AMENDMENT
NUMBER 1
TO
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
This Amendment Number 1 (the "Amendment") is entered into by
and among each of Highlands Insurance Group, Inc., a Delaware corporation
("HIG"), Highlands Acquisition Corp., a Delaware corporation ("Acquisition
Corp.") and Vik Brothers Insurance, Inc., an Indiana corporation ("VBI") with
respect to that certain Amended and Restated Agreement and Plan of Merger, dated
as of February 13, 1997, among HIG, Acquisition Corp. and VBI, as amended,
supplemented, extended or otherwise modified from time to time (the "Merger
Agreement").
RECITAL
Each of HIG, Acquisition Corp. and VBI, as a party to
the Merger Agreement, wishes, pursuant to Section 12.1 thereof,
to amend the Merger Agreement as set forth below.
Now therefore, in consideration of the foregoing and good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each of HIG, Acquisition Corp. and VBI agrees as follows:
AGREEMENT
1. Defined Terms. Capitalized terms not otherwise defined herein shall have the
respective meanings specified for such terms in the Merger Agreement.
2. Amendments to Subsections (a), (b), (d) and (f) of Section 3.3 of the Merger
Agreement.
2.1 Subsection (a) of Section 3.3 of the Merger Agreement is hereby
deleted and replaced in its entirety with the following new Subsection (a):
(a) At the Effective Time, the shares of Series One
Preferred Stock outstanding immediately prior to the Effective Time
shall by virtue of the Merger and without any action on the part of the
holders thereof be converted into the right to receive an aggregate of
122,654 HIG Shares, upon surrender of the certificates formerly
representing such shares of Series One Preferred Stock. From and after
the Effective Time, each holder of outstanding certificates
representing Series One Preferred Stock shall be entitled to receive in
exchange therefor a certificate representing the HIG Shares into which
such holder's Series One Preferred Stock was converted.
2.2 Subsection (b) of Section 3.3 of the Merger Agreement is hereby
deleted and replaced in its entirety with the following new Subsection (b):
(b) At the Effective Time, the shares of Series Two
Preferred Stock outstanding immediately prior to the Effective Time
shall by virtue of the Merger and without any action on the part of the
holders thereof be converted into the right to receive an aggregate of
122,654 HIG Shares, upon surrender of the certificates formerly
representing such shares of Series Two Preferred Stock. From and after
the Effective Time, each holder of outstanding certificates
representing Series Two Preferred Stock shall be entitled to receive in
exchange therefor a certificate representing the HIG Shares into which
such holder's Series Two Preferred Stock was converted.
2.3 Subsection (d) of Section 3.3 of the Merger Agreement is hereby
deleted and replaced in its entirety with the following new Subsection (d):
(d) At the Effective Time, the shares of Series Four
Preferred Stock and Series Five Preferred Stock outstanding immediately
prior to the Effective Time shall by
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virtue of the Merger and without any action on the part of the holders
thereof be converted into the right to receive an aggregate of 408,978
HIG Shares, upon surrender of the certificates formerly representing
such shares of Series Four Preferred Stock and Series Five Preferred
Stock. From and after the Effective Time, each holder of outstanding
certificates representing Series Four Preferred Stock or Series Five
Preferred Stock shall be entitled to receive in exchange therefor a
certificate representing the HIG Shares into which such holder's Series
Four Preferred Stock and Series Five Preferred Stock was converted.
2.4 Subsection (f) of Section 3.3 of the Merger Agreement is hereby
deleted and replaced in its entirety with the following new Subsection (f):
(f) At the Effective Time, the shares of Series Seven
Preferred Stock outstanding immediately prior to the Effective Time
shall by virtue of the Merger and without any action on the part of the
holders thereof be converted into the right to receive $4 million in
immediately available funds plus an aggregate of 427,321 HIG Shares,
upon surrender of the certificates formerly representing such shares of
Series Seven Preferred Stock. From and after the Effective Time, each
holder of outstanding certificates representing Series Seven Preferred
Stock shall be entitled to receive in exchange therefor a certificate
representing the HIG Shares into which any portion of such holder's
Series Seven Preferred Stock was converted.
3. Amendment of Article VII of the Merger Agreement.
3.1 Article VII of the Merger Agreement is hereby amended by adding,
immediately following Section 7.6, the following new Section 7.7.
Section 7.7 Release of PMSC Guaranty. On or before the
Closing, Policy Management Systems Corporation ("PMSC") shall have
delivered to VBI and AMV an agreement, effective as of the Closing
Date, terminating the personal guaranty of AMV with respect to the
Master Agreement for Data Processing
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Services dated November 8, 1994 between VBI and PMSC, as amended.
4. Amendments to Article XIV of the Merger Agreement.
4.1 Each of Sections 14.1, 14.3 and 14.4 of Article XIV of the Merger
Agreement is hereby deleted in its entirety.
4.2 Section 14.2 of the Merger Agreement is hereby deleted and replaced
in its entirety with the following new Section 14.1:
Section 14.1 Security Holder Agreements. By 5:00 p.m. New York
time on the Business Day twenty (20) Business Days after the date of
this Agreement, VBI and HIG shall have obtained agreements,
substantially in the forms attached hereto, from each of the following
security holders of VBI consenting to this Agreement and the Merger on
the terms set forth herein: (i) each holder of the Series One Preferred
Stock, (ii) each holder of the Series Two Preferred Stock, (iii) each
holder of the Series Four and Series Five Preferred Stock and (iv) each
holder of the Series Seven Preferred Stock. If VBI and HIG fail to
obtain such agreements within such twenty (20) Business Day period, HIG
may terminate this Agreement prior to the receipt of such agreements
from the foregoing security holders of VBI.
5. No Effect on Other Merger Agreement Provisions. All other provisions of the
Merger Agreement shall not be affected by this Amendment and shall remain in
full force and effect.
[SIGNATURES CONTAINED ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of March 10, 1997.
Highlands Insurance Group, Inc.
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President and Treasurer
Vik Brothers Insurance, Inc.
By: /s/ Xxxxxx X. Xxx
------------------------------------
Name: Xxxxxx X. Xxx
Title: President
Highlands Acquisition Corp.
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President and Treasurer
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