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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
Among
AMERICAN BANKERS INSURANCE GROUP, INC.,
ABIG ACQUISITION CORP. A.
and
MS DIVERSIFIED CORPORATION
Dated as of May 18, 1998
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TABLE OF CONTENTS
Page
RECITALS
ARTICLE I
The Merger; Closing; Effective Time
1.1. The Merger...............................................................................................1
1.2. Closing..................................................................................................1
1.3. Effective Time...........................................................................................2
ARTICLE II Charter and By-Laws of the Surviving Corporation
2.1. The Charter..............................................................................................2
2.2. The By-Laws..............................................................................................2
ARTICLE III Officers and Directors of the Surviving Corporation
3.1. Directors................................................................................................2
3.2. Officers.................................................................................................3
ARTICLE IV Effect of the Merger on Capital Stock;Exchange of Certificates
4.1. Effect on Capital Stock..................................................................................3
4.2. Dissenting Shares........................................................................................4
4.3. Stock Options and Stock Appreciation Rights..............................................................4
4.4. Cancellation of Shares...................................................................................5
4.5. Exchange of Certificates for Shares......................................................................5
(a) Exchange Agent..................................................................................5
(b) Exchange Fund...................................................................................6
(c) Exchange Procedures.............................................................................6
(d) Transfers.......................................................................................7
(e) Termination of Exchange Fund....................................................................7
(f) Lost, Stolen or Destroyed Certificates..........................................................7
(g) Withholding Rights..............................................................................7
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ARTICLE V Representations and Warranties
5.1. Representations and Warranties of the Company............................................................8
(a) Organization, Good Standing and Qualification...................................................8
(b) Capital Structure..............................................................................10
(c) Corporate Authority, Approval and Fairness.....................................................11
(d) Governmental Filings; No Violations............................................................11
(e) Financial Statements...........................................................................12
(f) Absence of Certain Changes.....................................................................13
(g) Litigation and Liabilities.....................................................................14
(h) Employee Benefits..............................................................................14
(i) Compliance with Laws; Permits..................................................................16
(j) Takeover Statutes..............................................................................17
(k) Environmental Matters..........................................................................18
(1) Taxes..........................................................................................19
(m) Labor Matters..................................................................................21
(n) Intellectual Property..........................................................................21
(o) Material Contracts.............................................................................22
(p) Brokers and Finders............................................................................23
(q) Insurance Matters..............................................................................23
(r) Liabilities and Reserves.......................................................................25
(s) Separate Accounts..............................................................................25
(t) Real Property..................................................................................26
(u) Interested Party Transactions..................................................................26
(v) Disclosure.....................................................................................26
5.2. Representations and Warranties of Parent and Merger Subsidiary..........................................27
(a) Organization, Good Standing and Qualification..................................................27
(b) Capitalization of Merger Subsidiary............................................................27
(c) Corporate Authority............................................................................27
(d) Governmental Filings...........................................................................27
(e) Legal Proceedings..............................................................................28
(f) Brokers and Finders............................................................................28
ARTICLE VI Covenants
6.1. Interim Operations......................................................................................28
6.2. Acquisition Proposals...................................................................................30
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6.3. Non-Disclosure..........................................................................................31
6.4. Stockholders Meetings...................................................................................33
6.5. Filings; Other Actions, Notification....................................................................33
6.6. Access..................................................................................................34
6.7. Publicity...............................................................................................34
6.8. Expenses................................................................................................35
6.9. Indemnification; Directors' and Officers' Insurance; Set-off Right......................................35
6.10 Takeover Statute........................................................................................36
6.11 Restrictive Covenants...................................................................................37
6.12 Future Consideration....................................................................................37
6.13 Officers' Certifications................................................................................37
6.14 Service Contract Administration Agreement...............................................................37
6.15 No-Post Closing Share Transfers.........................................................................37
ARTICLE VII Conditions
7.1. Conditions to Each Party's Obligation to Effect the Merger..............................................38
(a) Stockholder Approval...........................................................................38
(b) Regulatory Consents............................................................................38
(c) Litigation.....................................................................................38
(d) Blue Sky Approvals.............................................................................38
7.2. Conditions to Obligations of Parent and Merger Subsidiary...............................................38
(a) Representations and Warranties.................................................................38
(b) Performance of Obligations of the Company......................................................39
(c) Consents.......................................................................................39
(d) Dissenting Shares..............................................................................39
(e) No Material Adverse Changes....................................................................39
(f) Opinions of Counsel............................................................................39
(g) Consent of Option Holders......................................................................39
(h) Service Contract Administration Agreement......................................................40
7.3. Conditions to Obligation of the Company.................................................................40
(a) Representations and Warranties.................................................................40
(b) Performance of Obligations of Parent and Merger Subsidiary.....................................40
(c) Consents Under Agreement.......................................................................40
ARTICLE VIII Termination
8.1. Termination by Mutual Consent...........................................................................41
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8.2. Termination by Either Parent or the Company.............................................................41
8.3. Termination by the Company..............................................................................41
8.4. Termination by Parent...................................................................................42
8.5. Effect of Termination and Abandonment...................................................................42
ARTICLE IX Miscellaneous and General
9.1. Survival................................................................................................43
9.2. Modification or Amendment...............................................................................44
9.3. Waiver of Conditions....................................................................................44
9.4. Counterparts............................................................................................44
9.5. Governing Law; Waiver of Jury Trial.....................................................................44
9.6. Notices.................................................................................................45
9.7. Entire Agreement: No Other Representations..............................................................46
9.8. No Third Party Beneficiaries............................................................................46
9.9. Obligations of Parent and of the Company................................................................46
9.10 Severability............................................................................................47
9.11 Interpretation..........................................................................................47
9.12 Assignment..............................................................................................47
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Exhibit A -- Form of Confidentiality Agreement
Exhibit B -- Form of Officers' Certificates
Exhibit C -- Form of Opinion of Brunini, Grantham, Grower & Xxxxx, PLLC
Exhibit D -- Form of Opinion of Xxx X. Xxxxxxxx, Esq.
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "AGREEMENT"),
dated as of May 18, 1998, among AMERICAN BANKERS INSURANCE GROUP, INC., a
Florida corporation ("PARENT"), ABIG ACQUISITION CORP. A, a Florida corporation
and a wholly-owned subsidiary of Parent ("MERGER SUBSIDIARY"), and MS
DIVERSIFIED CORPORATION, a Mississippi corporation (the "COMPANY," the Company
and Merger Subsidiary sometimes being hereinafter collectively referred to as
the "CONSTITUENT CORPORATIONS").
RECITALS
WHEREAS, the respective boards of directors of each of Parent, Merger
Subsidiary and the Company have determined that the merger of Merger Subsidiary
with and into the Company (the "MERGER") upon the terms and subject to the
conditions set forth in this Agreement is advisable and have approved the
Merger;
WHEREAS, the Company, Parent and Merger Subsidiary desire to make
certain representations, warranties, covenants and agreements in connection with
this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
The Merger; Closing; Effective Time
1.1. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined in Section 1.3) the
Merger Subsidiary shall be merged with and into the Company and the separate
corporate existence of the Merger Subsidiary shall thereupon cease. The Company
shall be the surviving corporation in the Merger (sometimes hereinafter referred
to as the "SURVIVING CORPORATION"), and the separate corporate existence of the
Company with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger, except as set forth in Article III. The
Merger shall have the effects specified in the Mississippi Business Corporation
Act, as amended (the "MBCA") and the Florida Business Corporation Act, as
amended (the "FBCA").
1.2. CLOSING. The closing of the Merger (the "CLOSING") shall take
place (i) at the offices of Jorden Xxxx Xxxxx Xxxxxxxxx Xxxxxxxx & Xxxxxxx LLP,
000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxx 00000, at 10:00 A.M. within five
business days after the last to be fulfilled or
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waived of the conditions set forth in Article VII (other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the
fulfillment or waiver of those conditions) shall be satisfied or waived in
accordance with this Agreement or (ii) at such other place and time and/or on
such other date as the Company and Parent may agree in writing (the "CLOSING
DATE").
1.3. EFFECTIVE TIME. In connection with and at the time of the Closing,
the Company and Parent (i) will cause Articles of Merger (the "MISSISSIPPI
ARTICLES OF MERGER") to be executed, acknowledged and, as soon as practicable
following the Closing, filed with the Secretary of State of the State of
Mississippi (the "MISSISSIPPI SECRETARY") as provided in Section 79-4-11.05 of
the MBCA, and (ii) will cause Articles of Merger (the "FLORIDA ARTICLES OF
MERGER and collectively with the Mississippi Articles of Merger, the "ARTICLES
OF MERGER") to be executed, acknowledged and, as soon as practicable following
the Closing, filed with the Secretary of State of the State of Florida (the
"FLORIDA SECRETARY") as provided in Section 607.1105 of the FBCA. The Merger
shall become effective at the time that is the later of when the Mississippi
Secretary accepts for record the Mississippi Articles of Merger or when the
Florida Secretary accepts for record the Florida Articles of Merger, or at such
later time agreed by the parties and established under the Articles of Merger
(the "EFFECTIVE TIME").
ARTICLE II
Charter and By-Laws
of the Surviving Corporation
2.1. THE CHARTER. The Second Amended and Restated Articles of
Incorporation of the Company as in effect immediately prior to the Effective
Time shall be the charter of the Surviving Corporation (the "CHARTER"), until
duly amended as provided therein or by applicable law.
2.2. THE BY-LAWS. The by-laws of Company in effect at the Effective
Time shall be the by-laws of the Surviving Corporation (the "BY-LAWS"), until
thereafter amended as provided therein or by applicable law.
ARTICLE III
Officers and Directors
of the Surviving Corporation
3.1. DIRECTORS. The directors of Merger Subsidiary at the Effective
Time shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or
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removal in accordance with the Charter and the By-Laws. Prior to the Effective
Time, the Company shall cause each of its directors (other than Xxxxx X. Xxxxxx,
Xx.) to resign effective immediately following the Effective Time. Immediately
after the Effective Time, Parent shall cause Xxxxxx Xxxxx and Xxxxxx Xxxxxx to
be appointed as directors of the Surviving Corporation.
3.2. OFFICERS. The officers of the Company at the Effective Time shall,
from and after the Effective Time, be the officers of the Surviving Corporation
(except that, immediately after the Effective Time, the Company shall elect (i)
Xxxxxx Xxxxxx as Chairman of the Board (in replacement of Xxxx Xxxxxx), (ii)
Xxxxxx Xxxxxxxx as President and Chief Executive Officer (in replacement of
Xxxxx X. Xxxxxx, Xx.), and (iii) Xxxxx X. Xxxxxx, Xx. as Vice Chairman of the
Board), to hold office in each case until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Charter and the By-Laws.
ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates
4.1. EFFECT ON CAPITAL STOCK. At the Effective Time, as a result of the
Merger and without any action on the part of the holder of any capital stock of
the Company:
(a) Each share of common stock, no par value, of the Company
(a "SHARE" or, collectively, the "SHARES"), issued and outstanding immediately
prior to the Effective Time (other than Shares owned by Parent and Shares to be
canceled pursuant to subparagraph (b) below and Dissenting Shares (collectively,
the "EXCLUDED SHARES")) shall be converted into, and become exchangeable for,
the right to receive (i) a price of $10.556 per Share, in cash without interest
(the "PER SHARE PRICE), plus (ii) subject to section 6.9(e) and section 6.12,
the right to receive the Per Share Future Consideration (as defined below) (the
Per Share Price and the Per Share Future Consideration is referred to hereafter
as the "PER SHARE MERGER CONSIDERATION"). The "PER SHARE FUTURE CONSIDERATION"
shall be equal to the total number of shares of Search Financial Services, Inc.
common stock, $.01 par value ("SEARCH COMMON STOCK"), owned by the Company and
any Subsidiary of the Company (excluding any shares of Search Common Stock
acquired by Parent pursuant to its right of set-off under Section 6.9(e)) on
July 31, 1999, or such earlier date that the Company determines to distribute
the Search Common Stock (the "FUTURE CONSIDERATION DISTRIBUTION DATE"), divided
by the sum of (i) the number of Shares issued and outstanding immediately prior
to the Effective Time (other than the Excluded Shares), plus (ii) the aggregate
number of Option Shares (as defined below) for which a cash payment will become
payable pursuant to Section 4.3(a).
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(b) Each Share held in the treasury of the Company and each
Share owned by the Company or by any direct or indirect Subsidiary of the
Company, shall be canceled and retired without payment of any consideration
therefor.
(c) Each share of common stock, par value $.01 per share, of
Merger Subsidiary issued and outstanding immediately prior to the Effective Time
shall be converted into one validly issued, fully paid and nonassessable share
of common stock, no par value, of the Surviving Corporation.
(d) Each Option (as defined below) issued and outstanding
immediately prior to the Effective Time shall be canceled and retired without
payment of any consideration therefor (other than the consideration payable
pursuant to Section 4.3).
4.2. DISSENTING SHARES.
(a) Notwithstanding the provisions of Section 4.1 or any other
provision of this Agreement to the contrary, Shares that are issued and
outstanding immediately prior to the Effective Time and held by shareholders who
have not voted such Shares in favor of the approval and adoption of this
Agreement and who shall have properly demanded appraisal of such Shares in
accordance with the MBCA (the "DISSENTING SHARES") shall not be converted into
the right to receive the Per Share Price and the Per Share Future Consideration
at or after the Effective Time, unless and until the holder of such Dissenting
Shares shall have failed to perfect or shall have effectively withdrawn or lost
such right to appraisal and payment under the MBCA. If a holder of Dissenting
Shares shall have so failed to perfect or shall have effectively withdrawn or
lost such right to appraisal and payment, then, as of the Effective Time or the
occurrence of such event, whichever last occurs, such holder's Dissenting Shares
shall be converted into and represent solely the right to receive the Per Share
Price, without any interest thereon, and a right to receive the Per Share Future
Consideration, as provided in Section 4.1 hereof.
(b) The Company shall give Parent (i) prompt notice of any
written demands for appraisal, withdrawals of demands for appraisal and any
other instruments served pursuant to Article 13 (or any successor or
replacement) of the MBCA which are received by the Company, and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the MBCA. The Company will not voluntarily make any payment
with respect to any demands for appraisal and will not, except with the prior
written consent of Parent, settle or offer to settle any such demands.
4.3. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. As a result of the
Merger, each option and stock appreciation right (an "OPTION" and all such
options and stock appreciation
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rights, collectively, "OPTIONS") which has been granted under the Company's
Executive Stock Option Incentive Plan, which was approved by the Company's board
of directors on February 18, 1987, and the Company's Executive Stock Option
Incentive Plan, which was approved by the Company's board of directors on April
20, 1993 (collectively, the "OPTION PLANS") and which is outstanding at the
Effective Time, whether or not then exercisable, will be deemed converted into,
and the holder of each such Option will be entitled to receive:
(a) from the Exchange Agent upon surrender of the Option for
cancellation, an amount of cash (the "OPTION CASH CONSIDERATION") equal
to the product of:
(i) the positive difference, if any, between the Per Share
Price and the exercise price of each of the Shares issuable
under such Option (each of such Shares, an "OPTION SHARE" and
collectively, the "OPTION SHARES"), times
(ii) the number of Option Shares covered by such Option, plus
(b) from the Company on the Future Consideration Distribution Date, the
number of shares of Search Common Stock (or, at the Company's option,
the cash equivalent for any fractional shares of Search Common Stock)
equal to the product of:
(i) the Per Share Future Consideration, times
(ii) the number of Option Shares covered by such Option.
4.4. CANCELLATION OF SHARES. At the Effective Time, all Shares shall no
longer be outstanding and shall be canceled and retired and shall cease to
exist, and each certificate (a "CERTIFICATE") formerly representing any of such
Shares (other than Excluded Shares) shall thereafter represent only the right to
the Merger Consideration. Each Share issued and outstanding immediately prior to
the Effective Time and owned by the Company or any direct or indirect subsidiary
of the Company (in each case other than Shares that are owned on behalf of third
parties), shall, by virtue of the Merger and without any action on the part of
the holder thereof, cease to be outstanding, shall be canceled and retired
without payment of any consideration therefor and shall cease to exist.
4.5. EXCHANGE OF CERTIFICATES FOR SHARES.
(a) EXCHANGE AGENT. Prior to the Effective Time, Parent shall designate
a bank or trust company located in the United States and reasonably satisfactory
to the Company (the "Exchange Agent") to act as exchange agent in effecting,
INTER ALIA, the exchange for the Per Share Price
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multiplied by the number of Shares formerly represented thereby, of certificates
(the "Certificates") that, prior to the Effective Time, represented Shares
entitled to payment pursuant to Section 4.1(a)
(b) EXCHANGE FUND. Promptly after the Effective Time, Parent shall
deposit, or shall cause to be deposited, with the Exchange Agent, for the
benefit of the holders of Shares, an amount in cash (the "EXCHANGE FUND") equal
to the sum of (i) the Aggregate Per Share Price (as defined below), and (ii) the
aggregate amount of cash payable pursuant to Section 4.3 in respect of Options
outstanding immediately prior to the Effective Time. The "AGGREGATE PER SHARE
PRICE" shall mean the Per Share Price multiplied by the number of Shares that,
immediately prior to the Effective Time, represented Shares entitled to payment
pursuant to Section 4.1(a). The Exchange Fund shall be held by the Exchange
Agent for the benefit of holders of the Shares and shall not be used for any
purpose except as set forth in this Agreement.
(c) EXCHANGE PROCEDURES.
(i) At such time as the Closing Date is set under Section 1.2,
the Surviving Corporation shall cause the Exchange Agent to mail to each holder
of record of Certificates a form of letter of transmittal and instructions for
use in effecting the surrender of the Certificates in exchange for the Per Share
Price, in such form and having such provisions as Parent and the Company may
reasonably agree; provided, however, that such materials shall disclose to such
holders of record that no surrender and exchange will take effect until the
later of (i) the Effective Time, or (ii) the Exchange Agent's receipt in good
order of a Certificate surrendered by the holder of record for cancellation
together with a duly executed letter of transmittal. The Surviving Corporation
shall instruct the Exchange Agent to disburse, as promptly as reasonably
practicable after the later of (i) the Effective Time, or (ii) the Exchange
Agent's receipt in good order of a Certificate surrendered by the holder of
record for cancellation together with a duly executed letter of transmittal, to
the holder of record of such surrendered Certificate the Per Share Price
multiplied by the number of Shares represented by such surrendered Certificate,
and the Certificate so surrendered shall forthwith be canceled. No interest will
be paid or accrued on any amount payable upon due surrender of the Certificates.
(ii) At such time as the Closing Date is set under Section
1.2, the Surviving Corporation shall cause the Exchange Agent to mail to each
holder of record of Options a form of letter of transmittal and instructions for
use in effecting the surrender of the Options in exchange for the Option Share
Price, in such form and having such provisions as Parent and the Company may
reasonably agree; provided, however, that such materials shall disclose to such
holders of record that no surrender and exchange will take effect until the
later to occur of (i) the Effective Time, or (ii) the Exchange Agent's receipt
in good order of an Option for cancellation together with a duly executed letter
of transmittal. The Surviving Corporation shall instruct the Exchange Agent to
disburse, as promptly as reasonably practicable after the later of (i) the
Effective Time,
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or (ii) the Exchange Agent's receipt in good order of an Option surrendered by
the holder of record for cancellation together with a duly executed letter of
transmittal, to the holder of record of such surrendered Option the Option Cash
Consideration in respect of such Option, and the Option so surrendered shall
forthwith be canceled. No interest will be paid or accrued on any amount payable
upon due surrender of the Options.
(d) TRANSFERS. After the Effective Time, there shall be no transfers on
the stock transfer books of the Company of the Shares that were outstanding
immediately prior to the Effective Time.
(e) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
(including the proceeds of any investments thereof) that remains unclaimed by
the former holders of Shares of the Company for 180 days after the Effective
Time shall be paid to Parent. Any such former holders of Shares of the Company
who have not theretofore complied with this Article IV shall thereafter look
only to Parent for payment of the Per Share Price payable pursuant to Section
4.1 and Section 4.2(c) upon due surrender of their Certificates (or affidavits
of loss in lieu thereof), in each case, without any interest thereon.
Notwithstanding the foregoing, none of Parent, the Surviving Corporation, the
Exchange Agent or any other Person (as defined below) shall be liable to any
former holder of Shares for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
For the purposes of this Agreement, the term "PERSON" shall mean any
individual, corporation (including not-for-profit), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity (as defined in Section 5.1(d)) or
either entity of any kind or nature.
(f) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such Person of a
bond in customary amount in indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will pay in exchange for
such lost, stolen or destroyed Certificate the Per Share Price payable in
respect thereof pursuant to Section 4.1(a).
(g) WITHHOLDING RIGHTS. Parent shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
holder of Shares such amounts as Parent reasonably determines Parent 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, such withheld amounts shall be treated for all purposes of the Agreement
as having been paid to the holder of the Shares in respect of which such
deduction and withholding was made by Parent.
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ARTICLE V
Representations and Warranties
5.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth
in the corresponding sections or subsections of the disclosure letter delivered
to Parent by the Company on or prior to entering into this Agreement (the
"COMPANY DISCLOSURE LETTER"), the Company hereby represents and warrants to
Parent and Merger Subsidiary that:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Mississippi and each of its Subsidiaries (other than Air
Transportation, L.L.C.) is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of organization and
each of the Company and its Subsidiaries has all requisite corporate or similar
power and authority to own and operate its properties and assets and to carry on
its business as presently conducted and is qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the ownership
or operation of its properties or conduct of its business requires such
qualification, except where the failure to be so qualified or in good standing
would not, individually or in the aggregate, have a Company Material Adverse
Effect (as defined below). The Company has made available to Parent a complete
and correct copy of the Company's and its Subsidiaries' charter and by-laws,
each as amended to date. The Company's and its Subsidiaries' charter and by-laws
so delivered are in full force and effect.
As used in this Agreement, the term (i) "SUBSIDIARY" (or, in the case
of more than one Subsidiary, "SUBSIDIARIES") means, with respect to the Company,
Parent or Merger Subsidiary, as the case may be, any entity, whether
incorporated or unincorporated, of which at least a majority of the securities
or ownership interests having by their terms ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
is directly or indirectly owned or controlled by such party or by one or more of
its respective Subsidiaries or by such party and any one or more of its
respective Subsidiaries, (ii) "AFFILIATE" (or, in the case of more than one
Affiliate, "AFFILIATES") means, with respect to the Company, Parent or Merger
Subsidiary, as the case may be, any entity, whether incorporated or
unincorporated, that is a Subsidiary of, directly or indirectly controls, or is
under common control with, the Company, Parent or Merger Subsidiary, as the case
may be, and (iii) "COMPANY MATERIAL ADVERSE EFFECT" means any change, effect, or
circumstance that, individually or when taken together with all other changes,
effects and circumstances that have occurred prior to the date of determination
of the occurrence of the Company Material Adverse Effect, is or is reasonably
likely (A) to be adverse to the condition (financial or otherwise), operations,
properties, results of operations, or business or prospects of the Company and
its Subsidiaries in an amount in excess of $500,000, or (B) to prevent,
materially delay or materially impair the ability of the Company either (I) to
perform its
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obligations under this Agreement or (II) to consummate the Merger or any of the
other transactions contemplated by this Agreement.
The Company conducts its insurance operations through the Subsidiaries
set forth on Section 5.1(a) of the Company Disclosure Letter (collectively, the
"COMPANY INSURANCE SUBSIDIARIES"). Each of the Company Insurance Subsidiaries is
(i) duly licensed or authorized as an insurance company and, where applicable, a
reinsurer in its jurisdiction of incorporation, (ii) duly licensed or authorized
as an insurance company and, where applicable, a reinsurer in each other
jurisdiction where it is required to be so licensed or authorized, and (iii)
duly authorized in its jurisdiction of incorporation and each other applicable
jurisdiction to write each line of business reported as being written in the
Company SAP Statements (as hereinafter defined), except, in any such case, where
the failure to be so licensed or authorized would not, individually or in the
aggregate, have a Company Material Adverse Effect. The Company and each of the
Company Insurance Subsidiaries has made all required filings under applicable
insurance holding company statutes except where the failure to file would not,
individually or in the aggregate, have a Company Material Adverse Effect.
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(b) CAPITAL STRUCTURE.
(i) The authorized stock of the Company consists of 70,000,000
shares comprised of (A) 50,000,000 Shares, of which 5,042,450 Shares are
outstanding on the date hereof, (B) 10,000,000 shares of Class A preferred
stock, no par value, of which no shares are outstanding on the date hereof, and
(C) 10,000,000 shares of Class B preferred stock, no par value, of which no
shares are outstanding on the date hereof. All of the outstanding Shares have
been duly authorized and are validly issued, fully paid and nonassessable. The
Company has no commitments to issue or deliver Shares, except that, as of the
date hereof, there were 354,177 Option Shares subject to issuance pursuant to
the Company's Option Plans. The Company Disclosure Letter contains a correct and
complete list of each outstanding Option (including each outstanding stock
appreciation right) to purchase or acquire Shares under each of the Company's
Option Plans, including the plan, the holder, date of grant, exercise price and
number of Shares subject thereto. The Company has no commitments to issue or
deliver shares of its Class A or Class B preferred stock. Section 5.1(b) of the
Company Disclosure Letter contains a true and correct list of the holders of the
5,042,450 outstanding Shares as of the date of this Agreement.
(ii) Each of the outstanding shares of capital stock or other
securities of each of the Company's Subsidiaries (other than Air Transportation,
L.L.C.) is duly authorized, validly issued, fully paid and nonassessable and
owned by the Company or a direct or indirect wholly-owned subsidiary of the
Company, free and clear of any lien, pledge, security interest, claim or other
encumbrance. The Company owns 700 of the 1,000 outstanding units of interest in
Air Transportation, L.L.C., free and clear of any lien, pledge, security
interest, claim or other encumbrance.
(iii) Except as set forth in this subsection (b) and in the
Option Plans, there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements or commitments to issue or sell any
shares of capital stock or other securities of the Company or any of its
Subsidiaries (other than with respect to the issuance of shares of common stock,
$1.00 par value, and shares of Class A Preferred Stock, $1.00 par value, of MS
Diversified Life Insurance Company ("MSD LIFE" and such shares of common and
preferred stock, "MSD PERMITTED SHARES") to an Automobile Dealer Agent (as
defined below); provided, that (i) any such MSD Permitted Shares shall be
issuable by MSD Life only in the ordinary course of MSD Life's business and in
amounts consistent with past practices, and (ii) the issuance of any such MSD
Permitted Shares shall not cause MS Life Insurance Company to own less than 51%
of the outstanding shares of common stock of MSD Life) or any securities or
obligations convertible or exchangeable into or exercisable for, or giving any
Person a right to subscribe for or acquire, any securities of the Company or any
of its Subsidiaries, and no securities or obligations evidencing such rights are
authorized, issued or outstanding. The Company does not have outstanding any
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or, except as
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referred to in this subsection (b), convertible into or exercisable for
securities having the right to vote) with the shareholders of the Company on any
matter ("VOTING DEBT"). The term "AUTOMOBILE DEALER AGENT" shall mean any
automobile dealer that directly or through affiliates of such automobile dealer
has been appointed as an insurance agent by MSD Life.
(c) CORPORATE AUTHORITY, APPROVAL AND FAIRNESS.
(i) The Company has all requisite corporate power and
authority and has taken all corporate action necessary in order to execute,
deliver and perform its obligations under this Agreement and to consummate the
Merger, subject only to approval of the Merger by the holders of at least a
majority of the outstanding Shares (the "COMPANY COMMON STOCK REQUISITE VOTE").
This Agreement is a valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles (the "BANKRUPTCY AND EQUITY EXCEPTION").
(ii) The board of directors of the Company (A) has unanimously
declared that the Agreement, the Merger and the other transactions contemplated
hereby and thereby are advisable and in the best interests of the Company, (B)
has authorized, approved and adopted in all respects the Agreement, the Merger
and the other transactions contemplated hereby and thereby, and (C) has received
the opinion of its financial advisors, Xxxxxx Xxxxxx & Company, Inc. ("XXXXXX
XXXXXX"), to the effect that the consideration to be received by the holders of
the Shares in the Merger is fair from a financial point of view to such holders.
(d) GOVERNMENTAL FILINGS; NO VIOLATIONS.
(i) Other than the filings and/or notices (A) pursuant to
Section 1.3, (B) under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended (the "HSR ACT"), (C) to comply with state securities or "blue-sky"
laws, (D) the filing of appropriate documents with, and approval of, the
respective Commissioners of Insurance or similar regulatory authorities of the
states listed in Section 5.1(d) of the Company Disclosure Letter, and (E) such
notices and consents as may be required under the antitrust notification
insurance laws of the states listed in Section 5.1(d) of the Company Disclosure
Letter, no notices, reports or other filings are required to be made by the
Company or any of its Subsidiaries with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by the Company or
any of its Subsidiaries from, any governmental or regulatory authority, agency,
commission, body or other governmental entity ("GOVERNMENTAL ENTITY"), in
connection with the execution and delivery of this Agreement by the Company and
the consummation by the Company of the Merger and the other transactions
contemplated hereby and thereby, except those that the failure to make or obtain
would not, individually or in the aggregate, have a Company Material Adverse
Effect.
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(ii) The execution, delivery and performance of this Agreement
by the Company does not, and the consummation by the Company of the Merger and
the other transactions contemplated hereby and thereby will not, constitute or
result in (A) a breach or violation of, or a default under, the charter or
by-laws of the Company or the comparable governing instruments of any of its
Subsidiaries, (B) a breach or violation of, or a default under, the acceleration
of any obligations or the creation of a lien, pledge, security interest or other
encumbrance on the assets of the Company or any of its Subsidiaries (with or
without notice, lapse of time or both) pursuant to, any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation
("CONTRACTS") binding upon the Company or any of its Subsidiaries or (provided,
as to consummation, the filings and notices are made, and approvals are
obtained, as referred to in Section 5. 1 (d)(i)), any Law (as defined in Section
5. 1 (i)) or governmental or non-governmental permit or license to which the
Company or any of its Subsidiaries is subject, or (C) any change in the rights
or obligations of any party under any of the Contracts, except, in the case of
clause (B) or (C) above, for any breach, violation, default, acceleration,
creation or change that would not, individually or in the aggregate, have a
Company Material Adverse Effect. Section 5.1(d) of the Company Disclosure Letter
sets forth, to the knowledge of the Company and its Subsidiaries, a correct and
complete list of Contracts of the Company and its Subsidiaries pursuant to which
consents or waivers are or may be required prior to consummation of the
transactions contemplated by this Agreement (whether or not subject to the
exception set forth with respect to clauses (B) and (C) above). The phrase "to
the knowledge of the Company and its Subsidiaries" when used in this Agreement
shall mean the knowledge of any one or more of the Company and its respective
Subsidiaries.
(e) FINANCIAL STATEMENTS.
(i) The Company has previously delivered to Parent true and
complete copies of the Company's (A) audited consolidated balance sheet as of
December 31, 1997 (the "AUDIT DATE") and audited consolidated statements of
income, cash flows and stockholders' equity for the three years ended December
31, 1997 together with all notes thereto (collectively, the "AUDITED FINANCIAL
STATEMENTS"), and (B) any regularly prepared unaudited consolidated balance
sheets and unaudited consolidated statements of income, cash flows and
stockholders' equity for all subsequent monthly periods ended more than 30 days
prior to the date hereof together with all notes thereto (collectively, the
"UNAUDITED FINANCIAL STATEMENTS" and together with the Audited Financial
Statements, the "COMPANY FINANCIAL STATEMENTS"). Each of the Company Financial
Statements have been prepared in accordance with generally accepted accounting
principles ("GAAP") throughout the periods indicated (except as may be indicated
in the notes thereto), subject, in the case of the Unaudited Financial
Statements, only to normal year-end audit adjustments that will not be material
in amount or effect. The consolidated balance sheets included in each of the
Company Financial Statements (including the related notes and schedules) fairly
present the consolidated financial position of the Company and its Subsidiaries
as of the dates thereof and each of the consolidated statements of income and of
changes in financial
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position included in the Company Financial Statements (including any related
notes and schedules) fairly present the results of operations, retained earnings
and changes in financial position, as the case may be, of the Company and its
Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to notes and normal year-end audit adjustments that will
not be material in amount or effect), in each case in accordance with GAAP
consistently applied during the periods involved, except as may be noted
therein.
(ii) The Company has previously delivered to Parent true and
complete copies of the annual and quarterly statements of each of the Company
Insurance Subsidiaries as filed with the applicable insurance regulatory
authorities for the years ended December 31, 1995, 1996 and 1997, including all
exhibits, interrogatories, notes, schedules and any actuarial opinions,
affirmations or certifications or other supporting documents filed in connection
therewith (collectively, the "COMPANY SAP STATEMENTS"). Each of the Company SAP
Statements were prepared in conformity with statutory accounting practices
("SAP") prescribed or permitted by the applicable insurance regulatory authority
consistently applied for the periods covered thereby and present fairly the
statutory financial position of such Company Insurance Subsidiaries as at the
respective dates thereof and the results of operations of such Subsidiaries for
the respective periods then ended. Each of the Company SAP Statements complied
in all material respects with all applicable laws, rules and regulations when
filed, and, to the knowledge of the Company and its Subsidiaries, no material
deficiency has been asserted with respect to any Company SAP Statements by the
applicable insurance regulatory body or any other governmental agency or body.
The statutory balance sheets and income statements included in the Company SAP
Statements have been audited by Harper, Rains, Xxxxxx & Knight, and the Company
has made available to Parent true and complete copies of all audit opinions
related thereto. The Company has made available to Parent true and complete
copies of all examination reports of insurance departments and any insurance
regulatory agencies since January 1, 1994 relating to the Company Insurance
Subsidiaries.
(f) ABSENCE OF CERTAIN CHANGES. Since September 30, 1997, the Company
and its Subsidiaries have conducted the businesses of the Company and its
Subsidiaries, taken as a whole, only in, and have not engaged in any material
transaction other than according to, the ordinary and usual course of such
businesses and except as reflected in the Audited Financial Statements there has
not been (i) any change in the financial condition, management, properties,
prospects, business or results of operations of the Company and its Subsidiaries
or, to the knowledge of the Company and its Subsidiaries, any development or
combination of developments which, individually or in the aggregate, has had or
is reasonably likely to have a Company Material Adverse Effect; (ii) any
material damage, destruction or other casualty loss with respect to any material
asset or property owned, leased or otherwise used by the Company or any of its
Subsidiaries, whether or not covered by insurance; (iii) any declaration,
setting aside or payment of any dividend or other distribution in respect of the
stock of the Company (except for normal, recurring dividends paid in the
ordinary course of the Company's business and consistent with past practices),
(iv) any change
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by the Company in accounting principles, practices or methods other than those
required by GAAP or SAP; (v) any material addition, or any development involving
a prospective material addition, to the Company's consolidated reserves for
future policy benefits or other policy claims and benefits; or (vi) any material
change in the accounting, actuarial, investment, reserving, underwriting or
claims administration policies, practices, procedures, methods, assumptions or
principles of any Company Insurance Subsidiary. Since September 30, 1997, there
has not been any increase in, or any amendment to any of the Compensation and
Benefit Plans (as hereinafter defined) outside the ordinary course or which
results in an increase in, the compensation payable or that could become payable
by the Company or any of its Subsidiaries to any of their respective officers or
key employees in an amount in excess of $10,000.00 per annum.
(g) LITIGATION AND LIABILITIES. There are no (i) civil, criminal or
administrative actions, suits, claims, hearings, investigations or proceedings
pending or, to the knowledge of the Company and its Subsidiaries, threatened
against the Company or any of its Subsidiaries, directors or officers or (ii)
obligations or liabilities of any nature, whether or not accrued, contingent or
otherwise, including those relating to environmental and occupational safety and
health matters, or any other facts or circumstances that to the knowledge of the
Company and its Subsidiaries can reasonably be expected to result in any claims
against, or obligations or liabilities of, the Company or any of its
Subsidiaries, except for those that would not, individually or in the aggregate,
have a Company Material Adverse Effect. There are no suits, claims or
proceedings pending or, to the knowledge of the Company and its Subsidiaries,
threatened against the Company or any of its Subsidiaries under Article XI
(Indemnification) of the Company's Charter or under any similar provision of the
charter or articles of incorporation of any of its Subsidiaries.
(h) EMPLOYEE BENEFITS.
(i) A copy of each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option, employment, termination,
severance, change of control, compensation, medical, health or other plan,
agreement, policy or arrangement that covers employees, directors, former
employees or former directors of the Company and its Subsidiaries (the
"COMPENSATION AND BENEFIT PLANS") and any trust agreement or insurance contract
forming a part of such Compensation and Benefit Plans has been made available to
Parent prior to the date hereof. The Compensation and Benefit Plans are listed
in Section 5.1(h) of the Company Disclosure Letter and any "change of control"
or similar provisions therein are specifically identified in Section 5.1(h) of
the Company Disclosure Letter. Section 5.1(h) of the Company Disclosure Letter
also sets forth an accurate list of all officers, directors and key employees of
the Company and its Subsidiaries, as of the date hereof, all employment
agreements with such Persons and the rate of compensation (and the portions
thereof attributable to salary, bonus and other compensation, respectively) of
each of such Persons as of the date hereof.
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(ii) All Compensation and Benefit Plans are in substantial
compliance with all applicable law, including the Code and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Each Compensation
and Benefit Plan that is an "employee pension benefit plan" within the meaning
of Section 3(2) of ERISA (a "PENSION PLAN") and that is intended to be qualified
under Section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service (the "IRS") with respect to "TRA" (as defined
in Section 1 of Rev. Proc. 93-39), and the Company is not aware of any
circumstances reasonably likely to result in revocation of any such favorable
determination letter. There is no pending or, to the knowledge of the Company
and its Subsidiaries, threatened litigation relating to the Compensation and
Benefit Plans. Neither the Company nor any of its Subsidiaries has engaged in a
transaction with respect to any Compensation and Benefit Plan that, assuming the
taxable period of such transaction expired as of the date hereof, would subject
the Company or any of its Subsidiaries to a tax or penalty imposed by either
Section 4975 of the Code or Section 502 of ERISA.
(iii) No liability under Subtitle C or D of Title IV of ERISA
has been or is expected to be incurred by the Company or any of its Subsidiaries
with respect to any ongoing, frozen or terminated "SINGLE-EMPLOYER PLAN", within
the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by
any of them, or the single-employer plan of any entity which is considered one
employer with the Company under Section 4001 of ERISA or Section 414 of the Code
(an "ERISA AFFILIATE"). The Company and its Subsidiaries have not contributed,
or been obligated to contribute, to a multiemployer plan under Subtitle E of
Title IV of ERISA at any time. No notice of a "REPORTABLE EVENT", within the
meaning of Section 4043 of ERISA for which the 30-day reporting requirement has
not been waived, has been required to be filed for any Pension Plan or by any
ERISA Affiliate within the 12-month period ending on the date hereof.
(iv) All contributions required to be made under the terms of
any Compensation and Benefit Plan as of the date hereof have been timely made or
have been reflected on the most recent consolidated balance sheet filed in the
Company Financial Statements. Neither any Pension Plan nor any single-employer
plan of an ERISA Affiliate has an "accumulated funding deficiency" (whether or
not waived) within the meaning of Section 412 of the Code or Section 302 of
ERISA. Neither the Company nor its Subsidiaries has provided, or is required to
provide, security to any Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(v) Under each Pension Plan which is a single-employer plan,
as of the last day of the most recent plan year ended prior to the date hereof,
the actuarially determined present value of all "benefit liabilities", within
the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the Pension Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such Pension
Plan, and there has been no material change in the financial condition of such
Pension Plan since the last day of the most recent plan year.
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(vi) Neither the Company nor its Subsidiaries have any
obligations for retiree health and life benefits under any Compensation and
Benefit Plan, except as set forth in Section 5.1(h) of the Company Disclosure
Letter. The Company or its Subsidiaries may amend or terminate any such plan
under the terms of such plan at any time without incurring any material
liability thereunder.
(vii) The consummation of the Merger and the other
transactions contemplated by this Agreement, either alone or in connection with
a subsequent termination of employment, will not (x) entitle any employees of
the Company or its Subsidiaries to severance pay, (y) accelerate the time of
payment or vesting or trigger any payment of compensation or benefits under,
increase the amount payable or trigger any other material obligation pursuant
to, any of the Compensation and Benefit Plans or (z) result in any breach or
violation of, or a default under, any of the Compensation and Benefit Plans.
(viii) All Compensation and Benefit Plans covering current or
former non-U.S. employees or former employees of the Company and its
Subsidiaries comply in all material respects with applicable local law. The
Company and its Subsidiaries have no material unfunded liabilities with respect
to any Pension Plan that covers such non-U.S. employees.
(ix) No amount that could be received (whether in cash or
property or the vesting of property) as a result of any of the transactions
contemplated by this Agreement by any employee, officer, director or independent
contractor of the Company who is a "disqualified individual" (as such term is
defined in proposed Treasury Regulation Section 1.28OG-1) under any employment
arrangement would be treated as an "excess parachute payment" (as such term is
defined in Section 28OG(b)(1) of the Code). Schedule 5.1(h)(ix) contains a true
and complete list of each such employment arrangement in existence as of the
date hereof. To the extent that any employment arrangement set forth on Schedule
5.1(h)(ix) has been superseded, the new arrangement is not materially different
than the superseded arrangement.
(i) COMPLIANCE WITH LAWS; PERMITS.
(i) The business and operations of the Company and the Company
Insurance Subsidiaries have been conducted in compliance with all applicable
statutes and regulations regulating the business of insurance and all applicable
orders and directives of insurance regulatory authorities and market conduct
recommendations resulting from market conduct examinations of insurance
regulatory authorities (collectively, "INSURANCE LAWS"), except where the
failure to so conduct such business and operations would not, individually or in
the aggregate, have a Company Material Adverse Effect. Notwithstanding the
generality of the foregoing, except where the failure to do so would not,
individually or in the aggregate, have a Company Material Adverse Effect, each
Company Insurance Subsidiary and, to the knowledge of the
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Company and its Subsidiaries, its agents have marketed, sold and issued
insurance products in compliance with Insurance Laws applicable to the business
of such Company Insurance Subsidiary and in the respective jurisdictions in
which such products have been sold, including, without limitation, in compliance
with (i) all applicable prohibitions against "redlining" or withdrawal of
business lines, (ii) all applicable requirements relating to the disclosure of
the nature of insurance products as policies of insurance and (iii) all
applicable requirements relating to insurance product projections and
illustrations. Except as would not, individually or in the aggregate, have a
Company Material Adverse Effect, (i) there is no pending or, to the knowledge of
the Company and its Subsidiaries, threatened charge by any insurance regulatory
authority that any of the Company Insurance Subsidiaries has violated, nor is
there any pending or, to the knowledge of the Company and its Subsidiaries,
threatened investigation by any insurance regulatory authority with respect to
possible violations of, any applicable Insurance Laws; (ii) none of the Company
Insurance Subsidiaries is subject to any order or decree of any insurance
regulatory authority relating specifically to such Company Insurance Subsidiary
(as opposed to insurance companies generally); and (iii) the Company Insurance
Subsidiaries have filed all reports required to be filed with any insurance
regulatory authority on or before the date hereof.
(ii) In addition to Insurance Laws, the businesses of each of
the Company and its Subsidiaries have not been, and were not being, conducted in
violation of any federal, state, local or foreign law, statute, ordinance, rule,
regulation, judgment, order, injunction, decree, arbitration award, agency
requirement, license or permit of any Governmental Entity (collectively with
Insurance Laws, "LAWS"), except for violations or possible violations that would
not, individually or in the aggregate, have a Company Material Adverse Effect.
No investigation or review by any Governmental Entity with respect to the
Company or any of its Subsidiaries is pending or, to the knowledge of the
Company and its Subsidiaries, threatened, nor, to the knowledge of the Company
and its Subsidiaries, has any Governmental Entity indicated an intention to
conduct the same, except for those the outcome of which would not, individually
or in the aggregate, have a Company Material Adverse Effect. To the knowledge of
the Company and its Subsidiaries, no material change is required in the
Company's or any of its Subsidiaries' processes, properties or procedures in
connection with any such Laws, and the Company has not received any notice or
communication of any material noncompliance with any such Laws that has not been
cured as of the date hereof. The Company and its Subsidiaries each has all
permits, licenses, trademarks, patents, trade names, copyrights, service marks,
franchises, variances, exemptions, orders and other governmental authorizations,
consents and approvals necessary to conduct its business presently conducted
except those the absence of which would not, individually or in the aggregate,
have a Company Material Adverse Effect.
(j) TAKEOVER STATUTES. Prior to entering into this Agreement, the
Company has taken all actions necessary such that no restrictive provision of
any "fair price," "moratorium," "control share acquisition," "interested
shareholder" or other similar anti-takeover statute or regulation (including the
Mississippi Shareholder Protection Act and the Mississippi Control Share Act
under
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the MBCA) (each a "TAKEOVER STATUTE") or restrictive provision of any
applicable anti-takeover provision in the charter or by-laws of the Company is,
or at the Effective Time will be, applicable to the Company, Parent, the Shares,
the Merger or any other transaction contemplated by this Agreement.
(k) ENVIRONMENTAL MATTERS. Except for such matters that would not,
individually or in the aggregate, have a Company Material Adverse Effect: (i)
the Company and its Subsidiaries have complied with all applicable Environmental
Laws; (ii) the properties currently owned or operated by the Company or any of
its Subsidiaries (including soils, groundwater, surface water, buildings or
other structures) are not contaminated with any Hazardous Substances; (iii) the
properties formerly owned or operated by the Company or any of its Subsidiaries
were not contaminated with Hazardous Substances during the period of ownership
or operation by the Company or any of its Subsidiaries; (iv) neither the Company
nor any of its Subsidiaries is subject to liability for any Hazardous Substance
disposal or contamination on any third party property; (v) neither the Company
nor any of its Subsidiaries has been associated with any release or threat of
release of any Hazardous Substance; (vi) neither the Company nor any of its
Subsidiaries has received any notice, demand, letter, claim or request for
information alleging that the Company or any of its Subsidiaries may be in
violation of or liable under any Environmental Law; (vii) neither the Company
nor any of its Subsidiaries is subject to any orders, decrees, injunctions or
other arrangements with any Governmental Entity or is subject to any indemnity
or other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (viii) there are no
circumstances or conditions involving the Company or any of its Subsidiaries
that could reasonably be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use, or transfer of any
property of the Company or any of its Subsidiaries pursuant to any Environmental
Law.
As used herein, the term "ENVIRONMENTAL LAW" means any federal, state,
local or foreign law, statute, ordinance, regulation, judgment, order, decree,
arbitration award, agency requirement, license, permit, authorization or
opinion, relating to: (A) the protection, investigation or restoration of the
environment, health and safety, or natural resources, (B) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance or
(C) noise, odor, wetlands, pollution, contamination or any injury or threat of
injury to persons or property.
As used herein, the term "HAZARDOUS SUBSTANCE" means any substance that
is: (A) listed, classified or regulated pursuant to any Environmental Law; (B)
any petroleum product or by-product, asbestos-containing material,
lead-containing paint polychlorinated biphenyls, radioactive materials or radon;
or (C) any other substance which may be the subject of regulatory action by any
Government Authority pursuant to any Environmental Law.
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(1) TAXES. Except as provided in Section 5.1(l) of the Company
Disclosure Letter and except for such matters that would not, individually or in
the aggregate, have a Company Material Adverse Effect:
(i) the Company and each of its Subsidiaries have filed
completely and correctly all Tax Returns (as defined below) that are required by
all applicable laws to be filed by them, and (x) have paid, or made adequate
provision for the payment of, all Taxes (as defined below) which have or may
become due and payable pursuant to those Tax Returns, have paid all estimated
Taxes due and (y) have paid all other charges, claims and assessments received
to date other than those charges, claims and assessments for Taxes being
contested in good faith for which adequate provision has been made on the most
recent balance sheet included in the Company Financial Statements;
(ii) all Taxes which the Company and its Subsidiaries are
required by law to withhold and collect have been duly withheld and collected,
and have been paid over, in a timely manner, to the proper Taxing Authorities
(as defined below) to the extent due and payable;
(iii) neither the Company nor any of its Subsidiaries have
executed any waiver to extend, or otherwise taken or failed to take any action
that would have the effect of extending, the applicable statute of limitations
in respect of any Tax liabilities of the Company or its Subsidiaries for the
fiscal years prior to and including the most recent fiscal year;
(iv) the Company and its Subsidiaries have never been members
of any consolidated group for income tax purposes other than the consolidated
group of which the Company is the common parent; and the Company and its
Subsidiaries are not parties to any tax sharing agreement or arrangement, other
than with each other;
(v) no liens for Taxes exist with respect to any of the assets
or properties of the Company or its Subsidiaries, except for statutory liens for
Taxes not yet due or payable or that are being contested in good faith;
(vi) There are no income Tax Returns filed by or on behalf of
the Company or any of its Subsidiaries that are currently the subject of an
audit or examination (or for which notice of an upcoming audit or examination
has been given to the Company or any of its Subsidiaries) by the Internal
Revenue Service or appropriate Taxing Authority, and as to each of the income
Tax Returns filed by or on behalf of each of the Company and its Subsidiaries
for which the statute of limitations has not expired, there has been no
extension of any applicable statute of limitations;
(vii) all Taxes due with respect to any completed and settled
audit, examination or deficiency litigation with any Taxing Authority have been
paid in full;
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(viii) there is no audit, examination, deficiency, or refund
litigation pending with respect to any Taxes, and during the past four years no
Taxing Authority has given written notice of the commencement of any audit,
examination, deficiency or refund litigation, with respect to any Taxes;
(ix) neither the Company nor any of its Subsidiaries is bound
by any currently effective private ruling, closing agreement or similar
agreement with any Taxing Authority relating to a material amount of Taxes;
(x) neither the Company nor any of its Subsidiaries is
required to include in a taxable period ending after the Effective Time, any
taxable income attributable to income that economically accrued in a prior
taxable period as a result of Section 481 of the Code, the installment method of
accounting or any comparable provision of state or local Tax law;
(xi) (A) no amount of property of the Company or any of its
Subsidiaries is "TAX EXEMPT PROPERTY" within the meaning of Section 168(h) of
the Code, (B) no amount of assets of the Company or any of its Subsidiaries is
subject to a lease under Section 7701(h) of the Code, and (C) neither the
Company nor any of its Subsidiaries is a party to any lease made pursuant to
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
prior to the date of enactment of the Tax Equity and Fiscal Responsibility Act
of 1982; and
(xii) immediately following the Merger, neither the Company
nor any of its Subsidiaries will have any material amount of income or gain that
has been deferred under Treasury Regulation Section 1.1502-13, or any material
excess loss account in a Subsidiary under Treasury Regulation Section 1.1502-19;
and
(xiii) the Company is not a "consenting corporation" within
the meaning of Section 341(f) of the Code.
As used in this Agreement, (i) the term "TAX" (including, with
correlative meaning, the terms "Taxes" and "TAXABLE") shall mean, with respect
to any Person, (a) all taxes, domestic or foreign, including without limitation
any income (net, gross or other, including recapture of any tax items such as
investment tax credits), alternative or add-on minimum tax, gross income, gross
receipts, premium, gains, sales, use, ad valorem, transfer, recording,
franchise, profits, property (real or personal, tangible or intangible), fuel,
license, withholding (whether on amounts paid to or by such Person), payroll,
employment, unemployment, social security, excise, severance, stamp, occupation,
or environmental tax, customs, duties, or other like assessments or governmental
charges of any kind whatsoever, together with any interest, penalties, additions
or additional amounts imposed with respect thereto (including, without
limitation, penalties for failure to file Tax Returns), (b) any joint or several
liability of such Person with any other Person for the payment of any amounts of
the type described in clause (a) hereof, and (c) any liability of such
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Person for the payment of any amounts of the type described in clause (a) hereof
as a result of any express or implied obligation to indemnify any other Person;
(ii) the term "TAX RETURNS" shall mean all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Taxing Authority; and (iii) the term "TAXING AUTHORITY" shall mean any
authority responsible for the imposition, collection or administration of any
Tax.
(m) LABOR MATTERS. Neither the Company nor any of its Subsidiaries is a
party to or otherwise bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization. No
work stoppage or labor strike against the Company or any of its Subsidiaries is
pending or, to the knowledge of the Company and its Subsidiaries, threatened.
Neither the Company nor any of its Subsidiaries is involved in or, to the
knowledge of the Company and its Subsidiaries, threatened with, any labor
dispute, grievance, or litigation relating to labor, safety or discrimination
matters involving any employee of the Company or any of its Subsidiaries,
including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, have a Company Material Adverse Effect. Neither the Company
nor any of its subsidiaries has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act which would, individually or in the
aggregate, have a Company Material Adverse Effect.
(n) INTELLECTUAL PROPERTY.
(i) The Company and/or each of its Subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights to use all patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, technology, know-how, computer software programs or applications, and
tangible or intangible proprietary information or materials that are used in the
business of the Company and its Subsidiaries as currently conducted, except for
any such failures to own, be licensed or possess that would not, individually or
in the aggregate, have a Company Material Adverse Effect, and to the knowledge
of the Company and its Subsidiaries all patents, trademarks, trade names,
service marks and copyrights held by the Company and/or its Subsidiaries are
valid and subsisting.
(ii) Except as would not, individually or in the aggregate,
have a Company Material Adverse Effect:
(A) neither the Company nor any of its Subsidiaries is, nor will any of
them be, as a result of the execution and delivery of this Agreement or
the performance of their obligations hereunder, in violation of any
licenses, sublicenses and other agreements as to which the Company or
any of its Subsidiaries is a party and pursuant to which the Company or
any of its Subsidiaries is authorized to use any third-party patents,
trademarks, service marks, and copyrights ("THIRD-PARTY INTELLECTUAL
PROPERTY RIGHTS");
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(B) no claims are currently pending or, to the knowledge of the Company
and its Subsidiaries, are threatened by any Person with respect to (I)
the patents, registered and material unregistered trademarks and
service marks, registered copyrights, trade names, and any applications
therefor owned by the Company or any its Subsidiaries (the "COMPANY
INTELLECTUAL PROPERTY RIGHTS"); (II) any trade secret of the Company or
any of its Subsidiaries; or (III) Third-Party Intellectual Property
Rights;
(C) to the knowledge of the Company and its Subsidiaries, there are no
valid grounds for any bona fide claims (I) to the effect that the sale,
licensing or use of any product as now used, sold or licensed or
proposed for use, sale or license by the Company or any of its
Subsidiaries, infringes on any copyright, patent, trademark, service
xxxx or trade secret; (II) against the use by the Company or any of its
Subsidiaries, of any trademarks, trade names, trade secrets,
copyrights, patents, technology, know-how or computer software programs
and applications used in the business of the Company or any of its
Subsidiaries as currently conducted or as proposed to be conducted;
(III) challenging the ownership, validity or effectiveness of any of
the Company Intellectual Property Rights or other trade secret of the
Company or any of its Subsidiaries; or (IV) challenging the license or
legally enforceable right to use of the Third-Party Intellectual Rights
by the Company or any of its Subsidiaries; and
(D) to the knowledge of the Company and its Subsidiaries, there is no
unauthorized use, infringement or misappropriation of any of the
Company Intellectual Property Rights by any third party, including any
employee or former employee of the Company or any of its Subsidiaries.
(o) MATERIAL CONTRACTS. All of the material contracts of the Company
and its Subsidiaries are in full force and effect. True and complete copies of
all such material contracts have been delivered or have been made available by
the Company to Parent. Neither the Company nor any of its Subsidiaries nor any
other party is in breach of or in default under any such contract except for
such breaches and defaults as would not, individually or in the aggregate, have
a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is party to any agreement containing any provision or covenant
limiting the ability of the Company, any of its Subsidiaries or, except as
specifically identified on Section 5.1(o) of the Company Disclosure Letter,
assuming the consummation of the transactions contemplated by this Agreement,
Parent or any Affiliate of Parent, to (A) sell any products or services of or to
any other Person, (B) engage in any line of business, (C) compete with or to
obtain products or services from any Person or limiting the ability of any
Person to provide products or services to the Company or any of its
Subsidiaries, or (D) acquire securities of any Person.
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(p) BROKERS AND FINDERS. Neither the Company nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders, fees in connection
with the Merger or the other transactions contemplated in this Agreement except
that the Company has employed Xxxxxx Xxxxxx as its financial advisor, the
arrangements with which have been disclosed to Parent prior to the date hereof.
(q) INSURANCE MATTERS.
(i) Except as otherwise would not, individually or in the
aggregate, have a Company Material Adverse Effect, all policies, binders, slips,
certificates, annuity contracts and participation agreements and other
agreements of insurance, whether individual or group, in effect as of the date
hereof (including all applications, supplements, endorsements, riders and
ancillary agreements in connection therewith) that are issued by the Company
Insurance Subsidiaries (the "COMPANY INSURANCE CONTRACTS") and any and all
marketing materials, are, to the extent required under applicable law, on forms
approved by applicable insurance regulatory authorities or which have been filed
and not objected to by such authorities within the period provided for
objection, and such forms comply with the insurance statutes, regulations and
rules applicable thereto and, as to premium rates established by the Company or
any Company Insurance Subsidiary which are required to be filed with or approved
by insurance regulatory authorities, the rates have been so filed or approved,
the premiums charged conform thereto, and such premiums comply with the
insurance statutes, regulations and rules applicable thereto.
(ii) All reinsurance and coinsurance treaties or agreements,
including retrocessional agreements, to which the Company or any Company
Insurance Subsidiary is a party or under which the Company or any Company
Insurance Subsidiary has any existing rights, obligations or liabilities are in
full force and effect, except for such treaties or agreements the failure to be
in full force and effect of which would not, individually or in the aggregate,
have a Company Material Adverse Effect. Neither the Company nor any Company
Insurance Subsidiary, nor, to the knowledge of the Company and its Subsidiaries,
any other party to a reinsurance or coinsurance treaty or agreement to which the
Company or any Company Insurance Subsidiary is a party, is in default in any
material respect as to any provision thereof, and no such agreement contains any
provision providing that the other party thereto may terminate such agreement by
reason of the transactions contemplated by this Agreement. The Company has not
received any notice to the effect that the financial condition of any other
party to any such agreement is impaired with the result that a default
thereunder may reasonably be anticipated, whether or not such default may be
cured by the operation of any offset clause in such agreement. No insurer or
reinsurer or group of affiliated insurers or reinsurers accounted for the
direction to the Company and the Company Insurance Subsidiaries or the ceding by
the Company and the Company Insurance Subsidiaries of insurance or reinsurance
business in an aggregate amount equal to two percent or more of the consolidated
gross premium income of the Company and the Company Insurance Subsidiaries for
the year ended December 31, 1996.
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(iii) Prior to the date hereof, the Company has delivered or
made available to Parent a true and complete copy of any actuarial reports
prepared by actuaries, independent or otherwise, with respect to the Company or
any Company Insurance Subsidiary since December 31, 1994, and all attachments,
addenda, supplements and modifications thereto (the "COMPANY ACTUARIAL
ANALYSES"). The information and data furnished by the Company or any Company
Insurance Subsidiary to its independent actuaries in connection with the
preparation of the Company Actuarial Analyses were accurate in all material
respects. Furthermore, to the knowledge of the Company and its Subsidiaries,
each Company Actuarial Analysis was based upon an accurate inventory of policies
in force for the Company and the Company Insurance Subsidiaries, as the case may
be, at the relevant time of preparation, was prepared using appropriate modeling
procedures accurately applied and in conformity with generally accepted
actuarial standards consistently applied, and the projections contained therein
were properly prepared in accordance with the assumptions stated therein.
(iv) None of Standard & Poor's Corporation, Xxxxx'x Investors
Service, Inc. or A.M. Best Company has announced that it has under surveillance
or review its rating of the financial strength or claims-paying ability of any
Company Insurance Subsidiary and the Company has no reason to believe that any
rating presently held by the Company Insurance Subsidiaries is likely to be
modified, qualified, lowered or placed under such surveillance for any reason,
including as a result of the transactions contemplated hereby.
(v) Except as would not reasonably be expected to have a
Company Material Adverse Effect, all annuity contracts and life insurance
policies issued by each Company Insurance Subsidiary to an annuity holder
domiciled in the United States meet all definitional or other requirements for
qualification under the Code section applicable (or intended to be applicable)
to such annuity contracts or life insurance policies, including, without
limitation, the following: (A) each life insurance policy meets the requirements
of sections 101(f), 817(h) or 7702 of the Code, as applicable; (B) no life
insurance contract issued by any Company Insurance Company is a "modified
endowment contract" within the meaning of section 7702A of the Code unless and
to the extent that the holders of the policies have been notified of their
classification; (C) each annuity contract issued, entered into or sold by any
Company Insurance Subsidiary qualifies as an annuity under federal tax law; (D)
each annuity contract meets the requirements of, and has been administered
consistent with section 817(h) and 72 of the Code including but not limited to
section 72(s) of the Code (except for those contracts specifically excluded from
such requirement pursuant to section 72(s)(5) of the Code); (E) each annuity
contract intended to qualify under sections 130, 403(a), 403(b) or 408(b) of the
Code contains all provisions required for qualification under such sections of
the Code; (F) each annuity contract marketed as, or in connection with, plans
that are intended to qualify under section 401, 403, 408 or 457 of the Code
complies with the requirements of such section; and (G) none of the Company
Insurance Subsidiaries have entered into any agreement or are involved in any
discussions or negotiations
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and there are no audits, examinations, investigations or other proceedings with
the IRS with respect to the failure of any life insurance policy under section
7702 or 817(h) of the Code or the failure of any annuity contract to meet the
requirements of section 72(s) of the Code. There are no "hold harmless"
indemnification agreements respecting the tax qualification or treatment of any
product or plan sold, issued, entered into or administered by the Company
Insurance Subsidiaries, and there have been no claims asserted by any Person
under such "hold harmless" indemnification agreements so set forth.
(r) LIABILITIES AND RESERVES.
(i) The reserves carried on the Company SAP Statements of each
Company Insurance Subsidiary for future insurance policy benefits, losses,
claims and similar purposes were, as of the respective dates of such Company SAP
Statements, in compliance in all material respects with the requirements for
reserves established by the insurance departments of the state of domicile of
such Company Insurance Subsidiary, were determined in all material respects in
accordance with generally accepted actuarial standards and principles
consistently applied, and were fairly stated in all material respects in
accordance with sound actuarial and statutory accounting principles. The Company
reasonably believes that such reserves were adequate in the aggregate to cover
the total amount of all reasonably anticipated liabilities of the Company and
each Company Insurance Subsidiary under all outstanding insurance, reinsurance
and other applicable agreements as of the respective dates of such Company SAP
Statements. The admitted assets of each Company Insurance Subsidiary as
determined under applicable Laws are in an amount at least equal to the minimum
amounts required by applicable Laws. In addition, the Company has delivered or
made available to Parent copies of all work papers used as the basis for
establishing the reserves for the Company and the Company Insurance Subsidiaries
at December 31, 1995, December 31, 1996 and December 31, 1997, respectively.
(ii) Except for regular periodic assessments in the ordinary
course of business or assessments based on developments which are publicly known
within the insurance industry, to the knowledge of the Company and its
Subsidiaries, no claim or assessment is pending or threatened against any
Company Insurance Subsidiary which is peculiar or unique to such Company
Insurance Subsidiary by any state insurance guaranty association in connection
with such association's fund relating to insolvent insurers which if determined
adversely, would, individually or in the aggregate, have a Company Material
Adverse Effect.
(s) SEPARATE ACCOUNTS. None of the Company Insurance Subsidiaries
maintains any separate accounts. Neither the Company nor any of its Subsidiaries
conducts activities of or is otherwise deemed under applicable law to control an
"investment advisor" as such term is defined in Section 2(a)(20) of the
Investment Advisers Act of 1940, as amended (the "ADVISERS ACT"), whether or not
registered under the Advisers Act. Neither the Company nor any of its
Subsidiaries is an "investment company" as defined under the Investment Company
Act of 1940,
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and neither the Company nor any of its Subsidiaries sponsors any Person that is
such an investment company."
(t) REAL PROPERTY. Section 5.1(t) of the Company Disclosure Letter sets
forth a correct and complete list of all real property owned, leased or
subleased by the Company or any of its Subsidiaries (collectively, the "REAL
PROPERTY"). The Company or its Subsidiaries are the sole and exclusive legal and
equitable owners of all right, title and interest in, and have good, marketable
and insurable title to, all of the Real Property identified as being owned by
the Company or any of its Subsidiaries, free and clear of all Liens, except as
set forth in Section 5.1(t) of the Company Disclosure Letter. All leases for the
Real Property are in full force and effect in accordance with their respective
terms, and there are no existing defaults or events which with notice or lapse
of time or both would constitute defaults under any such leases. Neither the
consummation of the Merger nor any of the other transactions contemplated by
this Agreement shall cause the termination of any such leases or have a material
adverse effect on any of the Company's or its Subsidiaries' rights under any of
such leases.
(u) INTERESTED PARTY TRANSACTIONS. No officer or director of the
Company or Person who owns at least five percent (5%) of the outstanding stock
of the Company (nor any parent, child or spouse of any such Person, or any
trust, partnership or corporation in which any such Person has or has had an
interest), has or has had, directly or indirectly, (i) an interest in any entity
that furnished or sold, or furnishes or sells, services or products which the
Company furnishes or sells, or proposes to furnish or sell, or (ii) any interest
in any entity which purchases from or sells or furnishes to, the Company, any
goods or services; provided, that ownership of no more than one percent (1%) of
the outstanding voting stock of a publicly traded corporation shall not be
deemed an "interest in any entity" for purposes of this section 5.1(u), and
further provided that this sentence shall exclude any entity that is an
Automobile Dealer Agent or Financial Institution Agent (as defined below) if
such entity engages only in insurance agency transactions with one or more
Company Insurance Subsidiaries on terms substantially similar to insurance
agency transactions between the Company Insurance Subsidiaries and their other
insurance agents. The term "FINANCIAL INSTITUTION AGENT" shall mean any bank or
other financial institution that directly or through affiliates of such bank or
other financial institution has been appointed as an insurance agent by Life
Insurance Company of Mississippi.
(v) DISCLOSURE. The representations and warranties and statements of
the Company contained in this Agreement do not contain any untrue statement of a
material fact, and, when taken together, do not omit to state any material fact
necessary to make such representations, warranties and statements, in light of
the circumstances under which they are made, not misleading.
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5.2. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY.
Except as set forth in the corresponding sections or subsections of the
disclosure letter delivered to the Company by Parent on or prior to entering
into this Agreement (the "Parent Disclosure Letter'), Parent and Merger
Subsidiary each hereby represent and warrant to the Company that:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of Parent and
Merger Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own and operate its properties and
assets and to carry on its business as presently conducted. Parent has made
available to the Company a complete and correct copy of Parent's and Merger
Subsidiary's charter and by-laws, each as amended to the date hereof Parent's
and Merger Subsidiary's charter and by-laws so delivered are in full force and
effect.
(b) CAPITALIZATION OF MERGER SUBSIDIARY. The authorized stock of Merger
Subsidiary consists of 1,000 shares of Common Stock, par value $0.01 per share,
100 of which are duly authorized, validly issued and outstanding, fully paid and
non-assessable. All of the issued and outstanding stock of Merger Subsidiary is,
and at the Effective Time will be, owned by Parent, and there are (i) no other
shares of stock or voting securities of Merger Subsidiary, (ii) no securities of
Merger Subsidiary convertible into or exchangeable for shares of stock or voting
securities of Merger Subsidiary and (iii) no options or other rights to acquire
from Merger Subsidiary, and no obligations of Merger Subsidiary to issue or
deliver, any stock, voting securities or securities convertible into or
exchangeable for stock or voting securities of Merger Subsidiary. Merger
Subsidiary has not conducted any business prior to the date hereof and has no,
and prior to the Effective Time will have no, assets, liabilities or obligations
of any nature other than those incident to its formation and pursuant to this
Agreement and the Merger and the other transactions contemplated by this
Agreement.
(c) CORPORATE AUTHORITY. Each of the Parent and Merger Subsidiary has
all requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement and to consummate the Merger. This Agreement is a valid and binding
agreement of Parent and Merger Subsidiary, enforceable against each of Parent
and Merger Subsidiary in accordance with its terms, subject to the Bankruptcy
and Equity Exception.
(d) GOVERNMENTAL FILINGS. Other than the filings and/or notices (A)
pursuant to Section 1.3, (B) under the HSR Act, (C) to comply with state
securities or "blue-sky" laws, (D) the filing of appropriate documents with, and
approval of, the respective Commissioners of Insurance of the states of
Mississippi and Florida, (E) such notices and consents as may be required under
the antitrust notification insurance laws of Arkansas, Georgia, Kentucky, and
Tennessee, and (F) to the Mississippi Department of Banking and the Tennessee
Motor Vehicle Commission, no notices, reports or other filings are required to
be made by Parent or Merger Subsidiary with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
Parent or Merger
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Subsidiary from, any Governmental Entity, in connection with the execution and
delivery of this Agreement by Parent and Merger Subsidiary and the consummation
by Parent and Merger Subsidiary of the Merger and the other transactions
contemplated hereby, except those that the failure to make or obtain would not
materially delay or materially impair the ability of Parent or Merger Subsidiary
either to Perform its obligations under this Agreement or to consummate the
Merger or any of the other transactions contemplated by this Agreement.
(e) LEGAL PROCEEDINGS. There is no action, suit or proceeding by or
before any Governmental Authority which questions the validity of the Agreement
or any action taken or to be taken by Parent or Merger Subsidiary in connection
with the Merger or any other transactions contemplated by this Agreement.
Neither Parent nor Merger Subsidiary, nor any of their respective assets, are
subject to any judgment or other agreement which restricts the ability of Parent
or Merger Subsidiary from consummating the Merger or any other transactions
contemplated by this Agreement.
(f) BROKERS AND FINDERS. Neither Parent nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders, fees in connection
with the Merger or the other transactions contemplated by this Agreement.
ARTICLE VI
Covenants
6.1. INTERIM OPERATIONS. The Company covenants and agrees as to itself
and its Subsidiaries that, from the date hereof and prior to the Effective Time
(unless Parent shall otherwise approve in writing, and except as otherwise
expressly contemplated by this Agreement or set forth in Section 6.1 of the
Company Disclosure Schedule):
(a) its and its Subsidiaries' businesses shall be conducted in the
ordinary and usual course (it being understood and agreed that nothing contained
herein shall permit the Company to enter into or engage in (through acquisition,
product extension or otherwise) the business of selling any products or services
materially different from existing products or services of the Company and its
Subsidiaries or to enter into or engage in new lines of business without
Parent's prior written approval);
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(b) to the extent consistent with (a) above, it and its Subsidiaries
shall use their respective reasonable best efforts to preserve their respective
business organization intact and maintain their respective existing relations
and goodwill with customers, suppliers, reinsurers, distributors, creditors,
lessors, employees and business associates;
(c) it shall not (i) issue, sell, pledge, dispose of or encumber any
capital stock owned by it in any of its Subsidiaries; (ii) amend its charter or
by-laws; (iii) split, combine or reclassify its outstanding shares of capital
stock; (iv) authorize, declare, set aside or pay any dividend payable in cash,
stock or property in respect of any capital stock (except for the payment of a
cash dividend by the Company: (i) on any normal record date for a quarterly
dividend that is prior to the Closing Date, at a rate not to exceed $0.065 per
share per quarter, and (ii) if the Closing Date is more than forty five days
after the last normal record date for a quarterly cash dividend, at a rate not
to exceed $0.065 per share per quarter multiplied by a fraction (A) the
numerator of which is the number of days between the last normal record date and
the Closing Date, and (B) the denominator of which is 91); or (v) repurchase,
redeem or otherwise acquire, or permit any of its Subsidiaries to purchase or
otherwise acquire, any shares of its stock or any securities convertible into or
exchangeable or exercisable for any shares of its stock;
(d) neither it nor any of its Subsidiaries shall (i) issue, sell,
pledge, dispose of or encumber any shares of, or securities convertible into or
exchangeable or exercisable for, or options, warrants, calls, commitments or
rights of any kind to acquire, any shares of its capital stock of any class or
any other property or assets (other than the issuance of MSD Permitted Shares to
an Automobile Dealer Agent by MSD Life in the ordinary course of MSD Life's
business and in amounts consistent with past practices and only if the issuance
of any such MSD Permitted Shares shall not cause MS Life Insurance Company to
own less than 51% of the outstanding shares of common stock of MSD Life); (ii)
other than in the ordinary and usual course of business, transfer, lease,
license, guarantee, sell, mortgage, pledge, dispose of or encumber any other
property or assets (including capital stock of any of its Subsidiaries) or incur
or modify any material indebtedness or other liability; or (iii) make or
authorize or commit for any capital expenditures other than in amounts not
exceeding $50,000 in the aggregate (other than a computer system upgrade not
exceeding $100,000 in the aggregate) or, by any means, make any acquisition of,
or investment in, assets or stock of any other Person or entity, including by
way of assumption reinsurance, in excess of $25,000 individually or $100,000 in
the aggregate (other than in connection with ordinary course investment
activities);
(e) neither it nor any of its Subsidiaries shall terminate, establish,
adopt, enter into, make any new grants or awards under, amend or otherwise
modify, any Compensation and Benefit Plans, or increase the salary, wage, bonus,
severance benefits or other compensation of any employees except increases not
in excess of $10,000.00 per annum occurring in the ordinary and usual course of
business (which shall include normal periodic performance reviews and related
compensation and benefit increases consistent with the Company's past
practices).
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(f) neither it nor any of its Subsidiaries shall pay, discharge, settle
or satisfy any claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction of (i) pending litigation for which the total settlement
consideration does not exceed $30,000 for any one lawsuit and $150,00 in the
aggregate for all lawsuits, (ii) claims, liabilities or obligations legally due
and payable and arising in the ordinary and usual course of business, and (iii)
claims arising under the terms of products, contracts or policies issued by the
Company Insurance Subsidiaries in the ordinary and usual course of business;
(g) neither it nor any of its Subsidiaries shall make or change any Tax
election, settle any material audit, file any amended tax returns or permit any
insurance policy naming it as a beneficiary or loss-payable payee to be canceled
or terminated except in the ordinary and usual course of business;
(h) neither it nor any of its Subsidiaries shall enter into any
agreement containing any provision or covenant limiting the ability of the
Company or any Subsidiary of the Company (or, after the Effective Time, Parent
or any Affiliate of Parent) to (A) sell any products or services of or to any
other Person, (B) engage in any line of business, (C) compete with or to obtain
products or services from any Person or limiting the ability of any Person to
provide products or services to the Company or any of its Subsidiaries, or (D)
acquire securities of any Person;
(i) neither it nor any of its Subsidiaries shall enter into any new
quota share or other reinsurance transaction (A) which does not contain standard
cancellation and termination provisions, (B) which, except in the ordinary
course of business, materially increases or reduces the Company Insurance
Subsidiaries' consolidated ratio of net written premiums to gross written
premiums or (C) pursuant to which $500,000 or more in gross written premiums are
ceded by the Company Insurance Subsidiaries to any Person other than the Company
or any of its Subsidiaries;
(j) neither it nor any of the Company Insurance Subsidiaries will alter
or amend in any material respect their existing investment guidelines or
policies;
(k) neither it nor any of its Subsidiaries shall take any action or
omit to take any action that would cause any of its representations and
warranties herein to become untrue in any material respect; and
(l) neither it nor any of its Subsidiaries will authorize or enter into
an agreement to do any of the foregoing.
6.2. ACQUISITION PROPOSALS. The Company will not, and will not permit
or cause any of its Subsidiaries or any of the officers and directors of it or
its Subsidiaries to, and shall direct its
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and its Subsidiaries' employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) not to, directly or indirectly, initiate or solicit any proposal
or offer with respect to a merger, reorganization, share exchange, consolidation
or similar transaction involving, or any purchase of 15% or more of the assets
or any equity securities of, the Company or any of its Subsidiaries (any such
proposal or offer being hereinafter referred to as an "ACQUISITION PROPOSAL").
Nothing contained in this Agreement shall prevent the Company or its board of
directors from at any time (A) providing information in response to a request
therefor by a Person who has made an unsolicited bona fide written Acquisition
Proposal if the Board of Directors receives from the Person so requesting such
information an executed confidentiality agreement substantially in the form
attached hereto as Exhibit A; (B) engaging in any negotiations or discussions
with any Person who has made an unsolicited bona fide written Acquisition
Proposal; or (C) recommending such an Acquisition Proposal to the stockholders
of the Company, if and only to the extent that, (i) in each such case referred
to in clause (A), (B) or (C) above, the Board of Directors of the Company
determines in good faith after consultation with outside legal counsel that such
action is necessary in order for its directors to comply with their respective
fiduciary duties under applicable law and (ii) in each case referred to in
clause (B) or (C) above, the Board of Directors of the Company determines in
good faith (after consultation with its financial advisor) that such Acquisition
Proposal, if accepted, is reasonably likely to be consummated, taking into
account all legal, financial and regulatory aspects of the proposal and the
Person making the proposal and would, if consummated, result in a more favorable
transaction than the transaction contemplated by this Agreement, taking into
account the long-term prospects and interests of the Company and its
stockholders (any such more favorable Acquisition Proposal being referred to in
this Agreement as a "SUPERIOR PROPOSAL"). The Company will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing. The
Company agrees that it will take the necessary steps to promptly inform the
individuals or entities referred to in the first sentence in this Section 6.2 of
the obligations undertaken in this Section 6.2 and in Section 6.3. The Company
will notify Parent immediately if any such inquiries, proposals or offers are
received by, any such information is requested from, or any such discussions or
negotiations are sought to be initiated or continued with, any of its
representatives indicating, in connection with such notice, the name of such
Person and the material terms and conditions of any proposals or offers and
thereafter shall keep Parent informed, on a current basis, on the status and
terms of any such proposals or offers and the status of any such negotiations or
discussions. The Company also will promptly request each Person that has
heretofore executed a confidentiality agreement in connection with its
consideration of an Acquisition Proposal to return all confidential information
heretofore furnished to such Person by or on behalf of it or any of its
Subsidiaries.
6.3. NON-DISCLOSURE. No party to this Agreement (nor any of their
respective officers, employees, counsel, accountants and other authorized
representatives ("REPRESENTATIVES")) shall disclose to any third party, other
than potential lenders or potential acquirors of Parent, any
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confidential or proprietary information about the business, assets or operations
of the Company or its Subsidiaries or about the transaction contemplated hereby,
except as may be required by law or in connection with a Superior Proposal. The
parties hereto agree that the remedy at law for any breach of the requirements
of this Section 6.3 will be inadequate and that any breach would cause such
immediate and permanent damage as would be impossible to ascertain, and
therefore, the parties hereto agree and consent that in the event of any breach
of this subsection, in addition to any and all other legal and equitable
remedies available for such breach, including a recovery of damages, the
non-breaching parties shall be entitled to obtain preliminary or permanent
injunctive relief without the necessity of proving actual damage by reason of
such breach and, to the extent permissible under applicable law, a temporary
restraining order may be granted immediately on commencement of such action.
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6.4. STOCKHOLDERS MEETINGS.
(a) The Company will take, in accordance with its charter and by-laws,
all action necessary to convene a meeting of holders of Shares (the
"SHAREHOLDERS MEETING") as promptly as practicable, but in no event more than 45
days after the date hereof, for the purpose of voting on whether to approve the
Merger. Subject to fiduciary obligations under applicable law, the Company's
board of directors shall recommend such approval, shall not withdraw or modify
such recommendation and shall take all lawful action to solicit such approval.
Without limiting the generality of the foregoing, in the event that the
Company's board of directors withdraws or modifies its recommendation, the
Company nonetheless shall cause the Shareholders Meeting to be convened and a
vote taken with respect to the Merger and the board of directors shall
communicate to the Company's shareholders its basis for such withdrawal or
modification as contemplated by Section 79-4-11.03(b)(1) of the MBCA.
(b) Parent shall vote all shares of common stock owned by Parent in
Merger Subsidiary in favor of the Merger.
6.5. FILINGS; OTHER ACTIONS, NOTIFICATION.
(a) The Company and Parent shall cooperate with each other and use (and
shall cause their respective Subsidiaries to use) all best efforts (i) to cause
to be done all things, necessary, proper or advisable on its part under this
Agreement and applicable Laws to consummate and make effective the Merger and
the other transactions contemplated by this Agreement as soon as practicable,
including preparing and filing as promptly as practicable all documentation to
effect all necessary notices, reports and other filings, and (ii) to obtain as
promptly as practicable all consents, registrations, approvals, permits and
authorizations necessary or advisable to be obtained from any third party (a
"NECESSARY THIRD PARTY") and/or any Governmental Entity in connection with, as a
result of or in order to consummate the Merger or any of the other transactions
contemplated by this Agreement, including, without limitation, upon request of
Parent, all material consents required in connection with the consummation of
the Merger; provided, however, that nothing in this Section 6.5 shall require,
or be construed to require, Parent, in connection with the receipt of any
regulatory approval, to proffer to, or agree to (i) sell or hold separate and
agree to sell or to discontinue to or limit, before or after the Effective Time,
any assets, businesses, or interest in any assets or businesses of Parent, the
Company or any of their respective Affiliates (or to consent to any sale, or
agreement to sell, or discontinuance or limitation by the Company of any of its
assets or businesses) or (ii) agree to any conditions relating to, or changes or
restriction in, the operations of any such asset or businesses which, in either
case, could, in the judgment of the Parent's board of directors, materially and
adversely impact the economic or business benefits to Parent of the transactions
contemplated by this Agreement. Subject to applicable laws relating to the
exchange of information, Parent and the Company shall have the right to review
in advance, and to the extent practicable each will consult the other on, all
the information relating to Parent or
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the Company, as the case may be, and any of their respective Subsidiaries, that
appear in any filing made with, or written materials submitted to, any Necessary
Third Party and/or any Governmental Entity in connection with the Merger and the
other transactions contemplated by this Agreement. In exercising the foregoing
right, each of the Company and Parent shall act reasonably and as promptly as
practicable.
(b) The Company and Parent each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the any statement, filing, notice or
application made by or on behalf of Parent, the Company or any of their
respective Subsidiaries to any Necessary Third Party and/or any Governmental
Entity in connection with the Merger and the transactions contemplated by this
Agreement.
(c) The Company and Parent each shall keep the other apprised of the
status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be, or any of
its Subsidiaries, from any Necessary Third Party and/or any Governmental Entity
with respect to the Merger and the other transactions contemplated by this
Agreement. The Company and Parent each shall give prompt notice to the other of
any change that is reasonably likely to prevent, materially delay or materially
impair the ability of the Company or Parent (as the case may be) either (i) to
perform its obligations under this Agreement or (ii) to consummate the Merger or
any of the other transactions contemplated by this Agreement.
6.6. ACCESS. Upon reasonable notice, and except as may otherwise be
required by applicable law, the Company shall (and shall cause its Subsidiaries
to) afford Parent's Representatives access, during normal business hours
throughout the period prior to the Effective Time, to the Company's and its
Subsidiaries' management, properties, books, contracts and records and, during
such period, shall (and shall cause its Subsidiaries to) furnish promptly to
Parent all information concerning the Company's and its Subsidiaries' business,
properties and personnel as may reasonably be requested, provided that no
investigation pursuant to this Section shall affect or be deemed to modify any
representation or warranty made by the Company, and provided, further, that the
foregoing shall not require the Company to permit any inspection, or to disclose
any information, that in the reasonable judgment of the Company would result in
the disclosure of any trade secrets of third parties or violate any of its
obligations with respect to confidentiality if the Company shall have used all
reasonable efforts to obtain the consent of such third party to such inspection
or disclosure. All requests for information made pursuant to this Section 6.6
shall be directed to an executive officer of the Company or such Person as may
be designated by the Company's officers.
6.7. PUBLICITY. The Company and Parent each shall consult with each
other prior to issuing any press releases or otherwise making public
announcements with respect to the Merger
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and the other transactions contemplated by this Agreement and prior to making
any filings with any Necessary Third Party and/or any Governmental Entity
(including any national securities exchange) with respect thereto, except as may
be required by law or by obligations pursuant to any listing agreement with or
rules of any national securities exchange or interdealer quotation service.
6.8. EXPENSES. Except as otherwise provided in Section 8.5(b), whether
or not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the Merger and the other transactions contemplated by
this Agreement shall be paid by the party incurring such expense.
6.9. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE; SET-OFF
RIGHT.
(a) From and after the Effective Time, Parent shall cause the Surviving
Corporation to, and the Surviving Corporation agrees to, indemnify and hold
harmless in accordance with the Company's Charter, and subject to the
limitations of the MBCA and Mississippi law, each present and former director
and officer of the Company (when acting in such capacity) determined as of the
Effective Time (each, an "INDEMNIFIED PARTY" and, collectively, the "INDEMNIFIED
PARTIES"), against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively, "COSTS")
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
pertaining to acts or omissions, or alleged acts or omissions, by them in their
capacities as such, and which arise out of matters existing or occurring at or
prior to the Effective Time, whether asserted or claimed prior to, at or after
the Effective Time (and Parent shall also cause the Surviving Corporation, and
the Surviving Corporation agrees to, advance expenses in accordance with the
Company's Charter, and subject to the limitations of the MBCA and Mississippi
law, provided the Person to whom expenses are advanced provides a written
affirmation of his or her good faith belief that the standard of conduct
necessary for indemnification has been met, and an undertaking to repay such
advances if it is ultimately determined that such Person is not entitled to
indemnification).
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 6.9, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify Parent and the
Surviving Corporation thereof, but the failure to so notify shall not relieve
the Surviving Corporation of any liability it may have to such Indemnified Party
if such failure does not materially prejudice the Surviving Corporation. In the
event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) the Surviving Corporation shall
have the right to assume the defense thereof and the Surviving Corporation shall
not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified Parties
in connection with the defense thereof, except that if the Surviving Corporation
elects not to assume such defense or
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counsel for the Indemnified Parties advises that there are issues which raise
conflicts of interest between the Surviving Corporation and the Indemnified
Parties, the Indemnified Parties may retain counsel satisfactory to them, and
the Surviving Corporation shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received; provided, however, that the Surviving Corporation shall be obligated
pursuant to this paragraph (b) to pay for only one firm of counsel for all
Indemnified Parties in any jurisdiction unless the use of one counsel for such
Indemnified Parties would present such counsel with a conflict of interest, (ii)
the Indemnified Parties will cooperate in the defense of any such matter and
(iii) the Surviving Corporation shall not be liable for any settlement effected
without its prior written consent; and provided further, that the Surviving
Corporation shall not have any obligation hereunder to any Indemnified Party if
and when a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law.
(c) The Surviving Corporation shall use reasonable efforts to maintain
the Company's existing officers' and directors' liability insurance ("D&O
INSURANCE") or D&O Insurance that is substantially comparable (as determined in
good faith by the Surviving Corporation) to the Company's existing D&O Insurance
for a period of three years after the Effective Time so long as the annual
premium therefor is not in excess of 150% of the last annual premium paid prior
to the date hereof (such last annual premium being hereinafter referred to as
the "CURRENT PREMIUM"); provided, however, that if the existing D&O Insurance or
substantially comparable D&O Insurance cannot be acquired during the three-year
period for not in excess of 150% of the Current Premium, then the Surviving
Corporation will obtain as much D&O Insurance as can be obtained for the
remainder of such period for a premium not in excess (on an annualized basis) of
150% of the Current Premium.
(d) The provisions of this Section are intended to be for the benefit
of, and shall be enforceable by, each of the Indemnified Parties, their heirs
and their representatives.
(e) In the event of any breach of any representation, warranty,
covenant or agreement made by the Company in this Agreement, Parent shall be
entitled to set-off against the Search Common Stock all Costs incurred or
suffered by Parent or any Affiliate of Parent as a result of any such breach.
6.10. TAKEOVER STATUTE. If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated by this
Agreement, each of Parent and the Company and its board of directors shall grant
such approvals and take such actions as are necessary so that such transactions
may be consummated as promptly as practicable on the terms contemplated by this
Agreement or by the Merger and otherwise act to eliminate or minimize the
effects of such statute or regulation on such transactions.
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6.11. RESTRICTIVE COVENANTS. To the extent Parent determines that any
of the items identified in Section 5.1(o) of the Company Disclosure Letter may,
after the Effective Time, impose restrictions or obligation on Parent or any
Affiliate of Parent (other than the Company and its Subsidiaries), then promptly
following the execution of this Agreement, the Company shall use its reasonable
best efforts to cause Parent and any such Affiliate of Parent to be exempted
from such restrictions or obligations.
6.12. FUTURE CONSIDERATION. Prior to the Future Consideration
Distribution Date, and subject to Parent's right of set-off under section
6.9(e), Parent shall not permit and shall not permit any of its Affiliates to,
transfer, sell, or otherwise dispose of the Search Common Stock (other than
transfers to Parent or any of its Affiliates). No later than ten (10) business
days after the Future Consideration Distribution Date, and subject to Parent's
right of set-off under section 6.9(e), Parent shall deliver the Per Share Future
Consideration (or an amount in cash equal to the value of the Search Common
Stock to have been distributed) to any Person entitled, pursuant to Section
4.1(a) of this Agreement, to receive the Per Share Future Consideration;
provided, however, that if Parent determines in good faith that the aggregate
value of the Search Common Stock owned by Parent or any of its Affiliates
(excluding any shares of Search Common Stock acquired by Parent pursuant to its
right of set-off under section 6.9(e)) is less than $10,000 on the Future
Consideration Distribution Date, Parent shall have no obligation to make such
distribution.
6.13 OFFICERS' CERTIFICATIONS. Concurrent with the execution of this
Agreement, the Company shall deliver to Parent copies of certificates, in the
form attached as composite Exhibit B hereto, executed, respectively, by Xxxxx X.
Xxxxxx, Xx., Xxxxxx X. Xxxxx, Xxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxxxx, and Xxxx X.
Xxxxx (collectively, the "CERTIFYING OFFICERS").
6.14 SERVICE CONTRACT ADMINISTRATION AGREEMENT. The Company shall use
commercially reasonable efforts to cause Section 10 (entitled "Covenant not to
Compete") of that certain Service Contract Administration Agreement, effective
October 1, 1995 between United Service Protection, Inc. and Xxxxxx-DFS Warranty
Services, Inc. (as successor in interest to ITT Xxxxxx Property Insurance
Company) (the "ITT XXXXXX SERVICE CONTRACT") to be modified in a manner
satisfactory to Purchaser.
6.15. NO-POST CLOSING SHARE TRANSFERS. The Company covenants and agrees
that the Company shall close its stock transfer books effective as of the close
of business on the day immediately prior to the Closing Date (the "SHARE
TRANSFER CUT-OFF TIME"), and at the Closing the Company shall deliver to Parent
a true and correct list of the holders of the Company's shares as of the Share
Transfer Cut-Off Time. From the Share Transfer Cut-Off Time through the
Effective Time, the Company shall not permit any transfers of Shares to be
effected on the stock transfer books of the Company.
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ARTICLE VII
Conditions
7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) STOCKHOLDER APPROVAL. The Merger shall have been duly approved by
holders of Shares constituting the Company Requisite Vote and shall have been
duly approved by the sole stockholder of Merger Subsidiary in accordance with
applicable law.
(b) REGULATORY CONSENTS. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated, and, other than the filing provided for in Section 1.3, all notices,
reports and other filings required to be made prior to the Effective Time by the
Company or Parent or any of their respective Subsidiaries with, and all
consents, registrations, approvals, permits and authorizations required to be
obtained prior to the Effective Time by the Company or Parent or any of their
respective Subsidiaries from, any Governmental Entity (collectively,
"GOVERNMENTAL CONSENTS"), in connection with the execution and delivery of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby shall have been made or obtained (as the case may be).
(c) LITIGATION. No court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law, statute, ordinance, rule, regulation, judgment, decree, injunction or other
order (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Merger
(collectively, an "ORDER").
(d) BLUE SKY APPROVALS. Parent shall have received all state securities
and "blue sky" permits and approvals, if any, necessary to consummate the
transactions contemplated hereby.
7.2. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUBSIDIARY. The
obligations of Parent and Merger Subsidiary to effect the Merger are also
subject to the satisfaction or waiver by Parent at or prior to the Effective
Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement; and the representations and
warranties of the Company set forth in this Agreement shall be true and correct
as of the Closing Date as though made on and as of the Closing Date (except to
the extent any such representation or warranty expressly speaks as of an earlier
date), and Parent shall have received a certificate signed on behalf of the
Company by an
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executive officer of the Company to such effect as well as certificates from the
Certifying Officers confirming, as of the Closing Date, the respective
certifications delivered pursuant to section 6.13 hereof.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed in all material respects (and, as to the Company's obligations under
Section 6.1(d)(i) hereof, in all respects) all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by an
executive officer of the Company to such effect.
(c) CONSENTS. The Company shall have obtained the consent or approval
of each Person whose consent or approval shall be required under any Contract to
which the Company or any of its Subsidiaries is a party, except (i) those
identified under items 2 and 3 of Section 5.1(d)(ii) of the Company Disclosure
Letter, and (ii) those for which the failure to obtain such consents or
approvals would not, individually or in the aggregate, have a Company Material
Adverse Effect; and no such consent or approval, and no Governmental Consent
shall impose any condition or conditions relating to, or requiring changes or
restrictions in, the operations of any asset or businesses of the Company,
Parent or their respective Subsidiaries which could, in the judgment of Parent's
board of directors, individually or in the aggregate, materially and adversely
impact the economic or business benefits to Parent and its Subsidiaries of the
transactions contemplated by this Agreement.
(d) DISSENTING SHARES. No more than 10% of the Shares eligible to
receive the Per Share Merger Consideration under Section 4.1(a) shall be
Dissenting Shares.
(e) NO MATERIAL ADVERSE CHANGES. There shall not have been any change,
effect, or circumstance that, individually or when taken together with all other
changes, effects and circumstances occurring, after the execution of this
Agreement is or is reasonably likely to be material and adverse to the condition
(financial or otherwise), operations, properties, results of operations, or
business or prospects of the Company and its Subsidiaries taken as a whole.
(f) OPINIONS OF COUNSEL. The Company shall have delivered the written
opinion of: (i) Brunini, Grantham, Grower & Xxxxx, PLLC, as counsel to the
Company, dated the Closing Date and substantially in the form of Exhibit C
hereto, and (ii) Xxxxxx X. Xxxxxxxx, Esq., General Counsel of the Company, dated
the Closing Date and substantially in the form of Exhibit D hereto.
(g) CONSENT OF OPTION HOLDERS. As to each Person eligible to
participate in the Company's Option Plans, the names of which are listed in
Section 7.2 of the Company Disclosure Schedule, the Company shall have delivered
the written consent signed by each such Person to the
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termination of all Option Plans as well as to the terms and conditions under
which all Options shall be canceled pursuant to Article IV hereof.
(h) SERVICE CONTRACT ADMINISTRATION AGREEMENT. Either (i) Section 10
(entitled "Covenant not to Compete") of the ITT Xxxxxx Service Contract shall
have been modified in a manner satisfactory to Purchaser, or (ii) upon
Purchaser's request, the Company shall have promptly provided a notice of
termination under the ITT Xxxxxx Service Contract to Xxxxxx-DFS Warranty
Services, Inc. (as successor in interest to ITT Xxxxxx Property Insurance
Company).
7.3. CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company at or prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Parent and Merger Subsidiary set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement, and the
representations and warranties of Parent and Merger Subsidiary set forth in this
Agreement shall be true and correct as of the Closing Date as though made on and
as of the Closing Date (except to the extent any such representation or warranty
expressly speaks as of an earlier date), and the Company shall have received a
certificate signed on behalf of Parent by an executive officer of Parent and on
behalf of Merger Subsidiary by an executive officer of Merger Subsidiary to such
effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND MERGER SUBSIDIARY. Each of
Parent and Merger Subsidiary shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and the Company shall have received a certificate signed on
behalf of Parent by an executive officer of Parent and on behalf of Merger
Subsidiary by an executive officer of Merger Subsidiary to such effect.
(c) CONSENTS UNDER AGREEMENT. Parent shall have obtained the consent or
approval of each Person whose consent or approval shall be required in order to
consummate the transactions contemplated by this Agreement or under any Contract
to which Parent or any of its Subsidiaries is a party, except those for which
failure to obtain such consents or approvals is not, individually or in the
aggregate, reasonably likely to prevent or to materially burden or materially
impair the ability of Parent to consummate the transactions contemplated by this
Agreement.
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ARTICLE VIII
Termination
8.1. TERMINATION BY MUTUAL CONSENT . This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval by stockholders of the Company and Parent referred
to in Section 7.1(a), by mutual written consent of the Company and Parent by
action of their respective Boards of Directors.
8.2. TERMINATION BY EITHER PARENT OR THE COMPANY. This Agreement may be
terminated and the Merger may be abandoned (i) by action of the Board of
Directors of either Parent or the Company if the Merger shall not have been
consummated by September 30, 1998, whether such date is before or after the date
of approval by the shareholders of the Company (the "TERMINATION DATE"), (ii) by
action of the Board of Directors of Parent, if the Company Requisite Vote shall
not have been obtained at a meeting duly convened therefor or at any adjournment
or postponement thereof, (iii) by action of the Board of Directors of the
Company, if the Company Requisite Vote shall not have been obtained at a meeting
duly convened therefor or at any adjournment or postponement thereof and prior
to or at the time of such meeting no Person shall have made an Acquisition
Proposal to the Company or any of its Subsidiaries or any of its shareholders or
shall have publicly announced an intention (whether or not conditional) to make
an Acquisition Proposal with respect to the Company or any of its Subsidiaries,
or (iv) by action of the Board of Directors of either Parent or the Company if
any Order permanently restraining, enjoining or otherwise prohibiting
consummation of the Merger shall become final and non-appealable (whether before
or after the approval by the stockholders of the Company or Parent); provided,
that the right to terminate this Agreement pursuant to clause (i) above shall
not be available to any party that has breached in any material respect its
obligations under this Agreement in any manner that shall have proximately
contributed to the occurrence of the failure of the Merger to be consummated.
8.3. TERMINATION BY THE COMPANY. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, by action
of the Board of Directors of the Company:
(a) if (i) the Company is not in material breach of any of the
terms of this Agreement, (ii) the Merger shall not have been approved by the
Company Requisite Vote, (iii) the Board of Directors of the Company authorizes
the Company, subject to complying with the terms of this Agreement, to enter
into a binding written agreement concerning a transaction that constitutes a
Superior Proposal and the Company notifies Parent in writing that it intends to
enter into such an agreement, attaching the most current version of such
agreement to such notice, (iv) Parent does not make, prior to twenty days after
receipt of the Company's written notification of its intention to enter into a
binding agreement for a Superior Proposal (the "ALTERNATIVE TRANSACTION
NOTICE"), an offer that the Board of Directors of the Company determines, in
good faith after consultation with its financial advisors, is at least as
favorable, as the Superior Proposal, taking into account the long term prospects
and interests of the Company and its stockholders, and
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(v) the Company prior to such termination pays to Parent in immediately
available funds the Parent Expenses (as hereinafter defined) required to be paid
pursuant to Section 8.5. Without limiting the generality of the foregoing, the
Company agrees and acknowledges (x) that it cannot terminate this Agreement
pursuant to this Section 8.3(a) in order to enter into a binding agreement
referred to in clause (iii) above until at least twenty days after Parent's
receipt of the Alternative Transaction Notice and (y) to notify Parent promptly
if the Company's intention to enter into a written agreement referred to in its
Alternative Transaction Notice shall change at any time after giving such
notification.
(b) If there has been a material breach by Parent or Merger Subsidiary
of any representation, warranty, covenant or agreement contained in this
Agreement that is not curable or, if curable, is not cured within 20 days after
written notice of such breach is given by the Company to the party committing
such breach.
8.4. TERMINATION BY PARENT. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time by action of the
Board of Directors of Parent if (a) the Company enters into a binding agreement
for a Superior Proposal or the Board of Directors of the Company shall have
withdrawn or adversely modified its approval or recommendation of this Agreement
or failed to reconfirm its recommendation of this Agreement within ten business
days after a reasonable written request by Parent to do so, or (b) there has
been a material breach by the Company of any representation, warranty, covenant
or agreement contained in this Agreement that is not curable or, if curable, is
not cured within 20 days after written notice of such breach is given by Parent
to the party committing such breach.
8.5. EFFECT OF TERMINATION AND ABANDONMENT. (a) In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article VIII, this Agreement (other than as set forth in Section 9.1) shall
become void and of no effect with no liability on the part of any party hereto
(or of any of its directors, officers, employees, agents, legal and financial
advisors or other representatives); provided, however, except as otherwise
provided herein, no such termination shall relieve any party hereto of any
liability or damages resulting from any breach of this Agreement.
(b) In the event that this Agreement is terminated (I) by the
Company pursuant to Section 8.3(a), or (II) by Parent pursuant to Section 8.4,
then the Company shall promptly, but in no event later than two days after the
earliest to occur of the date of such termination, the date of entrance into an
agreement concerning a transaction that constitutes an Acquisition Proposal, or
the date Parent shall have requested payment of its charges and expenses
incurred in connection with the transactions contemplated hereby ("PARENT
EXPENSES"), pay to Parent the amount of such Parent Expenses up to a maximum of
$300,000, payable by wire transfer of same day funds. The Company acknowledges
that the agreements contained in this Section 8.5(b) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Parent and
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Merger Subsidiary would not enter into this Agreement; accordingly, if the
Company fails to promptly pay the amount due pursuant to this Section 8.5(b),
and, in order to obtain such payment, Parent or Merger Subsidiary commences a
suit which results in a judgment against the Company for the Parent Expenses set
forth in this paragraph (b), the Company shall pay to Parent or Merger
Subsidiary its costs and expenses (including attorneys' fees) in connection with
such suit, together with interest from the date of termination of this Agreement
on the amounts owed at the prime rate of The Chase Manhattan Bank, in effect
from time to time during such period plus two percent.
(c) In the event that this Agreement is terminated by the
Company pursuant to 8.3(b), then Parent shall promptly, but in no event later
than two days after the earliest to occur of the date of such termination, or
the date the Company shall have requested payment of its charges and expenses
incurred in connection with the transactions contemplated hereby ("COMPANY
EXPENSES"), pay to the Company the amount of such Company Expenses up to a
maximum of $300,000, payable by wire transfer of same day funds. Parent
acknowledges that the agreements contained in this Section 8.5(c) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, the Company would not enter into this Agreement;
accordingly, if Parent fails to promptly pay the amount due pursuant to this
Section 8.5(c), and, in order to obtain such payment, the Company commences a
suit which results in a judgment against Parent for the Company Expenses set
forth in this paragraph (c), Parent shall pay to the Company its costs and
expenses (including attorneys' fees) in connection with such suit, together with
interest from the date of termination of this Agreement on the amounts owed at
the prime rate of The Chase Manhattan Bank, in effect from time to time during
such period plus two percent.
(d) If (i) the ITT Xxxxxx Service Contract terminates as the
result of the Company providing, at Parent's request pursuant to Section 7.2(h)
hereof, a notice of termination to Xxxxxx-DFS Warranty Services, Inc. (as
successor in interest to ITT Xxxxxx Property Insurance Company), (ii) this
Agreement terminates for any reason other than as the result of a termination by
Parent pursuant to Section 8.4 hereof, and (iii) the Company has made a good
faith effort to have the ITT Xxxxxx Service Contract reinstated, then Parent
shall pay to the Company, no later than ten days after the later to occur of the
termination of the ITT Xxxxxx Service Contract or this Agreement, $80,000 as
consideration for the Company's termination of the ITT Xxxxxx Service Contract.
ARTICLE IX
Miscellaneous and General
9.1. SURVIVAL. This Article IX and the agreements of the Company,
Parent and Merger Subsidiary contained in Sections 6.9 (Indemnification;
Directors' and Officers' Insurance; Set-off Right) shall survive the
consummation of the Merger. This Article IX, the agreements of the Company,
Parent and Merger Subsidiary contained in Section 6.3 (Non-Disclosure), Section
6.6 (Access), insofar as it relates to the Company's and Parent's respective
confidentiality obligations, Section 6.8 (Expenses) and Section 8.5 (Effect of
Termination and Abandonment) shall survive the termination of this Agreement.
All representations and warranties of the Company shall survive the consummation
of the Merger until July 31, 1999. All other representations, warranties,
covenants and agreements in this Agreement shall not survive the consummation of
the Merger or the termination of this Agreement.
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9.2. MODIFICATION OR AMENDMENT. Subject to the provisions of applicable
law, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties.
9.3. WAIVER OF CONDITIONS. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
9.4. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.5. GOVERNING LAW; WAIVER OF JURY TRIAL.
(A) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL
RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH
THE LAW OF THE STATE OF FLORIDA WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES
THEREOF, EXCEPT THAT MATTERS RELATING TO THE VALIDITY AND EFFECTS OF THE MERGER
AND THE FIDUCIARY OBLIGATIONS OF THE DIRECTORS OF THE COMPANY REFERRED TO IN
SECTION 6.2 AND 6.4 HEREOF SHALL BE GOVERNED BY THE APPLICABLE PROVISIONS OF THE
MISSISSIPPI BUSINESS CORPORATION LAW.
(B) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS
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AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (II) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (III) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND
(IV) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.5.
(C) THE COMPANY AND MERGER SUBSIDIARY EACH AGREES THAT, IN
CONNECTION WITH ANY LEGAL SUIT OR PROCEEDING ARISING WITH RESPECT TO THIS
AGREEMENT, IT SHALL SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF FLORIDA AND AGREES TO VENUE IN SUCH COURTS.
THE COMPANY AND MERGER SUBSIDIARY EACH HEREBY APPOINTS THE SECRETARY OF THE
COMPANY AND MERGER SUBSIDIARY, RESPECTIVELY, AS ITS AGENT FOR SERVICE OF PROCESS
FOR PURPOSES OF THE FOREGOING SENTENCE ONLY.
9.6. NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:
IF TO PARENT OR MERGER SUBSIDIARY
American Bankers Insurance Group, Inc.
00000 Xxxxx Xxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
fax: (000) 000-0000
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with a copy to:
Xxxxxx Xxxx, Esq.,
Jorden Xxxx Xxxxx Xxxxxxxxx Xxxxxxxx & Xxxxxxx LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
fax: (000) 000-0000
IF TO THE COMPANY
Xxxxx X. Xxxxxx, Xx.
President and Chief Executive Officer
MS Diversified Corporation
000 X. Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
fax: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxxxxx, Esq.
Brunini, Grantham, Grower & Xxxxx, PLLC
1400 Trustmark Building
000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
fax: (000) 000-0000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
9.7. ENTIRE AGREEMENT: NO OTHER REPRESENTATIONS. This Agreement
(including any exhibits hereto), the Company Disclosure Letter, and the Parent
Disclosure Letter constitute the entire agreement, and supersede all other prior
agreements, understandings, representations and warranties both written and
oral, among the parties, with respect to the subject matter hereof.
9.8. NO THIRD PARTY BENEFICIARIES. Except as provided in Section 6.9
(Indemnification; Directors' and Officers' Insurance; Set-Off Right), this
Agreement is not intended to confer upon any Person other than the parties
hereto and their shareholders any rights or remedies hereunder.
9.9. OBLIGATIONS OF PARENT AND OF THE COMPANY. Whenever this Agreement
requires a Subsidiary of Parent to take any action, such requirement shall be
deemed to include an undertaking on the part of Parent to cause such Subsidiary
to take such action. Whenever this
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Agreement requires a Subsidiary of the Company to take any action, such
requirement shall be deemed to include an undertaking on the part of the Company
to cause such Subsidiary to take such action and, after the Effective Time, on
the part of the Surviving Corporation to cause such Subsidiary to take such
action.
9.10. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
9.11. INTERPRETATION. The table of contents and headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
Where a reference in this Agreement is made to a Section or Exhibit, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
9.12. ASSIGNMENT. This Agreement shall not be assignable by operation
of law or otherwise; provided, however, that Parent may designate, by written
notice to the Company, another wholly-owned direct or indirect Subsidiary to be
a Constituent Corporation in lieu of Merger Subsidiary, in which event all
references herein to Merger Subsidiary shall be deemed references to such other
Subsidiary, except that all representations and warranties made herein with
respect to Merger Subsidiary as of the date of this Agreement shall be deemed
representations and warranties made with respect to such other Subsidiary as of
the date of such designation.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties hereto or their duly authorized officers as of the date first
written above.
MS DIVERSIFIED CORPORATION
By:
--------------------------------
Name:
Title:
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AMERICAN BANKERS INSURANCE GROUP, INC.
By:
-----------------------------------
Name:
Title:
ABIG ACQUISITION CORP. A
By:
-----------------------------------
Name:
Title:
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EXHIBIT A
FORM OF CONFIDENTIALITY AGREEMENT
56
EXHIBIT B
FORM OF OFFICERS' CERTIFICATES
57
EXHIBIT C
FORM OF OPINION OF BRUNINI, GRANTHAM, GROWER & XXXXX, PLLC
58
EXHIBIT D
FORM OF OPINION OF XXX X. XXXXXXXX, ESQ.
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COMPANY DISCLOSURE LETTER