PLAN AND AGREEMENT OF MERGER
AMONG
XXXXXXX ACQUISITION CORP.,
XXXXXXX X. XXXXXXX,
AND
RISCORP, INC.
--------------------------
November 3, 1999
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Table of Contents
1. MERGER 2
1.1. The Merger......................................................................................2
1.2. Conversion of Shares............................................................................2
1.3. Dissenting Shares...............................................................................4
1.4. Payment of Cash for Class A Common Stock........................................................5
1.5. Stock Transfers.................................................................................7
2. CLOSING 7
3. REPRESENTATIONS AND WARRANTIES OF RISCORP................................................................7
3.1. Organization, Good Standing and Power...........................................................7
3.2. Capitalization..................................................................................7
3.3. RISCORP Subsidiaries............................................................................8
3.4. Authority; Enforceability.......................................................................8
3.5. No Violation; Consents..........................................................................8
3.6. RISCORP Financial Statement; SEC Reports........................................................9
3.7. Absence of Certain Changes or Events...........................................................10
3.8. Taxes and Tax Returns..........................................................................11
3.9. Litigation.....................................................................................13
3.10. Contracts and Commitments......................................................................13
3.11. Proxy Statement, Etc...........................................................................13
3.12. Employee Benefit Plans.........................................................................14
3.13. Collective Bargaining; Labor Disputes; Compliance..............................................15
3.14. Brokers and Finders............................................................................15
3.15. No Violation of Law............................................................................16
3.16. Voting Requirements............................................................................16
3.17. Properties.....................................................................................16
3.18. Amendment to Rights Agreement..................................................................17
3.19. Disclosure.....................................................................................17
4. REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND GUARANTOR................................................17
4.1. Organization, Good Standing and Power..........................................................18
4.2. Authority; Enforceability......................................................................18
4.3. No Violation; Consents.........................................................................18
4.4. Proxy..........................................................................................19
4.5. Brokers and Finders............................................................................19
4.6. Capitalization.................................................................................19
4.7. Disclosure.....................................................................................19
4.8. Investigation by Acquiror and Guarantor........................................................19
5. CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; CERTAIN COVENANTS.....................................20
5.1. Access and Information.........................................................................20
5.2. Conduct of Business Pending Merger.............................................................20
5.3. Stockholders' Approval.........................................................................24
5.4. Takeover Statutes..............................................................................25
5.5. Consents.......................................................................................25
5.6. Further Assurances.............................................................................25
5.7. Notice; Efforts to Remedy......................................................................26
5.8. Proxy Materials and Schedule 13E-3.............................................................26
5.9. Press Releases; Filings........................................................................26
5.10. Indemnification of Officers and Directors......................................................27
5.11. Surrender/Sale of Insurance Licenses...........................................................28
5.12. Management of Contingent Claim.................................................................28
6. CONDITIONS PRECEDENT TO MERGER..........................................................................28
6.1. Conditions to Each Party's Obligations.........................................................28
6.2. Conditions to Obligations of RISCORP...........................................................29
6.3. Conditions to Obligations of Acquiror..........................................................29
7. TERMINATION OF THE MERGER...............................................................................30
7.1. Termination....................................................................................30
7.2. Effect of Termination..........................................................................31
8. MISCELLANEOUS...........................................................................................32
8.1. Waiver and Amendment...........................................................................32
8.2. Non-Survival of Representations and Warranties.................................................32
8.3. Notices........................................................................................32
8.4. Descriptive Headings; Interpretation...........................................................34
8.5. Counterparts...................................................................................34
8.6. Entire Agreement...............................................................................34
8.7. Governing Law..................................................................................34
8.8. Severability...................................................................................34
8.9. Enforcement of Agreement.......................................................................34
8.10. Assignment.....................................................................................35
8.11. Limited Liability..............................................................................35
8.12. Definition of Knowledge........................................................................35
8.13. Guarantor......................................................................................35
List of Exhibits
Exhibit A.........Voting Agreement
Exhibit B.........General Release
Exhibit C.........Fee Advancement Agreement
Exhibit D.........Escrow Agreement
Exhibit E.........Form of Section 5.10(d) Compliance Certificate
Exhibit F.........Contact Information for Compliance with Section 5.11(d)
Exhibit G.........RISCORP's Knowledge
PLAN AND AGREEMENT OF MERGER
PLAN AND AGREEMENT OF MERGER (this "Agreement"), dated as of November
3, 1999, by and among, XXXXXXX ACQUISITION CORP., a Florida corporation
("Acquiror"), XXXXXXX X. XXXXXXX, an individual and resident of the state of
Florida ("Guarantor") and RISCORP, INC., a Florida corporation ("RISCORP").
WHEREAS, Guarantor has incorporated Acquiror under the Florida Business
Corporation Act (the "FBCA") for the purpose of Acquiror merging with and into
RISCORP pursuant to the applicable provisions of the FBCA (the "Merger") so that
RISCORP will continue as the surviving corporation of the Merger;
WHEREAS, Guarantor is the sole stockholder of Acquiror and is executing
this Agreement to guarantee the performance of Acquiror's obligations hereunder
through the Effective Time (as hereinafter defined);
WHEREAS, the respective Boards of Directors of RISCORP and Acquiror
have approved and declared advisable the Merger, the terms and provisions of
this Agreement and the transactions contemplated hereby;
WHEREAS, the respective Boards of Directors of RISCORP and Acquiror
have determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is fair to and in the best
interests of their respective stockholders;
WHEREAS, the Merger described herein is subject to the approval of the
stockholders of RISCORP and the satisfaction of certain other conditions
described in this Agreement;
WHEREAS, in order to induce the parties to enter into this Agreement
and to perform their obligations hereunder Guarantor and each holder of Class B
Common Stock (as hereinafter defined) have executed and delivered a voting
agreement in the form of Exhibit A attached hereto;
WHEREAS, in order to induce the parties to enter into this Agreement
and to perform their obligations hereunder, each of the holders of shares of
Class B Common Stock, the officers and directors of RISCORP, Guarantor, and
certain other parties have executed and delivered a release substantially in the
form of Exhibit B attached hereto to be effective as of the Effective Time (as
hereinafter defined) (the "Release"); and
WHEREAS, in connection with the execution and delivery of this
Agreement, Acquiror has executed and delivered a fee advancement agreement in
substantially the form of Exhibit C attached hereto to be effective as of the
Effective Time (the "Fee Advancement Agreement").
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, the
parties agree as follows:
1. MERGER
1.1. The Merger
(a) Upon the terms and subject to the conditions of this Agreement, at
the Effective Time and in accordance with the provisions of this Agreement
and the FBCA, Acquiror shall be merged with and into RISCORP, which shall
be the surviving corporation (sometimes referred to hereinafter as the
"Surviving Corporation") in the Merger, and the separate corporate
existence of Acquiror shall cease. Subject to the provisions of this
Agreement, articles of merger (the "Articles of Merger") shall be duly
prepared, executed and acknowledged by RISCORP, on behalf of the Surviving
Corporation, and thereafter delivered to the Secretary of State of the
State of Florida for filing on the Closing Date, as required by Section
607.1105 of the FBCA. The Merger shall become effective upon the filing of
the Articles of Merger with the Secretary of State of the State of Florida
or at such time thereafter as is provided in the Articles of Merger (the
"Effective Time").
(b) From and after the Effective Time, the Merger shall have all the
effects as provided in the applicable provisions of the FBCA. Without
limiting the generality of the foregoing, and subject thereto, by virtue of
the Merger and in accordance with the FBCA, all of the properties, rights,
privileges, powers and franchises of RISCORP and Acquiror shall vest in the
Surviving Corporation and all of the debts, liabilities and duties of
RISCORP and Acquiror shall become the debts, liabilities and duties of the
Surviving Corporation.
(c) The Articles of Incorporation of RISCORP in effect immediately
prior to the Effective Time shall be the Articles of Incorporation of the
Surviving Corporation until thereafter amended in accordance with the
provisions thereof and the FBCA.
(d) The Bylaws of RISCORP in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation until altered,
amended or repealed as provided in such Bylaws, in the Articles of
Incorporation of the Surviving Corporation and in the FBCA.
(e) The officers and directors of Acquiror immediately prior to the
Effective Time shall be the initial officers and directors of the Surviving
Corporation, in each case until their respective successors are duly
elected and qualified.
1.2. Conversion of Shares. As of the Effective Time, by virtue of the
Merger and without any action on the part of Acquiror, RISCORP or any holder of
the following securities:
(a) Each share of common stock, par value $.01 of Acquiror ("Acquiror
Common Stock") that is issued and outstanding immediately prior to the
Effective Time shall be converted into and become one fully paid and
nonassessable share of Class B Common Stock (as hereinafter defined).
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(b) Subject to Section 1.3, each share of Class A Common Stock, par
value $.01 per share of RISCORP (the "Class A Common Stock") that is issued
and outstanding immediately prior to the Effective Time shall be canceled
and extinguished and shall be converted automatically into a right to
receive an amount in cash equal to the Merger Consideration (as hereinafter
defined), without interest, less any required withholding taxes, payable to
the holder thereof, as provided in Section 1.4, upon surrender of the
certificate formerly representing the Class A Common Stock.
(i) As used herein:
(1) the term "Merger Consideration" shall equal (A)(I) $2.85
less (II) the excess of the Transactional Expenses over $1,500,000
divided by the Outstanding Class A Shares (as defined in Section 3.2),
plus (B) the Contingent Claim Amount divided by the aggregate of the
Outstanding Class A Shares and the Outstanding Class B Shares (as
defined in Section 3.2); and
(2) the term "Contingent Claim Amount" shall equal the value
of any recovery obtained by RISCORP from Zenith Insurance Company,
Xxxxxx Xxxxxxxx LLP or their respective insurers in settlement and
final discharge of all alleged errors made in the determination of the
Final Business Balance Sheet (as defined in that certain Asset
Purchase Agreement by and among RISCORP, its subsidiaries and Zenith
Insurance Company dated June 17, 1997) (the "Contingent Claim");
provided that (A) the value of any recovery (to the extent not paid in
cash or cash equivalents) shall be determined as of the date of
settlement of such Contingent Claim by an independent expert well
recognized for having the knowledge and experience necessary to value
such consideration (the "Independent Expert") who shall be selected by
RISCORP within its reasonable discretion and who shall use such
valuation methodologies as are reasonably customary under the
circumstances and deemed relevant by the Independent Expert (B) the
determination of such Independent Expert shall be final, valid and
binding on all parties in interest; (C) to the extent that all or any
portion of the recovery received in respect of the Contingent Claim is
not reasonably subject to valuation (as determined by the Independent
Expert) then all or such portion (as the case may be) of such recovery
shall be deemed to equal zero; and (D) the Contingent Claim Amount
shall be reduced by the aggregate of all fees, costs and expenses
incurred by, paid by, or charged to RISCORP in (I) pursuing,
prosecuting, settling, and obtaining recovery for any such Contingent
Claim, (II) hiring and engaging the Independent Expert and valuing any
recovery of the Contingent Claim; and (III) distributing any
Contingent Claim Amount to stockholders of RISCORP.
(ii) On the Closing Date, RISCORP shall deliver to Acquiror a
listing of each holder of Class A Common Stock indicating such holder's
name and address (the "Class A Stockholder List"). Not later than
forty-five (45) days following the final settlement of the Contingent
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Claim, RISCORP shall distribute to each holder of Class A Common Stock such
holder's pro rata portion of the Contingent Claim Amount to the address
shown on the Class A Stockholder List or such other address as any such
stockholder may from time to time provide in writing to RISCORP; provided
that to the extent that any recovery obtained by RISCORP on any Contingent
Claim is other than cash or a cash equivalent, RISCORP, within the exercise
of its reasonable discretion, may pay the pro rata portion of the
Contingent Claim Amount to the holders of Class A Common Stock in cash or
by distribution of any securities or other instruments received by RISCORP
in settlement of such Contingent Claim.
(iii) Not less than two (2) days prior to the Stockholders'
Meeting (as hereinafter defined), RISCORP shall cause the Officer's
Certificate (as hereinafter defined ) to be delivered to Acquiror. For
purposes of this Agreement:
(1) "Transactional Expenses" shall mean the amount of
Estimated Transactional Expenses (as hereinafter defined) as set forth
on the Officer's Certificate;
(2) "Estimated Transactional Expenses" shall mean the sum of
the (A) estimated costs, expenses and fees for legal services rendered
to RISCORP after the date hereof in connection with the consummation
of the transactions contemplated hereby and (B) the estimated fees,
costs, and expenses of RISCORP with respect to services provided to
RISCORP by KPMG, LLP (or any successor thereto) after the date hereof
in connection with the consummation of the transactions contemplated
hereby, (excluding any fees, costs and expenses related to the audit
of RISCORP's financial statements for the calendar year ending
December 31, 1999); and
(3) "Officer's Certificate" shall mean a certificate
executed by a duly authorized officer of RISCORP which sets forth the
Estimated Transactional Expenses and which shall include reasonable
and appropriate supporting invoices and/or other documentation.
(c) Each share of Class B Common Stock, par value $.01 per share of
RISCORP ("Class B Common Stock") that is issued and outstanding immediately
prior to the Effective Time shall remain outstanding.
1.3. Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of Class A Common Stock issued and outstanding immediately
prior to the Effective Time held by a holder who shall have not voted in favor
of the Merger or consented thereto in writing and who shall have demanded in
writing appraisal for such shares in accordance with Sections 607.1301 et seq.
of the FBCA shall not be converted into a right to receive the Merger
Consideration but shall have the rights set forth in Sections 607.1301 et seq.
of the FBCA (or any successor provisions), if applicable unless such holder
fails to perfect or otherwise loses such holder's right to such payment or
appraisal, if any, pursuant to Sections 607.1301 et seq. of the FBCA. If, after
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the Effective Time, any holder of Class A Common Stock fails to perfect or loses
any such right to appraisal, each such share of such holder shall be treated as
a share that had been converted as of the Effective Time into the right to
receive the Merger Consideration in accordance with Section 1.2. RISCORP shall
give prompt notice to Acquiror of any notices of dissent, demands for payment of
fair value or other communications or actions received by RISCORP with respect
to shares of Class A Common Stock, and Acquiror shall have the right to
participate in and approve all negotiations and proceedings with respect
thereto. RISCORP shall not, except with the prior written consent of Acquiror,
make any payment with respect to, or settle or offer to settle, any such
demands.
1.4. Payment of Cash for Class A Common Stock.
(a) At the Effective Time, RISCORP shall irrevocably deposit or cause
to be deposited with a bank or trust company to be designated by RISCORP
and reasonably satisfactory to Acquiror which is organized and doing
business under the laws of the Untied States or any state thereof and has a
combined capital and surplus of at least $100,000,000 (the "Disbursing
Agent"), as agent for the holders of the shares of the Class A Common
Stock, cash in the estimated aggregate amount required to effect conversion
of shares of Class A Common Stock into the Merger Consideration at the
Effective Time pursuant to Section 1.2 hereof. Pending distribution hereof
pursuant to Section 1.4(b) hereof of the cash deposited with the Disbursing
Agent, such cash shall be held in trust for the benefit of the holders of
the Class A Common Stock and the fund shall not be used for any other
purpose and Acquiror and Surviving Corporation may direct the Disbursing
Agent to invest such cash, provided that such investments:
(i) shall be obligations of or guaranteed by the United States of
America, commercial paper obligations receiving the highest rating
from either Xxxxx'x Investors Services, Inc. or Standard & Poors
Corporation, or certificates of deposit, bank repurchase agreements or
bankers acceptance, of domestic commercial banks with capital
exceeding $250,000,000 (collectively, "Permitted Investments") or
money market funds which are invested solely in Permitted Investments;
and
(ii) shall have maturities that will not prevent or delay
payments to be made pursuant to Section 1.4(b) hereof.
Each holder of a certificate or certificates representing shares of
Class A Common Stock canceled on the Effective Time pursuant to
Section 1.2 hereof may thereafter surrender such certificate to the
Disbursing Agent, as agent for such holder of shares of Class A Common
Stock, which shall effect the exchange of such certificate or
certificates on such holder's behalf for a period ending six months
after the Effective Time. Any interest and other income resulting from
such investments shall be paid to the Surviving Corporation.
(b) After surrender to the Disbursing Agent of any certificate which
prior to the Effective Time shall have represented any shares of Class A
Common Stock (such shares being the "Surrendered Shares"), the Disbursing
Agent shall promptly distribute to the person in whose name such
certificate shall have been registered a check in an amount equal to the
Merger Consideration multiplied by the number of Surrendered Shares. Until
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so surrendered and exchanged, each such certificate shall, after the
Effective Time, be deemed to represent only the right to receive such cash,
and until such surrender and exchange, no cash shall be paid to the holder
of such outstanding certificate in respect thereof. No interest or
dividends shall be paid or accrued on the Merger Consideration. Not less
than ten (10) business days prior to the Closing Date, Acquiror shall
submit to RISCORP, letters of transmittal and other documents and materials
to be mailed to the holders of Class A Common Stock to facilitate the
surrender of such Class A Common Stock. The Surviving Corporation shall
immediately following the Effective Time cause to be distributed to such
holders such letters of transmittal and other documents and materials
approved by RISCORP to facilitate such surrender.
(c) If any cash deposited with the Disbursing Agent for purposes of
payment in exchange for shares of Class A Common Stock remains unclaimed
following the expiration of six (6) months after the Effective Time, such
cash shall be delivered to the Surviving Corporation by the Disbursing
Agent, and thereafter the Disbursing Agent shall not be liable to any
persons claiming any amount of such cash, and the surrender and exchange
shall be effected directly with the Surviving Corporation (subject to
applicable abandoned property, escheat and similar laws). No interest shall
accrue or be payable with respect to any amounts which any such holder
shall be so entitled to receive. The Surviving Corporation or the
Disbursing Agent shall be authorized to pay the cash attributable to any
certificate theretofore issued which has been lost or destroyed, upon
receipt of evidence reasonably satisfactory to the Surviving Corporation of
ownership of the shares of Class A Common Stock represented thereby and of
appropriate indemnification.
(d) None of Acquiror, the Surviving Corporation or the Disbursing
Agent shall be liable to any person in respect of any shares of retained
Class A Common Stock (or dividends or distributions with respect thereto)
or cash delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any certificates representing shares
of Class A Common Stock shall not have been surrendered prior to three
years after the Effective Time, any such cash, dividends or distributions
in respect of such certificate shall, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free and clear of
all claims or interest of any person previously entitled thereto.
(e) If payment is to be made to a person other than the person in
whose name a surrendered certificate, which prior to the Effective Time
shall have represented any shares of Class A Common Stock, is registered,
it shall be a condition to such payment that the certificate so surrendered
shall be endorsed or shall otherwise be in proper form for transfer, and
that the person requesting such payment shall have paid any transfer and
other taxes required by reason of such payment in a name other than that of
the registered holder of the certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation or the
Disbursing Agent that such tax either has been paid or is not payable.
(f) From and after the Effective Time, the holders of shares of Class
A Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares of Class A Common
Stock except as otherwise provided herein or by law.
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1.5. Stock Transfers. After the Effective Time, there shall be no transfers
on the stock transfer books of the Surviving Corporation of any shares of Class
A Common Stock which were outstanding immediately prior to the Effective Time.
2.CLOSING. Unless otherwise mutually agreed upon in writing by Acquiror and
RISCORP, the closing of the Merger (the "Closing") will be held at 10:00 a.m.,
local time, on the second business day following the date that all of the
conditions precedent specified in this Agreement have been (or can be at the
Closing) satisfied or waived by the party or parties permitted to do so (such
date being referred to hereinafter as the "Closing Date"). The place of Closing
shall be at the offices of King & Spalding, 000 Xxxxxxxxx Xxxxxx, X.X., Xxxxxxx,
Xxxxxxx 00000, or at such other place as may be agreed between Acquiror and
RISCORP.
3. REPRESENTATIONS AND WARRANTIES OF RISCORP. With such exceptions as are
set forth in the appropriate sections of a letter (the "RISCORP Disclosure
Letter") delivered by RISCORP to Acquiror on or prior to the date of this
Agreement, RISCORP hereby represents and warrants to Acquiror as set forth in
this Section 3.
3.1. Organization, Good Standing and Power. RISCORP is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Florida and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. RISCORP is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties make such qualification or licensing
necessary, except where the failure to be so qualified or licensed or to be in
good standing would not, individually or in the aggregate, have a material
adverse effect (net of any insurance proceeds recovered) on (a) the financial
condition or net worth of RISCORP and RISCORP Subsidiaries (as hereinafter
defined) on a consolidated basis or (b) the ability of RISCORP to consummate the
transactions contemplated by this Agreement (collectively, a "Material Adverse
Effect on RISCORP"). RISCORP has made available to Acquiror complete and correct
copies of its Articles of Incorporation and all amendments thereto and its
Bylaws as amended and all similar organizational documents for all RISCORP
Subsidiaries.
3.2. Capitalization. The authorized capital stock of RISCORP as of the
date hereof consists of (a) 100,000,000 shares of Class A Common Stock of which
14,258,671 shares are issued and outstanding (such shares being the "Outstanding
Class A Shares"), (b) 100,000,000 shares of Class B Common Stock of which
24,334,443 shares are issued and outstanding (such shares being the "Outstanding
Class B Shares"), and (c) 10,000,000 shares of Preferred Stock, par value $.01
per share of RISCORP ("Preferred Stock"), of which no shares are issued and
outstanding. All outstanding shares of capital stock of RISCORP have been duly
authorized and validly issued and are fully paid and nonassessable and not
subject to any preemptive rights. Except as set forth in this Section 3.2, (a)
there are no shares of capital stock or other equity securities of RISCORP
outstanding, (b) there are no option plans, outstanding options, warrants or
rights to purchase or acquire from RISCORP any capital stock of RISCORP, (c)
there are no existing registration covenants with RISCORP with respect to
outstanding shares of any of the capital stock of RISCORP, and (d) there are no
7
convertible securities or other contracts, commitments, agreements,
understandings, arrangements or restrictions by which RISCORP is bound to issue
any additional shares of its capital stock or other securities. Other than as
contemplated in this Agreement and in the First Amendment to Directors
Agreement, there are no voting trusts or other agreements or understandings with
respect to the voting of capital stock of RISCORP or any RISCORP Subsidiary to
which RISCORP or any RISCORP Subsidiary is a party.
3.3. RISCORP Subsidiaries. Section 3.3 of RISCORP Disclosure Letter
sets forth a correct and complete list of each corporation owned directly or
indirectly by RISCORP (each a "RISCORP Subsidiary" and collectively the "RISCORP
Subsidiaries"). Section 3.3 of the Disclosure Letter also identifies those
RISCORP subsidiaries holding insurance licenses or owning any assets (the
"Insurance Subsidiaries"). RISCORP owns or controls, directly or indirectly,
100% of the outstanding equity securities of each RISCORP Subsidiary free and
clear of all liens, charges, pledges, security interests or other encumbrances.
Other than the RISCORP Subsidiaries, RISCORP does not own or control any equity
interest in any corporation, partnership, limited liability company, association
or other entity. All of the capital stock of each Insurance Subsidiary has been
duly authorized and validly issued and is fully paid and nonassessable. There
are no outstanding options or rights to subscribe to, or any contracts or
commitments to issue or sell, any shares of the common stock, equity interests
or other securities (collectively the "Capital Stock") or obligations
convertible into or exchangeable for, or giving any person any right to acquire,
any shares of the Capital Stock of any Insurance Subsidiary to which RISCORP or
any Insurance Subsidiary is a party. Each Insurance Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted.
3.4. Authority; Enforceability. RISCORP has the corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby, subject to the approval of this Agreement and the Merger by
the stockholders of RISCORP in accordance with the FBCA and the Bylaws and
Articles of Incorporation of RISCORP. Subject to such approval and compliance,
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of RISCORP, and this Agreement has been duly
executed and delivered by RISCORP and constitutes the valid and binding
obligation of RISCORP, enforceable against it in accordance with its terms, (i)
except as may be limited by bankruptcy, insolvency, moratorium or other similar
laws affecting or relating to enforcement of creditors' rights generally and
(ii) subject to general principles of equity.
3.5. No Violation; Consents.
(a) Except for compliance with the Securities Exchange Act of
1934 (the "Exchange Act"), neither the execution, delivery and performance
by RISCORP of this Agreement, the filing of the Articles of Merger with the
Secretary of State for the State of Florida, the consummation by RISCORP of
the transactions contemplated hereby, nor compliance by RISCORP with any of
the provisions hereof, will:
(i) violate, conflict with, result in a breach of any
provision of, constitute a default (or an event that, with notice or
lapse of time or both, would constitute a default) under, result in
the termination of, accelerate the performance required by, or result
in a right of termination or acceleration, or the creation of any
lien, security interest, charge or encumbrance upon any of the
8
properties or assets of RISCORP, under any of the terms, conditions or
provisions of, (x) RISCORP's Articles of Incorporation or Bylaws, (y)
the articles of incorporation, certificate of incorporation, bylaws or
any similar organizational document of any Insurance Subsidiary, or
(z) any note, bond, mortgage, indenture or Material Contract (as
hereinafter defined) to which RISCORP or any RISCORP Subsidiary is a
party, or by which RISCORP or any RISCORP Subsidiary may be bound, or
to which RISCORP or any RISCORP Subsidiary or the properties or assets
of any of them may be subject; or
(ii) subject to compliance with the statutes and regulations
referred to in Section 3.4(b), violate any valid and enforceable
judgment, ruling, order, award, writ, injunction, decree, or any
statute, rule or regulation applicable to RISCORP or any RISCORP
Subsidiary or any of their respective properties or assets.
(b) Except for (i) compliance with the Exchange Act, (ii)
notices, filings, authorizations, exemptions, consents or approvals, the
failure of which to give or obtain would not, individually or in the
aggregate, have a Material Adverse Effect on RISCORP, (iii) the filing of
the Articles of Merger with the Secretary of State of Florida, and (iv) the
filing of the notices with or the consents obtained from the state
insurance commissioners of Florida and Missouri or other regulatory
authorities set forth in the RISCORP Disclosure Letter and the surrender of
certificates of authority or insurance licenses in those states in which
such surrender has not been accomplished prior to or at Closing, no notice
to, filing with, authorization of, exemption by, or consent or approval of,
any governmental authority or other regulatory body is necessary for the
consummation by RISCORP of the transactions contemplated by this Agreement.
3.6.RISCORP Financial Statements; SEC Reports.
(a) Since February 27, 1998 (such date being the date RISCORP
filed the amended Annual Report on Form 10-K/A for the calendar year ending
December 31, 1996) (the "Filing Date") RISCORP has filed all reports or
amended reports (the "RISCORP Reports") required to be filed by it with the
Securities and Exchange Commission (the "SEC") and all RISCORP Reports
complied as to form in all material respects with the applicable
requirements of law. Each report required to be filed by RISCORP with the
SEC since the Filing Date did not on the date of filing of such reports
and, except to the extent revised or superseded by a subsequent filing with
the SEC prior to the date hereof does not, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein in light of the
circumstances under which they were made not misleading. RISCORP has
heretofore made available to Acquiror true and correct copies of all
RISCORP Reports, together with all exhibits thereto. RISCORP also has made
available to Acquiror true and correct copies of the unaudited consolidated
balance sheets of RISCORP and the RISCORP Subsidiaries at August 31, 1999
and the related unaudited consolidated statements of income, stockholders'
equity and cash flows for the period then ended. The audited consolidated
9
balance sheet of RISCORP and the RISCORP Subsidiaries as of December 31,
1998 as set forth in RISCORP's Annual Report on Form 10-K for the period
then ended (the "Form 10-K") is sometimes referred to herein as the "1998
Balance Sheet."
(b) All of the financial statements included in the RISCORP
Reports (which are collectively referred to herein as the "RISCORP
Consolidated Financial Statements") fairly presented in all material
respects the consolidated financial position of RISCORP and the RISCORP
Subsidiaries as at the dates mentioned and the consolidated results of
operations, changes in stockholders' equity and cash flows for the periods
then ended in conformity with generally accepted accounting principles
("GAAP") (subject to any exceptions as to consistency specified therein or
as may be indicated in the notes thereto or in the case of the unaudited
statements, as may be permitted by Form 10-Q of the SEC and subject, in the
case of unaudited statements, to normal, recurring year end audit
adjustments).
3.7.Absence of Certain Changes or Events. Since December 31, 1998:
(a) there has not been any condition, event or occurrence which,
individually or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect on RISCORP or give rise to a Material
Adverse Effect on RISCORP;
(b) RISCORP has not changed its accounting principles or methods
in any material respect except insofar as may be required by a change in
GAAP;
(c) there has been no condition, event or occurrence which could
reasonably be expected to prevent, materially hinder or materially delay
the ability of RISCORP to consummate the Merger or the transactions
contemplated by this Agreement;
(d) there has not been any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or property)
with respect to the capital stock of RISCORP or any RISCORP Subsidiary
other than dividends paid to RISCORP or a member of the consolidated group
of RISCORP;
(e) RISCORP has not terminated or accelerated the provisions of
any contract or agreement for the provision of professional services; and
(f) RISCORP and RISCORP Subsidiaries have not:
(i) increased the compensation or fringe benefits of any
present or former director, officer or employee of RISCORP or any
RISCORP Subsidiary (except for increases in salary or wages of
employees in the ordinary course of business consistent with past
practice);
(ii) granted any severance or termination pay to any present
or former director, officer or employee of RISCORP or any RISCORP
Subsidiary;
10
(iii) loaned or advanced money or other property by RISCORP
or any RISCORP Subsidiary to any of their present or former directors,
officers or employees; or
(iv) except as contemplated in Section 5.2(c)(xiv),
established, adopted, entered into, amended or terminated any RISCORP
Employee Plan (as hereinafter defined); or
(g) except as contemplated in Section 5.2(c)(xiv), RISCORP has
not amended, terminated, modified or accelerated any contract with The
Phoenix Management Company, Ltd.
3.8.Taxes and Tax Returns
(a) Since September 17, 1997 and, prior to September 17, 1997, to
the actual knowledge of RISCORP, without independent investigation or
inquiry, RISCORP and the RISCORP Subsidiaries have (i) duly and timely
filed (or there has been filed on their behalf) with appropriate
governmental authorities all tax returns required to be filed by them, on
or prior to the date hereof, except to the extent that any failure to
timely file would not, individually or in the aggregate, have a Material
Adverse Effect on RISCORP, and (ii) duly paid in full or made provisions in
RISCORP Consolidated Financial Statements in accordance with GAAP (or there
has been paid or provision has been made on their behalf) for the payment
of all Taxes (as hereinafter defined) for all periods ending on or prior to
the date hereof.
(b) All such returns are correct and complete in all material
respects and there are no deficiencies for Taxes (as hereinafter defined)
that have been proposed, asserted or assessed against RISCORP or its Tax
Affiliates that remain unpaid.
(c) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or tax returns of RISCORP or the RISCORP Subsidiaries
wherein an adverse determination or ruling in any one such proceeding or in
all such proceedings in the aggregate would have a Material Adverse Effect
on RISCORP.
(d) The RISCORP Disclosure Letter lists all tax returns that have
been audited and indicates all tax returns that are currently the subject
of audit. Since September 17, 1997 and, prior to September 17, 1997, to the
actual knowledge of RISCORP, without independent investigation or inquiry,
neither RISCORP nor any Tax Affiliate has granted any extension or waiver
of the statute of limitations period on the assessment of any material
Taxes which period (after giving effect to such extension or waiver) has
not expired. Since September 17, 1997 and, prior to September 17, 1997, to
the Knowledge of RISCORP, neither RISCORP nor any Tax Affiliate has granted
power of attorney with respect to any matter relating to any material Tax.
Since September 17, 1997 and, prior to September 17, 1997, to the actual
knowledge of RISCORP, without independent investigation or inquiry, no
11
claim has been made by an authority in a jurisdiction where RISCORP or any
Tax Affiliate does not file tax returns that it is or may be subject to Tax
in that jurisdiction.
(e) Since September 17, 1997 and, prior to September 17, 1997, to
the actual knowledge of RISCORP, without independent investigation or
inquiry, RISCORP and each Tax Affiliate has withheld and paid all Taxes
required to have been paid in connection with amounts paid or owing to any
employee, independent contractor, stockholder, partner or third party.
(f) Since September 17, 1997 and, prior to September 17, 1997, to
the actual knowledge of RISCORP, without independent investigation or
inquiry, neither RISCORP nor any Tax Affiliate is a party to any Tax
allocation, sharing or similar agreement.
(g) Since September 17, 1997 and, prior to September 17, 1997, to
the actual knowledge of RISCORP, without independent investigation or
inquiry, neither RISCORP nor any Tax Affiliate has been a member of an
affiliated group filing or consolidated federal income tax return (other
than a group the common parent of which was RISCORP).
(h) Since September 17, 1997 and, prior to September 17, 1997, to
the actual knowledge of RISCORP, without independent investigation or
inquiry, neither RISCORP nor any Tax Affiliate has made any payments, is
obligated to make any payments, or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not
be deductible under Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") or would constitute compensation in excess of the
limitation set forth in Section 162(m) of the Code.
(i) Since September 17, 1997 and, prior to September 17, 1997, to
the actual knowledge of RISCORP, without independent investigation or
inquiry, no consent under Section 341(f) of the Code has been filed with
respect to RISCORP or any Tax Affiliate.
(j) Neither RISCORP nor any Tax Affiliate has been a United
States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(k) Since September 17, 1997 and, prior to September 17, 1997, to
the actual knowledge of RISCORP, without independent investigation or
inquiry, no claim for unpaid Taxes has become a lien or encumbrance of any
kind against the property of RISCORP or any Tax Affiliate.
As used herein (i) the term "Taxes" shall include all Federal, state, local and
foreign income, property, premium, sales, excise, employment, payroll,
withholding and other taxes and (ii) the term "Tax Affiliate" shall mean any
RISCORP Subsidiary and any individual or entity for whose Taxes RISCORP or any
RISCORP Subsidiary is or could be held liable whether by reason of being a
member of an affiliated, consolidated, combined, unitary or other similar group
for tax purposes, by reason of being a successor, member or general partner, by
agreement, or otherwise.
12
3.9.Litigation. Except as disclosed in the RISCORP Reports:
(a) neither RISCORP nor any RISCORP Subsidiary is a party to any
pending or, to the Knowledge of RISCORP (as hereinafter defined),
threatened claim, action, suit, investigation or proceeding which, if
finally determined adversely, would have, either individually or in the
aggregate, a Material Adverse Effect on RISCORP;
(b) there is no outstanding order, writ, judgment, stipulation,
injunction, decree, determination, award or other decision against RISCORP
or any RISCORP Subsidiary which, either individually or in the aggregate,
has had or would have a Material Adverse Effect on RISCORP;
(c) no officer or director of RISCORP is a party to any pending
or, to the knowledge of such officer of director, threatened claim, action,
suit, investigation or proceeding or subject to outstanding order, writ,
judgment, stipulation, injunction, decree, determination, award or other
decision arising out of or related to such officer's or director's actions,
inactions, duties, or status as an officer or director of RISCORP.
3.10. Contract and Commitments. Each contract, agreement or other
document or instrument ("Material Contract") to which RISCORP or any of its
Subsidiaries is a party that was required to be filed as an exhibit to RISCORP's
annual report on Form 10-K or 10-K/A for the year ended December 31, 1998 or any
quarterly report on form 10-Q filed since December 31, 1998 was so filed. Except
for the Shareholder Protection Rights Agreement dated May 13, 1999 by and
between RISCORP and First Union National Bank (the "Rights Agreement"), RISCORP
is not a party to or subject to any "poison pill", shareholders rights plan,
rights agreement or similar agreement, instrument or plan.
3.11. Proxy Statement, etc. The proxy statement (the "Proxy
Statement") to be mailed to RISCORP's stockholders in connection with the
meeting (the "Stockholders' Meeting") to be called to consider the Merger and
any other document filed with the SEC in connection with the Merger, at the date
such document is first published, sent or delivered to RISCORP's stockholders
and at the Stockholders' Meeting will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein in light of the
circumstances under which they were made not misleading, provided that no
representation is made by RISCORP with respect to statements made in such Proxy
Statement or other document filed with the SEC in connection with the Merger
based on written information supplied by Acquiror or Guarantor specifically for
inclusion or incorporation by reference in the Proxy Statement or such other
document. All documents that RISCORP is responsible for filing with the SEC and
any other regulatory agency in connection with the Merger will comply as to form
in all material respects with the provisions of applicable law and any
applicable rules or regulations thereunder.
3.12. Employee Benefit Plans. Notwithstanding the following
representations regarding employee benefit plans, with respect to any
representations or warranties concerning any matter relating to or arising out
of any transactions occurring before September 17, 1997, between any party in
interest (as defined in Section 3(14) of the Employee Retirement Income Security
13
Act of 1974, as amended ("ERISA")), and the RISCORP Management Services, Inc.
Employee Stock Ownership Plan (as amended and restated as part of the RISCORP
Management Services, Inc. Retirement Plan) in this Section 3.12 or elsewhere in
this Agreement, such representation or warranty shall be based on RISCORP's
actual knowledge without independent investigation or inquiry.
(a) The RISCORP Disclosure Letter contains a list of each
employee benefit plan (as defined in Section 3(3) of ERISA) which is
maintained by or contributed to by RISCORP or any RISCORP Subsidiary, each
stock option, stock purchase or other equity-based compensation plan
maintained by or contributed to by RISCORP or any RISCORP Subsidiary, each
other plan, program or other arrangement which provides compensation or
taxable benefits to officers of RISCORP or any RISCORP Subsidiary, each
employment agreement in effect with any officer or employee of RISCORP or
any RISCORP Subsidiary and each agreement which provides any benefits upon
a change in control of RISCORP or any RISCORP Subsidiary (individually a
"RISCORP Employee Plan" and collectively the "RISCORP Employee Plans").
RISCORP has made available to Acquiror the plan documents or other writing
constituting each RISCORP Employee Plan and, if applicable, the trust,
insurance contract or other arrangement which holds, or which constitutes,
an asset of such plan, the ERISA summary plan description for such plan and
the most recent Form 5500 for such plan. RISCORP has identified those
RISCORP Employee Plans which RISCORP intends to satisfy the requirements of
Section 401 of the Code and has made available to Acquiror accurate copies
of the most recent favorable determination letters for such plans.
(b) No RISCORP Employee Plan is subject to Title IV or Section
302 of ERISA or Section 412 or 4971 of the Code. To the Knowledge of
RISCORP, there does not now exist, nor do any circumstances currently
exist, that could result in any liability under the continuation coverage
requirements of Section 601 et seq. of ERISA and Section 4980B of the Code
other than liabilities under such laws that arise solely out of, or relate
solely to, the RISCORP Employee Plans ("RISCORP Controlled Acquiror
Liability") that would be a liability of RISCORP or any RISCORP Subsidiary
following the Effective Time.
(c) Neither RISCORP nor any RISCORP Subsidiary is, or has been, a
participant in a multi employer plan (within the meaning of ERISA Section
3(37)). Neither RISCORP nor any RISCORP Subsidiary maintains or has at any
time maintained a RISCORP Employee Plan which is subject to Title IV of
ERISA. Neither RISCORP nor any RISCORP Subsidiary is obligated to provide
medical benefits or any other welfare benefits under any RISCORP Employee
Plan which is a welfare plan as defined in Section 3(1) of ERISA to or on
behalf of any person who is no longer an employee of RISCORP or any RISCORP
Subsidiary, except for health continuation coverage as required by Section
4980B of the Code or Part 6 of Title I of ERISA.
(d) Each RISCORP Employee Plan (i) has at all times been
maintained, by its terms and in operation, in accordance with all
applicable laws, and (ii) which is intended to be qualified under Section
401 of the Code has at all times been maintained, by its terms and in
operation, in accordance with Section 401 of the Code, in each case except
14
where a failure to be so maintained would not have a Material Adverse
Effect on RISCORP. As of December 31, 1998, neither RISCORP nor any of
RISCORP Subsidiaries had any liability under any RISCORP Employee Plan that
was not reflected in 1998 Balance Sheet or disclosed in the notes thereto,
other than liabilities which individually or in the aggregate would not
have a Material Adverse Effect on RISCORP.
(e) To the actual knowledge of RISCORP, without independent
investigation or inquiry, no prohibited transaction has occurred with
respect to any RISCORP Employee Plan maintained by RISCORP or any of the
RISCORP Subsidiaries that would result in the imposition of an excise tax
or other liability under the Code or ERISA on RISCORP or any RISCORP
Subsidiary or in any obligation to reimburse any person for any such tax or
other liability.
(f) All contributions or premium payments with respect to the
RISCORP Employee Plans due for any period ending on or before the Effective
Time have been or will be timely paid by RISCORP. The execution of or
performance of the transactions contemplated by this Agreement will not
create, accelerate or increase any obligations under the RISCORP Employee
Plans.
3.13. Collective Bargaining; Labor Disputes; Compliance. Neither
RISCORP nor any RISCORP Subsidiary (a) is a party to any collective bargaining
agreement or (b) has any employees. To the knowledge of RISCORP, since September
17, 1997, RISCORP and each RISCORP Subsidiary have complied with all laws
relating to the employment and safety of labor, including provisions relating to
wages, hours, benefits, collective bargaining and all applicable occupational
safety and health acts, laws and regulations except, in each case, where the
failure to be in compliance would not, individually or in the aggregate, have a
Material Adverse Effect on RISCORP.
3.14. Brokers and Finders. Neither RISCORP nor any RISCORP Subsidiary,
nor any of their respective officers, directors or employees, has employed or
will employ any broker or finder or incurred or will incur any liability for any
financial advisory fees, brokerage fees, commissions, or finder's fees, and no
broker or finder has acted or will act directly or indirectly for RISCORP or any
RISCORP Subsidiary, in connection with this Agreement or any of the transactions
contemplated hereby.
3.15. No Violation of Law. To the Knowledge of RISCORP, since
September 17, 1997, the business and operations of RISCORP and the RISCORP
Subsidiaries have been conducted in compliance with all applicable laws,
ordinances, regulations and orders of all governmental entities and other
regulatory bodies (including, without limitation, laws, ordinances, regulations
and orders relating to zoning, environmental matters and the safety and health
of employees and to applicable state and federal insurance laws) except where
such noncompliance, individually or in the aggregate, would not have a Material
Adverse Effect on RISCORP. Since September 17, 1997, except as disclosed in the
RISCORP Reports or the RISCORP Disclosure Letter:
15
(a) neither RISCORP, any RISCORP Subsidiary, nor any officer or
director of RISCORP has been charged with or, to the Knowledge of RISCORP,
is now under investigation with respect to, a violation of any regulation,
ordinance, order or other requirement of a governmental entity or other
regulatory body;
(b) neither RISCORP, any RISCORP Subsidiary nor any officer or
director of RISCORP is a party to or bound by any order, judgment, decree
or award of a governmental entity or other regulatory body which has or
will have, individually or in the aggregate, a Material Adverse Effect on
RISCORP; and
(c) RISCORP and the RISCORP Subsidiaries have timely filed all
reports required to be filed with any governmental entity or other
regulatory body on or before the date hereof as to which the failure to
timely file such reports would result, individually or in the aggregate, in
a Material Adverse Effect on RISCORP.
RISCORP and the RISCORP Subsidiaries have all permits, certificates, licenses,
approvals and other authorizations required in connection with the operation of
the business of RISCORP and the RISCORP Subsidiaries, except for permits,
certificates, licenses, approvals and other authorizations the failure of which
to have would not, individually or in the aggregate, have a Material Adverse
Effect on RISCORP. The RISCORP Disclosure Letter sets forth a list of all
permits, certificates, licenses, approvals and other authorizations required to
be obtained in connection with the consummation of the transactions contemplated
hereby the failure of which to obtain would have a Material Adverse Effects on
RISCORP.
3.16. Voting Requirements. The affirmative vote of (i) the holders of
80% of the issued and outstanding Voting Stock (as defined in RISCORP's Articles
of Organization) and (ii) the holders of two-thirds of the shares of Class A
Common Stock with respect to this Agreement and the Merger is the only vote of
the holders of any class or series of RISCORP's capital stock necessary to
approve this Agreement and the transactions contemplated by this Agreement.
3.17. Properties.
(a) RISCORP does not own any real property and there are no
outstanding contracts for the purchase of any real property.
(b) RISCORP and RISCORP Subsidiaries hold good and valid
leasehold title to leased real property they occupy, free of all liens
except for liens that, individually or in the aggregate, would not have a
Material Adverse Effect on RISCORP or liens securing indebtedness evidenced
by agreements listed on the RISCORP Disclosure Letter or reflected on the
RISCORP Consolidated Financial Statement. All Real Property leases are in
full force and effect and grant in all respects the leasehold estates or
rights of occupancy or use they purpose to grant. There are no existing
defaults (either on the part of RISCORP or any RISCORP Subsidiary, or, to
the Knowledge of RISCORP, any other party thereto) under any real property
lease and no event has occurred which, with notice or the lapse of time, or
both, would constitute a default (either on the part of RISCORP or any
RISCORP Subsidiary or, to the Knowledge of RISCORP, any other party
thereto) under any of the real property leases. The consummation of the
16
merger will not result in the occurrence of a default under any of the real
property leases (whether pursuant to a "change of control" provision in the
real property lease or otherwise).
3.18. Amendment to Rights Agreement. On or prior to the date hereof,
the Board of Directors of RISCORP has taken all necessary action with respect to
the Rights Agreement so that (i) neither Acquiror nor Guarantor will become an
"Acquiring Person" as a result of the consummation of the transactions
contemplated by this Agreement, (ii) no "Separation Time" (as such term is
defined in the Rights Agreement) will occur as a result of the consummation of
the transactions contemplated by this Agreement, and (iii) all Class A Rights
and Class B Rights (as such terms are defined in Rights Agreement) issued and
outstanding under the Rights Agreement or any other similar rights or options
issued pursuant to any contract or agreement will not be exercisable as a result
of the execution and delivery of this Agreement or the consummation of the
transactions contemplated herein.
3.19. Disclosure. No representation, warranty or covenant made by
RISCORP in this Agreement or the RISCORP Disclosure Letter contains an untrue
statement of a material fact or omits to state a material fact required to be
stated herein or therein or necessary to make the statements contained herein or
therein not misleading. The disclosure of any item in the RISCORP Disclosure
Letter or in any attachment thereto is disclosure for all purposes for which
disclosure is required under this Agreement, to the extent that such information
is reasonably apparent on its face as being applicable for all such purposes.
The inclusion of any item in the RISCORP Disclosure Letter (i) does not
represent a determination by RISCORP that such item is "material" or could have
a Material Adverse Effect on RISCORP; (ii) does not represent a determination by
RISCORP that such item did not arise in the ordinary course of business; and
(iii) shall not constitute an admission by RISCORP that such disclosure is
required to be made pursuant to any of the representations and warranties
contained herein.
4. REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND GUARANTOR. With such
exceptions as are set forth in a letter (the "Acquiror Disclosure Letter")
delivered by Acquiror to RISCORP prior to the date of this Agreement, each of
Acquiror and Guarantor hereby represents and warrants to RISCORP as follows:
4.1.Organization. Acquiror is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Florida and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted.
4.2. Authority; Enforceability. Each of Acquiror and Guarantor has the
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby, the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of each of Acquiror,
and this Agreement has been duly executed and delivered by Acquiror and
Guarantor and constitutes the valid and binding obligation of each such party,
17
enforceable against it in accordance with its terms, (i) except as may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to enforcement of creditors rights generally and (ii) subject to
general principles of equity.
4.3. No Violation; Consents
(a) Except for compliance with the Exchange Act, neither the
execution, delivery and performance by Acquiror or Guarantor of this
Agreement, the filing of the Articles of Merger with the Secretary of State
for the State of Florida, the consummation by Acquiror or Guarantor of the
transactions contemplated hereby, nor compliance by Acquiror or Guarantor
with any of the provisions hereof, will:
(i) violate, conflict with, result in a breach of any
provision of, constitute a default (or an event that, with notice or
lapse of time or both, would constitute a default) under, result in
the termination of, accelerate the performance required by, or result
in a right of termination or acceleration, or the creation of any
lien, security interest, charge or encumbrance upon any of the
properties or assets of Acquiror or Guarantor, under any of the terms,
conditions or provisions of, (x) Acquiror's Articles of Incorporation
or Bylaws, or (y) any note, bond, mortgage, indenture or material
contract to which Acquiror or Guarantor is a party, or by which
Acquiror or Guarantor may be bound, or to which Acquiror or Guarantor
or the properties or assets of any of them may be subject, other than
as would, with respect to clause (y) not have, individually or in the
aggregate, a material adverse effect (net of any insurance proceeds
recovered) on (1) the financial condition or net worth of Acquiror or
Guarantor or (2) the ability of Acquiror or Guarantor to consummate
the transactions contemplated by this Agreement (a "Material Adverse
Effect on Acquiror/Guarantor"); or
(ii) subject to compliance with the statutes and regulations
referred to in Section 4.3(b), violate any valid and enforceable
judgment, ruling, order, writ, injunction, decree, or any statute,
rule or regulation applicable to Acquiror or Guarantor or any of their
respective properties or assets where such violation would,
individually or in the aggregate, have a Material Adverse Effect on
Acquiror/Guarantor.
(b) Except for (i) compliance with the Exchange Act, (ii)
notices, filings, authorizations, exemptions, consents or approvals, the
failure of which to give or obtain would not, individually or in the
aggregate, have a Material Adverse Effect on Acquiror/Guarantor, and (iii)
the filing of the Articles of Merger with the Secretary of State of
Florida, no notice to, filing with, authorization of, exemption by, or
consent or approval of, any governmental authority or other regulatory body
is necessary for the consummation by Acquiror or Guarantor of the
transactions contemplated by this Agreement.
4.4.Proxy. The written information furnished to RISCORP by Acquiror
and Guarantor specifically for inclusion in the Proxy Statement, or any
amendment or supplement thereto, or specifically for inclusion in any other
documents filed with the SEC by RISCORP in connection with the Merger, shall,
(i) with respect to the Proxy Statement at the time the Proxy Statement is
18
mailed and at the time of the Stockholders' Meeting, and, (ii) with respect to
the Schedule 13E-3 and such other documents, at the time of filing with the SEC
and at the time of such Stockholders' Meeting, not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstance under which they were made, not misleading.
4.5. Brokers and Finders. Neither Acquiror nor Guarantor nor any of
their respective officers, directors or employees, has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions, or finder's fees, and no broker or finder has acted directly
or indirectly for Acquiror or Guarantor, in connection with this Agreement or
any of the transactions contemplated hereby.
4.6. Capitalization. The authorized capital stock of Acquiror consists
of 10,000 shares of common stock, par value $.10 per share of which one (1)
share is issued and outstanding on the date hereof and is owned of record and
beneficially by Guarantor. Such issued and outstanding stock has been duly
authorized and validly issued and is fully paid and non-assessable and free of
pre-emptive rights.
4.7. Disclosure. No representation, warranty or covenant made by
Acquiror in this Agreement or the Acquiror Disclosure Letter contains an untrue
statement of a material fact or omits to state a material fact required to be
stated herein or therein or necessary to make the statements contained herein or
therein not misleading. The disclosure of any item in the Acquiror Disclosure
Letter or in any attachment thereto is disclosure for all purposes for which
disclosure is required under this Agreement, to the extent that such information
is reasonably apparent on its face as being applicable for all such purposes.
The inclusion of any item in the Acquiror Disclosure Letter (i) does not
represent a determination by Acquiror that such item is "material" or could have
a Material Adverse Effect on Acquiror/Guarantor; (ii) does not represent a
determination by Acquiror that such item did not arise in the ordinary course of
business; and (iii) shall not constitute an admission by Acquiror or Guarantor
that such disclosure is required to be made pursuant to any of the
representations and warranties contained herein.
4.8. Investigation by Acquiror and Guarantor. Acquiror and Guarantor
have conducted their own independent review and analysis of the businesses,
assets, condition, operations and prospects of RISCORP and the RISCORP
Subsidiaries and acknowledge that Acquiror and Guarantor have been provided
access to the properties, premises and records of RISCORP and the RISCORP
subsidiaries for this purpose. In entering into this Agreement, Acquiror and
Guarantor have relied or will rely solely upon their own investigation and
analysis and the representations and warranties contained herein, and Acquiror
and Guarantor:
(a) acknowledge that, except with respect to the RISCORP Reports,
none of RISCORP, the RISCORP Subsidiaries or any of their respective
directors, officers, employees, affiliates, agents or representatives makes
any representation or warranty, either express or implied, as to the
accuracy or completeness of any of the information provided or made
available to Acquiror and Guarantor or their agents or representatives
prior to the execution of this Agreement; and
19
(b) agree, to the fullest extent permitted by law, that none of
RISCORP, the RISCORP Subsidiaries or any of their respective directors,
officers, employees, affiliates, agents or representatives shall have any
liability or responsibility whatsoever to Acquiror or Guarantor on any
basis (including, without limitation, in contract or tort or otherwise)
based upon any information provided or made available, or statements made,
to Acquiror or Guarantor prior to the execution of this Agreement,
except that the foregoing shall not apply to the extent RISCORP, the RISCORP
Subsidiaries or any of their respective directors, officers, employees,
affiliates, agents or representatives commits fraud or engages in intentional
deception with respect to the information that it provides or makes available to
RISCORP.
5. CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME; CERTAIN COVENANTS
5.1. Access and Information. Upon reasonable notice, RISCORP shall
afford Acquiror and Guarantor and their respective representatives reasonable
access during normal business hours to the properties, books, records and
personnel of RISCORP and RISCORP Subsidiaries and such additional information
concerning the business and properties of RISCORP and RISCORP Subsidiaries as
Acquiror and its representatives may reasonably request.
5.2. Conduct of Business Pending Merger.
(a) RISCORP agrees that from the date hereof to the Effective
Time, except as contemplated by this Agreement or to the extent that
Acquiror shall otherwise consent in writing, RISCORP and the RISCORP
Subsidiaries will operate their businesses only in the ordinary course,
and, consistent with its business practices since April 1, 1998.
(b) RISCORP agrees that from the date hereof to the Effective
Time, except as otherwise consented to by Acquiror in writing or as
permitted, required or contemplated by this Agreement, (i) neither it nor
any RISCORP Subsidiary will change any provision of its Certificate of
Incorporation or Bylaws or similar governing documents (subject to
compliance with Section 5.11 hereto, except such changes as are necessary
to effectuate the surrender and/or sale of RISCORP's or RISCORP
Subsidiaries' certificate of authority or licenses to transact the business
of insurance in the state where such certificates of authority or licenses
are currently held); (ii) neither it nor any RISCORP Subsidiary will not
make, declare or pay any dividend except for any dividend declared or paid
by any RISCORP Subsidiary to RISCORP or any RISCORP Subsidiary; and (iii)
neither it nor any RISCORP Subsidiary will make any distribution or
directly or indirectly sell, issue, redeem, purchase or otherwise acquire,
any shares of its outstanding capital stock, change the number of shares of
its authorized or issued capital stock or issue or grant any option,
warrant, call, commitment, subscription, right to purchase or agreement of
any character relating to its authorized or issued capital stock or any
securities convertible into shares of such stock.
20
(c) RISCORP agrees that, except to the extent (i) consented to by
Acquiror in writing or (ii) permitted, required or contemplated by this
Agreement, from the date hereof it will not, nor will it permit any RISCORP
Subsidiary to:
(i) enter into any agreement representing an obligation for
indebtedness for borrowed money or increase the principal amount of
indebtedness under any existing agreement or assume, guarantee,
endorse or otherwise become responsible for the obligations of any
other individual, firm or corporation;
(ii) sell, mortgage, encumber or pledge any of its
properties or assets;
(iii) take any action to (A) amend or terminate any RISCORP
Employee Plan, (B) increase the compensation of any of its directors,
executive officers or employees, (C) adopt any other plan, program,
arrangement or practice providing new or increased benefits or
compensation to its employees, or (D) modify, accelerate the benefits
under, amend or terminate any agreement with any of RISCORP's agents,
employees, officers or directors, except as set forth in Section
5.2(c)(xiv);
(iv) enter into any negotiation with respect to or adopt any
collective bargaining agreement;
(v) make any significant change in any accounting methods or
systems of internal accounting controls, except as may be appropriate
to conform to changes in statutory accounting rules or GAAP;
(vi) pay, loan or advance any amount to, or sell, transfer
or lease any properties or assets (real, personal or mixed, tangible
or intangible) to, or enter into any material agreement or arrangement
with, any (A) of its officers or directors, (B) "affiliate" or
"associate" of any of its officers or directors (as such terms are
defined in Rule 405 promulgated under the Securities Act) or (C) third
party;
(vii) make any tax election or settle or compromise tax
liability that would reasonably be expected to have a Material Adverse
Effect on RISCORP;
(viii) split, combine, or reclassify any capital stock of
RISCORP or any RISCORP Subsidiary;
(ix) acquire or agree to acquire by merging or consolidating
with or by purchasing a substantial portion of the stock or assets of,
or by any other manner, any business or any corporation, partnership,
joint venture, association or other business organization or division
thereof;
21
(x) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization;
(xi) invest assets of RISCORP or any RISCORP Subsidiary in
any security, instrument, or other investment other than in the
ordinary course of business at then prevailing market rates consistent
with RISCORP's written investment policy;
(xii) amend, terminate, modify, or accelerate any material
contract or agreement to which RISCORP is a party;
(xiii) modify, amend or terminate RISCORP's written
investment policy;
(xiv) modify or accelerate the provisions of or terminate or
amend any contract with The Phoenix Management Company, Ltd. or
Xxxxxxx Xxxxxxx and Company, P.A., provided that RISCORP shall be
authorized to take any action necessary to (A)(1) accelerate,
effective as of the Closing, the vesting of the Class A Common Stock
issued to The Phoenix Management Company, Ltd. pursuant to that
certain Restricted Stock Award Agreement by and between The Phoenix
Management Company, Ltd. and RISCORP and (2) amend the provisions of
the Management Agreement of RISCORP, Inc. dated February 18, 1998 (the
"Management Agreement") to reduce the fees paid to The Phoenix
Management Company, Ltd. to such amount RISCORP deems appropriate
after notice to Acquiror or (B) terminate the Management Agreement.
(xv) enter into any agreement to take any of the actions
described in Section 5.2(b) or elsewhere in this Section 5.2(c).
(d) RISCORP shall keep Acquiror and Guarantor informed with
respect to the status of any litigation to which RISCORP, any RISCORP
Subsidiary, or any officer, director or employee of RISCORP or any RISCORP
Subsidiary is a party (whether or not commenced prior to the date of this
Agreement) and shall not settle or compromise any such litigation in which
RISCORP or any RISCORP Subsidiary is a defendant without the consent of
Acquiror; provided that RISCORP may enter into any settlement agreement for
any litigation to which any RISCORP Subsidiary is a defendant in which a
determination has been made by RISCORP that neither it nor or any RISCORP
Subsidiary has any reasonable basis to assert claims for, cross claims for,
or similar rights to recovery if the amount paid for such settlement by
RISCORP and the RISCORP Subsidiaries does not exceed $100,000 for any such
individual litigation claim and does not exceed $250,000 in the aggregate
for all such litigation claims. Further, RISCORP covenants and agrees that
it will consult with representatives of Acquiror on an on-going basis with
respect to the direction and material decisions affecting the disposition
of all litigation in which RISCORP or any RISCORP Subsidiary is either a
plaintiff or asserting a cross or other similar form of claim and shall not
take any action to settle or compromise and/or resolve any such claim
22
without first giving Acquiror's representatives adequate opportunity to
consider the merits of any such settlement, compromise or resolution and an
opportunity to advise RISCORP of Acquiror's views with respect to the
merits of any such proposed settlement, compromise and/or resolution.
(e) Except as provided by this Section 5.2(e) RISCORP shall not,
nor shall it permit any RISCORP Subsidiary to, nor shall it authorize or
permit any officer, director or employee of, or any investment banker,
attorney or other advisor or representative or agent of, RISCORP or any
RISCORP Subsidiary to, directly or indirectly, (i) solicit, initiate or
encourage the submission of any bona fide proposal with respect to a
merger, consolidation, share exchange or similar transaction involving
RISCORP or any RISCORP Subsidiary, or any purchase of all or substantially
all of the assets of RISCORP other than the transactions contemplated
hereby (an "Acquisition Proposal"); (ii) furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Acquisition Proposal; (iii) withdraw, qualify
or modify, or propose publicly to withdraw, qualify or modify, in a manner
adverse to Acquiror, the approval or recommendation of RISCORP's Board of
Directors or any committee thereof of the Merger or this Agreement; (iv)
approve or recommend, or propose publicly to approve or recommend, any
transaction involving an Acquisition Proposal from a third party (an
"Alternative Transaction"); or (v) cause RISCORP to enter into any letter
of intent, agreement in principle, acquisition agreement or other similar
agreement related to any Alternative Transaction (each an "Acquisition
Agreement"). Notwithstanding the foregoing, nothing herein shall prevent
RISCORP's Board of Directors from furnishing non-public information to or
entering into discussions or negotiations with any person or entity in
connection with an unsolicited bona fide Alternative Transaction or
recommending such an unsolicited bona fide Alternative Transaction to the
stockholders of RISCORP, if and only to the extent that, RISCORP's Board of
Directors determines in good faith (after receiving advice from outside
counsel as to its fiduciary duties to RISCORP's stockholders under
applicable law) that it has received a Superior Proposal (as hereinafter
defined). If, in accordance with the immediately preceding sentence,
RISCORP's Board of Directors believes it has received a Superior Proposal,
it may inform RISCORP's stockholders that it no longer believes that the
Merger is advisable and no longer recommends approval of the Merger (a
"Subsequent Determination") and may enter into an Acquisition Agreement
with respect to a Superior Proposal, but only at a time that is after the
third business day following Acquiror's receipt of written notice advising
Acquiror that RISCORP's Board of Directors has received a Superior
Proposal. Such written notice shall specify the material terms and
conditions of such Superior Proposal, identify the person making such
Superior Proposal and state that RISCORP's Board of Directors intends to
make a Subsequent Determination. During such three business day period,
RISCORP shall provide an opportunity for Acquiror to propose such
adjustments to the terms and conditions of this Agreement as would enable
RISCORP to proceed with its recommendation to its stockholders without a
Subsequent Determination; provided, however, that the acceptance of any
such proposed adjustment shall be at the sole discretion of RISCORP's Board
of Directors, exercised in good faith, and this Agreement shall be amended
to reflect any such accepted adjustments; provided, further, however, that
any such proposed adjustment, the sole effect of which is to (i) increase
23
the amount of the Merger Consideration, (ii) waive one or more conditions
to the obligations of Acquiror to effect the Merger or (iii) modify the
terms and conditions of this Agreement to reflect identical terms and
conditions contained in such Superior Proposal, shall be automatically
accepted by RISCORP, and this Agreement shall be amended to reflect any
such automatically accepted adjustments. For purposes of this Agreement, a
"Superior Proposal" means any proposal (on its most recently amended or
modified terms, if amended or modified) made by a third party to enter into
an Alternative Transaction which RISCORP's Board of Directors determines in
its good faith judgment to be more favorable to RISCORP's stockholders than
the Merger, taking into account all relevant factors (including whether, in
the good faith judgment of RISCORP's Board of Directors, the third party is
reasonably able to finance the transaction, and any proposed changes to
this Agreement that may be proposed by Acquiror in response to such
Alternative Transaction). Nothing contained in this Section 5.2(e) or any
other provision hereof shall prohibit RISCORP or RISCORP Board of Directors
from making such disclosure to RISCORP's stockholders as, in the good faith
judgment of RISCORP's Board of Directors after receiving advice from
outside counsel, is consistent with its obligations hereunder and is
required by applicable law; provided, that RISCORP may not, except as
expressly provided by this Section 5.2(e), withdraw, qualify or modify, in
a manner adverse to Acquiror, the approval or recommendation of RISCORP's
Board of Directors of the Merger or this Agreement.
5.3. Stockholders' Approval.
(a) RISCORP shall take all actions reasonably necessary in
accordance with applicable law and its articles of incorporation and bylaws
to convene the Stockholders' Meeting as soon as reasonably practicable.
Except as set forth in Section 5.2(e) in connection with the Stockholders'
Meeting, the Board of Directors of RISCORP shall recommend that the
stockholders of RISCORP vote to approve this Agreement.
(b) RISCORP shall use all commercially reasonable efforts to
solicit from holders of shares of Class A Common Stock, proxies in favor of
the Merger and shall take all other action necessary or, in the reasonable
opinion of the Board of Directors of RISCORP, advisable to secure any vote
or consent of the holders of Class A Common Stock required by the FBCA and
this Agreement.
5.4. Takeover Statutes. If any "fair price," "moratorium," "control
share acquisition," "business combination," "stockholder protection" or similar
antitakeover statute or regulation enacted under state or Federal law shall
become applicable to the Merger or any of the other transactions contemplated
hereby, each of RISCORP and Acquiror and the Board of Directors of RISCORP and
partners of Acquiror shall grant such approvals and take such commercially
reasonable actions as are within its authority and consistent with its fiduciary
obligations to its stockholders as determined in good faith by such Board so
that the Merger and the other transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise use commercially reasonable efforts, subject to such fiduciary duties,
to eliminate or minimize the effects of such statute or regulation on the Merger
and the other transactions contemplated hereby.
24
5.5. Consents.
(a) RISCORP and Acquiror, individually or collectively, will use
commercially reasonable efforts to take, or cause to be taken all action
and to do, or cause to be done all things necessary, proper, or advisable
to obtain the written consent or approval of the governmental authorities,
regulatory bodies, and other persons or entities identified on Schedule 5.6
in connection with the consummation of the transactions contemplated by
this Agreement, except where the failure to obtain any required written
consent or approval thereunder would not individually or in the aggregate
result in a Material Adverse Effect on RISCORP; provided, however, the
costs, expenses and fees incurred by RISCORP in connection with obtaining
any consents or approvals from any state department of insurance shall not
be included in the Estimated Transactional Expenses.
(b) Subject to the terms and conditions herein provided, each of
the parties hereto will promptly file and prosecute diligently the
applications and related documents required to be filed by such party with
the applicable regulatory authorities in order to effect the transactions
contemplated hereby. Each party hereto agrees to use all commercially
reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement.
5.6. Further Assurances. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement or to obtain the written consent or approval of the governmental
authorities, regulatory bodies and other persons or entities identified on
Schedule 5.6, the proper officers and directors of each corporation which is a
party to this Agreement shall take all such necessary action. Each of the
parties hereto agrees to defend vigorously against any actions, suits or
proceedings in which such party is named as defendant which seeks to enjoin,
restrain or prohibit the transactions contemplated hereby or seeks damages with
respect to such transactions.
5.7. Notice; Efforts to Remedy.
(a) Each party hereto shall promptly give written notice to the
other parties hereto upon becoming aware of the impending occurrence of any
event which would cause or constitute a breach of any of the
representations, warranties or covenants of such party contained in this
Agreement and shall use all commercially reasonable efforts to prevent or
promptly remedy the same. During the period from the date of this Agreement
to the Effective Time, RISCORP and Acquiror each shall cause one or more of
its representatives to confer on a regular and frequent basis with
representatives of the other and to report on the general status of its
ongoing operations. RISCORP shall promptly notify Acquiror of any material
change in each case on a consolidated basis in the normal course of
RISCORP's or the RISCORP Subsidiaries' businesses or in the operation of
its or their properties and of the receipt by RISCORP or the RISCORP
Subsidiaries of notice of any governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated)
or the receipt by RISCORP or the RISCORP Subsidiaries of a notice of the
institution or the threat of litigation involving RISCORP or any of the
25
RISCORP Subsidiaries, and will keep Acquiror fully informed with respect to
such events.
5.8. Proxy Materials and Schedule 13E-3.
(a) In connection with the Stockholders' Meeting, RISCORP shall
prepare and file the Proxy Statement with the SEC and shall use its
commercially reasonable efforts to respond to the comments of the SEC and
to cause a Proxy Statement to be mailed to RISCORP's shareholders all as
soon as reasonably practicable; provided, that prior to filing the Proxy
Statement, RISCORP shall consult with Acquiror with respect to such filings
and shall afford Acquiror reasonable opportunity to comment thereon.
Acquiror shall provide RISCORP with any information for inclusion in the
Proxy Statement which may be required under applicable law and which is
reasonably requested by RISCORP.
(b) RISCORP and any person that may be deemed to be an affiliate
of RISCORP shall prepare and file concurrently with the filing of the Proxy
Statement a statement on Schedule 13E-3 with the SEC. If at any time prior
to the Stockholders' Meeting any event should occur which is required by
applicable law to be set forth in an amendment of, or supplement to, the
Schedule 13E-3, RISCORP and such person shall file such amendments or
supplements.
5.9. Press Releases; Filings. Without the consent of the other
parties, none of the parties shall issue any press release or make any public
announcement with regard to this Agreement or the Merger or any of the
transactions contemplated hereby or thereby; provided, however, that nothing in
this Section 5.9 shall be deemed to prohibit any party hereto from making any
disclosure which its counsel deems necessary or advisable in order to fulfill
such party's disclosure obligations imposed by law or the rules of any national
securities exchange or automated quotation system. Each of RISCORP and Acquiror
shall promptly notify the other of each report, schedule and other document
filed by it or any of its respective Subsidiaries with the SEC and of any other
document pertaining to the transactions contemplated hereby filed with any other
governmental authorities.
5.10. Indemnification of Officers and Directors.
(a) Immediately following the Effective Time, Acquiror shall
cause to be in effect the current policies of directors' and officers'
liability insurance maintained by RISCORP or any RISCORP Subsidiary (the
"D&O Policies") with respect to claims arising from facts or events which
occurred at or before the Effective Time, and Acquiror shall maintain such
coverage until such policies expire by their own terms or are cancelled by
the insurer. On the Closing Date, RISCORP shall transfer to First Union
National Bank ("Escrow Agent") an amount equal to $2,500,000 to be held by
Escrow Agent for a period not to exceed four and one half years and in
accordance with the Escrow Agreement attached hereto as Exhibit D (the
"Escrow Agreement").
(b) Until expiration of the applicable statute of limitations
period, the Surviving Corporation shall provide with respect to each
26
present or former director or officer of RISCORP and its subsidiaries (both
present and past) (the "Indemnified Parties"), the indemnification rights
(including any rights to advancement of expenses) which such Indemnified
Parties had, whether from RISCORP or such subsidiary, immediately prior to
the Merger, whether under the FBCA, the Indemnity Agreements to which each
present RISCORP director is a party or the articles of incorporation or the
bylaws of RISCORP or such subsidiary or otherwise.
(c) This Section 5.10 shall survive the Closing and is intended
to benefit RISCORP, the Surviving Corporation and each of the Indemnified
Parties and his or her heirs and representatives (each of whom shall be
entitled to enforce this Section 5.10 against Acquiror or the Surviving
Corporation, as the case may be) and shall be binding on all successors and
assigns of Acquiror and the Surviving Corporation.
(d) For a period of four and one half years (the "Covenant
Period") following the Closing Date, RISCORP shall, as of the end each
fiscal quarter during the Covenant Period, maintain a Net Book Value (as
hereinafter defined) of not less than the amount set forth in the Acquiror
Disclosure Letter, of which an amount set forth in the Acquiror Disclosure
Letter shall be comprised of cash and cash equivalents (as determined on a
consolidated basis and in accordance with GAAP). As used herein the term
"Net Book Value" shall equal (A) the sum of all of RISCORP's assets as of
the end of any such fiscal quarter determined on a consolidated basis and
in accordance with GAAP less (B) the sum of all of RISCORP's liabilities as
of the end of any such fiscal quarter determined on a consolidated basis
and in accordance with GAAP. Not more than thirty (30) days following the
end of each fiscal quarter during the Covenant Period, a duly authorized
officer of RISCORP shall deliver a certificate in the form attached hereto
as Exhibit E to each of the persons set forth on Exhibit F certifying
RISCORP's compliance with the covenants set forth in this Section 5.10(d).
5.11. Surrender/Sale of Insurance Licenses. RISCORP and Acquiror,
individually or collectively shall use commercially reasonable efforts to (i)
surrender or cause to be surrendered or sell or cause to be sold at or prior to
Closing all certificates of authority or insurance licenses held by RISCORP or
by any RISCORP Subsidiary, and (ii) receive or have released by any state
insurance commissioner or any other appropriate state authority any and all
restricted funds, minimum capital requirements or deposits or any other funds
shown as "Cash and Cash Equivalents Restricted" on the 1998 Balance Sheet;
provided, however, the costs, expenses and fees incurred by RISCORP in
connection with the performance of its obligations under this Section 5.11 shall
not be included in the Estimated Transactional Expenses. Notwithstanding
RISCORP's efforts to date to surrender or cause to be surrendered all
certificates of authority or insurance licenses held by RISCORP or by any
RISCORP Subsidiary, RISCORP agrees that it shall cooperate with Acquiror in its
efforts to determine whether such certificates of authority or insurance
licenses could be sold to a third party immediately prior to the consummation of
the Merger without delaying the consummation of the transactions contemplated
herein. The parties agree that any such sale of the certificates of authority or
insurance licenses would be on terms mutually acceptable to RISCORP and Acquiror
and would be subject to, among other things, RISCORP's ability to withdraw its
pending requests for the surrender of such certificates of authority or
insurance licenses.
27
5.12. Management of Contingent Claim. Notwithstanding any provisions
in this Agreement to the contrary, the parties hereto acknowledge and agree
that, following Closing, RISCORP shall have all right and authority to manage,
pursue and prosecute the Contingent Claim in such manner as RISCORP deems
necessary or appropriate within the exercise of RISCORP's sole, absolute and
unfettered discretion, including, without limitation, the right (i) to elect not
to pursue such Contingent Claim; (ii) to settle, compromise or dismiss such
Contingent Claim for such amount and/or for such consideration as RISCORP shall
determine in its sole, absolute and unfettered discretion; and (iii) to select
and appoint counsel and to determine the means used to prosecute or pursue or
settle, resolve or dismiss such Contingent Claim.
6. CONDITIONS PRECEDENT TO MERGER
6.1. Conditions to Each Party's Obligations. The respective
obligations of each party to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of each of the following
conditions:
(a) This Agreement and the Merger shall have been approved and
adopted by the affirmative vote or consent of the holders of at least (i)
80% of the Voting Stock (as defined in RISCORP's Articles of Incorporation)
and (ii) two-thirds of the outstanding shares of Class A Common Stock.
(b) All consents, authorizations, orders and approvals identified
on Schedule 5.6 required in connection with the execution, delivery and
performance of this Agreement, the failure to obtain which would prevent
the consummation of the Merger or have a Material Adverse Effect on RISCORP
or a Material Adverse Effect on Acquiror/Guarantor, shall have been
obtained without the imposition of any condition having a Material Adverse
Effect on RISCORP or a Material Adverse Effect on Acquiror/Guarantor.
(c) No governmental authority or other regulatory body (including
any court of competent jurisdiction) shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is then in effect and has the effect of making illegal or
in any way preventing or prohibiting the Merger or the transactions
contemplated by this Agreement.
(d) At the mailing date of the Proxy Statement and the date of
the Stockholders' Meeting, the Proxy Statement shall not contain any untrue
statement of a material fact, or omit to state any material fact necessary
in order to make the statements therein not misleading.
6.2. Conditions to Obligations of RISCORP. The obligations of RISCORP
to effect the Merger shall be subject to the satisfaction on or prior to the
Closing Date (except as set forth herein) of each of the following conditions
unless waived by RISCORP:
(a) The representations and warranties of Acquiror and Guarantor
set forth in Sections 4.1, 4.2, and 4.3 of this Agreement that are
28
qualified as to materiality shall be true and correct in all respects at
and as of the date of this Agreement and at and as of the Closing Date
(except to the extent such representations and warranties expressly relate
to an earlier date) as though made at and as of the Closing Date. The
representations and warranties of Acquiror and Guarantor set forth in
Sections 4.1, 4.2, and 4.3 of this Agreement that are not qualified as to
materiality shall be true and correct in all material respects at and as of
the date of this Agreement and at and as of the Closing Date (except to the
extent such representations and warranties expressly relate to an earlier
date) as though made at and as of the Closing Date.
(b) Acquiror and Guarantor each shall have performed in all
material respects all covenants and agreements required to be performed by
them under this Agreement at or prior to the Closing Date.
(c) Acquiror shall furnish RISCORP with a certificate of its
appropriate officers as to compliance with the conditions set forth in
Sections 6.2(a) and 6.2(b).
(d) RISCORP shall have paid to Escrow Agent the Escrow Amount and
the Escrow Agent and RISCORP shall have executed and delivered the Escrow
Agreement.
6.3. Conditions to Obligations of Acquiror. The obligations of
Acquiror and Guarantor to effect the Merger shall be subject to the satisfaction
on or prior to the Closing Date of each of the following conditions unless
waived by Acquiror and Guarantor:
(a) The representations and warranties of RISCORP set forth in
Sections 3.1, 3.2, 3.4 and 3.5 of this Agreement that are qualified as to
materiality shall be true and correct in all respects at and as of the date
of this Agreement and at and as of the Closing Date (except to the extent
such representations and warranties expressly relate to an earlier date) as
though made at and as of the Closing Date. The representations and
warranties of RISCORP set forth in Sections 3.1, 3.2, 3.4 and 3.5 of this
Agreement that are not qualified as to materiality shall be true and
correct in all material respects at and as of the date of this Agreement
and at and as of the Closing Date (except to the extent such
representations and warranties expressly relate to an earlier date) as
though made at and as of the Closing Date.
(b) RISCORP shall have performed in all material respects all
covenants and agreements required to be performed by it under this
Agreement at or prior to the Closing Date.
(c) RISCORP shall furnish Acquiror with a certificate of its
appropriate officers as to compliance with the conditions set forth in
Sections 6.3(a) and 6.3(b).
(d) RISCORP shall have paid to Escrow Agent the Escrow Amount and
the Escrow Agent and RISCORP shall have executed and delivered the Escrow
Agreement.
(e) Acquiror shall have received letters of resignation effective
as of the Effective Time from each of the officers and directors of
RISCORP.
29
7. TERMINATION OF THE MERGER
7.1.Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the approval by the stockholders of
RISCORP:
(a) by the mutual written consent of Acquiror and RISCORP;
(b) by RISCORP :
(i) if the Merger is not consummated on or before April 30,
2000 (or such later date as shall have been approved by Acquiror and
RISCORP), unless the failure of such occurrence shall be due to the
failure of RISCORP to perform or observe the covenants, agreements and
conditions hereof to be performed or observed by it at or before the
Effective Time;
(ii) if events occur which render impossible the
satisfaction of one or more of the conditions set forth in Sections
6.1 and 6.2 and such conditions are not waived by RISCORP, unless the
failure of such occurrence shall be due to the failure of RISCORP to
perform or observe the covenants, agreements and conditions hereof to
be performed or observed by it at or before the Effective Time;
(iii) if RISCORP is enjoined or restrained by any
governmental authority or other regulatory body (including any court),
such injunction or restraining order prevents the performance by
RISCORP of its obligations hereunder and such injunction shall not
have been withdrawn within 60 days after the date on which such
injunction was first issued;
(iv) the stockholders of RISCORP shall have voted on this
Agreement and the Merger and the votes shall not have been sufficient
to satisfy the condition set forth in Section 6.1(a); or
(v) in connection with entering into a definitive agreement
as permitted by Section 5.2(e) related to a Superior Proposal,
provided that Company has complied with all provisions of Section
5.2(e) including, without limitation, the notice provisions thereof.
(c) by Acquiror if:
(i) the Merger is not consummated on or before April 30,
2000 (or such later date as shall have been approved by RISCORP and
Acquiror), unless the failure of such occurrence shall be due to the
failure of Acquiror or Guarantor to perform or observe the covenants,
agreements and conditions hereof to be performed or observed by them
at or before the Effective Time;
(ii) events occur which render impossible the satisfaction
of one or more of the conditions set forth in Sections 6.1 and 6.3 and
30
such conditions are not waived by Acquiror, unless the failure of such
occurrence shall be due to the failure of Acquiror or Guarantor to
perform or observe the covenants, agreements and conditions hereof to
be performed or observed by them at or before the Effective Time;
(iii) Acquiror is enjoined or restrained by any governmental
authority or other regulatory body (including any court), such
injunction or restraining order prevents the performance by Acquiror
of its obligations hereunder and such injunction shall not have been
withdrawn within 60 days after the date on which such injunction was
first issued;
(iv) the stockholders of RISCORP shall have voted on this
Agreement and the Merger and the votes shall not have been sufficient
to satisfy the condition set forth in Section 6.1(a); or
(v) Acquiror receives a written notice from RISCORP's Board
of Directors in accordance with Section 5.2(e) that RISCORP's Board of
Directors has received a Superior Proposal or intends to make a
Subsequent Determination.
7.2.Effect of Termination. In the event of the termination and
abandonment of this Agreement under Section 7.1, this Agreement shall become
void and have no effect, without any liability on the part of any party or its
directors, officers or stockholders except (i) as provided in Section 5.9 and
(ii) to the extent that such termination results from the willful breach by any
party hereto of any material representation, warranty, covenant, or agreement
hereunder.
8. MISCELLANEOUS
8.1. Waiver and Amendment. Any term or provision of this Agreement may
be waived in writing at any time by the party which is, or whose stockholders
are, entitled to the benefits thereof, and any term or provision of this
Agreement may be amended or supplemented at any time by action of the respective
Boards of Directors (or its authorized representative) of Acquiror or RISCORP
without action of the stockholders, whether before or after the Stockholders'
Meeting; provided, however, that after approval of the stockholders of RISCORP
no such amendment shall (i) reduce the amount or change the form of the
consideration to be delivered to RISCORP's stockholders as contemplated by this
Agreement; (ii) otherwise materially adversely affect the interests of such
stockholders unless such amendment is approved by RISCORP's stockholders; or
(ii) except as allowed by Section 607.1002 of the FBCA, amend the articles of
incorporation of either RISCORP or Acquiror. No amendment to this Agreement
shall be effective unless it has been executed by RISCORP, Acquiror and
Guarantor.
8.2. Non-Survival of Representations and Warranties. None of the
representations and warranties of RISCORP set forth in Section 3 to this
Agreement or of Acquiror or Guarantor set forth in Section 4 to this Agreement,
or in any instrument or certificate delivered pursuant to this Agreement, shall
survive the Merger nor shall their respective stockholders, directors or
officers have any liability to the other after the Effective Time on account of
any breach of warranty or failure or the incorrectness of any of the
representations or warranties contained herein or in any certificate or other
instrument delivered pursuant to this Agreement. All covenants and agreements
set forth in this Agreement shall survive until satisfied or waived by the
appropriate party. Except as set forth in the immediately preceding sentence,
31
the sole right and remedy arising from a breach of a representation or warranty,
from the failure of any of the conditions of the Merger to be met, or from the
failure to perform (other than a willful failure to perform) any promise or
discharge any obligation in this Agreement shall be termination of this
Agreement by the aggrieved party and the remedies provided in Section 7.2 or
Section 8.9 hereof.
8.3. Notices . All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered
personally, telecopied (if confirmed) or sent by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
If to RISCORP:
One Sarasota Tower, Suite 000
Xxx Xxxxx Xxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Telecopy No.: 000-000-0000
With a copy to:
Xxxxxx & Bird LLP
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: J. Xxxxxxx Xxxxxx
Telecopy No.: 000-000-0000
If to Acquiror or Guarantor:
0000 X. Xxxxxx Xxxxxx
Xxxxx 000-X
Xxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopy No.: 000-000-0000
With a copy to:
King & Spalding
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
32
8.4. Descriptive Headings; Interpretation. The descriptive headings
are for convenience of reference only and shall not control or affect the
meaning or construction of any provision of this Agreement. When a reference is
made in this Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available.
8.5. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement. This Agreement 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 the parties need not sign the same counterpart.
8.6. Entire Agreement. This Agreement contains the entire agreement
between Acquiror and RISCORP with respect to the Merger, and supersede all prior
arrangements or understandings with respect to the subject matter hereof. Except
as otherwise contemplated in the covenants listed in Section 7.2 (which
covenants shall be enforceable by the person or persons affected thereby
following the Effective Time), this Agreement is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder; provided
that each current director and officer of RISCORP shall be deemed a third party
beneficiary of this Agreement and shall be entitled to enforce the covenants of
Acquiror contained in Section 5.10 hereof as if they were a party hereto.
8.7. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA (WITHOUT REGARD TO ANY
APPLICABLE CONFLICTS OF LAW PROVISIONS THEREOF).
8.8. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in a mutually acceptable manner in order that
the transactions be consummated as originally contemplated to the fullest extent
possible.
8.9. Enforcement of Agreement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
33
8.10. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, and any attempt to make any such assignment
without such consent shall be null and void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties hereto and their respective successors and assigns.
8.11. Limited Liability. Notwithstanding any other provision of this
Agreement, no stockholder, director, officer, affiliate or representative of
RISCORP or Acquiror shall have any personal liability in respect of or relating
a breach of the representations or warranties of such party under this
Agreement, except to the extent that such person or entity has engaged in fraud
with respect to such matters or has engaged in intentional deception with
respect to such matters. Except as set forth in the preceding sentence, to the
fullest extent legally permissible, each of RISCORP and Acquiror, for itself and
its stockholders, directors, officers and affiliates, waives and agrees not to
seek to assert or enforce any such liability for a breach of representations and
warranties contained herein that any such person otherwise might have pursuant
to applicable law.
8.12. Definition of Knowledge. The words "to the Knowledge of RISCORP"
or "to RISCORP's knowledge" and words of similar import shall mean the knowledge
of any one of the persons listed on Exhibit G. Knowledge shall include actual
knowledge as well as the knowledge a reasonable business person would have
obtained after making reasonable inquiry and after exercising reasonable
diligence with respect thereto.
8.13. Guarantor.
(a) Guarantor hereby unconditionally and irrevocably guarantees,
to RISCORP the due and punctual performance of each of the obligations and
the undertakings of Acquiror under this Agreement when and to the extent
the same are required to be performed and subject to all of the terms and
conditions hereof. If Acquiror shall fail to perform fully and punctually
any obligation or undertaking of Acquiror under this Agreement when and to
the extent the same is required to be performed, Guarantor will upon
written demand from RISCORP forthwith perform or cause to be performed such
obligation or undertaking, as the case may be. The obligations of Guarantor
under this guaranty shall constitute an absolute and unconditional present
and continuing guarantee of performance to the extent provided herein, and
shall not be contingent upon any attempt by RISCORP to enforce performance
by Acquiror.
(b) Subject to 8.13(a), the obligations of Guarantor under this
guaranty are absolute and unconditional, are not subject to any
counterclaim, set off, deduction, abatement or defense based upon any claim
Guarantor may have against RISCORP (except for any defense Acquiror may
have against RISCORP under the terms of this Agreement), and shall remain
in full force and effect without regard to (i) any agreement or
modification to any of the terms of this Agreement or any other agreement
which may hereafter be made relating thereto; (ii) any exercise,
nonexercise, or waiver by RISCORP of any right, power, privilege or remedy
under or in respect of this Agreement; (iii) any insolvency, bankruptcy,
dissolution, liquidation, reorganization or the like of Acquiror at or
prior to the Closing; (iv) absence of any notice to, or knowledge by,
34
Guarantor of the existence or occurrence of any of the matters or events
set forth in the forgoing causes (i) through (iii); or (v) any other
circumstance, whether similar or dissimilar to the foregoing.
(c) Guarantor unconditionally waives (i) any and all notice of
default, non-performance or non-payment by Acquiror under this Agreement,
(ii) all notices which may be required by statute, rule of law or otherwise
to preserve intact any rights of RISCORP against Guarantor, including,
without limitation, any demand, presentment or protest, or proof of notice
of non-payment under this Agreement, and (iii) any right to the
enforcement, assertion or exercise by RISCORP of any right, power,
privilege or remedy conferred in this Agreement or otherwise.
(d) Notwithstanding anything in this Section 8.13 to the
contrary, the guaranty set forth in this Section 8.13 shall terminate and
shall be of no further force or effect upon the Closing.
35
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by its respective duly authorized
officers, all as of the date first above written.
XXXXXXX ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: President
/s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
RISCORP, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
Name: Xxxxxx X. Xxxxxxxxx
Title: President
36
Exhibit E
Form of Section 5.10(d) Compliance Certificate
[Date]
To the persons set forth in Exhibit F of that certain Plan and Agreement of
Merger dated November 3, 1999.
Re: Compliance Certificate in accordance with
Section 5.10(d) of that certain Plan and Agreement of
Merger dated November 3, 1999 (the "Merger Agreement").
This certificate is being delivered to you pursuant to the requirements
of Section 5.11 of the Merger Agreement. Capitalized terms used in this
certificate but not otherwise defined shall have the meanings assigned to them
in the Merger Agreement.
The undersigned, being a duly appointed officer of RISCORP, does hereby
certify and confirm, in his capacity as such officer, that at the end of the
fiscal quarter ending _________, RISCORP satisfied the covenants set forth in
Section 5.10(d) of the Merger Agreement.
RISCORP, INC.
Exhibit F
Contact Persons for Compliance with Section 5.10(d)
The estate of Xxxxxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx
00000 Xxxxxxxx Xxxxx Xxxxx X.X. Xxxx Associates, inc.
Windermere, Florida 0000 XX 0xx Xxxxxx
Telecopy No: 000-000-0000 Xxxxx Xxxxxx, Xxxxxxx 00000
Telecopy No.: 000-000-0000
Seddon Xxxxx, Jr. Xxxxxx X. Xxxxxxxxx
University Research Park, Inc. 0000 Xxxxxxx Xxxxxx Xxxx
000 Xxxxx Xxxxx Xxxxxx Xxxxxxxxx, Xxxxxxx 00000
Two First Union Center Telecopy No.: 000-000-0000
Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Telecopy No.: 000-000-0000
Xxxxxx X. Xxxxxx, III Xxxxxx X. Xxxxxxx, XX
0000 Xxxxxxxxxxxx Xxxxxxxxx, XX Xxxxxxx, Hammock & Company, P.A.
Xx. Xxxxxxxxxx, Xxxxxxx 00000 0000 Xxxxxxx Xxxxxxx
Telecopy No.: 000-000-0000 Xxxxxxxxxxxx, Xxxxxxx 00000
Telecopy No.: 000-000-0000
With a copy to:
Xxxxxx & Bird LLP
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: J. Xxxxxxx Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
Exhibit G
RISCORP's Knowledge
1. Xxxxxx X. Xxxxxxxxx
2. Xxxxxx X. Xxxxxxx, XX
