AGREEMENT AND PLAN OF MERGER by and among PROFESSIONALS DIRECT, INC. (“Company”) HANOVER ACQUISITION CORP. (“Purchaser”) and THE HANOVER INSURANCE GROUP, INC. (“Parent”) June 25, 2007
Exhibit
2.1
EXECUTION
COPY
AGREEMENT
AND PLAN OF MERGER
by
and
among
PROFESSIONALS
DIRECT, INC.
(“Company”)
HANOVER
ACQUISITION CORP.
(“Purchaser”)
and
THE
HANOVER INSURANCE GROUP, INC.
(“Parent”)
June
25,
2007
TABLE
OF CONTENTS
Page
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ARTICLE
I THE MERGER
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1
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SECTION
1.1THE MERGER
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1
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SECTION
1.2EFFECTIVE TIME
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2
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SECTION
1.3EFFECTS OF MERGER
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2
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SECTION
1.4 ARTICLES OF INCORPORATION AND BYLAWS OF SURVIVING
CORPORATION
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2
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SECTION
1.5 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
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2
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ARTICLE
II CONVERSION OF SHARES
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4
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SECTION
2.1 EFFECT ON THE SHARES AND THE PURCHASER’S CAPITAL STOCK
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4
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ARTICLE
III PAYMENT FOR SHARES
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4
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SECTION
3.1 PAYMENT FOR SHARES
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4
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ARTICLE
IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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6
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SECTION
4.1 ORGANIZATION
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6
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SECTION
4.2 CAPITALIZATION
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9
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SECTION
4.3 AUTHORITY
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9
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SECTION
4.4 NO VIOLATIONS; CONSENTS AND APPROVALS
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8
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SECTION
4.5 SEC DOCUMENTS; FINANCIAL STATEMENTS
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11
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SECTION
4.6ABSENCE OF CERTAIN CHANGES; NO UNDISCLOSED LIABILITIES; SUBORDINATED
DEBENTURES
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13
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SECTION
4.7 LITIGATION
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14
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SECTION
4.8 COMPLIANCE WITH APPLICABLE LAW
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12
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SECTION
4.9 TAXES
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16
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SECTION
4.10 LABOR AND EMPLOYMENT MATTERS
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18
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SECTION
4.11 EMPLOYEE BENEFIT PLANS, ERISA
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19
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SECTION
4.12 TITLE TO PROPERTY; ASSETS
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21
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SECTION
4.13 REAL PROPERTIES
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21
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SECTION
4.14 ENVIRONMENTAL MATTERS
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23
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SECTION
4.15 INTELLECTUAL PROPERTY
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20
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SECTION
4.16 INFORMATION
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26
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SECTION
4.17 INSURANCE REPORTS
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27
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SECTION
4.18 INSURANCE MATTERS
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28
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SECTION
4.19 GENERAL INSURANCE
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30
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SECTION
4.20 CERTAIN CONTRACTS
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31
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SECTION
4.21 OPINION OF FINANCIAL ADVISOR
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33
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SECTION
4.22 CHANGE IN CONTROL PAYMENTS
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33
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SECTION
4.23 QUESTIONABLE PAYMENTS.33
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SECTION
4.24 MICHIGAN ACTS
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33
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SECTION
4.25 BROKER’S FEES
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33
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SECTION
4.26 NO OTHER REPRESENTATIONS OR WARRANTIES
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33
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ARTICLE
V REPRESENTATIONS AND WARRANTIES OF PARENT AND THE
PURCHASER
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34
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SECTION
5.1 ORGANIZATION
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34
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SECTION
5.2 AUTHORITY
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34
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SECTION
5.3 NO VIOLATIONS; CONSENTS AND APPROVALS
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34
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SECTION
5.4 FINANCING
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35
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SECTION
5.5 BROKER’S FEES
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35
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ARTICLE
VI COVENANTS
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35
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SECTION
6.1 CONDUCT OF BUSINESS OF THE COMPANY
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35
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SECTION
6.2 NO SOLICITATION
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39
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SECTION
6.3 INSURANCE REGULATORY FILINGS
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35
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SECTION
6.4 PROXY STATEMENT; SHAREHOLDER MEETING
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42
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SECTION
6.5 ACCESS TO INFORMATION
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44
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SECTION
6.6 REASONABLE BEST EFFORTS, OTHER ACTIONS
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45
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SECTION
6.7 PUBLIC ANNOUNCEMENTS
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45
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SECTION
6.8 NOTIFICATION OF CERTAIN MATTERS
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45
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SECTION
6.9 INDEMNIFICATION AND INSURANCE
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47
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SECTION
6.10 EXPENSES
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49
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SECTION
6.11 OBLIGATIONS OF THE PURCHASER
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49
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SECTION
6.12 401(K) PLAN
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49
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ARTICLE
VII CONDITIONS TO THE OBLIGATIONS OF PARENT, THE PURCHASER AND
THE
COMPANY
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39
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SECTION
7.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
MERGER
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39
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SECTION
7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND
PURCHASER
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50
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SECTION
7.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY
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52
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ARTICLE
VIII TERMINATION AND ABANDONMENT
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52
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SECTION
8.1 TERMINATION
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52
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SECTION
8.2 TERMINATION BY PARENT
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54
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SECTION
8.3 TERMINATION BY THE COMPANY
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55
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SECTION
8.4 PROCEDURE FOR TERMINATION
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55
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SECTION
8.5 EFFECT OF TERMINATION
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55
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SECTION
8.6 TERMINATION FEE
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55
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ARTICLE
IX DEFINITIONS
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58
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SECTION
9.1 TERMS DEFINED IN AGREEMENT
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58
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ARTICLE
X MISCELLANEOUS
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61
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SECTION
10.1 AMENDMENT AND MODIFICATION.61
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SECTION
10.2 WAIVER
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61
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SECTION
10.3 SURVIVABILITY; INVESTIGATIONS
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61
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SECTION
10.4 NOTICES
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61
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SECTION
10.5 ASSIGNMENT; NO THIRD PARTY BENEFICIARIES
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63
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SECTION
10.6 GOVERNING LAW
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64
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SECTION
10.7 COUNTERPARTS
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64
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SECTION
10.8 CERTAIN DISCLOSURE MATTERS
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64
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SECTION
10.9 INTERPRETATION
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64
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SECTION
10.10 ENTIRE AGREEMENT
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50
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SECTION
10.11 WAIVER OF JURY TRIAL
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65
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i
AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER is dated as of June 25, 2007 (the “Agreement”), by
and among Professionals Direct, Inc., a Michigan corporation (the
“Company”), Hanover Acquisition Corp., a Michigan
corporation (the “Purchaser”), and The Hanover Insurance Group, Inc., a Delaware
corporation (“Parent”). The Company and the Purchaser are hereinafter
sometimes collectively referred to as the “Constituent
Corporations.” An index of defined terms used in this Agreement is
set forth in Article IX.
RECITALS
WHEREAS,
the respective Boards of Directors of each of Parent, the Purchaser and the
Company have approved the acquisition of the Company by the Parent upon the
terms and subject to the conditions set forth herein;
WHEREAS,
in furtherance of such acquisition, the respective Boards of Directors
of each of Parent, the Purchaser and the Company have approved the
merger of the Purchaser with and into the Company in accordance with the
terms
of this Agreement and the Michigan Business Corporation Act (the “MBCA”) and
with any other applicable law; and
WHEREAS,
the Board of Directors of the Company (the “Board”) has, in light of and subject
to the terms and conditions set forth herein, (a) determined that (i) the
consideration to be paid for each Share in the Merger (as such terms are
hereinafter defined) is fair to the shareholders of the Company, and (ii)
the
Merger is otherwise in the best interests of the Company and its shareholders,
and (b) resolved to approve and adopt this Agreement and the transactions
contemplated hereby and to recommend approval by the shareholders of the
Company
of this Agreement.
NOW,
THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants, agreements and conditions contained herein, the parties
hereto agree as follows:
ARTICLE
I
THE
MERGER
Section
1.1 The
Merger.
(a) In
accordance with the provisions of this Agreement and the MBCA, at the Effective
Time, the Purchaser shall be merged with and into the Company (the “Merger”),
and the Company shall be the surviving corporation (hereinafter sometimes
called
the “Surviving Corporation”) and shall continue its corporate existence under
the Laws of the State of Michigan. At the Effective Time the separate
existence of the Purchaser shall cease.
(b) The
name
of the Surviving Corporation shall be “Professionals Direct, Inc.”
(c) Unless
this Agreement is terminated in accordance with Article VIII of this Agreement
and subject to the satisfaction or waiver of the conditions set forth in
Article
VII, the consummation of the Merger will take place as promptly as practicable
after satisfaction or waiver of the conditions set forth in Article VII,
at the
offices of Xxxxxx Xxxxxxx, PLLC, 000 Xxxxxx Xxxxxx, XX, Xxxxx 000, Xxxxx
Xxxxxx,
Xxxxxxxx, unless another date, time or place is agreed to in writing by the
parties hereto (“Closing”). The Merger shall have the effects on the Company and
the Purchaser as provided under the MBCA and this Agreement. As of
the Effective Time, the Company shall be a wholly-owned direct or indirect
subsidiary of Parent.
(d) Subject
to the terms and conditions of this Agreement, each of Parent, the Purchaser
and
the Company shall take all such reasonable and lawful action as may be necessary
or appropriate in order to effectuate the Merger in accordance with this
Agreement as promptly as practicable. If, at any time after the
Effective Time, any such further action is necessary or desirable to carry
out
the purposes of this Agreement and to vest the Surviving Corporation with
full
right, title, possession, privileges, powers, franchises, licenses, and
interests of the Company and the Purchaser in and to every type of property
(whether real, personal, or mixed), the officers and directors of the Company
and Purchaser immediately prior to the Effective Time are fully authorized
in
the name of their respective corporations or otherwise to take all such lawful
and necessary action.
Section
1.2 Effective
Time. At
Closing, the parties shall file a certificate of merger in the form required
by
and executed in accordance with the MBCA (the “Certificate of Merger”) with the
Michigan Department of Labor and Economic Growth in accordance with the
provisions of the MBCA and the Merger shall become effective at the time
of
filing of, or at such later time specified in, the Certificate of
Merger. The date and time when the Merger shall become effective is
herein referred to as the “Effective Time.”
Section
1.3 Effects
of Merger. At
the Effective Time, the effect of the Merger shall be as provided in this
Agreement, the Certificate of Merger, and the applicable provisions of the
MBCA. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time (a) all the rights, privileges, powers,
franchises, licenses, and interests of the Company and the Purchaser in and
to
every type of property (whether real, personal, or mixed), shall vest in
the
Surviving Corporation, (b) all choses in action of the Company and the Purchaser
shall continue unaffected and uninterrupted by the Merger and shall accrue
to
the Surviving Corporation, and (c) all debts, liabilities and duties of the
Company and the Purchaser shall become the debts, liabilities and duties
of the
Surviving Corporation.
Section
1.4 Articles
of Incorporation and Bylaws of Surviving Corporation. Subject
to Section 1.1(b), the Articles of Incorporation of the Purchaser shall be
submitted with the Certificate of Merger as the Articles of Incorporation
of the
Surviving Corporation and the Bylaws of the Purchaser shall be the Bylaws
of the
Surviving Corporation, in each case until thereafter amended as provided
by
applicable Law.
Section
1.5 Directors
and Officers of Surviving Corporation.
(a) Subject
to applicable Law, the directors of the Purchaser immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation
and
shall hold office
2
until
their respective successors are duly elected and qualified, or their earlier
death, resignation or removal.
(b) The
officers of the Company immediately prior to the Effective Time shall be
the
initial officers of the Surviving Corporation and shall hold office until
their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal.
ARTICLE
II
CONVERSION
OF SHARES
Section
2.1 Effect
on the Shares and the Purchaser’s Capital Stock.
(a) As
of the
Effective Time, by virtue of the Merger and without any action on the part
of
the holders thereof, each share of common stock of the Company (each a “Share”
and collectively the “Shares”) issued and outstanding immediately prior to the
Effective Time (other than any Shares held by a wholly-owned subsidiary of
the
Company, which Shares, by virtue of the Merger and without any action on
the
part of the holder thereof, shall be canceled and retired and shall cease
to
exist with no payment being made with respect thereto) shall be converted
into
the right to receive $69.61 net to the holder in cash (the “Merger Price”),
payable to the holder thereof, without interest thereon, as set forth in
Article
III.
(b) As
of the
Effective Time, by virtue of the Merger and without any action on the part
of
the holders thereof, each share of capital stock of the Purchaser issued
and
outstanding immediately prior to the Effective Time shall be converted into
and
become one fully paid and nonassessable share of common stock of the Surviving
Corporation.
ARTICLE
III
PAYMENT
FOR SHARES
Section
3.1 Payment
For Shares.
(a) From
and
after the Effective Time, Computershare, Ltd. shall act as paying agent (the
“Paying Agent”) for the purpose of effecting the payment of the Merger Price in
exchange for certificates (the “Certificates”) formerly representing Shares and
entitled to payment of the Merger Price pursuant to Section 2.1. At
the Effective Time and from time to time thereafter, Parent shall, or shall
cause the Purchaser or the Surviving Corporation (including, if necessary,
providing the Purchaser or the Surviving Corporation with sufficient funds)
to,
deposit, or cause to be deposited, in trust with the Paying Agent sufficient
funds to permit the Paying Agent to make the payments contemplated by this
Section 3.1. Such funds shall be invested by the Paying Agent in a
bank money-market account, short-term certificates of deposit issued by a
bank,
or short-term securities issued or guaranteed by the United States Government,
as directed by Parent or the Purchaser, in trust for the benefit of the holders
of the Shares, for payment in accordance with Section 2.1 in exchange for
outstanding Shares. Parent or the Surviving Corporation may cause the
Paying Agent to pay over to the Parent or Surviving Corporation any net earnings
with respect to the investment of the funds. In no event will any
holder of Shares be entitled to any earnings on the funds to which such holder
shall become entitled pursuant to
3
Section
2.1. To the extent that there are losses with respect to any
investment of the funds or the funds diminish for any reason below the level
required to make prompt cash payment as contemplated by this Section 3.1,
Parent
shall, or shall cause the Surviving Corporation (including, if necessary,
providing the Surviving Corporation with sufficient funds) to, promptly replace
or restore such funds in cash so as to ensure that funds at all times are
maintained at a level sufficient to make such cash payments.
(b) Promptly
after the Effective Time, Parent shall cause the Paying Agent to mail to
each
record holder of a Certificate that immediately prior to the Effective Time
represented Shares (other than any Certificate representing Shares held by
a
wholly-owned subsidiary of the Company) a form of letter of transmittal that
shall specify that delivery shall be effected, and risk of loss and title
to the
Certificates shall pass, only upon proper delivery of the Certificate to
the
Paying Agent, instructions for use in surrendering Certificates and receiving
the Merger Price therefore, and such other provisions as Parent and the Company
may reasonably specify. Upon the surrender of each Certificate for
cancellation to the Paying Agent, or in lieu of any such Certificate which
has
been lost, stolen or destroyed, an affidavit of lost, stolen or destroyed
share
certificates (including customary indemnity against loss but excluding any
requirement to post a bond or similar security), together with such letter
of
transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the Paying Agent shall pay the holder
of
such Certificate in exchange therefore cash in an amount equal to the Merger
Price multiplied by the number of Shares formerly represented by such
Certificate, and such Certificate shall forthwith be canceled. Until
so surrendered, each Certificate (other than Certificates representing Shares
held by a wholly-owned subsidiary of the Company) shall represent solely
the
right to receive the aggregate Merger Price relating thereto. No
interest shall be paid or accrued on the Merger Price.
(c) Promptly
following the date which is 18 months after the Effective Time, Parent may
require the Paying Agent to deliver to Parent all cash (including any interest
received with respect thereto), Certificates and other documents in its
possession relating to the transactions described in this Agreement, and
the
Paying Agent’s duties shall terminate. Thereafter, each holder of a
Certificate formerly representing a Share (other than Certificates representing
Shares held by a wholly-owned subsidiary of the Company) shall be entitled
to
look to Parent (subject to applicable abandoned property, escheat and similar
Laws) only as general creditors thereof with respect to the Merger Price
payable
upon the surrender of their Certificates, without any interest
thereon. None of Parent, the Purchaser or the Surviving Corporation
shall be liable to any holder of Shares for any amount paid to a public official
in accordance with applicable abandoned property, escheat or similar
Laws.
(d) The
Merger Price shall be net to each holder of Certificates in cash, subject
to
reduction only for any applicable federal back up withholding and any other
taxes payable by such holder. Parent, the Surviving Corporation or
the Paying Agent shall be entitled to deduct and withhold from the Merger
Price
otherwise payable pursuant to this Agreement to any holder of Shares such
amounts as Parent, the Surviving Corporation or the Paying Agent is required
to
deduct and withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the “Code”), or any provision of
state, local or foreign tax Law. To the extent that amounts are so
withheld by Parent, the Surviving Corporation or the Paying Agent, such withheld
amounts shall be treated for all purposes of this Agreement as having
been
4
paid
to
the holder of the Shares in respect of which such deduction and withholding
was
made by Parent, the Surviving Corporation or the Paying Agent.
(e) If
payment of cash in respect of any Certificate is to be made to a person other
than the person in whose name such Certificate is registered, it shall be
a
condition to such payment that the Certificate so surrendered shall be properly
endorsed or shall be otherwise in proper form for transfer and that the person
requesting such payment shall have paid any taxes required by reason of such
payment in a name other than that of the registered holder of the Certificate
surrendered or shall have established to the satisfaction of Parent or the
Paying Agent that such tax either has been paid or is not payable.
(f) The
Merger Price delivered upon the surrender for exchange of Shares in accordance
with the terms hereof shall be deemed to have been issued in full satisfaction
of all rights pertaining to such Shares, and, after the Effective Time, there
shall be no transfers on the stock transfer books of the Surviving Corporation
of any Shares which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates formerly
representing Shares (other than Certificates representing Shares held by
a
wholly-owned subsidiary of the Company) are presented to Parent, the Surviving
Corporation or the Paying Agent, they shall be surrendered and canceled in
return for the payment by Parent or the Paying Agent, as applicable, of the
aggregate Merger Price relating thereto, without interest, as provided in
this
Section 3.1.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to Parent and the Purchaser that the statements
contained in this Article IV are correct and complete as of the date of this
Agreement and shall be correct and complete as of the Effective Time (as
though
made as of the Effective Time), except as disclosed by the Company to Parent
and
the Purchaser in the Disclosure Letter dated the same date hereof, subject
to
Section 10.8 (the “Disclosure Letter”), or, with respect to the statements in
this Article IV being correct and complete as of the Effective Time, by the
Company to Parent and Purchaser in the Updated Disclosure Letter, subject
to
Section 10.8:
Section
4.1 Organization.
(a) The
Company is a corporation duly organized, validly existing and in good standing
under the Laws of the state of Michigan and the Company and each of its direct
and indirect subsidiaries have all requisite corporate power and authority
necessary to own, lease and operate their respective properties they purport
to
own or lease and to carry on their respective businesses as now being conducted.
Each subsidiary of the Company is a corporation or trust, as applicable,
duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization and each subsidiary of the Company has all
requisite corporate or trust, as applicable, power and
authority necessary to own, lease and operate their respective properties
they
purport to own, lease or operate and to carry on their respective businesses
as
now being conducted. The Company and each of its subsidiaries is duly qualified
or licensed and
5
in
good
standing to do business in each jurisdiction in which the property owned,
leased
or operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except in such jurisdictions where
the
failure to be so duly qualified or licensed and in good standing, individually
or in the aggregate, would not reasonably be expected to have a Company Material
Adverse Effect. Schedule 4.1(a) of the Disclosure Letter sets forth
the name and state or incorporation or organization of each of the Company’s
subsidiaries. Except for the Company subsidiaries set forth in
Schedule 4.1(a) of the Disclosure Letter, the Company does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for, any equity or similar interest in,
any
corporation, partnership, joint venture or other business association or
entity,
excluding securities in any publicly traded company held for investment by
the
Company and compromising less that five percent of the outstanding stock
of such
company. For the purposes of this Agreement, “Company Material
Adverse Effect” means a material adverse effect on the business, operations,
assets, financial condition or results of operations of the Company and its
subsidiaries taken as a whole or a material adverse effect on the Company’s
ability to perform its obligations under this Agreement or to consummate
the
Merger, except for any such effect attributable to (i) acts of sabotage or
terrorism, or the engagement by the United States in hostilities, whether
or not
pursuant to the declaration of a national emergency or war, (ii) changes
in
general economic conditions, or financial or securities markets (including
any
disruption thereof and any decline in the price of any security or any market
index) to the extent not disproportionately affecting the Company and the
Company’s subsidiaries, taken as a whole, as compared to other similarly
situated companies in the legal malpractice insurance industry, (iii) changes
affecting the legal malpractice insurance industry in general to the extent
not
disproportionately affecting the Company and the Company’s subsidiaries, taken
as a whole, as compared to other similarly situated companies in the legal
malpractice insurance industry, (iv) the execution and announcement of this
Agreement and the transactions contemplated hereby, (v) Parent’s announcement or
other communication by Parent of its plans or intentions with respect to
the
Company or any of its subsidiaries or any other acts or omissions of Parent
or
the Purchaser, (vi) acts or omissions of the Company prior to the Effective
Time
taken at the written request of Parent or the Purchaser or with the prior
written consent of Parent or the Purchaser (provided, however,
that nothing set forth in this Agreement shall constitute such consent),
(vii)
changes in generally accepted accounting principles or actuarial methodologies
or practices historically employed by the Company to establish Loss Reserves
unless the principles, methodologies or practices historically employed by
the
Company were not in accordance with or more conservative than those called
for
in relevant policy and reinsurance contract provisions during the period
employed, (viii) changes in Tax Laws, or (ix) except for a Loss Reserve MAE,
changes in Loss Reserves. For purposes of this Agreement, “Loss Reserves” means
the Company’s estimates of its future obligations on any incidents, demands and
suits made and reported to the Insurance Company Subsidiary, including estimates
of future losses, indemnity obligations, loss adjustment expenses, unallocated
loss adjustment expenses, extended reporting endorsement estimates and any
other
type of losses, whether or not such may be net of deductibles and reinsurance,
gross or ceded.
Notwithstanding
the foregoing, a
Company Material Adverse Effect shall have occurred if one or both of the
following occurs (a “Loss Reserve MAE”):
(X)
The Milliman Selected Retained
Reserves for report years 1990 through 2006 (as detailed, the “Selected Retained
Reserves”) as of June 30, 2007, as set forth in the
6
Professionals
Direct Insurance Company Analysis of Statutory Loss and LAE Reserves (the
“PDIC
Report”) as of June 30, 2007, prepared by Xxxxxxxx, Inc. exceeds
$16,176,000. For purpose of illustration, the Milliman Selected
Retained Reserves as of December 31, 2006 are set forth in Exhibit A5, page
1,
column 7 and Exhibit A6, page 1, column 7 in the PDIC Report as
of December 31, 2006. If the Merger has not been
consummated by September 30, 2007, Parent shall have the option of causing
the
Company, at Parent’s sole cost, to promptly engage Xxxxxxxx, Inc. or, if
Xxxxxxxx, Inc. is unable or unwilling to prepare such report, actuaries selected
by Parent, to prepare a PDIC Report as of September 30, 2007 and, in such
event,
a Company Material Adverse Effect shall have occurred if the actuary’s Selected
Retained Reserves determined as of September 30, 2007, as set forth in the
PDIC
Report as of September 30, 2007, exceeds $16,561,000; or
(Y) The
Company’s estimated loss and ALAE ratio (the “Loss and ALAE Ratio”) for either
the first six months or first nine months of 2007 (the 2007 report year)
exceeds
67%. The Loss and ALAE Ratio shall be calculated by dividing (i)
estimates by Xxxxxxxx, Inc. (or, potentially, other actuaries selected by
Parent
for preparation of the PDIC Report as of September 30, 2007) for indemnity
(also
known as loss) and defense and cost containment (also known as DCC and/or
ALAE),
but excluding any expenses or estimates or changes in estimates from prior
periods for ULAE, coverage or extended reporting endorsements (all as defined
and set forth in (A) the PDIC Report as of June 30, 2007 for determination
of
the Loss and ALAE Ratio for the first six months of 2007 or (B) the PDIC
Report
as of September 30, 2007 for determination of the Loss and ALAE Ratio for
the
first nine months of 2007) by (ii) the Company’s net earned premium (X) for the
first six months of 2007, as set forth in the Insurance Company SAP Statements
for the quarterly period ended June 30, 2007 (for determination of the Loss
and
ALAE Ratio for the first six months of 2007) or (Y) for the first nine months
of
2007, as set forth in the Insurance Company SAP Statements for the quarterly
period ended September 30, 2007 (for determination of the Loss and ALAE Ratio
for the first nine months of 2007).
(b) Copies
of
the articles of incorporation and bylaws of the Company, and the organizational
documents of each of its subsidiaries and all amendments thereto, have been
made
available to Parent and the Purchaser and such copies are true and
complete. The Company owns directly or indirectly all of the
outstanding capital stock of each of its subsidiaries, free and clear of
any
security interest, claim, lien, pledge, limitation on the Company’s voting
rights, charges or other encumbrances of any nature whatsoever, other than
(i)
statutory liens and other encumbrances for Taxes not yet due and payable,
(ii)
liens and other encumbrances for real estate Taxes being contested in good
faith, (iii) liens and other encumbrances arising by operation of law in
the
ordinary course of business, (iv) liens and other encumbrances listed on
Schedule 4.1(b), and (v) minor imperfections in title that do not
materially detract from the value of the property subject thereto (collectively,
“Liens”).
(c) The
Company conducts its insurance operations exclusively through Professionals
Direct Insurance Company (the “Insurance Company Subsidiary”) and Professionals
Direct Insurance Services, Inc. (the “Insurance Services
Subsidiary”). The Insurance Company Subsidiary is duly authorized and
licensed to write each line of business reported as being
7
written
by the Company in the Insurance Company SAP Statements, in each jurisdiction
where it is required to be so licensed and eligible. The Insurance Services
Subsidiary is duly authorized and licensed as an insurance agency in each
jurisdiction where it is required to be so authorized or licensed.
Section
4.2 Capitalization. The
authorized capital stock of the Company consists of 5,000,0000 Shares and
500,000 shares of preferred stock, (“Company Preferred Stock”). The
Company has 333,300 Shares and no shares of Company Preferred Stock issued
and
outstanding. The Company and Company subsidiaries have no, and at all times
through the Effective Time there will not be any, existing options, warrants,
calls, subscriptions or other rights or other agreements or commitments
obligating the Company or any of its subsidiaries to issue, transfer, sell
or
vote any shares of capital stock of the Company or any of its subsidiaries
or
any other securities convertible into or evidencing the right to subscribe
for
any such shares under any equity compensation plan or otherwise. All
issued and outstanding Shares, and all outstanding shares of capital stock
of
each subsidiary, are duly authorized and validly issued, fully paid,
nonassessable and free of preemptive rights with respect thereto.
Section
4.3 Authority. The
Company has all requisite corporate power and authority to execute and deliver
this Agreement and, subject to the affirmative vote of the holders of at
least a
majority of the Shares entitled to vote in accordance with the MBCA (the
“Company Shareholder Approval”) and receipt of approvals by applicable
Governmental Authorities regulating the Insurance Company Subsidiary and
the
Insurance Services Subsidiary, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized and unanimously approved by the Board, and, assuming that none
of the
Parent, the Purchaser or any of their affiliates is an “interested shareholder”
under Chapter 7A of the MBCA, other than the Company Shareholder Approval,
no
other corporate proceedings are necessary to authorize or adopt this Agreement
or the consummation of the transactions contemplated hereby. At a meeting
held
June 22 and June 24, 2007, the Board determined that it is advisable and
in the
best interest of the holders of the Shares for the Company to enter into
a
business combination with Parent upon the terms and subject to the conditions
of
this Agreement and unanimously recommended that the holders of the Shares
approve and adopt this Agreement and the Merger. The Company
Shareholder Approval is the only vote of holders of any class or series of
the
Company’s capital stock necessary to approve the Merger. This
Agreement has been duly and validly executed and delivered by the Company
and,
assuming this Agreement constitutes a legal, valid and binding agreement
of the
other parties hereto, it constitutes a legal, valid and binding agreement
of the
Company, enforceable against it in accordance with its terms, except that
(a)
such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws, now or hereafter in effect,
relating to creditors’ rights generally and (b) equitable remedies of specific
performance and injunctive and other forms of equitable relief may be subject
to
equitable defenses and to the discretion of the court before which any
proceeding therefore may be brought.
Section
4.4 No
Violations; Consents and Approvals.
(a) None
of
the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby or the compliance by the Company with any
of
the provisions
8
hereof
shall, subject to the Company Shareholder Approval and receipt of approvals
by
applicable Governmental Authorities regulating the Insurance Company Subsidiary
and the Insurance Services Subsidiary, (i) violate any provision of its or
any
of its subsidiaries’ organizational documents, (ii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or
both) a
default, or give rise to any right of termination, cancellation or acceleration
or any right which becomes effective upon the occurrence of a merger,
consolidation or change in control or ownership, under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture or other
instrument of indebtedness for money borrowed to which the Company or any
of its
subsidiaries is a party, or by which the Company or any of its subsidiaries
or
any of their respective properties is bound, or (iii) result in a violation
or
breach of, or constitute (with or without due notice or lapse of time or
both) a
default, or give rise to any right of termination, cancellation or acceleration
or any right which becomes effective upon the occurrence of a merger,
consolidation or change in control or ownership, under, any of the terms,
conditions or provisions of any license, franchise, permit or agreement to
which
the Company or any of its subsidiaries is a party, or by which the Company
or
any of its subsidiaries or any of their respective properties is bound, or
(iv)
conflict with or violate any federal, foreign, state, local or provincial
statute, rule, regulation, order, judgment or decree (collectively, “Laws”) of
any public body or authority by which the Company or any of its subsidiaries
or
any of their respective properties is bound, excluding from the foregoing
clauses (ii), (iii) and (iv) violations, breaches, defaults or rights which,
individually or in the aggregate, would not reasonably be expected to have
a
Company Material Adverse Effect or for which the Company has received, or
prior
to the Effective Time shall have received, appropriate consents or
waivers. The material consents and approvals required to be obtained
by the Company or its subsidiaries for the consummation of the Merger are
set
forth in Schedule 4.4(a) of the Disclosure Letter.
(b) No
filing
or registration with, notification to, or authorization, consent or approval
of,
any Governmental Authority is required in connection with the execution and
delivery of this Agreement by the Company, or the consummation by the Company
of
the transactions contemplated hereby, except (i) in connection, or in
compliance, with the provisions of the Securities Exchange Act of 1934, as
amended (including the rules and regulations promulgated thereunder), (the
“Exchange Act”), (ii) the filing of the Certificate of Merger with the Michigan
Department of Labor and Economic Growth, (iii) the filing of applications,
notices and forms with, and the obtaining of approvals from, any applicable
Governmental Authorities regulating the Insurance Company Subsidiary or the
Insurance Services Subsidiary, including the Commissioner of Insurance of
the
State of Michigan under the Michigan Insurance Code of 1956, as amended,
with
respect to the transactions contemplated by this Agreement, (iv) filing with,
and approval of, the Securities and Exchange Commission (the “SEC”) and all
other applicable governing bodies with respect to the deregistration of the
Shares, (v) those consents, approvals, orders, authorizations, notifications,
registrations, declarations and filings listed on Schedule 4.4(a) of the
Disclosure Letter, and (vi) such other consents, approvals, orders,
authorizations, notifications, registrations, declarations and filings not
obtained or made prior to the Effective Time the failure of which to be obtained
or made, individually or in the aggregate, would not reasonably be expected
to
prevent consummation of the Merger, or otherwise prevent the Company from
performing its obligations under this Agreement, or would otherwise reasonably
be expected to have a Company Material Adverse Effect.
9
(c) No
shareholder of the Company has any right to dissent and obtain payment for
his
or her Shares under applicable Law with respect to, or as a result of, the
transactions contemplated by this Agreement (including the Merger).
Section
4.5 SEC
Documents; Financial Statements.
(a) The
Company has filed and made available to Parent and the Purchaser true and
complete copies of each registration statement, report,
proxy statement, information statement or schedule, together with all amendments
thereto, that were required to be filed with the SEC by the Company since
April
30, 2002 (the “SEC Documents”). As of their respective dates, the SEC
Documents complied in all material respects with the applicable requirements
of
the Securities Act of 1933, as amended, and the Exchange Act, as the case
may
be, and none of such SEC Documents contained at the time they were filed
(or if
amended or superseded by a filing prior to the date of this Agreement, then
on
the date of such filing) any untrue statement of a material fact or omitted
to
state a material fact required to be stated therein or necessary to make
the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) As
of
their respective dates, the consolidated financial statements (including
the
notes thereto) of the Company included in the SEC Documents were prepared
in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated therein
or in
the notes thereto) and fairly presented in all material respects, the Company’s
consolidated financial position and that of its consolidated subsidiaries
as at
the dates thereof and the consolidated results of their operations and
statements of cash flows for the periods then ended (subject, in the case
of
unaudited statements, to the lack of footnotes thereto, and to normal year
end
audit adjustments which, individually or in the aggregate, were not or are
not
expected to be material in amount).
(c) Each
of
the Insurance Company Subsidiary and the Insurance Services Subsidiary (i)
has
timely filed all annual and quarterly reports (including the financial
statements contained therein), registrations and statements, together with
all
amendments required to be made with respect thereto, that were required to
be
filed since April 30, 2002 with any applicable Governmental Authority regulating
the Insurance Company Subsidiary or the Insurance Services Subsidiary, as
applicable, and (ii) has paid all fees and assessments due and payable in
connection therewith. All such reports, registrations and statements,
together with all such amendments, were in compliance, in all material respects,
with applicable Law when filed and, as of their respective dates, did not
contain any untrue statement of material fact or omit to state any material
fact
required to be stated therein or necessary to make the statements therein,
in
light of the circumstances under which they were or are made, not
misleading. No material deficiencies have been asserted by any
applicable Governmental Authority with respect to such reports, registrations
and statements or any such amendments thereto.
(d) Each
of
the principal executive officer of the Company and the principal financial
officer of the Company (or each former principal executive officer of the
Company and each former principal financial officer of the Company, as
applicable) has made all applicable certifications required by Rule 13a-14
or
15d-14 under the Exchange Act and Sections 302 and 906 of the Xxxxxxxx-Xxxxx
Act
of 2002 (including the rules and regulations promulgated
10
thereunder,
“SOX”) with respect to the SEC Documents and the statements contained in such
certifications are in compliance with the requirements of the Exchange Act
and
SOX. For purposes of this Agreement, “principal executive officer”
and “principal financial officer” have the meanings ascribed to such terms in
SOX. Neither the Company nor any of the Company’s subsidiaries has
outstanding, or has since the effective date of Section 402 of SOX, arranged
any
outstanding “extensions of credit” to or for directors or executive officers of
the Company in violation of Section 402 of SOX.
(e) The
Company maintains a system of “internal control over financial reporting,” as
defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, and such system
is
maintained in compliance with such rules.
(f) The
Company has not received any written notification from its outside auditors
of
any (A) “significant deficiency” or (B) “material weakness” in the Company’s
internal controls over financial reporting since January 1, 2006. To
the knowledge of the Company, there is no outstanding “significant deficiency”
or “material weakness” that has not been appropriately and adequately remedied
by the Company. For purposes of this Agreement, the terms
“significant deficiency” and “material weakness” shall have the meanings
assigned to them in Auditing Standard No. 2 of the Public Company Accounting
Oversight Board, as in effect on the date hereof.
(g) None
of
the Company’s subsidiaries is, or has ever been, subject to the reporting
requirements of Sections 13(a) and 15(d) of the Exchange Act.
Section
4.6 Absence
of Certain Changes; No Undisclosed Liabilities; Subordinated
Debentures.
(a) Except
as
set forth in the SEC Reports, since March 31, 2007, each of the Company and
its
subsidiaries has conducted its business in the ordinary course consistent
with
past practice and there has not occurred: (a) any action, event or occurrence
that, individually or in the aggregate, would reasonably be expected to have
a
Company Material Adverse Effect; (b) any amendments or changes in the articles
of incorporation or bylaws of the Company or any of its subsidiaries; (c)
any
changes by the Company in its accounting methods, principles or practices
or
underwriting, reserving or actuarial practices or methods, except as may
be
required to conform to changes in statutory or regulatory accounting rules,
or
generally accepted accounting principles, or applicable regulatory requirements;
(d) any declaration, setting aside or payment of any dividend or other
distribution in respect of capital stock of the Company or any direct or
indirect redemption, purchase or other acquisition by the Company or any
of its
subsidiaries of any capital stock or of any interest in or right to acquire
any
capital stock of the Company or any of its subsidiaries; (e) any Lien created
or
assumed on any of the assets or properties of the Company or any of its
subsidiaries, except under the existing credit arrangements with Fifth Third
Bank; (f) any borrowing of money by the Company other than in the ordinary
course of business; (g) an incurrence by the Company or any of its subsidiaries
of any deferred purchase price obligation that, individually or in the
aggregate, exceeds $100,000; (h) any material write-off or write-down of,
or any
determination to write-off or write-down, the assets or properties (other
than
any statutory write-down of investment assets) of the Company or any of its
subsidiaries or any portion thereof, other than in the ordinary course of
business; (i)
11
any
material addition to the Company’s consolidated reserves for future benefits or
other policy claims and benefits before the date of this Agreement, except
in
the ordinary course of business consistent with past practice; (j) acquisition
(by merger, consolidation, acquisition of stock or assets, or otherwise)
of any
corporation, partnership or other business organization or division thereof;
(k)
any increase in the compensation payable or to become payable to the Company’s
directors, officers or other executive employees, or grant of any severance
or
termination pay to, or enter into any employment or severance agreement with
any
director, officer or other executive employee of the Company; (l) any material
tax election inconsistent with past practice or settlement or compromise
of any
material federal, state, local or foreign tax liability or agreement to an
extension of a statute of limitations; (m) payment, discharge or satisfaction
of
any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of liabilities reflected or reserved against in the financial
statements contained in the SEC Reports; (n) any sale of a material amount
of
property or assets of the Company or any of its subsidiaries, except in the
ordinary course of business; or (o) any contract or agreement to take any
of the
actions set forth in subsections (a) through (n) of this Section
4.6(a).
(b) Neither
the Company nor any of its subsidiaries has any liabilities or obligations
of
any nature, whether or not accrued, contingent or otherwise, required by
generally accepted accounting principles to be reflected on a consolidated
balance sheet of the Company and its subsidiaries, except for liabilities
or
obligations (i) under this Agreement, (ii) disclosed in the Company’s March 31,
2007 consolidated balance sheet (including the notes thereto), as set forth
in
the SEC Reports, or (iii) that are incurred in the ordinary course of business
since the date of the Company’s March 31, 2007 consolidated balance sheet, as
set forth in the SEC Reports, and which would not reasonably be expected
to have
a Company Material Adverse Effect.
(c) The
floating rate junior subordinated debenture, having a principal amount of
$2,062,000, issued by the Company to Professionals Direct Statutory Trust
I on
December 4, 2002 may be redeemed in whole or in part beginning on December
4,
2007. The junior subordinated debenture, having a principal amount of
$3,093,000, issued by the Company to Professionals Direct Statutory Trust
II on
June 30, 2005 may be redeemed in whole or in part beginning on September
15,
2010.
Section
4.7 Litigation. Except
for any coverage or other claim made with respect to insurance policies issued
by the Insurance Company Subsidiary, there is no suit, claim, action, proceeding
or investigation pending, or to the knowledge of the Company threatened,
against
the Company or any of its subsidiaries or any of their respective properties
or
assets before any court or Governmental Authority seeking damages of $100,000
or
more. Neither the Company nor any of its subsidiaries is subject to
any outstanding order, writ, injunction or decree (excluding coverage and
other
claims made with respect to insurance policies issued by the Insurance Company
Subsidiary).
Section
4.8 Compliance
with Applicable Law.
(a) The
business and operations of the Company, the Insurance Company Subsidiary
and the
Insurance Services Subsidiary have been conducted in compliance, in all
material
12
respects,
with all applicable statutes and regulations regulating the business of
insurance and all applicable orders and directives of Insurance Regulators
(collectively, “Insurance Laws”), except any noncompliance which individually,
or in the aggregate, would not reasonably likely to have a Company Material
Adverse Effect. For purposes of this Agreement, “Insurance
Regulators” means all Governmental Authorities regulating the business of
insurance under Insurance Laws. The Insurance Company Subsidiary and
Insurance Services Subsidiary have marketed, sold, and issued insurance products
in compliance, in all material respects, with Insurance Laws applicable to
the
business of the Insurance Company Subsidiary or the Insurance Services
Subsidiary and in the respective jurisdictions in which the products have
been
sold. There is no material pending or, to the knowledge of the
Company, threatened charge by any Insurance Regulators with respect to
violations of any applicable Insurance Laws. The Company Insurance
Subsidiary is not subject to any order or decree of any Insurance Regulators
relating to the Insurance Company Subsidiary or the Insurance Services
Subsidiary (as opposed to insurance companies generally) which would,
individually or in the aggregate, be reasonably likely to have a Company
Material Adverse Effect. Since December 31, 2002, to the knowledge of
the Company, the Company and each of the Insurance Company Subsidiary and
the
Insurance Services Subsidiary have filed all reports and other filings required
to be filed with any Insurance Regulators on or before the date of this
Agreement. As of its date, each of such reports and filings contained all
information required by the Insurance Regulators with which it was filed
and did
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in
light
of the circumstances under which they were made, not
misleading. Schedule 4.8(a) of the Disclosure Letter sets forth (i) a
list of the states in which any of the Company, the Insurance Company Subsidiary
or the Insurance Services Subsidiary file reports or other filings with
Insurance Regulators, (ii) the dates on which such reporting obligations
commenced and (iii) a brief description of the frequency with which reports
are
required to be filed in each such state.
(b) Except
for violations or possible violations that are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect, neither
the Company nor any of its subsidiaries is in conflict with, or in default
or
violation of, (i) any Law applicable to the Company or any of its subsidiaries
or by which its or any of their respective properties is bound or affected
or
(ii) any note, bond, mortgage, indenture, contract, agreement, lease, license,
franchise or other instrument or obligation to which the Company or any of
its
subsidiaries is a party or by which the Company or any of its subsidiaries
or
its or any of their respective properties is bound or affected.
(c) The
Company and its subsidiaries hold all permits, licenses, easements, variances,
exemptions, consents, certificates, orders and approvals from Governmental
Authorities which are necessary for the operation of the businesses of the
Company and each of its subsidiaries as now being conducted (collectively,
the
“Company Permits”). The Company and its subsidiaries are in
compliance with the terms of the Company Permits in all material respects.
Copies of all insurance licenses of the Company, the Insurance Company
Subsidiary and the Insurance Services Subsidiary have previously been made
available to Parent. For purposes of this Agreement, “Governmental
Authority” or “Governmental Authorities” means any governmental body, agency,
official, instrumentality, subdivision or authority, whether federal, foreign,
state, local or provincial.
13
Section
4.9 Taxes.
(a) For
purposes of this Agreement, “Tax” or “Taxes” shall mean taxes, fees, levies,
duties, tariffs, imposts, and governmental impositions or charges of any
kind in
the nature of (or similar to) taxes, payable to any federal, state, local
or
foreign taxing authority, including (i) income, franchise, profits, gross
receipts, ad valorem, net worth, value added, sales, use, service, real or
personal property, special assessments, capital stock, license, payroll,
withholding, employment, social security, workers’ compensation, unemployment
compensation, utility, severance, environmental, customs duties, production,
excise, stamp, occupation, premiums, windfall profits, transfer and gains
taxes,
or other tax of any kind whatsoever and (ii) interest, penalties, additional
taxes and additions to tax imposed with respect thereto. “Tax
Returns” shall mean returns, declarations, claims for refund, reports, and
information statements, including any attachment or schedule thereto and
including any amendment thereof, with respect to Taxes required to be filed
with
the Internal Revenue Service (“IRS”) or any other federal, foreign, state, local
or provincial taxing authority, domestic or foreign, including consolidated,
combined and unitary tax returns.
(b) Each
of
the Company and its subsidiaries has filed, or caused to be filed, all Tax
Returns required to be filed by it, has paid or withheld, or caused to be
paid,
withheld or remitted, all Taxes of any nature whatsoever, that are shown
on such
Tax Returns as due and payable, or otherwise required to be paid, other than
such Taxes as are being contested in good faith (as described in Schedule
4.9 of
the Disclosure Letter) and for which adequate reserves have been
established. All Tax Returns filed by or on behalf of the Company and
its subsidiaries with respect to Taxes are true and correct in all material
respects. The Company and each of its subsidiaries have paid or will
timely pay all Taxes due with respect to any period ending on or prior to
the
Effective Time, other than Taxes contested in good faith and for which adequate
reserves are established, or where the payment of Taxes is not yet due, have
established, or with respect to Taxes incurred after the date hereof will
timely
establish in accordance with past practices, an adequate accrual in accordance
with generally accepted accounting principles. There are no claims,
assessments or audits pending, or to the Company’s knowledge threatened, against
the Company or its subsidiaries for any alleged deficiency in any
Tax. None of the Company or its subsidiaries have ever been a member
of a consolidated return group under Section 1504 of the Code except one
for
which the Company is the parent company. There is no deferred
inter-company gain within the meaning of the Treasury Regulations promulgated
under Code Section 1502. Neither the Company nor any of its
subsidiaries are liable for the payment of Taxes of another person (other
than
the Company or any of its subsidiaries) under the principles of Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local foreign
Law) as a transferee or successor, by contract, or otherwise. There
are no outstanding waivers or extensions of any applicable statute of
limitations to assess any Taxes of the Company or any of its
subsidiaries. There are no outstanding requests by the Company or any
of its subsidiaries for any extension of time within which to file any Tax
Return or within which to pay any Taxes shown to be due on any Tax
Return. There are no Liens for any Taxes upon the assets of the
Company or any of its subsidiaries. Except as described in Schedule
4.9 of the Disclosure Letter, neither the Company nor any of its subsidiaries
is
a party to, is bound by or has any obligation under, a tax sharing or tax
allocation agreement or arrangement for the allocation, apportionment, sharing,
indemnification or payment of Taxes. The Company has provided Parent
with true and complete copies of all Tax Returns filed by Company and
its
14
subsidiaries
for all Tax periods beginning on or after January 1, 2004. Neither
the Company nor any of its subsidiaries has any “tax exempt use property” within
the meaning of Code Section 168(h). Neither the Company nor any of
its subsidiaries is a United States Real Property Holding Company as defined
in
Code Section 897(c)(2). The Company and its subsidiaries have
properly disclosed on their Tax Returns all positions that could result in
a
substantial understatement as defined in Code Section 6662. There is
no requirement of the Company or any of its subsidiaries to include any item
of
income in, or exclude any item of deduction from, taxable income post-closing
as
a result of: (a) a change in accounting method, (b) a closing
agreement under Code Section 7121 (or any similar provision of state, local
foreign Law), (c) intercompany transactions or an excess loss account pursuant
to Code Section 1502 and regulations thereunder (or any similar provision
of
state, local or foreign Law), (d) installment sales or open transactions,
or (e)
prepaid amounts. None of the Company or any of its subsidiaries was a
party to a transaction under Code Sections 355 or 361. No power of
attorney for tax matters has been granted to any person. None of the
Company or any of its subsidiaries has engaged in a “listed transaction” as
described in Treasury Regulation Section 1.6011-4(b)(2).
Section
4.10 Labor
and Employment Matters.
(a) The
Company has made available to Parent and the Purchaser an accurate and complete
list of each (i) employment agreement with each executive officer and other
employee of the Company or its subsidiaries (each employee of the Company
or its
subsidiaries, an “Employee” and all such employees, collectively, the
“Employees”) not terminable without material liability or obligation on 60 days’
or less notice; (ii) agreement with any director, executive officer or other
Employee of the Company or its subsidiaries (A) the benefits of which are
contingent, or the terms of which are materially altered, on the occurrence
of a
transaction involving the Company or its subsidiaries of the nature of any
of
the transactions contemplated by this Agreement or relating to an actual
or
potential change in control of the Company or (B) providing any compensation
guarantee or extending severance benefits or other benefits after termination
not comparable to benefits available to Employees generally; (iii) agreement,
plan or arrangement under which any person may receive payments that may
be
subject to Tax imposed by Section 4999 of the Code or included in the
determination of such person’s “parachute payment” under Section 280G of the
Code; and (iv) agreement or plan, including any stock option plan, stock
appreciation right plan, restricted stock plan or stock purchase plan, any
of
the benefits of which will be increased, or the vesting of the benefits of
which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement. Since March 31, 2007, neither the Company nor any of its
subsidiaries has entered into or amended any employment or severance agreement
with any director, executive officer or other employee of the Company or
granted
any severance or termination pay to any director, executive officer or employee
of the Company.
(b) The
Company and each of its subsidiaries are in material compliance with all
applicable Laws respecting employment, employment practices, terms and
conditions of employment, employee safety and wages and hours, and in each
case,
with respect to Employees: (i) has withheld and reported all amounts required
by
Law or by agreement to be withheld and reported with respect to wages, salaries
and other payments to Employees, (ii) is not liable for any arrears of wages,
severance pay or any taxes or any penalty for failure to
15
comply
with any of the foregoing, and (iii) is not liable for any payment to any
trust
or other fund governed by or maintained by or on behalf of any Governmental
Authority, with respect to unemployment compensation benefits, social security
or other benefits or obligations for Employees (other than routine payments
to
be made in the normal course of business and consistent with past
practice). There are no material actions, suits, claims or
administrative matters pending, or to the knowledge of the Company, threatened
or reasonably anticipated against the Company or any of its subsidiaries,
or any
of their Employees relating to any Employee, Employee agreement or Company
or
subsidiary employee plan. There are no pending or, to the knowledge
of the Company, threatened material claims or actions against Company or
any of
its subsidiaries, any Company or subsidiary trustee under any worker’s
compensation policy or long-term disability policy. None of the
Company or any of its subsidiaries has any direct or indirect liability with
respect to any misclassification of any person as an independent contractor
rather than as an employee, or with respect to any employee leased from another
employer.
(c) No
work
stoppage or labor strike against the Company or any of its subsidiaries is
pending, or, to the knowledge of the Company, threatened or reasonably
anticipated. The Company has no knowledge of any activities or
proceedings of any labor union to organize any Employees. There are
no actions, suits, claims, labor disputes or grievances pending or to the
knowledge of the Company threatened or reasonably anticipated relating to
any
labor matters involving any Employee, including charges of unfair labor
practices or discrimination complaints. None of the Company or any of
its subsidiaries has engaged in any material unfair labor practices within
the
meaning of the National Labor Relations Act. Neither the Company nor
any of its subsidiaries presently, nor have any of them been in the past,
a
party to, or bound by, any collective bargaining agreement or union contract
with respect to Employees and no collective bargaining agreement is being
negotiated by the Company or any of its subsidiaries. The Company and
its subsidiaries have not incurred any liability or obligation under the
Worker
Adjustment and Retraining Notification Act or any similar state or local
Law
that remains unsatisfied.
Section
4.11 Employee
Benefit Plans, ERISA.
(a) Each
“employee benefit plan” (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”)), and all other employee
benefit, bonus, incentive, stock option (or other equity based), severance,
change in control, welfare (including post retirement medical and life
insurance) and fringe benefit plans (whether or not subject to ERISA) maintained
or sponsored by the Company or any of its subsidiaries or any trade or business,
whether or not incorporated, that would be deemed a “single employer” within the
meaning of Section 4001 of ERISA or Section 414 of the Code (an “ERISA
Affiliate”), for the benefit of any employee or former employee of the Company
or any of its ERISA Affiliates (collectively, the “Plans”) has been operated and
administered, in all material respects, in accordance with its terms and
with
applicable Law. To the knowledge of the Company, all filings,
disclosures and notices related to the Plans as required by applicable Law
have
been timely made. There is no pending, or to the knowledge of the
Company threatened, litigation, administrative action, suit or claim relating
to
any of the Plans (other than routine claims for benefits). To the
knowledge of the Company, the Company has not engaged in a transaction, or
omitted to take any action, with respect to any Plan that would reasonably
be
16
expected
to subject the Company to a penalty or Tax imposed by either Section 4975
of the
Code or Section 502 of ERISA.
(b) The
Company has made available to Parent true and complete copies of the
following: the current Plan document (including a written description
of all oral Plans), any amendments thereto, and the related summary plan
description and summaries of material modifications, if any, for the last
three
Plan years; the financial information or reports (including any FASB required
reports, if applicable), relating to each such Plan; and all Annual Report
Form
5500 series) filed with any governmental agency at any time during the three
year period ending on the Effective Time.
(c) Neither
the Company nor any ERISA Affiliate maintains or has maintained during the
last
six years a Plan which is subject to Title IV of ERISA or which is subject
to
the minimum funding requirements of Section 412 of the Code. None of
the Company, any ERISA Affiliate, any Plan, any trust created under any Plan,
or
to the Company’s knowledge any trustee or administrator of any such trust, has
engaged in a transaction in connection with which the Company, any ERISA
Affiliate, any Plan, any such trust or any such trustee or administrator
would
reasonably be expected to be subject to either a civil liability or penalty
pursuant to Section 409, 502(i) or 502(l) of ERISA or a tax imposed pursuant
to
Chapter 43 of the Code.
(d) All
contributions required to be made under the terms of any Plan or any employee
benefit arrangements to which the Company is a party or of which the Company
is
a sponsor have been timely made for the four prior Plan years. All
additional contributions, premium payments and other payments due on or before
the Effective Time shall have been paid by that date. The Company has
no material obligation to provide retiree health, life insurance, disability
insurance or other retiree benefits under any Plan, other than benefits mandated
by Section 4980B of the Code.
(e) At
no
time has the Company or an ERISA Affiliate contributed to or been obligated
to
contribute to any multiemployer plan, as defined in Section 3(37) of
ERISA.
(f) Neither
the Company nor an ERISA Affiliate has ever established, sponsored, maintained,
participated in or contributed to any self-insured plan that provides benefits
to employees (including any such plan pursuant to which a stop-loss policy
or
contract applies).
(g) Neither
the Company nor any of its subsidiaries maintains any compensation plans,
programs or arrangements under which any payment is non-deductible, in whole
or
in part, for tax reporting purposes as a result of the limitations under
Section
162(m) of the Code and the regulations issued thereunder. The
consummation of the transactions contemplated by this Agreement will not,
directly or indirectly (including as a result of any termination of employment
or service at any time prior to or following the Effective Time), entitle
any
current or former director, officer, employee or independent contractor of
the
Company to any actual or deemed payment (or benefit) which would constitute
a
“parachute payment” (as such term is defined in Section 280G of the
Code).
(h) Each
Plan
that is subject to Code Section 409A has been operated and administered in
compliance, in all material respects, with Code Section 409A.
17
(i) Each
Plan
can be amended, terminated or otherwise discontinued after the Effective
Time in
accordance with its terms, without liability to the Company, Purchaser or
Parent
(other than ordinary administration expenses).
(j) Except
as
set forth on Schedule 4.11 of the Disclosure Letter, with respect to each
Plan
that is an “employee pension benefit plan” (as defined in ERISA Section
3(2)): (1) each such Plan that is intended to qualify as a
tax-qualified retirement plan under Code Section 401(a) and each trust intended
to qualify under Code Section 501(a) has received a current favorable
determination letter (or notification, advisory or opinion letter, as
applicable) from the IRS as to qualification of such Plan covering the period
from its adoption through the Effective Time; all amendments required to
maintain such qualification have been timely adopted; nothing has occurred,
whether by action or failure to act, which has resulted in or, to the knowledge
of the Company, would reasonably be expected to cause the loss of such
qualification (whether or not eligible for review under the IRS’s Closing
Agreement Program, Voluntary Compliance Resolution program or any similar
governmental agency program); and each trust thereunder is exempt from Tax
pursuant to Code Section 501(a); and (2) no such Plan is a “multiemployer plan”
(as defined in ERISA Section 3(37)).
Section
4.12 Title
to Property; Assets.
(a) The
Company and each of its subsidiaries have good and marketable title to all
of
their owned properties and assets, free and clear of all Liens. All
leases pursuant to which the Company or any of its subsidiaries lease from
others material amounts of personal property are, in all material respects,
in
good standing, valid and effective in accordance with their respective terms,
and, to the knowledge of the Company, there is not, under any of such leases
any
existing default or event of default (or event which with notice or lapse
of
time, or both, would reasonably be expected to constitute a
default).
(b) The
Insurance Company SAP Statements contain accurate lists, in accordance with
SAP,
as of their respective dates of investment, of assets held and purchases
and
sales of the investment assets by the Insurance Company
Subsidiary. Such debentures, notes, stock, limited partnership
interests, other securities, mortgages and other investment assets are owned
by
either the Company or the Insurance Company Subsidiary, free and clear of
all
Liens.
Section
4.13 Real
Properties
(a) Neither
the Company nor any of its subsidiaries is a party to any agreement or option
to
purchase any real property or interest therein. Neither the Company nor any
of
its subsidiaries (i) own, or have ever owned, any real property, or (ii)
lease
or operate any real property other than the Leased Real Property (as defined
below).
(b) Set
forth
in Schedule 4.13(b) of the Disclosure Letter is a list of all leases and
subleases of real property, including all amendments, modifications and
supplements thereto (the “Real Estate Leases”), to which the Company or any of
its subsidiaries is a party and a list of all other agreements between the
Company, or any subsidiary of the Company, and any lessor or sublessor under
any
of the Real Estate Leases, any mortgagee of any of the premises covered by
the
Real Estate Leases (the “Leased Real Property”) or any assignor of any of the
Real Estate
18
Leases.
The Company has made available true and complete copies of each of the Real
Estate Leases to Parent.
(c) Neither
the Company nor any of its subsidiaries has received any written notice of
any
pending or threatened condemnation, expropriation, eminent domain or similar
proceeding affecting all or any portion of any of the Leased Real
Property.
(d) All
accounts for work and services performed or materials placed or furnished
upon
or in respect of the construction and completion of any of the Leased Real
Property have been fully paid.
(e) Neither
the Company nor any of its subsidiaries has any knowledge of any fact or
condition that would reasonably be expected to result in termination or
limitation of full and free vehicular access to and from a public right-of-way
to the Leased Real Property.
(f) To
the
extent required under any Real Property Leases, the Company now has in force
normal and customary casualty, liability and business interruption insurance
relating to such Leased Real Property. The Company has received no
written notice from any insurance carrier alleging any defects or inadequacies
in the Leased Real Property that, if not corrected, would reasonably be expected
to result in termination of such insurance coverage or increase in the normal
and customary cost of any or all of such insurance coverage.
Section
4.14 Environmental
Matters.
(a) The
Company and each of its subsidiaries have at all times been in material
compliance with all orders of any federal, state, local or foreign court
or
Governmental Authority or tribunal and all Laws, in each case related to
human
health or the environment (“Environmental Laws”).
(b) There
are
not any past or present conditions or circumstances at, or arising out of,
any
current or former business, assets or properties of the Company or any of
its
subsidiaries, including to on-site or off-site disposal presence or release
of
or exposure to any chemical substance, product or waste or any other condition
or circumstance which has resulted in or would reasonably be expected to
have
resulted in or would reasonably be expected to give rise to: (i) material
liabilities, fines, penalties, costs, capital expenditures or obligations
for
any violation, noncompliance, cleanup, remediation, disposal or corrective
action under any Environmental Law, or (ii) material claims arising for personal
injury, property damage, or damage to natural resources.
(c) Neither
the Company nor any of its subsidiaries has (i) received any notice of
noncompliance with, violation of, or liability or potential liability relating
to any Environmental Law or (ii) entered into any consent decree, agreement
or
order or is subject to any order of any federal, state, local or foreign
court
or Governmental Authority or tribunal or any indemnity with any third party
relating to any Environmental Law or relating to the cleanup of any hazardous
materials contamination.
19
Section
4.15 Intellectual
Property.
(a) “Intellectual
Property” means:
(i) Any
know-how, invention (whether patentable or un-patentable and whether or not
reduced to practice), any improvements to any invention, and any patent,
patent
application, statutory invention registration or patent disclosure, together
with any reissuance, division, continuation, continuation-in-part, revision,
extension, or reexamination of any patent;
(ii) any
trademark, service xxxx, trade dress, logo, trade name, domain name or corporate
name, whether or not registered, together with any translation, adaptation,
derivation, or combination and including any associated goodwill, and any
application, registration, or renewal;
(iii) any
copyrightable work (including policy forms), any copyright, and any application,
registration, or renewal;
(iv) any
trade
secret or confidential or proprietary business information (including any
idea,
research and development, know-how, formula, composition, manufacturing and
production process or technique, technical data, design, drawing, specification,
customer or supplier list, pricing and cost information, and business and
marketing plan or proposal);
(v) any
other
proprietary right, including waivers of such rights by others and the right
to
xxx and recover damages, attorneys’ fees and costs for past infringement of any
patent, trademark, copyright; and
(vi) any
copies or tangible embodiment of any of the foregoing.
(b) To
the
knowledge of the Company, the Company, directly or indirectly, owns, or is
licensed or otherwise possesses legally enforceable rights to use, all
Intellectual Property that is material to the business of the Company and
its
subsidiaries as currently conducted (the “Company Intellectual Property
Rights”). To the knowledge of the Company, there are no settlements,
forbearances to xxx, consents, judgments, or orders or similar obligations
which
restrict the Company or its subsidiaries’ rights to use any Company Intellectual
Property Rights, or restrict the Company or its subsidiaries’ business in order
to accommodate a third party’s Intellectual Property, or permit third parties to
use any Company Intellectual Property Rights owned by the Company or its
subsidiaries.
(c) Schedule
4.15(c) of the Disclosure Letter sets forth a complete list of all patents
and
patent applications, trademark and service xxxx registrations and applications
therefore, unregistered trademarks and service marks, trade names, domain
names,
copyright registrations and applications therefore, and unregistered copyrights
included in the Company Intellectual Property Rights, and specifies, where
applicable, the jurisdictions in which each such Company Intellectual Property
Right has been issued or registered or in which an application for such issuance
and registration has been filed, including the respective patent, registration
or application numbers and the names of all registered owners. The Company
or
one of its subsidiaries is listed in the records of the appropriate United
States, state or foreign agency as the sole owner of record for each patent,
any
registration, or application listed in Schedule 4.15(c) of
20
the
Disclosure Letter. In each case where a registration or patent, or
application for registration or patent, listed in Schedule 4.15(c) of the
Disclosure Letter is held by assignment, the assignment has been duly recorded
with the governmental office from which the original registration or patent
issued or before which the application for registration or patent is
pending.
(d) All
the
material licenses, sublicenses and other agreements as to which the Company
or
any of its subsidiaries is a party and pursuant to which the Company, any
of its
subsidiaries or any other person is authorized to use any Company Intellectual
Property Right have been made available to Parent. To the knowledge
of the Company, all such licenses, sublicenses, and other agreements are,
in all
material respects, legal, binding, enforceable and in full force and effect
and
represent the entire agreement with respect to the subject matter of the
agreement. To the knowledge of the Company, neither the Company nor
any of its subsidiaries, nor any other party, is in violation of any such
license, sublicense or agreement except such violations as do not materially
impair the Company’s or such subsidiary’s rights under such license, sublicense
or agreement. The execution and delivery of this Agreement by the
Company, and the consummation of the transactions contemplated hereby, will
neither cause the Company or any of its subsidiaries to be in violation or
default under any such license, sublicense or agreement, nor entitle any
other
party to any such license, sublicense or agreement to terminate or modify
such
license, sublicense or agreement. Neither the Company nor any of its
subsidiaries has received any notice of termination or cancellation under
any
license, sublicense or other agreement, nor any notice of a breach or default
which has not been cured.
(e) The
Company Intellectual Property Rights owned by the Company or one of its
subsidiaries are free from and clear of any Liens, excluding any Liens relating
to infringement, and to the knowledge of the Company are free and clear of
any
Liens relating to infringement. Neither the Company nor any of its
subsidiaries has received any notice of a claim and, to the knowledge of
the
Company, no claims are threatened by any person and there are no valid grounds
for a claim (i) that the Company or any of its subsidiaries is infringing
on any
copyright, patent trademark, or service xxxx, or misappropriating any trade
secret or other violating the rights in any Intellectual Property of any
third
party or (ii) challenging the ownership or right to use by the Company or
any of
its subsidiaries, or the validity or effectiveness of, any of the Company
Intellectual Property Rights. To the knowledge of the Company, there
is no unauthorized use, infringement, dilution or misappropriation of any
of the
Company Intellectual Property Rights by any third party.
(f) The
Company and each of its subsidiaries have taken reasonable precautions to
protect the secrecy, confidentiality and value of their trade
secrets.
Section
4.16 Information. None
of the Proxy Statement or any other document to be filed by or on
behalf of the Company with the SEC or any other Governmental Authority entity
in
connection with the transactions contemplated by this Agreement will, at
the
respective times filed with the SEC or other Governmental Authority and,
in
addition, in the case of the Proxy Statement at the date it or any amendment
or
supplement is mailed to shareholders of the Company and at the time of the
Shareholder Meeting, 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 made therein, in light of the circumstances under which
they
were made, not
21
misleading;
provided that the foregoing shall not apply to information supplied by
Parent or the Purchaser specifically for inclusion or incorporation by reference
in any such document.
Section
4.17 Insurance
Reports.
(a) “Insurance
Company SAP Statements” means (i) the annual statutory statements of the
Insurance Company Subsidiary filed with any Insurance Regulator for each
of the
years ended December 31, 2006, 2005 and 2004 and for each calendar year ending
after the date of this Agreement, (ii) the quarterly statutory statements
of the Insurance Company Subsidiary filed with any Insurance Regulator for
the
quarterly period ended March 31, 2007, and for each quarterly period ending
after the date of this Agreement, and (iii) all exhibits, interrogatories,
notes, schedules and any actuarial opinions, affirmations or certifications
or
other supporting documents filed in connection with such annual statutory
statements and quarterly statutory statements.
(b) All
such
Insurance Company SAP Statements were prepared (i) in conformity with statutory
accounting practices prescribed or permitted by the Insurance Regulators
consistently applied (“SAP”) and (ii) from the books and records of the
Insurance Company Subsidiary. The Insurance Company SAP Statements,
when read in conjunction with the notes thereto and any statutory audit reports
relating thereto, present fairly in all material respects the statutory
financial condition and results of operations of the Insurance Company
Subsidiary as of the dates and for the periods indicated (subject, in the
case
of unaudited statements, to notes and normal year-end adjustments that are
not
material in amount or effect). The annual statutory balance sheets and income
statements included in the Insurance Company SAP Statements have been, where
required by Insurance Laws, audited by an independent accounting firm of
recognized national reputation.
(c) Since
December 31, 2002, the Company and the Insurance Company Subsidiary (i) have
filed or submitted with the applicable Insurance Regulator all registration
statements, notices and reports, together with all supplements and amendments
thereto, required under the Insurance Laws applicable to insurance holding
companies (the “Holding Company Act Reports”); (ii) have filed all
Insurance Company SAP Statements, (iii) have filed all other reports and
statements together with all amendments and supplements thereto, required
to be
filed with any Insurance Regulator under the Insurance Laws (the “Other Reports
and Statements”), and (iv) have paid all fees and assessments due and
payable by them under the Insurance Laws, except where the failure to so
file or
so pay would not reasonably be expected to have a Company Material Adverse
Effect. The Company has made available to Parent true and complete
copies of all Insurance Company SAP Statements and all Holding Company Act
Reports filed by Company or the Insurance Company Subsidiary with any Insurance
Regulator for periods ending and events occurring, after January 1, 2003
and
prior to the Effective Time. All such Insurance Company SAP
Statements, Holding Company Act Reports, and Other Reports and Statements
complied in all material respects with the Insurance Laws when
filed. No material deficiencies have been asserted by any
Governmental Authority with respect to such Insurance Company SAP Statements,
Holding Company Act Reports, and Other Reports and Statements that the Company
has not appropriately addressed with such Governmental Authority.
22
(d) Except
for examinations conducted by a Governmental Authority in the ordinary course
of
the business of the Company and its subsidiaries, to the knowledge of the
Company, no Governmental Authority has initiated any proceeding or investigation
into the business or operations of the Company or its subsidiaries, or any
director or officer of the Company or its subsidiaries in his or her capacity
as
such, since January 1, 2003. There is no unresolved violation or
exception asserted in writing to the Company or any of its subsidiaries by
any
Governmental Authority with respect to any examinations of the Company or
any of
its subsidiaries.
(e) The
Company has made available to Parent correct and complete reports issued
by the
applicable Insurance Regulator with respect to such financial
examinations. Except with respect to the transactions contemplated by
this Agreement, there are no regulatory examinations of the Company or any
of
its subsidiaries currently in process.
(f) Neither
the Company nor any of its subsidiaries has received from any Person any
currently pending Notice on Form A or such other form as may be prescribed
under
applicable Law indicating that such Person intends to make or has made a
tender
offer for or a request or invitation for tenders of, or intends to enter
into or
has entered into any agreement to exchange securities for, or intends to
acquire
or has acquired (in the open market or otherwise), any voting security of
Company, if after the consummation thereof such Person would directly or
indirectly be in control of Company.
Section
4.18 Insurance
Matters.
(a) All
policies, binders, slips, certificates and other agreements of insurance
in
effect as of the date of this Agreement (including all applications,
endorsements, supplements, endorsements, riders and ancillary agreements
in
connection therewith) issued by the Insurance Company Subsidiary, and any
and
all marketing materials, agents agreements, brokers agreements, service
contracts, and managing general agents agreements to which Company or any
of its
subsidiaries is a party, are, to the extent required under applicable Law,
on
forms approved by the Insurance Regulators or have been filed with and not
objected to in writing by such Insurance Regulators within the period provided
for objection, and all of such forms comply in all material respects with
the
Insurance Laws.
(b) All
premium rates and other charges of the Insurance Company Subsidiary required
to
be filed with or approved by any Governmental Authority have been so filed
and
have received interim or final approval from each such Governmental Authority,
and all premiums and other fees charged by the Insurance Company Subsidiary
conform with such approvals.
(c) No
party
to any of the reinsurance treaties issued to the Insurance Company Subsidiary
has given notice that such party intends to terminate or cancel any of the
reinsurance treaties as a result of or following consummation of the
Merger. Each of the reinsurance treaties is in full force and effect
and is valid and binding on each party thereto. None of the Company
or its subsidiaries, and to the knowledge of Company, any other party thereto,
is in default in any material respect with respect to any of the reinsurance
treaties. None of the reinsurance treaties contain any provision
providing that the other party thereto may terminate the same by reason
of
23
the
transactions contemplated by this Agreement, or contains any other provision
which would be altered or otherwise become applicable by reason of such
transactions. To the knowledge of the Company all amounts to which
the Insurance Company Subsidiary is entitled as of the date hereof under
any
reinsurance agreements (including amounts based on paid and unpaid losses),
are
collectible, except as otherwise reflected in the applicable Insurance Company
SAP Statements. The Insurance Company Subsidiary is entitled to take
full credit in its Insurance Company SAP Statements pursuant to applicable
Law
for all reinsurance ceded by it pursuant to any reinsurance
agreements.
(d) The
Insurance Company Subsidiary has assets that qualify as admitted assets under
the Insurance Laws in an amount at least equal to the sum of all its reserves
and other liability amounts as shown on the balance sheet contained in the
most
recently filed Insurance Company SAP Statements and its minimum statutory
capital and surplus as required by such Insurance Laws. Each of the
Insurance Company SAP Statements, as of the date thereof, sets forth the
Loss
Reserves. The Loss Reserves as of December 31, 2006 have been
reviewed and certified by a nationally recognized actuarial firm. The
Loss Reserves in the December 31, 2006 Company SAP Statements (and any Company
SAP Statements thereafter) accurately reflect management’s estimate of the total
amount of all reasonably anticipated matured and unmatured claims and other
liabilities of the Company and the Insurance Company Subsidiary under all
insurance contracts under which any of the Company or the Insurance Company
Subsidiary has any liability (including any liability arising under or as
a
result of any reinsurance, coinsurance or other similar contract) on the
respective dates of such Insurance Company SAP Statement. The Company
owns assets that qualify as legal reserve assets under applicable insurance
Laws
in an amount at least equal to all such Loss Reserves. Except for
regular periodic assessments based on developments that are publicly known
within the insurance industry, to the knowledge of the Company, no claim
or
assessment is pending or threatened against the Company or any of its
subsidiaries which is peculiar or unique to the Company or such subsidiary
by
any state insurance guaranty association in connection with such association’s
fund relating to insolvent insurers.
(e) The
Company has made available to Parent a true and complete copy of any actuarial
reports prepared by actuaries, independent or otherwise, with respect to
the
Insurance Company Subsidiary since June 30, 2004, and all attachments, addenda,
supplements and modifications thereto.
Section
4.19 General
Insurance.
(a) The
Company and its subsidiaries maintain policies of general liability, fire
and
casualty, directors and officers, errors and omissions, and other forms of
insurance in such amounts, with such deductibles and against such risks and
losses as are reasonable, in the judgment of the Company, for the business
and
assets of the Company and its subsidiaries (the “Insurance
Policies”). All such Insurance Policies are in full force and effect,
all premiums due and payable thereon have been paid, and no notice of
cancellation or termination has been received with respect to any such Insurance
Policy which has not been replaced on substantially similar terms prior to
the
date of such cancellation. To the knowledge of the Company, the
activities and operations of the Company and its subsidiaries have been
conducted in a manner so as to conform in all material respects to all
applicable provisions of such Insurance Policies.
24
The
coverages and policy limits of the Insurance Policies maintained by the Company
and each of its subsidiaries during the last three (3) years are consistent,
in
all material respects, with the Insurance Policies currently in
effect.
(b) Schedule
4.19(b) of the Disclosure Letter sets forth a complete and correct list of
the
Insurance Policies, indicating for each policy the insurance company, type
of
coverage, annual premium and whether the terms of such policy provide for
retrospective premium adjustments, and, by year, for each of the current
policy
year and each of the three preceding policy years, the following:
(i) A
summary
of the loss experience under each Insurance Policy;
(ii) A
statement describing each claim under an Insurance Policy for an amount in
excess of $10,000, which identifies the Insurance Policy under which the
claim
was made and sets forth (A) the name of the claimant, and (B) the amount
and
brief description of the claim; and
(iii) A
statement describing the loss experience for all claims that were self-insured,
including the number and aggregate cost of such claims.
(c) The
premiums for the Insurance Policies have been paid in full, and no declaratory
judgment has been sought by any Person or entered by any court of competent
jurisdiction that denies or limits coverage (in whole or in part) under any
of
the Insurance Policies. There are no pending or, to the knowledge of
the Company, threatened claims against such Insurance Policies by or on behalf
of the Company or any of its subsidiaries as to which the insurers have denied
liability, and there exist no claims under such Insurance Policies or binders
that have not been properly and timely submitted by or on behalf of the Company
or its subsidiaries to its insurers.
Section
4.20 Certain
Contracts.
(a) The
documents listed in Item 13 of the Company’s Annual Report on Form 10-KSB for
the fiscal year ended December 31, 2006, as filed with the SEC and the
documents listed on Schedule 4.20(a) of the Disclosure Letter set forth all
written contracts, agreements, arrangements, commitments or understandings
and,
to the knowledge of Company, all oral contracts, agreements, arrangements,
commitments or understandings, to which the Company or any of its subsidiaries
is currently a party to or bound: (i) with respect to the employment
or other services of any directors or officers; or (ii) which, upon the
consummation of the transactions contemplated by this Agreement will (either
alone or upon the occurrence of any additional acts or events) result in
any
material payment (whether of severance pay or otherwise) becoming due from
the
Company, Parent, Purchaser, or any of their respective subsidiaries to any
director, officer or employee thereof; or (iii) which is a “material contract”
(as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC)
to be
performed after the date of this Agreement that has not been filed or
incorporated by reference in the SEC Documents, (iv) that concerns a partnership
or joint venture that is not consolidated with the Company for financial
reporting purposes; or (v) the purpose of which is to limit the ability of
the
Company or any of its subsidiaries to compete with respect to any product,
service or territory; or (vi) that is in the
25
nature
of
a collective bargaining agreement, employment agreement, consulting agreement
or
severance agreement that is not cancelable by the Company or any of its
subsidiaries without penalty or compensation on thirty (30) days notice or
less;
(vii) that is with any Insurance Regulator and restricts (A) distributions
or other payments to the shareholders of the Company or any of its subsidiaries,
(B) the continued operation of the Company or any of its subsidiaries, or
(C) any other material matter relating to the Company or any of its
subsidiaries and its affairs; or (viii) (including any stock option plan,
stock
appreciation rights plan, restricted stock plan or stock purchase plan) any
of
the benefits of which will be increased, or the vesting of the benefits of
which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement, or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement. The Company has made available to Parent correct and
complete copies of all of the contracts, agreements, commitments and
arrangements listed on Schedule 4.20(a) of the Disclosure
Letter. Each material contract, agreement, arrangement, commitment,
or understanding of the type described in Sections 4.20(a) and (b) of this
Agreement, whether or not set forth in the Disclosure Letter, is referred
to in
this Agreement as a “Company Contract.”
(b) Schedule
4.20(b) of the Disclosure Letter sets forth a list of, and the Company has
made
available to Parent correct and complete copies of, all written arrangements
(or
group of related written arrangements) from or to third persons, for the
furnishing of services to, or receipt of services by, the Company or any
of its
subsidiaries (including non-claim legal services, accounting services, risk
management services, agency agreements, managing general agent agreements,
reinsurance intermediary agreements and other distribution agreements, and
agreements relating to the sale or servicing of professional liability insurance
products offered by the Company or any of its subsidiaries) under which payments
were made during any calendar year since December 31, 2002 in excess of
$200,000. Schedule 4.20(b) of the Disclosure Letter sets forth a
list of all agency agreements, general agent and managing general agent
agreements, reinsurance intermediary agreements and other distribution
agreements, and agreements relating to the sale or servicing of professional
liability insurance products offered by the Company or any of its subsidiaries
that will not expire and cannot be canceled or terminated within one year,
to
which the Company or any of its subsidiaries is a party and under which payments
were made during any calendar year since December 31, 2002 in excess of
$200,000. To the knowledge of the Company, neither the Company nor
any of its subsidiaries is a party to any verbal contract, agreement or other
arrangement which if reduced to written form would be required to be listed
in
Schedule 4.20(b) of the Disclosure Letter under the terms of this Section
4.20(b).
(c) With
respect to each Company Contract: (i) such Company Contract is in
full force and effect, and is legally valid, binding and enforceable in
accordance with its terms, in all material respects except as enforceability
may
be limited by bankruptcy Laws and creditors’ rights generally; (ii) there
are no monetary defaults in excess of $5,000 and no material non-monetary
defaults by the Company or any of its subsidiaries, or, to the knowledge
of the
Company, any other party, under such Company Contract; (iii) neither the
Company nor any of its subsidiaries has received written notice of any default,
offset, counterclaim or defense under such Company Contract; (iv) to the
knowledge of the Company, no condition or event has occurred which with the
passage of time or the giving of notice or both would reasonably be expected
to
constitute a default or breach (that would be required to be disclosed under
clause (ii)) by the Company or any of its subsidiaries, or any other party
under
the terms of such
26
Company
Contract; (v) all security deposits, reserve funds, and other sums and charges
that have become due and payable under such Company Contract have been paid
in
full; and (vi) to the knowledge of the Company no party has repudiated any
provision of such Company Contract.
Section
4.21 Opinion
of Financial Advisor. The
Company has been advised by, and received a written opinion from, its financial
advisor, Xxxxx Xxxxx & Co. (the “Company Financial Advisor”), that in its
opinion, as of the date hereof, the Merger Price set forth herein is fair
to the
holders of Shares from a financial point of view and such opinion has not
been
changed, withdrawn or otherwise modified in any way.
Section
4.22 Change
in Control Payments. Neither
the Company nor any of its subsidiaries have any plans, programs or agreements
to which they are parties, or to which they are subject, pursuant to which
payments may be required or acceleration of benefits may be required upon
a
change of control of the Company.
Section
4.23 Questionable
Payments. Neither
the Company nor any of its subsidiaries, nor any of their respective current
directors or officers, and to the knowledge of the Company, former officers
or
directors or current or former employees, agents or representatives have
(i)
used any corporate funds for any illegal contributions, gifts, entertainment
or
other unlawful expenses relating to political activity, (ii) used any corporate
funds for any direct or indirect unlawful payments to any foreign or domestic
government officials or employees, (iii) violated any provision of the Foreign
Corrupt Practices Act of 1977, (iv) established or maintained any unlawful
or
unrecorded fund of corporate monies or other assets, (v) made any false or
fictitious entries on the books and records of the Company or any of its
subsidiaries, (vi) made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment of any nature, or (vii) made any material favor
or
gift which is not deductible for federal income tax purposes.
Section
4.24 Michigan
Acts. Assuming
that none of the Parent, the Purchaser or any of their affiliates is an
“interested shareholder” under Chapter 7A of the MBCA, neither Chapter 7A or
Chapter 7B of the MBCA will apply to this Agreement or any of the transactions
contemplated by this Agreement.
Section
4.25 Broker’s
Fees. Except
for fees payable to the Company Financial Advisor, neither the Company nor
any
of its subsidiaries has incurred any liability for any broker’s fees,
commissions or financial advisory or finder’s fees in connection with any of the
transactions contemplated by this Agreement, and neither the Company nor
any of
its subsidiaries has employed any broker, finder or financial advisor other
than
the Company Financial Advisor in connection with any of the transactions
contemplated by this Agreement.
Section
4.26 No
Other Representations or Warranties. Except
for the express representations and warranties contained in this Article
IV,
none of the Company, its subsidiaries or any other person makes, or shall
be
deemed to have made, any other representation or warranty, express or implied,
on behalf of the Company or any of its subsidiaries or other
affiliates. Without limiting the generality of the foregoing, and
notwithstanding any representation and warranty made by the Company in this
Article IV, none of the Company, any of its subsidiaries or any other person
makes any representation or warranty with respect to (a) any projections,
estimates or budgets delivered or made available to Parent, the Purchaser
or
any
27
of
their
respective representatives at any time with respect to future revenues, expenses
or expenditures or future results of operations, or (b) except as expressly
covered by any representation and warranty contained in this Article IV,
any
other information or documents (financial or otherwise) made available to
Parent, the Purchaser or any of their respective representatives, including
the
information memorandum, whether on, before or after the date of this
Agreement.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF PARENT AND THE PURCHASER
Parent
and the Purchaser represent and warrant to the Company as follows:
Section
5.1 Organization. Each
of Parent and the Purchaser is a corporation duly organized, validly existing
and in good standing under the Laws of its state of incorporation and each
of
Parent and the Purchaser has all requisite corporate power and authority
necessary to own, lease and operate its properties and to carry on its business
as now being conducted. Purchaser is a wholly-owned subsidiary of
Parent. None of the Parent, the Purchaser or any of their affiliates
is an “interested shareholder” under Chapter 7A of the MBCA.
Section
5.2 Authority. Each
of Parent and the Purchaser has all requisite corporate power and authority
to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly and
validly authorized and approved by the Board of Directors of each of Parent
and
the Purchaser and by Parent as the ultimate holding company of the Purchaser,
and no other corporate proceedings are necessary to authorize or adopt this
Agreement or the consummation of the transactions contemplated
hereby. This Agreement has been duly and validly executed and
delivered by each of Parent and the Purchaser and, assuming this Agreement
constitutes a legal, valid and binding agreement of the Company, it constitutes
a legal, valid and binding agreement of each of Parent and the Purchaser,
enforceable against each of them in accordance with its terms, except that
(a)
such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws, now or hereafter in effect,
relating to creditors’ rights generally and (b) equitable remedies of specific
performance and injunctive and other forms of equitable relief may be subject
to
equitable defenses and to the discretion of the court before which any
proceeding therefore may be brought.
Section
5.3 No
Violations; Consents and Approvals.
(a) None
of
the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby or the compliance by Parent or the Purchaser
with any of the provisions hereof will (i) violate any provision of their
respective organizational documents, (ii) result in a violation or breach
of, or
constitute (with or without due notice or lapse of time or both) a default,
or
give rise to any right of termination, cancellation or acceleration or any
right
which becomes effective upon the occurrence of a merger, under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture or
other
instrument of indebtedness for money borrowed to which Parent or the Purchaser
is a party, or by which Parent or the Purchaser or any
28
of
their
respective properties is bound, (iii) result in a violation or breach of,
or
constitute (with or without due notice or lapse of time or both) a default,
or
give rise to any right of termination, cancellation or acceleration or any
right
which becomes effective upon the occurrence of a merger, under any of the
terms,
conditions or provisions of any license, franchise, permit or agreement to
which
Parent or the Purchaser is a party, or by which Parent or the Purchaser or
any
of their respective properties is bound, or (iv) conflict with or violate
any
Laws by which Parent or the Purchaser or any of its respective properties
is
bound, excluding from the foregoing clauses (ii), (iii) and (iv) violations,
breaches, defaults or rights which would not reasonably be expected to have
a
material adverse effect on Parent’s or the Purchaser’s ability to perform their
respective obligations under this Agreement or consummate the Merger (a “Parent
Material Adverse Effect”) or the approval of Insurance Regulators described in
Section 7.1(b).
(b) No
filing
or registration with, notification to, or authorization, consent or approval
of,
any Governmental Authority is required by Parent or the Purchaser in connection
with the execution and delivery of this Agreement, or the consummation by
Parent
or the Purchaser of the transactions contemplated hereby, except (i) in
connection, or in compliance, with the provisions of the Exchange Act, (ii)
the
filing of the Certificate of Merger with the Michigan Department of Labor
and
Economic Growth, (iii) the filing of applications, notices and forms with,
and
the obtaining of approvals from, any applicable Governmental Authorities
regulating transactions involving insurance companies, agencies or underwriters
with respect to the transactions contemplated by this Agreement, and (iv)
such
other consents, orders, authorizations, registrations, declarations and filings
not obtained prior to the Effective Time the failure of which to be obtained
or
made would not prevent consummation of the Merger, or otherwise prevent the
Parent or the Purchaser from performing its obligations under this Agreement,
and would not otherwise reasonably be expected to have a Parent Material
Adverse
Effect.
Section
5.4 Financing. Parent
has adequate financial resources to pay the Merger Price in full as required
by
Sections 2.1 and 3.1 of this Agreement and to pay all other costs to be paid
by
Parent and the Purchaser, as applicable, under this Agreement.
Section
5.5 Broker’s
Fees. Neither
Parent nor the Purchaser has incurred any liability for any broker’s fees,
commissions or financial advisory or finder’s fees in connection with any of the
transactions contemplated by this Agreement, and neither Parent nor the
Purchaser has employed any broker, finder or financial advisor in connection
with any of the transactions contemplated by this Agreement.
ARTICLE
VI
COVENANTS
Section
6.1 Conduct
of Business of the Company. The
Company covenants and agrees that, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, unless Parent shall otherwise agree in writing, the
Company shall conduct its business and shall cause the businesses of its
subsidiaries to be conducted only in, and the Company and its subsidiaries
shall
not take any action except in, the ordinary course of business and in a manner
consistent with past practice other than actions taken by the Company or
its
subsidiaries in contemplation of the Merger; and the Company shall
29
use
its
reasonable commercial efforts to preserve substantially intact the business
organization of the Company and its subsidiaries, to keep available the services
of the present officers, employees and consultants of the Company and its
subsidiaries, to file all required reports and statements with the SEC, state
securities regulators and Insurance Regulators, and to preserve the present
relationships of the Company and its subsidiaries with customers, suppliers,
agents, brokers, insurers and other persons with which the Company or any
of its
subsidiaries has significant business relations. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in
this
Agreement, prior to the Effective Time, the Company shall not, and shall
cause
its subsidiaries not to, without the prior written consent of Parent or the
Purchaser:
(a) amend
or
propose to amend its organizational documents;
(b) authorize
for issuance, issue, sell, deliver or agree or commit to authorize, issue,
sell
or deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of
any
class or any other securities or equity equivalents, or amend any of the
terms
of any such securities or agreements outstanding as of the date
hereof;
(c) split,
combine or reclassify any shares of its capital stock, declare, set aside
or pay
any dividend or other distribution (whether in cash, stock or property or
any
combination thereof) in respect of its capital stock or redeem or otherwise
acquire any of its securities, other than any dividend or other distribution
to
the Company by any of its subsidiaries;
(d) except
in
the ordinary course of business consistent with past practice (including
selling
professional liability insurance), (i) incur, assume or prepay any long-term
or
short-term debt or issue any debt securities, except for borrowings under
existing lines of credit or prepayments in the ordinary course of business;
(ii)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for any material obligations of any
other
person, except for obligations of any subsidiary of the Company; (iii) make
any
material loan, advance or capital contribution to, or investment in, any
other
person (other than to any subsidiary of the Company or any customary loan
or
advance to employees related to advancement of expenses or 401(k) loans,
and not
to exceed $10,000 in the aggregate); (iv) pledge or otherwise encumber shares
of
capital stock of the Company or any of its subsidiaries; or (v) mortgage
or
pledge any of its assets, tangible or intangible, or create or suffer to
exist
any material Lien thereupon;
(e) except
as
may be required by Law, enter into, adopt, amend or terminate any bonus,
profit
sharing, compensation, severance, termination, stock option, stock appreciation
right, restricted stock, performance unit, stock equivalent, stock purchase
agreement, pension, retirement, deferred compensation, employment, severance
or
other employee benefit agreement, trust, plan, fund or other arrangement
for the
benefit or welfare of any director, officer or employee in any manner, or
(except for normal increases in the ordinary course of business that, in
the
aggregate, do not result in a material increase in benefits or compensation
expense to the Company, or except as required under any existing agreement,
plan
or arrangement) increase in any manner the compensation or fringe benefits
of
any director, officer or employee or pay any benefit not required by any
agreement, plan and arrangement as in effect as of the date hereof;
30
(f) acquire,
sell, lease, encumber or dispose of any assets of the Company or any of its
subsidiaries (except for (i) dispositions of obsolete or worthless assets,
(ii)
sales of immaterial assets not in excess of $50,000 in the aggregate, and
(iii)
encumbrances created under existing secured lending arrangements on assets
acquired after the date of this Agreement), enter into any contract, agreement
or transaction outside the ordinary course of business consistent with past
practice, or modify, amend, terminate or waive any material rights under
any
material contract or agreement;
(g) except
as
may be required as a result of a change in Law or in generally accepted
accounting principles (after consultation with Parent as to the effect of
any
such change), change any of the accounting principles or practices, any
actuarial methodologies (other than any changes to such methodologies used
by
the Company’s actuaries twice a year in setting annual Loss Reserve picks and
consistent with generally accepted actuarial practice), or any pricing policy
or
reserving policy used by it or any of its subsidiaries;
(h) acquire
(i) by merger, consolidation, acquisition of stock or assets or otherwise
any
corporation, partnership or other business organization or division thereof
or
(ii) any equity interest therein other than any investment made in ordinary
course of business;
(i) revalue
in any material respect any of its assets, including writing off notes or
accounts receivable;
(j) except
as
required as a result of a change in Law, make or change any Tax election,
change
a Tax accounting period, adopt or change any Tax accounting method, file
any
amended Tax Return, enter into any Tax closing agreement, settle any Tax
claim
or assessment relating to the Company or any of its subsidiaries, surrender
any
right to claim a refund of Taxes, consent to extension or waiver of the statute
of limitations applicable to any Tax, or take any similar action;
(k) pay,
discharge or satisfy any claim, liability or obligation (whether absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business consistent
with past practice of liabilities reflected or reserved against in the
consolidated financial statements (including the notes thereto) of the Company
and its subsidiaries contained in SEC Reports filed prior to the date of
this
Agreement or incurred in the ordinary course of business consistent with
past
practice;
(l) settle
or
compromise any pending or threatened suit, action or claim relating to the
transactions contemplated hereby or material to the Company and its subsidiaries
taken as a whole;
(m) authorize
any new capital expenditure which when aggregated with all other new capital
expenditures causes all such new capital expenditures to exceed
$75,000;
(n) offer
insurance of a type or in a jurisdiction materially different from the types
and
jurisdictions for which they offer insurance on the date of this Agreement;
or
(o) take,
or
agree in writing or otherwise to take, any of the actions described in Section
6.1(a) through (n) above, or any action which would reasonably be expected
to
make any
31
of
the
representations or warranties of the Company contained in this Agreement
untrue
or incorrect or prevent the Company, subject to the terms and conditions
of this
Agreement, from performing or cause the Company not to perform its covenants
hereunder.
Section
6.2 No
Solicitation.
(a) The
Company and its subsidiaries shall, and shall direct their officers, directors,
employees, representatives and agents (“Representatives”) to, immediately cease
any existing discussions and negotiations with any parties conducted before
the
date of this Agreement with respect to any Acquisition Transaction, and request
that all non-public information concerning the Company and its subsidiaries
provided by the Company or its subsidiaries with respect to the evaluation
of an
Acquisition Transaction and in the possession of such persons and their
affiliates, representatives and advisors be returned to the Company or
destroyed. Prior to the Effective Time, the Company and its
subsidiaries shall not, and shall not authorize or permit any of its
subsidiaries or any of their Representatives, directly or indirectly, to,
solicit, initiate, facilitate or encourage (including by way of furnishing
or
disclosing non-public information, or waiving of any standstill provisions
or
agreements) any inquiries or the making of any proposal with respect to an
Acquisition Transaction or negotiate, explore or otherwise engage in substantive
communications in any way with any person (other than with respect to the
Merger
and the other transactions contemplated by this Agreement) with respect to
any
Acquisition Transaction, or enter into any agreement, contract or arrangement
requiring it to abandon, terminate or fail to consummate the Merger or any
other
transactions contemplated by this Agreement. “Acquisition
Transaction” means any offer or proposal for, or any inquiry or indication of
interest in, (i) any sale, lease, exchange, mortgage, transfer or other
disposition of 10% or more of the consolidated assets of the Company and
its
subsidiaries, (ii) any acquisition or purchase of an equity interest in the
Company representing in excess of 10% of the power to vote for the election
of
the directors of the Company, or any tender offer or exchange offer for equity
securities of the Company, (iii) any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company, or any of its subsidiaries whose assets, individually
or
in the aggregate, constitute more than 10% of the consolidated assets of
the
Company, (iv) a plan of liquidation or extraordinary dividend relating to
more
than 10% of the Company’s total assets, (v) the repurchase by the Company or any
of its subsidiaries of more than 10% of the outstanding Shares or (vi) any
other
transaction similar to any of the foregoing, in each case other than the
transactions with Parent or the Purchaser contemplated by this
Agreement.
(b) Notwithstanding
Section 6.2(a), the Company may negotiate or otherwise engage in discussions
with, and furnish non-public information to, any Person in response to an
unsolicited, bona fide third party written proposal by such Person, not
resulting from a breach of this Section 6.2, if (i) the Board determines
in good
faith after consultation with and advice from the Company Financial Advisor
or
financial advisor of nationally or regionally recognized reputation, that
such
proposal is reasonably likely to result in a Superior Proposal, (ii) such
Person
executes a confidentiality agreement no less favorable to the Company than
the
Confidentiality Agreement (including the standstill provisions thereof) and
including therein a restriction on such Person from, without the prior written
consent of the Board, proposing or entering into any Acquisition Transaction,
making, or in any way participating, directly or indirectly, in any solicitation
of, or request for, proxies, consents or authorizations to vote, or
32
seeking
to advise or influence any person with respect to the voting of any voting
securities of the Company, taking any action that might require the Company
to
make a public announcement regarding the possibility of any of the foregoing
or
requesting the Company to amend or waive any of the foregoing (the “Third Party
Confidentiality Agreement”) and the Company does not agree to waive the terms of
the Third Party Confidentiality Agreement (except that any approval or consent
of the Company or the Board of any action that, under the standstill provisions
of the Third Party Confidentiality Agreement, requires the Company’s or Board’s
approval or consent shall not be, and shall not be deemed to be, a waiver
of any
terms of the Third Party Confidentiality Agreement), and (iii) the Board
determines in good faith after receiving the advice of outside legal counsel
that the failure to engage in such negotiation or discussions or provide
such
information would be inconsistent with the Board’s fiduciary duties under
applicable Law.
(c) The
Company (i) shall notify Parent of any Acquisition Transaction (including,
without limitation, the material terms and conditions thereof and the identity
of the Person making it) as promptly as practicable (but in no case later
than
24 hours after its receipt, and in any event before providing any information
to
or entering into discussions or negotiations with any Person in connection
with
the Acquisition Transaction); (ii) unless restricted by contract, shall promptly
provide Parent with a copy of any written Acquisition Transaction or amendments
or supplements thereto; (iii) shall promptly inform Parent of the status
of any
discussions or negotiations with such Person and any material changes to
the
terms and conditions of such Acquisition Transaction; and (iv) shall promptly
deliver to Parent a copy of any information delivered by the Company to such
Person which has not previously been delivered by the Company to
Parent.
(d) Except
as
permitted by the second sentence of this Section 6.2(d), neither the Board
nor
any committee thereof shall (1) withdraw or modify, or publicly propose to
withdraw or modify, in a manner adverse to Parent, its recommendation of
this
Agreement and the Merger and that its shareholders vote in favor of this
Agreement and the Merger, or take any action not explicitly permitted by
this
Agreement that would be inconsistent with its approval of this Agreement
and the
Merger, (2) approve or recommend, or publicly propose to approve or recommend,
any Acquisition Transaction or (3) cause the Company to enter into any letter
of
intent, agreement in principle, acquisition agreement or similar agreement
or
document (other than a Third Party Confidentiality Agreement as permitted
under
Section 6.2(b)) related to any Acquisition
Transaction. Notwithstanding the foregoing, the Board shall be
permitted (1) not to recommend, and publicly propose not to recommend, to
its
shareholders approval and adoption of this Agreement and the Merger, (2)
to
withdraw or modify, and publicly propose to withdraw or modify, in a manner
adverse to Parent, its recommendation to its shareholders, (3) to approve
or
recommend, and publicly propose to approve and recommend, any Superior Proposal
or (4) to terminate this Agreement in accordance with Section 8.3(a) below
and
in connection therewith enter into an agreement with respect to such Superior
Proposal, but only if (y) the Company has received an Acquisition Transaction
which the Board reasonably determines in good faith after consultation with
and
advice from the Company Financial Advisor or other financial advisor of
nationally or regionally recognized reputation constitutes a Superior Proposal
and (z) the Board determines in good faith, after receiving the advice of
outside legal counsel, that the failure to take such action would be
inconsistent with the Board’s fiduciary duties under applicable Law;
provided, however, that any termination of this Agreement by the
Company pursuant to Section
33
8.3(a)
below shall be void and of no force or effect unless, within the applicable
time
periods set forth in Section 8.6(b), the Company pays to Parent the Expense
Payment, the Initial Fee and the Final Fee in accordance with Section 8.6(b);
and provided, further, that the Company shall not exercise its
right to terminate this Agreement and the Board shall not take any of the
actions set forth above unless the Company shall have delivered to Parent
a
prior written notice advising Parent that the Company or its Board intends
to
take such action with respect to a Superior Proposal, specifying in reasonable
detail the material terms and conditions of the Superior Proposal, this notice
to be delivered not less than four Business Days prior to the time the action
is
taken, and, during this four Business Day period, the Company and its advisors
shall negotiate in good faith with Parent to make such adjustments in the
terms
and conditions of this Agreement (“Modified Merger Agreement”) such that such
other proposal would no longer constitute a Superior Proposal and shall accept
the Modified Merger Agreement if the other proposal is no longer a Superior
Proposal.
(e) For
purposes of this Agreement, “Superior Proposal” means any bona fide, third party
written proposal not solicited by the Company or any of its subsidiaries
or any
of their Representatives, nor otherwise resulting from a breach of this Section
6.2, nor made in breach of the Third Party Confidentiality Agreement, relating
to any acquisition of more than fifty percent (50%) of the Company and its
subsidiaries taken as a whole, by means of a merger, consolidation, share
exchange or other business combination involving the Company and its
subsidiaries, or acquisition of more than fifty percent (50%) of the assets
or
capital stock of the Company and its subsidiaries, taken as a whole, which
contains no financing contingency or for which the financing is determined
by
the Board to be reasonably available to the offeror, and which the Board
determines in good faith, after consultation with and advice from the Company
Financial Advisor or other financial advisor of nationally or regionally
recognized reputation, and taking into account all the terms and conditions
of
the proposal, is more favorable to the Company’s shareholders (in their
capacities as shareholders) from a financial point of view than this Agreement
and Merger, as supplemented by the Modified Merger Agreement, and is reasonably
likely to be consummated on the terms set forth in the proposal, taking into
account all legal, financial, regulatory and other aspects of the proposal
determined relevant by the Board.
(f) Except
in
connection with a termination of this Agreement in accordance with the terms
of
this Agreement, the Company shall not take any action to exempt any Person
from
the restrictions on “business combinations,” “control share acquisitions,”
“takeover offers” or similar provisions contained in Chapter 7A or Chapter 7B of
the MBCA or the Company’s articles of incorporation, or otherwise cause such
restrictions not to apply unless such actions are taken simultaneously with
a
termination of this Agreement in accordance with the terms of this
Agreement.
(g) The
Company agrees that any violations of the restrictions set forth in this
Section
6.2 by any Representative of the Company or any of its subsidiaries shall
be
deemed to be a breach of this Section 6.2 by the Company.
34
Section
6.3 Insurance
Regulatory Filings.
(a) The
parties hereto understand and agree that Parent will be required to file
certain
documents and obtain certain approvals in order to complete the transactions
contemplated hereby, which filings and approvals include notice on Form A
and
Form E, if applicable, to be filed with Insurance Regulators in support of
Parent’s request for approval of a change in control of the Company and its
subsidiaries (the “Insurance Filings”). Each party covenants and
agrees that all information furnished by it for inclusion in the Insurance
Filings will not contain any untrue statement of material fact or omit to
state
any material fact required to be stated therein.
(b) Parent
shall use its reasonable best efforts to file all Insurance Filings and obtain
the approval of the necessary Insurance Regulators to the transactions
contemplated herein as soon as reasonably practicable, including giving notice
of any public hearing regarding the Merger to any persons required by such
Insurance Regulators in the manner prescribed by such authorities, having
its
representatives attend the public hearings of such authorities and testify
at
such hearings, if required, and submitting such information as may be reasonably
available pursuant to the requests by such Insurance Regulators authorities
in
connection with such hearings. In furtherance of the foregoing,
Parent shall use its reasonable best efforts to file the Form A and Form
E, if
applicable, with the Insurance Regulators of the State of Michigan no later
than
10 Business Days after the date of this Agreement. The Company shall
reasonably cooperate and coordinate with Parent, at Parent’s expense, in
providing all information necessary to complete the Insurance Filings and
in
obtaining the approval of the necessary Insurance Regulators to the transactions
contemplated herein.
Section
6.4 Proxy
Statement; Shareholder Meeting.
(a) As
soon
as practicable following the date of this Agreement, the Company shall
prepare, with the assistance and input of Parent, and file with the SEC,
and
Parent shall reasonably cooperate with the Company in the preparation and
filing
of, a proxy statement relating to the adoption of this Agreement and the
approval of the transactions contemplated hereby by the shareholders of the
Company (the “Proxy Statement”) and shall use its commercially reasonable
efforts to have the Proxy Statement cleared by the SEC as promptly as
practicable after such filing. The Company hereby represents and
warrants that the Proxy Statement will comply with the requirements of the
Exchange Act and the rules and regulations related thereto in all material
respects, and will not contain any untrue statement of a material fact or
omit
to state a material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representation or warranty
with respect to any information that Parent or the Purchaser will supply
specifically for use in the Proxy Statement. The Company shall notify
Parent promptly of the receipt of any comments from the SEC and of any request
by the SEC for amendments or supplements to the Proxy Statement and will
use its
reasonable best efforts to respond promptly to and resolve such comments
or
requests. The Company will promptly provide to Parent copies of all
correspondence between it, or any of its Representatives, and the SEC with
respect to the Proxy Statement. Parent and the Purchaser shall cooperate
with
the Company in the preparation of, and furnish all information concerning
it
required to be included in, the Proxy Statement. The Company shall cause
the
Proxy Statement to be mailed to the Company’s shareholders as promptly as
practicable after it is cleared by the SEC.
35
(b) The
Company shall call a meeting of its shareholders in accordance with applicable
Laws for the purpose of voting upon the adoption of this Agreement and approval
of the transactions contemplated hereby (the “Shareholder Meeting”) as soon as
practicable after the date hereof, and shall use its reasonable best efforts
to
hold the Shareholder Meeting not later than September 15,
2007. Subject to Section 6.2, the Board shall recommend and declare
advisable such adoption and approval (which recommendation the Company shall
include in the Proxy Statement) and shall use its reasonable best efforts
(which
shall not be deemed to require the Company to engage any proxy solicitation
or
public relations firms) to obtain, such adoption and approval. Parent
shall vote or cause to be voted at the Shareholder Meeting (and any adjournment
thereof) all shares of common stock beneficially owned by Parent or any of
its
subsidiaries in favor of the adoption of this Agreement and approval of the
transactions contemplated hereby.
(c) Without
limiting the generality of the foregoing provisions of this Section, subject
to
Section 6.2(d), the Company agrees that its obligations pursuant to this
Section
shall not be affected by (i) the commencement, public proposal, public
disclosure or communication to the Company of an Acquisition Transaction
or (ii)
the withdrawal or modification by the Board of its approval or recommendation
of
this Agreement or the Merger.
Section
6.5 Access
to Information. From
the date of this Agreement until the Effective Time, (i) the Company shall
give
Parent and its authorized representatives (including counsel, financial
advisors, accountants, banks, financial institutions, actuaries and auditors)
full access, during normal business hours to all facilities and operations
and
to all books and records of the Company and its subsidiaries, shall permit
Parent to make such inspections as it may reasonably request and shall cause
its
officers and those of its subsidiaries to promptly furnish Parent with such
financial and operating data and other information with respect to its business
and properties as Parent may from time to time reasonably request and (ii)
the
Company shall, and shall cause each of its subsidiaries to, furnish promptly
to
Parent (a) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of federal
or state securities Laws, (b) a copy of each report or other document filed
with
or otherwise provided to or received from a Governmental Authority or its
staff,
(c) a copy of each report or other document filed with or otherwise provided
to
or received from a rating agency or its staff and (d) all other information
concerning its business, properties and personnel as Parent may reasonably
request. All such information shall be held in confidence in
accordance with the terms of the Confidentiality Agreement (the “Confidentiality
Agreement”) between Parent and the Company dated March 15, 2007, the terms of
which are hereby incorporated herein and shall survive the termination of
this
Agreement. Parent and the Purchaser shall not, and Parent shall cause
its other subsidiaries and affiliates to not, without the prior written consent
of the Board, propose to enter or enter into any Acquisition Transaction
(except
the Merger pursuant to this Agreement), make or in any way participate, directly
or indirectly, in any solicitation of, or request for, proxies, consents
or
authorizations to vote, or seek to advise or influence any person with respect
to the voting of any voting securities of the Company, take any action that
might require the Company to make a public announcement regarding the
possibility of any of the foregoing or request the Company to amend or waive
any
of the foregoing.
36
Section
6.6 Reasonable
Best Efforts, Other Actions. Subject
to the terms and conditions herein provided and applicable Law, each of the
Company, Parent and the Purchaser shall use its reasonable best efforts promptly
to take, or cause to be taken, all other actions and do, or cause to be done,
all other things necessary, proper or appropriate under applicable Laws to
consummate and make effective the transactions contemplated by this Agreement,
including all applications, notices and forms to be filed with, and the
approvals to be obtained from, any applicable Governmental Authorities
regulating the Company and its subsidiaries, including under applicable
insurance Laws, with respect to the transactions contemplated by this
Agreement. If any court or Governmental Authority issues an order,
decree or ruling or takes any other action restraining, enjoining or otherwise
prohibiting the Merger or any of the other transactions contemplated by this
Agreement, each of the parties hereto shall use its reasonable best efforts
to
remove or lift such order, decree or ruling. In furtherance of the
foregoing, each of the Company, Parent and the Purchaser agree to use their
reasonable best efforts to consummate the Merger within five days after receipt
of the latter of Company Shareholder Approval or the approval of Insurance
Regulators described in Section 7.1(b).
Section
6.7 Public
Announcements. Before
issuing any press release or otherwise making any public statements with
respect
to this Agreement or the Merger, Parent, the Purchaser and the Company shall
consult with each other as to its form and substance (including providing
the
opportunity to review and comment on such release or statement) and shall
not
issue any such press release or make any such public statement prior to such
consultation, except in either case as may be required by Law or any obligations
pursuant to the rules and regulations issued by the SEC, the National
Association of Securities Dealers, Inc., the New York Stock Exchange or the
NASDAQ Stock Market, Inc., if it has used its reasonable best efforts to
consult
with the other party prior thereto. Parent, the Purchaser and the
Company shall mutually agree as to the form and content of any initial press
release or public statement with respect to this Agreement or the Merger
prior
to issuance.
Section
6.8 Notification
of Certain Matters. Each
of the Company and Parent shall give prompt notice to the other party of
(a) the
occurrence or non-occurrence of any event the occurrence or non-occurrence
of
which would be reasonably likely to cause either (i) any representation or
warranty of any party contained in this Agreement to be untrue or inaccurate
in
any material respect at any time from the date hereof to the Effective Time,
or
(ii) any condition set forth in Article VII to be unsatisfied at any time
from
the date hereof to the Effective Time, and (b) any material failure of the
Company, Parent or the Purchaser, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by
it
hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.8 shall not limit or otherwise affect the remedies available
hereunder to the Company, Parent or the Purchaser. The Company shall
update the Disclosure Letter (the “Updated Disclosure Letter”) to a date that is
no earlier than 10 Business Days prior to the Effective
Time and no later than one Business Day prior to the Effective Time and shall
deliver the Updated Disclosure Letter to the Parent and the Purchaser not
less
than one Business Day prior to the Effective Time; provided, however,
that the Updated Disclosure Letter shall have no effect on the representations
or warranties of the Company made as of the date of this Agreement or the
conditions to the obligations of Parent and the Purchaser under this Agreement
relating to the accuracy of such representations and warranties made as of
such
date.
37
Section
6.9 Indemnification
and Insurance.
(a) From
and
after the Effective Time, Parent and the Surviving Corporation shall indemnify,
defend and hold harmless, and Parent shall cause the Surviving Corporation
(including, if necessary, providing the Surviving Corporation with sufficient
funds) to indemnify, defend and hold harmless, each person who is now, or
has
been at any time prior to the date hereof or who becomes prior to the Effective
Time, an officer, director, employee or agent of the Company or any of its
subsidiaries (the “Indemnified Parties”) against all losses, claims, damages,
expenses (including reasonable legal fees and expenses), liabilities or
judgments or amounts that are paid in settlement with the approval of the
indemnifying party (which approval shall not be unreasonably withheld or
delayed) incurred based in whole or in part on or arising in whole or in
part
out of actions or omissions or alleged actions or omissions occurring at
or
prior to the Effective Time to the same extent and on the same terms and
conditions (including with respect to advancement of expenses) provided for
in
the Company’s articles of incorporation and bylaws and agreements in effect at
the date hereof (to the extent consistent with applicable Law).
(b) For
a
period of six years after the Effective Time, Parent shall maintain in effect,
and shall cause the Surviving Corporation to maintain in effect, without
any
lapses of coverage, the current policies of directors’ and officers’ liability
insurance maintained by the Company (provided that Parent may substitute
therefore policies of at least the same coverage and amounts containing terms
and conditions which are no less advantageous) with respect to claims arising
in
whole or in part from facts or events which occurred before the Effective
Time
(the “Continuation Coverage”). Alternatively, Parent may obtain and
fully pay for a “tail” insurance policy (providing only for coverage for
indemnified directors and officers where the existing policies also include
coverage for the Company) with a claims period of at least six years after
the
Effective Time with the same coverage and amounts, and containing terms and
conditions which are no less advantageous then the Company’s current policies
with respect to claims arising in whole or in part from facts or events which
occurred before the Effective Time (the “Tail Coverage”). Parent
shall not be obligated to make annual premium payments for any Continuation
Coverage to the extent such premiums exceed 200% of the annual premiums paid
as
of the date hereof by the Company for its current policies of directors’ and
officers’ liability insurance or, if Parent elects to obtain Tail Coverage, it
shall not be obligated to pay an aggregate premium payment for such Tail
Coverage in excess of 300% of the annual premiums paid as of the date hereof
by
the Company for its current policies of directors’ and officers’ liability
insurance (the “Maximum Amount”). If the amount of the premiums
necessary to maintain or procure such insurance coverage exceeds the Maximum
Amount, Parent and the Surviving Corporation shall, and Parent shall cause
the
Surviving Corporation to, maintain the most advantageous policies of directors’
and officers’ insurance obtainable for an annual premium equal to the Maximum
Amount. Notwithstanding the foregoing, Parent may not elect to obtain
Tail Coverage in lieu of Continuation Coverage if Parent applies the limitation
in the immediately preceding sentence and the Tail Coverage would be less
advantageous to the Company’s directors and officers than the Continuation
Coverage.
(c) The
provisions of this Section 6.9 shall survive the consummation of the Merger
and
are intended to be for the benefit of, and shall be enforceable by, each
Indemnified Party, and their respective heirs, legal representatives, successors
and assigns. The rights of each Indemnified Party under this Section
6.9 shall be in addition to any rights such Indemnified Party
38
may
have
under the articles or incorporation and bylaws of the Company or any of its
subsidiaries or applicable Law.
(d) The
obligations of Parent and the Surviving Corporation under this Section 6.9
shall
be joint and several. If Parent, the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any
other
Person and is not the surviving entity of such consolidation or merger, or
(ii)
transfers all or substantially all of its assets to any Person, then in each
such case, proper provision shall be made so that the surviving entity or
such
Person assumes in full the obligations set forth in this Section
6.9.
Section
6.10 Expenses. Except
as set forth in Sections 6.3 and 8.6, Parent, the Purchaser and the Company
shall each bear their respective expenses incurred in connection with this
Agreement and the Merger, including the preparation, execution and performance
of this Agreement, the Proxy Statement and regulatory filings, proxy
solicitation costs and regulatory fees, and the transactions contemplated
hereby, and all fees and expenses of investment bankers, finders, brokers,
agents, representatives, counsel and accountants.
Section
6.11 Obligations
of the Purchaser. Parent
shall take all action necessary to cause the Purchaser to perform its
obligations under this Agreement and to consummate the Merger on the terms
and
conditions set forth in this Agreement. To the extent required by
applicable Law or any Governmental Authority, Parent will cause the Company
or
the Insurance Company Subsidiary, as applicable, to redeem the outstanding
5.25%
surplus certificates previously issued by the Insurance Company Subsidiary,
including any interest thereon.
Section
6.12 401(k)
Plan. If
requested by the Parent no later than five Business Days before the Effective
Time, the Company shall terminate the Professionals Direct, Inc. 401(k) Plan
(the “Company Plan”) immediately prior to the Effective Time. Subject to
Parent’s reasonable satisfaction that the Company Plan is tax qualified upon
termination, if the Company Plan is terminated, as soon as reasonably
practicable after the Effective Time, the Parent shall ensure that a qualified
retirement plan of Parent or any of its affiliates will accept rollover
contributions from the Company Plan on behalf of employees of the Company
and
its subsidiaries. As soon as reasonably practicable after receipt of a favorable
determination letter from the IRS with respect to the termination of the
Company
Plan, if necessary (as determined by Parent in its reasonable discretion),
the
assets of the Company Plan shall be distributed to the participants or
beneficiaries thereof or transferred pursuant to an eligible rollover
distribution as a participant or beneficiary may direct (including a rollover
into a qualified retirement plan of Parent or any of its
affiliates).
ARTICLE
VII
CONDITIONS
TO THE OBLIGATIONS OF PARENT, THE PURCHASER AND THE COMPANY
Section
7.1 Conditions
to Obligation of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject
to
the satisfaction at or prior to the Effective Time of all of the following
conditions:
39
(a) Shareholder
Approval. This Agreement and the Merger shall have been approved
and adopted by the requisite vote of the shareholders of the
Company.
(b) Insurance
Regulatory Authority Approvals. The completion of all filings
with, and receipt of all approvals by, the Commissioner of Insurance of the
State of Michigan and the Office of Financial and Insurance Services of the
Michigan Department of Labor and Economic Growth (the “Michigan Insurance
Regulators”) that are legally required to consummate the Merger, this Agreement
and all transactions contemplated hereby.
(c) No
Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order, or other legal
restraint or prohibition issued by any court of competent jurisdiction in
the
United States preventing the consummation of the Merger shall be in effect,
nor
shall any proceeding brought by any administrative agency or commission or
other
Governmental Authority in the United States seeking any of the foregoing
be
pending; and there shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal.
(d) Governmental
Actions. There shall not have been instituted, pending or
threatened any action or proceeding (or any investigation or other inquiry
that
would likely result in such an action or proceeding) by any Governmental
Authority before any Governmental Authority or court of competent jurisdiction
in the United States, nor shall there be in effect any judgment, decree or
order
of any Governmental Authority or court of competent jurisdiction in the United
States (including the insurance regulatory approvals described in Section
7.1(b)), in either case, seeking to prohibit or limit Parent from exercising
all
material rights and privileges pertaining to its ownership of the Surviving
Corporation or the ownership or operation by Parent or any of its subsidiaries
of all or a material portion of the business or assets of Parent or any of
its
subsidiaries, or seeking to compel Parent or any of its subsidiaries to dispose
of or hold separate all or any material portion of the business or assets
of
Parent or any of its subsidiaries (including the Surviving Corporation and
its
subsidiaries), or imposing any materially burdensome conditions or restrictions
on Parent, the Company or their subsidiaries, as a result of the Merger or
the
transactions contemplated by this Agreement.
Section
7.2 Additional
Conditions to Obligations of Parent and Purchaser. The
obligations of Parent and the Purchaser to effect the Merger are also subject
to
each of the following conditions:
(a) Representations
and Warranties. The representations and warranties of the
Company contained in this Agreement shall be true and correct at and as of
the
Effective Time as if made at and as of such time (except for those
representations and warranties which address matters only as of a particular
date, which shall have been true and correct as of such date), with the same
force and effect as if made at and as of the Effective Time, except where
the
cumulative effect of the failure to be true and correct, or any additional
matters set forth in the Updated Disclosure Letter not set forth in the
Disclosure Letter, has not had, and would not reasonably be expect to have,
a
Company Material Adverse Effect, and Parent and Purchaser shall have received
a
certificate to such effect signed on behalf of the Company by the President
and
the Vice President of Finance of the Company.
40
(b) Agreements
and Covenants. The Company shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Effective
Time, and Parent and Purchaser shall have received a certificate to such
effect
signed on behalf of the Company by the President and the Vice President of
Finance of the Company.
(c) Employment
Agreement. Xxxxxxx X. Xxxx shall have executed and delivered to
Parent an Employment Agreement substantially in the form previously reviewed
and
confirmed by Xx. Xxxx and Parent.
(d) Material
Developments. There shall not have occurred after the date of
this Agreement (i) any development or developments with relation to the Company
or its subsidiaries that has had, or would reasonably be expected to have,
a
Company Material Adverse Effect, or (ii) any downgrade in the Company’s A.M.
Best rating below “A-.”
Section
7.3 Additional
Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is also subject to each of
the
following conditions:
(a) Representations
and Warranties. The representations and warranties of Parent and
the Purchaser contained in this Agreement shall be true and correct at and
as of
the Effective Time as if made at and as of such time (except for those
representations and warranties which address matters only as of a particular
date, which shall have been true and correct as of such date), with the same
force and effect as if made at and as of the Effective Time, except where
the
cumulative effect of the failure to be true and correct has not had, and
would
not reasonably be expect to have, a Parent Material Adverse Effect, and the
Company shall have received a certificate to such effect signed on behalf
of
Parent by the Chief Financial Officer and the Secretary of Parent.
(b) Agreements
and Covenants. Parent and Purchaser shall have performed or
complied in all material respects with all agreements and covenants required
by
this Agreement to be performed or complied with by them on or prior to the
Effective Time, and the Company shall have received a certificate to such
effect
signed on behalf of Parent by the Chief Financial Officer and the Secretary
of
Parent.
ARTICLE
VIII
TERMINATION
AND ABANDONMENT
Section
8.1 Termination. This
Agreement may be terminated, and the Merger contemplated hereby may be
abandoned, notwithstanding approval thereof by the shareholders of the Company,
at any time prior to the Effective Time:
(a) by
mutual
written consent of Parent and the Company;
(b) by
either
Parent or the Company if, the Effective Time has not occurred on or before
December 31, 2007, (which date may be extended by mutual written consent
of
Parent
41
and
the
Company) unless due to any material breach by the terminating party of its
representations, warranties or covenants made in this Agreement;
(c) by
either
Parent or the Company if the shareholders of the Company fail to approve
the
Merger and this Agreement at a duly held meeting (including any adjournment
or
postponement permitted by this Agreement), except that the Company shall
not be
entitled to elect to terminate this Agreement unless it has complied with
its
obligations under Section 6.4; or
(d) by
either
Parent or the Company if (i) the Michigan Insurance Regulators have not provided
the approval that is legally required to consummate the Merger and the denial
of
such approval has become final and nonappealable; or (ii) any court of competent
jurisdiction in the United States or other Governmental Authority in the
United
States shall have issued an order (other than a temporary restraining order),
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger, and such order, decree, ruling or other action shall
have become final and nonappealable; provided that the party seeking to
terminate this Agreement shall have used its reasonable best efforts in
accordance with Section 6.6 to obtain such approval or reverse, remove or
lift
such denial, order, decree, ruling or other action.
Section
8.2 Termination
by Parent. This
Agreement may be terminated by Parent at any time prior to the Effective
Time,
if (a) the Company has breached any of its representations and warranties
contained in this Agreement so that the closing conditions set forth in Section
7.2(a) cannot be satisfied, except for any breach that is capable of being
and
is cured (other than by mere disclosure of the breach) within 20 days after
written notice from the Purchaser to the Company of such breach; (b) the
Company
has breached in any material respect any of its covenants made in this
Agreement, except for any breach that is capable of being and is cured within
20
days after written notice from the Purchaser to the Company of such breach;
(c)
the Board shall have (i) withdrawn its recommendation or approval in respect
of
this Agreement or the Merger, (ii) modified its recommendation or approval
in
respect of this Agreement or the Merger in a manner adverse to Parent, (iii)
failed to recommend to shareholders of the Company that they approve the
Merger,
or (iv) failed, at the written request of Parent, to publicly reaffirm within
five Business Days after the request, its recommendation or approval in respect
of this Agreement or the Merger, which public reaffirmation must also include,
if requested by Parent, the unconditional rejection of any other Acquisition
Transaction; (d) the Board shall have recommended any proposal other than
by
Parent or the Purchaser in respect of an Acquisition Transaction; or (e)
any
court of competent jurisdiction in the United States or other Governmental
Authority in the United States shall have issued a judgment, decree or order
that is final and nonappealable and in the reasonable judgment of Parent
(A) has
the effect of prohibiting the Merger, (B) individually or in the aggregate
has
had, or is reasonably likely to have, a Company Material Adverse Effect,
or (C)
prohibits or limits Parent from exercising all material rights and privileges
pertaining to its ownership of the Surviving Corporation or the ownership
or
operation by Parent or any of its subsidiaries of all or a material portion
of
the business or assets of Parent or any of its subsidiaries, or compels Parent
or any of its subsidiaries to dispose of or hold separate all or any material
portion of the business or assets of Parent or any of its subsidiaries
(including the Surviving Corporation and its subsidiaries), or imposes any
materially burdensome conditions or restrictions on Parent, the Company or
their
subsidiaries, as a result of the Merger or the transactions contemplated
by this
Agreement.
42
Section
8.3 Termination
by the Company. This
Agreement may be terminated by the Company at any time prior to the Effective
Time, if (a), in connection with its intention to enter into a definitive
acquisition agreement with respect to a Superior Proposal, to the extent
otherwise permitted by this Agreement, if (x) the Company provides written
notice, as required by Section 6.2(d), to Parent and the Purchaser of the
material terms and conditions of the Superior Proposal that the Board or
the
Company intends to accept and (y) on or after the fifth Business Day following
delivery of such written notice, the Board reasonably determines, upon the
advice of its financial advisor, that such proposal remains a Superior Proposal
and, after receiving the advice of outside legal counsel to the Company,
that
the failure to terminate this Agreement to enter into an agreement with respect
to the Superior Proposal would be inconsistent with its fiduciary duties
under
applicable Law; (b) Parent or the Purchaser has breached any of its
representations and warranties contained in this Agreement so that the closing
conditions set forth in Section 7.2(a) cannot be satisfied, except for any
breach that is capable of being and is cured (other than by mere disclosure
of
the breach) within 20 days after written notice from the Company to Parent
of
such breach; or (c) either Parent or the Purchaser has breached in any material
respect any of its covenants made in this Agreement, except for any breach
that
is capable of being and is cured within 20 days after written notice from
the
Company to Parent of such breach.
Section
8.4 Procedure
for Termination. Termination
of this Agreement by Parent or the Company pursuant to this Article VIII
shall
be effective upon written notice thereof to the other as provided in this
Agreement.
Section
8.5 Effect
of Termination. In
the event of termination of this Agreement pursuant to and in accordance
with
this Article VIII, the Merger shall be deemed abandoned and this Agreement
shall
forthwith become void, except as provided in the last two sentences of Section
6.5 and in Sections 6.7 and 6.10 (which sentences and Sections shall survive
any
termination of this Agreement), without liability on the part of any party
hereto or its affiliates, directors, officers, employees, agents or
shareholders, except as provided in Section 8.6 and except with respect to
any
willful or bad faith breach of any provision of this Agreement, and each
of the
parties hereto hereby irrevocably waives and releases any other claim which
may
otherwise exist upon such termination.
Section
8.6 Termination
Fee.
(a) If
this Agreement is terminated by Parent pursuant to Section 8.2(c) or (d),
then
the Company shall reimburse Parent and the Purchaser their actual, incurred
expenses directly relating to the transactions contemplated by this Agreement
up
to the sum of $300,000 in the aggregate (the “Expense Payment”) promptly (but no
later than one Business Day) after Parent and the Purchaser provide the Company
reasonable evidence of such expenses. If the Expense Payment is
payable pursuant to the preceding sentence and within 18 months after such
termination of this Agreement the Company consummates a Termination Transaction
with a third party, the Company shall pay to Parent a termination fee equal
to
$900,000 (the “Termination Fee”) promptly (but in no event later than one
Business Day) after consummation of the Termination Transaction. If
this Agreement is terminated by either party pursuant to Section 8.1(c) and,
prior to such termination, an Acquisition Transaction by a third party has
been
publicly announced or otherwise become publicly known or a third party has
publicly
43
announced
an intention to make a proposal with respect to an Acquisition Transaction
and
the Company consummates a Termination Transaction with such third party within
18 months after such termination, then the Company shall pay to Parent and
the
Purchaser (i) the Expense Payment promptly (but no later than one Business
Day)
after Parent and the Purchaser provide the Company reasonable evidence of
such
expenses and (ii) the Termination Fee promptly (but in no event later than
one
Business Day) after consummation of the Termination Transaction. If
this Agreement is terminated by either party pursuant to Section 8.1(b) and,
prior to such termination, an Acquisition Transaction by a third party has
been
publicly announced or otherwise become publicly known or a third party has
publicly announced an intention to make a proposal with respect to an
Acquisition Transaction and the Company consummates a Termination Transaction
with such third party within 18 months after such termination, then the Company
shall pay to Parent and the Purchaser the Expense Payment promptly (but no
later
than one Business Day) after Parent and the Purchaser provide the Company
reasonable evidence of such expenses.
(b) If
this Agreement is terminated by the Company pursuant to Section 8.3(a), then
(i)
the Company shall pay to Parent and the Purchaser the Expense Payment promptly
(but no later than one Business Day) after Parent and the Purchaser provide the
Company reasonable evidence of such expenses, (ii) the Company shall pay
to
Parent a termination fee equal to $300,000 (the “Interim Fee”) promptly (but no
later than one Business Day) after entering into a definitive acquisition
agreement with respect to a Superior Proposal, and (iii) if within 18 months
after such termination of this Agreement the Company consummates a Termination
Transaction, the Company shall pay Parent an additional termination fee equal
to
$600,000 (the “Final Fee”) promptly (but in no event later than one Business
Day) after such consummation.
(c) If
this Agreement is terminated by Parent pursuant to Section 8.2(a) (other
than
solely due to a Loss Reserve MAE) or Section 8.2(b), then the Company shall
pay
to Parent and the Purchaser the Expense Payment promptly (but no later than
one
Business Day) after Parent and the Purchaser provide the Company reasonable
evidence of such expenses.
(d) Acceptance
by Parent and Purchaser of any payments referred to in this Section shall
constitute conclusive evidence that this Agreement has been validly terminated,
and upon such acceptance the Company shall be fully released and discharged
from
any liability or obligation resulting from or under this Agreement (except
that
acceptance of the Expense Payment shall not relieve the Company from its
obligation to pay the Termination Fee in accordance with this
Section). The Expense Payment and Termination Fee shall be paid by
wire transfer to Parent.
(e) The
Company acknowledges that the agreements contained in this Section 8.6 are
an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Parent would not enter into this Agreement;
accordingly, if the Company fails to timely pay any amount due pursuant to
this
Section 8.6, and, in order to obtain the payment, Parent commences a suit
which
results in a judgment against the Company for the payment set forth in this
Section 8.6, the Company shall pay to Parent its reasonable costs and expenses
(including reasonable attorneys’ fees) in connection with this suit, together
with interest on the amount due from each date for payment until the date
of the
payment at the prime rate of interest as charged by Fifth Third Bank, in
effect
on the date the payment was required to be made.
44
(f) For
purposes of this Agreement, a “Termination Transaction” shall mean any
acquisition of more than fifty percent (50%) of the Company and its
subsidiaries, taken as a whole, by means of a merger, consolidation, share
exchange or other business combination involving the Company and its
subsidiaries, or acquisition of more than fifty percent (50%) of the assets
or
capital stock of the Company and its subsidiaries, taken as a whole, in each
case other than the transactions with Parent or the Purchaser contemplated
by
this Agreement.
ARTICLE
IX
DEFINITIONS
Section
9.1 Terms
Defined in Agreement. The
following terms used herein shall have the meanings ascribed in the indicated
sections.
Acquisition
Transaction
|
|
6.2 | (a) | |
Agreement
|
Preamble
|
|||
Board
|
Recitals
|
|||
Business
Day
|
10.9
|
|||
Certificate
of Merger
|
1.2
|
|||
Certificates
|
3.1 | (a) | ||
Closing
|
1.1 | (c) | ||
Code
|
3.1 | (d) | ||
Company
|
Preamble
|
|||
Company
Contract
|
4.20 | (a) | ||
Company
Financial Advisor
|
4.21
|
|||
Company
Intellectual Property Rights
|
4.15 | (b) | ||
Company
Material Adverse Effect
|
4.1 | (a) | ||
Company
Permits
|
4.8 | (c) | ||
Company
Plan
|
6.12
|
|||
Company
Preferred Stock
|
4.2
|
|||
Company
Shareholder Approval
|
4.3
|
|||
Confidentiality
Agreement
|
6.5
|
|||
Constituent
Corporations
|
Preamble
|
|||
Continuation
Coverage
|
6.9 | (b) | ||
Disclosure
Letter
|
Article
IV
|
|||
Effective
Time
|
1.2
|
|||
Employee
or Employees
|
4.10 | (a) | ||
Environmental
Laws
|
4.14 | (a) | ||
ERISA
|
4.11 | (a) | ||
ERISA
Affiliate
|
4.11 | (a) | ||
Exchange
Act
|
4.4 | (b) | ||
Expense
Payment
|
8.6 | (a) | ||
Final
Fee
|
8.6 | (b) | ||
Governmental
Authority or Governmental Authorities
|
4.8 | (c) | ||
Holding
Company Act Reports
|
4.17 | (c) |
45
Indemnified
Parties
|
6.9 | (a) | ||
Insurance
Company SAP Statements
|
4.17 | (a) | ||
Insurance
Company Subsidiary
|
4.1 | (c) | ||
Insurance
Filings
|
6.3 | (a) | ||
Insurance
Laws
|
4.8 | (a) | ||
Insurance
Policies
|
4.19 | (a) | ||
Insurance
Regulators
|
4.8 | (a) | ||
Insurance
Services Subsidiary
|
4.1 | (c) | ||
Intellectual
Property
|
4.15 | (a) | ||
Interim
Fee
|
8.6 | (b) | ||
IRS
|
4.9 | (a) | ||
Laws
|
4.4 | (a) | ||
Leased
Real Property
|
4.13 | (b) | ||
Liens
|
4.1 | (b) | ||
Loss
and ALAE Ratio
|
4.1 | (a) | ||
Loss
Reserves
|
4.1 | (a) | ||
Loss
Reserve MAE
|
4.1 | (a) | ||
Maximum
Amount
|
6.9 | (b) | ||
MBCA
|
Recitals
|
|||
Merger
|
1.1 | (a) | ||
Merger
Price
|
2.1 | (a) | ||
Michigan
Insurance Regulators
|
7.1 | (b) | ||
Modified
Merger Agreement
|
6.2 | (d) | ||
Other
Reports and Statements
|
4.17 | (c) | ||
Parent
|
Preamble
|
|||
Parent
Material Adverse Effect
|
5.3 | (a) | ||
Paying
Agent
|
3.1 | (a) | ||
PDIC
Report
|
4.1 | (a) | ||
Plans
|
4.11 | (a) | ||
Proxy
Statement
|
6.4 | (a) | ||
Purchaser
|
Preamble
|
|||
Real
Estate Leases
|
4.13 | (b) | ||
Representatives
|
6.2 | (a) | ||
SAP
|
4.17 | (b) | ||
SEC
|
4.4 | (b) | ||
SEC
Documents
|
4.5 | (a) | ||
Selected
Retained Reserves
|
4.1 | (a) | ||
Share
or Shares
|
2.1 | (a) | ||
Shareholder
Meeting
|
6.4 | (b) | ||
SOX
|
4.5 | (d) | ||
Superior
Proposal
|
6.2 | (e) | ||
Surviving
Corporation
|
1.1 | (a) | ||
Tail
Coverage
|
6.9 | (b) | ||
Tax
or Taxes
|
4.9 | (a) | ||
Tax
Returns
|
4.9 | (a) | ||
Termination
Fee
|
8.6 | (a) |
46
Termination
Transaction
|
8.6 | (f) | ||
Third
Party Confidentiality Agreement
|
6.2 | (b) | ||
Updated
Disclosure Letter
|
6.8
|
The
definition of additional terms and phrases used in this Agreement are set
forth
in Section 10.9.
ARTICLE
X
MISCELLANEOUS
Section
10.1 Amendment
and Modification. Subject
to applicable Law, this Agreement may be amended, modified or supplemented
only
by written agreement (referring specifically to this Agreement) of Parent,
the
Purchaser and the Company with respect to any of the terms contained herein;
provided, however, that after any approval of this Agreement by the shareholders
of the Company, no such amendment, modification or supplement shall be made
which reduces the Merger Price or the form of consideration therefore or
which
in any way materially adversely affects the rights of such shareholders,
without
the further approval of such shareholders.
Section
10.2 Waiver. At
any time prior to the Effective Time, Parent and the Purchaser, on the one
hand,
and the Company, on the other hand, may (i) extend the time for the performance
of any of the obligations or other acts of the other, (ii) waive any
inaccuracies in the representations and warranties of the other contained
herein
or in any documents delivered pursuant hereto and (iii) waive compliance
by the
other with any of the agreements or conditions contained herein which may
legally be waived. Any such extension or waiver shall be valid only
if set forth in an instrument in writing specifically referring to this
Agreement and signed on behalf of such party.
Section
10.3 Survivability;
Investigations. The
respective representations and warranties of Parent, the Purchaser and the
Company contained herein or in any certificates or other documents delivered
prior to or as of the Effective Time shall not survive beyond the Effective
Time. The covenants and agreements of the parties hereto (including
the Surviving Corporation after the Merger) shall survive the Effective Time
(except for those which, by their terms, contemplate a shorter survival
period).
Section
10.4 Notices. All
notices, requests, demands and other communications required to be given
pursuant to this Agreement shall be in writing and shall be deemed to have
been
duly given on the day of delivery if delivered by hand or if sent by facsimile
with confirmation on a Business Day (or on the next Business Day if the day
of
delivery is not a Business Day), on the first Business Day following deposit
with a nationally recognized overnight mail service, or on the third Business
Day following first class mailing, with first class, postage
prepaid:
47
|
(a)
|
If
to the Company, to
|
|
Xxxxx
X. Xxxxxx
Chairman,
Special Committee of the
Board
of Directors, Professionals Direct, Inc.
000
Xxxxxx Xxxxxx X.X.
Xxxxx
000
Xxxxx
Xxxxxx, Xxxxxxxx 00000
Facsimile:
(000) 000-0000
|
|
with
a copy to:
|
||
Xxxxxx
& Xxxxxxxxx LLP
000
Xxxxxx Xxxxxx X.X.
Xxxxx
000
Xxxxx
Xxxxxx, Xxxxxxxx 00000
Facsimile:
(000) 000-0000
Attention: R.
Xxxx Xxxxxx, Esq.
|
||
(b)
|
If
to Parent or the Purchaser, to
|
|
The
Hanover Insurance Group, Inc.
000
Xxxxxxx Xx.
Xxxxxxxxx,
XX 00000
Facsimile:
(000) 000-0000
Attention: Xx.
Xxxxxx X. Xxxxxxxx
|
||
with
a copy to:
|
||
The
Hanover Insurance Group, Inc.
000
Xxxxxxx Xx.
Xxxxxxxxx,
XX 00000
Facsimile:
(000) 000-0000
Attention: Xx.
Xxxxxxx X. Xxxxxx
|
||
with
a copy to:
|
||
Xxxxxx
Xxxxxxx, PLLC
000
Xxxxxxxxxxx Xxxxxx
Xxxxxxx,
XX 00000
Facsimile:
(000) 000-0000
Attention:
Xxxxxx X. Xxxxxx, Esq.
|
Section
10.5 Assignment;
No Third Party Beneficiaries. This
Agreement and all of the provisions hereof shall be binding upon and inure
to
the benefit of the parties hereto and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights,
48
interests
or obligations hereunder shall be assigned by any of the parties hereto without
the prior written consent of the other parties; provided that Parent may
assign
the rights and obligations of the Purchaser under this Agreement to any direct
or indirect wholly-owned subsidiary of Parent, but no such assignment shall
relieve any party of its obligations under this Agreement. This
Agreement, except for the provisions of Sections 3.1 and 6.9 (which are intended
to be for the benefit of the persons identified therein, and may be enforced
by
such persons), is not intended to confer any rights or remedies hereunder
upon
any other person except the parties hereto, this Agreement being for the
exclusive benefit of the parties hereto and their successors and permitted
assigns.
Section
10.6 Governing
Law. This
Agreement shall be governed by and construed in accordance with the applicable
Laws of the State of Michigan as applicable to contracts made and to be
performed in the State of Michigan, without regard to conflicts of laws
principles. Any action or proceeding seeking to enforce any provision
of, or based on any right arising out of, this Agreement or the Merger may
only
be brought in a court sitting in the State of Michigan, County of Kent, City
of
Grand Rapids, or the United States District Court for the Western District
of
Michigan, and each party hereby irrevocably consents to the jurisdiction
of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in
any action or proceeding referred to in the preceding sentence may be served
on
a party anywhere in the world.
Section
10.7 Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original and together shall constitute one and the same
agreement. A facsimile or pdf (portable document format) signature
will have the same effect as an original signature.
Section
10.8 Certain
Disclosure Matters. Each
disclosure of the Company set forth in the Disclosure Letter shall limit
a
representation and warranty of the Company only to the extent such disclosure
specifically references the particular representation or warranty it is intended
to qualify or it is reasonably apparent on the face of such disclosure that
it
qualifies such particular representation or warranty.
Section
10.9 Interpretation. The
article and section headings contained in this Agreement are solely for the
purpose of reference, are not part of the agreement of the parties and shall
not
in any way affect the meaning or interpretation of this Agreement. As
used in this Agreement, (i) the term “person” or “Person” means and includes any
individual, partnership, joint venture, corporation, trust, unincorporated
organization or association, government (or any department or agency
thereof) or any other entity; (ii) the term “subsidiary” of any person means any
corporation, partnership, joint venture or other legal entity of which such
person (either alone or through any other subsidiary) owns, directly or
indirectly, more than 50% of the stock or other equity interests the holders
of
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity; (iii)
the
term “including” and words of similar import mean “including, without
limitation” unless the context otherwise requires or unless otherwise specified;
(iv) the term “business day” or “Business Day” means any day other than a day on
which banks in the State of Michigan or the State of Massachusetts are required
or authorized to be closed; and (v) the term “to the knowledge of
the
49
Company”
(or words of similar import) shall mean to the actual knowledge of any executive
officer of the Company.
Section
10.10 Entire
Agreement. This
Agreement, the Disclosure Letter, the Updated Disclosure Letter and the
Confidentiality Agreement set forth the entire agreement and understanding
of
the parties hereto in respect of the subject matter contained herein and
therein
and supersede all prior agreements and understandings between the parties
with
respect to such subject matter. No representation, promise,
inducement or statement of intention has been made by any party hereto in
connection with the Merger or the transactions contemplated by this Agreement,
which is not embodied in this Agreement, and no party hereto shall be bound
by
or liable for any alleged representation, promise, inducement or statement
of
intention not so embodied.
Section
10.11 Waiver
of Jury Trial. EACH
OF THE PARTIES HERETO HEREBY KNOWINGLY AND WILLINGLY WAIVES ITS RIGHTS TO
DEMAND
A JURY TRIAL IN ANY ACTION OR PROCEEDING INVOLVING THIS AGREEMENT, ANY OTHER
TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. EACH OF THE PARTIES REPRESENTS AND WARRANTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY
WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO TRIAL BY THE COURT.
[Signature
page follows.]
50
Parent,
the Purchaser and the Company have caused this Agreement and Plan of Merger
to
be signed by their respective duly authorized officers as of the date first
above written.
THE
HANOVER INSURANCE GROUP, INC.
|
||
By:
|
/s/ Xxxxxx X. Xxxxxxxx | |
Name:
|
Xxxxxx
X. Xxxxxxxx
|
|
Title:
|
Senior
Vice President
|
|
“Parent”
|
||
HANOVER
ACQUISITION CORP.
|
||
By:
|
/s/ Xxxxxx X. Xxxxxxxx | |
Name:
|
Xxxxxx
X. Xxxxxxxx
|
|
Title:
|
Vice
President
|
|
“Purchaser”
|
||
PROFESSIONALS
DIRECT, INC.
|
||
By:
|
/s/ Xxxxxxx X. Xxxx | |
Name:
|
Xxxxxxx
X. Xxxx
|
|
Title:
|
President
and Chief Executive Officer
|
|
“Company”
|