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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
October 31, 1997 between Guaranty National Corporation, a Colorado corporation
(the "Company"), and Orion Capital Corporation, a Delaware corporation
("Orion").
WHEREAS, the Board of Directors of the Company has resolved to
adopt this Agreement and the transactions contemplated hereby and, if required,
to submit this Agreement to the shareholders of the Company as provided herein;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, the Company and Orion hereby agree as follows:
ARTICLE I.
THE OFFER
SECTION 1.01 The Offer. Provided that none of the conditions
set forth in the offer to purchase referred to below shall have occurred or be
existing, Orion (or one or more direct or indirect wholly owned subsidiaries of
Orion) shall promptly, and in no event later than two business day(s) after the
date of this Agreement, publicly announce, and within five business days
thereafter commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), an offer to purchase all
outstanding shares of common stock, par value $1.00 per share of the Company
(each a "Share"), at a price of $36.00 per Share, net to the seller in cash (the
"Offer", which term shall include any amendments to such Offer not prohibited by
this Agreement), and, subject to a minimum of not less than 50.01% of the
outstanding Shares (other than shares owned by Orion and its wholly-owned
subsidiaries) being validly tendered and not withdrawn (the "Minimum Condition")
and the further conditions set forth in the offer to purchase relating to the
Offer. The date on which the Offer is commenced is referred to herein as the
"Commencement Date." Orion shall deposit with the depositary for the Offer, or
cause to be deposited, on or before the expiration date of the Offer, funds
sufficient for payment of the purchase price for all Shares accepted for payment
pursuant to the Offer not later than December 31, 1997. Orion shall have the
right to transfer or assign to one or more of its subsidiaries the right to
purchase or pay for Shares pursuant to the Offer.
SECTION 1.02 Company Action. The Company consents to the Offer
and represents that its Board of Directors has unanimously approved the Offer
and the Merger (as defined in Section 2.01) and has unanimously resolved to
recommend acceptance of the Offer to the Company's shareholders. Promptly upon
the commencement of the Offer, the Company shall file with the Securities and
Exchange Commission (the "Commission") and mail to the holders of Shares a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
which shall reflect the Company's recommendation. The Company shall promptly
furnish Orion with mailing labels containing the names and addresses of the
record holders and, if available, of non-objecting beneficial owners of Shares
and lists of securities positions of
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Shares held in stock depositories, each as of the most recent practicable date,
and shall from time to time furnish Orion with such additional information,
including updated or additional lists of shareholders, mailing labels and lists
of securities positions, and other assistance as Orion may reasonably request.
SECTION 1.03 Shareholders' Action. Promptly following the
expiration date of the Offer as set forth to in Article I hereof, the Company
shall, if then required in accordance with applicable law, unless the Merger may
be effected pursuant to the provisions of Section 0-000-000 of the Colorado Law
(as such term defined in Section 2.02), in which case it shall be so effected
(including, if necessary, the adoption of a Plan of Merger between the Company
and Transition (as defined in Section 2.01) consistent with the terms of this
Agreement), duly call, give notice of, convene and hold a special meeting of its
shareholders (the "Shareholders' Meeting") as soon as practicable for the
purpose of considering and taking action upon this Agreement and Plan of Merger
and in connection therewith use its best efforts (i) to obtain and furnish the
information required to be included by it in the Proxy Statement (as such term
is defined in Section 3.07 hereof) and, after consultation with Orion, respond
promptly to any comments made by the Commission with respect to the Proxy
Statement and any preliminary version thereof and cause the Proxy Statement to
be mailed to its shareholders at the earliest practicable time and (ii) to
solicit proxies and to obtain the necessary approvals by its shareholders of
this Agreement and the transactions contemplated hereby. References to "Shares"
in this Agreement include the associated stock purchase rights (the "Rights")
pursuant to the Rights Agreement dated November 20, 1991 between the Company and
its rights agent. No separate or additional consideration other than the Offer
price and Merger consideration of $36.00 per Share in cash will be payable for
the Rights.
ARTICLE II.
THE MERGER
SECTION 2.01 The Merger. At the Effective Time (as defined in
Section 2.02 hereof) and subject to and upon the terms and conditions of this
Agreement, a wholly owned subsidiary of Orion, to be incorporated in the State
of Colorado ("Transition"), shall be merged (the "Merger") with and into the
Company. Following the Merger, the Company shall continue as the surviving
corporation (the "Surviving Corporation") and the separate corporate existence
of Transition shall cease.
SECTION 2.02 Effective Time. As soon as practicable after the
expiration date of the Offer and the satisfaction or waiver of the conditions
set forth in Article VII, the parties hereto will cause the Merger to be
consummated by executing articles of merger ("Articles") in accordance with
Section 0-000-000 of the Colorado Business Corporation Act (the "Colorado Law")
and delivering the Articles to the Secretary of State of Colorado (the
"Secretary") and upon the filing by the Secretary of the Articles, the Merger
shall be effective in accordance with the provisions of the Colorado Law (the
"Effective Time"). The parties shall take all such other and further actions as
may be required by applicable law to make the Merger effective.
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SECTION 2.03 Effects of the Merger. The Merger shall have the
effects set forth in the Colorado Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of the Company and Transition shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Transition shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 2.04 Articles of Incorporation and By-Laws. (a) At the
Effective Time, the Restated Articles of Incorporation of the Company, as in
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation, until duly amended in accordance
with applicable law.
(b) The By-Laws of the Company, as in effect at the Effective
Time, shall be the By-Laws of the Surviving Corporation, until duly amended in
accordance with applicable law, the Articles of Incorporation of the Surviving
Corporation and such By-Laws.
SECTION 2.05 Conversion of Shares. (a) Each Share issued and
outstanding immediately prior to the Effective Time (other than Shares held in
the Company's treasury or by Orion or any wholly owned (except for director's
qualifying shares) subsidiary of Orion and other than Dissenting Shares (as
defined in Section 3.01)) shall, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into the right to receive,
pursuant to Section 3.02, $36.00 in cash (the "Merger Price"), payable to the
holder thereof, without interest thereon, upon the surrender of the certificate
formerly representing such Share.
(b) Each Share held in the treasury of the Company immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be cancelled, retired and cease to
exist and no payment shall be made with respect thereto.
(c) Each Share held by Orion or any wholly owned subsidiary of
Orion immediately prior to the Effective Time shall remain outstanding and
unchanged after the Merger as shares of the Surviving Corporation.
SECTION 2.06 Conversion of Transition's Capital Stock. The
shares of common stock of Transition issued and outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into and exchangeable for such number
of shares of common stock, par value S1.00 per share, of the Surviving
Corporation as shall equal the number of Shares converted into the right to
receive the Merger Price pursuant to Section 2.05(a) hereof.
SECTION 2.07 Options. At the Effective Time, each outstanding
option to purchase Shares from the Company (an "Option"), whether or not then
exercisable, shall be converted into or replaced by an option to purchase a
number of shares of Orion common stock (which shall be rounded up if .5 or more
and rounded down if less than .5 so that no option on Orion common stock shall
relate to a fractional share) equal to the number of Shares subject to the
Option multiplied by a fraction the numerator of which shall be 36 and the
denominator of
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which shall be the average of the closing price of Orion common stock on the ten
trading days ending on the fifth trading day prior to the Effective Time, at a
price per share (rounded to the nearest whole cent) equal to (i) the aggregate
exercise price for the Shares otherwise purchasable pursuant to such stock
option, divided by (ii) the number of full shares of Orion common stock deemed
purchasable pursuant to such option in accordance with the foregoing. If such
conversion shall not be permitted by the terms of the related agreement pursuant
to which an Option is issued or the Company equity incentive plans pursuant to
which such Option was granted, the Option shall be canceled and the holder of
such Option will be entitled to receive from the Company, for each Share subject
to such Option, an amount in cash equal to the excess, if any, of the Merger
Price over the per share exercise price of such Option.
ARTICLE III.
DISSENTING SHARES; EXCHANGE OF SHARES
SECTION 3.01 Dissenting Shares. (a) Notwithstanding anything
in this Agreement to the contrary, each Share which is issued and outstanding
immediately prior to the Effective Time and which is held by a shareholder who
has properly exercised rights with respect to such Shares, if available, under
Sections 0-000-000 to 0-000-000 of the Colorado Law (collectively, the
"Dissenting Shares") shall not be converted into or be exchangeable for the
right to receive the consideration provided in Section 2.05, unless and until
such shareholder shall have failed to perfect or shall have effectively
withdrawn or lost such right under the Colorado Law. If any shareholder shall
have so failed to perfect or shall have effectively withdrawn or lost such
right, his Shares shall thereupon be deemed to have been converted into and to
have become exchangeable for, at the Effective Time, the right to receive the
consideration provided for in Section 2.05, without any interest thereon.
(b) The Company shall give Orion (i) prompt notice of any
written demands under Sections 0-000-000 to 0-000-000 of the Colorado Law with
respect to any shares of capital stock of the Company, any withdrawal of any
such demand, and any other instruments served pursuant to the Colorado Law and
received by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to any demands under Sections 0-000-000 to 0-000-000 of
the Colorado Law with respect to any shares of capital stock of the Company. The
Company shall cooperate with Orion concerning, and shall not, except with the
prior written consent of Orion, voluntarily make any payment with respect to, or
offer to settle or settle, any such demands.
SECTION 3.02 Exchange of Shares. (a) Prior to the Effective
Time, Orion shall designate a bank or trust company reasonably acceptable to the
Company to act as Exchange Agent in connection with the Merger (the "Exchange
Agent") pursuant to an exchange agency agreement providing for the matters set
forth in this Section 3.02 and otherwise reasonably satisfactory to the Company.
At the Effective Time, Orion will provide the Exchange Agent with the funds
necessary to make the payments contemplated by Section 2.05 (the "Exchange
Fund").
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(b) Promptly after the Effective Time, the Exchange Agent
shall mail to each record holder, as of the Effective Time, of an outstanding
certificate or certificates which immediately prior to the Effective Time
represented Shares (the "Certificates") a form letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent) and instructions for use in effecting the surrender of the
Certificates for payment therefor. Upon surrender to the Exchange Agent of a
Certificate, together with a duly executed letter of transmittal and any other
required documents, the holder of such Certificate shall receive in exchange
therefor (as promptly as practicable) the consideration set forth in Section
2.05, without any interest thereon, and such Certificate shall forthwith be
canceled. If payment is to be made to a person other than the person in whose
name a Certificate so surrendered is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer or other taxes required by reason of the payment
to a person other than the registered holder of the Certificate so surrendered
or establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 3.02, each Certificate (other than Certificates
representing Shares held in the Company's treasury or by Orion or any wholly
owned subsidiary of Orion and other than Certificates representing Dissenting
Shares) shall represent for all purposes only the right to receive for each
Share represented thereby the consideration set forth in Section 2.05, without
any interest thereon.
(c) After the Effective Time, there shall be no transfers on
the stock transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time (other than Certificates
representing Shares owned by Orion or any of its wholly owned subsidiaries). If,
after the Effective Time, Certificates (other than Certificates representing
Shares owned by Orion or any of its wholly owned subsidiaries) are presented to
the Surviving Corporation, they shall be cancelled and exchanged for the
consideration provided for, and in accordance with the procedures set forth, in
this Article III.
(d) From and after the Effective Time, the holders of
Certificates evidencing ownership of Shares (other than Shares owned by Orion or
any of its wholly owned subsidiaries) outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such Shares except
as otherwise provided herein or by applicable law.
(e) Any portion of the Exchange Fund (including the proceeds
of any investments thereof) that remains unclaimed by the shareholders of the
Company for six months after the Effective Time shall be repaid to Orion. Any
shareholders of the Company who have not theretofore complied with this Article
III shall thereafter look only to Orion for payment of their claim for the
consideration set forth in Section 2.05 for each Share such shareholder holds,
without any interest thereon.
(f) Notwithstanding anything to the contrary in this Section
3.02, none of the Exchange Agent, Orion or the Surviving Corporation shall be
liable to a holder of a Certificate
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formerly representing Shares for any amount properly paid to a public official
pursuant to any applicable property, escheat or similar law.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Orion as follows:
SECTION 4.01 Organization and Qualification; Subsidiaries. (a)
Each of the Company and its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power and authority would not in the aggregate have a Material Adverse
Effect (as defined below). The Company has heretofore made available to Orion
accurate and complete copies of the Restated Articles of Incorporation and
By-Laws, as currently in effect, of the Company and the certificate or articles
of incorporation and bylaws, as currently in effect, of each of its
subsidiaries. When used in connection with the Company or any of its
subsidiaries, the term "Material Adverse Effect" means any change in or effect
on the business of the Company or any of its subsidiaries that is materially
adverse to the business, operations or financial condition of the Company and
its subsidiaries taken as a whole.
(b) Each of the Company and its subsidiaries is duly qualified
or licensed and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not in the aggregate have a Material Adverse Effect.
SECTION 4.02 Capitalization of the Company and its
Subsidiaries. (a) The authorized capital stock of the Company consists of
30,000,000 Shares, of which, as of the date hereof 15,062,933 Shares are issued
and outstanding, and 6,000,000 shares of preferred stock, par value $0.10 per
share, of which, as of the date hereof, no shares are issued and outstanding.
All the issued and outstanding Shares are validly issued, fully paid and
nonassessable and free of preemptive rights. As of the date hereof, the Company
has two equity incentive plans under which on the date hereof, options for a
total of 517,738 Shares are outstanding, of which 271,500 are exercisable.
Except as set forth above or pursuant to the exercise of outstanding Options,
there are not as of the date hereof, and at the Effective Time there will not
be, any shares of capital stock of the Company issued or outstanding or any
subscriptions, options, warrants, calls, rights, convertible securities or other
agreements or commitments of any character relating to issued or unissued
capital stock or other securities of the Company, or otherwise obligating the
Company or any of its subsidiaries to issue, transfer or sell any of such
securities. Following the Merger, the Company will have no obligation to issue,
transfer or sell any shares of its capital stock or other securities of the
Company pursuant to any employee benefit plan or otherwise.
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(b) All of the outstanding shares of capital stock of each of
the Company's subsidiaries have been validly issued, fully paid and
nonassessable and are owned by either the Company or its subsidiaries free and
clear of all material liens, charges, claims or encumbrances.
(c) The Shares constitute the only class of equity securities
of the Company or any of its subsidiaries registered or required to be
registered under the Exchange Act.
SECTION 4.03 Authority Relative to this Agreement. The Company
has all necessary corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the board of
directors of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated other than, with respect to the Merger, the
approval of this Agreement by the holders, including Orion and its subsidiaries,
of the majority of the then outstanding Shares, unless the Merger may be
effected without the vote of shareholders of the Company. This Agreement has
been duly and validly executed and delivered by the Company and constitutes a
valid, legal and binding agreement of the Company enforceable against the
Company in accordance with its terms, except as enforcement may be limited by
general principles of equity whether applied in a court of law or a court of
equity.
SECTION 4.04 SEC Reports. (a) The Company has filed all
required forms, reports and documents with the Commission since January 1, 1994
(collectively, the "SEC Reports"), all of which have complied in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended, and the Exchange Act. The Company has heretofore delivered to Orion, in
the form filed with the Commission, its (i) Annual Reports on Form 10-K for each
of the three fiscal years ended December 31, 1996, (ii) all definitive proxy
statements relating to the Company's meetings of shareholders (whether annual or
special) held since January 1, 1994 and (iii) all other reports or registration
statements filed by the Company with the Commission since January 1, 1994. None
of such forms, reports or documents, including, without limitation, any
financial statements or schedules included or incorporated by reference therein,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated or incorporated by reference therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. None of the subsidiaries of the Company is
required to file any reports, statements, forms or other documents with the
Commission.
(b) The Company has heretofore made available to Orion a
complete and correct copy of any amendments or modifications, which have not yet
been filed with the Commission, to agreements, documents or other instruments
which previously had been filed by the Company with the Commission pursuant to
the Exchange Act.
SECTION 4.05 Absence of Certain Changes. Except as set forth
or otherwise reflected in the SEC Reports, since December 31, 1996, neither the
Company nor any of its significant subsidiaries has suffered any Material
Adverse Effect.
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SECTION 4.06 No Undisclosed Liabilities. Except as and to the
extent set forth in the Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (the "1996 10-K"), as of December 31, 1996, neither the
Company nor any of its subsidiaries had any material liabilities or obligations,
whether accrued, contingent or otherwise, required by generally accepted
accounting principles to be reflected on a consolidated balance sheet of the
Company and its subsidiaries. Since December 31, 1996, neither the Company nor
any of its subsidiaries has incurred any liabilities or obligations which in the
aggregate are material to the Company and its subsidiaries, taken as a whole,
other than liabilities and obligations incurred in the ordinary course of
business or pursuant to or as contemplated by this Agreement.
SECTION 4.07 Proxy Statement; Schedule 13E-3. Any proxy or
similar materials distributed to the Company's shareholders in connection with
the Merger, including any amendments or supplements thereto (a "Proxy
Statement"), will comply in all material respects with applicable laws,
including the federal securities laws, except that no representation is made by
the Company with respect to information supplied by Orion for inclusion in any
Proxy Statement. None of the information supplied by the Company for inclusion
in any Proxy Statement or in Orion's Tender Offer Statement on Schedule 14D-1
(the "Schedule 14D-1"), the Rule 13E-3 Transaction Statement (the "Schedule
13E-3") and any amendments thereto to be filed with the Commission by Orion and
the Company in connection with the transactions contemplated by this Agreement
will, at the time that the Schedule 14D-1, the Schedule 13E-3 or any amendments
or supplements thereto are filed with the Commission and, in the case of any
Proxy Statement at the time that any amendment thereto is mailed to the
Company's shareholders, at the time of the Shareholders' Meeting and at the
Effective Time, as the case may be, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. If no vote of shareholders shall be
required to effect the Merger, the Company will furnish to its shareholders any
documents and information required by the Colorado Law complying with the
provisions thereof in a prompt and timely fashion.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF ORION
Orion represents and warrants to the Company as follows:
SECTION 5.01 Organization. Orion is a corporation existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and authority
would not in the aggregate have a Material Adverse Effect (as defined below).
Orion has heretofore delivered to the Company an accurate and complete copy of
its certificate of incorporation and bylaws, as currently in effect. When used
in connection with Orion, the term "Material Adverse Effect" means any change in
or effect on the business of
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Orion that is materially adverse to the business, operations or financial
condition of Orion and all of its subsidiaries taken as a whole.
SECTION 5.02 Authority Relative to this Agreement. Orion has
all necessary corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the board of
directors of Orion and no other corporate proceedings on the part of Orion are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
Orion and constitutes a valid, legal and binding agreement of Orion, enforceable
against Orion in accordance with its terms, except as enforcement may be limited
by general principles of equity whether applied in a court of law or a court of
equity.
SECTION 5.03 Proxy Statement; Schedule 13E-3. None of the
information supplied by Orion for inclusion in any Proxy Statement or the
Schedule 13E-3 will, at the respective times that such Proxy Statement and the
Schedule 13E-3 or any amendments or supplements thereto are filed with the
Commission or, in the case of a Proxy Statement, at the time that it or any
amendment or supplement thereto is mailed to the Company's shareholders, at the
time of the Shareholders' Meeting or at the Effective Time, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
ARTICLE VI.
COVENANTS
SECTION 6.01 Conduct of Business of the Company. Except as
contemplated by this Agreement or otherwise approved by Orion, during the period
from the date hereof to the Effective Time, the Company and its subsidiaries
will each conduct its operations according to its ordinary and usual course of
business and consistent with past practice, and the Company and its subsidiaries
will each use its best efforts to preserve intact its business organization, to
keep available the services of its officers and employees and to maintain
existing relationships with licensors, licensees, suppliers, contractors,
distributors, customers and others having business relationships with it.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in this Agreement, prior to the Effective Time, neither the
Company nor any of its subsidiaries will, without the prior consent of Orion or
the approval of a majority of the members of the Board of Directors of the
Company:
(a) amend its certificate or articles of incorporation or
by-laws;
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities,
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except as required by the Option agreements as in effect as of the date hereof,
or amend any of the terms of any such securities or agreements outstanding as of
the date hereof;
(c) split, combine or reclassify any shares of its capital
stock, or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, or redeem
or otherwise acquire any of its securities or any securities of its subsidiaries
except for dividends declared and paid in accordance with Section 6.09 hereof;
(d)(i) except in the ordinary course of business under
existing lines of credit, incur or assume any funded indebtedness; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except in the
ordinary course of business and except for obligations of wholly owned
subsidiaries of the Company; (iii) make any loans, advances or capital
contributions to, or investments in, any other person except in the ordinary
course of business (other than to wholly owned subsidiaries of the Company or
customary loans or advances to employees);
(e) enter into, adopt or (except as may be required by law)
amend or terminate any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, pension, retirement, deferred compensation, employment,
severance or other employee benefit agreement, trust, plan, fund or other
arrangement for the benefit or welfare of any director, officer or group of
employees, or (except for normal increases in the ordinary course of business
that are consistent with past practices and that, in the aggregate, do not
result in a material increase in benefits or compensation expense to the
Company) increase in any manner the compensation or fringe benefits of any
director, officer or group of employees or pay any benefit not required by any
plan and arrangement as in effect as of the date hereof (including, without
limitation, the granting of stock appreciation rights or performance units) or
enter into any contract, agreement, commitment or arrangement to do any of the
foregoing;
(f) acquire, sell, lease or dispose of any assets outside the
ordinary course of business or any assets which in the aggregate are material to
the Company and its subsidiaries taken as a whole or enter into any commitment
or transaction outside the ordinary course of business;
(g) change any of the accounting principles or practices used
by it;
(h) revalue in any material respect any of its assets,
including, without limitation, writing down the value of inventory or writing
off notes or accounts receivable other than in the ordinary course of business;
(i)(i) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business organization or
division thereof; (ii) enter into any contract or agreement other than in the
ordinary course of business; ( iii ) authorize any new capital expenditure or
expenditures which, individually, is in excess of $1,000,000 or, in the
aggregate, are in excess of $5,000,000; provided, that none of the foregoing
shall limit any capital expenditure already included in the Company's 1997
capital expenditure budget; or (iv)
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enter into or amend any contract, agreement, commitment or arrangement with
respect to any of the matters set forth in this Section 6.01(i);
(j) make any tax election or settle or compromise any material
income tax liability;
(k) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unassorted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of liabilities reflected or
reserved against in, or contemplated by, the consolidated financial statements
(or the notes thereto) of the Company and its consolidated subsidiaries or
incurred in the ordinary course of business and consistent with past practice;
or
(l) take, or agree in writing or otherwise to take, any of the
actions described in Sections 6.01(a) through 6.01(k) or any action which would
make any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect as of the date when made or as of a future date or
would result in any of the conditions set forth in Section 7.03 not being
satisfied.
SECTION 6.02 No Solicitation. Neither the Company nor any of
its subsidiaries, affiliates, officers, directors, employees, representatives or
agents, shall, directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with, or except as may be required by law,
upon the written advice of counsel, provide any information to, any corporation,
partnership, person or other entity or group (other than Orion or an affiliate
or an associate of Orion) concerning any merger, sale of assets or sale of
shares of capital stock of the Company or of any subsidiary or division of the
Company or similar transaction.
SECTION 6.03 Access to Information. Between the date hereof
and the Effective Time, the Company will give Orion and its authorized
representatives reasonable access to all employees, plants, offices, warehouses
and other facilities and to all books and records of the Company and its
subsidiaries, will permit Orion to make such inspections as Orion may reasonably
require and will cause the Company's officers and those of its subsidiaries to
furnish Orion with such financial and operating data and other information with
respect to the business and properties of the Company and any of its
subsidiaries as Orion may from time to time request.
SECTION 6.04 Best Efforts. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its best efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things reasonably necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, cooperation in the preparation
and filing of the Schedule 14D-1, Schedule 14D-9 and Schedule 13E-3 and any
amendments thereto and the execution of any additional instruments necessary to
consummate the transactions contemplated hereby. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of each party
hereto shall take all such necessary action.
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SECTION 6.05 Consents and Approvals. Each of Orion and the
Company will use its best efforts to obtain consents or approvals of all third
parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement.
SECTION 6.06 Public Announcements. Orion and the Company will
consult with each other before issuing any press release or otherwise making any
public statements with respect to the transactions contemplated by this
Agreement and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
law or by obligations pursuant to any listing agreement with any national
securities exchange.
SECTION 6.07 Indemnification and Insurance. Orion agrees that
all rights to indemnification existing in favor of the present or former
directors and officers of the Company or any of its subsidiaries (collectively,
the "Indemnified Parties") as provided in the Company's Restated Articles of
Incorporation or By-Laws or the articles of incorporation, by-laws or similar
documents of any of the Company's subsidiaries as in effect as of the date
hereof with respect to matters occurring prior to the Effective Time shall
survive the Merger and shall continue in full force and effect for a period of
not less than the statutes of limitations applicable to such matters. From and
after the Merger and to the extent Orion is permitted to do so under its loan or
financing agreements, Orion shall guarantee the Company's indemnification
obligations to the Company's current directors as they relate to this Agreement
and the transactions contemplated hereby. Orion shall use its best efforts to
obtain any consents required under such loan and financing agreements. To the
extent available, Orion shall cause to be maintained in effect for not less than
three years from the Effective Time policies of the directors' and officers'
liability insurance, with terms and conditions which are not materially less
advantageous than those presently maintained by the Company, with respect to
matters occurring prior to the Effective Time, provided, however, that in no
event shall Orion or the Surviving Corporation be required to expend per year
more than 125% of the current annual premium payable by the Company with respect
to its current directors and officers liability insurance policy to maintain or
procure insurance coverage pursuant to this Section 6.07(a).
(b) In the event that any action, suit, proceeding or
investigation relating hereto or to the transactions contemplated hereby is
commenced, whether before or after the Effective Time, the parties hereto agree
to cooperate and use their best efforts to defend against and respond thereto.
(c) This Section 6.07, which shall survive the consummation of
the Merger at the Effective Time and shall continue without limit, is intended
to benefit the Company, the Surviving Corporation, the Indemnified Parties
(whether or not parties to this Agreement) and shall be binding on all
successors and assigns of the Company and the Surviving Corporation.
SECTION 6.08 Notification of Certain Matters. The Company
shall give prompt notice to Orion, and Orion shall give prompt notice to the
Company, of (i) the occurrence, or nonoccurrence, of any event the occurrence,
or nonoccurrence, of which would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any
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material respect at or prior to the Effective Time and (ii) any material failure
of the Company, or Orion, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder, provided, however, that the delivery of any notice pursuant to this
Section 6.08 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 6.09 Dividends. Until the Effective Time, the Company
may continue to set record dates, declare and pay quarterly dividends consistent
with the amounts and schedule followed by the Company since January 1, 1995,
provided that it is permitted to do so under applicable Colorado law.
SECTION 6.10 Shareholder Agreement. Upon the purchase of
Shares pursuant to the Offer, the Shareholder Agreement dated November 7, 1991
between Orion and the Company, as amended through June 18, 1996, shall
immediately terminate.
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligation of each party hereto to effect the Merger
is subject to the satisfaction or mutual waiver at or prior to the Effective
Time of the following conditions:
(a) this Agreement, following its adoption by the Board of
Directors of Transition, shall have been approved by the requisite vote of the
shareholders of the Company in accordance with applicable law;
(b) no statute, rule, regulation, executive order, decree, or
injunction shall have been enacted, entered, promulgated or enforced by any
court or governmental authority which prohibits or restricts the consummation of
the Merger;
(c) Orion and the Company shall have received or obtained all
regulatory approvals (including state insurance regulatory approvals) necessary
to consummate the Offer and the Merger on terms and conditions satisfactory to
Orion.
(d) there shall not be pending any action or proceeding by or
before any court or governmental regulatory or administrative agency, authority
or tribunal, against Orion or the Company or any of their respective directors
or officers which (i) seeks to restrain, prohibit or delay the consummation of
the Offer and the Merger, (ii) may result in a material diminution in the
benefits expected to be derived by Orion as a result of the Offer or the Merger
or (iii) challenges the adoption, entering into or approval of this Agreement or
challenges or seeks damages in connection with this Agreement, the transactions
contemplated hereby or any other proposal by Orion to acquire the Company.
SECTION 7.02 Conditions to Obligations of the Company to
Effect the Merger. The obligation of the Company to effect the Merger is further
subject to Orion's having
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performed in all material respects its obligations under this Agreement required
to be performed by it, or the Company having waived such performance, at or
prior to the Effective Time pursuant to the terms hereof.
SECTION 7.03 Conditions to Obligation of Orion to Effect the
Merger. The obligation of Orion to effect the Merger is further subject to the
satisfaction or waiver by it at or prior to the Effective Time of the following
conditions:
(a) the representations and warranties of the Company set
forth in this Agreement shall be true and correct in all material respects on
the date hereof and as of the Effective Time;
(b) the Company shall not have breached in any material
respect any covenant contained in this Agreement;
(c) the number of Dissenting Shares hereof shall not exceed 5%
of the Shares (other than the Shares owned by Orion and its wholly owned
subsidiaries); and
(d) no change shall have occurred or be threatened in the
business, operations or financial condition of the Company and its subsidiaries
taken as a whole which has, or might have, a Material Adverse Effect.
ARTICLE VIII.
TERMINATION; AMENDMENT; WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and
the Merger may be abandoned at any time, notwithstanding approval thereof by the
shareholders of the Company, but prior to the Effective Time:
(a) by mutual written consent of the Company (with the
approval of a majority vote of the Independent Directors, as herein defined) and
Orion; or
(b) by the Company (with the approval of a majority vote of
the Independent Directors) or Orion if (i) the Effective Time shall not have
occurred on or before March 31, 1998 (provided that the right to terminate this
Agreement under this Section 7.01(b) shall not be available to any party whose
willful failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Effective Time to occur on or before
such date) or (ii) any court of competent jurisdiction in the United States or
other United States governmental body shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action shall have become
final and nonappealable.
SECTION 8.02 Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section 8.01, this
Agreement shall forthwith become void and have no effect, without any liability
on the part of any party hereto or its directors,
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officers or shareholders, other than the provisions of this Section 8.02 and
Article IX. Nothing contained in this Section 8.02 shall relieve any party from
liability for any breach of this Agreement prior to the termination hereof
SECTION 8.03 Amendment. This Agreement may be amended by
action taken by the Company (approved by a majority vote of Messrs. Xxxxxx Xxxx
Xxxxx, Xxxxxx X. Xxxxx and Xxxxxxx X. Xxxxxx and Ms. M. Xxx Xxxxxxx as directors
of the Company (collectively, the "Independent Directors") ) and Orion at any
time before or after approval of this Agreement by the shareholders of the
Company, but, after any such approval, no amendment shall be made which
decreases the Merger Price or the Offer price or which adversely affects the
rights of the Company's shareholders hereunder without the approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of the parties (which instrument, in the case of the
Company, shall be approved by a majority of the Independent Directors).
SECTION 8.04 Extension; Waiver. At any time prior to the
Effective Time, the parties hereto (in the case of the Company, with the
approval of a majority vote of the Independent Directors) may (i) extend the
time for the performance of any of the obligations or other acts of the other
parties, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document, certificate or writing delivered pursuant
hereto, (iii) waive compliance with any of the agreements or conditions
contained herein or (iv) waive the conditions set forth in Article VII hereto.
Any agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01 Nonsurvival of Representations and Warranties.
The representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement.
SECTION 9.02 Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties or any of them with
respect to the subject matter hereof and (b) shall not be assigned by operation
of law or otherwise, provided that Orion may assign its rights and obligations
to any subsidiary of Orion but no such assignment shall relieve Orion of its
obligations hereunder if such assignee does not perform such obligations.
SECTION 9.03 Validity. If any provision of this Agreement, or
the application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
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SECTION 9.04 Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
cable, telegram or telex, or by registered or certified mail (postage prepaid,
return receipt requested), to the respective parties as follows:
if to Orion or Transition:
Orion Capital Corporation
0 Xxxx Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
with a copy to:
Xxxxxxx, Leisure, Xxxxxx & Irvine
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. XxXxxx, Esq.
if to the Company:
Guaranty National Corporation
0000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxx X. Xxxxxxx, President & CEO
with a copy to:
Ireland, Xxxxxxxxx, Xxxxx & Xxxxxx, P.C.
Suite 2600
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxx, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
SECTION 9.05 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Colorado,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
SECTION 9.06 Descriptive Headings. The descriptive headings
herein are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
SECTION 9.07 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto and its
successors and permitted assigns, and,
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except as provided in Sections 2.05, 2.07, 6.07 and 9.02(b), nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 9.08 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement.
SECTION 9.09 Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers hereunto duly authorized,
all as of the day and year first above written.
ORION CAPITAL CORPORATION
By:/s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President,
General Counsel & Secretary
GUARANTY NATIONAL CORPORATION
By:/s/ Xxxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President and Chief
Executive Officer
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