Agreement and Plan of Reorganization
AGREEMENT AND PLAN OF REORGANIZATION
among
AMERICAN PUBLIC HOLDINGS, INC.,
AMERICAN FIDELITY CORPORATION
and
APLIC ACQUISITION CORP.
April 24, 2000
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS................................................................................ 1
ARTICLE II THE MERGER................................................................................ 6
Section 2.1 The Merger................................................................................6
Section 2.2 Effective Time............................................................................6
Section 2.3 Effect of the Merger......................................................................6
Section 2.4 Certificate of Incorporation; Bylaws; Directors and Officers..............................6
Section 2.5 Conversion of Securities..................................................................7
Section 2.6 Dissenting Shares.........................................................................7
Section 2.7 Surrender of Shares; Stock Transfer Books.................................................8
Section 2.8 Closing...................................................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF AFC.....................................................9
Section 3.1 Organization and Authority................................................................9
Section 3.2 Authorization.............................................................................9
Section 3.3 No Conflict; Required Filings and Consents................................................9
Section 3.4 Satisfaction of Conditions...............................................................10
Section 3.5 Litigation...............................................................................10
Section 3.6 Financing................................................................................10
Section 3.7 Regulatory Matters.......................................................................10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
THE COMPANY..............................................................................10
Section 4.1 Organization, Authority and Authorization of the Company.................................10
Section 4.2 Company Subsidiaries.....................................................................11
Section 4.3 Capitalization of the Company, APLIC, DentaCare, and
Greater South..........................................................................12
Section 4.4 Organizational Documents.................................................................13
Section 4.5 No Conflict, Required Filings and Consents...............................................13
Section 4.6 SEC Filings..............................................................................14
Section 4.7 GAAP Financial Statements................................................................14
Section 4.8 Statutory Financial Statements...........................................................15
Section 4.9 Recent Results...........................................................................16
Section 4.10 Litigation..............................................................................16
Section 4.11 Absence of Changes in Events............................................................16
Section 4.12 Reports.................................................................................17
Section 4.13 Proxy Statement.........................................................................17
Section 4.14 Registration Rights.....................................................................17
Section 4.15 Properties..............................................................................17
ii
Section 4.16 Taxes ..................................................................................18
Section 4.17 1999 Tax Returns........................................................................19
Section 4.18 Employees and Benefits..................................................................19
Section 4.19 Agreements, Contracts and Commitments...................................................22
Section 4.20 Reinsurance.............................................................................24
Section 4.21 No Defaults under Contracts or Agreements...............................................24
Section 4.22 Compliance with Laws; Environmental Matters.............................................24
Section 4.23 Brokers and Finders.....................................................................25
Section 4.24 Regulatory Agreements...................................................................26
Section 4.25 Dividends...............................................................................26
Section 4.26 Actuarial Opinion.......................................................................26
Section 4.27 Investments.............................................................................26
Section 4.28 Completeness of Documents Furnished by Company..........................................26
Section 4.29 Minute Books............................................................................26
Section 4.30 Books of Account.........................................................................26
Section 4.31 Satisfaction of Conditions..............................................................27
Section 4.32 Complete Disclosure.....................................................................27
ARTICLE V. CONDUCT OF BUSINESS PRIOR TO THE CLOSING..................................................27
Section 5.1 Conduct Prior to Closing.................................................................27
Section 5.2 Notification of Certain Matters..........................................................30
Section 5.3 Consents and Approvals...................................................................30
ARTICLE VI ADDITIONAL AGREEMENTS.....................................................................31
Section 6.1 Current Information......................................................................31
Section 6.2 Access, Information, and Confidentiality.................................................31
Section 6.3 Review of Specific Matters...............................................................32
Section 6.4 Expenses.................................................................................32
Section 6.5 Meeting of Stockholders of the Company...................................................33
Section 6.6 Repayment of Shareholder Advances........................................................33
Section 6.7 Company Operations Pending Closing.......................................................33
Section 6.8 Services Agreement.......................................................................33
ARTICLE VII CONDITIONS...............................................................................33
Section 7.1 Conditions to Each Party's Obligation to Consummate
the Closing............................................................................33
Section 7.2 Conditions to Obligation of AFC..........................................................34
Section 7.3 Conditions to Obligation of the Company to
Consummate the Merger..................................................................35
ARTICLE VIII TERMINATION, AMENDMENT, AND WAIVER......................................................36
Section 8.1 Termination..............................................................................36
Section 8.2 Amendment................................................................................36
Section 8.3 Waiver...................................................................................36
iii
ARTICLE IX SUBSEQUENT ACQUISITION PROPOSALS OR
OTHER UNANTICIPATED EVENTS............................................................................37
Section 9.1 No Solicitation..........................................................................37
Section 9.2 Notification to AFC......................................................................37
Section 9.3 Board Recommendation.....................................................................37
Section 9.4 Disclosure...............................................................................37
Section 9.5 Termination..............................................................................37
ARTICLE X. DISPUTE RESOLUTION........................................................................38
Section 10.1 Negotiation between Senior Executives...................................................38
Section 10.2 Mediation ..............................................................................39
ARTICLE XI GENERAL PROVISIONS........................................................................39
Section 11.1 Survival of Representations, Warranties, and
Agreements.............................................................................39
Section 11.2 Notices.................................................................................39
Section 11.3 Fees and Expenses ......................................................................40
Section 11.4 Complete Agreement......................................................................40
Section 11.5 Binding Effect..........................................................................41
Section 11.6 Governing Law...........................................................................41
Section 11.7 No Third Party Benefit..................................................................41
Section 11.8 Severability............................................................................41
Section 11.9 Non-waiver..............................................................................41
Section 11.10 Captions...............................................................................41
Section 11.11 Counterpart............................................................................41
iv
LIST OF SCHEDULES AND EXHIBITS
Schedules
---------
4.1 States in which American Public Holdings, Inc. is Qualified
4.2 States in which Subsidiaries are Qualified to do Business
4.5.1 Approval of Governmental Agencies required of the Company; Preacquisition Notification Filings With
State Insurance Authorities
4.9 Claims Department Production
4.10 Litigation
4.15.1 Owned Property
4.15.2 Leases
4.15.3 Names, Logos, Marks, Symbols, Trade Names, Trademarks, Service Marks, Copyrights And Patents used
by the Company or any of the Subsidiaries
4.15.4 Investment Portfolio Summary - Company and the Subsidiaries as of March 31, 2000
4.16.1 Outstanding Taxes Owed by the Company and the Subsidiaries
4.18.2 Pension And Welfare Plans Maintained by the Company or any of the Subsidiaries
4.18.4 Incentive, Bonus, Parachute, or Other Employee Merit or Change of Control Agreements or
Arrangements Between the Company or any of its Subsidiaries and Any Current or Former Employee
4.18.5 Employment Agreements with Key Employees
4.18.9 Computer Software Programs and Systems Owned or Licensed To Use by the Company or any of its
Subsidiaries
4.19.1 Material Contracts, Agreements and Instruments Required for the Conduct of the Business of the
Company or any of the Subsidiaries
4.19.2 Agents and Agent Agreements
4.20 Reinsurance Agreements
4.22.2 Permits
4.23 Xxxx Xxxxx Agreement
4.26 Actuarial Opinion of Xxxxxx and Associates, Inc. dated February 14, 2000
Exhibits
--------
A Services Agreement
B Legal Opinion of Xxxxxxx Xxxxxx Winter & Stennis, P.A.
C Legal Opinion of McAfee & Xxxx A Professional Corporation
v
This Agreement
and Plan of Reorganization (the “Agreement”) is made and entered into
as of April 24, 2000, by and between American Fidelity Corporation, a Nevada
corporation (“AFC”), APLIC Acquisition Corp. (“Subcorp”), an
Oklahoma corporation and a wholly-owned subsidiary of AFC, and American Public
Holdings, Inc. (the “Company”), a Mississippi corporation and the sole
stockholder of American Public Life Insurance Company, a Mississippi stock
insurance company (“APLIC”).
Background Information
A. The Boards of
Directors of AFC, Subcorp and the Company have each determined that it is in the
best interests of their respective stockholders for AFC to acquire the Company
upon the terms and subject to the conditions set forth herein.
B. In
furtherance thereof, the Boards of Directors of AFC, Subcorp, and the Company
have each approved the merger (the “Merger”) of the Company with and
into Subcorp in accordance with the general corporation laws of the States of
Oklahoma and Mississippi (collectively, the “Merger Law”) for total
consideration consisting of cash in the aggregate amount of $18,300,000 subject
to adjustment as provided for in Sections 4.23, 6.4, 7.3.4, 10.2 and 11.3 of
this Agreement (the “Merger Consideration”), and upon the terms and
subject to the conditions set forth herein. The Board of Directors of the
Company has resolved to recommend that all holders of the issued and outstanding
shares of common stock, without par value, of the Company (the
“Shares”) approve the Merger.
Statement of Agreement
The Company,
AFC, and Subcorp (the “Parties”) acknowledge the accuracy of the
foregoing Background Information, and in consideration of the mutual promises
hereinafter set forth and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
ARTICLE I.
DEFINITIONS
As used herein,
the terms “AFC,” “Agreement,” “APLIC,”
“Company,” “Merger,” “Merger Consideration,”
“Merger Law,” “Shares” and “Subcorp” shall have
the meanings set forth above. In addition:
“Acquisition
Proposal” shall mean any proposal or offer, with respect to any merger,
consolidation, reorganization, acquisition, lease or sale of substantial assets,
change of control, or any similar transaction involving the Company and any of
the Subsidiaries except sales of investments in the ordinary and usual course of
business.
“Affiliate”
shall mean, with respect to any Person, any other Person that directly or
indirectly controls, is controlled by, or is under common control with such
Person.
"AFC" shall mean American Fidelity Corporation, a Nevada corporation.
“Agreement”
shall mean this Agreement and Plan of Reorganization, as entered into on April
24, 2000, and, to the extent supplemented, modified or amended, as so
supplemented, modified or amended.
“Agreement
of Merger” shall mean the Plan and Agreement of Merger providing for the
Merger of the Company with and into Subcorp, together with an appropriate
certificate or articles of merger and related documents (as necessary or
appropriate under the Merger Law).
“APLIC”
shall mean American Public Life Insurance Company, a Mississippi stock insurance
company.
“Blue Sky
laws” shall mean the securities or equivalent laws of any state or other
jurisdiction in which any holder of Company Common Stock may be located or in
which the Company transacts business.
"Business Entity" shall mean a corporation, partnership, limited partnership, limited liability company,
business trust or other form of legal entity.
"Company" shall mean American Public Holdings, Inc., a Mississippi corporation.
“Closing”
shall mean the closing of the Merger and other transactions contemplated by this
Agreement.
"Closing Date" shall mean the date specified in Section 2.8.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
“Company
Reports” shall mean all reports, registrations, and statements, together
with any amendments required to be made with respect thereto, that are required
to be filed with the Department of Insurance and any applicable state or foreign
insurance or licensing authorities.
"Company Stockholders' Meeting" shall mean the meeting of the Company stockholders to consider the
Merger.
“Consolidated
Group” shall mean the Company and the Subsidiaries and any other member of
the group included in the consolidated federal income tax returns filed by the
Company.
"DentaCare" shall mean DentaCare Marketing and Administration Inc., a Louisiana corporation.
“Department
of Insurance” shall mean the Department of Insurance of the State of
Mississippi.
2
“Dissenting
Shares” shall mean Shares held by a holder who has demanded and perfected
his demand for appraisal of his Shares in accordance with Mississippi Law and
who, as of the Effective Time, has neither effectively withdrawn nor lost his
right to such appraisal.
"Effective Time" shall mean the date the Certificate of Merger is filed pursuant to Section 2.2 of this
Agreement.
“Environmental
Laws” shall mean all federal, state, and local laws, statutes, ordinances,
and codes relating to the protection of public health or the environment or
which deal with Solid Waste, hazardous waste, wastewater discharges, water
quality, drinking water, air emissions, air quality (indoor or outdoor),
Hazardous Substances, asbestos, toxic substances, radioactive materials or
waste, petroleum or its derivatives, wetlands, lead-based paint, radon, employee
health and safety, or community right-to-know.
“Environmental
Report” shall mean the Environmental Report provided for in Section 6.4.
“ERISA”
means the Employment Retirement Income Security Act of 1974, as amended.
“ERISA
Plans” shall mean pension plans, as defined in Section 3(2) of ERISA
maintained by the Company or any of its Subsidiaries, all welfare plans, as
defined in Section 3(1) of ERISA maintained by the Company or any of its
Subsidiaries, and all other incentive, fringe benefit, vacation or leave plans,
policies or arrangements maintained by the Company.
“Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.
“Exchange Agent”
shall mean a bank, trust company or transfer agent to act as agent for the
holders of Shares to receive funds necessary to make the Merger Consideration
payments.
“Financial
Statements” shall mean the GAAP Financial Statements and the Statutory
Statements.
“GAAP”
shall mean generally accepted accounting principles in the United States as in
effect from time to time as set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public
Accountants and the statements and pronouncements of the Financial Accounting
Standards Board which are applicable to the circumstances as of the date of
determination consistently applied.
“GAAP
Financial Statements” shall mean the consolidated balance sheets of the
Company and the Subsidiaries as at December 31, 1996, 1997, 1998 and 1999 and
the related consolidated statements of operations and consolidated statements of
cash flows and the related notes thereto, for each of the years then ended, as
reported upon by Deloitte & Touche, LLP, independent certified public
accountants.
"Greater South" shall mean Greater South Insurance Company, a Mississippi corporation.
“Hazardous
Substance” shall mean asbestos, radioactive substances, radon, PCBs,
petroleum, and any substance deemed under applicable federal, state, and local
laws, statutes, ordinances, and codes to be a hazardous or toxic substance,
material, chemical substance, pollutant, waste, pesticide, or fungicide.
3
“HSR
Act” shall mean the Xxxx-Xxxxx-Xxxxxx Anti-Trust Improvements Act of 1976,
as amended.
"IRS" shall mean the Internal Revenue Service.
"Leases" shall mean all leases of real property to which the Company or any of the Subsidiaries is a
party.
“Xxxx
Xxxxx” shall mean Xxxx Xxxxx Xxxx Xxxxxx, Incorporated, financial advisor
to the Company.
“Liability
or Obligation” shall mean any liability or obligation, whether accrued,
absolute, contingent or otherwise, and whether directly incurred or by means of
a guaranty, undertaking or otherwise, including without limitation obligations
for borrowed money, whether or not evidenced by a note, bond, debenture or
similar instrument, claims against, whether asserted or unasserted, known or
unknown, or contracted obligations.
“Material
Adverse Effect” shall mean any change in, event, occurrence or effect on
the business of the Company or any Subsidiary, whether or not in the ordinary
course of business, that is or could reasonably be expected to be materially
adverse to the business operations, assets, properties, liabilities, prospects,
or condition (financial or otherwise) of the Company and the Subsidiaries taken
as a whole.
"Merger" shall mean the merger of the Company with and into Subcorp.
"Merger Law" shall mean the General Corporation Law of the State of Mississippi and the General Corporation Act
of the State of Oklahoma.
"Mississippi Law" shall mean the General Corporation Law of the State of Mississippi.
"Oklahoma Law" shall mean the General Corporation Act of the State of Oklahoma.
“Owned
Realty” shall mean all of the real property owned by the Company as set
forth on Schedule 4.15.1.
"Parties" shall mean the Company, AFC and Subcorp.
“Proportionate
Part” shall mean the percentage (computed to the nearest one hundredth of a
percent) determined by dividing the number of Shares owned of record by each
Stockholder as of the Effective Time by the total number of Shares issued and
outstanding as of the Effective Time.
“Proxy
Statement” shall mean the Proxy Statement, or any amendment thereof or
supplement thereto, which will be sent to the stockholders of the Company and
will contain information regarding the terms of the Merger.
4
"SEC" shall mean the Securities and Exchange Commission.
“SEC
Reports” shall mean all forms, reports and documents required to be filed
with the SEC since January 1, 1997 pursuant to the Exchange Act or the
Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended.
“Services
Agreement” shall mean the Services Agreement provided for in Section 6.9.
"Share or Shares" shall mean the issued and outstanding shares of Common Stock, without par value, of
the Company.
“Solid
Waste” means any substance deemed under applicable federal, state, and
local laws, statutes, ordinances, and codes to be a waste and also infectious
waste, residual waste, hazardous waste, or nuclear/radioactive waste regardless
of the level of radioactivity.
“Statutory
Statements” shall mean the audited statutory financial statements
(including the notes thereto and all accompanying schedules contained in the
“statutory annual statement of the Company and its Subsidiaries as of and
for the years ended December 31, 1996, 1997, 1998 and 1999.
"Stockholder" shall mean a holder of Shares.
"Subcorp" shall mean APLIC Acquisition Corp., an Oklahoma corporation.
"Subsidiary" shall mean any of APLIC, DentaCare and Greater South.
"Subsidiaries" shall mean APLIC, DentaCare Marketing and Administration, Inc. and Greater South
Insurance Company.
“Superior
Proposal” shall mean an Acquisition Proposal which, if consummated in
accordance with its terms, would result in the holder of all Shares receiving an
aggregate cash consideration which is at least ten percent (10%) greater than
the Merger Consideration.
“Surviving
Corporation” shall mean Subcorp, as the surviving corporation after the
Merger.
“Tax
Returns” shall mean all returns, amended returns, declarations, reports,
estimates, information returns and statements required or permitted to be filed
under federal, state, local or foreign law relating to Taxes by, or including,
the Company or any of its Subsidiaries.
“Taxes”
shall mean all taxes, charges, fees, levies or other assessments of whatever
kind or nature, including without limitation, all net income, gross income,
gross receipts, premium, sales, use, ad valorem, transfer, franchise, profits,
licenses, withholding, payroll, employment, excise, estimated, severance, stamp,
occupancy or property taxes, custom duties, fees, assessments or charges of any
kind whatsoever (together with any and all interest, penalty or addition to
tax).
5
“Taxes of
the Company” shall mean all Taxes imposed by any taxing authority (federal,
state, local or foreign) upon the Company or any of its Subsidiaries.
"Xxxxxx" shall mean Xxxxxx and Associates, Inc., an independent actuarial firm.
ARTICLE II.
THE MERGER
2.1 The Merger. On or before the Closing Date, all parties named
in the Agreement of Merger shall duly execute, acknowledge, and deliver the
Agreement of Merger in a number of counterparts which is sufficient to provide
duplicate originals for all such parties and their respective counsel and the
requisite number of copies for filing pursuant to Merger Law. At or before the
Effective Time, and subject to the terms and conditions of this Agreement, the
Agreement of Merger shall be filed by the Parties or their duly authorized
agents in the appropriate public offices in such jurisdictions as may be
necessary or appropriate to give effect to the transactions contemplated hereby.
At the Effective Time, and subject to and upon the terms and conditions of this
Agreement and the Merger Law, the Company shall be merged with and into Subcorp,
the separate corporate existence of the Company shall cease, and Subcorp shall
continue as the surviving corporation. Subcorp as the surviving corporation
after the Merger is hereinafter sometimes referred to as the “Surviving
Corporation.”
2.2 Effective Time. As promptly as practicable after the
Closing, the Parties shall cause the Merger to be consummated by filing a
Certificate of Merger as provided in Section 2.1, above. The Merger shall be
effective as of the close of business on the date of such filing (the
“Effective Time”).
2.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the Merger Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all property, rights, privileges, powers and franchises of the
Company and Subcorp shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Subcorp shall become the debts,
liabilities and duties of the Surviving Corporation.
2.4 Articles and Certificate of Incorporation; Bylaws; Directors and Officers.
2.4.1 At the Effective Time, the Certificate of Incorporation of Subcorp, as in effect immediately prior to
the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation, unless and until
thereafter amended in accordance with the General Corporation Act of the State of Oklahoma ("Oklahoma Law") and
such Certificate of Incorporation.
2.4.2 At the Effective Time, Bylaws of Subcorp, as in effect immediately prior to the Effective Time, shall be
the Bylaws of the Surviving Corporation, unless and until thereafter amended in accordance with Oklahoma Law and
the Certificate of Incorporation and such Bylaws.
2.4.3 The directors and officers of Subcorp immediately prior to the Effective Time shall be the directors and
officers of the Surviving Corporation, until their successors are elected or appointed and qualified in
accordance with Oklahoma Law and the Certificate of Incorporation and Bylaws of the Surviving Corporation. If, at
the Effective Time, one or more vacancies shall exist on the Board of Directors or in any office of the Surviving
Corporation, such vacancy may thereafter be filled in accordance with Oklahoma Law and the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
6
2.5 Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part
of AFC, Subcorp, the Company, or the holder of any Shares:
2.5.1 Each common share, without par value, of Subcorp which is issued and outstanding immediately prior to
the Effective Time shall be converted into one share of common stock, without par value, of the Surviving
Corporation, which shall thereafter constitute all of the issued and outstanding capital stock of the Surviving
Corporation (the "Surviving Corporation Shares").
2.5.2 Each Share issued and outstanding immediately prior to the Effective Time, other than any to be canceled
pursuant to Section 5.5.3, below, and any Dissenting Shares (as defined in Section 2.7, below), shall be canceled
and extinguished and be converted into the right of the holder of record of such Share to receive such holder's
Proportionate Part of the Merger Consideration, without interest, upon surrender of the certificate representing
such Share.
2.5.3 Each Share owned by the Company or by any direct or indirect wholly-owned subsidiary of the Company
immediately prior to the Effective Time shall be canceled, extinguished, and cease to exist and no cash payment
or other consideration shall be made with respect thereto.
2.6 Dissenting Shares.
2.6.1 Notwithstanding any provision of this Agreement to the contrary, any Shares held by a holder who has
demanded and perfected his demand for appraisal of his Shares in accordance with Mississippi Law and who, as of
the Effective Time, has neither effectively withdrawn nor lost his right to such appraisal ("Dissenting Shares")
shall not be converted into or represent a right to receive the Merger Consideration pursuant to Section 2.5.2,
above, but the holder thereof shall only be entitled to such rights as are granted by Mississippi Law and shall
cease to have any other rights with respect to such Shares.
2.6.2 Notwithstanding the provisions of Section 2.6.1, above, if any holder of Shares who demands appraisal of
his Shares under Mississippi Law shall effectively withdraw or lose (through failure to perfect or otherwise) his
right to appraisal, then, as of the Effective Time or the occurrence of such event, whichever later occurs, such
holder's Shares shall automatically be converted into and represent only the right to receive the Merger
Consideration as provided in Section 2.5.2, above, without interest thereon, upon surrender of the certificate or
certificates representing such Shares.
2.6.3 The Company shall give AFC (i) prompt notice of any written demands for appraisal or payment of the fair
value of any Shares, withdrawals of such demands, and any other instruments served pursuant to Mississippi Law
received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal
7
under Mississippi Law. The Company shall not voluntarily make any payment with respect to
any demands for appraisal and shall not, except with the prior written consent of AFC, settle or offer to settle
any such demands.
2.7 Surrender of Shares; Stock Transfer Books.
2.7.1 Each holder of a certificate or certificates representing any Shares canceled upon the Merger pursuant
to Section 2.5.2, above, shall thereafter surrender such certificate or certificates to the Exchange Agent, as
agent for such holder, to effect the surrender of such certificate or certificates on such holder's behalf;
provided that, upon termination of the Exchange Agent's agency, AFC shall require the Exchange Agent to return to
AFC any funds then held by the Exchange Agent pursuant to Section 2.7.1, above, and, thereafter, any holder of a
certificate or certificates representing Shares canceled upon the Merger pursuant to Section 2.5.2, above, who
has not yet surrendered such certificate or certificates as provided in this Agreement shall surrender such
certificate or certificates to AFC, which shall be responsible for the payments contemplated by Section 2.5.2,
above. AFC agrees that promptly after the Effective Time it shall cause to be distributed to holders of record
of Shares as of the Effective Time appropriate materials to facilitate such surrender.
2.7.2 If payment of cash in respect of canceled Shares is to be made to a person other than the person in
whose name a surrendered certificate or instrument is registered, it shall be condition to such payment that the
certificate or instrument shall be properly endorsed or shall be otherwise 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 or instrument surrendered or shall
have established to the satisfaction of AFC or the Exchange Agent that such tax either has been paid or is not
payable.
2.7.3 At the Effective Time, the stock transfer books of the Company with respect to the Shares shall be
closed and there shall be no further registration of transfer of such Shares thereafter on the records of the
Company. If, after the Effective Time, certificates for Shares are presented to the Surviving Corporation, they
shall be canceled and exchanged for cash as provided in Section 2.5.2, above. No interest shall accrue or be
paid on any cash payable upon the surrender of a certificate or certificates which immediately prior to the
Effective Time represented outstanding Shares. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of Shares for any amount properly paid to a public official pursuant to
any applicable abandoned property, escheat or similar law.
2.8 Closing. The closing of the Merger and the other
transactions contemplated by this Agreement (the “Closing”) shall take
place at the offices of Xxxxxxx Xxxxxx Winter & Stennis, P.A., 000 Xxxxx
Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxx, xx such date within five business days after
the satisfaction or waiver of all conditions precedent set forth in Article VII
hereof as the parties may agree, or at such other place, time or date as may be
mutually agreed upon in writing by the parties (the “Closing Date”).
The parties shall use their reasonable efforts to cause the Closing to occur by
May 31, 2000, but in any event the Closing shall occur not later than July 31,
2000.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF AFC
8
AFC represents and warrants to the Company as follows:
3.1 Organization and Authority. AFC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada. Subcorp is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Oklahoma. Each of AFC and Subcorp has
full corporate power, right, and authority to own its properties and assets and
to carry on its business as it is now being conducted, and, subject to the
conditions set forth in Article VII, to consummate the Merger and to enter into
and carry out the transactions contemplated by this Agreement. Each of AFC and
Subcorp has all necessary governmental authorizations to own or lease its
properties and assets and to carry on its business as now being conducted in all
respects material to the financial condition or business of AFC and its
subsidiaries taken as a whole.
3.2 Authorization. Subject to satisfaction or waiver of the
conditions set forth in Article VII, this Agreement has been duly authorized,
executed, and delivered by each of AFC and Subcorp, and no further corporate
proceedings on the part of either AFC or Subcorp are or will then be necessary
to authorize this Agreement and the transactions contemplated hereby. Subject to
satisfaction or waiver of the conditions set forth in Article VII, this
Agreement is the legal, valid, and binding obligation of each of AFC and
Subcorp, enforceable against them, respectively, in accordance with its terms.
3.3 No Conflict; Required Filings and Consents. Neither the execution, delivery, and performance of this
Agreement by each of AFC and Subcorp nor the consummation of the transactions contemplated hereby will:
3.3.1 Require any consent, approval, authorization, or permit of, or filing with or notification to, any
governmental or regulatory authority, except (i) for filings with and/or approval of the state insurance
authorities in the State of Mississippi, (ii) for filings under the Xxxx-Xxxxx-Xxxxxx Anti-trust Improvements Act
of 1976, as amended (the "HSR Act"), (iii) filing and recordation of appropriate merger documents as required by
the Merger Law, (iv) where the failure to obtain such consents, approvals, authorizations, or permits, or to make
such filings or notifications, individually or in the aggregate, would not adversely affect either AFC's or
Subcorp's ability to consummate the Merger or otherwise perform its obligations under this Agreement, and (v) for
those requirements which become applicable to AFC as a result of the specific regulatory status of the Company or
any of its subsidiaries or as a result of any other facts that specifically relate to the business or activities
in which the Company or any of its subsidiaries is or proposes to be engaged.
3.3.2 Violate, conflict with, or result in a breach of any provisions of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of,
or accelerate the performance required by, or result in a right of termination or acceleration under, or the
creation of any lien, security interest, charge, or encumbrance upon any of the properties or assets of AFC or
any subsidiary of AFC under any of the terms, conditions, or provisions of (i) the Certificate of Incorporation
or By-laws of AFC or any of its subsidiaries, (ii) any material note, bond, mortgage, indenture, deed of trust,
license, lease, agreement, or other instrument or obligation to which AFC or any subsidiary of AFC is a party or
by which AFC or any subsidiary of AFC may be bound, or to which AFC or any
9
subsidiary of AFC or the properties or assets of AFC or any subsidiary of AFC may be subject, or (iii) except where such event would not have a material
adverse effect on the financial condition or business of Buyer and its subsidiaries taken as a whole, any
judgment, ruling, order, writ, injunction, decree, statute, rule, or regulation applicable to AFC or any
subsidiary of AFC or to the properties or assets of AFC or any of its subsidiaries.
3.4 Satisfaction of Conditions. AFC is not, as of the date
hereof, aware of any reason why the conditions to be satisfied by AFC as set
forth in Article VII hereof would not be satisfied on the Closing Date.
3.5 Litigation. There is no action, suit or proceeding pending
or, to the knowledge of AFC, threatened against AFC or any affiliate of AFC or
any of its properties before any court or arbitrator or any governmental body,
agency, or official which in any manner challenges or seeks to prevent, enjoin,
alter, or materially delay any of the transactions contemplated hereby.
3.6 Financing. AFC currently has and at the Closing will have
adequate capital and available funds to fulfill its obligations hereunder on the
Closing Date, subject to fulfillment or waiver of the conditions set forth in
Article VI hereof.
3.7 Regulatory Matters. Each of AFC and Subcorp has all
necessary permits, licenses, certificates of authority, orders and approvals of,
and has made all filings and applications with, all regulatory authorities
required in order to permit each of AFC and Subcorp to carry on its business as
presently conducted.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to AFC that:
4.1 Organization, Authority and Authorization of the Company.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Mississippi. The Company has the full
corporate power, right, and authority to own its properties and assets and to
carry on its business as it is now being conducted and, subject to the
satisfaction of the conditions set forth in Article VII hereof, to enter into
and perform its obligations under this Agreement. The Company is duly qualified
to do business in the states listed in Schedule 4.1, and is not required to
qualify to do business in any state or foreign jurisdiction where it is not
already so qualified. The Company has all necessary governmental authorizations
and licenses to own or lease its properties and assets, to underwrite insurance,
and otherwise to carry on its business as now being conducted. This Agreement
has been duly authorized, executed, and delivered by the Company, and, except
for the approval of the stockholders of the Company as contemplated by Section
6.5, below, no further corporate proceedings on the part of the Company are or
will then be necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement is the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms.
10
4.2 Company Subsidiaries. The Company has no wholly or partially owned subsidiaries except the following
corporations (the "Subsidiaries") with respect to each of which the Company owns 100% of the outstanding capital
stock.
Subsidiary State of Incorporation Percent of
Ownership
American Public Life Insurance Company Mississippi 100%
DentaCare Marketing and Administration, Inc. Louisiana 100%
Greater South Insurance Company Mississippi 100%
All of the capital stock of each subsidiary, as set forth above,
has been validly authorized and issued, is fully paid and nonassessable and is
owned directly or indirectly, through one or more subsidiaries, by the Company
free and clear of any lien, charge or encumbrance. Such corporations (whether
they are subsidiaries of the Company or subsidiaries of a subsidiary of the
Company) are herein collectively referred to as a “Subsidiary” or
“Subsidiaries.” The accounts of all of the Subsidiaries are
consolidated with the accounts of the Company. Each of the Subsidiaries is duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation. Each of the Subsidiaries has the
corporate power to own its respective property and to carry on its respective
business as now being conducted. Each of the Subsidiaries is duly qualified
and/or licensed, as may be required, and in good standing as a foreign
corporation, as the case may be, in each jurisdiction in which the nature of the
business conducted by it or the character of the property owned, leased or used
by it makes such qualification and/or licensing necessary. A list of such
jurisdictions is set forth with reference to any such Subsidiary in Schedule
4.2. For purposes of this Agreement, a “subsidiary” shall mean any
corporation, partnership, limited liability company, or other entity of which
the Company, directly or indirectly, through APLIC or otherwise, is the
beneficial owner of capital stock or other equity interest.
4.3 Capitalization of the Company, APLIC, DentaCare, and Greater South.
4.3.1 The authorized capital stock of the Company consists of 25,000,000 shares of preferred stock, $1.00 par
value (the "Preferred Shares"), none of which are issued or outstanding, and 50,000,000 Shares, of which
1,099,278 Shares are issued and outstanding and no Shares are held in the Treasury of the Company. All of the
issued and outstanding Shares have been validly issued and are fully paid and nonassessable. There are no other
shares of capital stock or other equity securities of the Company outstanding and there are no outstanding
options, warrants, scrip, preemptive or other rights to subscribe to or purchase, calls, commitments, or
agreements of any character whatsoever relating to, or securities or rights convertible into or exchangeable for,
shares of capital stock of the Company. As of March 20, 2000, there were 1,581 holders of record of Shares. The
Company has delivered to AFC a stockholders list showing the names, addresses, and number of Shares held by each
stockholder, and such list is accurate and complete, except to the extent that the address for any stockholder is
no longer current.
4.3.2 The authorized capital stock of APLIC consists of 500,000 shares of common stock, par value $50.00 per
share (the "APLIC Shares"), of which 52,844 APLIC Shares are issued and outstanding and no APLIC Shares are held
in Treasury.
11
All of the issued and outstanding APLIC Shares have been validly issued and are fully paid and nonassessable. There are no other shares of capital stock or other equity securities of APLIC outstanding and no
outstanding options, warrants, scrip, preemptive or other rights to subscribe to or purchase, calls, commitments,
or agreements of any character whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of capital stock of APLIC. The Company owns all of the issued and outstanding APLIC Shares free and
clear of all liens, claims, security interests, or other encumbrances whatsoever.
4.3.3 The authorized capital stock of DentaCare consists of 1000 shares of common stock (the "DentaCare
Shares"), of which 1,000 DentaCare Shares are issued and outstanding and no DentaCare Shares are held in
Treasury. All of the issued and outstanding DentaCare Shares have been validly issued and are fully paid and
nonassessable. There are no other shares of capital stock or other equity securities of DentaCare outstanding
and no outstanding options, warrants, scrip, preemptive or other rights to subscribe to or purchase, calls,
commitments, or agreements of any character whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of capital stock of DentaCare. APLIC owns all of the issued and outstanding DentaCare
Shares free and clear of all liens, claims, security interests, or other encumbrances whatsoever.
4.3.4 The authorized capital stock of Greater South consists of 1,000,000 shares of common stock (the "Greater
South Shares"), of which 1,000 Greater South Shares are issued and outstanding and no Greater South Shares are
held in Treasury. All of the issued and outstanding Greater South Shares have been validly issued and are fully
paid and nonassessable. There are no other shares of capital stock or other equity securities of Greater South
outstanding and no outstanding options, warrants, scrip, preemptive or other rights to subscribe to or purchase,
calls, commitments, or agreements of any character whatsoever relating to, or securities or rights convertible
into or exchangeable for, shares of capital stock of Greater South. APLIC owns all of the issued and outstanding
Greater South Shares free and clear of all liens, claims, security interests, or other encumbrances whatsoever.
4.4 Organizational Documents. The Company has heretofore
furnished to AFC complete and correct copies of the Articles or Certificate of
Incorporation and Bylaws, or equivalent organizational documents, each as
amended to date, of the Company and each of the Subsidiaries. All of such
Articles or Certificate of Incorporation and Bylaws, or equivalent
organizational documents, are in full force and effect. There are no amendments
to such Articles or Certificate of Incorporation, By-laws or equivalent
organizational documents which are not reflected in the copies furnished to AFC.
Neither the Company nor any of the Subsidiaries is in violation of any of the
provisions of its Articles or Certificate of Incorporation or Bylaws or
equivalent organizational documents.
4.5 No Conflict, Required Filings and Consents. Neither the execution, delivery, and performance of this
Agreement by the Company nor the consummation of the transactions contemplated hereby will:
4.5.1 Require any consent, approval, authorization, or permit of, or filing with or notification to, any
governmental or regulatory authority, except (i) for filings with and/or approval of the state insurance
authorities in the States of Mississippi and
12
Oklahoma and those states listed in Schedule 4.5.1, (ii) for filings under the HSR Act, (iii) in connection with the Exchange Act, Blue Sky Laws, and filing and recordation of
appropriate merger documents as required by Merger Law, and (iv) where the failure to obtain such consents,
approvals, authorizations, or permits, or to take such filings or notifications, individually or in the
aggregate, would not adversely affect its ability to consummate the Merger or otherwise perform its obligations
under this Agreement.
Except for preacquisition notification filings with the state insurance authorities in the states listed
in Schedule 4.5.1 no notice to, filing with, authorization of, exception by, or consent or approval from any
third party is required to be made or obtained by AFC or the Company prior to the Closing in order for AFC to
maintain, from and after the Closing Date, the insurance licenses of the Company and the Subsidiaries in effect
on the date hereof.
4.5.2 Violate, conflict with, or result in a breach of any provisions of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of,
or accelerate the performance required by, or result in a right of termination or acceleration under, or the
creation of any lien, security interest, charge or encumbrance upon any of the properties or, assets of the
Company or any subsidiary of the Company under any of the terms, conditions or provisions of (i) the Articles of
Incorporation or Bylaws, or equivalent organizational documents, of the Company or any of the Subsidiaries, (ii)
any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation
to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary may be bound, or to
which the Company or any Subsidiary or the properties or assets of the Company or any Subsidiary may be subject,
or (iii) any judgment, ruling, order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any Subsidiary or to the properties or assets of the Company or any of the Subsidiaries.
4.6 SEC Filings. The Company has filed all forms, reports, and
documents required to be filed with the Securities and Exchange Commission (the
“SEC”) since January 1, 1997, pursuant to the Securities Exchange Act
of 1934, as amended (the “Exchange Act”) or the Securities Act of
1933, as amended (the “Securities Act”) (collectively, the “SEC
Reports”), and has heretofore delivered to AFC, in the form filed with the
SEC, its (a) Annual Reports on Form 10-K for the fiscal years ended December 31,
1996, 1997, 1998, and 1999 respectively, (b) its quarterly reports on Form 10-Q
for the fiscal quarters ended March 31, June 30 and September 30, 1999; (c) all
proxy statements relating to the Company’s meetings of stockholders
(whether annual or special) held since January 1, 1997, and (d) all other
reports and registration statements filed by the Company with the SEC since
January 1, 1997. The SEC Reports were prepared in accordance with the
requirements of the Securities Act of 1933, as amended, or the Exchange Act, as
the case may be, and the rules and regulations promulgated thereunder and did
not at the time they were filed 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 the light of the circumstances under
which they were made not misleading.
4.7 GAAP Financial Statements.
4.7.1 The Company has previously furnished AFC a true and correct copy of (i) the consolidated balance sheets
of the
13
Company and the Subsidiaries at December 31, 1996, 1997, 1998 and 1999 and the related consolidated statements of operations and consolidated statements of cash flows, and the related notes thereto, for each of
the years then ended, reported upon by Deloitte & Touche LLP, independent certified public accountants,
(collectively, the "GAAP Financial Statements"). The GAAP Financial Statements have been prepared in conformity
with GAAP. The consolidated balance sheets of the Company and the Subsidiaries as at December 31, 1996, 1997,
1998 and 1999 constituting a part of the GAAP Financial Statements, are true and correct and fairly present the
financial condition of the Company and its Subsidiaries as of the respective dates thereof. The consolidated
statements of operations and statements of cash flows of the Company and the Subsidiaries for the periods ended
December 31, 1996, 1997, 1998 and 1999 constituting a part of the GAAP Financial Statements, are true and correct
and fairly present the results of operations of the Company and the Subsidiaries for the periods indicated. For
the purposes of this Agreement, all financial statements of the Company and its Subsidiaries shall be deemed to
include the notes to such financial statements.
4.7.2 Neither the Company nor any of its Subsidiaries has any Liability or Obligation which has not been:
(a) reflected on the Consolidated Balance Sheet and in the notes thereto of the Company and the
Subsidiaries as of dated December 31, 1999 constituting a part of the GAAP Financial Statements (the "1999 Balance
Sheet"); or
(b) specifically described in any of the Schedules furnished to AFC in connection herewith; or
(c) incurred, consistent with past practices, in or as a result of the ordinary course of business
since December 31, 1999, none of which is material in amount;
4.7.3 Except for the litigation matters described in Schedule 4.10, there are no Liabilities or Obligations
of, or any legal basis for any Liabilities or Obligations of, the Company or any of the Subsidiaries which might
result in a reduction in excess of $50,000 in the consolidated net worth of the Company or any of the
Subsidiaries from that shown in the 1999 Balance Sheet or any charge against consolidated net earnings of the
Company or any of the Subsidiaries in excess of $50,000, except as expressly disclosed by this Agreement or the
Schedules, financial data and other material submitted in connection herewith.
4.7.4 Since December 31, 1999 neither the Company nor any of the Subsidiaries has engaged in any material
transaction outside the ordinary course of its business and there has not been, occurred or arisen since December
31, 1999;
(a) any material adverse change in the consolidated financial condition or in the operations of the
business of the Company or any of the Subsidiaries from that shown on the 1999 Balance Sheet and the related
consolidated statements of operations; or
(b) any damage or destruction in the nature of a casualty loss, or interference with its business
from such loss or from any labor dispute or court or governmental action, order or decree, whether
covered by insurance or not, materially and adversely affecting the properties or business of the
Company or of any of its Subsidiaries; or
14
(c) any increase, except increases given in accordance with prior practice, in the compensation payable
or to become payable by the Company or any of the Subsidiaries to officers of the Company or any of its
Subsidiaries or salaried employees of the Company or any of the Subsidiaries whose annual remuneration
exceeded $60,000, or any increase in the benefits, regardless of amount, in any bonus, insurance,
pension or other plan, program, payment or arrangement with respect to employee benefits made to, for or
with any officers or employees; or
(d) any extraordinary loss (as defined in Opinions No. 9 and No. 30 of the Accounting Principles Board
of the American Institute of Certified Public Accountants) suffered by the Company or any of the
Subsidiaries, or any waiver by the Company or any of its Subsidiaries or any rights which are material
to the Company or to any of its Subsidiaries; or
(e) any other event, condition or statement of facts (other than the general state of the national
economy and proposed federal legislation or regulation) of any character which, to the best of the knowledge of
the Company, materially and adversely affects or could reasonably be expected to affect the results of
operations or business or financial condition of the Company or of any of the Subsidiaries.
4.8 Statutory Financial Statements. The audited statutory
consolidated financial statements (including the notes thereto and all
accompanying schedules contained in the “statutory blanks”) of APLIC
as and for the years ended December 31, 1996, 1997, and 1998 and 1999 (the
“Statutory Statements”), have been prepared in conformity with
actuarial principles and accounting practices prescribed or permitted by the
Mississippi Department of Insurance (the “Department of Insurance”),
are in accordance with the related insurance, coinsurance and reinsurance
contracts issued or assumed by APLIC, and present fairly, in all material
respects, the admitted assets, liabilities and capital and surplus of APLIC at
the dates stated therein and the results of operations of APLIC for the periods
then ended on the basis of accounting and actuarial practices described herein.
Copies of the Statutory Statements have been previously delivered by the Company
to AFC. The GAAP Financial Statements and the Statutory Statements contain
adequate reserves and such reserves make good and sufficient provisions for all
insurance and other obligations of the Company and each of the Subsidiaries. All
reserves have been opined upon as reasonable and adequate as of the date opined
upon by a qualified actuary, and all reserves have been stated upon the basis of
prior practices and procedures.
4.9 Recent Results. At February 29, 2000, APLIC had statutory
capital and surplus of not less than $6.5 million before giving effect to any
reduction in APLIC’s reserves since December 31, 1999. Schedule 4.9 is an
accurate and complete summary of the production of the claims department(s) of
the Company and the Subsidiaries for the year 1999 and for the months of January
and February 2000.
4.10 Litigation. (a) Except as set forth in Schedule 4.10, there
is no action, suit, proceeding, or investigation pending or to the knowledge of
the Company, threatened against or affecting the Company, any Subsidiary or any
Affiliate of the Company or any Subsidiary or any of their respective properties
before any court, arbitrator, or governmental body, agency, or official,
15
nor, to
the knowledge of the Company, is there any basis for any of the same, (i) which in any manner challenges or seeks to prevent, enjoin, alter, or delay any of the
transactions contemplated hereby; (ii) which might materially and adversely
affect the financial condition or business of the Company or of any of the
Subsidiaries or the conduct of the Company or any of the Subsidiaries’
businesses, (iii) involving any claims exceeding potential liability (including
costs of defense and attorneys’ fees) whether or not covered by insurance
in an amount in excess of $25,000 with respect to the individual suit, action,
proceeding or investigation or potential liability (including costs of defense
and attorneys’ fees) whether or not covered by insurance or $50,000 in the
aggregate of all such suits, actions, proceedings or investigations, except
workers compensation, automobile accident and other routine claims wholly
covered by existing insurance (including costs of defense and attorneys’
fees); (b) there are no outstanding judgments, decrees, or orders against the
Company or any Subsidiary enjoining any of them in respect of, or the effect of
which is to prohibit, any business practice or the acquisition of any property
or the conduct of business in any area, and (c) there are no existing violations
by the Company or any of the Subsidiaries of any federal, foreign, state, or
local laws, regulations, or orders which, in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
For purposes of
this Agreement, the term “Material Adverse Effect” shall mean any
change, event, occurrence, or effect on the business of the Company or any
Subsidiary that is or will be materially adverse to the business operations,
assets, properties, liabilities, prospects, or condition (financial or
otherwise) of the Company and the Subsidiaries taken as a whole.
4.11 Absence of Changes in Events. Since December 31, 1999,
there has been no change in the business operations, assets, properties,
liabilities, prospects, or condition (financial or otherwise) of the Company or
any of the Subsidiaries, and no occurrence, circumstance, event, or combination
thereof which reasonably could be expected to result in any such change, which
constitutes or may reasonably be expected to have a Material Adverse Effect.
4.12 Reports. Since December 31, 1996, the Company has filed all
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that were required to be filed with (a) the
Department of Insurance, and (b) any applicable state or foreign insurance or
licensing authorities (all such reports and statements are collectively referred
to herein as the “Company Reports”). As of their respective dates, the
Company Reports complied with the statutes, rules, and regulations enforced or
promulgated by the regulatory authority with which they were filed, and no
material deficiencies have been asserted by any regulatory authority nor have
there been any disagreements with the independent auditors in connection with
such Company Reports, or, if asserted, such deficiencies or disagreements have
been resolved to the satisfaction of the regulatory authority asserting the
deficiency or the independent auditors asserting the disagreement.
4.13 Proxy Statement. Neither the proxy statement to be sent to
the stockholders of the Company in connection with the meeting of the
Company’s stockholders to consider the Merger (the “Company
Stockholders’ Meeting”) or the information statement to be sent to
such stockholders, as appropriate (such proxy statement or information
statement, as amended or supplemented, is herein referred to as the “Proxy
Statement”), will, at the date the Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to stockholders and at the time
of the Company Stockholders’ Meeting and at the Effective Time, be false or
misleading with respect to any material fact, or omit to state any material fact
required to be
16
stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they are made, not misleading
or necessary to correct any statement in any earlier communication with respect
to the solicitation of proxies for the Company Stockholders’ Meeting which
has become false or misleading. Notwithstanding the foregoing, the Company makes
no representation or warranty with respect to any AFC information. The Proxy
Statement will comply in all material respects as to form and substance with the
requirements of the Exchange Act and the rules and regulations thereunder.
4.14 Registration Rights. No person has a right to require the Company to register the offer or sale of any
Shares, nor does the Company have any obligations to register the offer or sale of any Shares.
4.15 Properties.
4.15.1 Schedule 4.15.1 sets forth a list of all real property owned by the Company or any of the Subsidiaries
("Owned Realty"). Included in Schedule 4.15.1 are true, correct and complete copies of owners title insurance
policy no. Z-308544 issued by Mississippi Valley Title Insurance Company and Old Republic National Title
Insurance Company dated March 7, 1994 at 8:00 a.m. in favor of American Public Life Insurance Company and
covering the real property owned by American Public Life Insurance Company and located at 0000 Xxxxxxxx Xxxxx,
Xxxxxxx, Xxxxxx Xxxxxx, Xxxxxxxxxxx and owners title policy xx. XX 000000 issued by Title Insurance Company of
Minnesota dated November 27, 1979 at 3:55 p.m. in favor of American Public Life Insurance Company and covering
the real property owned by American Public Life Insurance Company and located at 480 Xxxxxxx Xxxxxx, Jackson,
Xxxxx County, Mississippi (collectively, the "Title Policies"). Except as may be reflected in Schedule 4.15.1,
and except for such imperfections of title as do not materially affect the value of any such personal or real
property reflected in the GAAP Financial Statements or acquired since the date of such statements and which do
not materially interfere with or impair the present and continued use of any such property, the Company or one or
more of the Subsidiaries has good and marketable title, free and clear of any liens, claims, charges, options or
other encumbrances, to all of the personal and real property reflected in the GAAP Financial Statements or
Statutory Statements or listed on Schedule 4.15.1 and all personal and real property acquired since the
respective dates of the GAAP Financial Statements or Statutory Statements, except such personal and real property
as has been disposed of in the ordinary course of business since December 31, 1999.
4.15.2 Schedule 4.15.2 sets forth a list and information as of the date hereof of all leases of real
property, identifying separately each ground lease, to which the Company or any of the Subsidiaries is a party
(collectively, the "Leases"). There are no material liabilities, contingent or otherwise, with respect to the
Owned Realty or leased real property of the Company or any of its subsidiaries, for environmental matters or
otherwise, that are not adequately insured against. The Leases are in full force and effect and, as of the date
of this Agreement, neither the Company nor any of its subsidiaries has received a notice of default or
termination with respect to any such Leases. Except as set forth on Schedule 4.15.2, there has not occurred any
event which would, with notice or lapse of time or otherwise, constitute a breach by the Company or any of its
subsidiaries of, or default by the Company or any of its subsidiaries in, the performance of any covenant,
agreement or condition contained in any Lease.
17
4.15.3 Schedule 4.15.3 sets forth a correct list of all names, logos, marks, symbols, trade names, trademarks,
service marks, copyrights and patents used by the Company or any of the Subsidiaries in the conduct of their
respective businesses and all filings, registrations or issuances of any of the foregoing with or by any federal,
state, local, or foreign regulatory, administrative, or governmental office or offices. All of the foregoing are
owned by the Company or one of the Subsidiaries free and clear of all liens, claims, rights of use, encumbrances,
or other restrictions. Except as provided in Schedule 4.15.3, the respective businesses of the Company and the
Subsidiaries have not been conducted in contravention of any trademark, copyright, or other proprietary right of
any third party, and neither the Company nor any of the Subsidiaries has received notice of any claim that any
such names, logos, marks, symbols, trade names, trademarks, service marks, copyrights, patents, or other similar
property rights listed on Schedule 4.15.3 is not valid or enforceable by its owner as stated on Schedule 4.15.3,
or infringes upon any trademark, service xxxx, trade name, copyright, patent, or intellectual property right of
any third party.
4.15.4 Schedule 4.15.4 sets forth a correct summary of the investment portfolio of the Company and the
Subsidiaries as of March 31, 2000, including the amounts invested and the market value in each category of
governmental, debt, and other fixed maturities, cash, and short- term investments and equity securities, the
Standard and Poor's or Moody's ratings of such investments, and the average maturities of the bond portfolio.
Since March 15, 2000, there has not been any material change in the composition of the investment portfolio.
4.16 Taxes.
4.16.1 Except as set forth in Schedule 4.16.1, (i) the Company and the Subsidiaries have filed all tax returns
which are required to be filed and has paid all Taxes which have become due pursuant to such tax returns or
pursuant to any assessment which has become payable; (ii) all such tax returns are complete and accurate and
disclose all Taxes required to be paid; (iii) all such tax returns have been examined by the relevant taxing
authority or the period for assessment of the Taxes in respect of which such tax returns were required to be
filed has expired; (iv) there is no action, suit, investigation, audit, claim or assessment pending or proposed
or, to the knowledge of the Company, threatened with respect to Taxes, and, to the best of the Company's
knowledge, no basis exists therefor; (v) the Company and the Subsidiaries have not waived or been requested to
waive any statute of limitations in respect of Taxes; (vi) all monies required to be withheld by the Company and
the Subsidiaries, as the case may be; (vii) no transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code; and (viii) following the Closing Date, pursuant to any agreement or
arrangement entered into by the Company or any Affiliate thereof on or prior to the Closing Date, the Company and
the Subsidiaries will not be obligated to make a payment to an individual that would be a "parachute payment" to
a "disqualified individual" as those terms are defined in Section 280G of the Code, without regard to whether
such payment is reasonable compensation for personal services performed or to be performed in the future.
4.16.2 The statute of limitations for the assessment of federal income taxes of the Company and all of the
Subsidiaries has expired for each period through December 31, 1995 and no waivers of any applicable statutes of
limitations are outstanding.
18
4.16.3 No deficiency or adjustment for any Taxes of the Company, the Subsidiaries or of any other member of the
group included in the consolidated federal income tax returns filed by the Company (the "Consolidated Group") not
yet paid has been proposed in writing or assessed. The Company and all of the Subsidiaries are the only members
of the Consolidated Group for the years 1996, 1997, 1998 and 1999. There are no pending or, to the best of the
Company's knowledge, threatened federal, state, local, or foreign tax audits of the Company or of any other
member of the Consolidated Group for years in which the Company or any of the Subsidiaries was a member of the
Consolidated Group.
4.17 1999 Tax Return. The Company has duly filed its
consolidated federal income tax return for its fiscal year ended December 31,
1999 and has duly elected to use all net operating losses, if any, as tax
deductions for taxable years ending after December 31, 1999, irrespective of the
taxable year in which such net operating losses were incurred.
4.18 Employees and Benefits.
4.18.1 There are no labor or collective bargaining agreements binding upon the Company or any of its
subsidiaries. Except under Plans (as defined below), neither the Company nor any of its subsidiaries has any
obligation, contingent or otherwise, under any employment, consulting, retirement, or severance agreements.
4.18.2 Schedule 4.18.2 sets forth a complete list of all pension plans, as defined in Section 3(2) of ERISA,
maintained by the Company or any of the Subsidiaries (each, a "Pension Plan"), all welfare plans, as defined in
Section 3(l) of ERISA, maintained by the Company or any of its Subsidiaries (such welfare plans and the Pension
Plans being hereinafter referred to as "ERISA Plans"), and all other incentive, fringe benefit, vacation, or
leave plans, policies, or arrangements maintained by the Company or any of the Subsidiaries (collectively, the
"Plans"). Neither the Company nor any of the Subsidiaries maintains or contributes to any "multi-employer plan"
as that term is defined at Section 4001(a)(3) of ERISA, and neither the Company nor any of the Subsidiaries has
incurred any material liability under Section 4062, 4063, 4064, 4069, 4071 or 4201 of ERISA. Each Pension Plan
which is intended to be qualified under Section 401 (a) of the Code has been determined by the Internal Revenue
Service so to qualify, and there are no facts in existence which might adversely affect such qualification. None
of the ERISA Plans has provided a benefit which is a "Disqualified Benefit" (as such term is defined in Code
Section 4976(b)) for which an excise tax would be imposed. Nothing has been done or omitted to be done with
respect to any ERISA Plan that would result in any material liability on the part of the Company or any of its
subsidiaries under Part 5 of Title I or Title IV of ERISA or Section 4975 of the Code. No "reportable event", as
defined in Section 4043 of ERISA, has occurred with respect to any Pension Plan subject to Title IV of ERISA.
Except for continuation of health coverage to the extent required under Section 4980B of the Code, and except as
specifically set forth in Schedule 4.18.2, there are no unfunded obligations under any ERISA Plan providing
benefits after termination of employment. There is no accumulated funding deficiency as defined in Section 302 of
ERISA or Section 412 of the Code with respect to any Pension Plan. The Company has made, and has caused all of
the Subsidiaries to make, all quarterly contributions required under Section 412(m) of the Code, and has made or
will make, and has caused or will cause the Subsidiaries to make, prior to the Closing Date, all payments and
contributions
19
(including insurance premiums) for benefits accrued prior to the Closing Date, whether or not due and payable before that date, to each ERISA Plan, and all payments and contributions required under the terms of
such Plans. With respect to each Pension Plan which is subject to Title IV of ERISA, as of the Closing Date, the
current fair market value of the Plan assets exceeds the present value of all benefit liabilities as defined in
Section 4001(a)(16) of ERISA.
4.18.3 Each Plan and ERISA Plan subject to ERISA is and has been in the past maintained and operated in all
material respects in compliance with ERISA and all applicable requirements under the Code and other applicable
federal and state laws. Each Plan and ERISA Plan has been administered and operated in all respects in compliance
with the applicable requirements of Section 1962(b)(1)(A), (B) and (C) of the Social Security Act and Sections
4980B and 5000 of the Code, and neither the Company nor any of its subsidiaries is subject to any liability,
including but not limited to taxes (excise or otherwise), additional contribution requirements, fines, penalties,
or loss of tax deductions, as a result of such administration and operation. All reporting and disclosure
requirements under the Code and ERISA applicable to any Plan or ERISA Plan have been complied with, and there are
no currently pending or, to the best of the Company's knowledge, threatened actions or claims against or with
respect to any Plan, ERISA Plan, the Company or any of the Subsidiaries, or any fiduciary of a Plan or ERISA
Plan. No Plan or ERISA Plan and no fiduciary of any such Plan is currently the subject of a pending audit or
examination by the Department of Labor or the Internal Revenue Service nor, to the best of the Company's
knowledge, is any such audit or examination threatened or anticipated. The directors, officers, and employees of
the Company and the Subsidiaries, to the extent any of them are fiduciaries with respect to any Plan or ERISA
Plan, have not breached any of their responsibilities or obligations imposed upon them as fiduciaries under ERISA
or taken any action or failed to act in any way which could result in any claim being made under, by, against, or
on behalf of any Plan or ERISA Plan (other than routine claims for benefits due) by any party with standing to
make such claim. The execution and consummation of the transactions contemplated by this Agreement do not
constitute a triggering event under any Plan, ERISA Plan, policy, arrangement, statement, commitment, or
agreement, whether or not legally enforceable, which (either alone or upon the occurrence of any additional or
subsequent event) will or may result in any payment (of severance pay or otherwise), acceleration, increase in
vesting, or increase in benefits to any current or former participant, employee, former employee, or director of
the Company or any of the Subsidiaries.
4.18.4 There are no incentive, bonus, parachute, or other employee merit or change of control agreements or
arrangements between the Company or any of the Subsidiaries and any current or former employee thereof other than
(i) Plans listed in Schedule 4.18.4, or (ii) arrangements which are not material to the financial condition or
business of the Company or any of the Subsidiaries.
4.18.5 Neither the Company nor any of the Subsidiaries is a party to any employment agreement providing for
base compensation in excess of $50,000 per year, except as listed on Schedule 4.18.5.
4.18.6 Except as disclosed on Schedules 4.18.4 and 4.18.5, there are no employment, deferred compensation,
20
consulting, severance, or other agreements with officers or directors of the Company or any of the Subsidiaries of a nature which would be required to be disclosed in Form 10-K filed under the Exchange Act.
4.18.7 Any reference to ERISA or the Code or any section thereof shall be construed to include all applicable
regulations and administrative rulings issued thereunder.
All obligations, of the Company and the Subsidiaries, whether arising by operation of law, contract,
agreement, or otherwise, for payments to trusts or other funds or to any governmental agency or to any employees,
directors, officers, agents, or any other individual (or any of their respective heirs, legatees, beneficiaries,
or legal representatives) with respect to profit sharing, pension or retirement benefits, or any other employee
benefit of any kind whatsoever will have been paid, or adequate accruals in accordance with GAAP for such
payments will be reflected on the books of account of the Company for the period covered thereby. All legally
enforceable obligations of the Company and the Subsidiaries, whether arising by operation of law, contract,
agreement, or otherwise, for bonuses or other forms of compensation or benefits which are, or may become, payable
to its employees, director, officers, agents, or any other individual (or their respective heirs, legatees,
beneficiaries or legal representative) with respect to periods ending on or before the Effective Date of the
Merger have been paid, or adequate accruals for payment thereof will be made prior to the Effective Time.
4.18.8 The Company's books of account and GAAP Financial Statements provide for vested vacation entitlement in
accordance with Statement of Financial Accounting Standards No. 43.
4.18.9 The Company and each Subsidiary maintain complete and accurate records of all furniture, fixtures and
equipment owned by them and the basis upon which the same is depreciated for federal income tax purposes. All of
the items of furniture, fixtures and equipment reflected in the 1999 Balance Sheet are owned by the Company and
its Subsidiaries, free and clear of all claims, liens, encumbrances, security interests and other rights of third
parties. Schedule 4.18.9 is a complete and accurate description of each computer software program and system
which the Company or any of its Subsidiaries owns or is licensed to use in connection with its business
operations. Each such program or system which is owned by the Company and of its Subsidiaries is complete and
proprietary to the Company or such Subsidiary, and is not subject to any lien, claim, encumbrance, security
interest, right, restriction, option or purchase obligation held by any Person. Each such program and system
which is licensed to the Company and any Subsidiary is held by a valid, legal and binding license agreement which
is in full force and effect, and no event has occurred which would constitute an event of default by the Company
or any Subsidiary thereunder or which, with the lapse of time or the giving of notice or both, would constitute
an event of default by the Company or any Subsidiary under such license agreement.
4.19 Agreements, Contracts and Commitments.
4.19.1 The Company has listed on Schedule 4.19.1 all contracts, agreements and instruments which are in any
single case of material importance to the conduct of the business of the Company or any of the Subsidiaries,
together with true and correct copies of each such document and a written description of each oral arrangement so
listed. Without limiting the
21
generality of the foregoing, the aforesaid list includes all the contracts,
agreements and instruments of the following types to which the Company and any of the Subsidiaries is a party
(without regard to whether such contracts, agreements and instruments are material):
(a) any collective bargaining agreements or any agreements that contain any severance pay liabilities or
obligations,
(b) labor union contracts together with a list of all labor unions representing or, to the Company's best
knowledge, attempting to represent employees of the Company or any Subsidiary;
(c) any bonus, deferred compensation, pension, profit sharing, retirement, stock option, stock bonus, stock
purchase, hospitalization, insurance, vacation pay plan, programs or other similar employee benefit
arrangements,
(d) any employment agreement, contract or commitment with an employee having more than one year to run from
December 31, 1999, or to pay any employee more than $60,000 per annum,
(e) any agreement of guarantee or indemnification running from the Company or any of the Subsidiaries to any
person or entity other than to a Subsidiary,
(f) any agreement, contract or commitment which might reasonably be expected to have a potential material
adverse impact on the business of the Company or any of the Subsidiaries,
(g) any agreement, loan agreement, promissory note, indenture or other instrument for borrowed money and any
agreement or other instrument which contains restrictions with respect to payment of dividends or any
other distribution in respect of its common stock or any other outstanding securities,
(h) any agreement, contract or commitment containing any covenant limiting the freedom of the Company or any
of the Subsidiaries to engage in any line of business or compete with any person,
(i) any mortgage, deed of trust, security agreement, pledge, pledge agreement or other form of agreement
creating a lien, encumbrance or restriction on any asset owned by the Company or any of the
Subsidiaries,
(j) any agreement, contract or commitment relating to capital expenditures in excess of $50,000 and
involving future payments,
(k) any contracts or agreements with other persons engaged in sales or distributing activities, and
advertising contracts, which are not terminable by the Company, or the Subsidiaries, without liability
upon termination notice of thirty days or less;
22
(l) written or oral agreements, understandings and arrangements with officers, directors, employees,
shareholders or agents relating to present or future compensation of, or other benefits available to,
such persons;
(m) contracts, and other arrangements of any kind, whether oral or written, with any director, officer, or
shareholder of the Company or any of the Subsidiaries;
(n) during the five years preceding the date hereof, been a party to any contract with the Department of
Defense or any other department or agency of the United States government, or to any subcontract under
any such contract, which is subject to renegotiation under the Renegotiation Act of 1951, as amended,
(o) leases of real or personal property as to which the Company or any of the Subsidiaries is the tenant
with terms in excess of 12 months and annual rental in excess of $20,000, or
(p) any agreement, contract or commitment not made in the ordinary course of business which involves $50,000
or more or has a remaining term of one year or more from December 31, 1999 or is not cancelable on six
months' or less notice without penalty.
(q) Neither the Company nor any of the Subsidiaries has breached, nor is there any claim or any legal basis
for a claim that the Company or any of the Subsidiaries has breached, any of the terms or conditions of
any agreement, contract or commitment set forth in any of the Schedules attached to this Agreement or of
any other agreement, contract or commitment, if any such breach or breaches in the aggregate could
result in the imposition of damages or the loss of benefits to the Company or to any of the
Subsidiaries. All of the leases of real or personal property described in Schedule 4.19.1 in respect of
which the Company or any Subsidiary is the tenant are valid, in full force and effect, and enforceable
in accordance with their terms and there are no defaults thereunder and no waiver or indulgence has been
granted by any of the landlords under such leases and, in the case of each lease, the Company or the
Subsidiaries have been in peaceable possession since the commencement of the original term of such
lease. Except as set forth in Schedule 4.19.1 each of such leases grants the leasehold it purports to
grant.
4.19.2 Schedule 4.19.2 is a true and accurate list of all persons who have been appointed as managing general
agents, independent general agents, general agents and agents for the purpose of soliciting, procuring and taking
applications for policies of insurance issued by the Company and its Subsidiaries. Each of the persons listed on
Schedule 4.19.2 is a party to a valid, binding and legally enforceable agreement with the Company and any of its
Subsidiaries which provides, among other things, for the terms upon which such Persons are entitled to receive
the payment of commissions and other compensation from the Company and any of its Subsidiaries in the form(s)
included in Schedule 4.19.2 (the "Agent Agreements"). Schedule 4.19.2 includes true and correct copies of each
Agent Agreement. All of the Agent Agreements are in full force and effect and have not been modified,
supplemented or replaced.
23
4.20 Reinsurance. Schedule 4.20 contains a complete and correct
list as of the date hereof of all reinsurance agreements to which the Company or
any of the Subsidiaries is a party and the types and amounts of all coverages.
All of such reinsurance agreements are in full force and effect, no default
exists thereunder, all premiums or ceding commissions which are due thereon have
been paid, none of such reinsurance agreements require the consent or approval
of the reinsurer to the consummation of the transactions contemplated by this
Agreement.
4.21 No Defaults under Contracts or Agreements. Without limiting
any of the representations and warranties of the Company contained in this
Article IV, all material contracts and other agreements to which the Company or
any of the Subsidiaries is a party are valid and in full force and effect, and
neither the Company nor any of the Subsidiaries is in violation of or in default
under any lease, contract, mortgage, promissory note, deed of trust, loan, or
other commitment or arrangement, which violation or default would constitute a
material violation or default thereunder.
4.22 Compliance with Laws; Environmental Matters.
4.22.1 Each of the Company and the Subsidiaries has all permits, licenses, certificates of authority, orders,
and approvals of, and have made all filings, applications, and registrations with, federal, state, local, or
foreign governmental or regulatory bodies that are required in order to permit it to carry on its business as
presently conducted or to own its properties as and where presently owned; such permits, licenses, certificates
of authority, registrations, orders, and approvals are in full force and effect in all material respects. The
conduct of their respective businesses by the Company and the Subsidiaries including, without limitation the
ownership and/or use of any property owned, leased and/or used by the Company and the Subsidiaries, has not
violated or infringed, and does not violate or infringe, any applicable domestic (federal, state, or local) or
foreign law, statute, ordinance, license, or regulation now in effect. No event has occurred that allows, or
after notice or lapse of time, or both, would allow, revocation, suspension, or termination of any permits,
licenses, certificates of authority, orders, or approvals held by or affecting the Company or any of the
Subsidiaries. Without limiting the generality of the foregoing provisions of this Section 4.22, each of the
Subsidiaries has all necessary permits, licenses, certificates of authority, orders and approvals of, and has
made all filings and applications with, all state insurance and other regulatory authorities, including without
limitation the Department of Insurance and all other state and federal insurance regulatory agencies, required in
order to permit the Subsidiaries to carry on their respective businesses as presently conducted. None of the
Subsidiaries has been a party to any investigation or proceeding instituted by any such state insurance
authority, and none of the Subsidiaries is in violation of, or has infringed, any statute, regulation,
ordinance, or license or been subject to any judgment, ruling, injunction, or order of any such state insurance
authority.
4.22.2 Schedule 4.22.2 includes a list of all franchises, licenses, permits, consents, authorizations,
approvals and certificates necessary for the Company and the Subsidiaries to carry on their respective businesses
as presently conducted (collectively, the "Permits"), each of which currently is owned by the Company or one of
the Subsidiaries, as indicated on Schedule 4.22.2, and is valid and in full force and effect. Except as set forth
in Schedule 4.22.2, neither the Company nor any of the Subsidiaries is in violation of any of the Permits, and
there are no pending or, to the Company's knowledge, threatened
24
proceedings which could result in the revocation, cancellation, or inability of the Company or any of its subsidiaries to renew any Permit.
4.22.3 There are no conditions at, in, on, under, or related to the Company or any of the Subsidiaries or their
respective properties which pose a hazard to human health or the environment, other than such conditions which
are in compliance with applicable Environmental Laws. The Company and the Subsidiaries are in compliance with all
applicable Environmental Laws, and there is no production, use, treatment, storage, transportation, handling,
discharge, disposal, arrangement for disposal, or release or threatened release of any Hazardous Substance or
Solid Waste in violation of applicable Environmental Law at, in, on, under, from, or over any real property
owned, leased, or used by the Company or any of the Subsidiaries or into or upon or over soil, surface water, or
groundwater at, on, or under any real property owned, leased, or used by the Company or any of the Subsidiaries.
At, on, or under the real property owned, leased, or used by the Company or any of the Subsidiaries, other than
in compliance with all applicable Environmental Laws, there is no: (i) asbestos-containing material, (ii) radon,
or (iii) PCB--containing electrical transformers or other equipment or machinery which contains or has contained
PCBs.
4.23 Brokers and Finders. Except for Xxxx Xxxxx, a copy of whose
engagement agreement is provided as Schedule 4.23, neither the Company nor any
of the Subsidiaries 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 the Company, in
connection with this Agreement or the transactions contemplated hereby. The fees
of Xxxx Xxxxx or any other financial advisor, finder or broker incurred by the
Company or any of the Subsidiaries in connection with the transactions
contemplated hereby will be paid by the Company, subject to the provisions of
Section 11.3 of this Agreement.
4.24 Regulatory Agreements. Neither the Company nor any of the
Subsidiaries is a party to or has received notice of an impending supervisory
agreement, memorandum of understanding, consent order, cease and desist order,
or condition of any regulatory order or decree with or by the Department of
Insurance or any other regulatory authority that relates to the conduct of the
business of the Company or any of the Subsidiaries, and, to the Company’s
knowledge, no event has occurred which could result in any supervisory
agreement, memorandum of understanding, consent order, cease and desist order,
or condition of any regulatory order or decree with or by the Department of
Insurance or any other regulatory authority that relates to the conduct of the
business of the Company or any of the Subsidiaries.
4.25 Dividends. Since December 31, 1999, neither the Company nor
any of the Subsidiaries has declared or paid any dividend to any stockholder or
made any other distribution with respect to its shares of stock.
4.26 Actuarial Opinion. Schedule 4.26 is a true, correct and
complete copy of the actuarial opinion of Xxxxxx dated February 14, 2000
regarding the adequacy of the insurance reserves of the Company and its
Subsidiaries as of December 31, 1999 which has been prepared in accordance with
Section 7 of NAIC Model Actuarial Opinion and Memorandum (the “
25
Xxxxxx
Opinion”). The factual information supplied by the Company and the
Subsidiaries to Xxxxxx for the purpose of preparation of the Xxxxxx Opinion was
true, accurate, correct and complete at the time such factual information was
furnished. The Company has no reason to believe that the assumptions upon which
the Xxxxxx Opinion is based are invalid, inaccurate or unreasonable.
4.27 Investments. The Company and each of the Subsidiaries is in compliance with the Company's investment
policy guideline statement.
4.28 Completeness of Documents Furnished by Company. The copies
of the Certificate of Incorporation and By-laws of the Company and each of the
Subsidiaries, each as amend, and of all leases, instruments, agreements and
other documents (including all Schedules and documents delivered pursuant to
this Agreement) which have been or will be delivered to AFC pursuant to the
terms of this Agreement or in connection with the transactions contemplated
hereby, are, or if not now delivered, will when delivered, be complete and
correct.
4.29 Minute Books. All corporate minute books of the Company and the Subsidiaries have been maintained in
accordance with applicable corporate law and are current and complete in all material respects.
4.30 Books of Account. The Company and each of the Subsidiaries
has maintained its respective books of account in the usual, regular and
ordinary manner and, between the date of this Agreement and the Effective Time,
the Company and each of the Subsidiaries will continue to keep its respective
books of account on such a basis.
4.31 Satisfaction of Conditions. The Company is not aware of any
reason why the conditions to be satisfied by the Company as set forth in Article
VII hereof would not be satisfied on the Closing Date.
4.32 Complete Disclosure. No representation or warranty by the
Company in this Agreement or any Schedule referred to herein, and no statement,
certificate, or other writing furnished to AFC by or on behalf of the Company in
connection with the transactions contemplated by this Agreement, contains any
untrue statement of a material fact or omits a material fact necessary to make
the statements contained herein or therein not misleading.
ARTICLE V.
CONDUCT OF BUSINESS PRIOR TO THE CLOSING
5.1 Conduct Prior to Closing. The Company hereby covenants and
agrees with AFC, that, prior to the Closing, unless the prior written consent of
AFC shall have been obtained (which consent shall not be unreasonably withheld
or delayed) and except as otherwise contemplated herein, the Company and each of
the Subsidiaries shall operate its business, and shall cause its subsidiaries to
operate their respective businesses, only in the usual, regular, and ordinary
course and in accordance with past practices and to use its best efforts to
preserve intact its business organization and assets, and those of its
subsidiaries, and to maintain its and its subsidiaries’ materially
important rights and franchises. From the date hereof until the Closing, the
Company covenants and agrees that it will not do or agree or commit to do, and
will not permit any of the Subsidiaries to do or agree or commit to do, without
the prior written consent of AFC, any of the following:
26
5.1.1 Incur any Liabilities or Obligations in excess of $50,000, in the aggregate, except for insurance
liabilities or obligations incurred by APLIC in the ordinary course of its insurance business under its standard
underwriting procedures; or make any loans or advances (except for policy loans made in the ordinary course of
business pursuant to the terms of insurance contracts) or acquire any equity, debt, or other investment
securities except for acquisitions of such securities in the ordinary course of its insurance business and in
accordance with its established investment policies and guidelines;
5.1.2 Grant any general increase in compensation to its employees as a class, or any increase in compensation
to any of its officers or directors; effect any change in the amount of retirement benefits to any class of
employees or officers (unless any such change shall be required by applicable law); or enter into any employment,
severance, or similar agreements or arrangements with any directors or officers which, in the case of employment
agreements, would extend beyond the Closing Date;
5.1.3 Declare or pay any dividend or make any other distribution with respect to its stock or purchase,
acquire, or redeem or split or combine or reclassify any of the shares of capital stock;
5.1.4 Except in compliance with the provisions of Article IX, purchase or otherwise acquire any substantial
portion of the assets, or more than 5% of any class of stock or other form of equity interest of any Business
Entity;
5.1.5 Except in compliance with the provisions of Article IX, merge or agree to merge with any other Business
Entity or permit any other Business Entity to merge into it or consolidate with any other Business Entity;
5.1.6 Liquidate, sell, dispose of, or encumber any assets or acquire any assets, other than in the ordinary
course of business consistent with past practice, or involving amounts less than $100,000 per transaction;
5.1.7 Issue any common shares or shares of any other class or permit any of its common shares or shares of any
other class held in its treasury to become outstanding;
5.1.8 Issue or grant or extend the term of any option, warrant, conversion or stock appreciation right not in
existence on the date hereof;
5.1.9 Propose or adopt any amendments to its corporate charter or Bylaws;
5.1.10 Enter into any business not conducted by the Company or one of the Subsidiaries as of the date of this
Agreement;
5.1.11 Propose or adopt any changes to the accounting principles used by the Company and the Subsidiaries,
except as required by generally accepted accounting principles or statutory accounting principles, as the case
may be, and then only after consultation with AFC;
5.1.12 Enter into any transactions with any Subsidiaries or Affiliates other than in the ordinary course of
business; or
27
5.1.13 Pay any debt owed by the Company or any Subsidiary to the Company or any other Subsidiary or to any
Affiliate of the Company.
5.1.14 Issue or enter into any agreement, arrangement or understanding to issue any of its capital stock or
grant options, warrants, rights or securities convertible into, exchangeable for or which contain the right to
purchase any of the Company's capital stock.
5.1.15 Make any change in the business conducted by the Company and the Subsidiaries;
5.1.16 Make capital expenditures or enter into any contracts or commitments therefor in excess of an aggregate
of $50,000;
5.1.17 Enter into any contract, agreement, undertaking or commitment which would have been required to be set
forth in Schedule 4.19.1 if in effect on the date hereof or enter into any contract which requires the consent or
approval of any third party to consummate the transactions contemplated by this Agreement; or make any material
modification to any existing agreement or to any Permits, other than changes make in good faith to cure document
deficiencies;
5.1.18 Enter into any contract for the purchase, lease (as lessee) or other occupancy of real property or
exercise any option to extend a lease listed in Schedule 4.15.1 or Schedule 4.15.2;
5.1.19 Sell, lease (as lessor), transfer or otherwise dispose of (including any transfers from the Company or
any Subsidiary to any of their Affiliates), or mortgage or pledge, or impose or suffer to be imposed any lien,
charge or encumbrance on, any of the assets of the Company or any Subsidiary, other than inventory and minor
amounts of personal property sold or otherwise disposed of for fair value in the ordinary course of business
consistent with past practice;
5.1.20 Acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial portion of
the assets of or equity in, or by any other manner, any business or any corporation, partnership, limited
liability company, association or other Business Entity;
5.1.21 Alter through merger, liquidation, reorganization, restructuring or in any other fashion the corporate
structure or ownership of the Company;
5.1.22 Cancel any debts owed to or claims held by the Company or any Subsidiary (including the settlement of
any claims or litigation) other than in the ordinary course of business consistent with past practice;
5.1.23 Create, incur or assume, or agree to create, incur or assume, any indebtedness for borrowed money or
enter into, as lessee, any capitalized lease obligations (as defined in Statement of Financial Accounting
Standards No. 13);
5.1.24 Accelerate or delay collection of any notes or accounts receivable in advance of or beyond their regular
due dates or the dates when the same would have been collected in the ordinary course of business consistent with
past practice;
28
5.1.25 Delay or accelerate payment of any account payable or other liability beyond or in advance of its due
date or the date when such liability would have been paid in the ordinary course of business consistent with past
practice;
5.1.26 Knowingly violate or fail to perform any obligation or duty imposed upon the Company or any Subsidiary
by any applicable requirements of law;
5.1.27 Make any tax election or change any method of accounting for tax purposes, in each case except to the
extent required by law, or settle or compromise any tax liability;
5.1.28 Terminate, amend, modify or waive any provisions of any confidentiality agreement to which the Company
or any Subsidiary is a party (other than those involving AFC);
5.1.29 Make any material change in the accounting policies applied in the preparation of the Financial
Statements;
5.1.30 Enter into any agreement, arrangement or understanding to take or omit to take any action which, if
taken or omitted to be taken immediately prior to the execution of this Agreement, would have resulted in a
modification to any of the Schedules to this Agreement; or
5.1.31 Enter into any agreement or commitment to take any action prohibited by this Section 5.1.
5.2 Notification of Certain Matters. The Company will promptly
advise in writing of (i) any event which could reasonably be expected to have a
Material Adverse Effect on the Company or any of the Subsidiaries or of the
results of its operations or its condition (financial or otherwise), (ii) any
notice or other communication from any third Person alleging that the consent of
such third Person is or may be required in connection with the transactions
contemplated by this Agreement, and (iii) any default under any agreement listed
on any Schedule to this Agreement or event which, with notice or lapse of time
or both, would become such a default.
5.3 Consents and Approvals. The Parties hereby agree to the following:
5.3.1 Subject to the terms and conditions herein provided, each of the Parties agrees to cooperate with the
other and use all 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, regulations, and contractual arrangements to
consummate and make effective the transactions contemplated by this Agreement, including without limitation using
reasonable efforts to lift or rescind any injunction or restraining order or other order adversely affecting the
ability of the Parties to consummate the transactions contemplated hereby. The Company and AFC hereby covenant
and agree to take no action (a) which would render any of their representations and warranties contained herein
untrue in any material respect at and as of the Closing except as otherwise contemplated herein, or (b) which
would adversely affect the ability of either of them to satisfy any of the conditions set forth in Article VII,
including without limitation the ability to obtain any necessary approvals of governmental authorities required
for the transactions contemplated hereby or materially increase the period of time necessary to obtain such
approvals.
29
5.3.2 AFC, with the cooperation of the Company, shall prepare and file within 20 business days of the date
hereof (unless such delay is due to the Company): (a) with the Department of Insurance and any other applicable
jurisdictions, such applications or notifications as may be required in order to obtain any approvals necessary
for the consummation of the transactions contemplated hereby; and (b) with the insurance authorities of states
listed in Schedules 4.1 and 4.2, such preacquisition applications or notifications as may be required to be made
by AFC prior to the Closing in order for AFC to maintain, after the Closing Date, the insurance licenses of the
Company and its subsidiaries in effect on the date hereof. In connection with such approvals, AFC shall accept,
and use all reasonable efforts to satisfy, all conditions to the consummation of the transactions contemplated
hereby imposed by such regulatory authorities.
5.3.3 To the extent that the rights of the Company or any of the Subsidiaries under any agreement may not be
transferred or assigned without the consent or approval of another party thereto, the Company shall obtain any
such consent or approval or amend the agreement such that no consent or approval is required.
5.3.4 Promptly after Closing, but in no event later than 10 business days after the Closing, the Company, the
Subsidiaries and AFC shall file with all applicable state insurance authorities such registrations or other
information as may be required to comply with all applicable state insurance holding company statutes.
5.3.5 Each of AFC and the Company shall promptly make all required filings under the HSR Act, if any,
including without limitation a Notification and Report Form for Certain Mergers and Acquisitions (or any
successor form), and any amendments thereto, with the Federal Trade Commission and the Department of Justice, in
connection with the transactions contemplated by this Agreement as required by the antitrust laws of the United
States. In the event that a request for additional information is, properly made of either of AFC or the Company
pursuant to the HSR Act, AFC or the Company, as the case may be, shall use its best efforts to comply with such
request as soon as practicable after receipt of such request.
ARTICLE VI.
ADDITIONAL AGREEMENTS
6.1 Current Information. During the period from the date of this
Agreement to the Closing, the Company and AFC will cause one or more of their
respective representatives to confer with each other on a regular and frequent
basis with respect to the status of the ongoing operations of the Company,
APLIC, DentaCare and Greater South. Each Party will promptly notify the other
Party of any material change in the normal course of its business or in the
operation of its properties and, to the extent permitted by applicable law, of
any governmental complaints, investigations, or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of material litigation involving such Party which would, in any manner,
challenge, prevent, alter, or materially delay any of the transactions
contemplated hereby, and each Party will keep the other Party fully informed
with respect to such events. Each Party will also promptly notify the other
Party of the status of regulatory applications and third party consents,
including without limitation providing copies of all written communications to
and from the Department of Insurance and any other applicable governmental
agency.
30
6.2 Access, Information, and Confidentiality. From the date of
this Agreement until the Closing, the Company shall make or cause to be made
available to AFC and its representatives, attorneys, accountants, and agents for
examination the assets and property of the Company and its subsidiaries and all
books of account, contracts, agreements, commitments, records, and documents of
every character relating to the Company and its subsidiaries and shall permit
AFC and its representatives, attorneys, accountants, and agents to interview
personnel of the Company and its Subsidiaries, and agents authorized by the
Company and the Subsidiaries. All information furnished to AFC and its
representatives and all analyses, compilations, data, studies, or other
documents prepared by AFC or its representatives containing or based in whole or
in part on any such furnished information or reflecting AFC’s review of, or
interest in, the Company (the “Information”) shall be used solely as
set forth and permitted by the Confidentiality Agreement dated February 10,
2000, between AFC and the Company (the “Confidentiality Agreement”).
In the event of the termination of this Agreement, AFC shall return all
Information (including copies thereof) to the Company. After the execution of
this Agreement, the Company shall not disclose to any person or entity (other
than AFC and those designated by AFC) or permit or assist any such person or
entity to use in any manner, directly or indirectly, any information or data
relating to this Agreement or the transactions contemplated hereby or any
information or data relevant to the business of the Company except for (a) such
information and data as is in the public domain other than as a result of a
breach by the Company of the provisions of this Section, and (b) disclosures
required to be made by the Company in order to comply with applicable securities
and insurance laws and regulations. The terms and provisions of the
Confidentiality Agreement shall survive the Closing or the termination of this
Agreement.
6.3 Review of Specific Matters. In addition to the provisions of
Section 6.2, the Company and the Subsidiaries shall make available to AFC and
its representatives, attorneys, accountants and agents for examination all
information in the possession or control of the Company and the Subsidiaries, or
to which the Company and any Subsidiary has access, relating to:
6.3.1 The exchange of insurance policies providing full benefit Cancer and Specified Disease insurance
coverage for insurance policies providing limited benefit Cancer and Specified Disease insurance coverage.
6.3.2 All preliminary and final reports of examination of the Company and its Subsidiaries by the Department
of Insurance for years ended on or prior to December 31, 1998.
6.4 Expenses. AFC shall pay its own expenses incident to
preparing for, entering into, and carrying out this Agreement. The expenses
incurred by the Company in preparing for, entering into and carrying out this
Agreement shall be paid by the Company, subject to the provisions of Section
7.3.4 and Section 11.3.
6.5 Meeting of Stockholders of the Company. The Company
represents and warrants that its Board of Directors has, by resolution duly
adopted by a vote at a meeting of such Board duly held on March 16, 2000,
unanimously approved and adopted this Agreement and the transactions
contemplated hereby, recommended that the stockholders of the Company approve
and adopt this Agreement and the transactions contemplated hereby, and
determined that the Merger is in the best interest of holders of the Shares.
Following the execution of this Agreement by both Parties, the Company shall
promptly take all action necessary in accordance with SEC rules and
31
regulations, Merger Law and the Company’s Articles of Incorporation and Bylaws to
convene the Company Stockholders’ Meeting. Unless consented to by AFC, the
record date for such meeting shall be no earlier than the fifth business day
following the execution of this Agreement by both Parties. The Company shall use
its best effort to solicit from stockholders of the Company proxies in favor of
the Merger and to take all other action necessary or, in the opinion of AFC,
advisable to secure any vote or consent of stockholders required by Merger Law
to effect the Merger. The Company hereby agrees to file with the SEC, as
promptly as practicable after the date hereof, the Proxy Statement, which shall
be in form and content acceptable to AFC. The Company shall file the Proxy
Statement in preliminary form with the SEC as promptly as is practicable and
shall use its best efforts to address all SEC comments and to mail the Proxy
Statement in definitive form to its stockholders as soon thereafter as is
practicable. The Company also agrees to obtain all necessary permits and
approvals which are required under Blue Sky Laws in order for the Company to
carry out the transactions contemplated by this Agreement.
6.6 Repayment of Shareholder Advances. Prior to the Closing, the
Company shall cause each stockholder to repay to the Company the full
outstanding amount of any advances (other than policy loans) made by the Company
and the Subsidiary to such stockholder, including without limitation any advance
bonus payment or other advance payment of compensation.
6.7 Company Operations Pending Closing. Commencing upon the
execution of this Agreement and continuing until the Closing, the Company shall
permit one or more representatives of AFC to be present at the premises of the
Company and the Subsidiaries who may observe the daily operations of the Company
and the Subsidiaries and who shall be promptly and fully advised by officers and
employees of the Company and the Subsidiaries of and shall have the right to
participate in the making of, all significant business discussions which are to
be made regarding all aspects of the business, properties, assets, liabilities,
operations, personnel and condition, financial or otherwise, of the Company and
each of the Subsidiaries.
6.8 Services Agreement. Contemporaneously with the execution of
this Agreement, the Company and AFC shall enter into an agreement granting to
AFC and its Affiliates, among other things, the right to have an observer
present on the premises of the Company and the Subsidiaries to observe the
business operations of the Company and the Subsidiaries pending the Closing in
the form of the Services Agreement which is Exhibit A annexed hereto and made a
part hereof (the “Services Agreement”).
6.9 Title Search. Prior to Closing, the Company shall cause a
search to be made of the title to the Owned Realty commencing with the date of
each of the respective Title Policies and ending at the close of business on the
day next preceding the Closing Date (the “Title Search”). The Title
Search shall be conducted by an independent title company satisfactory to AFC.
The Title Search shall be conducted in a manner designed to reflect any and all
options, liens, claims, leases, encumbrances, restrictions, exceptions or
objections of title to the Owned Realty.
ARTICLE VII.
CONDITIONS
7.1 Conditions to Each Party’s Obligation to Consummate the
Closing. The respective obligations of each Party to consummate the transactions
contemplated by this Agreement shall
32
be subject to the fulfillment at or prior to the Closing of the following conditions, unless waived by each Party in
writing:
7.1.1 The Merger and the other transactions contemplated hereby shall have been approved by the stockholders
of the Company (consistent with applicable corporate law and the Company's Articles of Incorporation and Bylaws),
the Department of Insurance, and any other state insurance department and other regulators whose approval is
required to consummate the transactions contemplated hereby; all conditions required to be satisfied prior to the
Closing imposed by the terms of such approvals shall be acceptable to AFC in its discretion and shall have been
satisfied; all waiting periods relating to such approvals shall have expired; and all notifications to any
regulatory authorities that are required shall have been made.
7.1.2 All appropriate HSR Act filings, if any, shall have been made and any applicable waiting period (and
extensions thereof) under the HSR Act shall have expired or terminated.
7.1.3 Neither AFC nor the Company shall be subject to any order, decree, or injunction of a court or agency of
competent jurisdiction which enjoins or prohibits the Closing.
7.2 Conditions to Obligations of AFC. The obligations of AFC to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment at or prior to the Closing of the following additional
conditions, unless waived by AFC in writing:
7.2.1 Representations and Warranties. The representations and warranties of the Company set forth in Article
IV hereof shall be true and correct in all material respects when made and as of the Closing as though made at and
as of the Closing (it being understood that representations and warranties that speak as of a specified date
shall continue to speak as of the date so specified), except as otherwise contemplated or permitted by this
Agreement or consented to in writing by AFC.
7.2.2 Agents Agreements. The Company shall have obtained duly executed Agents Agreements from all managing
general agents and independent general agents listed on Schedule 4.19.2. In addition, the Company shall have
obtained duly executed Agents Agreements from general agents and agents appointed or licensed by the Company
whose customers paid earned insurance premiums to the Company and the Subsidiaries during the year ended December
31, 1999, which, in the aggregate, represented at least eighty percent (80%) of the aggregate amount of the
earned insurance premiums received by the Company and the Subsidiaries during the year ended December 31, 1999.
7.2.3 Report of Examination. The Company shall have received the final report of the Department of Insurance
with respect to its examination of the Company and the Subsidiaries for the six years ended December 31, 1998,
and the content and findings of the Department of Insurance contained in such final report shall not, in the
reasonable judgment of AFC, be materially different than the contents and findings of the Department of Insurance
contained in its draft report of examination dated April 20, 2000.
7.2.4 Title Material. At the Closing, the Company shall furnish to AFC report of the Title Search issued by a
reputable and responsible title insurance company acceptable to AFC (the "Title Company"), which shall reflect
that the title of the
33
Company and the Subsidiaries to the real properties owned by the Company and the Subsidiaries and located at 000 Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxx and at 0000 Xxxxxxxx Xxxxx, Xxxxxxx,
Xxxxxxxxxxx (the "Owned Realty"), is free and clear of any and all options, liens, claims, leases, encumbrances,
restrictions, exceptions or objections to title except such as may be reflected in the Title Policies and the
rights of owners of minerals in and under the Owned Realty and their lessees and such other matters as are
approved by AFC in writing, and shall be without exceptions for possible mechanic's or materialmen's liens not
shown by the public records.
7.2.5 Performance of Obligations. The Company shall have fully performed or complied with, or satisfied all
obligations, covenants, or conditions required to be performed, complied with, or satisfied by it under this
Agreement prior to the Closing.
7.2.6 Legal Opinions. AFC shall have received a legal opinion, substantially in the form attached
hereto as Exhibit B, dated as of the Closing Date, from Xxxxxxx Xxxxxx Winter & Stennis, P.A., counsel to the
Company, with respect to the transactions contemplated herein.
7.2.7 No Material Adverse Effect. Since December 31, 1999, there shall not have been any Material Adverse
Effect or any event or series of events which, in the reasonable judgment of AFC, would cause AFC to believe that
there has been a Material Adverse Effect, except any such Material Adverse Effect as has been disclosed by the
Company in this Agreement or on any of the Schedules provided pursuant to in this Agreement.
7.2.8 Consents. The Department of Insurance and all other insurance and other regulatory authorities, and all
parties to contracts, agreements, leases, or other instruments, whose consent to the consummation of any of the
transactions contemplated by this Agreement is required, including without limitation reinsurers of the Company
or any of the Subsidiaries, shall have so consented in writing, a copy of which shall have been provided to AFC.
In addition, AFC shall have received such other evidence as it deems necessary to verify the accuracy of any of
the representations and warranties of the Company.
7.2.9 Closing Certificates. The Company shall have delivered to AFC at the Closing a certificate of its
president and secretary or treasurer to the effect that the conditions set forth in Sections 7.1 and 7.2 have
been satisfied and such other certificates, documents, and instruments as may be reasonably requested by counsel
for AFC.
7.3 Conditions to Obligation of the Company to Consummate the
Merger. The obligations of the Company to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing of the following additional conditions, unless waived in writing
by the Company:
7.3.1 Representations and Warranties. The representations and warranties of AFC set forth in Article III
hereof shall be true and correct in all material respects as of the Closing as though made at and as of the
Closing (it being understood that representations and warranties that speak as of a specified date shall continue
to speak as of the date so specified), except as otherwise contemplated or permitted by this Agreement or
consented to in writing by the Company.
34
7.3.2 Performance of Obligations. AFC shall have fully performed or complied with, or satisfied all
obligations, covenants, or conditions required to be performed, complied with, or satisfied by it under this
Agreement prior to the Closing.
7.3.3 Legal Opinion. The Company shall have received a legal opinion, substantially in the form attached
hereto as Exhibit C, dated as of the Closing Date, from McAfee & Xxxx A Professional Corporation, with respect to
the transactions contemplated herein.
7.3.4 Fairness Opinion. The Company shall have received a fairness opinion, dated as of a date which is
within ten (10) days prior to the Closing Date, from Xxxx Xxxxx, with respect to the transactions contemplated
herein, all costs and expenses of which shall be paid by the Company and shall be included in the fee paid by the
Company as provided in Section 11.3.
7.3.5 Closing Certificates. AFC shall have delivered to the Company at the Closing a certificate of its
president and secretary or treasurer to the effect that the conditions set forth in Sections 7.1 and 7.3 have
been satisfied and such other certificates, documents and instruments as may be reasonably requested by counsel
for the Company.
ARTICLE VIII.
TERMINATION, AMENDMENT, AND WAIVER
8.1 Termination. This Agreement may, by written notice, be terminated at any time prior to the Closing:
8.1.1 By mutual consent of the Company and AFC;
8.1.2 By either the Company or AFC at any time afterthe later to occur of July 31, 2000 or (b) five business
days next following the Department of Insurance approval of the change of control of the Company and the
Subsidiaries as provided for in this Agreement, if the Closing shall not theretofore have occurred; or
8.1.3 By either Party in the event of the material breach by the other Party of any representation,
warranty, or agreement contained herein or in any Schedule or document delivered herewith which cannot be or has
not been cured within 30 days after written notice to the Party committing such breach.
8.1.4 By AFC if AFC has determined that a Material Adverse Effect has occurred.
Notwithstanding the foregoing, a Party in breach of any provision of the Agreement may not terminate the
Agreement pursuant to this Section 8.1.
8.2 Amendment. This Agreement and Schedules hereto may be
amended by mutual agreement of the Parties hereto at any time before the
Closing. This Agreement and the Schedules may not be amended except by an
instrument in writing signed on behalf of each of the Parties hereto.
Notwithstanding any provision of this Agreement to the contrary, AFC may elect,
at any time prior to the Effective Time, instead of merging Subcorp into the
Company as hereinabove provided, to merge another direct or indirect
wholly-owned subsidiary of AFC into the Company or to merge the Company into AFC
or into Subcorp or another direct or indirect
35
wholly-owned subsidiary of AFC. In any such event, the Parties agree to execute an appropriate amendment to this
Agreement in order to reflect the foregoing and to provide that the Company or
such other subsidiary of AFC, as appropriate, shall be the Surviving Corporation
and, at the election of AFC, to adopt its charter and Bylaws as those of the
Surviving Corporation.
8.3 Waiver. Any term, condition, or provision of this Agreement may be waived in writing at any time by the
Party which is entitled to the benefits thereof.
ARTICLE IX.
SUBSEQUENT ACQUISITION PROPOSALS OR OTHER UNANTICIPATED EVENTS
9.1 No Solicitation. The Company shall not, and shall not
authorize or permit any of its officers, directors or employees, agents,
attorneys or representatives to, directly or indirectly, (a) solicit, initiate,
or encourage (including by way of furnishing non-public information), or take
any other action to facilitate, any inquires or the making of any proposal that
constitutes, or may reasonably be expected to lead to, an Acquisition Proposal
or (b) participate in any discussions or negotiations regarding an Acquisition
Proposal; provided, however, that at any time prior to the adoption of this
Agreement by the holders of the Company’s common stock, the board of
directors of the Company, in response to a written Acquisition Proposal that (i)
was unsolicited or that did not otherwise result from a breach of this Section,
and (ii) is reasonably likely to lead to a Superior Proposal, may authorize the
Company to (x) furnish non-public information with respect to the Company to the
person who made such Acquisition Proposal pursuant to a customary
confidentiality agreement and (y) participate in negotiations regarding such
Acquisition Proposal; provided, further the Company must provide AFC with a
written opinion of the Company’s legal counsel stating that the board of
directors of the Company is required to consider such Acquisition Proposal,
then, and only then, consistent with the fiduciary duty.
9.2 Notification to AFC. The Company shall promptly (but in any
event within one day) advise AFC orally and in writing of any Acquisition
Proposal or any inquiry regarding the making of an Acquisition Proposal. The
Company will, to the extent reasonably practicable, keep AFC fully informed of
the status and progress of any such Acquisition Proposal details.
9.3 Board Recommendation. The Board of Directors of the Company
shall not withdraw or modify, or propose to withdraw or modify, in a manner
adverse to AFC, its approval or recommendation of this Agreement or the Merger
unless (a) it shall have received a Superior Proposal and (b) the Board of
Directors of the Company shall have determined, in good faith, that this
agreement or the Merger is no longer in the best interests of the Company’s
stockholders, and (ii) written advice from the Company’s outside counsel,
that the failure to withdraw or modify this Agreement would constitute a breach
of, and that such withdrawal or modification is required in order to satisfy,
its fiduciary duties to the Company’s stockholders under applicable law.
9.4 Disclosure. Nothing contained in this section shall prohibit
the Company from at any time taking and disclosing to its stockholders a
position contemplated by Rule 14e-2(a) promulgated under the Securities and
Exchange Act of 1934, as amended.
36
9.5 Termination. (a) In addition to the rights of termination
provided for in Article VIII of this Agreement, this Agreement may be terminated
by the Company prior to the Stockholders’ Meeting if (i) the Board of
Directors of the Company shall have determined in good faith based on the advice
of outside counsel that failure to do so would constitute a breach of its
fiduciary duties to the Company’s stockholders under applicable law, (ii)
it is not in breach of its obligations under this Article in any material
respect and has complied with, and continues to comply with, all requirements
and procedures of this Article in all material respects and has authorized,
subject to complying with the terms of this Agreement, the Company to enter into
a binding written agreement for a transaction that constitutes a Superior
Proposal and the Company notifies AFC in writing that it intends to enter into
such agreement, attaching the most current version of such agreement to such
notice, (iii) AFC does not make with five (5) business days after receipt of the
Company’s written notice of its intention to enter into a binding agreement
for a Superior Proposal, any offer that the Board of Directors reasonably and in
good faith determines, after consultation with its financial and legal advisors,
is at least as favorable to the stockholders of the Company as the Superior
Proposal and during such period the Company reasonably considers and discusses
in good faith all proposals submitted by AFC and, without limiting the
foregoing, meets with, and causes its financial advisors and legal advisors to
meet with, AFC and its advisors from time to time as required by AFC to consider
and discuss in good faith AFC’s proposals, and (iv) prior to the
Company’s termination pursuant to this Section 9.5(a), the Company pays to
AFC the sum of $500,000 to reasonably compensate AFC for its time, effort, costs
and expenses incurred in connection with this Agreement. The payment of such
amount shall not serve as AFC’s exclusive remedy resulting from the
Company’s breach of any other provision of this Agreement. The Company
agrees (x) that it will not enter into a binding agreement referred to in clause
(ii) above until at least the 6th business day after AFC has received the notice
to AFC required by clause (ii) and (y) to notify AFC promptly if its intention
to enter into a binding agreement referred to in its notice to AFC shall change
at any time after giving such notice.
(b) In addition to the rights of termination provided for in Article VIII of this Agreement, this
Agreement may be terminated by AFC if either (i) the Company has breached its obligations under this Article in
any material respect (ii) the Board of Directors of the Company has recommended, approved, or authorized the
Company's acceptance or execution of a definitive agreement providing for a Superior Proposal (iii) the Board of
Directors of the Company has modified in a manner materially adverse to AFC or withdrawn its recommendation of
this Agreement or (iv) a tender offer or exchange offer for any outstanding shares of Company common stock is
commenced, and the Board of Directors of the Company, within ten business days after such tender offer or
exchange offer is so commenced, either fails to recommend against acceptance of such tender offer or exchange
offer by its stockholders or takes not position with respect to the acceptance of such tender offer or exchange
offer by its stockholders.
ARTICLE X.
DISPUTE RESOLUTION
10.1 Negotiation between Senior Executives. The parties will
attempt to resolve any controversy, claim or dispute arising out of or relating
to this Agreement or the interpretation, performance, breach, termination,
enforceability, validity of, or arbitrability of any issue under this Agreement
(including any controversy, claim or dispute involving any of the Company’s
37
Subsidiaries, officers, directors, employees, agents or representatives) (a
“Dispute”) promptly by negotiation between senior executives of the
Company and AFC who have authority to settle the Dispute (“Senior
Executives”). Either the Company or AFC may give the other written notice
(“Dispute Notice”) of any Dispute that has not been resolved in the
ordinary course of business. Within fifteen (15) days after delivery of the
Dispute Notice, the receiving party must give to the other a written response
(“Response”). The Dispute Notice and the Response must include: (i) a
statement describing the position of the party giving the Dispute Notice and the
Response, and a summary of arguments supporting such position, and (ii) the name
of the Senior Executive and any other persons who will accompany the Senior
Executive at the meeting at which the parties will attempt to resolve the
Dispute. Within thirty (30) days after delivery of the Dispute Notice, the
Senior Executives will meet at a mutually acceptable time and place, and then as
often as they reasonably consider necessary, to attempt to resolve the Dispute.
All reasonable requests for information made by one party to the other will be
honored. If the Dispute has not been resolved within sixty (60) days after
delivery of the Dispute Notice, or if the Senior Executives do not meet within
thirty (30) days after delivery of the Dispute Notice, either party may initiate
mediation of the Dispute. All negotiations under this section shall be treated
as compromise and settlement negotiations. If a Dispute Notice is given after
the Closing, the Representative shall be the “Senior Executive” acting
for the Company.
10.2 Mediation. If the Dispute has not been resolved by
negotiation, each party will make a good faith attempt to settle the Dispute by
mediation under the provisions of this section before resorting to arbitration,
litigation or any other dispute resolution procedure. The mediation will be
conducted in Dallas, Texas, in accordance with the rules for mediation of the
American Arbitration Association. Within thirty (30) days after the mediator has
been selected, Senior Executives of each party will meet with the mediator for
at least one (1) mediation session. If the Dispute cannot be settled at that
mediation session or at any mutually agreed continuation of that mediation
session, either party may give the other party and the mediator a written notice
declaring the mediation process at an end. All conferences and discussions that
occur in connection with the mediation conducted under this Agreement will be
deemed settlement discussions. Each party will bear its own costs of mediation,
and any costs payable to the mediation service or the mediator will be shared
equally by the parties to such mediation; provided, that any costs or expenses
to be borne by the Company shall be a charge against and reduction of the Merger
Consideration.
ARTICLE XI.
GENERAL PROVISIONS
11.1 Survival of Representations, Warranties, and Agreements.
The representations, warranties, and agreements of AFC and the Company in this
Agreement or in any additional document provided under the terms and conditions
of this Agreement shall not survive the Closing; provided that the foregoing
shall not be deemed a waiver of any claim for intentional misrepresentation or
fraud.
11.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly received either on the
date given if delivered personally or by cable, telegram, telex, or telecopy, or
on the date received if mailed by registered or certified mail (return receipt
requested) or sent by Federal Express, UPS, or other overnight delivery
38
service,
to the Parties at the following addresses (or at such other address for a Party
as shall be specified by like notice):
(1) If to AFC or Subcorp:
American Fidelity Corporation
0000 X. Xxxxxxx Xxxxxx, 0 Xxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000-0000
Attn: Xx. Xxxxxxx X. Xxxxxxx
Fax No.: (000) 000-0000
with a copy to:
McAfee & Xxxx A Professional Corporation
10th Fl., Two Leadership Square
000 X. Xxxxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attn: Xxxxxxxx X. Xxxx, Esq.
Fax No.: (000) 000-0000
(2) If to the Company:
American Public Holdings, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, CLU, President and Chief Executive Officer
Fax No.: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxx Winter & Stennis, P.A.
000 Xxxxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
Fax No.: (000) 000-0000
11.3 Fees and Expenses. Each of the parties shall pay their own
expenses in connection with this Agreement and the transactions contemplated
hereby. If the Merger is consummated, the reasonable expenses incurred by or on
behalf of the Company in connection with the negotiation and preparation of this
Agreement and the consummation of the transactions provided for herein
including, without limitation, the fees of Xxxx Xxxxx paid pursuant to the
engagement letter referred to in Section 4.23 and any transaction fee payable to
Xxxxx X. Xxxxxxx, shall not exceed $605,000.
11.4 Complete Agreement. This Agreement constitutes the entire
agreement among the Parties and supersedes all prior or contemporaneous
discussions, negotiations, representations, or agreements relating to the
subject matter of this Agreement. No changes to this Agreement shall
39
be made or be binding on any Party unless made in writing and signed by each Party to this
Agreement.
11.5 Binding Effect. This Agreement shall be binding upon, inure to the benefit of, and be enforceable by and
against each of the Parties to this Agreement and their respective successors and permitted assigns.
11.6 Governing Law. All questions concerning the validity or
meaning of this Agreement or relating to the rights and obligations of the
Parties with respect to performance under this Agreement shall be construed and
resolved under the laws of Oklahoma, without regard to principles of conflicts
of laws.
11.7 No Third Party Benefit. This Agreement is intended for the
exclusive benefit of the Parties to this Agreement and their respective
successors and assigns, and nothing contained in this Agreement shall be
construed as creating any rights or benefits in or to any third party.
11.8 Severability. The intention of the Parties to this
Agreement is to comply fully with all laws and public policies, and this
Agreement shall be construed consistently with all laws and public policies to
the extent possible. If any court of competent jurisdiction determines it is
impossible to construe any provision of this Agreement consistently with any law
or public policy and consequently holds that provision to be invalid, such
holding shall in no way affect, the validity of the other provisions of this
Agreement, which shall remain in full force and effect, provided that such
result would not frustrate the intent of the Parties in entering into this
Agreement.
11.9 Non-waiver. No failure by any Party to insist upon strict
compliance with any term of this Agreement, to exercise any option, enforce any
right, or seek any remedy upon any default of any other Party shall affect, or
constitute a waiver of, the first Party’s right to insist upon such strict
compliance, exercise that option, enforce that right, or seek that remedy with
respect to that default or any prior, contemporaneous, or subsequent default,
nor shall any custom or practice of the Parties at variance with any provision
of this Agreement affect, or constitute a waiver of, any Party’s right to
demand strict compliance with all provisions of this Agreement.
11.10 Captions. The captions of the various sections of this
Agreement are not part of the context of this Agreement, but are only labels to
assist in locating those sections, and shall be ignored in construing this
Agreement.
11.11 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be considered an original but all of
which together shall constitute one and the same Agreement.
40
AMERICAN FIDELITY CORPORATION AMERICAN PUBLIC HOLDINGS, INC.
By /s/ Xxxxx X. Xxxxxxxxx By /s/ Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxxxx, Xxxxx X. Xxxxxxx, President
Senior Vice President
APLIC ACQUISITION CORP.
By /s/ Xx Xxxxxxxxxxx
Xx Xxxxxxxxxxx, President
41
