to be
canceled or terminated except in the ordinary and usual course of business;
(h) neither it nor any of its Subsidiaries shall enter into any
agreement containing any provision or covenant limiting in any material respect
the ability of the Company or any Subsidiary or affiliate to (A) sell any
products or services of or to any other person, (B) engage in any line of
business or (C) compete with or to obtain products or services from any person
or limiting the ability of any person to provide products or services to the
Company or any of its Subsidiaries or affiliates;
(i) neither it nor any of its Subsidiaries shall enter into any new
quota share or other reinsurance transaction (A) which does not contain standard
cancellation and termination provisions, (B) which, except in the ordinary
course of business,
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materially increases or reduces the Company Insurance Subsidiaries' consolidated
ratio of net written premiums to gross written premiums or (C) pursuant to which
$5 million or more in gross written premiums are ceded by the Company Insurance
Subsidiaries to any Person other than the Company or any of its Subsidiaries;
(j) neither it nor any of the Company Insurance Subsidiaries will
alter or amend in any material respect their existing investment guidelines or
policies;
(k) neither it nor any of its Subsidiaries shall take any action or
omit to take any action that would cause any of its representations and
warranties herein to become untrue in any material respect; and
(l) neither it nor any of its Subsidiaries will authorize or enter
into an agreement to do any of the foregoing.
6.2. Acquisition Proposals. The Company will not, and will not
permit or cause any of its Subsidiaries or any of the officers and directors of
it or its Subsidiaries to, and shall direct its and its Subsidiaries' employees,
agents and representatives (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, initiate, solicit, encourage or otherwise facilitate any inquiries
or the making of any proposal or offer with respect to a merger, reorganization,
share exchange, consolidation or similar transaction involving, or any purchase
of 15% or more of the assets or any equity securities of, the Company or any of
its Subsidiaries (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal"). The Company will not, and will not permit or cause any
of its Subsidiaries or any of the officers and directors of it or its
Subsidiaries to and shall direct its and its Subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any Person relating to an Acquisition
Proposal, whether made before or after the date of this Agreement, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal
(including, without limitation, by means of an amendment to the Rights
Agreement); provided, however, that nothing contained in this Agreement shall
prevent the Company or its Board of Directors from (i) complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal or
(ii) at any time after 120 days from the date hereof if the Merger shall not by
such date have been approved by the Company Requisite Vote (A) providing
information in response to a request therefor by a Person who has made an
unsolicited bona fide written Acquisition Proposal if the Board of Directors
receives from the Person so requesting such information an executed
confidentiality agreement on terms substantially equivalent to those contained
in the Confidentiality Agreement (as defined in Section 9.7); (B) engaging in
any negotiations or discussions with any Person who has made an unsolicited bona
fide written Acquisition Proposal; or (C) recommending such
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an Acquisition Proposal to the stockholders of the Company, if and only to the
extent that, (i) in each such case referred to in clause (A), (B) or (C) above,
the Board of Directors of the Company determines in good faith after
consultation with outside legal counsel that such action is necessary in order
for its directors to comply with their respective fiduciary duties under
applicable law and (ii) in each case referred to in clause (B) or (C) above, the
Board of Directors of the Company determines in good faith (after consultation
with its financial advisor) that such Acquisition Proposal, if accepted, is
reasonably likely to be consummated, taking into account all legal, financial
and regulatory aspects of the proposal and the Person making the proposal and
would, if consummated, result in a more favorable transaction than the
transaction contemplated by this Agreement, taking into account the long-term
prospects and interests of the Company and its stockholders (any such more
favorable Acquisition Proposal being referred to in this Agreement as a
"Superior Proposal"). The Company will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. The Company agrees
that it will take the necessary steps to promptly inform the individuals or
entities referred to in the first sentence hereof of the obligations undertaken
in this Section 6.2 and in the Confidentiality Agreement (as defined in Section
9.7). The Company will notify Parent immediately if any such inquiries,
proposals or offers are received by, any such information is requested from, or
any such discussions or negotiations are sought to be initiated or continued
with, any of its representatives indicating, in connection with such notice, the
name of such Person and the material terms and conditions of any proposals or
offers and thereafter shall keep Parent informed, on a current basis, on the
status and terms of any such proposals or offers and the status of any such
negotiations or discussions. The Company also will promptly request each Person
that has heretofore executed a confidentiality agreement in connection with its
consideration of an Acquisition Proposal to return all confidential information
heretofore furnished to such Person by or on behalf of it or any of its
Subsidiaries.
6.3. Information Supplied. The Company and Parent each agrees, as to
itself and its Subsidiaries, that none of the information supplied or to be
supplied by it or its Subsidiaries for inclusion or incorporation by reference
in (i) the Registration Statement on Form S-4 to be filed with the SEC by Parent
in connection with the issuance of shares of Parent Common Stock and Parent
Preferred Stock in the Merger (including the proxy statement and prospectus (the
"Prospectus/ Proxy Statement") constituting a part thereof) (the "S-4
Registration Statement") will, at the time the S-4 Registration Statement
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (ii) the Prospectus/Proxy Statement
and any amendment or supplement thereto will, at the date of mailing to
stockholders and at the times of the meetings of stockholders of the Company to
be held in connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required
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to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
6.4. Stockholders Meetings. The Company will take, in accordance
with its charter and by-laws, all action necessary to convene a meeting of
holders of Common Shares (the "Common Stockholders Meeting") and a meeting of
holders of Preferred Shares (the "Preferred Stockholders Meeting" and, together
with the Common Stockholders Meeting, the "Stockholders Meetings") as promptly
as practicable, but in no event more than 45 days, after the S-4 Registration
Statement is declared effective to consider and vote upon the approval of the
Merger. Subject to fiduciary obligations under applicable law, the Company's
board of directors shall recommend such approval, shall not withdraw or modify
such recommendation and shall take all lawful action to solicit such approval.
Without limiting the generality of the foregoing, in the event that the
Company's board of directors withdraws or modifies its recommendation, the
Company nonetheless shall cause the Stockholders Meetings to be convened and a
vote taken with respect to the Merger and the board of directors shall
communicate to the Company's stockholders its basis for such withdrawal or
modification as contemplated by Section 607.1103(2)(a) of the FBCA.
6.5. Filings; Other Actions; Notification. (a) Parent and the
Company shall promptly prepare and file with the SEC the Prospectus/Proxy
Statement, and Parent shall prepare and file with the SEC the S-4 Registration
Statement as promptly as practicable. Parent and the Company each shall use all
reasonable efforts to have the S-4 Registration Statement declared effective
under the Securities Act as promptly as practicable after such filing, and
promptly thereafter mail the Prospectus/Proxy Statement to the stockholders of
the Company. Parent shall also use all reasonable efforts to obtain prior to the
effective date of the S-4 Registration Statement all necessary state securities
law or "blue sky" permits and approvals required in connection with the Merger
and to consummate the other transactions contemplated by this Agreement and will
pay all expenses incident thereto.
(b) The Company and Parent shall cooperate with each other and use
(and shall cause their respective Subsidiaries to use) all best efforts (i) to
cause to be done all things, necessary, proper or advisable on its part under
this Agreement and applicable Laws to consummate and make effective the Merger
and the other transactions contemplated by this Agreement as soon as
practicable, including preparing and filing as promptly as practicable all
documentation to effect all necessary notices, reports and other filings, and
(ii) to obtain as promptly as practicable all consents, registrations,
approvals, permits and authorizations necessary or advisable to be obtained from
any third party and/or any Governmental Entity in connection with, as a result
of or in order to consummate the Merger or any of the other transactions
contemplated by this Agreement, including, without limitation, upon request of
Parent, all material consents required in connection with the consummation of
the Merger; provided, however, that nothing in this
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Section 6.5 shall require, or be construed to require, Parent, in connection
with the receipt of any regulatory approval, to proffer to, or agree to (i) sell
or hold separate and agree to sell or to discontinue to or limit, before or
after the Effective Time, any assets, businesses, or interest in any assets or
businesses of Parent, the Company or any of their respective Affiliates (or to
consent to any sale, or agreement to sell, or discontinuance or limitation by
the Company of any of its assets or businesses) or (ii) agree to any conditions
relating to, or changes or restriction in, the operations of any such asset or
businesses which, in either case, could, in the judgment of the Board of Parent,
materially and adversely impact the economic or business benefits to Parent of
the transactions contemplated by this Agreement. Subject to applicable laws
relating to the exchange of information, Parent and the Company shall have the
right to review in advance, and to the extent practicable each will consult the
other on, all the information relating to Parent or the Company, as the case may
be, and any of their respective Subsidiaries, that appear in any filing made
with, or written materials submitted to, any third party and/or any Governmental
Entity in connection with the Merger and the other transactions contemplated by
this Agreement. In exercising the foregoing right, each of the Company and
Parent shall act reasonably and as promptly as practicable.
(c) The Company and Parent each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Prospectus/Proxy Statement, the
S-4 Registration Statement or any other statement, filing, notice or application
made by or on behalf of Parent, the Company or any of their respective
Subsidiaries to any third party and/or any Governmental Entity in connection
with the Merger and the transactions contemplated by this Agreement.
(d) The Company and Parent each shall keep the other apprised of the
status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be, or any of
its Subsidiaries, from any third party and/or any Governmental Entity with
respect to the Merger and the other transactions contemplated by this Agreement.
The Company and Parent each shall give prompt notice to the other of any change
that is reasonably likely to result in a Company Material Adverse Effect or
Parent Material Adverse Effect, respectively.
(e) The Company shall use its best efforts to cause the Company and
each of the persons listed in Section 6.5(e) of the Company Disclosure Schedule
to enter into prior to the Effective Time an Amendment of Severance Agreement in
the form attached hereto as Exhibit D or E, as applicable.
6.6. Taxation. Subject to Section 6.2, neither Parent nor the
Company shall take or cause to be taken any action, whether before or after the
Effective Time, that would disqualify the Merger as a "reorganization" within
the meaning of Section 368(a)
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of the Code. Each of Parent and the Company agrees to use all reasonable efforts
to cure any impediment to the qualification of the Merger as a "reorganization"
within the meaning of Section 368(a) of the Code.
6.7. Access. (a) Upon reasonable notice, and except as may otherwise
be required by applicable law, the Company shall (and shall cause its
Subsidiaries to) afford Parent's officers, employees, counsel, accountants and
other authorized representatives ("Representatives") access, during normal
business hours throughout the period prior to the Effective Time, to the
Company's and its Subsidiaries' management, properties, books, contracts and
records and, during such period, shall (and shall cause its Subsidiaries to)
furnish promptly to Parent all information concerning the Company's and its
Subsidiaries' business, properties and personnel as may reasonably be requested,
provided that no investigation pursuant to this Section shall affect or be
deemed to modify any representation or warranty made by the Company, and
provided, further, that the foregoing shall not require the Company to permit
any inspection, or to disclose any information, that in the reasonable judgment
of the Company would result in the disclosure of any trade secrets of third
parties or violate any of its obligations with respect to confidentiality if the
Company shall have used all reasonable efforts to obtain the consent of such
third party to such inspection or disclosure. All requests for information made
pursuant to this Section 6.7(a) shall be directed to an executive officer of the
Company or such Person as may be designated by the Company's officers. All such
information shall be governed by the terms of the Confidentiality Agreement (as
hereinafter defined).
(b) Upon reasonable notice, and except as may otherwise be required
by applicable law, Parent shall afford the Company's Representatives such access
as is reasonably requested (giving due consideration to the size and
capitalization of, and availability of public information concerning, Parent and
the pricing and other terms contained in this Agreement), during normal business
hours throughout the period prior to the Effective Time, to a limited number of
Parent's management personnel and all relevant books and records, provided that
no investigation pursuant to this Section shall affect or be deemed to modify
any representation or warranty made by Parent, and provided, further, that the
foregoing shall not require Parent to permit any inspection, or to disclose any
information, that in the reasonable judgment of Parent would result in the
disclosure of any trade secrets of third parties or violate any of its
obligations with respect to confidentiality. All requests for information made
pursuant to this Section 6.7(b) shall be directed to an executive officer of
Parent or such Person as may be designated by Parent's officers. All such
information shall be governed by the terms of the Confidentiality Agreement (as
hereinafter defined).
6.8. Affiliates. Prior to the date of the Stockholders Meeting, the
Company shall deliver to Parent a list of names and addresses of those Persons
who will be, in the opinion of the Company, as of the time of the Stockholders
Meeting referred to
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in Section 6.4, "affiliates" of the Company within the meaning of Rule 145 under
the Securities Act. There shall be added to such list the names and addresses of
any other Person subsequently identified by either Parent or the Company as a
Person who may be deemed to be such an affiliate of the Company; provided,
however, that no such Person identified by Parent shall be added to the list of
affiliates of the Company unless Parent delivers to the Company, on or before
the date of the Stockholders Meetings, an opinion of counsel reasonably
satisfactory to the Company to the effect that such Person is such an affiliate.
The Company shall exercise its reasonable best efforts to deliver or cause to be
delivered to Parent, prior to the date of the Stockholders Meetings, from each
affiliate of the Company identified in the foregoing list (as the same may be
supplemented as aforesaid), a letter dated as of the Stockholders Meetings
substantially in the form attached as Exhibit C (the "Affiliates Letter").
Parent shall not be required to maintain the effectiveness of the S-4
Registration Statement or any other registration statement under the Securities
Act for the purposes of resale of Parent Common Stock or Parent Preferred Stock
by such affiliates received in the Merger and the certificates representing
Parent Common Stock and Parent Preferred Stock received by such affiliates shall
bear a customary legend regarding applicable Securities Act restrictions and the
provisions of this Section.
6.9. Stock Exchange Listing and De-listing. Parent shall use its
reasonable best efforts to cause (i) the shares of Parent Common Stock to be
issued in the Merger to be approved for listing on the NYSE subject to official
notice of issuance and (ii) the shares of Parent Preferred Stock to be issued in
the Merger to be approved for listing on the NYSE subject to official notice of
issuance, prior to the Closing Date. The Surviving Corporation shall use its
best efforts to cause (i) the Common Shares to be de-listed from the NYSE and
de-registered under the Exchange Act as soon as practicable following the
Effective Time and (ii) the Preferred Shares to be de-listed from the NYSE and
de-registered under the Exchange Act as soon as practicable following the
Effective Time.
6.10. Publicity. The initial press release shall be a joint press
release and thereafter the Company and Parent each shall consult with each other
prior to issuing any press releases or otherwise making public announcements
with respect to the Merger and the other transactions contemplated by this
Agreement and prior to making any filings with any third party and/or any
Governmental Entity (including any national securities exchange) with respect
thereto, except as may be required by law or by obligations pursuant to any
listing agreement with or rules of any national securities exchange interdealer
quotation service.
6.11. Benefits.
(a) Stock Options.
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(i) At the Effective Time, each Company Option whether vested or
unvested, shall be deemed to constitute an option to acquire, on the same terms
and conditions as were applicable under such Company Option, the same number of
shares of Parent Common Stock as the holder of such Company Option would have
been entitled to receive pursuant to the Merger had such holder exercised such
option in full immediately prior to the Effective Time and assuming that the
Common Stock Merger Consideration consisted entirely of Parent Common Stock
(rounded down to the nearest whole number), at a price per share (rounded up to
the nearest whole cent) equal to (y) the aggregate exercise price for the Common
Shares otherwise purchasable pursuant to such Company Option divided by (z) the
number of full shares of Parent Common Stock deemed purchasable pursuant to such
Company Option in accordance with the foregoing; provided, however, that in the
case of any Company Option to which Section 422 of the Code applies, the option
price, the number of shares purchasable pursuant to such option and the terms
and conditions of exercise of such option shall be determined in accordance with
the foregoing, subject to such adjustments as are necessary in order to satisfy
the requirements of Section 424(a) of the Code; provided, further, that to the
extent that Common Shares acquired upon exercise of a Company Option would be
subject to vesting or other restrictions under the terms of the relevant Company
Stock Plan under which such Company Option was issued ("Company Restricted
Shares"), the number of shares of Parent Common Stock to be issued upon exercise
of an assumed Company Option in accordance with the foregoing that bears the
same ratio to the total shares of Parent Common Stock deemed purchasable
pursuant to such assumed Company Option as the number of Company Restricted
Shares bears to the total number of Company Shares issuable under such Company
Option shall be subject to the same vesting and other restrictions as would be
applicable to the Company Restricted Shares. At or prior to the Effective Time,
the Company shall make all necessary arrangements with respect to the Company
Stock Plans to permit the assumption of the unexercised Company Options by
Parent pursuant to this Section.
(ii) Effective at the Effective Time, Parent shall assume each
Company Option in accordance with the terms of the relevant Company Stock Plan
under which it was issued and the stock option agreement by which it is
evidenced. At or prior to the Effective Time, Parent shall take all corporate
action necessary to reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery upon exercise of Company Options assumed by it in
accordance with this Section. As soon as practicable after the Effective Time,
Parent shall file a registration statement on Form S-3 or Form S-8, as the case
may be (or any successor or other appropriate forms), or another appropriate
form (or shall cause such Company Option to be deemed to be an option issued
pursuant to a Parent Stock Plan for which shares of Parent Common Stock have
previously been registered pursuant to an appropriate registration form) with
respect to the Parent Common Stock subject to such Company Options, and shall
use its reasonable best efforts to maintain the effectiveness of such
registration statements (and maintain the
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current status of the prospectus or prospectuses contained therein) for so long
as such Company Options remain outstanding.
(b) Employee Benefits. Parent agrees that, during the period
commencing at the Effective Time and ending on the first anniversary thereof,
the employees of the Company and its Subsidiaries will continue to be provided
with benefits under the Company's and its Subsidiaries' existing employee
benefit plans (other than plans involving the issuance or award of Shares or
rights to acquire Shares) that are no less favorable in the aggregate than
those currently provided by the Company and its Subsidiaries to such employees.
Any such employees will receive credit under any plans of Parent or any of its
Subsidiaries for service with the Company or any of its Subsidiaries or
predecessors (to the extent service with such predecessors was credited under
the Compensation and Benefit Plans disclosed in the Company Disclosure Letter)
prior to the Effective Time for the purpose of determining eligibility and
vesting; and Parent shall cause any and all pre-existing condition limitations
(to the extent such limitations did not apply to a pre-existing condition under
the Compensation and Benefit Plans) and eligibility waiting periods under group
health plans of the Parent or any of its Subsidiaries to be waived with respect
to such participants and their eligible dependents. All discretionary awards
and benefits under any employee benefit plans of Parent or any of its
Subsidiaries shall be subject to the discretion of the persons or committee
administering such plans.
6.12. Expenses. The Surviving Corporation shall pay all charges and
expenses, including those of the Exchange Agent, in connection with the
transactions contemplated in Article IV. Except as otherwise provided in Section
8.5(b), whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the Merger and the other
transactions contemplated by this Agreement shall be paid by the party incurring
such expense, except that expenses incurred in connection with the filing fee
for the S-4 Registration Statement and printing and mailing the Prospectus/Proxy
Statement and the S-4 Registration Statement shall be shared equally by Parent
and the Company.
6.13. Indemnification; Directors' and Officers' Insurance. (a) From
and after the Effective Time, Parent agrees that it will indemnify and hold
harmless each present and former director and officer of the Company, (when
acting in such capacity) determined as of the Effective Time (each, an
Indemnified Party and, collectively, the "Indemnified Parties"), against any
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent that the
Company would have been permitted under Florida law and its charter or by-laws
in effect on the date hereof to indemnify such Person (and Parent shall also
advance expenses as incurred to the fullest extent permitted
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under applicable law provided the Person to whom expenses are advanced provides
a written affirmation of his or her good faith belief that the standard of
conduct necessary for indemnification has been met), and an undertaking to repay
such advances if it is ultimately determined that such Person is not entitled to
indemnification).
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 6.13, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify Parent thereof, but the
failure to so notify shall not relieve Parent of any liability it may have to
such Indemnified Party if such failure does not materially prejudice the
indemnifying party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) Parent
or the Surviving Corporation shall have the right to assume the defense thereof
and Parent shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if
Parent or the Surviving Corporation elects not to assume such defense or counsel
for the Indemnified Parties advises that there are issues which raise conflicts
of interest between Parent or the Surviving Corporation and the Indemnified
Parties, the Indemnified Parties may retain counsel satisfactory to them, and
Parent or the Surviving Corporation shall pay all reasonable fees and expenses
of such counsel for the Indemnified Parties promptly as statements therefor are
received; provided, however, that Parent shall be obligated pursuant to this
paragraph (b) to pay for only one firm of counsel for all Indemnified Parties in
any jurisdiction unless the use of one counsel for such Indemnified Parties
would present such counsel with a conflict of interest, (ii) the Indemnified
Parties will cooperate in the defense of any such matter and (iii) Parent shall
not be liable for any settlement effected without its prior written consent; and
provided, further, that Parent shall not have any obligation hereunder to any
Indemnified Party if and when a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
(c) The Surviving Corporation shall maintain the Company's existing
officers' and directors' liability insurance ("D&O Insurance") or D&O Insurance
that is substantially comparable to the Company's existing D&O Insurance for a
period of two years after the Effective Time so long as the annual premium
therefor is not in excess of 200% of the last annual premium paid prior to the
date hereof (such last annual premium being hereinafter referred to as the
"Current Premium"); provided, however, that if the existing D&O Insurance or
substantially comparable D&O Insurance cannot be acquired during the two-year
period for not in excess of 200% of the Current Premium, then the Surviving
Corporation will obtain as much D&O Insurance as can be obtained for the
remainder of such period for a premium not in excess (on an annualized basis) of
200% of the Current Premium. If the D&O Insurance is terminated prior to the end
of the sixth anniversary of the Effective Time, the Surviving Corporation will
purchase
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extended reporting coverage under D&O Insurance covering claims made during the
remainder of such period with respect to acts which occurred prior to the
Effective Time.
(d) The provisions of this Section are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified Parties, their
heirs and their representatives.
6.14. Convertible Notes. The Company shall repay, at par, the
aggregate principal amount outstanding under the Convertible Notes and cancel
such Convertible Notes in their entirety if they are outstanding as of the
Effective Time.
6.15. Other Actions by the Company and Parent.
(a) Rights. If requested by Parent prior to the Effective Time, the
board of directors of the Company shall take all necessary action to terminate
or redeem all of the outstanding Rights and to terminate the Rights Agreement,
effective immediately prior to the Effective Time.
(b) Takeover Statute. If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated by this
Agreement, the Stock Option Agreement or the Voting Agreement, each of Parent
and the Company and its board of directors shall grant such approvals and take
such actions as are necessary so that such transactions may be consummated as
promptly as practicable on the terms contemplated by this Agreement, the Stock
Option Agreement or the Voting Agreement, as the case may be, or by the Merger
and otherwise act to eliminate or minimize the effects of such statute or
regulation on such transactions.
(c) Dividends. The Company shall coordinate with Parent the
declaration, setting of record dates and payment dates of dividends on Common
Shares and Preferred Shares so that holders of Common Shares and Preferred
Shares do not receive dividends on (i) both Common Shares and Parent Common
Stock received in the Merger or (ii) both Preferred Shares and Parent Preferred
Stock received in the Merger in respect of any calendar quarter or portion
thereof or fail to receive a dividend on (i) either Common Shares or Parent
Common Stock received in the Merger or on (ii) either Preferred Shares or Parent
Preferred Stock received in the Merger in respect of any calendar quarter.
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ARTICLE VII
Conditions
7.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) Stockholder Approval. The Merger shall have been duly approved
by holders of Shares constituting the Company Requisite Vote and shall have been
duly approved by the sole stockholder of Merger Subsidiary in accordance with
applicable law.
(b) Listing. The shares of Parent Common Stock issuable to the
holders of Common Shares pursuant to this Agreement shall have been authorized
for listing on the NYSE upon official notice of issuance. The shares of Parent
Preferred Stock issuable to the holders of Preferred Shares pursuant to this
Agreement shall have been authorized for listing on the NYSE upon official
notice of issuance.
(c) Regulatory Consents. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated, and, other than the filing provided for in Section 1.3, all notices,
reports and other filings required to be made prior to the Effective Time by the
Company or Parent or any of their respective Subsidiaries with, and all
consents, registrations, approvals, permits and authorizations required to be
obtained prior to the Effective Time by the Company or Parent or any of their
respective Subsidiaries from, any Governmental Entity (collectively,
"Governmental Consents"), in connection with the execution and delivery of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby shall have been made or obtained (as the case may be).
(d) Litigation. No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law, statute, ordinance, rule, regulation, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Merger
(collectively, an "Order").
(e) S-4. The S-4 Registration Statement shall have become effective
under the Securities Act. No stop order suspending the effectiveness of the S-4
Registration Statement shall have been issued, and no proceeding for that
purpose shall have been initiated or be threatened, by the SEC.
(f) Blue Sky Approvals. Parent shall have received all state
securities and "blue sky" permits and approvals, if any, necessary to consummate
the transactions contemplated hereby.
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7.2. Conditions to Obligations of Parent and Merger Subsidiary. The
obligations of Parent and Merger Subsidiary to effect the Merger are also
subject to the satisfaction or waiver by Parent at or prior to the Effective
Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement; and the
representations and warranties of the Company set forth in this Agreement shall
be true and correct as of the Closing Date as though made on and as of the
Closing Date (except to the extent any such representation or warranty expressly
speaks as of an earlier date) except where the failure of such representations
and warranties to be so true and correct (without giving effect to any
qualifications as to "Company Material Adverse Effect", "material" or similar
qualifications) are not, individually or in the aggregate, reasonably likely to
have a Company Material Adverse Effect, and Parent shall have received a
certificate signed on behalf of the Company by an executive officer of the
Company to such effect.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent shall
have received a certificate signed on behalf of the Company by an executive
officer of the Company to such effect.
(c) Consents. The Company shall have obtained the consent or
approval of each Person whose consent or approval shall be required under any
Contract to which the Company or any of its Subsidiaries is a party, except
those for which the failure to obtain such consents or approvals is not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect or is not, individually or in the aggregate, reasonably likely to
prevent or to materially burden or materially impair the ability of the Company
to consummate the transactions contemplated by this Agreement; and no such
consent or approval, and no Governmental Consent shall impose any condition or
conditions relating to, or requiring changes or restrictions in, the operations
of any asset or businesses of the Company, Parent or their respective
Subsidiaries which could, in the judgment of the Board of Parent, individually
or in the aggregate, materially and adversely impact the economic or business
benefits to Parent and its Subsidiaries of the transactions contemplated by this
Agreement.
(d) Tax Opinion. Parent shall have received, prior to the effective
date of the S-4 Registration Statement, the opinion of Xxxxxxxx & Xxxxxxxx,
counsel to Parent, to the effect that the Merger will be treated for Federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code, and that each of Parent, Merger Subsidiary and the Company will be a
party to that reorganization within the meaning of Section 368(b) of the Code,
and such firm shall have reconfirmed such
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opinion as of the Closing Date. In rendering such opinion, Xxxxxxxx & Xxxxxxxx
may rely upon and require such certificates of the Company, Parent and Merger
Subsidiary and/or their officers or principal shareholders as are customary for
such opinions.
(e) Affiliates Letters. Parent shall have received an Affiliates
Letter from each Person identified as an affiliate of the Company pursuant to
Section 6.8.
(f) Employment Agreements. The employment agreements entered into as
of December 21, 1997 between the Company and Messrs. Xxxxxx and Xxxxxxxx,
respectively, shall be in full force and effect.
7.3. Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Subsidiary set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement, and
the representations and warranties of Parent and Merger Subsidiary set forth in
this Agreement shall be true and correct as of the Closing Date as though made
on and as of the Closing Date (except to the extent any such representation or
warranty expressly speaks as of an earlier date) except where the failure of
such representations and warranties to be so true and correct (without giving
effect to any qualifications as to "Parent Material Adverse Effect", "material"
or similar qualifications) are not, individually or in the aggregate, reasonably
likely to have a Parent Material Adverse Effect, and the Company shall have
received a certificate signed on behalf of Parent by an executive officer of
Parent and on behalf of Merger Subsidiary by an executive officer of Merger
Subsidiary to such effect.
(b) Performance of Obligations of Parent and Merger Subsidiary. Each
of Parent and Merger Subsidiary shall have performed in all material respects
all obligations required to be performed by it under this Agreement at or prior
to the Closing Date, and the Company shall have received a certificate signed on
behalf of Parent by an executive officer of Parent and on behalf of Merger
Subsidiary by an executive officer of Merger Subsidiary to such effect.
(c) Consents Under Agreements. Parent shall have obtained the
consent or approval of each Person whose consent or approval shall be required
in order to consummate the transactions contemplated by this Agreement under any
Contract to which Parent or any of its Subsidiaries is a party, except those for
which failure to obtain such consents or approvals is not, individually or in
the aggregate, reasonably likely to have a Parent Material Adverse Effect or is
not, individually or in the aggregate, reasonably likely to prevent or to
materially burden or materially impair the ability of Parent to consummate the
transactions contemplated by this Agreement.
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(d) Tax Opinion. The Company shall have received, prior to the
effective date of the S-4 Registration Statement, the opinion of Jorden Xxxx
Xxxxxxxx & Xxxxxxx LLP, counsel to the Company, to the effect that the Merger
will be treated for Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, and that each of Parent, Merger
Subsidiary and the Company will be a party to that reorganization within the
meaning of Section 368(b) of the Code, and such firm shall have reconfirmed such
opinion as of the Closing Date. In rendering such opinion, Jorden Xxxx Xxxxxxxx
& Xxxxxxx LLP may rely upon and require such certificates of the Company, Parent
and Merger Subsidiary and/or their officers or principal shareholders as are
customary for such opinions.
ARTICLE VIII
Termination
8.1. Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by stockholders of the Company and Parent referred
to in Section 7.1(a), by mutual written consent of the Company and Parent by
action of their respective Boards of Directors.
8.2. Termination by Either Parent or the Company. This Agreement may
be terminated and the Merger may be abandoned (i) by action of the Board of
Directors of either Parent or the Company if the Merger shall not have been
consummated by September 30, 1998, whether such date is before or after the date
of approval by the stockholders of the Company (the "Termination Date"), (ii) by
action of the Board of Directors of Parent, if the Company Common Stock
Requisite Vote shall not have been obtained at a meeting duly convened therefor
or at any adjournment or postponement thereof, (iii) by action of the Board of
Directors of the Company, if the Company Common Stock Requisite Vote shall not
have been obtained at a meeting duly convened therefor or at any adjournment or
postponement thereof and prior to or at the time of such meeting no Person shall
have made an Acquisition Proposal to the Company or any of its Subsidiaries or
any of its stockholders or shall have publicly announced an intention (whether
or not conditional) to make an Acquisition Proposal with respect to the Company
or any of its Subsidiaries, (iv) by action of the Board of Directors of the
Company at any time after 180 days from the date hereof, if the Company Common
Stock Requisite Vote shall not have been obtained at a meeting duly convened
therefor or at any adjournment or postponement thereof and prior to or at the
time of such meeting any Person shall have made an Acquisition Proposal to the
Company or any of its Subsidiaries or any of its stockholders or shall have
publicly announced an intention (whether or not conditional) to make an
Acquisition Proposal with respect to the Company or any of its Subsidiaries, or
(v) by action of the Board of Directors of either
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Parent or the Company if any Order permanently restraining, enjoining or
otherwise prohibiting consummation of the Merger shall become final and
non-appealable (whether before or after the approval by the stockholders of the
Company or Parent); provided, that the right to terminate this Agreement
pursuant to clause (i) above shall not be available to any party that has
breached in any material respect its obligations under this Agreement in any
manner that shall have proximately contributed to the occurrence of the failure
of the Merger to be consummated.
8.3. Termination by the Company. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, by
action of the Board of Directors of the Company:
(a) if (i) the Company is not in material breach of any of the terms
of this Agreement, (ii) the Merger shall not have been approved by the Company
Requisite Vote, (iii) the Board of Directors of the Company authorizes the
Company, subject to complying with the terms of this Agreement, to enter into a
binding written agreement concerning a transaction that constitutes a Superior
Proposal and the Company notifies Parent in writing that it intends to enter
into such an agreement, attaching the most current version of such agreement to
such notice, (iv) Parent does not make, prior to the later of (x) five business
days after receipt of the Company's written notification of its intention to
enter into a binding agreement for a Superior Proposal (the "Alternative
Transaction Notice"), or (y) the Section 8.3 Termination Date (as hereinafter
defined), an offer that the Board of Directors of the Company determines, in
good faith after consultation with its financial advisors, is at least as
favorable, as the Superior Proposal, taking into account the long term prospects
and interests of the Company and its stockholders, and (v) the Company prior to
such termination pays to Parent in immediately available funds the fees required
to be paid pursuant to Section 8.5. Without limiting the generality of the
foregoing, the Company agrees and acknowledges (x) that it cannot terminate this
Agreement pursuant to this Section 8.3(a) in order to enter into a binding
agreement referred to in clause (iii) above until at least the date falling 180
days from the date of this Agreement (the "Section 8.3 Termination Date") or, if
later, five business days after receipt of the Alternative Transaction Notice
and (y) to notify Parent promptly if its intention to enter into a written
agreement referred to in its Alternative Transaction Notice shall change at any
time after giving such notification.
(b) if there has been a material breach by Parent or Merger
Subsidiary of any representation, warranty, covenant or agreement contained in
this Agreement that is not curable or, if curable, is not cured within 20 days
after written notice of such breach is given by the Company to the party
committing such breach.
8.4. Termination by Parent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after the approval by the stockholders of Parent referred to in Section
7.1(a), by action of the
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Board of Directors of Parent if (a) the Company enters into a binding agreement
for a Superior Proposal or the Board of Directors of the Company shall have
withdrawn or adversely modified its approval or recommendation of this Agreement
or, after the mailing of the Prospectus/Proxy Statement, failed to reconfirm its
recommendation of this Agreement within ten business days after a reasonable
written request by Parent to do so, or (b) there has been a material breach by
the Company of any representation, warranty, covenant or agreement contained in
this Agreement that is not curable or, if curable, is not cured within 20 days
after written notice of such breach is given by Parent to the party committing
such breach.
8.5. Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article VIII, this Agreement (other than as set forth in Section 9.1) shall
become void and of no effect with no liability on the part of any party hereto
(or of any of its directors, officers, employees, agents, legal and financial
advisors or other representatives); provided, however, except as otherwise
provided herein, no such termination shall relieve any party hereto of any
liability or damages resulting from any breach of this Agreement.
(b) In the event that this Agreement is terminated (i) by the
Company pursuant to Section 8.2(iv) or Section 8.3(a) or (ii) by Parent pursuant
to Section 8.2(ii) (and prior to, or at the time of the meeting referred to
therein any Person shall have made an Acquisition Proposal to the Company or any
of its Subsidiaries or any of its stockholders or shall have publicly announced
an intention (whether or not conditional) to make an Acquisition Proposal with
respect to the Company or any of its Subsidiaries) or Section 8.4(a), then the
Company shall promptly, but in no event later than two days after the date of
such termination or date of entrance into an agreement concerning a transaction
that constitutes an Acquisition Proposal or such earlier time as required by
this Agreement, pay Parent a termination fee of $66 million payable by wire
transfer of same day funds. The Company acknowledges that the agreements
contained in this Section 8.5(b) are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent and
Merger Subsidiary would not enter into this Agreement; accordingly, if the
Company fails to promptly pay the amount due pursuant to this Section 8.5(b),
and, in order to obtain such payment, Parent or Merger Subsidiary commences a
suit which results in a judgment against the Company for the fee set forth in
this paragraph (b), the Company shall pay to Parent or Merger Subsidiary its
costs and expenses (including attorneys' fees) in connection with such suit,
together with interest from the date of termination of this Agreement on the
amounts owed at the prime rate of The Chase Manhattan Bank, in effect from time
to time during such period plus two percent.
(c) In the event this Agreement is terminated (i) by the Company
pursuant to Section 8.2(iii) or (ii) by Parent pursuant to Section 8.2(ii) and
prior to, or at the time of the meeting referred to therein, no Person shall
have made an Acquisition Proposal to
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the Company or any of its Subsidiaries or any of its stockholders or shall have
publicly announced an intention (whether or not conditional) to make an
Acquisition Proposal with respect to the Company or any of its Subsidiaries,
then the Company shall promptly, but in no event later than two business days
after Parent shall have requested payment of its charges and expenses incurred
in connection with the transactions contemplated hereby ("Expenses"), pay to
Parent the amount of such Expenses up to a maximum of $5,000,000 and, if within
18 months of such termination, the Company enters into an agreement concerning a
transaction that constitutes an Acquisition Proposal, the Company at the time of
entering into such agreement, shall pay to Parent the termination fee of $66
million, in each case payable by wire transfer of same day funds.
ARTICLE IX
Miscellaneous and General
9.1. Survival. This Article IX and the agreements of the Company,
Parent and Merger Subsidiary contained in Sections 6.11 (Benefits) and 6.13
(Indemnification; Directors' and Officers' Insurance) shall survive the
consummation of the Merger. This Article IX, the agreements of the Company,
Parent and Merger Subsidiary contained in Section 6.7 (Access), insofar as it
relates to the Company's and Parent's respective confidentiality obligations,
Section 6.12 (Expenses) and Section 8.5 (Effect of Termination and Abandonment)
shall survive the termination of this Agreement. All other representations,
warranties, covenants and agreements in this Agreement shall not survive the
consummation of the Merger or the termination of this Agreement.
9.2. Modification or Amendment. Subject to the provisions of
applicable law, at any time prior to the Effective Time, the parties hereto may
modify or amend this Agreement, by written agreement executed and delivered by
duly authorized officers of the respective parties.
9.3. Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.5. GOVERNING LAW; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT
SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED,
CONSTRUED AND GOVERNED BY AND IN
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ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT
OF LAW PRINCIPLES THEREOF, EXCEPT THAT MATTERS RELATING TO THE VALIDITY AND
EFFECTS OF THE MERGER AND THE FIDUCIARY OBLIGATIONS OF THE DIRECTORS OF THE
COMPANY REFERRED TO IN SECTION 6.2 AND 6.4 HEREOF SHALL BE GOVERNED BY THE
APPLICABLE PROVISIONS OF THE FLORIDA BUSINESS CORPORATION LAW.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.5.
(c) THE COMPANY AND MERGER SUBSIDIARY EACH AGREES THAT, IN
CONNECTION WITH ANY LEGAL SUIT OR PROCEEDING ARISING WITH RESPECT TO THIS
AGREEMENT, IT SHALL SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF DELAWARE AND AGREES TO VENUE IN SUCH COURTS. THE
COMPANY AND MERGER SUBSIDIARY EACH HEREBY APPOINTS THE SECRETARY OF THE COMPANY
AND MERGER SUBSIDIARY, RESPECTIVELY, AS ITS AGENT FOR SERVICE OF PROCESS FOR
PURPOSES OF THE FOREGOING SENTENCE ONLY.
9.6. Notices. Any notice, request, instruction or other document to
be given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:
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if to Parent or Merger Subsidiary
American International Group, Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
fax: (000) 000-0000
(with a copy to Xxxxx X. Xxxxxx, Esq.,
Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
fax: (000) 000-0000)
if to the Company
American Bankers Insurance Group, Inc.
00000 Xxxxx Xxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
fax: (000) 000-0000
(with a copy to Xxxxxxxxx Xxxxxxxxx, Esq.,
Jorden Xxxx Xxxxxxxx & Xxxxxxx LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
fax: (000) 000-0000
and
Xxxxxxxx X. Xxxxxxxx, Esq.
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
fax: (000) 000-0000)
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
9.7. Entire Agreement; No Other Representations. This Agreement
(including any exhibits hereto), the Company Disclosure Letter, the Parent
Disclosure
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Letter, the Stock Option Agreement and the Confidentiality Agreement between
Parent and the Company (the "Confidentiality Agreement") constitute the entire
agreement, and supersede all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof.
9.8. No Third Party Beneficiaries. Except as provided in Section
6.13 (Indemnification; Directors' and Officers' Insurance), this Agreement is
not intended to confer upon any Person other than the parties hereto any rights
or remedies hereunder.
9.9. Obligations of Parent and of the Company. Whenever this
Agreement requires a Subsidiary of Parent to take any action, such requirement
shall be deemed to include an undertaking on the part of Parent to cause such
Subsidiary to take such action. Whenever this Agreement requires a Subsidiary of
the Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
9.10. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
9.11. Interpretation. The table of contents and headings herein are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section or Exhibit, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
9.12. Assignment. This Agreement shall not be assignable by
operation of law or otherwise; provided, however, that Parent may designate, by
written notice to the Company, another wholly-owned direct or indirect
Subsidiary to be a Constituent Corporation in lieu of Merger Subsidiary, in
which event all references herein to Merger Subsidiary shall be deemed
references to such other Subsidiary, except that all representations and
warranties made herein with respect to Merger Subsidiary as of the
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date of this Agreement shall be deemed representations and warranties made with
respect to such other Subsidiary as of the date of such designation.
9.13. Alternative Transaction Structure. Notwithstanding anything to
the contrary contained in this Agreement, if the Company Preferred Stock
Requisite Vote is not obtained at the meeting duly convened to consider the
Merger or Parent reasonably determines that the Company Preferred Stock
Requisite Vote is not likely to be obtained pursuant to the Agreement (other
than pursuant to this Section 9.13), Parent shall, subject to the Company Common
Stock Requisite Vote and the other terms and conditions of this Agreement, merge
Merger Subsidiary with and into the Company such that the separate corporate
existence of Merger Subsidiary shall cease and the Company shall continue as the
Surviving Corporation. In connection with the alternative transaction
contemplated by the prior sentence, the Company shall take all actions
reasonably requested by Parent including, without limitation, promptly amending
this Agreement, as Parent may reasonably deem necessary or appropriate,
including, if applicable, to provide that the Preferred Shares shall remain
outstanding after the Merger pursuant to the same terms and conditions as are in
effect on the date hereof (except that the Preferred Shares shall be convertible
into Parent Common Stock) and adding, if applicable, the number of days between
the date of the Preferred Stockholders Meeting and the date of the Common
Stockholders Meeting to the time periods set forth in Section 8.2(i) and (iv)
and the Section 8.3 Termination Date and eliminating the covenant contained in
Section 6.6 and the conditions to closing contained in Sections 7.2(d) and
7.3(d).
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first written above.
AMERICAN BANKERS INSURANCE GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name:
Title:
AMERICAN INTERNATIONAL GROUP, INC.
By: /s/
--------------------------------
Name:
Title:
AIGF, INC.
By: /s/
--------------------------------
Name:
Title:
