AGREEMENT AND PLAN OF REORGANIZATION
by and among
OHIO FARMERS INSURANCE COMPANY
WESTFIELD MERGER SUB, INC.
and
OLD GUARD GROUP, INC.
Dated as of May 10, 2000
Exhibits
Exhibit A - Definitions
Exhibit B - Target Option Agreement
Exhibit C - Voting Agreement
Exhibit D - Certificate of Merger
Exhibit E - Legal Opinions of Acquiror's and Merger Sub's
Counsel
Exhibit F - Legal Opinions of Target's Counsel
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this
"Agreement") is made and entered into as of May 10, 2000, by and
among Ohio Farmers Insurance Company, an Ohio corporation
("Acquiror"), Westfield Merger Sub, Inc., an Ohio corporation
and wholly owned subsidiary of Acquiror ("Merger Sub"), and Old
Guard Group, Inc., a Pennsylvania corporation ("Target").
Acquiror, Merger Sub and Target are sometimes collectively
referred to herein as the "Parties" and individually as a
"Party."
RECITALS
A. The respective Boards of Directors of Target, Acquiror
and Merger Sub believe it is in the best interests of their
respective companies that Target and Merger Sub combine into a
single company through the statutory merger of Target with and
into Merger Sub whereby either Target or Merger Sub will be the
surviving corporation (the "Merger") and, in furtherance
thereof, have approved the Merger.
B. Target, Acquiror and Merger Sub desire to make certain
representations and warranties and other agreements in
connection with the Merger.
C. Concurrent with the execution of this Agreement and as
a material inducement to Acquiror and Merger Sub to enter into
this Agreement, (a) Target and Acquiror have entered into a
Target Option Agreement dated the date hereof and attached
hereto as Exhibit B (the "Target Option Agreement") providing
for the purchase by Acquiror of newly issued shares of Target's
common stock in certain specified circumstances, (b) Acquiror
and certain stockholders of Target (the "Selected Stockholders")
have entered into a Voting Agreement dated the date hereof and
attached hereto as Exhibit C (the "Voting Agreement") providing
for (i) an agreement to vote the shares of Target's common stock
owned by such Selected Stockholders to approve the Merger and
against any competing proposals, and (ii) in certain specified
circumstances the purchase by Acquiror of outstanding shares of
Target's common stock held by such Selected Stockholders.
NOW, THEREFORE, in consideration of the covenants and
representations set forth herein, and for other good and
valuable consideration, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Certain capitalized terms used in this Agreement shall have
the meanings ascribed thereto in Exhibit A attached hereto.
References to any federal, state, local or foreign statute or
law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise.
Unless the context otherwise requires, all references to
"Sections," "Exhibits" and "Schedules" shall be deemed to refer
to Sections within or Exhibits and Schedules to this Agreement.
All Exhibits and Schedules to this Agreement are hereby
incorporated herein. The word "including" shall mean including
without limitation, and the word "or" shall not be limiting.
Unless the context otherwise requires, any word used in the
singular form shall be interpreted as including the plural form
thereof, and vice versa, and any word used in one gender shall
be interpreted as including the other gender, as necessary or
appropriate. Any reference to facts or information "known" to a
Party, or words having similar meaning, shall refer to the
conscious awareness of information of the directors and those
responsible officers and employees of such Party and its
Subsidiaries charged with administrative or operational
responsibility for such matters, and which is known or would be
known to any one or more of them following reasonable
investigation under the circumstances.
ARTICLE II
THE MERGER
2.1 The Merger. At the Effective Time and subject to and
upon the terms and conditions of this Agreement, the Articles of
Merger attached hereto as Exhibit D (the "Certificate of
Merger") and the applicable provisions of the Pennsylvania
Business Corporation Law ("Pennsylvania Law") and Ohio General
Corporation Law ("Ohio Law"), Merger Sub shall be merged with
and into Target, the separate corporate existence of Merger Sub
shall cease and Target shall continue as the surviving
corporation. Target as the surviving corporation after the
Merger is hereinafter sometimes referred to as the "Surviving
Corporation." Notwithstanding the foregoing or any other
provision of this Agreement, at any time prior to Closing,
Acquiror shall have an option (the "Restructuring Option") to
elect that, following the Merger, Target shall be merged with
and into Merger Sub, the separate corporate existence of Target
shall cease, and Merger Sub shall continue as the Surviving
Corporation, provided, however, that exercise of the
Restructuring Option shall not have any adverse effect on (i)
the amount of Merger Consideration payable to holders of Target
Common Stock, or (ii) the Tax consequences of the Merger to
holders of Target Common Stock. In the event Acquiror effects
the Restructuring Option prior to the Closing, (i) in lieu of
the Certificate of Merger attached as Exhibit D, the Parties
shall execute a Certificate of Merger (as required by and as
defined in Ohio Law and Pennsylvania Law) to effect the Merger
of Target into Merger Sub, such Certificate of Merger shall be
deemed the "Certificate of Merger" for all purposes under this
Agreement, (ii) all other provisions of this Agreement relating
to the Surviving Corporation shall be deemed automatically
amended to reflect the Restructuring Option to the extent
necessary or appropriate, and (iii) the Merger Sub shall
expressly assume (within the meaning of Treasury Regulation
Section 1.461-4(d)(5)(i)) any and all liabilities of Target arising out
of Target's trade or business that Target, but for the economic
performance requirements of Section 461(h) of the Code, would
have been entitled to incur as of the Effective Time.
2.2 Closing; Effective Time. The closing of the
transactions contemplated hereby (the "Closing") shall take
place on a date as soon as reasonably practicable after the
satisfaction or waiver of each of the conditions set forth in
Article VII hereof or at such other date as the Parties agree
(the "Closing Date"). The Closing shall take place at the
offices of Xxxxxxx & Xxxxxx LLP, 000 Xxxxx Xxxxx Xxxxxx,
Xxxxxxxx, Xxxx 00000, or at such other location as the Parties
agree. In connection with the Closing, the Parties shall cause
the Merger to be consummated by filing the Certificate of Merger
and any other required information with the Secretary of State
of each of the States of Pennsylvania and Ohio (the time of such
filing being the "Effective Time").
2.3 Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in this Agreement, the
Certificate of Merger and the applicable provisions of
Pennsylvania Law and Ohio Law. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time,
all the property, rights, privileges, powers and franchises of
Target and Merger Sub shall vest in the Surviving Corporation,
and all debts, liabilities and duties of Target and Merger Sub
shall become the debts, liabilities and duties of the Surviving
Corporation.
2.4 Articles of Incorporation: Bylaws or Code of
Regulations.
(a) At the Effective Time, the Articles of
Incorporation of Target, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the
Surviving Corporation until thereafter amended as provided by
Pennsylvania Law and the Surviving Corporation's Articles of
Incorporation. Notwithstanding the foregoing, if Acquiror
elects the Restructuring Option prior to the Closing, the
Articles of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Articles
of Incorporation of the Surviving Corporation until thereafter
amended as provided by Ohio Law and the Surviving Corporation's
Articles of Incorporation; provided, however, that Article I of
the Articles of Incorporation of the Surviving Corporation shall
be amended to read as follows: "The name of the corporation is
Old Guard Group, Inc."
(b) The Bylaws of Target, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended in accordance
therewith; provided, however, that if Acquiror elects the
Restructuring Option prior to the Closing, the Code of
Regulations of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Code of Regulations of the
Surviving Corporation until thereafter amended in accordance
therewith.
2.5 Directors and Officers. At the Effective Time the
directors of Target shall be the initial directors of the
Surviving Corporation, until their respective successors are
duly elected or appointed and qualified, subject to the effect
of Section 7.3(j); provided, however, if Acquiror elects the
Restructuring Option prior to the Closing, the directors of
Merger Sub shall be the initial directors of the Surviving
Corporation, until their respective successors are duly elected
or appointed and qualified. The officers of Target shall be the
initial officers of the Surviving Corporation, until their
respective successors are duly elected or appointed and
qualified.
2.6 Conversion of Target Common Stock.
(a) At the Effective Time, subject to Section 2.14,
each share of common stock, no par value, of Target ("Target
Common Stock"), issued and outstanding immediately prior to the
Effective Time (other than Dissenting Shares and any shares of
Target Common Stock to be canceled pursuant to Section 2.13),
will be canceled and extinguished and converted automatically
into the right to receive cash in an amount equal to $12.00 per
share, as such amount may be adjusted pursuant to the provisions
of Section 2.9 (the "Merger Consideration").
(b) On and after the Effective Time, holders of
certificates (other than holders of Dissenting Shares) which
immediately prior to the Effective Time represented outstanding
shares of Target Common Stock (the "Certificates") shall cease
to have any rights as stockholders of Target, except the right
to receive the Merger Consideration for each such share of
Target Common Stock held by them.
2.7 Options and Target Stock Option Plans. All options,
warrants or similar rights (including related stock appreciation
rights, if any) (each an "Option") issued, awarded or granted
pursuant to any plan, agreement or arrangement of Target or any
of its Subsidiaries and entitling the holder thereof to purchase
shares of Target Common Stock or any other capital stock of
Target or any of its Subsidiaries (the "Target Stock Option
Plans") shall be terminated at or prior to the Effective Time,
either automatically pursuant to the terms thereof or by
execution of an agreement referred to in this Section 2.7, and
each holder of a terminated Option with an exercise price per
share less than the Merger Consideration shall be entitled to
receive, in consideration for the termination of such Option, an
amount in cash (less applicable withholding Taxes) equal to the
excess of the Merger Consideration over the exercise price per
share for each Option so terminated. Each holder of a
terminated Option with an exercise price per share greater than
the Merger Consideration shall receive no consideration for
termination thereof. The total consideration to be paid for the
termination of all Options pursuant to this Section 2.7 is
hereinafter referred to as the "Option Termination
Consideration." At least five (5) business days prior to the
Closing, (x) Target shall deliver to Acquiror agreements (in a
form reasonably acceptable to Acquiror) executed by each
director and officer of Target and any Subsidiary thereof
holding an Option acknowledging that the payment made pursuant
to this Section 2.7 is being made in full satisfaction of such
Person's rights under the applicable Target Stock Option Plans
and any Option awards granted thereunder, and (y) Target shall
use commercially reasonable efforts to obtain executed
agreements of the type described in clause (x) from each other
holder of an Option to purchase shares of Target Common Stock
awarded under any Target Stock Option Plans. At or immediately
prior to the Effective Time, Target shall pay, or cause to be
paid, to each holder of a terminated Option with an exercise
price less than the Merger Consideration, the Option Termination
Consideration to which such holder is entitled to receive
pursuant to such holder's agreement described in clauses (x) and
(y) above and this Section 2.7.
2.8 Capital Stock of Merger Sub Converted. At the
Effective Time, each share of common stock, no par value, of
Merger Sub ("Merger Sub Common Stock") issued and outstanding
immediately prior to the Effective Time shall be converted into
300,000 shares of common stock, no par value, of the Surviving
Corporation, such that the Surviving Corporation shall be a
wholly owned subsidiary of Acquiror. On and after the Effective
Time, holders of certificates which immediately prior to the
Effective Time represented outstanding shares of Merger Sub
Common Stock shall represent such number of shares of common
stock of the Surviving Corporation, multiplied by 300,000.
Notwithstanding the foregoing, if Acquiror elects the
Restructuring Option prior to the Closing, each share of Merger
Sub Common stock issued and outstanding immediately prior to the
Effective Time shall remain issued and outstanding and be
unaffected by the Merger, and each stock certificate of Merger
Sub representing outstanding shares of Merger Sub Common Stock
shall evidence ownership of such shares of common stock of the
Surviving Corporation.
2.9 Adjustments to Merger Consideration. The per share
amount of the Merger Consideration specified in Section 2.6
shall be adjusted to reflect fully the effect of any stock
split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Target Common
Stock), reorganization, recapitalization or other like change
with respect to Target Common Stock occurring after the date
hereof and prior to the Effective Time.
2.10 Cancellation of Target Common Stock Owned by Acquiror
or Target. At the Effective Time, all shares of Target Common
Stock owned by Target as treasury stock and each share of Target
Common Stock owned by any direct or indirect wholly owned
Subsidiary of Target immediately prior to the Effective Time
shall be canceled and extinguished without any conversion
thereof.
2.11 Surrender of Certificates.
(a) Exchange Agent. American Stock Transfer & Trust
Company, or such other bank or trust company selected by
Acquiror and approved by Target (the approval of which shall not
be unreasonably withheld by Target), shall act as exchange agent
(the "Exchange Agent") in the Merger.
(b) Acquiror to Provide Cash. Promptly after the
Effective Time, Acquiror shall deposit with the Exchange Agent
sufficient cash to make all cash payments to be made pursuant to
Section 2.6. All deposits of cash with the Exchange Agent
pursuant to this Section 2.11, together with any earnings
thereon, are referred to as the "Exchange Fund." The Exchange
Fund may be invested in short-term investment-grade debt
instruments as directed by Acquiror and shall not be used for
any purpose except as provided in this Agreement. Any risk of
loss with respect to the Exchange Fund shall be borne by
Acquiror.
(c) Exchange Procedures. Promptly after the
Effective Time, the Surviving Corporation shall cause to be
mailed to each holder of record of a certificate or certificates
which immediately prior to the Effective Time represented
outstanding shares of Target Common Stock (the "Certificates"),
(i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the
Certificates shall pass, only upon receipt of the certificates
by the Exchange Agent, and shall be in such form and have such
other provisions as Acquiror may reasonably specify), and (ii)
instructions for use in effecting the surrender of the
Certificates in exchange for cash. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Acquiror, together
with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, and such
other customary documents as may be reasonably required pursuant
to such instructions, the holder of such Certificate (other than
a holder of Dissenting Shares) shall be entitled to receive in
exchange therefor the Merger Consideration to which such holder
shall have become entitled pursuant to Section 2.6 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. Any interest or other income
earned by the Exchange Fund shall be for the account of
Acquiror. Subject to Pennsylvania Law and the provisions of
this Agreement in the case of Dissenting Shares, until so
surrendered, each outstanding Certificate that, prior to the
Effective Time, represented shares of Target Common Stock will
be deemed from and after the Effective Time, for all corporate
purposes, to evidence solely the right to receive, upon
surrender of such Certificate, the Merger Consideration with
respect to the shares of Target Common Stock represented
thereby.
(d) Failure of Target Stockholders to Deliver
Certificates. Any portion of the Exchange Fund which remains
unclaimed by holders of Target Common Stock for 60 days after
the Effective Time shall be delivered to Acquiror, and the
holders of Target Common Stock shall thereafter look only to
Acquiror for payment of their claims for the Merger
Consideration in respect of their shares of Target Common Stock.
If any Certificates shall not have been surrendered prior to two
years after the Effective Time (or immediately prior to such
earlier date on which any payment in respect thereof would
otherwise escheat or become the property of any governmental
unit or agency), the payment in respect of such Certificates
shall, to the extent permitted by applicable law, become the
property of Acquiror, free and clear of all claims or interest
of any Person previously entitled thereto.
(e) No Liability. Notwithstanding anything to the
contrary in this Agreement, neither the Exchange Agent, the
Surviving Corporation, nor any other Party shall be liable to
any Person for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or
similar law.
(f) Tax Withholding. Acquiror or the Exchange Agent
shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of a
Certificate surrendered for the Merger Consideration such amount
as Acquiror or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the "Code"), or any
provision of any state, local or foreign Tax law. To the extent
that amounts are so deducted and withheld, such amounts shall be
treated for all purposes of this Agreement as having been paid
to the holder thereof.
2.12 No Further Ownership Rights in Target Common Stock.
All cash transmitted upon the surrender for exchange of shares
of Target Common Stock in accordance with the terms hereof shall
be deemed to have been given in full satisfaction of all rights
pertaining to such shares of Target Common Stock, and there
shall be no further registration of transfers on the records of
the Surviving Corporation of shares of Target Common Stock which
were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Article II.
2.13 Dissenting Shares.
(a) Status of Dissenting Shares. Notwithstanding the
provisions of Section 2.6 or any other provision of this
Agreement to the contrary, shares of Target Common Stock that
are issued and outstanding immediately prior to the Effective
Time and are held by stockholders who have not voted such shares
in favor of the Merger and the approval and adoption of this
Agreement and who shall have properly demanded appraisal of such
shares of Target Common Stock (the "Dissenting Shares") in
accordance with Title 15, Article B, Chapter 19, Subchapter C,
Section 1930 of the Pennsylvania Law or any successor or
replacement provision (the "Dissenters Rights Law") shall not be
converted into the right to receive the Merger Consideration at
or after the Effective Time, unless and until the holder of such
Dissenting Shares shall have failed to perfect or shall have
effectively withdrawn or lost such right to appraisal and
payment under Pennsylvania Law. If a holder of Dissenting
Shares shall have so failed to perfect or shall have effectively
withdrawn or lost such right to appraisal and payment, then, as
of the Effective Time or the occurrence of such event, whichever
last occurs, such holder's Dissenting Shares shall be converted
into and represent solely the right to receive the Merger
Consideration, without any interest thereon, as provided in
Section 2.6.
(b) Direction of Appraisal Proceedings. Target shall
give Acquiror (i) prompt notice of any written demands for
appraisal, withdrawals of demands for appraisal and any other
instruments served pursuant to the Dissenters Rights Law which
are received by Target, and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for
appraisal under Pennsylvania Law. Target will not voluntarily
make any payment with respect to any demands for appraisal and
will not, except with the prior written consent of Acquiror,
settle or offer to settle any such demands.
2.14 Lost, Stolen or Destroyed Certificates. In the event
any Certificates shall have been lost, stolen or destroyed, the
Exchange Agent shall issue in exchange therefor, upon the making
of an affidavit of that fact by the holder thereof, the Merger
Consideration with respect to the shares of Target Common Stock
represented thereby as may be required pursuant to Section 2.6;
provided, however, that Acquiror may, in its discretion and as a
condition precedent to the issuance thereof, require the owner
of such lost, stolen or destroyed Certificates to deliver a bond
in such sum as it may reasonably direct as indemnity against any
claim that may be made against Acquiror, the Surviving
Corporation or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
2.15 Taking of Necessary Action: Further Action. If, at
any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right,
title and possession to all assets, property, rights,
privileges, powers and franchises of Target and Merger Sub, the
officers and directors of Target and Merger Sub are fully
authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary
action, so long as such action is not inconsistent with this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET
Target represents and warrants to Acquiror and Merger Sub
that the statements in this Article III are true and correct,
except as set forth in the disclosure schedule delivered by
Target to Acquiror and Merger Sub as of this date and
acknowledged by the Parties (the "Target Disclosure Schedule").
The mere listing (or inclusion of a copy) of a document or other
item shall not be deemed adequate to disclose an exception to a
representation or warranty made herein (unless the
representation or warranty has to do with the existence of the
document or other item itself). The Target Disclosure Schedule
is arranged in paragraphs corresponding to the lettered and
numbered sections and schedules contained in or referred to in
this Article III. The representations and warranties of Target
contained in this Article III and elsewhere in this Agreement,
or in the Target Disclosure Schedule or any other document
delivered pursuant to or contemplated by this Agreement, shall
not be affected or deemed waived by reason of the fact that
Acquiror, Merger Sub and/or their representatives knew or should
have known that any such representation or warranty is or might
be untrue or inaccurate in any respect.
3.1 Organization, Standing and Power. Target and each of
Target's Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction
of organization, has all requisite corporate power and authority
to own properties and to carry on business as now being
conducted and as proposed to be conducted and is duly qualified
to do business and is in good standing in each jurisdiction
where its ownership or leasing of property or the conduct of its
business requires it to be so qualified, except where the
failure to be so qualified would not have a Material Adverse
Effect on Target. Each Target Subsidiary which is engaged in
the business of insurance has valid and subsisting licenses to
conduct the insurance business conducted by such Subsidiary.
All of Target's Subsidiaries are listed on Schedule 3.1,
identifying thereon (with respect to each Subsidiary which is an
insurance company) its state of domicile and the states in which
it is licensed to conduct an insurance business. Except as
disclosed on Schedule 3.1, Target does not directly or
indirectly own any equity or similar interest in, or any
interest convertible or exchangeable or exercisable for, any
equity or similar interest constituting in excess of five
percent (5%) of the ownership in, any other corporation,
partnership, joint venture or other business association or
entity. Target has delivered to Acquiror a true and correct
copy of the Articles of Incorporation, as amended (the "Articles
of Incorporation") of Target, and the Bylaws, as amended (the
"Bylaws") of Target, and the Articles of Incorporation and
Bylaws or other organizational documents, as applicable, of each
of its Subsidiaries, each as amended to date. Target is not in
violation of any of the provisions of the Articles of
Incorporation or Bylaws, and no such Subsidiary is in violation
of any provisions of its equivalent organizational documents.
Except as set forth in Schedule 3.1, Target owns beneficially
and of record all outstanding shares of capital stock of each of
its Subsidiaries, and all such shares of capital stock are duly
authorized, validly issued, fully paid and nonassessable. All
outstanding shares of capital stock of each such Subsidiary are
owned by Target free and clear of any charge, mortgage, pledge,
security interest, restriction, claim, lien, or encumbrance
(collectively, "Liens"). Except as set forth on Schedule 3.1,
there are no outstanding subscriptions, options, warrants, puts,
calls, rights, exchangeable or convertible securities, voting
agreements or proxies, or other commitments or agreements of any
character relating to the issued or unissued capital stock or
other securities of any such Subsidiary, or otherwise obligating
Target or any such Subsidiary to issue, transfer, sell,
purchase, redeem or otherwise acquire any such securities.
3.2 Capital Structure. The authorized capital stock of
Target consists of 15,000,000 shares of Target Common Stock,
with no par value, and 5,000,000 shares of preferred stock, with
no par value. As of the close of business on April 30, 2000,
3,708,571 shares of Target Common Stock (excluding treasury
shares) were issued and outstanding, no shares of preferred
stock were issued or outstanding, and 548,756 shares of Target
Common Stock were held in treasury. All outstanding shares of
Target Common Stock are duly authorized, validly issued, fully
paid and nonassessable and are free and clear of any Liens other
than Liens created by or imposed upon the holders thereof, and
are not subject to preemptive rights or rights of first refusal
created by statute, the Articles of Incorporation or Bylaws of
Target, or any agreement to which Target is a party or by which
it is bound. Target has reserved 588,687 shares of Target
Common Stock for issuance to employees, directors and certain
insurance agents of Target's insurance company Subsidiaries
pursuant to the Target Stock Option Plans and the Management
Recognition Plan of Target dated August 19, 1997 (the "MRP"), of
which 50,167 shares have been issued pursuant to valid Option
exercises, 163,547 shares have been issued pursuant to valid MRP
grants, and 231,515 shares remain subject to outstanding and
unexercised Options under the Target Stock Option Plans, all of
which Options shall become fully vested and available for
exercise at or upon consummation of the Merger. All shares
granted under the MRP have been issued and will automatically
fully vest upon consummation of the Merger. Target has not
issued or granted additional Options under the Target Stock
Option Plans, and has not made additional grants under the MRP.
Other than rights under this Agreement, the Target Option
Agreement and the MRP, and other than Options outstanding under
the Target Stock Option Plans in the amounts reserved for as set
forth above, there are no other Options, commitments or
agreements of any character to which Target is a party or by
which it is bound obligating Target to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of capital stock of Target
or obligating Target to grant, extend, accelerate the vesting
of, change the price of, or otherwise amend or enter into any
such Option, warrant, call, right, commitment or agreement. All
issuances of securities by Target and its Subsidiaries,
including all Target Common Stock, since their respective dates
of incorporation complied with all applicable federal and state
securities laws, and all registrations and filings required
thereby have been timely made by or on behalf of the issuer
thereof. Except as set forth on Schedule 3.2, there are no
Contracts, commitments or understandings relating to the voting,
purchase or sale of any capital stock of Target or any of its
Subsidiaries (i) between or among Target and any of its
stockholders or any third party, and (ii) to the best of
Target's knowledge, between or among any of Target's
stockholders or any third party. True and complete copies of
all Target Stock Option Plans and the MRP, and all agreements
and instruments relating to or issued thereunder, are listed on
Schedule 3.2 and have been provided to Acquiror. The Target
Stock Option Plans and the MRP, such agreements and instruments
relating to or issued thereunder, have not been amended,
modified or supplemented, and there are no agreements to amend,
modify or supplement such plans, agreements or instruments, in
any case from the form made available to Acquiror. Schedule 3.2
includes a complete list of all holders of outstanding Options
under the Target Stock Option Plans and a complete list of all
grants under the MRP, including the number of shares of Target
Common Stock subject to each such Option or MRP grant, the
exercise or vesting schedule, the exercise price per share and
the term of each such Option or grant.
3.3 Authority. Target has all requisite corporate power
and authority to enter into this Agreement and the Target Option
Agreement and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and
the Target Option Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of
Target, subject only to the approval of the Merger by Target's
stockholders as contemplated by Section 7.1(a). Both this
Agreement and the Target Option Agreement have been duly
executed and delivered by Target and constitute valid and
binding obligations of Target enforceable against Target in
accordance with their terms, except as enforceability may be
limited by bankruptcy and other laws affecting the rights and
remedies of creditors generally and general principles of
equity. Except as described on Schedule 3.3, the execution and
delivery of this Agreement and the Target Option Agreement by
Target do not or will not, as the case may be, and the
consummation of the transactions contemplated hereby and thereby
will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, amendment,
cancellation or acceleration of any obligation or loss of any
benefit under (i) any provision of the Articles of Incorporation
or Bylaws of Target or equivalent organizational documents of
any of Target's Subsidiaries, as amended, (ii) any Contract to
which Target or any of its Subsidiaries is a party or by which
any of them is bound, or (iii) any permit, concession,
franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Target or any of its
Subsidiaries or any of their properties or assets, or to which
Target or any of its Subsidiaries or any of their properties or
assets is subject or bound or that give rise to any Lien, except
where such conflict, violation, default, termination,
cancellation or acceleration with respect to the foregoing
provisions of (iii) would not have had and could not reasonably
be expected to have a Material Adverse Effect on Target. No
consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required
by or with respect to Target or any of its Subsidiaries in
connection with the execution and delivery of this Agreement or
the Target Option Agreement, or the consummation of the
transactions contemplated hereby and thereby, except for (i) the
filing of the Certificate of Merger as provided in Section 2.2,
(ii) the filing with the SEC and the NASD of the Proxy Statement
relating to the Target Stockholders Meeting, (iii) the approvals
of each of the Pennsylvania Department of Insurance, the
Delaware Department of Insurance and the Virginia Department of
Insurance pursuant to each such jurisdiction's Form A statutes,
(iv) notifications (but not consents) required to be filed after
the Effective Time with state insurance regulatory authorities
pursuant to insurance holding company systems laws and
regulations and state insurance licensing laws and regulations,
and (v) such filings and approvals as may be required under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
(the "HSR Act").
3.4 SEC Documents; Financial Statements. Target has
provided to Acquiror a true and complete copy of each statement,
report, registration statement (with the prospectus in the form
filed pursuant to Rule 424(b) of the Securities Act of 1933, as
amended (the "Securities Act")), definitive proxy statement and
other filings filed with the Securities and Exchange Commission
("SEC") by Target since January 1, 1997, and, prior to the
Effective Time, Target will have made available promptly to
Acquiror true and complete copies of any additional documents
filed with the SEC by Target prior to the Effective Time,
including the Form 10-Q for the fiscal quarter ended March 31,
2000, and the Target Proxy Statement (collectively, the "Target
SEC Documents"). Target has provided to Acquiror all exhibits
to the Target SEC Documents filed prior to the date hereof, and
will promptly make available to Acquiror all exhibits to any
additional Target SEC Documents filed prior to the Effective
Time. All documents required to be filed as exhibits to the
Target SEC Documents have been (or will be) so filed, and all
material Contracts required to be filed as exhibits are in full
force and effect, except those which have expired in accordance
with their terms, and neither Target nor any of its Subsidiaries
is in material default thereunder. Target has filed (and will
file) each of the Target SEC Documents on a timely basis. As of
their respective filing dates, the Target SEC Documents complied
(or will comply) in all material respects with the requirements
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the Securities Act, and none of the Target
SEC Documents contained (or will contain) any untrue statement
of a material fact or omitted (or will 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. Target has provided to Acquiror
the audited financial statements, including the footnotes
thereto, of Target and its Subsidiaries for the fiscal year
ended December 31, 1999, and the related report of
PriceWaterhouseCoopers thereon (the "Target 1999 Audited
Statements"), included in Target's Form 10-K filing for the
fiscal year ended December 31, 1999. Each of the financial
statements of Target, including the notes thereto, included or
to be included in the Target SEC Documents, including the Target
1999 Audited Statements (collectively, the "Target Financial
Statements"), were (or will be when filed) complete and correct
in all material respects as of their respective dates, in
compliance as to form in all material respects with applicable
accounting requirements and the published rules and regulations
of the SEC with respect thereto as of their respective dates,
and prepared in accordance with U.S. generally accepted
accounting principles applied on a basis consistent throughout
the periods indicated and consistent with each other ("GAAP")
(except as may be indicated in the notes thereto or, in the case
of unaudited statements included in any quarterly reports on
Form 10-Q, as permitted by Form 10-Q promulgated by the SEC).
The Target Financial Statements fairly present (or will fairly
present) the consolidated financial condition, operating
results, cash flows and changes in stockholders' equity of
Target and its Subsidiaries at the dates and during the periods
indicated therein (subject, in the case of unaudited statements,
to normal, recurring year-end adjustments that were or are not
material in amount). No financial statements of any Person
other than Target's Subsidiaries are required by GAAP to be
included in the consolidated financial statements of Target.
3.5 Absence of Certain Changes. Since December 31, 1999
(the "Target Balance Sheet Date"), Target and its Subsidiaries
have conducted their business in the ordinary course consistent
with past practice and, except as set forth in Schedule 3.5,
there has not occurred: (i) any change, event or condition
(whether or not covered by insurance) that has resulted in, or
might reasonably be expected to result in, a Material Adverse
Effect on Target; (ii) any acquisition, sale or transfer of any
material asset of Target or any of its Subsidiaries other than
in the ordinary course of business and consistent with past
practice; (iii) any change in accounting methods or practices
(including any change in depreciation or amortization policies
or rates) by Target or any revaluation by Target of any of its
or any of its Subsidiaries' assets; (iv) any declaration,
setting aside, or payment of a dividend or other distribution
with respect to the shares of Target, or any direct or indirect
redemption, purchase or other acquisition by Target of any of
its shares of capital stock; (v) any material Contract entered
into by Target or any of its Subsidiaries, other than in the
ordinary course of business and as provided to Acquiror, or any
material amendment or termination of, or default under, any
material Contract to which Target or any of its Subsidiaries is
a party or by which it is bound; (vi) any amendment or change to
the Articles of Incorporation or Bylaws of Target or
organizational documents of any of its Subsidiaries; or (vii)
any increase in or modification of the compensation, benefits or
severance amounts payable or to become payable by Target or any
of its Subsidiaries to any of their directors, employees or
insurance agents (other than compensation and benefit increases
made solely in the ordinary course of business, and other than
entering into New Employment Agreements, Wavier Agreements and
Option Cancellation Agreements as contemplated by Sections 5.3
and 5.4, respectively). Target and its Subsidiaries have not
agreed since the Target Balance Sheet Date to do any of the
things described in the preceding clauses (i) through (vii) and
are not currently involved in any negotiations to do any of the
things described in the preceding clauses (i) through (vii)
(other than negotiations with Acquiror and its representatives
regarding the transactions contemplated by this Agreement and
the Target Option Agreement).
3.6 Absence of Undisclosed Liabilities. Target and its
Subsidiaries have no material obligations or liabilities of any
nature (whether known or unknown, asserted or unasserted,
absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and due or to become due), other than (i) those
set forth or adequately provided for in the Balance Sheet
included in the Target 1999 Audited Statements (the "Target
Balance Sheet") or in the footnotes thereto, (ii) those incurred
in the ordinary course of business since the Target Balance
Sheet Date and consistent with past practice (only if such
obligations or liabilities do not arise out of, result from or
relate to any breach of contract, breach of warranty, tort,
infringement or violation of law); and (iii) those incurred in
connection with the execution of this Agreement.
3.7 Litigation.
(a) Except as set forth on Schedule 3.7(a), there is
no private or governmental action, suit, proceeding, claim,
arbitration or investigation pending before any Governmental
Entity, or to the knowledge of Target or any of its Subsidiaries
threatened, against Target or any of its Subsidiaries or any of
their respective properties or any of their respective officers
or directors (in their capacities as such), except for
policyholder claims in the ordinary course of business made
under insurance policies issued by Target's Subsidiaries none of
which (i) if determined adversely would have or could reasonably
be expected to have a Material Adverse Effect on Target, or (ii)
involves claims of bad faith, extra contractual claims, or
claims giving rise to punitive damages (in each case, excluding
any and all damages based on amounts recoverable under the terms
of the applicable insurance policy). There is no agreement,
judgment, injunction, decree or order against Target or any of
its Subsidiaries, or, to the knowledge of Target and its
Subsidiaries, any of their respective directors or officers (in
their capacities as such), that would prevent, enjoin, alter or
materially delay any of the transactions contemplated by this
Agreement, or that has or could reasonably be expected to have a
Material Adverse Effect on Target. Neither Target nor any of
its Subsidiaries has been advised by any Person that such Person
is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such agreement,
judgment, injunction, decree or order.
(b) Except as described on Schedule 3.7(b), during
the five year period prior to the date hereof there have been no
civil, criminal or administrative proceedings or investigations
to which Target or any of its Subsidiaries has been a party
which sought (i) payment of any criminal or administrative fines
or penalties by Target or any of its Subsidiaries or any
employee thereof, whether in such Person's capacity as an
employee of Target or any Target Subsidiary or otherwise, (ii)
civil damages in excess of $250,000, or (iii) injunctive relief
of any type or nature against Target or any of its Subsidiaries.
3.8 Restrictions on Business Activities. There is no
agreement, judgment, injunction, decree or order binding upon
Target or any of its Subsidiaries which has or reasonably could
be expected to have the effect of prohibiting or materially
impairing any business practice of Target or any of its
Subsidiaries, any acquisition of property by Target or any of
its Subsidiaries or the conduct of business by Target or any of
its Subsidiaries. Neither Target nor any of its Subsidiaries
has been advised by any Person that such Person is contemplating
issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such agreement, judgment, injunction,
decree or order.
3.9 Insurance Licenses, Insurance Reports and Target
Authorizations.
(a) Target and its Subsidiaries have all valid and
subsisting insurance licenses required to conduct the insurance
business conducted by each of them (the "Insurance Licenses"),
and have timely filed all insurance reports, registrations and
statements (together with the Annual Statements and Quarterly
Statements referred to below, the "Insurance Reports"), required
to be obtained by any of them from or filed with (i) the
Pennsylvania Department of Insurance, (ii) the Delaware
Department of Insurance, (iii) the Virginia Department of
Insurance, or (iv) any other state or foreign insurance
licensing authority (collectively, the "Insurance Authorities").
Copies of all Insurance Licenses applied for, issued to or held
by Target's Subsidiaries are attached to Schedule 3.9. All
Insurance Reports filed with any Insurance Authority by Target
or its Subsidiaries complied in all material respects with the
applicable statutes, rules and regulations enforced or
promulgated by such Insurance Authority, and were true, correct
and complete as so filed therewith. For each Subsidiary of
Target that conducts an insurance business, the required annual
statutory financial statements (including the notes thereto)
(the "Annual Statements") and the statutory financial statements
required to be filed on a quarterly basis (including the notes
thereto) (the "Quarterly Statements") of each such Subsidiary
are and, with respect to Annual Statements and Quarterly
Statements required to be filed after the date hereof and prior
to the Effective Time will be, prepared in conformity with
accounting practices prescribed or permitted by the Insurance
Authority of such Subsidiary's state of domicile ("SAAP")
consistently applied, and present fairly (or will present
fairly) the admitted assets, liabilities and capital and surplus
of each such Subsidiary at the dates stated (or to be stated)
therein on the basis of SAAP consistently applied. Copies of
all such Annual Statements and Quarterly Statements which were
required to be filed since January 1, 1996, have been (and, with
respect to any such statements required to be filed after the
date hereof and prior to the Effective Time, will be) provided
to Acquiror.
(b) Neither Target nor any of its Subsidiaries has
received any approvals from any Insurance Authority to engage
in, within the last three fiscal years has engaged in, or has
sought or plans to seek any approval to engage in, any
"permitted practices" in the preparation, submission or filing
of any Insurance Reports which deviate from SAAP as prescribed
by any such Insurance Authority.
(c) Target and each of its Subsidiaries has obtained
from each Governmental Entity (other than Insurance Authorities)
all other consents, licenses, permits, grants and other
authorizations (i) pursuant to which Target or any of its
Subsidiaries operates or holds any interest in any of its
properties, or (ii) that is required for the operation of its
business or the holding of any such interest other than its
conduct of the business of insurance (sub-items (i) and (ii)
herein, together with the Insurance Licenses, are collectively
referred to as the "Target Authorizations"). Each of the Target
Authorizations is in full force and effect and will not be
revoked or otherwise adversely affected by the Merger, except as
set forth on Schedule 3.9.
(d) During the three (3) years prior to the date
hereof, each Target Subsidiary which conducts an insurance
business (a) has not had its license or qualification to conduct
insurance business in any jurisdiction revoked or suspended or
been involved in a proceeding to revoke or suspend such license
or qualification, nor to the best knowledge of Target and its
Subsidiaries has any investigation been conducted, or is
pending, in any such jurisdiction with a view to revocation or
suspension of any such license, and (b) has complied in all
material respects with all laws, regulations and orders of
Insurance Authorities applicable to its businesses and the
present use of its properties, and the business conducted by it,
and does not violate in any material respect any such laws,
regulations or orders.
3.10 Title to Property. Target and its Subsidiaries have
good and valid title to all of their respective properties,
interests in properties and assets, real and personal, reflected
in the Target Balance Sheet or acquired after the Target Balance
Sheet Date (except properties, interests in properties and
assets sold or otherwise disposed of since the Target Balance
Sheet Date in the ordinary course of business, none of which
were material in nature or amount), or in the case of leased
properties and assets, valid leasehold interests in properties
or assets used in the business of Target and its Subsidiaries,
free and clear of all Liens of any kind or character, except (i)
Liens for current Taxes not yet due and payable, (ii) such
imperfections of title, Liens and easements as do not and will
not materially detract from or interfere with the current or
proposed use of the properties subject thereto or affected
thereby, or otherwise materially impair current or proposed
business operations involving such properties, and (iii) Liens
securing debt which is fully reflected on the Target Balance
Sheet and the notes thereto. The plant, property and equipment
of Target and its Subsidiaries used in their business operations
are in good operating condition and repair, ordinary wear and
tear excepted. All properties used in the business operations
of Target and its Subsidiaries are reflected in the Target
Balance Sheet to the extent GAAP requires the same to be
reflected thereon. Schedule 3.10 identifies (i) each parcel of
real property owned or leased by Target or any of its
Subsidiaries, (ii) any items of personal property of Target or
any of its Subsidiaries utilized by its insurance agents or
other third parties under any lease or bailment requiring annual
payments in excess of $10,000 per lease or bailment, and (iii)
copies of all leases of real property with affiliates of Target.
3.11 Intellectual Property.
(a) Target and its Subsidiaries own, free and clear
of all Liens, or are licensed or otherwise possess legally
enforceable rights to use, all patents, trademarks, trade names,
service marks, domain names, copyrights, maskworks, net lists,
schematics, technology, knowhow, trade secrets, inventory,
ideas, algorithms, processes, computer software programs or
applications, and all other tangible or intangible proprietary
information or material (collectively, "Intellectual Property")
used in the business of Target or its Subsidiaries. Target or
its Subsidiaries own and possess source code for all software
owned by Target or its Subsidiaries and own or have valid
licenses and possess source code for all products, to the extent
that they contain software, distributed and presently supported
by Target or its Subsidiaries. Target and its Subsidiaries have
not (i) licensed any of their Intellectual Property in source
code form to any Person, or (ii) entered into any exclusive
Contracts relating to their Intellectual Property.
(b) Schedule 3.11 lists (i) all patents and patent
applications, all registered and material unregistered
trademarks, domain names, trade names and service marks, and all
registered copyrights and maskworks included in the Intellectual
Property, including the jurisdictions in which each such
Intellectual Property right has been issued or registered or in
which any application for such issuance and registration has
been filed, (ii) all licenses, sublicenses and other Contracts
as to which Target or any of its Subsidiaries is a party and
pursuant to which any Person is authorized to use any
Intellectual Property, and (iii) all licenses, sublicenses and
other Contracts as to which Target or any of its Subsidiaries is
a party and pursuant to which Target or any of its Subsidiaries
is authorized to use any third party patents, trademarks,
copyrights, trade secrets or other proprietary right, including
software ("Third Party Intellectual Property Rights") used in
the business of Target or any of its Subsidiaries or are
incorporated in, are, or form a part of any of Target's or any
of its Subsidiaries' products or services.
(c) To the knowledge of Target and its Subsidiaries,
there is no and has been no unauthorized use, disclosure,
infringement or misappropriation of any Intellectual Property
rights of Target or any of its Subsidiaries, or any Third Party
Intellectual Property Right of any third party to the extent
licensed by or through Target or any of its Subsidiaries, by any
Person, including any employee or former employee of Target or
any of its Subsidiaries. Neither Target nor any of its
Subsidiaries has entered into any Contract to indemnify any
other Person against any charge of infringement of any
Intellectual Property, other than indemnification provisions
contained in purchase orders or licensing agreements entered
into in the ordinary course of business.
(d) Neither Target nor any of its Subsidiaries is,
nor will any of them be as a result of the execution and
delivery of this Agreement or the performance of its obligations
hereunder, in breach of any license, sublicense or other
Contract relating to the Intellectual Property or Third Party
Intellectual Property Rights, and no such license or sublicense
shall be terminated or terminable by any other party thereto
(with or without notice or penalty) as a result of the
transactions contemplated by this Agreement.
(e) All patents, trademarks, trade names, service
marks, domain names and copyrights held by Target or any of its
Subsidiaries are valid and subsisting. Neither Target nor any
of its Subsidiaries (i) has received a claim or been sued in any
suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, trade names, service
marks, domain names, copyrights or violation of any trade secret
or other proprietary right of any third party, or (ii) has
brought any action, suit or proceeding for infringement of
Intellectual Property or breach of any license or Contract
involving Intellectual Property against any third party. The
operation of the business of Target and its Subsidiaries, and
the use, marketing, licensing, lease or sale of the products and
services of Target and its Subsidiaries, does not infringe any
patent, trademark, trade name, service xxxx, domain name,
copyright, trade secret or other proprietary right of any third
party.
(f) Target and its Subsidiaries have obtained valid
written assignments from any consultants and employees who
contributed to the creation or development of Intellectual
Property of all such Persons' rights to such contributions that
Target or its Subsidiaries do not already own by operation of
law.
(g) Target and its Subsidiaries have taken all
necessary steps to protect and preserve the confidentiality of
all Intellectual Property not otherwise protected by patents,
patent applications or copyright ("Confidential Information").
All use or disclosure of Confidential Information owned by
Target or its Subsidiaries by or to a third party has been
pursuant to the terms of a written Contract between Target or
its Subsidiaries and such third party. All use or receipt of
Confidential Information not owned by Target or its Subsidiaries
has been pursuant to the terms of a written Contract between
Target or its Subsidiaries and the owner of such Confidential
Information, or is otherwise lawful.
3.12 Environmental Matters. Except as set forth on
Schedule 3.12, (i) to the best of Target's knowledge no
methylene chloride or asbestos is contained in or has been used
at or released from the Facilities in violation of Environmental
and Safety Laws; (ii) all Hazardous Materials and wastes have
been disposed of in accordance with all Environmental and Safety
Laws in all material respects; (iii) Target and its Subsidiaries
have received no notice (verbal or written) of any noncompliance
of the Facilities or its past or present operations with
Environmental and Safety Laws; (iv) no notices, administrative
actions or suits are pending or, to Target's knowledge,
threatened relating to any material violation of any
Environmental and Safety Laws; (v) neither Target nor any of its
Subsidiaries is a potentially responsible party under the
federal Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), or similar state statute, arising out
of events occurring prior to the Effective Time; (vi) to the
best of Target's knowledge, there have not been in the past, and
are not now, any Hazardous Materials on, under or migrating to
or from the Facilities or Property; (vii) there have not been in
the past, and are not now, any underground tanks or underground
improvements at, on or under the Property including without
limitation, treatment or storage tanks, sumps, or water, gas or
oil xxxxx; (viii) there are no polychlorinated biphenyls
("PCBs") deposited, stored, disposed of or located on the
Property or Facilities or any equipment on the Property
containing PCBs at levels in excess of 50 parts per million;
(ix) there is no formaldehyde on the Property or in the
Facilities, nor any insulating material containing urea
formaldehyde in the Facilities; (x) the Facilities and Target's
and its Subsidiaries' uses and activities therein have at all
times complied with all Environmental and Safety Laws in all
material respects; and (xi) Target and its Subsidiaries have all
material permits and licenses required to be issued under
Environmental and Safety Laws and are in material compliance
with the terms and conditions of each such permit and license.
3.13 Taxes. Target and its Subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax
purposes of which Target or any of its Subsidiaries is or has
been a member, have timely filed all Tax Returns required to be
filed by them and have paid (or withheld and paid) all Taxes
owed by (or required to be withheld and paid by) Target and its
Subsidiaries (whether or not shown on any Tax Return), unless
appropriately contested thereby and accrued in the balance sheet
contained in the Target 1999 Audited Statements. All such Tax
Returns are complete and accurate in all respects and properly
reflect the Taxes of Target and its Subsidiaries for the periods
covered thereby. Target has provided adequate accruals in
accordance with GAAP in the Target Financial Statements for any
Taxes that were not paid as of the date of such financial
statements, whether or not shown as being due on any Tax Return.
Target and its Subsidiaries are not delinquent in the payment of
any Tax, assessment or similar governmental charge. Neither
Target nor any of its Subsidiaries has received any notice that
any Tax deficiency has been asserted against Target or any of
its Subsidiaries, and there is no threat of such assertion.
There is no unpaid assessment, proposal for additional Taxes,
deficiency or delinquency in the payment of any Tax that could
be asserted by any Tax Authority. Neither Target nor any of its
Subsidiaries has violated any applicable federal, state, local
or foreign Tax law in any respect. Except as disclosed in the
SEC Documents and the Target 1999 Audited Statements, (i) no
claim for Taxes has become a Lien against the property of Target
or any of its Subsidiaries or is being asserted against Target
or any of its Subsidiaries, (ii) no action, suit, proceeding,
investigation, claim or audit has formally commenced and no
written notification has been given that such audit or other
proceeding is pending or threatened with respect to Target or
any of its Subsidiaries in respect of any Tax, (iii) no
extension or waiver of the statute of limitations on the
assessment or collection of any Tax has been granted by Target
or any of its Subsidiaries and is currently in effect, and (iv)
there is no agreement, Contract or arrangement to which Target
or any of its Subsidiaries is a party that may result in the
payment of any amount that would not be deductible by reason of
Section 280G, 162 or 404 of the Code. Target has not been and
will not be required to include any adjustment in Taxable income
for any Tax period (or portion thereof) pursuant to Section 481
or 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions, events or
accounting methods employed prior to the Merger. Except as set
forth on Schedule 3.13, neither Target nor any of its
Subsidiaries is a party to any tax sharing or tax allocation
agreement, nor does Target or any of its Subsidiaries owe any
amount under any such agreement. No consent to the application
of Section 341(f)(2) of the Code has been filed with respect to
Target or any of its Subsidiaries. All Taxes that Target or any
of its Subsidiaries is or was required to withhold or collect
have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Entity, Tax
Authority or other Person. Target and its Subsidiaries will not
be required to include any amount in Taxable income for any
Taxable period (or portion thereof) ending after the Closing
Date as a result of a change in the method of accounting for a
Taxable period ending prior to the Closing Date, any "closing
agreement" as described in Section 7121 of the Code (or any
corresponding provision of state, local, or foreign tax laws)
entered into prior to the Closing Date, any sale reported on the
installment method that occurred prior to the Closing Date, or
any Taxable income from "excess loss accounts" or "intercompany
transactions" as defined in the Code or the applicable Treasury
Regulations (or any corresponding provision of state, local or
foreign tax laws). The United States federal, state and foreign
Tax Returns of Target and its Subsidiaries have been audited by
the IRS or relevant state or foreign Tax Authorities or are
closed by the applicable statute of limitations for all taxable
years set forth on Schedule 3.13. Schedule 3.13 sets forth a
reasonably detailed description of the nature of any pending
audit relating to Taxes. No claim has been made by a Tax
Authority in any jurisdiction in which Target or any of its
Subsidiaries does not file Tax Returns that Target or any of its
Subsidiaries is required to file Tax Returns in such
jurisdiction and, to the knowledge of Target and its
Subsidiaries, no Tax Authority could reasonably make any such
claim.
3.14 Employee Benefit Plans.
(a) Schedule 3.14 lists (i) all employee benefit
plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and related
trusts which are maintained or contributed to by Target or any
of its Subsidiaries or with respect to which Target or any of
its Subsidiaries has any liability or obligation to contribute,
(ii) each loan to a non-officer employee or former employee of
Target or any of its Subsidiaries, loans to officers and
directors of Target or any of its Subsidiaries and any stock
option, stock purchase, phantom stock, stock appreciation right,
severance, sabbatical, employee relocation, cafeteria benefit
(Code Section 125) or dependent care (Code Section 129), or
accident insurance plans, programs or arrangements benefiting
employees or former employees of Target or any of its
Subsidiaries, (iii) all bonus, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements
benefiting employees or former employees of Target or any of its
Subsidiaries, (iv) other fringe or employee benefit plans,
programs or arrangements that apply to management and other
employees of Target or any of its Subsidiaries, and (v) any
current or former employment or executive compensation or
severance agreements, written or otherwise, as to which
unsatisfied obligations of Target or any of its Subsidiaries of
greater than $25,000 remain for the benefit of, or relating to,
any present or former employee, consultant or director of Target
or any of its Subsidiaries (together, the "Target Employee
Plans").
(b) Target has furnished to Acquiror a copy of each
of the Target Employee Plans and related plan documents
(including trust documents, insurance policies or contracts with
third party administrators, actuaries, investment managers,
consultants and all independent contractors related to such
Target Employee Plans, employee booklets, employment manuals,
policy manuals, summary plan descriptions and other authorizing
documents, and any material employee communications relating
thereto), the most recent actuarial report, where applicable,
and has, with respect to each Target Employee Plan which is
subject to ERISA reporting requirements, provided copies of the
Form 5500 reports filed for the last three plan years. Any
Target Employee Plan intended to be qualified under Section
401(a) of the Code has either obtained from the Internal Revenue
Service a favorable determination letter as to its qualified
status under the Code, including all amendments to the Code
effected by the Tax Reform Act of 1986 and subsequent
legislation, or has applied to the Internal Revenue Service for
such a determination letter prior to the expiration of the
requisite period under applicable Treasury Regulations or
Internal Revenue Service pronouncements in which to apply for
such determination letter and to make any amendments necessary
to obtain a favorable determination. Target has furnished
Acquiror with the most recent Internal Revenue Service
determination letter issued with respect to each such Target
Employee Plan, and nothing has occurred since the issuance of
each such letter which would reasonably be expected to cause the
loss of the tax qualified status of any Target Employee Plan
subject to Code Section 401(a). Target has furnished Acquiror
with all registration statements and prospectuses prepared in
connection with each Target Employee Plan.
(c) (i) No Target Employee Plan promises or provides
retiree medical or other retiree welfare benefits to any Person,
except as required by applicable law; (ii) there has been no
"prohibited transaction," as such term is defined in Section 406
of ERISA and Section 4975 of the Code, with respect to any
Target Employee Plan; (iii) each Target Employee Plan has been
administered in accordance with its terms and in compliance with
the requirements prescribed by any and all statutes, rules and
regulations (including ERISA and the Code), and Target and each
of its Subsidiaries have performed all obligations required to
be performed by them under, are not in any material respect in
default under or violation of, and have no knowledge of any
default or violation by any other party to, and are otherwise in
full compliance with ERISA, the Code and other applicable laws
with respect to any of the Target Employee Plans; (iv) neither
Target nor any of its Subsidiaries is subject to any liability
or penalty under Sections 4971 through 4980E of the Code or
Title I of ERISA with respect to any of the Target Employee
Plans; (v) all contributions required to be made by Target or
any of its Subsidiaries to any Target Employee Plan have been
made on or before their due dates and the full amount required
has been accrued for contributions to each Target Employee Plan
for the current plan years; (vi) with respect to each Target
Employee Plan, no "reportable event" within the meaning of
Section 4043 of ERISA (excluding any such event for which the
thirty (30) day notice requirement has been waived under the
regulations to Section 4043 of ERISA) nor any event described in
Section 4062, 4063 or 4041 of ERISA has occurred; (vii) no
Target Employee Plan is covered by, and neither Target nor any
of its Subsidiaries nor any trade or business (whether or not
incorporated) which is, or at any time within the six-year
period preceding the date of this Agreement, was treated as a
single employer with Target (an "ERISA Affiliate") within the
meaning of Section 414(b), (c), (n) or (o) of the Code,
maintains or contributes to or at any time within the six-year
period preceding the date of this Agreement maintained or
contributed to or had an obligation to contribute to any
employee benefit plan covered by or has incurred or expects to
incur any liability under Part 3 of Subtitle B of Title I of
ERISA, Title IV of ERISA or Section 412 of the Code; (viii) each
Target Employee Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its
terms, without liability to Acquiror and without any additional
accrual on the books of Target or any of its Subsidiaries; and
(ix) no Target Employee Plan promises or provides benefits to
any of Target's or its Subsidiaries' independent contractors or
subcontractors. With respect to each Target Employee Plan
subject to ERISA as either an employee pension plan within the
meaning of Section 3(2) of ERISA or an employee welfare benefit
plan within the meaning of Section 3(1) of ERISA, Target has
prepared in good faith and timely filed all requisite
governmental reports (which were true and correct in all
material respects as of the date filed) and has properly and
timely filed and distributed or posted all notices and reports
to employees required to be filed, distributed or posted with
respect to each such Target Employee Plan. No suit,
administrative proceeding, action or other litigation has been
brought, or to the knowledge of Target or its Subsidiaries is
threatened, against or with respect to any such Target Employee
Plan, including any audit or inquiry by the IRS or United States
Department of Labor. No payment or benefit which will or may be
made by Target or any of its Subsidiaries to any employee will
be characterized as an "excess parachute payment" within the
meaning of Section 280G(b)(1) of the Code.
(d) The consummation of the transactions contemplated
by this Agreement will not (i) entitle any current or former
employee or other service provider of Target, any of its
Subsidiaries or any other ERISA Affiliate to severance benefits
or any other payment, except as expressly provided in this
Agreement, or (ii) accelerate the time of payment or vesting, or
increase the amount of compensation due any such employee or
service provider.
(e) There has been no amendment to, written
interpretation or announcement (whether or not written) by
Target or any of its Subsidiaries relating to, or change in
participation or coverage under, any Target Employee Plan which
would materially increase the expense of maintaining such Plan
above the level of expense incurred with respect to that Plan as
reflected in the Target Financial Statements for the most
recently completed fiscal year.
(f) Target's Employee Stock Ownership Plan (the
"ESOP") is an "employee stock ownership plan" within the meaning
of Section 4985(e)(7) of the Code and is qualified under Section
401(a) of the Code. The ESOP has been duly constituted in
accordance with the Trust Agreement dated as of January 1, 1997,
as amended (the "Trust Agreement"), by and between Target and
Bank of Lancaster, N. A. (the "Trustee"), is validly existing
and is Tax-exempt under Section 501(a) of the Code. Since
January 1, 1997, the ESOP has been operated in substantial
compliance with terms of the Trust Agreement and the
requirements of ERISA and the Code, and no Person or
Governmental Entity has made any claim or assertion to the
contrary, and no basis exists for any such claim or assertion.
The ESOP has the requisite power and authority to own its
properties and assets. The execution, delivery and performance
of this Agreement by Target will not involve any transaction
which is subject to the prohibitions of Section 406 of ERISA for
which there is no exemption and will not otherwise constitute a
violation by the ESOP of, or give rise to any liability under,
any other provision of Title I of ERISA or Section 4975 of the
Code.
3.15 Certain Agreements Affected by the Merger. Except as
set forth on Schedule 3.15, neither the execution and delivery
of this Agreement nor the consummation of the transactions
contemplated hereby will (i) result in any payment (including
severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director or employee of Target or
any of its Subsidiaries, (ii) materially increase any benefits
otherwise payable by Target, or (iii) result in the acceleration
of the time of payment or vesting of any such benefits.
3.16 Employees and Insurance Agents.
(a) Schedule 3.16 sets forth (i) information
regarding (including copies of Contracts with) all managing
general agents with underwriting authority on behalf of Target's
Subsidiaries, and (ii) names, annual rates of salary, bonus,
profit-sharing, incentive compensation, employee benefits and
other material compensation of all present officers, directors,
employees, agents (including insurance agents) and independent
contractors of Target and its Subsidiaries (other than employees
of Target or its Subsidiaries with aggregate compensation of
less than $40,000 reported on their 1999 Forms W-2 as reported
to the Internal Revenue Service). Schedule 3.16 also sets forth
all loans and advances (other than routine travel advances to be
repaid or formally accounted for within thirty days and
reflected on the books of Target) made by Target or any of its
Subsidiaries to employees or agents (including insurance agents)
since the Target Balance Sheet Date. Target and its
Subsidiaries are in compliance in all material respects with all
applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of
employment, wages, hours and occupational safety and health and
employment practices, and is not engaged in any unfair labor
practice. Target and its Subsidiaries have withheld all amounts
required by law or by Contract to be withheld from the wages,
salaries and other payments to employees; and are not liable for
any arrears of wages or any Taxes or any penalty for failure to
comply with any of the foregoing. Target and its Subsidiaries
are not liable for any material payment to any trust or other
fund or to any Governmental Entity with respect to unemployment
compensation benefits, social security or other benefits or
obligations for employees (other than routine payments to be
made in the normal course of business and consistent with past
practice). There are no pending claims against Target or any of
its Subsidiaries for any material amounts under any workers
compensation plan or policy or for long term disability.
Neither Target nor any of its Subsidiaries has any obligations
under COBRA with respect to any former employees or qualifying
beneficiaries thereunder, except for obligations that are not
material in amount. There are no controversies pending or, to
the knowledge of Target or any Subsidiary, threatened, between
Target or any of its Subsidiaries and any of their respective
employees, which controversies have or would reasonably be
expected to result in an action, suit, proceeding, claim,
arbitration or investigation by or before any Governmental
Entity. Neither Target nor any of its Subsidiaries is a party
to any collective bargaining agreement or other labor union
contract, nor does Target or any of its Subsidiaries have
knowledge of any activities or proceedings of any labor union to
organize any such employees. To the knowledge of Target and its
Subsidiaries, no employees of Target or any of its Subsidiaries
are in material violation of any term of an employment contract,
patent disclosure agreement, noncompetition agreement, or
restrictive covenant to a former employer relating to the right
of any such employee to be employed by Target or any of its
Subsidiaries because of the nature of the business conduced or
presently proposed to be conducted by Target or any of its
Subsidiaries or to the use of trade secrets or proprietary
information of others.
(b) Target and its Subsidiaries conduct their
insurance business solely through the American independent
agency system, and none of them is engaged in any direct sales
of insurance products to customers by way of the internet or any
other direct-writing distribution arrangement. Target's
relationships with its independent agents can reasonably be
characterized as good, and no agent (or group of agents) which
accounted for more than one percent (1%) of the insurance
premium of Target and its Subsidiaries during the fiscal year
ended December 31, 1999, has indicated that it will discontinue
or materially decrease its level of business written with any of
Target's Subsidiaries, whether as a result of the Merger or
otherwise, and neither Target nor any of its Subsidiaries has
any reason to believe that any such agent will discontinue or
materially decrease its business written with Target's
Subsidiaries. Schedule 3.16 identifies each managing general
agent engaged by any Target Subsidiary in its business of
insurance and the nature of the business relationship therewith.
3.17 Interested Party Transactions. Except as disclosed in
the Target SEC Documents, (i) neither Target nor any of its
Subsidiaries is indebted to any director or officer of Target or
any of its Subsidiaries (except for amounts due as normal
salaries and bonuses and in reimbursement of ordinary expenses),
(ii) no such Person is indebted to Target or any of its
Subsidiaries, and (iii) there are no other transactions of the
type required to be disclosed pursuant to Items 402 and 404 of
Regulation S-K under the Securities Act and the Exchange Act.
3.18 Insurance. Schedule 3.18 lists all insurance policies
owned or held by Target and its Subsidiaries. All such
insurance policies are in full force and effect, all premiums
with respect thereto covering all periods up to and including
the date hereof have been paid to the extent due and no notice
of cancellation or termination has been received with respect to
any such policy. No insurance policy required to be listed on
Schedule 3.18 shall be cancelable, terminable, or subject to
renegotiation as to terms or coverage by the issuer thereof as a
result of the consummation of the Merger or the other
transactions contemplated by this Agreement.
3.19 Books and Records. The books of account of Target and
its Subsidiaries reflect all material items of income and
expense and all material assets, liabilities and accruals, and
are prepared and maintained in form and substance adequate for
preparing audited financial statements in accordance with GAAP
and in accordance with SAAP as prescribed or permitted by the
Pennsylvania, Delaware and Virginia Departments of Insurance.
The minute books of Target and its Subsidiaries have been
provided to Acquiror and contain complete and accurate summaries
of all meetings of directors and stockholders or actions by
written consent since the time of incorporation of Target and
its respective Subsidiaries through the date of this Agreement,
and reflect all transactions referred to in such minutes
accurately in all material respects. Such minutes or consents
have not been rescinded or amended except as reflected in such
minute books.
3.20 Complete Copies of Materials. Target has delivered
true and complete copies of each document that has been
requested by Acquiror, its counsel and its accountants in
connection with their business, legal and accounting review of
Target and its Subsidiaries.
3.21 Brokers' and Finders' Fees. Except for payment
obligations to Xxxxxxx, Xxxxxxx & Co. to be paid by Target as
set forth in an engagement letter, a true and complete copy of
which has been made available to Acquiror, Target and its
Subsidiaries have not incurred, nor will they incur, directly or
indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar
charges in connection with this Agreement or any transaction
contemplated hereby.
3.22 Proxy Statement. The information supplied by Target
for inclusion in the proxy statement to be sent to the
stockholders of Target in connection with the meeting of
Target's stockholders to consider the Merger (the "Target
Stockholders Meeting") (such proxy statement as amended or
supplemented is referred to herein as the "Proxy Statement")
shall comply in all material respects with the requirements of
the Exchange Act and shall not, on the date the Proxy Statement
is first mailed to Target's stockholders, at the time of the
Target Stockholders Meeting or at the Effective Time, contain
any statement which, at such time, is false or misleading with
respect to any material fact, or omit to state any material fact
necessary in order to make the statements made therein, in light
of the circumstances under which they are made, not false or
misleading; or omit to state any material fact necessary to
correct any statement in any earlier communication with respect
to the solicitation of proxies for the Target Stockholders
Meeting which has become false or misleading. If at any time
prior to the Effective Time any event or information is
discovered by Target which should be set forth in a supplement
to the Proxy Statement, Target shall promptly inform Acquiror
and Merger Sub. Notwithstanding the foregoing, Target makes no
representation, warranty or covenant with respect to any
information supplied by Acquiror or Merger Sub which is
contained in any of the foregoing documents.
3.23 Opinion of Financial Advisor. Target has been advised
in writing by its financial advisor, Xxxxxxx Xxxxxxx & Co., that
in such advisor's opinion, as of the date of this Agreement that
the consideration to be received by the stockholders of Target
in the Merger is fair, from a financial point of view, to the
stockholders of Target.
3.24 Vote Required. The affirmative vote of the holders of
a majority of the shares of Target Common Stock, as determined
as of the record date set for the Target Stockholders Meeting,
voting in person or by proxy at such meeting at which a quorum
is present and acting throughout, is the only vote of the
holders of any of Target's capital stock necessary to approve
this Agreement and the transactions contemplated hereby.
3.25 Board Approval. The Board of Directors of Target has
(i) approved this Agreement and the Merger, (ii) determined that
the Merger is in the best interests of Target, and (iii)
recommended that the stockholders of Target approve this
Agreement and consummation of the Merger.
3.26 Voting Agreement; Irrevocable Proxies. All of the
Selected Stockholders listed on Schedule 3.26 have agreed in
writing to vote for approval of the Merger pursuant to the
Voting Agreement.
3.27 Certain Laws and Rights Not Applicable. The Board of
Directors of Target has taken all actions so that the
restrictions contained in Pennsylvania Law applicable to a
combination or majority share acquisition (as determined
thereunder) will not apply to the execution, delivery or
performance of this Agreement, the Target Option Agreement, the
Voting Agreement, the consummation of the Merger, or the other
transactions contemplated by this Agreement, the Target Option
Agreement or the Voting Agreement. No rights or obligations of
any Person (including Target or Target's stockholders) under the
Rights Agreement dated as of February 9, 1999, between Target
and American Stock Transfer & Trust Company, as amended (the
"Rights Plan"), will be triggered or created by the Parties
entering into this Agreement and the Target Option Agreement, or
by consummating the Merger.
3.28 Agreements. Schedule 3.28 contains a true and
complete list of all oral and written Contracts to which Target
or any of its Subsidiaries is a party or by which any of their
properties or assets may be bound and which (a) involve
obligations by any party thereto in excess of $25,000; (b)
contain any provision or option relating to the sale by Target
or any of its Subsidiaries of any business or material assets;
or (c) are Contracts to which any Governmental Entity is a
party; provided, that notwithstanding the foregoing provisions
of this Section 3.28, the Target Disclosure Schedule need not
list, and for such purpose the term "Contracts" shall not
include, agreements for which the obligations of the parties
thereto have been completely fulfilled. All Contracts required
to be disclosed on Schedule 3.28 were entered into by Target or
its Subsidiaries in the ordinary course of business (except as
otherwise indicated thereon), are valid and binding and in full
force and effect against Target or any Subsidiary of Target that
is a party thereto and each of the other parties thereto, and
there exists no material breach or default by Target or any of
its Subsidiaries that is a party thereto or any claim of such a
breach or default, or any event which, with notice or lapse of
time or both, would constitute a material breach or default by
Target or any of its Subsidiaries that is a party thereto or by
any other party thereto. Except as set forth on Schedule 3.28,
the execution, delivery and performance of this Agreement will
not cause or result in a breach or default, or result in
termination or modification, with or without notice or consent,
of any Contract required to be disclosed on Schedule 3.28.
Target has provided to Acquiror true and complete copies,
including amendments, modifications and assignments relating
thereto, of all such written Contracts and true and correct
summaries of all such oral Contracts.
3.29 Projections. The financial projections of Target
dated as of April 14, 2000, which were prepared for and
submitted to A. M. Best and have been furnished to Acquiror and
Merger Sub, were prepared in good faith and with reasonable care
based on reasonable assumptions and, at the time such
projections and information were provided, in the reasonable
business judgment of Target constitute reasonably attainable
estimates of potential future operating results, in each
instance subject to the assumptions set forth therein.
3.20 Certain Acts. Neither Target nor any of its
Subsidiaries nor any of their former or current officers,
directors, employees, agents or representatives, has, directly
or indirectly, (a) made any contribution, gift, bribe, rebate,
payoff, influence payment, kickback or other payment to any
Person, private or public, regardless of form, whether in money,
property or services (i) to obtain favorable treatment in
securing and maintaining business or any Target Authorizations,
(ii) to pay for favorable treatment for business secured, (iii)
to obtain special concessions or for special concessions already
obtained, for or in respect of Target or any of its Subsidiaries
or Affiliates, or (iv) in violation of any laws, or (b)
established or maintained any fund or asset that has not been
recorded in the books and records of Target.
3.31 Banking Information. Schedule 3.31 contains a list of
all bank accounts, custodial accounts and credit facilities and
authorized signatories on bank accounts, custodial accounts and
credit facilities of Target and its Subsidiaries. No Person
other than as listed on Schedule 3.31 is authorized to withdraw
any funds on such bank accounts or custodial accounts or to draw
down on such credit facilities.
3.32 Loss Reserves. Target has provided to Acquiror its
independent actuary's opinion and analysis of the loss reserves
of Target and its Subsidiaries as of September 30, 1999, and
will provide its independent actuary's opinion and analysis of
such loss reserves as of December 31, 1999, and as of March 31,
2000, as soon as available prior to the Effective Time. All
statistical and other data to be described in the letter from
Target to Acquiror dated as of a date which shall be the earlier
to occur of (i) 60 days after the date hereof, or (ii) five
business days prior to the Closing, which information
constituted all material information provided to Target's
actuaries in connection with the preparation of its reports with
respect to the September 30, 1999, December 31, 1999, and March
31, 2000, loss reserve analyses of Target and its Subsidiaries,
will be true, correct and complete in all material respects as
of such dates. From the Target Balance Sheet Date through the
Closing Date, Target and its Subsidiaries have reserved and will
continue to reserve against losses in a manner consistent with
past practice.
3.33 Insurance Policies; Reinsurance.
(a) Schedule 3.33 contains a true and complete list
of all types of insurance policies issued by Target's
Subsidiaries in any jurisdiction. Target has made available to
Acquiror true and complete copies of all forms of insurance
policies of Target's Subsidiaries together with all forms of
endorsements thereto (other than policies or endorsements issued
on forms prepared by the Insurance Services Office).
(b) Schedule 3.33 contains a true and complete list
of all reinsurance agreements to which Target or any of its
Subsidiaries is a party and to which any of them has been a
party since January 1, 1995. Copies of all such reinsurance
agreements have been made available to Acquiror. The
consummation of the Merger will not adversely affect, limit or
terminate the continuing obligations of reinsurers under such
reinsurance agreements.
(c) Except as disclosed on Schedule 3.33, to the
knowledge of Target and its Subsidiaries (i) no material default
of any party under any reinsurance agreement required to be
listed on Schedule 3.33 has occurred and no basis exists for the
declaration of any default or termination right thereunder,
except for agreements which, prior to the Closing, have or will
have expired by their terms, and (ii) each party to any
reinsurance agreement required to be listed on Schedule 3.33
was, at the date such reinsurance agreement was executed and
delivered, solvent and financially capable of fulfilling its
obligations to Target or its Subsidiaries thereunder.
3.34 Data Processing Matters. Except as otherwise set
forth on Schedule 3.34:
(a) Target and its Subsidiaries do not have any of
their respective records, systems, controls, data or information
recorded, stored, maintained, operated or otherwise wholly or
partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access
thereto and therefrom) are not under the exclusive ownership and
direct control of Target and its Subsidiaries.
(b) Target and its Subsidiaries own, lease or license
certain computer equipment, associated peripheral devices, and
related operating and application systems and other software
utilized in connection with their business and operations
(collectively, the "Data Processing Systems"). Target and its
Subsidiaries have not been advised by any consultant or other
third party that the Data Processing Systems do not adequately
meet the data processing needs of Target and its Subsidiaries
and their operations as presently conducted in any material
respect.
(c) Target and its Subsidiaries have taken
appropriate action by instruction, agreement or otherwise with
its employees or other Persons permitted access to system
application programs and data files used in the Data Processing
Systems to protect against unauthorized access, use, copying,
modification, theft and destruction of such programs and files.
Target and its Subsidiaries have not sustained, and are not
aware of any information or circumstances indicating that any of
them may sustain, disruption of business or loss by reason of
unauthorized access, use, copying, modification, theft or
destruction of such programs and files by its current or former
employees or other Persons permitted access thereto.
(d) The data processing and data storage facilities
of Target and its Subsidiaries are adequate, properly protected
and possess proper temperature and humidity control devices and
fire protection equipment.
(e) Target and its Subsidiaries have arranged for
back-up data processing services adequate to meet data
processing needs in the event that the Data Processing Systems
or any component thereof are rendered temporarily or permanently
inoperative as a result of a natural or other disaster.
3.35 Professional Employers Organization Business and
Operations. With respect to Target's equity ownership in All
Staffing, Inc. (the "PEO"), Schedule 3.35 contains (i) a
description of the nature and extent of Target's ownership
interest therein, and (ii) a true and complete list of all
agreements and instruments to which Target or any of its
Subsidiaries, on the one hand, and the PEO or any other owner of
an equity interest in the PEO, on the other hand, is a party
relating to ownership, management or control of the PEO. To the
best of Target's knowledge, the conduct of business by the PEO
complies in all material respects with all applicable laws. No
actions taken or failed to be taken by the PEO in the conduct of
its business has caused or will cause any material liability to
be incurred by Target with respect thereto, either directly or
indirectly. True and complete copies of all of agreements and
instruments required to be listed on Schedule 3.35 have been
previously provided to Acquiror.
3.36 Title Insurance Business and Operations.
(a) With respect to Target's title insurance
Subsidiary, Southern Title Insurance Company ("Southern Title"),
the financial statements of Southern Title included in the
Annual Convention Statements on NAIC Form 9 for the fiscal years
ended December 31, 1999, 1998 and 1997 (including the financial
statements prepared in accordance with SAAP and the accompanying
exhibits and schedules), copies of all of which have been
provided to Acquiror, were prepared in accordance with
accounting practices prescribed or permitted for title insurance
companies by state regulatory authorities of the State of
Virginia, applied on a consistent basis except as otherwise
stated therein, and present fairly in accordance with SAAP the
statutory financial position of Southern Title, as of the dates
of, and the statutory results of its operations for the periods
covered by, such Annual Convention Statements.
(b) Each bank account or similar account for the
deposit of cash or securities (other than agent escrow accounts)
maintained or utilized by Southern Title is (i) wholly owned by
Southern Title or by a joint venture in which Southern Title is
a co-venturer, (ii) reconciled to its bank statements on a
regular and timely basis; and (iii) to the extent such accounts
of Southern Title in the aggregate hold monies or securities in
an escrow or trust capacity, contain in the aggregate a balance
sufficient to meet in the aggregate all escrow and trust
obligations of Southern Title to which such monies or securities
relate.
(c) There is no agreement or understanding between
Target or any of its Subsidiaries (including Southern Title), on
the one hand, and any regulatory authority, on the other hand,
concerning the payment of dividends by Southern Title or the
maintenance of any NAIC Insurance Regulatory Information System
Ratio or adequacy of reserves.
3.37 Representations Complete. No statement, certificate,
instrument or other writing furnished or to be furnished by
Target pursuant to this Agreement or any Schedule or Exhibit
hereto, including the Target Disclosure Schedule, or any
certificate, instrument or other writing furnished or to be
furnished by Target pursuant thereto, contains or will contain
at the Effective Time any untrue statement of a material fact,
or omits or will omit at the Effective Time to state any
material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances
under which made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Acquiror and Merger Sub hereby represent and warrant to
Target as follows:
4.1 Organization, Standing and Power. Each of Acquiror
and Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of
organization. Each of Acquiror and Merger Sub has the requisite
corporate power to own its properties and to carry on its
business as now being conducted and as proposed to be conducted
and is duly qualified to do business and is in good standing in
each jurisdiction where its ownership or leasing of property or
the conduct of its business requires it to be so qualified.
Neither Acquiror nor Merger Sub is in violation of any of the
provisions of its Articles of Incorporation or Code of
Regulations or equivalent organizational documents.
4.2 Authority. Acquiror and Merger Sub have all requisite
corporate power and authority to enter into this Agreement, the
Target Option Agreement and the Voting Agreement and to
consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement, the Target Option
Agreement and the Voting Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of
Acquiror and Merger Sub. This Agreement has been duly executed
and delivered by Acquiror and Merger Sub and constitutes the
valid and binding obligations of Acquiror and Merger Sub
enforceable against Acquiror and Merger Sub in accordance with
its terms, except as enforceability may be limited by bankruptcy
and other laws affecting the rights and remedies of creditors
generally and general principles of equity. The execution and
delivery of this Agreement, the Target Option Agreement and the
Voting Agreement do not, and will not, as the case may be, and
the consummation of the transactions contemplated hereby and
thereby will not, conflict with, or result in any violation of,
or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, amendment,
cancellation or acceleration of any obligation or loss of a
benefit under (i) any provision of the Articles of Incorporation
or Code of Regulations of Acquiror or equivalent organizational
documents of Merger Sub, as amended, or (ii) any Contract,
permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to
Acquiror or Merger Sub or any of their properties or assets, or
to which Acquiror or Merger Sub or any of their properties or
assets is subject or bound or that give rise to any Liens. No
consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required
by or with respect to Acquiror or Merger Sub in connection with
the execution and delivery of this Agreement, the Target Option
Agreement and the Voting Agreement or the consummation by
Acquiror and Merger Sub of the transactions contemplated hereby
and thereby, except for (i) the filing of the Certificate of
Merger as provided in Section 2.2, (ii) the filing of a Form A
with each of the Pennsylvania Department of Insurance, the
Delaware Department of Insurance and the Virginia Department of
Insurance, and the obtaining of approvals therefrom, (iii) the
filing of an appropriate investment request with the Ohio
Department of Insurance and the obtaining of approval therefrom,
(iv) the filing of a Schedule 13D with the SEC to report
entering into the Target Option Agreement, and (v) the filings
required under the HSR Act and the expiration of all applicable
waiting periods thereunder.
4.3 Litigation. There is no agreement, judgment,
injunction, decree or order against Acquiror or any of its
Subsidiaries, or, to the knowledge of Acquiror and its
Subsidiaries, any of their respective directors or officers (in
their capacities as such) that would prevent, enjoin, alter or
materially delay any of the transactions contemplated by this
Agreement, or that has or could reasonably be expected to have a
Material Adverse Effect on the ability of Acquiror to consummate
the transactions contemplated by this Agreement. Neither
Acquiror nor any of its Affiliates has been advised by a Person
that such Person is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any
such agreement, judgment, injunction, decree or order.
4.4 Broker's and Finders' Fees. Except for payment
obligations to McDonald Investments Inc. to be paid by Acquiror,
Acquiror has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar
charges in connection with this Agreement or any transaction
contemplated hereby.
4.5 Proxy Statement. The information supplied by Acquiror
for inclusion in the Proxy Statement shall not, on the date the
Proxy Statement is first mailed to Target's stockholders, at the
time of the Target Stockholders Meeting and at the Effective
Time, contain any statement which, at such time, is false or
misleading with respect to any material fact, or omit to state
any material fact necessary in order to make the statements
therein, in light of the circumstances under which they are
made, not false or misleading; or omit to state any material
fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for
the Target Stockholders Meeting which has become false or
misleading. If at any time prior to the Effective Time any
event or information is discovered by Acquiror or Merger Sub
which should be set forth in a supplement to the Proxy
Statement, Acquiror or Merger Sub will promptly inform Target.
Notwithstanding the foregoing, Acquiror and Merger Sub make no
representation, warranty or covenant with respect to any
information supplied by Target which is contained in any of the
foregoing documents.
4.6 Board Approval. The Board of Directors of Acquiror
has approved this Agreement and the Merger, and the Board of
Directors and sole shareholder of Merger Sub have approved this
Agreement and the Merger.
4.7 Financial Capability. Acquiror has and shall have, as
of the Closing Date, sufficient funds to consummate the
transactions contemplated by this Agreement.
4.8 Lancaster Office. Acquiror has no present intention
of closing Target's Lancaster, Pennsylvania office for a period
of not less than two years following the Effective Time.
4.9 Representations Complete. No statement, certificate,
instrument or other writing furnished or to be furnished by
Acquiror or Merger Sub pursuant to this Agreement, or any
certificate furnished or to be furnished by Acquiror or Merger
Sub pursuant to this Agreement, contains or will contain at the
Effective Time any untrue statement of a material fact, or omits
or will omit at the Effective Time to state any material fact
necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not
misleading.
ARTICLE V
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1 Conduct of Business of Target. Prior to the Closing,
Target shall, and shall cause its Subsidiaries to (except to the
extent expressly contemplated by this Agreement or as consented
to in writing by Acquiror), carry on its and its Subsidiaries'
business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, to pay
and to cause its Subsidiaries to pay debts and Taxes when due
subject to good faith disputes over such debts or Taxes, to pay
or perform other obligations when due, and to use all reasonable
efforts consistent with past practice and policies to preserve
intact its and its Subsidiaries' present business organizations,
use its reasonable best efforts consistent with past practice to
keep available the services of its and its Subsidiaries' present
officers and key employees and use its reasonable best efforts
consistent with past practice to preserve its and its
Subsidiaries' relationships with all insurance regulatory
authorities, independent insurance agents, reinsurers,
customers, suppliers, licensors, licensees and others having
business dealings with it or its Subsidiaries, such that its and
its Subsidiaries' goodwill and ongoing businesses shall be
unimpaired at the Effective Time. Target shall promptly notify
Acquiror of any event or occurrence (i) not in the ordinary
course of Target or its Subsidiaries' business, (ii) that would
result in a breach of any covenant or agreement of Target or any
of its Subsidiaries set forth in this Agreement, (iii) that
would cause any representation or warranty of Target in this
Agreement to be untrue as of the date of such event or
occurrence, or (iv) which would have a Material Adverse Effect
on Target or any of its Subsidiaries. Except as expressly
contemplated by this Agreement, Target shall not do, cause or
permit any of the following, or allow, cause or permit any of
its Subsidiaries to do, cause or permit any of the following,
without the prior written consent of Acquiror:
(a) Charter Documents. Amend the Articles of
Incorporation, Bylaws or equivalent organizational documents of
Target or any of Target's Subsidiaries;
(b) Dividends; Changes in Capital Stock. Declare or
pay any dividends on or make any other distributions (whether in
cash, stock or property) in respect of any of its capital stock
(other than payment of quarterly cash dividends to stockholders
of not more than $.05 per share), or split, combine or
reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or purchase,
repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock, except from former employees,
directors and insurance agents in accordance with agreements
providing for the repurchase of shares in connection with any
termination of service to it or its Subsidiaries;
(c) Target Stock Option Plans, Etc. Other than as
permitted by any Target Stock Option Plans, take any action to
accelerate, amend or change the period of exercisability or
vesting of options or other rights otherwise granted under any
Target Stock Option Plans or any benefit plan or authorize cash
payments in exchange for any options or other rights granted
under any such plan;
(d) Material Contracts. Enter into any Contract or
commitment, or violate, terminate, amend or otherwise modify or
waive any of the terms of any of its Contracts, other than in
the ordinary course of business consistent with past practice,
and shall not enter into or modify in any material respect any
Contracts or commitments with managing general agents without
the prior written consent of Acquiror, which consent shall not
be unreasonably withheld;
(e) Issuance of Securities. Issue, deliver or sell
or authorize or propose the issuance, delivery or sale of, or
purchase or propose the purchase of, any shares of its capital
stock or securities convertible into shares of its capital
stock, or subscriptions, rights, warrants or options to acquire,
or other agreements or commitments of any character obligating
it to issue any such shares or other convertible securities
(other than the issuance of shares of Target Common Stock
pursuant to the exercise of stock options outstanding as of the
date of this Agreement or pursuant to the Target Option
Agreement) or modify any outstanding securities convertible into
shares of its capital stock or subscription rights, warrants or
options to acquire, or other agreements or commitments of any
character obligating it to issue such shares or other
convertible securities;
(f) Intellectual Property. Transfer or license to
any Person or otherwise extend, amend or modify any rights to
its Intellectual Property other than in the ordinary course of
business consistent with past practice;
(g) Exclusive Rights. Enter into or amend any
agreements pursuant to which any other party is granted
exclusive marketing, servicing, or other exclusive rights of any
type or scope with respect to any of its services, products,
processes or technology;
(h) Dispositions. Sell, lease, license or otherwise
dispose of or encumber any properties or assets which are
material, individually or in the aggregate, to its and its
Subsidiaries' business, except in the ordinary course of
business consistent with past practice;
(i) Indebtedness. Incur any indebtedness for
borrowed money or guarantee any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire debt
securities or guarantee any debt securities of others;
(j) Payment of Obligations. Pay, discharge, satisfy,
settle or compromise any amount in excess of $25,000 in any
case, claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than
claims of or against insurance policyholders arising in the
ordinary course of business consistent with past practice, and
payment, discharge or satisfaction of liabilities reflected or
reserved against in the Target Financial Statements;
(k) Capital Expenditures. Make any capital
expenditures, capital additions or capital improvements, except
in the ordinary course of business and consistent with past
practice;
(l) Insurance and Reinsurance. Except as described
on Schedule 5.1(l), materially reduce the amount of any
insurance coverage provided by existing insurance policies or
materially modify the nature, terms or amounts of existing
reinsurance;
(m) Reserves. Modify or readjust any insurance
reserves of any kind or nature, other than in the ordinary
course of business consistent with past practice;
(n) Termination or Waiver. Terminate or waive any
right of substantial value, other than in the ordinary course of
business;
(o) Employee Benefit Plans; New Hires; Pay Increases.
Enter into any collective bargaining agreement; establish,
adopt, enter into or amend in any material respect any bonus,
profit sharing, thrift, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, trust, fund, policy or
arrangement for the benefit of directors, officers or employees;
hire any new officer level employee, pay any special bonus or
special remuneration to any employee or director, or increase
the salaries or wage rates of employees other than pursuant to
ordinary annual employee reviews consistent with past practice;
(p) Severance Arrangements. Grant or increase any
severance or termination pay to, or enter into any employment,
severance or termination agreement with, (i) any director or
officer, or (ii) any other employee except payments made
pursuant to standard written agreements outstanding on the date
hereof and disclosed on the Target Disclosure Schedule.
(q) Lawsuits. Commence a lawsuit other than (i) for
the routine collection of bills, (iii) in connection with the
ordinary course of its claims settlement practices, (iii) in
such cases where it in good faith determines failure to commence
suit would result in material impairment of a valuable aspect of
its business, provided that Target consults with Acquiror prior
to the filing of such a suit, or (iii) for a breach of this
Agreement;
(r) Acquisitions. Except pursuant to those Contracts
referred to in the Target Disclosure Schedule, acquire or agree
to acquire by merger or consolidation with, by purchasing an
equity interest in or a material portion of the assets of, or by
any other manner, any business or any Person or division
thereof, or otherwise acquire or agree to acquire any assets
which are material, individually or in the aggregate, to its and
its Subsidiaries' business, or acquire or agree to acquire any
equity securities of any Person, other than in the ordinary
course of managing its investment portfolio consistent with past
practice;
(s) Taxes. Make or change any election in respect of
Taxes, adopt or change any accounting method in respect of
Taxes, file any Tax Return or any amendment to a Tax Return
(other than in the ordinary course of business consistent with
past practice), enter into any closing agreement, settle any
claim or assessment in respect of Taxes, or consent to any
extension or waiver of a limitation period applicable to any
claim or assessment in respect of Taxes;
(t) Notices. Fail to give any notice or provide
other information required by applicable law to be given to the
employees of Target and any applicable Governmental Entity under
the WARN Act, the National Labor Relations Act, the Code, or
other applicable law in connection with the transactions
provided for in this Agreement;
(u) Revaluation. Revalue any of its assets,
including writing off notes or accounts receivable other than in
the ordinary course of business consistent with past practice;
(v) Restrictive Agreements. Enter into any agreement
with any Person limiting in any manner the territory or scope of
business activities which Target or any of its Subsidiaries may
engage;
(w) New Subsidiaries. Form any new Subsidiary; or
(x) Other. Take or agree in writing to take (i) any
of the actions described in Sections 5.1(a) through (w), or (ii)
any action which would make any of its representations or
warranties contained in this Agreement untrue or incorrect or
could prevent it from performing or cause it not to perform its
covenants and obligations hereunder.
5.2 No Solicitation. Target and its Subsidiaries and
their officers, directors, employees or other agents will not,
directly or indirectly, (i) take any action to solicit, initiate
or encourage any Takeover Proposal (as defined in Section
8.3(f)), or (ii) subject to the terms of the immediately
following sentence, engage in negotiations with, or disclose any
nonpublic information relating to Target or any of its
Subsidiaries to, or afford access to the properties, books or
records of Target or any of its Subsidiaries to, any Person that
has advised Target that it may be considering making, or that
has made, a Takeover Proposal; provided, nothing herein shall
prohibit Target's Board of Directors from taking and disclosing
to Target's stockholders a position with respect to a tender
offer pursuant to Rules 14d-9 and 14e-2 promulgated under the
Exchange Act. Notwithstanding the immediately preceding
sentence, if an unsolicited written Takeover Proposal shall be
received by the Board of Directors of Target, then, to the
extent the Board of Directors of Target believes in good faith
(after written advice from its independent financial advisor)
that such Takeover Proposal would, if consummated, result in a
transaction materially more favorable to Target's stockholders
from a financial point of view than the Merger (any such more
favorable Takeover Proposal being referred to in this Agreement
as a "Superior Proposal"), and the Board of Directors of Target
determines in good faith after advice from outside legal counsel
that, in such outside legal counsel's judgment, there is a
reasonable basis for the Board of Directors of Target, in order
to comply with its fiduciary duties under applicable
Pennsylvania Law, then Target and its officers, directors,
employees, investment bankers, attorneys, accountants and other
representatives retained by it may furnish in connection
therewith information to the Person making such Superior
Proposal and engage in negotiations with such person, and such
actions shall not be considered a breach of this Section 5.2 or
any other provisions of this Agreement; provided that in each
such event Target immediately notifies Acquiror of such
determination by the Target Board of Directors and provides
Acquiror with a true and complete copy of the Superior Proposal
received from such third Person, and provides (or has provided)
Acquiror with all documents containing or referring to nonpublic
information of Target supplied to such third Person; provided
further, that Target shall provide such nonpublic information
pursuant to a nondisclosure agreement at least as restrictive on
such third person as the Confidentiality Agreement (as defined
in Section 6.4) is on Acquiror; and provided further, that
Target shall not, and shall not permit any of its officers,
directors, employees or other representatives to, agree to or
endorse any Takeover Proposal or withdraw its recommendation of
the Merger unless Target (i) has provided Acquiror at least five
(5) days prior notice thereof, (ii) has terminated this
Agreement pursuant to Section 8.1(f), (iii) has paid Acquiror
all amounts payable pursuant to Section 8.3(b), and (iv) if
required by the terms of the Target Option Agreement, has
performed its obligations under the Target Option Agreement.
Target will promptly notify Acquiror after receipt of any
Takeover Proposal or any notice that any Person is considering
making a Takeover Proposal or any request for nonpublic
information relating to Target or any of its Subsidiaries or for
access to the properties, books or records of Target or any of
its Subsidiaries by any Person that has advised Target that it
may be considering making, or that has made, a Takeover
Proposal, and will keep Acquiror fully informed of the status
and details of any such Takeover Proposal notice, and shall
provide Acquiror with a true and complete copy of such Takeover
Proposal notice or any amendment thereto, if in writing, or a
complete written summary thereof, if not in writing.
5.3 New Employment Agreements or Waivers. Prior to the
Closing, Target shall use commercially reasonable efforts to
either (i) enter into amended employment agreements reasonably
satisfactory in form and substance to Acquiror (the "New
Employment Agreements") with each senior management employee of
Target and its Subsidiaries listed on Schedule 5.3, or (ii)
receive an Amendment to Employment Agreement reasonably
satisfactory in form and substance to Acquiror (the "Waiver
Agreements") from each such employee pursuant to which, among
other things, each such employee shall waive the right to assert
that the acquisition of Target by Acquiror constitutes a "Change
of Control" (as defined in each such employee's existing
employment agreement). Upon execution and delivery thereof,
each New Employment Agreement, and each Waiver Agreement, shall
constitute the legal, valid, binding and enforceable obligations
of the parties thereto.
5.4 Option Cancellation Agreements. Notwithstanding any
other provision of this Agreement to the contrary, prior to the
Effective Time Target shall be permitted to enter into the
agreements referred to in Section 2.7 (the "Option Cancellation
Agreements") with persons holding vested (or to be vested)
Options under any Target Stock Option Plans, pursuant to which
each such person shall agree prior to the Closing to cancel all
such Options in exchange for the payment by Target contemplated
by Section 2.7; provided, however, that prior to entering into
any Option Cancellation Agreement, Target shall obtain the prior
written consent of Acquiror as to the form thereof, which
consent shall not be unreasonably withheld; and provided
further, that each Option Cancellation Agreement shall by its
terms only become effective as of the Effective Time.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Proxy Statement/Prospectus; Registration Statement.
As promptly as practicable after the execution of this
Agreement, Target shall prepare (after consultation with
Acquiror), and shall file with the SEC, preliminary proxy
materials relating to approval of the Merger and the
transactions contemplated hereby by the stockholders of Target,
which proxy materials shall comply in form with applicable SEC
requirements under the Exchange Act. As promptly as practicable
following receipt of SEC comments thereon, Target shall file
with the SEC definitive proxy materials which comply in form
with applicable SEC requirements under the Exchange Act. Target
will promptly notify Acquiror of the receipt of any comments
from the SEC or its staff and of any request by the SEC or its
staff or any other government officials for amendments or
supplements to the Proxy Statement or any other filing or for
additional information, and will supply copies of all
correspondence with the SEC or its staff or any other government
officials with respect to the Proxy Statement or any related
filing. Whenever any event occurs that is required to be set
forth in an amendment or supplement to the Proxy Statement or
any other filing, Target shall promptly inform Acquiror of such
occurrence and cooperate in filing with the SEC or its staff or
any other government officials, and/or mailing to shareholders
of Target, such amendment or supplement. The Proxy Statement
shall include the recommendation of the Board of Directors of
Target in favor of the Merger, subject to the fiduciary
exception set forth in Section 5.2.
6.2 Meeting of Stockholders. Target shall consult with
Acquiror regarding the date of the Target Stockholders Meeting
and use all reasonable efforts and shall not postpone or adjourn
(other than for the absence of a quorum) the Target Stockholders
Meeting without the consent of Acquiror. Subject to Sections
5.2 and 6.1, Target shall use its reasonable best efforts to
solicit from stockholders of Target proxies in favor of the
Merger and shall take all other action reasonably necessary or
advisable to secure the vote or consent of stockholders required
to effect the Merger.
6.3 Access to Information.
(a) Target shall afford Acquiror and its officers,
employees, accountants, counsel and other representatives access
during normal business hours during the period prior to the
Effective Time to (i) all of Target's and its Subsidiaries'
properties, books, contracts, commitments and records, and (ii)
all other information concerning the business, properties and
personnel of Target and its Subsidiaries as Acquiror may
reasonably request. Target shall provide to Acquiror and its
accountants, counsel and other representatives, copies of
internal financial statements promptly upon request.
(b) Subject to compliance with applicable law, from
the date hereof until the Effective Time, Target shall confer on
a regular and frequent basis with one or more representatives of
Acquiror to report operational matters of materiality and the
general status of ongoing operations.
(c) No information or knowledge obtained in any
investigation pursuant to this Section 6.3 shall affect or be
deemed to modify any representation or warranty contained herein
or the conditions to the obligations of the parties to
consummate the Merger.
6.4 Confidentiality. The Parties acknowledge that
Acquiror and Target have executed a letter agreement regarding
the treatment of confidential information (the "Confidentiality
Agreement"), which Confidentiality Agreement shall continue in
full force and effect in accordance with its terms.
6.5 Public Disclosure. Unless otherwise permitted by this
Agreement, Acquiror and Target shall consult with each other
before issuing any press release or otherwise making any public
statement or making any other public (or non-confidential)
disclosure (whether or not in response to an inquiry) regarding
the terms of this Agreement and the transactions contemplated
hereby, and neither shall issue any such press release or make
any such statement or disclosure without the prior approval of
the other (which approval shall not be unreasonably withheld),
except as may be required by law, by obligations pursuant to any
listing agreement with the NASD, or as may be requested by A. M.
Best.
6.6 Consents; Cooperation.
(a) Each of Acquiror and Target shall promptly apply
for or otherwise seek, and use its reasonable best efforts to
obtain, all consents and approvals required to be obtained by it
for the consummation of the Merger, including those required
under the HSR Act and those required to be obtained from the
Pennsylvania Department of Insurance, the Delaware Department of
Insurance, the Virginia Department of Insurance and the Ohio
Department of Insurance, and shall use reasonable best efforts
to obtain all necessary consents, waivers and approvals under
any of the material Contracts of Target and its Subsidiaries in
connection with the Merger for the assignment thereof or
otherwise. The Parties will consult and cooperate with one
another, and consider in good faith the views of one another, in
connection with any analyses, appearances, presentations,
memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any Party in connection with
proceedings (i) before any Insurance Authority, or (ii) relating
to or under the HSR Act.
(b) Each of Acquiror and Target shall use reasonable
best efforts to resolve such objections, if any, as may be
asserted by any Governmental Entity with respect to the
transactions contemplated by this Agreement under (i) any
insurance holding company system act or insurance company
licensing act administered by any Insurance Authority and any
rules or regulations or policies thereunder, or (ii) the HSR Act
and any other federal, state or foreign statutes, rules,
regulations, orders or decrees designed to prohibit, restrict or
regulate actions having the purpose or effect of monopolization
or restraint of trade (collectively, "Antitrust Laws"). In
connection therewith, if any administrative or judicial action
or proceeding is instituted (or threatened to be instituted)
challenging any transaction contemplated by this Agreement as
prohibited by any law administered by an Insurance Authority or
as violating any Antitrust Law, each of Acquiror and Target
shall cooperate and use reasonable best efforts vigorously to
contest and resist any such action or proceeding and to have
vacated, lifted, reversed, or overturned any decree, judgment,
injunction or other order, whether temporary, preliminary or
permanent (each an "Order"), that is in effect and prohibits,
prevents or restricts consummation of the Merger or any such
other transactions, unless Acquiror and Target mutually decide
in good faith that litigation is not in their respective best
interests. Notwithstanding the immediately preceding sentence,
it is expressly understood and agreed that Acquiror shall have
no obligation to litigate or contest any administrative or
judicial action or proceeding or any Order beyond November 30,
2000. Each of Acquiror and Target shall use reasonable best
efforts to take such action as may be required to cause the
expiration of the waiting periods under the HSR Act with respect
to the Merger as promptly as possible after the execution of
this Agreement. Acquiror and Target shall also take any and all
of the following actions to the extent reasonably necessary to
obtain the approval of any Insurance Authority or other
Governmental Entity with jurisdiction over the enforcement of
any applicable laws regarding the transactions contemplated
hereby: entering into negotiations; providing information
required by law or governmental regulation; and substantially
complying with any second request for information pursuant
thereto. Notwithstanding anything to the contrary in this
Section 6.6, neither Acquiror nor Target nor any of its
Subsidiaries shall be required to take any action that would
reasonably be expected to substantially impair the overall
benefits expected, as of the date hereof, to be realized from
the consummation of the Merger or the other transactions
contemplated hereby.
(c) Notwithstanding anything to the contrary in
Section 6.6(a) or (b), (i) neither Acquiror nor any of its
Subsidiaries shall be required to divest any of their respective
businesses, services, product lines, assets, or to take or agree
to take any other action or agree to any limitation that would
reasonably be expected to have a Material Adverse Effect on
Acquiror or on Acquiror combined with the Surviving Corporation
after the Effective Time, and (ii) neither Target nor its
Subsidiaries shall be required to divest any of their respective
businesses, services, product lines or assets, or to take or
agree to take any other action or agree to any limitation that
would reasonably be expected to have a Material Adverse Effect
on Target.
6.7 Voting Agreement. Pursuant to the request of
Acquiror, Target has caused each Selected Stockholder named in
Schedule 3.26 to execute and deliver to Acquiror the Voting
Agreement substantially in the form of Exhibit C concurrent with
the execution of this Agreement.
6.8 Legal Requirements. Each of Acquiror, Merger Sub and
Target shall, and shall cause their respective Affiliates to,
take all reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on any of them with
respect to the consummation of the transactions contemplated by
this Agreement, shall promptly cooperate with and furnish
information to any Party necessary in connection with any such
requirements imposed upon such other Party in connection with
the consummation of such transactions, and shall take all
reasonable actions necessary to obtain (and cooperate with the
other Parties in obtaining) any consent, approval, order or
authorization of, or any registration, declaration or filing
with, any Governmental Entity or other Person, required to be
obtained or made in connection with the taking of any action
contemplated by this Agreement.
6.9 Target Option Agreement. Concurrently with the
execution of this Agreement, Target shall deliver to Acquiror an
executed Target Option Agreement in the form of Exhibit B.
Target shall fully perform its obligations under the Target
Option Agreement.
6.10 Indemnification of Directors and Officers.
(a) The Surviving Corporation shall provide rights to
indemnification pursuant to its Articles of Incorporation and
Code of Regulations substantially similar to those now existing
and contained in Target's Articles of Incorporation or Bylaws
for the benefit of any Person who served as a director or
officer of Target at any time prior to the Effective Time (the
"Indemnified Parties").
(b) Until the later of (i) six years after the
Effective Time, or (ii) the termination of the litigation listed
as Item 1 on Schedule 3.7(a) and all appeals therein, or the
final settlement thereof, Acquiror shall cause the Surviving
Corporation to use commercially reasonable efforts to provide
officers' and directors' liability insurance in respect of acts
or omissions occurring on or prior to the Effective Time
covering each Person currently covered by Target's officers' and
directors' liability insurance policy on terms substantially
similar to those of such policy in effect on the date hereof,
provided that, in satisfying its obligation hereunder, Acquiror
shall not be obligated to cause the Surviving Corporation to pay
premiums in excess of 150% of the amount per annum Target paid
in its last full fiscal year, which amount has been disclosed to
Acquiror, and if the Surviving Corporation is unable to obtain
the insurance required by this Section 6.10, it shall obtain as
much comparable insurance as possible for an annual premium
equal to such maximum amount.
(c) To the extent any claim, action, suit, proceeding
or investigation (whether arising before or after the Effective
Time) against an Indemnified Party exists that arises out of or
pertains to any action or omission in his or her capacity as
director or officer of Target occurring prior to the Effective
Time, or arises out of or pertains to the transactions
contemplated by this Agreement for a period of three years after
the Effective Time (whether arising before or after the
Effective Time), in each case for which such Indemnified Party
is entitled to be indemnified under the Surviving Corporation's
Articles of Incorporation and Code of Regulations, such
Indemnified Party shall be entitled to be represented by
counsel, which counsel may be counsel of Acquiror (provided that
if use of counsel of Acquiror would be expected under applicable
standards of professional conduct to give rise to a conflict
between the position of the Indemnified Person and of Acquiror,
the Indemnified Party shall be entitled instead to be
represented by counsel selected by the Indemnified Party and
reasonably acceptable to Acquiror). Following the Effective
Time the Surviving Corporation and Acquiror shall pay the
reasonable fees and expenses of such counsel with respect to a
claim for which such Indemnified Party is entitled to be
indemnified under the Surviving Corporation's Articles of
Incorporation and Code of Regulations promptly after statements
therefor are received and the Surviving Corporation and Acquiror
will cooperate in the defense of any such matter; provided,
however, that such Indemnified Party has complied with any
requirements stipulated by the Pennsylvania Law or the Ohio Law,
as applicable, provided further, that neither the Surviving
Corporation nor Acquiror shall be liable for any settlement
effected without its written consent (which consent shall not be
unreasonably withheld); and provided, further, that, in the
event that any claim or claims for indemnification are asserted
or made within such three year period, all rights to
indemnification in respect to any such claim or claims shall
continue until the disposition of any and all such claims. The
Indemnified Parties as a group may retain only one law firm to
represent them with respect to any single action unless there
is, under applicable standards of professional conduct, a
conflict on any significant issue between the position of any
two or more Indemnified Parties. Acquiror hereby consents to
the continuation of the existing legal representation of Target
and the other named defendants in the litigation matter referred
to as Item 1 in Schedule 3.7(a).
6.11 Best Efforts and Further Assurances. Each of the
Parties shall use reasonable best efforts to effectuate the
transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to Closing hereunder. Each Party, at
the reasonable request of another Party, shall execute and
deliver such other instruments and do and perform such other
acts and things as may be necessary or desirable for effecting
completely the consummation of the Merger and the transactions
contemplated hereby.
ARTICLE VII
CONDITIONS TO THE MERGER
7.1 Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each Party to consummate
and effect this Agreement and the transactions contemplated
hereby shall be subject to satisfaction at or prior to the
Effective Time of the following conditions, any of which may be
waived, in writing, by agreement of all Parties:
(a) Stockholder Approval. This Agreement and the
Merger shall have been approved and adopted by the requisite
vote of the stockholders of Target under Pennsylvania Law.
(b) No Injunctions or Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction
or other order issued by any Governmental Entity or other legal
or regulatory restraint or prohibition preventing the
consummation of the Merger shall be in effect, nor shall any
proceeding brought by a Governmental Entity seeking any of the
foregoing be pending; nor shall there be any action taken, or
any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger, which makes the
consummation of the Merger illegal or impractical. In the event
an injunction or other order shall have been issued, each Party
shall use commercially reasonable efforts to have such
injunction or other order lifted.
(c) Governmental Approvals. The Parties and their
respective Subsidiaries and Affiliates shall have timely filed
with and obtained from each Governmental Entity (including all
Insurance Authorities) all filings, notices, approvals, waivers
and consents necessary for consummation of the Merger and the
transactions contemplated hereby, including such filings,
notices, approvals, waivers and consents as may be required
under applicable state insurance laws and the HSR Act.
7.2 Additional Conditions to Obligations of Target. The
obligations of Target to consummate and effect this Agreement
and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of the following
conditions, any of which may be waived, in writing, by Target:
(a) Representations, Warranties and Covenants. (i)
The representations and warranties of Acquiror and Merger Sub in
this Agreement shall be true and correct in all material
respects (except for such representations and warranties that
are qualified by their terms by a reference to materiality,
which representations and warranties as so qualified shall be
true in all respects) on and as of the date hereof and the
Effective Time as though such representations and warranties
were made on and as of such times, and (ii) Acquiror and Merger
Sub shall have performed and complied in all material respects
with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by them as of the
Effective Time.
(b) Certificate of Acquiror. Target shall have
received a certificate executed on behalf of Acquiror by its
President, its Chief Financial Officer and its Secretary and
General Counsel certifying that the condition set forth in
Section 7.2(a) shall have been fulfilled.
(c) Opinions. Counsel to Acquiror and Merger Sub
(which shall be Xxxxxxx & Xxxxxx LLP and Acquiror's in house
General Counsel) shall have provided the opinions set forth on
Exhibit E to Target.
(d) Fairness Opinion. Target shall have received a
written opinion from its financial advisor, Xxxxxxx Xxxxxxx &
Co., dated not later than the date of mailing of the Target
Proxy Statement, that the consideration to be received by the
stockholders of Target in the Merger is fair, from a financial
point of view, to the stockholders of Target.
7.3 Additional Conditions to the Obligations of Acquiror
and Merger Sub. The obligations of Acquiror and Merger Sub to
consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any of
which may be waived, in writing, by Acquiror:
(a) Representations, Warranties and Covenants. (i)
The representations and warranties of Target in this Agreement
shall be true and correct in all material respects (except for
such representations and warranties that are qualified by their
terms by a reference to materiality, which representations and
warranties as so qualified shall be true in all respects) on and
as of the date hereof and the Effective Time as though such
representations and warranties were made on and as of such
times, and (ii) Target shall have performed and complied in all
material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by
it as of the Effective Time.
(b) Certificate of Target. Acquiror shall have been
provided with a certificate executed on behalf of Target by its
President, its Chief Financial Officer and its Secretary and
General Counsel certifying that the condition set forth in
Section 7.3(a) shall have been fulfilled.
(c) Third Party Consents. Target shall have
obtained, and Acquiror shall have been furnished with evidence
reasonably satisfactory to it, of the consent or approval of
those Persons whose consent or approval shall be required in
connection with the Merger under any material Contract of Target
or any of its Subsidiaries or otherwise, except where failure to
obtain such consent would not have a Material Adverse Effect on
Target.
(d) Injunctions or Restraints on Conduct of Business.
No temporary restraining order, preliminary or permanent
injunction or other order issued by any Governmental Entity or
other legal or regulatory restraint provision limiting or
restricting Acquiror's conduct or operation of the business of
Target and its Subsidiaries following the Merger shall be in
effect, nor shall any proceeding brought by any Governmental
Entity seeking the foregoing be pending or threatened in
writing.
(e) No Material Adverse Changes. There shall not
have occurred any event which could cause a Material Adverse
Effect on Target.
(f) New Employment Agreements or Waiver Agreements.
All employees of Target and its Subsidiaries identified on
Schedule 5.3 shall have executed either New Employment
Agreements or Waiver Agreements.
(g) Dissenting Shares. The aggregate number of
Dissenting Shares (if any) with respect to which holders thereof
shall have properly demanded appraisal in accordance with
Pennsylvania Law before the taking of a vote on the Merger at
the Target Stockholders Meeting or any adjournment thereof, the
holders of which shall not have withdrawn such demand as of the
Closing Date, shall not exceed seven percent (7%) of the issued
and outstanding shares of Target Common Stock entitled to vote
thereon.
(h) Insurance Coverage. Acquiror shall have obtained
such additional insurance coverage with respect to Target and
its Subsidiaries as Acquiror shall reasonably require.
(i) Termination of Certain Agreements. Each of the
MRP, the Target Stock Option Plans, and all restricted stock
agreements of Target and its Subsidiaries shall have been
terminated as of the Closing Date; Acquiror shall have received
reasonably satisfactory evidence of such termination prior to
the Closing (including copies of any Option Cancellation
Agreements); and Acquiror shall be reasonably satisfied that the
Surviving Corporation and Target's Subsidiaries shall have no
further liability or obligation whatsoever under any such
canceled plan or agreement, except payment of the Option
Termination Consideration described in Section 2.7.
(j) Resignations of Directors. To the extent
requested by Acquiror prior to the Closing, each member of the
Board of Directors of Target and its Subsidiaries shall have
tendered his or her resignation effective as of the Effective
Time.
(k) Opinions. Counsel to Target (which shall be
Xxxxxxx & Xxx and Target's in-house General Counsel) shall have
provided the opinions set forth on Exhibit F to Acquiror and
Merger Sub.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. At any time prior to the Effective Time,
whether before or after approval of the matters presented in
connection with the Merger by Target's stockholders, this
Agreement may be terminated:
(a) by mutual consent of Acquiror, Merger Sub and
Target;
(b) by any Party, if, without fault of the
terminating Party, the Closing shall not have occurred on or
before November 30, 2000 (provided a later date may be agreed
upon in writing by the Parties, and provided further that the
right to terminate this Agreement under this Section 8.1(b)
shall not be available to any Party whose action or failure to
act has been the cause of or resulted in the failure of the
Merger to occur on or before such date and such action or
failure to act constitutes a breach of this Agreement);
(c) by Acquiror, if (i) Target shall materially
breach any of its representations, warranties or obligations
hereunder and such breach shall not have been cured within
fifteen (15) business days of receipt by Target of written
notice of such breach, or if such breach cannot be cured by
Target within such time period but can be cured by Target prior
to the Effective Time and Target has not commenced actions
reasonably necessary (in the opinion of Acquiror) to cure such
breach, (ii) the Board of Directors of Target shall have
withdrawn or modified its recommendation of this Agreement or
the Merger in a manner adverse to Acquiror or shall have
resolved to do any of the foregoing, or (iii) for any reason
Target fails to call the Target Stockholders Meeting on or
before August 31, 2000, or hold the Target Stockholders Meeting
on or before September 30, 2000.
(d) by Target, if Acquiror or Merger Sub shall
materially breach any of its representations, warranties or
obligations hereunder and such breach shall not have been cured
within fifteen (15) business days following receipt by Acquiror
of written notice of such breach, or if such breach cannot be
cured by Acquiror within such time period but can be cured by
Acquiror prior to the Effective Time and Acquiror has not
commenced actions reasonably necessary (in the opinion of
Target) to cure such breach;
(e) by Acquiror if a Trigger Event or Takeover
Proposal shall have occurred and Target's Board of Directors
does not within ten (10) business days of such occurrence (i)
reconfirm its approval and recommendation of this Agreement and
the Merger and other transactions contemplated hereby, and (ii)
reject such Takeover Proposal or Trigger Event (in the case of a
Trigger Event involving a tender or exchange offer);
(f) by Target if a Superior Proposal shall have been
received; provided that Target shall have provided Acquiror at
least five (5) business days prior notice of the terms of the
Superior Proposal and Target shall have paid Acquiror the
amounts set forth in Section 8.3(b); or
(g) by any Party if (i) any permanent injunction or
other order of a Governmental Entity preventing the consummation
of the Merger shall have become final and non-appealable, or
(ii) if any required approval of Target's stockholders shall not
have been obtained by reason of the failure to obtain the
required vote upon a vote held at a duly held meeting of
Target's stockholders or at any adjournment thereof.
8.2 Effect of Termination. In the event of termination of
this Agreement as provided in Section 8.1, this Agreement shall
forthwith become void and there shall be no liability or
obligation on the part of Acquiror, Merger Sub or Target or
their respective officers, directors, stockholders or
Affiliates, except to the extent that such termination results
from the breach by a Party of any of its representations,
warranties or covenants in this Agreement; provided that the
provisions of Section 6.4, Section 8.3, Article IX, Article X,
and this Section 8.2 shall remain in full force and effect and
survive any termination of this Agreement; provided further,
that notwithstanding anything to the contrary contained in this
Agreement, if this Agreement is terminated by a Party because of
the breach of this Agreement by another Party or because one or
more of the conditions to the terminating Party's obligations
under this Agreement is not satisfied as a result of another
Party's failure to comply with its obligations hereunder, the
terminating Party's right to pursue all legal remedies shall
survive such termination unimpaired. Such rights shall be in
addition to those expressly set forth in Section 8.3.
8.3 Expenses and Termination Fees.
(a) Subject to subsections (b), (c), (d) and (e) of
this Section 8.3, whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby (including the fees and
expenses of its advisers, accountants and legal counsel) shall
be paid by the Party incurring such expense.
(b) In the event (i) Acquiror terminates this
Agreement pursuant to Section 8.1(e) or Target terminates this
Agreement pursuant to Section 8.1(f), (ii) Acquiror terminates
this Agreement pursuant to Section 8.1(c)(ii), or (iii) either
Acquiror or Target terminates this Agreement pursuant to Section
8.1(g)(ii) following a failure of Target's stockholders to
approve this Agreement and, prior to the time of the meeting of
Target's stockholders, there shall have been (A) a Trigger Event
with respect to Target, or (B) a Takeover Proposal with respect
to Target which at the time of the Target Stockholders Meeting
shall not have been rejected by Target, or (iv) Acquiror
terminates this Agreement pursuant to Section 8.1(c)(i) or
Section 8.1(c)(iii), due in whole or in part to any failure by
Target to use its reasonable best efforts to perform and comply
with all agreements and conditions required by this Agreement to
be performed or complied with by Target prior to or on the
Closing Date or any failure by Target's Affiliates to take any
actions required to be taken hereby, and prior thereto there
shall have been (A) a Trigger Event with respect to Target, or
(B) a Takeover Proposal with respect to Target which shall not
have been rejected by Target, then Target shall reimburse
Acquiror for all of the out-of-pocket costs and expenses
incurred by Acquiror in connection with this Agreement and the
transactions contemplated hereby (including the fees and
expenses of its financial advisors, accountants and outside
legal counsel), and, in addition to any other remedies Acquiror
may have, Target shall pay to Acquiror the sum of $2,500,000 no
later than two (2) business days thereafter.
(c) In the event that (i) Acquiror terminates this
Agreement pursuant to Section 8.1(c)(i) or 8.1(c)(iii) under
circumstances not described in Section 8.3(b)(iv), or (ii)
Acquiror terminates this Agreement pursuant to Section
8.1(g)(ii) under circumstances not described in Section
8.3(b)(iii), Target shall promptly reimburse Acquiror for all
out-of-pocket costs and expenses incurred by Acquiror in
connection with this Agreement and the transactions contemplated
hereby (including the fees and expenses of its financial
advisors, accountants and outside legal counsel); and, in the
event (A) any Takeover Proposal or Trigger Event is consummated
(as defined in Section 8.3(g)) by or with any Person that made a
Takeover Proposal prior to termination of this Agreement or that
caused a Trigger Event prior to such termination, or any
Affiliate of any such Person, within twelve months of the later
of, or (B) any other Takeover Proposal or Trigger Event not
described in clause (A) is consummated (as defined in Section
8.3(g)) within six months of the later of, (x) such termination
of this Agreement, and (y) the payment of the above described
expenses, Target shall pay to Acquiror the additional sum of
$2,500,000 (less any amounts paid by Target to Acquiror under
Section 8.3(b)) no later than two (2) business days thereafter.
(d) In the event Target terminates this Agreement
pursuant to Section 8.1(d), or in the event Acquiror refuses to
effect the Closing and terminates this Agreement as a result of
the failure of the condition set forth in Section 7.3(h),
Acquiror shall promptly reimburse Target for all of the out-of-
pocket costs and expenses up to an aggregate of $250,000
incurred by Target in connection with this Agreement and the
transactions contemplated hereby (including the fees and
expenses of its financial advisors, accountants and outside
legal counsel).
(e) As used herein, a "Trigger Event" shall occur if
any "person" (as that term is defined in Section 13(d) of the
Exchange Act and the regulations thereunder) acquires securities
representing 20% or more, or commences a tender or exchange
offer following the successful consummation of which the offeror
and its affiliates would beneficially own securities
representing 20% or more, of the voting power of Target;
provided, however, a Trigger Event shall not be deemed to
include the acquisition by any Person of securities representing
20% or more of Target if such Person has acquired such
securities not with the purpose nor with the effect of changing
or influencing the control of Target, nor in connection with or
as a participant in any transaction having such purpose or
effect, including not in connection with such Person (i) making
any public announcement with respect to the voting of such
shares at any meeting to consider any merger, consolidation,
sale of substantial assets or other business combination or
extraordinary transaction involving Target, (ii) making, or in
any way participating in, any "solicitation" of "proxies" (as
such terms are defined or used in Regulation 14A under the
Exchange Act) to vote any voting securities of Target (including
any such solicitation subject to Rule 14a-11 under the Exchange
Act) or seeking to advise or influence any Person with respect
to the voting of any voting securities of Target, directly or
indirectly, relating to a merger or other business combination
involving Target or the sale or transfer of a significant
portion of assets (excluding the sale or disposition of assets
in the ordinary course of business) of Target, (iii) forming,
joining or in any way participating in any "group" within the
meaning of Section 13(d)(3) of the Exchange Act with respect to
any voting securities of Target, directly or indirectly,
relating to a merger or other business combination involving
Target or the sale or transfer of a significant portion of
assets (excluding the sale or disposition of assets in the
ordinary course of business) of Target, or (iv) otherwise
acting, alone or in concert with others, to seek control of
Target or to seek to control or influence the management or
policies of Target.
(f) As used herein, "Takeover Proposal" means any
offer or proposal for, or any indication of interest in, a
merger or other business combination involving Target or any of
its Subsidiaries or the acquisition of 20% or more of the
outstanding shares of capital stock of Target, or a significant
portion of the assets of, Target or any of its Subsidiaries,
other than the transactions contemplated by this Agreement.
(g) For purposes of Section 8.3(c), (A)
"consummation" of a Takeover Proposal shall occur on the date a
written agreement is entered into with respect to a merger or
other business combination involving Target or the acquisition
of 20% or more of the outstanding shares of capital stock of
Target, or sale or transfer of any material assets (excluding
the sale or disposition of assets in the ordinary course of
business) of Target or any of its Subsidiaries, and (B)
"consummation" of a Trigger Event shall occur on the date any
Person or any of its Affiliates or associates would beneficially
own securities representing 20% or more of the voting power of
Target, following a tender or exchange offer.
8.4 Amendment. The boards of directors of the Parties may
amend this Agreement at any time by execution of an instrument
in writing signed on behalf of each of the Parties; provided
that an amendment made subsequent to adoption of the Agreement
by the stockholders of Target shall not (i) alter or change the
amount or kind of consideration to be received on conversion of
the Target Common Stock, (ii) alter or change any term of the
Articles of Incorporation or Bylaws of the Surviving Corporation
to be effected by the Merger, or (iii) alter or change any of
the terms and conditions of the Agreement if such alteration or
change would materially and adversely affect the holders of
Target Common Stock.
8.5 Extension; Waiver. At any time prior to the Effective
Time any Party may, to the extent legally allowed, (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 made to such Party contained
herein or in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements or conditions for
the benefit of such Party contained herein. Any agreement on
the part of a 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
INDEMNIFICATION
9.1 Indemnification Relating to Proxy Statement. In the
event that for any reason the Merger is not consummated and the
Closing does not occur, Target shall defend, indemnify and hold
harmless Acquiror, its affiliates, officers, directors and
agents, its attorneys and accountants, and each Person who
controls Acquiror within the meaning of the Securities Act, from
and against any and all losses, damages, liabilities, claims,
judgments, settlements, costs and expenses (including reasonable
attorneys' fees) of every nature (collectively, "Adverse
Consequences"), insofar as such Adverse Consequences are
incurred by reason of or arise out of or in connection with any
untrue statement or alleged untrue statement of any material
fact contained in the Proxy Statement or in any amendment or
supplement thereto or are incurred by reason of or arise out of
or in connection with the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, insofar
as such statement or omission relates to Target and is based on
information furnished by Target.
9.2 Basket. Acquiror may only make claims under this
Article IX if the amount of Adverse Consequences exceeds $25,000
in the aggregate, in which case Acquiror may make a claim for
the full amount of such Adverse Consequences, including the
first $25,000.
ARTICLE X
GENERAL PROVISIONS
10.1 No Survival Past Effective Time. The
representations, warranties, covenants and agreements set forth
in this Agreement shall terminate at the Effective Time, except
that the agreements set forth in Article II, Sections 6.4, 6.10,
8.3, 8.4, Article IX and this Article X shall survive the
Effective Time.
10.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if
delivered personally or by commercial delivery service, or
mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt)
to the parties at the following address (or at such other
address for a party as shall be specified by like notice):
if to Acquiror or
Merger Sub, to: Ohio Farmers Insurance Company
Xxx Xxxx Xxxxxx
X. X. Xxx 0000
Xxxxxxxxx Xxxxxx, Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxx,
Executive Vice
President and Chief
Operating Officer
Facsimile No.: 000-000-0000
Telephone No.: 330/000-0000
with a copy to: Xxxx X. Xxxx, III
Xxxxxxx & Xxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Facsimile No.: 614/227-2390
Telephone No.: 614/000-0000
if to Target, to: Old Guard Group, Inc.
0000 Xxxxxx Xxxx
X. X. Xxx 0000
Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Facsimile No.: 717/569-3480
Telephone No.: 717/000-0000
with a copy to: Xxxxxxx & Xxx
0000 Xxxxxxxx Xxxx
X. X. Xxx 000
Xxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile No.: 610/687-1384
Telephone No.: 610/000-0000
10.3 Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or more
counterparts have been signed by each of the Parties and
delivered to the other Parties, it being understood that all
Parties need not sign the same counterpart.
10.4 Entire Agreement; Nonassignability: Parties in
Interest. This Agreement and the documents and instruments and
other agreements specifically referred to herein or delivered
pursuant hereto, including the Exhibits, and the Target
Disclosure Schedule (a) constitute the entire agreement among
the Parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written
and oral, among the Parties with respect to the subject matter
hereof, except for the Confidentiality Agreement, which shall
continue in full force and effect, and shall survive any
termination of this Agreement or the Closing, in accordance with
its terms; (b) are not intended to confer upon any other Person
any rights or remedies hereunder, except as set forth in
Sections 2.6, 6.11 and 9.1; and (c) shall not be assigned by
operation of law or otherwise, except that Acquiror may assign
its rights under this Agreement to any of its Subsidiaries,
provided that if such assignee Subsidiary fails to perform any
obligation hereunder, Acquiror shall remain liable for full
performance thereof.
10.5 Severability. In the event any provision of this
Agreement or the application thereof becomes or is declared by a
court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to
other Persons or circumstances will be interpreted so as
reasonably to effect the intent of the Parties. The Parties
further agree to replace such void or unenforceable provision of
this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and
other purposes of such void or unenforceable provision.
10.6 Remedies Cumulative. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a
Party will be deemed cumulative with and not exclusive of any
other remedy conferred hereby, or by law or equity upon such
Party, and the exercise by a Party of any one remedy will not
preclude the exercise of any other remedy.
10.7 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Ohio.
10.8 Rules of Construction. The Parties have been
represented by counsel during the negotiation, preparation and
execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other
document will be construed against the Party drafting such
agreement or document.
IN WITNESS WHEREOF, Target, Acquiror and Merger Sub have
caused this Agreement to be executed and delivered by their
respective officers thereunto duly authorized, all as of the
date first written above.
OLD GUARD GROUP, INC.
By:_______________________________
Name: Xxxxx X. Xxxxxx
Title: President and Chief
Executive Officer
OHIO FARMERS INSURANCE COMPANY
By:_______________________________
Name: R. Xxxx Xxxxx
Title: Chief Executive Officer
WESTFIELD MERGER SUB, INC.
By:_______________________________
Name: R. Xxxx Xxxxx
Title: President and Chief
Executive Officer
EXHIBIT A
DEFINITIONS
In addition to the other definitions set forth in this
Agreement, the following terms shall have the meanings set forth
in this Exhibit A:
"Acquiror" shall mean Ohio Farmers Insurance Company,
an Ohio corporation.
"Adverse Consequences" shall have the meaning set
forth in Section 9.1.
"Affiliate" shall have the meaning set forth in
Section 12b-2 of the Exchange Act.
"Agreement" shall have the meaning set forth in the
first paragraph to this Agreement.
"Annual Statements" shall have the meaning set forth
in Section 3.9(a).
"Antitrust Laws" shall have the meaning set forth in
Section 6.6(b).
"Articles of Incorporation" shall have the meaning set
forth in Section 3.1.
"Bylaws" shall have the meaning set forth in Section
3.1.
"CERCLA" means the Comprehensive Environmental
Response, Compensation and Liability Act, as amended.
"Certificate of Merger" shall have the meaning set
forth in Section 2.1.
"Certificate" or "Certificates" shall have the meaning
set forth in Section 2.11(c).
"Closing" shall have the meaning set forth in Section
2.2.
"Closing Date" shall have the meaning set forth in
Section 2.2.
"COBRA" means the federal Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Confidential Information" shall have the meaning set
forth in Section 3.11(g).
"Confidentiality Agreement" shall have the meaning set
forth in Section 6.4.
"Contract" or "Contracts" means any mortgage,
indenture, lease, note, contract or other agreement or
instrument to which a Person is a party or by which such Person
or such Person's assets are or may be bound.
"Data Processing Systems" shall have the meaning set
forth in Section 3.34(b).
"Dissenters Rights Law" shall have the meaning set
forth in Section 2.13(a).
"Dissenting Shares" shall have the meaning set forth
in Section 2.13(a).
"Effective Time" shall have the meaning set forth in
Section 2.2.
"Environmental and Safety Laws" shall mean any
federal, state or local laws, ordinances, codes, regulations,
rules, policies and orders that are intended to assure the
protection of the environment, or that classify, regulate, call
for the remediation of, require reporting with respect to, or
list or define air, water, groundwater, solid waste, hazardous
or toxic substances, materials, wastes, pollutants or
contaminants, or which are intended to assure the safety of
employees, workers or other Persons, including the public.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, as set forth in Section 3.14(a).
"ERISA Affiliate" shall have the meaning set forth in
Section 3.14(c)(vii).
"ESOP" shall have the meaning set forth in Section
3.14(f).
"Exchange Act" means the Securities Exchange Act of
1934, as amended, as set forth in Section 3.4.
"Exchange Agent" shall have the meaning set forth in
Section 2.11(a).
"Exchange Fund" shall have the meaning set forth in
Section 2.11(b).
"Exhibits" shall have the meaning set forth in Article
I to this Agreement.
"Facilities" shall mean all buildings and improvements
on the Property of Target or its Subsidiaries.
"GAAP" shall have the meaning set forth in Section
3.4.
"Governmental Entity" means any court, administrative
agency or commission or other governmental or regulatory agency,
authority or instrumentality of any federal, state, local or
foreign government, of any kind, type or nature.
"Hazardous Materials" shall mean any toxic or
hazardous substance, material or waste or any pollutant or
contaminant, or infectious or radioactive substance or material,
including without limitation, those substances, materials and
wastes defined in or regulated under any Environmental and
Safety Laws.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, as set forth in Section
3.3.
"Indemnified Parties" shall have the meaning set forth
in Section 6.10(a).
"Insurance Authorities" shall have the meaning set
forth in Section 3.9(a).
"Insurance Licenses" shall have the meaning set forth
in Section 3.9(a).
"Insurance Reports" shall have the meaning set forth
in Section 3.9(a).
"Intellectual Property" shall have the meaning set
forth in Section 3.11(a).
"Liens" shall have the meaning set forth in Section
3.1.
"Material Adverse Effect" with respect to any Person
means any event, change, condition or effect that (i) has, or
could reasonably be expected to have, a materially adverse
effect on the condition (financial or otherwise), properties,
assets, liabilities, business, operations, results of operations
or prospects of such Person and its Subsidiaries, taken as a
whole (whether or not arising from transactions in the ordinary
course of business) (excluding changes in security portfolio
values due to changes in interest rates or changes in GAAP that
affect the insurance industry as a whole), or (ii) materially
impairs, or could reasonably be expected to materially impair,
the ability of such Person to perform its obligations under this
Agreement or any related agreement or to consummate the Merger
and the other transactions contemplated by this Agreement.
"Merger Consideration" shall have the meaning set
forth in Section 2.6(a).
"Merger Sub Common Stock" shall have the meaning set
forth in Section 2.8.
"Merger Sub" means Westfield Merger Sub, Inc., an Ohio
corporation and wholly owned subsidiary of Acquiror.
"Merger" shall have the meaning set forth in Paragraph
A of the Recitals to this Agreement.
"MRP" shall have the meaning set forth in Section 3.2.
"NAIC" means the National Association of Insurance
Commissioners.
"NASD" means the National Association of Securities
Dealers, Inc.
"New Employment Agreements" shall have the meaning set
forth in Section 5.3.
"Ohio Law" shall have the meaning set forth in Section
2.1.
"Option" shall have the meaning set forth in Section
2.7.
"Option Cancellation Agreements" shall have the
meaning set forth in Section 5.4.
"Option Termination Consideration" shall have the
meaning set forth in Section 2.7.
"Order" shall have the meaning set forth in Section
6.6(b).
"Parties" shall mean Acquiror, Merger Sub and Target
collectively.
"Party" shall mean Acquiror, Merger Sub or Target
individually.
"PCBs" shall have the meaning set forth in Section
3.12.
"Pennsylvania Law" shall have the meaning set forth in
Section 2.1.
"PEO" means All Staffing, Inc., a Tennessee
corporation.
"Person" means any natural person or individual,
trustee, corporation, general or limited partnership, limited
liability company or partnership, joint venture, joint stock
company, bank, firm, Governmental Entity, trust, association,
organization or unincorporated entity of any kind.
"Property" shall mean all real property leased or
owned by Target or its Subsidiaries either currently or in the
past.
"Proxy Statement" shall have the meaning set forth in
Section 3.22.
"Quarterly Statements" shall have the meaning set
forth in Section 3.9(a).
"Restructuring Option" shall have the meaning set
forth in Section 2.1.
"Rights Plan" shall have the meaning set forth in
Section 3.27.
"SAAP" shall have the meaning set forth in Section
3.9(a).
"Schedule" shall refer to an applicable portion of the
Target Disclosure Schedule.
"SEC" means the Securities and Exchange Commission, as
set forth in Section 3.4.
"Sections" shall have the meaning set forth in Article
I to this Agreement.
"Securities Act" means the Securities Act of 1933, as
amended, as set forth in Section 3.4.
"Selected Stockholders" shall have the meaning set
forth in Recital C and shall consist of those persons identified
on Schedule 3.26.
"Southern Title" means Southern Title Insurance
Company, a Virginia corporration, as set forth in Section
3.36(a).
"Subsidiary" or "Subsidiaries" shall mean, with
respect to any Party, any corporation, limited liability
company, partnership, trust, limited partnership, joint venture,
or other business association or entity, at least a majority of
the voting securities or economic interests of which is directly
or indirectly owned or controlled by such Party or by any one or
more of its Subsidiaries.
"Superior Proposal" shall have the meaning set forth
in Section 5.2.
"Surviving Corporation" shall have the meaning set
forth in Section 2.1.
"Takeover Proposal" shall have the meaning set forth
in Section 8.3(f).
"Target" shall mean Old Guard Group, Inc., a
Pennsylvania corporation.
"Target 1999 Audited Statements" shall have the
meaning set forth in Section 3.4.
"Target Authorizations" shall have the meaning set
forth in Section 3.9(c).
"Target Balance Sheet Date" shall have the meaning set
forth in Section 3.5.
"Target Balance Sheet" shall have the meaning set
forth in Section 3.6.
"Target Common Stock" shall have the meaning set forth
in Section 2.6(a).
"Target Disclosure Schedule" shall have the meaning
set forth in the first paragraph of Article III.
"Target Disclosure Schedule" shall refer to the entire
Disclosure Schedule delivered by Target to Acquiror on the date
of the Agreement and attached to this Agreement.
"Target Employee Plans" shall have the meaning set
forth in Section 3.14(a).
"Target Financial Statements" shall have the meaning
set forth in Section 3.4.
"Target Option Agreement" shall have the meaning set
forth in Paragraph C of the Recitals, the form of which is
attached hereto as Exhibit B.
"Target SEC Documents" shall have the meaning set
forth in Section 3.4.
"Target Stock Option Plans" shall have the meaning set
forth in Section 2.7.
"Target Stockholders Meeting" shall have the meaning
set forth in Section 3.22.
"Target" means Mt. Laurel Group, Inc., a Pennsylvania
corporation.
"Tax Authority" means any Governmental Entity
responsible for the imposition or collection of any Tax or with
whom any Tax Return is required to be filed.
"Tax Return" shall mean any return, statement, report
or form (including estimated Tax returns and reports,
withholding Tax returns and reports and information reports and
returns) required to be filed with respect to Taxes.
"Tax" (and, with correlative meaning, "Taxes" and
"Taxable") means (i) any net income, alternative or add-on
minimum tax, gross income, gross receipts, premium, sales, use,
ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit tax, custom,
duty or other tax, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed by any Tax
Authority, (ii) any liability for the payment of any amounts of
the type described in (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any
Taxable period and (iii) any liability for the payment of any
amounts of the type described in (i) or (ii) as a result of any
express or implied obligation to indemnify any other Person.
"Third Party Intellectual Property Rights" shall have
the meaning set forth in Section 3.11(b).
"Treasury Regulations" shall mean regulations adopted
by the Internal Revenue Service pursuant to the Code.
"Trigger Event" shall have the meaning set forth in
Section 8.3(e).
"Trust Agreement" shall have the meaning set forth in
Section 3.14(f).
"Trustee" means the Bank of Lancaster, N.A. as set
forth in Section 3.14(f).
"Voting Agreement" shall have the meaning set forth in
Paragraph C of the Recitals, the form of which is attached
hereto as Exhibit C.
"Waiver Agreement" shall have the meaning set forth in
Section 5.3.
"WARN Act" shall mean the federal Worker Adjustment
and Retraining Notification Act of 1988, as amended.
EXHIBIT
B
TARGET OPTION AGREEMENT
This Target Option Agreement (this "Agreement") is dated as
of May 10, 2000 between Ohio Farmers Insurance Company, an Ohio
corporation ("Acquiror"), and Old Guard Group, Inc., a
Pennsylvania corporation ("Target"). Acquiror and Target are
hereinafter collectively referred to as the "Parties" and
individually as a "Party."
Recitals
A. Concurrently with the execution and delivery of this
Agreement, Target, Acquiror and Westfield Merger Sub, Inc., an
Ohio corporation ("Merger Sub"), are entering into an Agreement
and Plan of Reorganization, dated as of the date hereof as
amended from time to time (the "Reorganization Agreement"),
providing that, among other things, upon the terms and subject
to the conditions thereof, Target and Merger Sub shall merge
(the "Merger").
B. As a condition and inducement to Acquiror's willingness
to enter into the Reorganization Agreement, Acquirer has
required that Target agree, and Target has so agreed, to grant
to Acquiror an option with respect to certain shares of Target's
common stock on the terms and subject to the conditions set
forth herein.
C. Capitalized terms used herein (or other terms defined
in the Reorganization Agreement) but not defined in this
Agreement shall have the meanings set forth in the
Reorganization Agreement.
NOW, THEREFORE, in consideration of the foregoing and of
the mutual covenants and agreements set forth herein and in the
Reorganization Agreement, the receipt, sufficiency and adequacy
of which is hereby acknowledged, the Parties agree as follows:
1. Grant of Option. Target hereby grants Acquiror an
irrevocable option (the "Target Option") to purchase up to
367,000 shares (the "Target Shares") of the common stock,
without par value, of Target (the "Target Common Stock") in the
manner set forth herein at a price (the "Exercise Price") equal
to $12.00 per Target Share, payable in cash.
2. Exercise of Option. The Target Option may be
exercised by Acquiror, in whole or in part, at any time or from
time to time, after the occurrence of any of the events
described in Section 8.3(b) of the Reorganization Agreement, or
if a Takeover Proposal or Trigger Event is consummated as set
forth in Section 8.3(c) of the Reorganization Agreement. In the
event Acquiror elects to exercise the Target Option, Acquiror
shall deliver to Target a written notice (an "Exercise Notice")
specifying the total number of Target Shares it wishes to
purchase pursuant thereto. Each closing of a purchase of Target
Shares (a "Closing") shall occur at a place, on a date, and at a
time designated by Acquiror in an Exercise Notice delivered at
least two business days prior to the date of the Closing.
Except as provided in the last sentence of this Section 2, the
Target Option shall terminate upon the earlier of: (i) the
Effective Time; (ii) the termination of the Reorganization
Agreement pursuant to Section 8.1 thereof (other than a
termination in connection with which Acquiror is or will be
entitled to any payments as specified in Section 8.3(b) or (c)
thereof); (iii) 181 days following any termination of the
Reorganization Agreement in connection with which Acquiror is or
will be entitled to a payment as specified in Section 8.3(b)
thereof (or if, at the expiration of such 181 day period, the
Target Option cannot be exercised by reason of any applicable
judgment, decree, order, law or regulation, ten (10) business
days after such impediment to exercise shall have been removed
or shall have become final and not subject to appeal); or (iv)
12 months and one day following any termination of the
Reorganization Agreement in connection with which Acquiror is or
will be entitled to a payment as specified in Section 8.3(c)
thereof (or if, at the expiration of such 12 months and one day
period, the Target Option cannot be exercised by reason of any
applicable judgment, decree, order, law or regulation, ten (10)
business days after such impediment to exercise shall have been
removed or shall have become final and not subject to appeal).
Notwithstanding the termination of the Target Option, Acquiror
shall be entitled to exercise the Target Option if it has given
the Exercise Notice in accordance with the terms hereof prior to
the termination of the Target Option, and the termination of the
Target Option shall not affect any rights hereunder which by the
terms of this Agreement do not terminate or expire prior to or
as of such termination.
3. Conditions to Closing. The obligation of Target to
issue the Target Shares to Acquiror hereunder is subject to the
conditions that (i) all waiting periods, if any, under the Xxxx-
Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder ("HSR Act"),
applicable to the issuance of the Target Shares hereunder shall
have expired or have been terminated; (ii) all consents,
approvals, orders or authorizations of, or declarations or
filings with, any Federal, state or local administrative agency
or commission or other Federal, state or local governmental
authority or instrumentality, if any, including any applicable
state Department of Insurance, required in connection with the
issuance of the Target Shares hereunder shall have been obtained
or made, as the case may be; and (iii) no preliminary or
permanent injunction or other order by any court of competent
jurisdiction or governmental agency prohibiting or otherwise
restraining such issuance shall be in effect.
4. Closing. At any Closing, (a) Target will deliver to
Acquiror a single certificate in definitive form representing
the number of Target Shares designated by Acquiror in its
Exercise Notice, such certificate to be registered in the name
of Acquiror and to bear the legend set forth in Section 9, and
(b) Acquiror will deliver to Target the aggregate price for the
Target Shares so designated and being purchased by wire transfer
of immediately available funds. At any Closing at which
Acquirer is exercising the Target Option in part, Acquiror shall
present and surrender this Agreement to Target, and Target shall
deliver to Acquiror an executed new agreement with the same
terms as this Agreement evidencing the right to purchase the
balance of the shares of Target Common Stock purchasable
hereunder.
5. Representations and Warranties of Target. Target
represents and warrants to Acquirer as follows as of the date
hereof and as of each date up to and including each Closing:
(a) Target is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Pennsylvania and has the corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder;
(b) the execution and delivery of this Agreement by
Target and the consummation by Target of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Target and no other corporate
proceedings on the part of Target are necessary to authorize
this Agreement or any of the transactions contemplated hereby;
(c) this Agreement has been duly executed and
delivered by Target and constitutes a valid and binding
obligation of Target enforceable against Target in accordance
with its terms, except as enforceability may be limited by
bankruptcy and other laws affecting the rights and remedies of
creditors generally and general principles of equity;
(d) Target has taken all necessary corporate action
to authorize and reserve for issuance and to permit it to issue,
upon exercise of the Target Option, and at all times from the
date hereof through the expiration of the Target Option will
have reserved, that number of unissued Target Shares that are
subject to the Target Option, all of which, upon their issuance
and delivery in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable;
(e) upon delivery of the Target Shares to Acquiror
upon the exercise of the Target Option, Acquiror will acquire
the Target Shares free and clear of all Liens, except for such
Liens, if any, as may be created by Acquiror;
(f) except as may be required under the Securities
Act of 1933 as amended (the "Securities Act"), the execution and
delivery of this Agreement by Target does not, and the
performance of this Agreement by Target will not, conflict with,
or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right
of termination, cancellation or acceleration of any obligation
or the loss of a benefit under, or the creation of a Lien on
assets pursuant to (any such conflict, violation, default, right
of termination, cancellation or acceleration, loss or creation,
a "Violation"), (A) any provision of the Articles of
Incorporation or Bylaws or other similar organizational
documents of Target, or (B) any provisions of any Contract,
permit, concession, franchise, or license to which Target or any
of its Subsidiaries is a party or by which any one or more of
them is bound, or (C) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Target or its
Subsidiaries or their respective properties or assets, which
Violation, in the case of each of clauses (B) and (C), would
have a Material Adverse Effect on Target; and
(g) except as described in Section 3.3 of the
Reorganization Agreement and Section 3(i) of this Agreement, and
except as may be required under the Securities Act, the
execution and delivery of this Agreement by Target does not, and
the performance of this Agreement by Target will not, require
any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory
authority.
6. Representations and Warranties of Acquiror. Acquiror
represents and warrants to Target as follows, as of the date
hereof and as of each date up to and including each Closing:
(a) Acquiror is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Ohio and has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder;
(b) the execution and delivery of this Agreement by
Acquiror and the consummation by Acquiror of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Acquiror and no other corporate
proceedings on the part of Acquiror are necessary to authorize
this Agreement or any of the transactions contemplated hereby;
(c) this Agreement has been duly executed and
delivered by Acquiror and constitutes a valid and binding
obligation of Acquiror enforceable against Acquiror in
accordance with its terms, except as enforceability may be
limited by bankruptcy and other laws affecting the rights and
remedies of creditors generally and general principles of
equity;
(d) except as described in Section 4.2 of the
Reorganization Agreement, the execution and delivery of this
Agreement by Acquiror does not, and the performance of this
Agreement by Acquiror will not, result in any Violation pursuant
to, (A) any provision of the Articles of Incorporation or Bylaws
or similar organizational documents of Acquiror, (B) any
provisions of any Contract, permit, concession, franchise, or
license to which Acquiror is a party or by which it is bound, or
(C) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Acquiror or its properties or
assets, which Violation, in the case of each of clauses (B) and
(C), would have a Material Adverse Effect on Acquiror;
(e) except as described in Section 4.2 of the
Reorganization Agreement and Section 3(i) of this Agreement, and
except as may be required under the Securities Act, the
execution and delivery of this Agreement by Acquiror does not,
and the performance of this Agreement by Acquiror will not,
require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory
authority; and
(f) any Target Shares acquired upon exercise of the
Target Option will not be, and the Target Option is not being,
acquired by Acquiror with a view to the public distribution
thereof within the meaning of the Securities Act.
7. Registration Rights.
(a) Following the termination of the Reorganization
Agreement, Acquiror may by written notice (the "Registration
Notice") to Target request Target to register under the
Securities Act all or any part of the shares of Target Common
Stock acquired pursuant to this Agreement (the "Restricted
Shares") beneficially owned by Acquiror (the "Registrable
Securities"). Target (and/or any person designated in writing
by Target to Acquiror) shall thereupon have the option
exercisable by written notice delivered to Acquiror within ten
(10) business days after the receipt of the Registration Notice,
irrevocably to agree to purchase all or any part of the
Registrable Securities for cash at a price (the "Option Price")
equal to the product of (i) the number of Registrable Securities
multiplied by (ii) the average of the closing prices of such
shares of Target Common Stock on the NASDAQ National Market (or
such other exchange or inter-dealer quotation system on which
Target Common Stock is then listed or quoted) for the ten
trading days immediately preceding the Notice Date. Any such
purchase of Registrable Securities by Target shall take place at
a closing to be held at the principal executive offices of
Acquiror at any reasonable date and time designated by Target
and/or such designee in such notice within ten (10) business
days after delivery of such notice. Any payment for the shares
to be purchased hereunder shall be made by delivery of the
Option Price at the time of such closing by wire transfer of
immediately available funds.
(b) If Target does not elect to exercise its option
to purchase pursuant to Section 7(a) with respect to all
Registrable Securities, Target shall use commercially reasonable
efforts to effect, as promptly as reasonably practicable, the
registration under the Securities Act of the unpurchased
Registrable Securities (including without limitation a shelf
registration statement under Rule 415 promulgated under the
Securities Act); provided, however, that (i) Acquiror shall not
be entitled to more than an aggregate of two effective
registration statements hereunder, and (ii) Target will not be
required to file any such registration statement during any
period of time (not to exceed 45 days after such request in the
case of clause (A) below or 135 days in the case of clauses (B)
and (C) below) when (A) Target is in possession of material
nonpublic information which it reasonably believes (i) would be
detrimental to be disclosed at such time, and (ii) after
consultation with counsel to Target, such information would have
to be disclosed if a registration statement were filed at that
time; (B) Target is required under the Securities Act to include
audited financial statements for any period in such registration
statement and such financial statements are not yet reasonably
available for inclusion in such registration statement; or (C)
Target determines, in its reasonable judgment, that such
registration would materially interfere with any financing,
acquisition or other material transaction involving Target or
any of its Subsidiaries. Without Acquiror's prior written
consent, no securities other than the Registrable Securities
shall be included in any such registration. If consummation of
the sale of any Registrable Securities pursuant to a
registration hereunder does not occur within 120 days after the
initial filing with the SEC of the registration statement, the
provisions of this Section 7 shall again be applicable to any
proposed registration and the filing of such registration
statement shall not reduce the number of registrations Acquiror
may request pursuant to this Section 7. Target shall use
commercially reasonable efforts to cause any Registrable
Securities registered pursuant to this Section 7 to be qualified
for sale under the securities or Blue Sky laws of such
jurisdictions as Acquiror may reasonably request and shall
continue such registration or qualification in effect in such
jurisdiction; provided, however, that Target shall not be
required to qualify to do business in, or consent to general
service of process in, any jurisdiction by reason of this
provision.
(c) The registration rights set forth in this Section
7 are subject to the condition that Acquiror shall provide
Target with such information with respect to Acquiror's
Registrable Securities, the plans for the distribution thereof,
and such other information with respect to Acquiror as, in the
reasonable judgment of counsel for Target, is necessary to
enable Target to include in such registration statement all
material facts required to be disclosed with respect to a
registration thereunder.
(d) If the Target Common Stock is then authorized for
quotation or trading or listing on the New York Stock Exchange,
the NASDAQ National Market System, or any other securities
exchange or automated quotations system, then upon the request
of Acquiror, Target shall promptly file an application, if
required, to authorize for quotation, trading or listing the
shares of Registrable Securities on such exchange or system and
will use commercially reasonable efforts to obtain approval, if
required, of such quotation, trading or listing as soon as
reasonably practicable.
(e) If Target shall propose to register under the
Securities Act the offering, sale and delivery of Target Common
Stock for cash for its own account or for any other stockholder
of Target pursuant to a firm commitment underwriting, Target
shall, in addition to Target's other obligations under this
Section 7, grant Acquiror the right to participate in such
registration so long as Acquiror participates in the
underwriting; provided, however, that, if the managing
underwriter of such offering advises Target in writing that in
its reasonable opinion the number of shares of Target Common
Stock requested to be included in such registration exceeds the
number which can be sold in such offering, Target shall, after
fully including therein all shares of Target Common Stock to be
sold by Target, include the shares of Target Common Stock
requested to be included therein by Acquiror pro rata (based on
the number of shares of Target Common Stock intended to be
included therein) with the shares of Target Common Stock
intended to be included therein by persons other than Target.
(f) A registration effected under this Section 7
shall be effected at Target's expense, except for underwriting
discounts and commissions and the fees and the expenses of
counsel to Acquiror, and, if such sale of Registrable Securities
is being conducted by means of an underwritten public offering,
Target shall provide to the underwriters such documentation
(including certificates, opinions of counsel and "comfort"
letters from auditors) as are customary in connection with
underwritten public offerings as such underwriters may
reasonably require. In connection with any such registration,
the Parties agree (i) to indemnify each other and the
underwriters in the customary manner, and (ii) if such sale of
Registrable Securities is being conducted by means of an
underwritten public offering, to enter into an underwriting
agreement in form and substance customary to transactions of
this type with the underwriters participating in such offering.
8. Adjustment Upon Changes in Capitalization.
(a) In the event of any change in Target Common Stock
by reason of stock dividend, split-up, merger (other than the
Merger), recapitalization, combination, exchange of shares or
the like, the type and number of shares or securities subject to
the Target Option, and the purchase price per share provided in
Section 1, shall be adjusted appropriately, and proper provision
shall be made in the agreements governing such transaction so
that Acquiror shall receive, upon exercise of the Target Option,
the number and class of shares or other securities or property
that Acquiror would have received in respect of the Target
Common Stock if the Target Option had been exercised immediately
prior to such event or the record date therefor, as applicable.
(b) In the event Target enters in an agreement: (i)
to consolidate with or merge into any Person, other than
Acquiror or one of its Subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation or
merger; (ii) to permit any Person, other than Acquiror or one of
its Subsidiaries, to merge into Target whereby Target shall be
the continuing or surviving corporation and the shares of Target
Common Stock outstanding immediately prior to such merger shall
be changed into or exchanged for stock or other securities of
Target or any other person or cash or any other property, or the
outstanding shares of Target Common Stock immediately prior to
such merger shall after such merger represent less than 50% of
the outstanding shares and share equivalents of the merged
company; or (iii) to sell or otherwise transfer all or
substantially all of its assets to any Person, other than
Acquirer or one of its Subsidiaries, then, and in each such
case, the agreement governing such transaction shall make proper
provisions so that upon the consummation of any such transaction
and upon the terms and conditions set forth herein, Acquiror
shall receive for each Target Share with respect to which the
Target Option has not been exercised an amount of consideration
in the form of and equal to the per share amount of
consideration that would be received by the holder of one share
of Target Common Stock less the Exercise Price (and, in the
event of an election or similar arrangement with respect to the
type of consideration to be received by holders of Target Common
Stock, subject to the foregoing, proper provision shall be made
so that Acquiror, as holder of the Target Option, would have the
same election or similar rights as would the holder of the
number of shares of Target Common Stock for which the Target
Option is then exercisable).
9. Restrictive Legend. Each certificate representing
shares of Target Common Stock issued to Acquiror hereunder shall
include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
10. Binding Effect; No Assignment. This Agreement
shall be binding upon and inure to the benefit of the Parties
and their respective successors and permitted assigns. Except
as expressly provided in this Agreement, neither this Agreement
nor the rights or the obligations of either Party are
assignable, except by operation of law, or with the written
consent of the other Party. Nothing contained in this
Agreement, express or implied, is intended to confer upon any
Person other than the Parties and their respective permitted
assigns any rights or remedies of any nature whatsoever. Any
Restricted Shares sold by Acquiror in compliance with the
provisions of Section 7 shall, upon consummation of such sale,
be free of the restrictions imposed with respect to such shares
by this Agreement, unless and until Acquiror shall repurchase or
otherwise become the beneficial owner of such shares, and any
transferee of such shares shall not be entitled to the rights of
Acquiror. Certificates representing shares sold in a registered
public offering pursuant to Section 7 shall not be required to
bear the legend set forth in Section 9.
11. Specific Performance. The Parties recognize and
agree that if for any reason any provisions of this Agreement
are not performed in accordance with their specific terms or are
otherwise breached, immediate and irreparable harm or injury
would be caused for which money damages would not be an adequate
remedy. Accordingly, each Party agrees that, in addition to
other remedies, the other Party shall be entitled to an
injunction restraining any violation or threatened violation of
the provisions of this Agreement. In the event any action
should be brought in equity to enforce the provisions of this
Agreement, neither Party will allege, and each Party hereby
waives the defense, that there is adequate remedy at law.
12. Entire Agreement. This Agreement and the
Reorganization Agreement constitute the entire agreement among
the Parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both
written and oral, among the Parties or any of them with respect
to the subject matter hereof.
13. Further Assurance. Each Party shall execute and
deliver all such further documents and instruments and take all
such further actions as may be necessary in order to consummate
the transactions contemplated hereby.
14. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of the other provisions of this Agreement, which
shall remain in full force and effect. If any court or other
competent authority holds any provision of this Agreement to be
null, void or unenforceable, the Parties shall negotiate in good
faith the execution and delivery of an amendment to this
Agreement in order, as nearly as possible, to effectuate, to the
extent permitted by law, the intent of the Parties with respect
to such provision. Each Party agrees that, should any court or
other competent authority hold any provision of this Agreement
or part hereof to be null, void or unenforceable, or order any
Party to take any action inconsistent herewith, or not take any
action required herein, the other Party shall not be entitled to
specific performance of such provision or part hereof or to any
other remedy, including but not limited to money damages, for
breach hereof or of any other provision of this Agreement or
part hereof as the result of such holding or order.
15. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if
delivered personally or by commercial delivery service, or
mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt)
to the Parties at the following address (or at such other
address for a Party as shall be specified by like notice).
if to Acquiror or Merger
Sub, to: Ohio Farmers Insurance Company
Xxx Xxxx Xxxxxx
X. X. Xxx 0000
Xxxxxxxxx Xxxxxx, Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxx
Facsimile No.: 000-000-0000
Telephone No.: 330/000-0000
with a copy to: Xxxxxxx & Xxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxx, III
Facsimile No.: 614/227-2390
Telephone No.: 614/000-0000
if to Target, to: Old Guard Group, Inc.
0000 Xxxxxx Xxxx
X. X. Xxx 0000
Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Facsimile No.: 717/569-3480
Telephone No.: 717/000-0000
with a copy to: Xxxxxxx & Xxx
0000 Xxxxxxxx Xxxx
X. X. Xxx 000
Xxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile No.: 610/687-1384
Telephone No.: 610/000-0000
16. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Ohio
applicable to agreements made and to be performed entirely
within such state without regard to any applicable conflicts of
law rules.
17. 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.
18. Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or more
counterparts have been signed by each of the Parties and
delivered to the other Parties, it being understood that all
Parties need not sign the same counterpart.
19. Amendments; Waiver. This Agreement may be amended by
the Parties and the terms and conditions hereof may be waived
only by an instrument in writing signed on behalf of each of the
Parties, or, in the case of a waiver, by an instrument signed on
behalf of the Party waiving compliance.
20. Termination. This Agreement shall terminate upon
termination of the Target Option. Notwithstanding the
foregoing, if all or a portion of the Target Option shall have
been exercised prior to the termination of the Target Option,
all representations and warranties in this Agreement of a Party
shall survive any such termination, and all covenants of a Party
and other provisions in Sections 7 and 9 through 21 shall
survive any such termination. No such termination shall
extinguish any liability of a Party for breach of its
obligations under this Agreement.
21. Expenses. Each of the Parties shall bear and pay all
costs and expenses incurred by it or on its behalf in connection
with the negotiation, execution and performance of this
Agreement, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
IN WITNESS WHEREOF, the Parties have executed this
Agreement by their respective duly authorized officers as of the
date first above written.
OHIO FARMERS INSURANCE COMPANY
By:_______________________________
Name: R. Xxxx Xxxxx
Title: Chief Executive Officer
OLD GUARD GROUP, INC.
By:_______________________________
Name: Xxxxx X. Xxxxxx
Title: President and Chief
Executive Officer
EXHIBIT C
VOTING AGREEMENT
This Voting Agreement (this "Agreement") is made and
entered into as of May 10, 2000, between the undersigned
stockholders (each a "Stockholder" and collectively the
"Stockholders") of Old Guard Group, Inc., a Pennsylvania
corporation ("Target"), and Ohio Farmers Insurance Company, an
Ohio corporation ("Acquiror"). The Stockholders and Acquiror
are hereinafter collectively referred to herein as the "Parties"
and individually as a "Party."
RECITALS
A. Concurrently with the execution and delivery of this
Agreement, Target and Acquirer are entering into an Agreement
and Plan of Reorganization dated as of the date hereof as the
same may be amended from time to time (the "Reorganization
Agreement"), providing for the merger of Target with and into a
wholly owned subsidiary of Acquiror (the "Merger") pursuant to
the terms and conditions thereof.
B. As a condition and an inducement to Acquiror entering
into the Reorganization Agreement, pursuant to which each
Stockholder will receive the consideration provided for in the
Reorganization Agreement in exchange for each share of common
stock, with no par value, of Target (the "Target Common Stock")
owned by such Stockholder, Acquiror has required that the
Stockholders agree, and the Stockholders have so agreed, to
enter into this Agreement whereby each Stockholder will agree to
vote such Stockholder's Shares (as defined below) in favor of
the Merger and against any competing merger proposal.
NOW, THEREFORE, in consideration of the foregoing and of
the mutual covenants and agreements set forth herein and in the
Reorganization Agreement, the receipt, sufficiency and adequacy
of which are hereby acknowledged, the Parties agree as follows:
1. Representations and Warranties of the Stockholders.
Each Stockholder represents and warrants to Acquiror that such
Stockholder:
(a) is the beneficial owner of that number of shares
of Target Common Stock set forth opposite such Stockholder's
name on Exhibit A (such Stockholder's "Shares");
(b) except as described in Exhibit A, does not
beneficially own (as such term is defined in the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) or own of
record any shares of Target Common Stock other than such
Stockholder's Shares, other than shares of Target Common Stock
which such Stockholder has the right to obtain upon the exercise
of stock options outstanding on the date hereof as described on
Exhibit A; and
(c) has the right, power and authority to execute and
deliver this Agreement and to perform such Stockholder's
obligations under this Agreement, and this Agreement has been
duly executed and delivered by such Stockholder and constitutes
a valid and legally binding agreement of such Stockholder,
enforceable in accordance with its terms; and such execution,
delivery and performance by such Stockholder of this Agreement
will not (i) conflict with, require a consent, waiver or
approval under, result in a breach of or default under, or
result in the termination of, any term of any contract,
agreement, understanding, commitment or other obligation
(written or oral) to which such Stockholder is a party or by
which such Stockholder is bound; (ii) violate any order,
judgment, writ, injunction, decree or statute, or any rule or
regulation, applicable to Stockholder or any of the properties
or assets of such Stockholder; or (iii) result in the creation
of, or impose any obligation on such Stockholder to create, any
lien, charge or other encumbrance of any nature whatsoever upon
the Shares, other than in favor of Acquiror.
The representations and warranties contained herein shall
be made as of the date hereof and as of each date from the date
hereof through and including the date that the Merger is
consummated or this Agreement is terminated in accordance with
its terms.
2. Agreement to Vote Shares. At each meeting of the
stockholders of Target, each Stockholder shall be present (in
person or by proxy) and vote such Stockholder's Shares and any
New Shares (as defined in Section 4), and shall cause any holder
of record of such Stockholder's Shares or New Shares to be
present and vote, (a) in favor of adoption and approval of the
Reorganization Agreement and the Merger (and each other action
and transaction contemplated by the Reorganization Agreement or
by this Agreement) and (b) against any Takeover Proposal (as
defined in the Reorganization Agreement) other than the Merger
(or any other Takeover Proposal of Acquiror) and against any
proposed action or transaction that would prevent or
intentionally delay consummation of the Merger (or other
Takeover Proposal of Acquiror) or is otherwise inconsistent
therewith at every meeting of the stockholders of Target at
which any such matters are considered and at every adjournment
thereof. Any such vote shall be cast, or consent shall be
given, in accordance with such procedures relating thereto as
shall ensure that it is duly counted for purposes of determining
that a quorum is present and for purposes of recording the
results of such vote. Each Stockholder shall deliver to
Acquiror upon request a proxy substantially in the form attached
hereto as Exhibit B, which proxy shall be coupled with an
interest and irrevocable to the extent permitted under
Pennsylvania law, with the total number of such Stockholder's
Shares and any New Shares correctly indicated thereon. Each
Stockholder hereby revokes any and all previous proxies granted
with respect to such Stockholder's Shares. Each Stockholder
shall also use reasonable best efforts to take, or cause to be
taken, all action, and do, or cause to be done, all things
necessary or advisable in order to consummate and make effective
the transactions contemplated by this Agreement.
3. No Voting Trusts. After the date hereof, each
Stockholder agrees that such Stockholder will not, nor will such
Stockholder permit any entity under such Stockholder's control
to, deposit any Shares or New Shares in a voting trust or
subject any Shares or New Shares to any lien or agreement,
proxy, arrangement or understanding with respect to the voting
of such Shares other than with or in favor of Acquiror.
4. Additional Purchases. Each Stockholder agrees that in
the event (a) of any stock dividend, stock split,
recapitalization, reclassification, combination or exchange of
shares of stock of Target on, of or affecting the Shares of such
Stockholder, (b) such Stockholder purchases or otherwise
acquires beneficial ownership of any shares of Target Common
Stock after the execution of this Agreement (including by
exercise of options), or (c) such Stockholder acquires the right
to vote or share in the voting of any shares of Target Common
Stock other than the Shares (collectively, "New Shares"), such
Stockholder shall deliver promptly to Acquiror upon request an
irrevocable proxy substantially in the form attached hereto as
Exhibit B with respect to such New Shares. Each Stockholder
also agrees that any New Shares acquired or purchased by such
Stockholder shall be subject to the terms of this Agreement and
shall constitute Shares to the same extent as if they were owned
by such Stockholder on the date hereof.
5. No Encumbrances.
(a) Except as expressly contemplated by this
Agreement, each Stockholder's Shares and the certificates
representing such Shares are now, and at all times during the
term hereof will be, held by such Stockholder, or by a nominee
or custodian for the benefit of such Stockholder, free and clear
of all liens, claims, security interests, proxies, voting trusts
or agreements, understandings or arrangements or any other
encumbrances whatsoever (other than to the extent set forth on
Exhibit A to this Agreement), except for any encumbrances or
proxies arising hereunder.
(b) Notwithstanding the foregoing each Stockholder
shall be permitted to sell (or pledge to Target in support of a
loan) such portion of New Shares (but may not sell any New
Shares to Target or its Subsidiaries (as defined in the
Reorganization Agreement)) solely to pay the exercise price of
any employee stock options and tax liabilities in respect of an
exercise of employee stock options; provided that any such New
Shares shall be sold (or pledged) subject to the irrevocable
proxy referred to in Section 2.
6. No Solicitation. Each Stockholder agrees that such
Stockholder will not, directly or indirectly (i) take any action
to solicit, initiate or encourage any Takeover Proposal (as
defined in the Reorganization Agreement) or (ii) engage in
negotiations with, or disclose any nonpublic information
relating to Target or any of its Subsidiaries, to any person
that has advised Target that it may be considering making, or
that has made, a Takeover Proposal. Such Stockholder will
promptly notify Acquiror after receipt of any Takeover Proposal
or any notice that any person is considering making a Takeover
Proposal or any request for nonpublic information relating to
Target or any of its Subsidiaries or for access to the
properties, books or records of Target or any of its
Subsidiaries by any person that has advised Target that it may
be considering making, or that has made a Takeover Proposal and
will keep Acquiror fully informed of the status and details of
any such Takeover Proposal notice, and shall provide Acquiror
with a true and complete copy of such Takeover Proposal notice
or any amendment thereto, if it is in writing, or a complete
written summary thereof, if it is not in writing.
7. Appraisal Rights. Each Stockholder agrees not to
exercise any rights (including, without limitation, under Title
15, Article B, Chapter 19, Subchapter C, Section 1930 of the
Pennsylvania General Corporation Law) to demand appraisal of any
Target Common Stock which may arise with respect to the Merger.
8. Reliance by Acquiror. Each Stockholder understands
and acknowledges that Acquiror is entering into the
Reorganization Agreement in reliance upon each Stockholder's
execution and delivery of this Agreement.
9. Action in Stockholder Capacity Only. Each Stockholder
makes no agreement or understanding hereunder as an officer or
director of Target. Each Stockholder executes this Agreement
solely in such Stockholder's capacity as a beneficial owner of
the Shares, and nothing herein shall limit or effect any actions
taken in such Stockholder's capacity as an officer or director
of Target. The obligations of each Stockholder under this
Agreement are the several, and not joint, obligations of such
Stockholder.
10. Specific Performance. Each Party severally
acknowledges that such Party will be impossible to measure in
money the damage to the other Parties if the Party fails to
comply with any of the obligations imposed by this Agreement,
that every such obligation is material and that, in the event of
any such failure, the other Parties will not have an adequate
remedy at law or damages. Accordingly, each Party severally
agrees that injunctive relief or other equitable remedy, in
addition to remedies at law or damages, is the appropriate
remedy for any such failure and will not oppose the granting of
such relief on the basis that any other Party has an adequate
remedy at law. Each Party severally agrees that such Party will
not seek, and agrees to waive any requirement for, the securing
or posting of a bond in connection with any other Party's
seeking or obtaining such equitable relief.
11. Heirs, Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the Parties and
their respective heirs, successors and assigns and shall not be
assignable without the written consent of all other Parties,
other than any assignment in whole or in part by Acquiror.
12. Entire Agreement. This Agreement supersedes all prior
agreements, written or oral, among the Parties with respect to
the subject matter hereof and contains the entire agreement
among the Parties with respect to the subject matter hereof.
This Agreement may not be amended, supplemented or modified, and
no provisions hereof may be modified or waived, except by an
instrument in writing signed by all the Parties. No waiver of
any provisions hereof by any Party shall be deemed a waiver of
any other provisions hereof by any such Party, nor shall any
such waiver be deemed a continuing waiver of any provision
hereof by such Party.
13. Regulatory Approvals or Exemptions. The Parties
acknowledge and agree that certain transactions contemplated by
this Agreement may require receipt by Acquiror of certain
regulatory approvals from, or the granting of one or more
exemptions by, certain applicable insurance regulatory
authorities with jurisdiction over Target and its Subsidiaries
(as defined in the Reorganization Agreement). Upon request each
Stockholder shall use commercially reasonable efforts to
cooperate with Acquiror in obtaining any such required insurance
regulatory approvals or exemptions relating to the transactions
contemplated by this Agreement.
14. Miscellaneous.
(a) Expenses. Each Party shall bear and pay all
costs and expenses incurred by such Party or on such Party's
behalf in connection with the negotiation of this Agreement,
including fees and expenses of such Party's own financial
consultants, investment bankers, accountants and counsel.
(b) Amendment. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of
the Parties, provided, however, that any amendment signed by
Acquiror and any one or more Stockholders (but not by all
Stockholders) shall be effective to amend this Agreement but
only with respect to the mutual obligations of Acquiror and such
executing Stockholder or Stockholders hereunder.
(c) Governing Law. This Agreement shall be deemed a
contract made under, and for all purposes shall be construed in
accordance with, the internal laws of the State of Ohio without
regard to principles of conflicts of law, except for those
provisions relating to the voting and the proxy with respect to
the Shares, which shall be governed by Pennsylvania law.
(d) Severability. If any provision of this Agreement
or the application of such provision to any person or
circumstances shall be held invalid by a court of competent
jurisdiction, the remainder of the provision held invalid and
the application of such provision to persons or circumstances,
other than the Party as to which it is held invalid, shall not
be affected.
(e) Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one and the
same instrument.
(f) Termination. This Agreement shall terminate upon
the earlier of (i) the Effective Date of the Merger (as provided
in the Reorganization Agreement) or (ii) the termination of the
Reorganization Agreement pursuant to Section 8.1 thereof,
provided that no such termination shall extinguish any liability
of a Party for breach of such Party's obligations under this
Agreement. In addition, this Agreement may be terminated by
Acquiror at any time and for any reason as to any or all
Stockholders by delivery of a written notice of termination from
Acquiror to such Stockholder or Stockholders, in which case all
rights and obligations of Acquiror hereunder with respect to
each such Stockholder and such Stockholder's Shares, and all
obligations of each such Stockholder hereunder, shall
immediately terminate; provided, however, that such termination
by Acquiror pursuant to this sentence shall be without prejudice
to the rights of any Party against any other Party or Parties
arising out of or relating to a breach of this Agreement that
occurred prior to such termination.
(g) Headings. All Section headings herein are for
convenience of reference only and are not part of this Agreement
and no construction or reference shall be derived therefrom.
(h) Notices. All notices, requests, claims, demands,
and other communications under this Agreement must be in writing
and shall be deemed given if delivered personally or by
commercial delivery service, or mailed by registered or
certified mail (return receipt requested) or sent via facsimile
(with confirmation of receipt), to the Parties at the following
address (or at such other address for a Party as shall be
specified by like notice):
if to Acquiror, to: Ohio Farmers Insurance Company
Xxx Xxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxx Xxxxxx, Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxx
Facsimile No. 330/887-6295
Telephone No.: 330/000-0000
with a copy to: Xxxxxxx & Xxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxx, III
Facsimile No. 614/227-2390
Telephone No.: 614227-2383
if to a Stockholder, to the address of such Stockholder set
forth on the signature pages
hereto.
with a copy to: Old Guard Group, Inc.
0000 Xxxxxx Xxxx
X. X. Xxx 0000
Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Facsimile No.: 717/569-3480
Telephone No.: 717/000-0000
(i) Further Assurances. In the event of any exercise
of the Option or election to take the Cash Payment Amount,
Target and the Stockholders shall execute and deliver all other
documents and instruments and take all other actions that may be
reasonably necessary in order to consummate the transactions
contemplated by such exercise.
(j) Restrictive Legend. Each Stockholder shall cause
certificates for the Shares and New Shares to have typed or
printed thereon a restrictive legend which shall read
substantially as follows (if and to the extent true and
necessary in light of legal and factual circumstances existing
at such time).
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO CERTAIN PROVISIONS AS SET FORTH IN THAT CERTAIN VOTING
AGREEMENT, DATED AS OF MAY 10, 2000, A COPY OF WHICH WILL BE
MAILED BY THE COMPANY TO THE SHAREHOLDER WITHOUT CHARGE WITHIN
FIVE (5) DAYS AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR, WHICH
CONTAINS RESTRICTIONS ON THE VOTING AND TRANSFER THEREOF."
IN WITNESS WHEREOF, the Parties have executed this
Agreement as of the date first written above.
OHIO FARMERS INSURANCE COMPANY
By:_______________________________
Name:__________________
Title:_________________
THE STOCKHOLDERS:
By:_______________________________
Name:__________________
Title:_________________
Address:_______________
By:_______________________________
Name:__________________
Title:_________________
Address:_______________
By:_______________________________
Name:__________________
Title:_________________
Address:_______________
By:_______________________________
Name:__________________
Title:_________________
Address:_______________
This Agreement is accepted and agreed to by the Company
solely for purposes of providing copies of this Agreement as
contemplated by the restrictive legend referred to in Section
15(j) hereof.
OLD GUARD GROUP, INC.
By:_______________________
Its:_______________________
EXHIBIT B
FORM OF PROXY
The undersigned stockholder, for consideration received,
hereby appoints [OFIC DESIGNEES] and each of them as the
undersigned's proxies, with full power of substitution in each
of them, to cast on behalf of the undersigned all votes entitled
to be cast by the holder of the shares of Common Stock, without
par value, of Mt. Laurel Group, Inc., a Pennsylvania corporation
("Target"), owned by the undersigned at the Meeting of
Stockholders of Target to be held [DATE, TIME AND PLACE] and at
any adjournment thereof (i) "FOR" approval and adoption of the
Agreement and Plan of Merger, dated as of May __, 2000, among
Target, Ohio Farmers Insurance Company, an Ohio corporation
("Acquiror"), and Westfield Merger Sub, Inc., an Ohio
corporation and wholly owned subsidiary of Acquiror ("Merger
Sub"), providing for the merger (the "Merger") of Target with
and into Merger Sub, and "FOR" the Merger and (ii) "AGAINST" any
proposal or offer with respect to a merger, reorganization,
share exchange, consolidation, business combination,
recapitalization, liquidation, dissolution or similar
transaction involving, or any purchase of any substantial
portion of the assets of, or any equity securities of, or any
transaction that would involve the transfer or potential
transfer of control of, Target other than the Merger (or any
other takeover proposal of Acquiror) and any proposed action or
transaction that would prevent or intentionally delay
consummation of the Merger (or any other takeover proposal of
Acquiror) or is otherwise inconsistent therewith. This proxy is
coupled with an interest and is irrevocable until such time as
the Voting and Option Agreement, dated as of May __, 2000, among
certain stockholders of Target, the undersigned, and Acquiror
terminates in accordance with its terms.
Dated ___________________, 2000
____________________________________
(Signature of Stockholder)
____________________________________
(Number of Shares)
