EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
AMONG
LIBERTY MUTUAL INSURANCE COMPANY,
SPACE MOUNTAIN ACQUISITION CORP.
AND
SUMMIT HOLDING SOUTHEAST, INC.
DATED JUNE 29, 1998
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is entered into on June 29, 1998, by and
among Liberty Mutual Insurance Company, a Massachusetts mutual insurance company
("Liberty"), Space Mountain Acquisition Corp., a Florida corporation and a
wholly-owned subsidiary of Liberty (the "Acquisition Sub"), and Summit Holding
Southeast, Inc., a Florida corporation ("Summit"). Liberty, the Acquisition Sub,
and Summit are referred to collectively herein as the "Parties."
Preliminary Statement
The respective Boards of Directors of Liberty, Acquisition Sub and Summit
have approved the merger of the Acquisition Sub with and into Summit, pursuant
to which (i) Summit would become a wholly-owned subsidiary of Liberty and (ii)
the holders of the Common Stock, $.01 par value, of Summit ("Summit Common
Stock") would receive, in exchange for each of their shares of Summit Common
Stock, the Merger Consideration described below, all on the terms of and subject
to the conditions set forth in this Agreement. The Board of Directors of Summit
has (a) determined that this Agreement and the transactions contemplated hereby,
including the Merger (as defined herein), are fair to and in the best interests
of the shareholders of Summit, (b) determined that the Merger Consideration to
be paid in the Merger to the shareholders of Summit is fair to and in the best
interests of such shareholders, and (c) approved this Agreement and the
transactions contemplated hereby, including the Merger.
Now, therefore, in consideration of the premises and the mutual
representations, warranties and covenants herein contained, the Parties agree as
follows.
1. Definitions. Certain capitalized terms are used in this Agreement as
specifically defined in Appendix 1 hereto.
2. Basic Transaction.
(a) The Merger. On and subject to the terms and conditions of this
Agreement, the Acquisition Sub will merge into Summit (the "Merger") at the
Effective Time in accordance with the provisions of the 1989 Florida Business
Corporation Act (the "Florida Business Act"). Summit will be the corporation
surviving the Merger (the "Surviving Corporation").
(b) Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to
Section 8(a), and subject to the satisfaction or waiver of the conditions set
forth in Section 7, the closing of the Merger (the "Closing") will take place
at 11:00 p.m. on the third business day following the date on which the last
of the conditions in Section 7(a) shall have been fulfilled or waived in
accordance with this Agreement (the "Closing Date"), at the offices of
Xxxxxx, Xxxx & Xxxxxxx, Exchange Place, 00 Xxxxx Xxxxxx,
Xxxxxx, Xxxxxxxxxxxxx, unless another date, time or place is agreed to
in writing by the Parties.
(c) Effect of Merger.
(i) General. Summit and the Acquisition Sub will file with the
Florida Department of State on the Closing Date (or on such other date as
the Parties may agree) duly prepared and executed Articles of Merger in a
form prescribed by Liberty (the "Articles of Merger"). The Merger shall
become effective at the time (the "Effective Time") Summit and the
Acquisition Sub file the Articles of Merger with the Florida Department of
State. The Merger shall have the effect set forth in the Florida Business
Act. The Surviving Corporation may, at any time after the Effective Time,
take any action (including executing and delivering any document) in the
name and on behalf of either Summit or the Acquisition Sub in order to
carry out and effectuate the transactions contemplated by this Agreement.
(ii) Articles of Incorporation. The Articles of Incorporation of the
Acquisition Sub immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation, except that the
name of the Surviving Corporation shall continue to be Summit Holding
Southeast, Inc.
(iii) By-Laws. The By-Laws of Acquisition Sub immediately prior to
the Effective Time shall be the By-Laws of the Surviving Corporation.
(iv) Directors and Officers. The directors and officers of the
Acquisition Sub immediately prior to the Effective Time shall become the
directors and officers of the Surviving Corporation at and as of the
Effective Time (retaining their respective positions and terms of office).
(v) Conversion of Summit Common Stock. At and as of the Effective
Time, by virtue of the Merger and without any action on the part of any
holder of any capital stock of Summit, each share of Summit Common Stock
outstanding at the Effective Time shall automatically be cancelled and
retired and cease to exist, and each holder of a certificate representing
Summit Common Stock shall cease to have any right with respect thereto,
except to receive and become exchangeable for an amount in cash equal to
$33.00 per share (the "Merger Consideration") in accordance with the
provisions of Section 2(d) below.
(vi) Conversion of Acquisition Sub Shares. At and as of the
Effective Time, by virtue of the Merger and without any action on the part
of any holder of any capital stock of the Acquisition Sub, each share of
Common Stock of the Acquisition Sub outstanding at the Effective Time
shall be converted into one share of Common Stock of the Surviving
Corporation.
(vii) Cancellation of Treasury Stock. Each share of Summit Common
Stock issued and outstanding immediately prior to the Effective Time that
is owned by Summit or by any Subsidiary of Summit shall automatically be
cancelled and retired and shall cease to exist, and no Merger
Consideration or other consideration shall be delivered or deliverable in
exchange therefor.
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(viii) Conversion of Stock Options. At the Effective Time, (A) each
option to purchase shares of Summit Common Stock pursuant to stock options
granted by Summit under the Summit Holding Southeast, Inc. 1996 Long-Term
Incentive Plan (the "Incentive Plan") and outstanding at the Effective
Time (collectively, the "Summit Options"), all of which are fully
exercisable and vested, shall be cancelled and (B) in consideration of
such cancellation, Liberty shall pay to each such holder of Summit Options
an amount in cash equal to the product of (1) the difference between the
Merger Consideration and the price per share of Summit Common Stock
pursuant to which the holder of such Summit Option may purchase the shares
of Summit Common Stock to which such Summit Option relates (and less any
withholding of Taxes as may be required by applicable law) and (2) the
number of shares of Summit Common Stock subject thereto. At the Effective
Time, each such Summit Option shall no longer represent the right to
purchase or receive shares of Summit Common Stock, but in lieu thereof
shall represent the right to receive the cash payment referred to above in
this Section 2(c)(viii). At or prior to the Effective Time, Summit shall
take all actions necessary to provide notice of the provisions of this
Section 2(c)(viii) to all holders of Summit Options and to cause the
cancellation of the Summit Options in accordance herewith at the
Effective Time.
(d) Exchange of Certificates.
(i) Paying Agent. At the Effective Time, Liberty shall deposit, or
shall cause to be deposited, with or for the account of Xxxxx Xxxxxx (the
"Paying Agent"), for the benefit of the holders of shares of Summit Common
Stock, cash in an aggregate amount sufficient to pay the aggregate Merger
Consideration (the "Payment Fund"). As soon as practicable after the
Effective Time, Liberty will cause the Paying Agent to mail transmittal
instructions and a form of letter of transmittal in a customary form to
each Person who was a holder of Common Stock of Summit immediately prior
to the Effective Time.
(ii) Exchange Procedures. As soon as practicable after the Effective
Time, each holder of an outstanding certificate or certificates which
prior thereto represented shares of Summit Common Stock shall, upon
surrender to the Paying Agent of such certificate or certificates and
acceptance thereof by the Paying Agent, be entitled to receive with
respect to each such share of Summit Common Stock the amount of cash equal
to the Merger Consideration. The Paying Agent shall accept certificates
previously representing Summit Common Stock upon compliance with such
terms and conditions as the Paying Agent may impose to effect an orderly
exchange thereof in accordance with normal exchange practices. If any
Merger Consideration to be paid (or any portion thereof) is to be
delivered to any Person other than the Person in whose name the
certificate representing shares of Summit Common Stock surrendered in
exchange therefor is registered, it shall be a condition to such exchange
that the certificate so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the Person requesting
such exchange shall pay to the Paying Agent any transfer or other taxes
required by reason of the payment of Merger Consideration to a Person
other than the
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registered holder of the certificate surrendered, or shall establish to
the satisfaction of the Paying Agent that such tax has been paid or is not
applicable.
After the Effective Time, there shall be no further transfer on the
records of Summit or its transfer agent of certificates representing
shares of Summit Common Stock and if such certificates are presented to
Summit for transfer, they shall be cancelled against delivery of the
Merger Consideration as hereinabove provided. Until surrender as
contemplated by this Section 2(d), each certificate representing shares of
Summit Common Stock shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender Merger
Consideration with respect to each such share, without any interest
thereon. No interest will be paid or will accrue on any Merger
Consideration payable.
(iii) No Further Ownership Rights in Summit Common Stock. The Merger
Consideration with respect to each share of Summit Common Stock paid upon
the surrender of each certificate representing shares of Summit Common
Stock in accordance with the terms of this Agreement shall be deemed to
have been issued and paid in full satisfaction of all rights pertaining to
the shares of Summit Common Stock theretofore represented by such
certificates.
(iv) Termination of Payment Fund. Any portion of the Payment Fund
that remains undistributed to the holders of the certificates
representing shares of Summit Common Stock for six months after the
Effective Time shall be delivered to Liberty, upon demand, and any
holders of shares of Summit Common Stock who have not theretofore
complied with this Section 2(d) shall thereafter look only to Liberty
for payment of their claim for any Merger Consideration.
(v) No Liability. None of Liberty, the Surviving Corporation or the
Paying Agent shall be liable to any Person in respect of any cash, shares,
dividends or distributions payable from the Payment Fund delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any certificates representing shares of Summit Common
Stock shall not have been surrendered prior to five years after the
Effective Time (or immediately prior to such earlier date on which any
Merger Consideration in respect of such certificate would otherwise
escheat to or become the property of any governmental agency or regulatory
authority (a "Governmental Entity")), any Merger Consideration payable in
respect of such certificate shall, to the extent permitted by applicable
law, become the property of Liberty, free and clear of all claims or
interest of any Person previously entitled thereto.
(vi) Investment of Payment Fund. The Paying Agent shall invest the
Payment Fund, as directed by Liberty, in (A) direct obligations of the
United States of America, (B) obligations for which the full faith and
credit of the United States of America is pledged to provide for the
payment of principal and interest or (C) commercial paper rated, at the
time of purchase, in either of the two highest quality categories by
Xxxxx'x
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Investors Services, Inc. or Standard & Poor's Corporation, and any net
earnings with respect thereto shall be paid to Liberty as and when
requested by Liberty. In the event the Payment Fund shall realize a loss
on any such investment, Liberty shall promptly thereafter deposit in such
Payment Fund cash in an amount sufficient to enable such Payment Fund to
satisfy all remaining obligations originally contemplated to be paid out
of such Payment Fund.
3. Representations and Warranties of Summit. Summit represents and
warrants to Liberty that the statements contained in this Section 3 are
correct and complete on the date hereof, except as set forth in the
disclosure schedule attached hereto (the "Disclosure Schedule"). The
Disclosure Schedule is arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this Section 3.
(a) Organization; Qualification; Corporate Power. Each of Summit and its
Subsidiaries is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation and is duly
qualified to conduct business in and in good standing under the laws of each
jurisdiction where such qualification is required except where the failure to so
qualify would not have a Summit Material Adverse Effect. Each of Summit and its
Subsidiaries has full corporate power and authority and all material licenses,
permits, and authorizations necessary to carry on the business in which it is
engaged and in which it currently proposes to engage and to own and use the
properties owned and used by it. Set forth in Section 3(a) of the Disclosure
Schedule is a list of the direct and indirect Subsidiaries of Summit and the
directors and executive officers of Summit and each of its Subsidiaries. Each of
Summit and its Subsidiaries has delivered to Liberty correct and complete copies
of its charter and by-laws, as amended to date. The minute books (containing the
records of meetings of the stockholders, the boards of directors, and any
committees of the boards of directors) and the stock record books of Summit and
its Subsidiaries are correct and complete. Neither Summit nor any of its
Subsidiaries is in default under or in violation of any provision of its charter
or by-laws.
(b) Capitalization. The entire authorized capital stock of Summit
consists of 25,000,000 shares, of which 20,000,000 are shares of Summit
Common Stock and of which 5,000,000 are shares of the Series A Preferred
Stock of Summit ("Series A Preferred Stock" and, together with shares of
Summit Common Stock, the "Summit Shares"). Of the Summit Common Stock,
5,791,600 shares are issued and outstanding and none are held in treasury,
and of the Series A Preferred Stock, 1,639,701 shares are issued and
outstanding and none are held in treasury. Except as set forth above, as of
the date hereof and except for 500,000 shares of Summit Common Stock reserved
for issuance pursuant to the Incentive Plan, no shares of capital stock or
other equity securities of Summit were issued, reserved for issuance, or
outstanding. All of the outstanding Summit Shares have been duly authorized,
are validly issued, fully paid, and nonassessable and are not subject to any
preemptive rights. All shares of Summit Common Stock which may be issued
pursuant to the Incentive Plan, when issued, will have been duly authorized,
validly issued, fully paid and nonassessable. Set forth on Section 3(b) of
the Disclosure Schedule is a list of the holders of options under the
Incentive Plan, the number of shares of Summit Common Stock issuable upon the
exercise of each such option, and the exercise price thereof.
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There are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to Summit. No bonds,
debentures, notes or other indebtedness of Summit or any of its Subsidiaries
are issued or outstanding that are convertible into, or exchangeable for,
securities having the right to vote on any matters on which the shareholders
of Summit are entitled to vote. Except as set forth in Section 3(b) of the
Disclosure Schedule, all of the outstanding shares of capital stock of each
of Summit's Subsidiaries are validly issued, fully paid and nonassessable,
free and clear of all pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever (collectively, "Liens").
Except as set forth on Section 3(b) of the Disclosure Schedule, all of the
outstanding shares of capital stock of each of Summit's Subsidiaries are
owned by Summit or by one or more of its Subsidiaries. Except as set forth in
Section 3(b) of the Disclosure Schedule, none of Summit or any of its
Subsidiaries has any outstanding option, warrant, subscription or other
right, agreement or commitment that either (i) obligates Summit or any of its
Subsidiaries to issue, sell or transfer, repurchase, redeem or otherwise
acquire or vote any shares of the capital stock of Summit or any of its
Subsidiaries or (ii) restricts the transfer of Summit Common Stock.
(c) Authority; Noncontravention. Summit has the requisite corporate
power and authority to enter into this Agreement and, subject to the approval
of its shareholders with respect to this Agreement and the Merger, to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Summit and the consummation by Summit of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Summit, subject to the approval of its
shareholders. This Agreement has been duly executed and delivered by Summit
and constitutes the valid and binding obligation of Summit, enforceable
against Summit in accordance with its terms. Except as set forth in Section
3(c) of the Disclosure Schedule, the execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated by this
Agreement and compliance with the terms and provisions hereof will not, (i)
conflict with any of the provisions of the charter or by-laws of Summit or
any of its Subsidiaries, (ii) subject to the governmental filings and other
matters referred to in the following paragraph, conflict with, result in a
breach of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration
of any obligation or loss of a material benefit under, or require the consent
of any Person under, any indenture or other material agreement, permit,
concession, franchise, license or similar instrument or undertaking to which
Summit or any of its Subsidiaries is a party or by which Summit or any of its
Subsidiaries or any of their assets are bound or affected, or (iii) subject
to the governmental filings and other matters referred to in the following
paragraph, contravene in any material respect any law, rule or regulation of
any state or of the United States or political subdivision thereof or
therein, or any order, writ, judgment, injunction, decree, ruling,
determination or award currently in effect.
No consent, approval or authorization of, or declaration or filing with,
or notice to, any Governmental Entity that has not been received or made, is
required by or with respect to Summit or any of its Subsidiaries in connection
with the execution and delivery of this Agreement by Summit or the consummation
by Summit of the transactions contemplated hereby, except for (i) the filing of
premerger notification and report forms under the Xxxx-Xxxxx-Xxxxxx
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Antitrust Improvements Act of 1976, as amended (the "HSR Act"), with respect
to the transactions contemplated by this Agreement, (ii) the filing with the
Securities and Exchange Commission (the "SEC") of (x) a proxy statement and
related materials relating to the approval by the shareholders of Summit of
this Agreement and the Merger (such proxy statement and related materials, as
amended or supplemented from time to time, the "Proxy Statement"), and (y)
such reports under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement and the
transactions contemplated by this Agreement, (iii) the filing of the Articles
of Merger with the Florida Department of State and appropriate documents with
the relevant authorities of other states in which Summit is qualified to do
business, (iv) the filings, approvals and/or consents required under the
insurance laws and regulations of the jurisdictions set forth in Section 3(c)
of the Disclosure Schedule, and (v) such other consents, approvals,
authorizations, filings or notices as are set forth in Section 3(c) of the
Disclosure Schedule. Summit is not required to make any filings or take any
other action not taken prior to the execution hereof in order for
restrictions imposed by Section 607.902 of the Florida Business Act or any
other anti-takeover statute not to apply to the Merger, this Agreement or any
of the transactions contemplated hereunder.
(d) SEC Documents. (i) Summit has filed all required reports, schedules,
forms, statements and other documents with the SEC since May 21, 1997 (such
reports, schedules, forms, statements and other documents are hereinafter
referred to as the "SEC Documents"); (ii) as of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and none of the SEC Documents as of
such dates contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; and (iii) the consolidated financial statements of Summit
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited consolidated quarterly statements, as
permitted by Form 10-Q of SEC) applied on a consistent basis during the period
involved (except as may be indicated in the notes thereto) and fairly presented
in all material respects the consolidated financial position of Summit and its
Subsidiaries as of the dates thereof and the consolidated results of their
operation and cash flows for the periods then ended (subject, in the case of
unaudited quarterly statements, to normal year-end adjustments).
(e) Information Supplied. None of the information supplied or to be
supplied by Summit specifically for inclusion or incorporation by reference in
the Proxy Statement will, at the date it is first mailed to Summit's
shareholders or at the time of the shareholders meeting in connection therewith
(the "Shareholders' Meeting") contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act and rules and
regulations thereunder.
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(f) Brokers' Fees. Except as set forth in Section 3(f) of the Disclosure
Schedule, Summit does not have any Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
(g) Title to Assets. Except as set forth in Section 3(g) of the Disclosure
Schedule, each of Summit and its Subsidiaries has good and marketable title to,
or a valid leasehold interest in, the properties and assets used by it, located
on its premises, or shown on the most recent audited financial statements (the
"Audited Financial Statements") included in the SEC Documents or acquired after
the date thereof, free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of Business since the
date of the Audited Financial Statements.
(h) Absence of Certain Changes or Events; No Undisclosed Liabilities.
Except as disclosed in Section 3(h) of the Disclosure Schedule, since the
date of the Audited Financial Statements, Summit and its Subsidiaries have
conducted their business only in the Ordinary Course of Business, and there
has not been (i) any change that would have a Summit Material Adverse Effect,
(ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of
Summit's outstanding capital stock, (iii) any split, combination or
reclassification of any of its outstanding capital stock or any issuance or
the authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of its outstanding capital stock, (iv)
(A) any granting by Summit or any of its Subsidiaries to any executive
officer or other employee of Summit or any of its Subsidiaries of any
increase in compensation, except in the Ordinary Course of Business, (B) any
granting by Summit or any of its Subsidiaries to any such executive officer
of any increase in severance or termination pay, except in the Ordinary
Course of Business, or (C) any entry by Summit or any of its Subsidiaries
into any employment, severance or termination agreement with any such
executive officer, (v) any material change in accounting methods, principles
or practices by Summit or any of its Subsidiaries, except insofar as may have
been required by a change in GAAP, (vi) any amendment or restatement to the
charter or by-laws of Summit or any of its Subsidiaries, (vii) any damage or
destruction or loss of property (whether or not covered by insurance) that
individually or in the aggregate exceeds $50,000, (viii) any sale, lease,
transfer or assignment of any material portion of the assets of Summit or any
of its Subsidiaries other than in the Ordinary Course of Business, or (ix)
any action that would have been prohibited under Section 5(a) below had this
Agreement been in effect.
Except as and to the extent (i) reflected and reserved against in the
Audited Financial Statements and (ii) for current liabilities (other than for
borrowed money) incurred in the Ordinary Course of Business after the date of
the Audited Financial Statements, neither Summit nor any of its Subsidiaries has
or will have as of the Effective Time any liability or obligation, secured or
unsecured, whether absolute, accrued, fixed, contingent, liquidated or
unliquidated or otherwise.
(i) Compliance with Applicable Laws. Each of Summit and its Subsidiaries
has in effect all material federal, state, local and foreign governmental
approvals, authorizations,
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certifications, filings and franchises, licenses, notices, permits and rights
("Licenses") necessary for it to own, lease or operate its properties and to
carry on its business as now conducted, and there has occurred no default
under any such License. Summit and its Subsidiaries are in compliance with
all applicable statutes, laws, ordinances, rules, orders and regulations of
any Governmental Entity, except for possible noncompliance that individually
or in the aggregate would not have a Summit Material Adverse Effect. No
investigation by any Governmental Entity with respect to Summit or any of its
Subsidiaries is pending, or to the Knowledge of Summit, threatened. Each of
Bridgefield Employers Insurance Company and Bridgefield Casualty Insurance
Company (together, the "Insurance Subsidiaries") (i) is an authorized insurer
in each state in which it currently writes insurance for the type of
insurance it currently writes in such states and (ii) meets in all material
respects all statutory and regulatory requirements of all Governmental
Entities that have jurisdiction over it to be an authorized insurer on either
an admitted or nonadmitted basis. All insurance policies issued by the
Insurance Subsidiaries as now in force are, to the extent required under
applicable law, in a form acceptable to applicable regulatory authorities or
have been filed and not objected to (or such objection has been withdrawn or
resolved) by such authorities within the period provided for objection.
Neither Summit nor any of its Subsidiaries that is not an Insurance
Subsidiary has issued any insurance policies. Except as set forth in Section
3(i) of the Disclosure Schedule, (i) all material reports, statements,
documents, registrations, filings and submissions to state insurance
regulatory authorities complied with applicable law in effect when filed and
(ii) no deficiencies have been asserted by any such regulatory authority with
respect to such reports, statements, documents, registrations, filings or
submissions that have not been satisfied. All premium rates established by
the Insurance Subsidiaries that are required to be filed or approved have
been filed or approved, and the premiums charged conform to the premiums so
filed or approved and comply (or complied at the relevant time) with the
insurance laws applicable thereto.
(j) Tax Matters.
(i) All Tax Returns required to be filed by Summit or any of its
Subsidiaries have been timely filed or requests for extensions have been
timely filed, granted and have not expired for periods ended on or before
the more recent of December 31, 1997 and the most recent fiscal year end
immediately preceding the Effective Time. All such Tax Returns are correct
and complete in all material respects. All Taxes shown on filed Tax
Returns have been paid. No claim has ever been made by an authority in a
jurisdiction where Summit or any of its Subsidiaries does not file Tax
Returns that it is subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of Summit or any of its
Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax.
(ii) Each of Summit and its Subsidiaries has withheld and deposited
with the Internal Revenue Service all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee,
shareholder, or other third party.
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(iii) Set forth in Section 3(j) of the Disclosure Schedule is a
list of all federal, state, local, and foreign income Tax Returns filed
with respect to Summit and its Subsidiaries for taxable periods ended
on or after December 31, 1993. Summit and its Subsidiaries have
delivered to Liberty correct and complete copies of all federal income
Tax Returns that have been filed for periods ending on or after
December 31, 1995. Except as set forth in Section 3(j) of the
Disclosure Schedule, there are no audit examinations, deficiencies or
refund litigation with respect to any Taxes
(iv) Except as set forth in Section 3(j) of the Disclosure Schedule,
neither Summit nor any of its Subsidiaries have executed an extension or
waiver of any statute of limitations, which extension or waiver currently
is in effect, on the assessment or collection of any Taxes for any period
ending on or before the Effective Time.
(v) Neither Summit nor any of its Subsidiaries has made any
payments, is obligated to make any payments or is a party to any
agreement that under certain circumstances could obligate it to make
any payments that will not be deductible under Code Section 280G or, if
any such payments have been made or are obligated to be made by Summit
or any of its Subsidiaries, the payor has complied with the shareholder
approval requirements of Code Section 280G(b)(5).
(vi) Except as set forth in Section 3(j) of the Disclosure Schedule,
neither Summit nor any of its Subsidiaries is a party to any Tax
allocation or sharing agreement, and neither Summit nor any of its
Subsidiaries (A) has been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a group the common
parent of which was Summit) or (B) has any Liability for the Taxes of any
Person (other than Summit and its Subsidiaries) under Treas. Reg. Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise. Copies of all Tax
allocation or sharing agreements to which Summit or any of its
Subsidiaries is a party have been delivered to Liberty.
(vii) The provision for any Taxes due or to become due for Summit or
any of its Subsidiaries for the period or periods through and including
the date of Audited Financial Statements that has been made and is
reflected on such Audited Financial Statements is materially sufficient to
cover all such Taxes.
(viii) The Escrow Agreement by and among Employers Self Insurers
Fund, Summit Acquisition Corporation, Summit Holding Corporation, Xxxxxxx
X. Xxxx as the Shareholders' Representative and First Union National Bank
of Florida, dated as of January 16, 1996 (the "Escrow Agreement"), is
legal, valid, binding, enforceable and in full force and effect and the
transactions contemplated hereby will not cause the Escrow Agreement not
to be in full force and effect for the benefit of the Surviving
Corporation on identical terms immediately subsequent to the Effective
Time and the consummation of the transactions contemplated hereby.
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(k) Real Property.
(i) Summit owns no real property.
(ii) Set forth in Section 3(k)(ii) of the Disclosure Schedule are
the addresses of all parcels of real property leased or subleased to
Summit. Summit has delivered to Liberty correct and complete copies of
the leases and subleases (as amended to date) listed in Section
3(k)(ii) of the Disclosure Schedule. With respect to each lease and
sublease listed in Section 3(k)(ii) of the Disclosure Schedule:
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(B) except as set forth in Section 3(k)(ii) of the Disclosure
Schedule, the transactions contemplated hereby will not cause the
lease or sublease to be illegal, invalid, non-binding,
non-enforceable and to not be in full force and effect on identical
terms immediately subsequent to the Effective Time of the Merger and
consummation of such transactions contemplated hereby;
(C) neither Summit, nor any of its Subsidiaries, nor, to
Summit's Knowledge, any other party to the lease or sublease, is in
breach or default, and no event has occurred which, with notice or
lapse of time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) no party to the lease or sublease has repudiated any
provision thereof;
(E) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(F) with respect to each sublease, the representations and
warranties set forth in subsections (A) through (E) above are true
and correct with respect to the underlying lease;
(G) Summit has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(H) to the Knowledge of Summit, all facilities leased or
subleased thereunder have received all approvals of Governmental
Entities (including licenses and permits) required in connection
with the operation thereof and have been operated and maintained in
accordance with applicable laws, rules, and regulations; and
(I) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of
said facilities.
11
(l) Intangible Property Rights. Each of Summit and its Subsidiaries has
good and marketable title to, or valid and continuing licenses to use, all
trademarks, service marks, trade names, copyrights, franchises, logos, trade
secrets, patents, know-how, and all rights to the foregoing, which are used
in the operation of its business as currently conducted (collectively, with
any application with respect to the issuance or granting of any of the
foregoing, the "Intangible Property"). Set forth in Section 3(l) of the
Disclosure Schedule is a true, correct and complete list of all Intangible
Property owned or used by Summit and each of its Subsidiaries (including all
registrations and applications with respect to the issuance or granting of
any right). To Summit's Knowledge, none of the Intangible Property infringes
on any rights of others.
(m) Tangible Assets. Summit or its Subsidiaries owns or leases all
buildings, machinery, equipment, and other tangible assets necessary for the
conduct of the business of Summit and its Subsidiaries as currently conducted
and proposed to be conducted. Each such tangible asset is free from defects
(patent and latent) has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear), and is suitable for the purposes for which it currently is used and
proposed to be used.
(n) Contracts. Except as set forth in the SEC Documents or Section 3(n)
of the Disclosure Schedule, neither Summit nor any of its Subsidiaries is a
party to:
(i) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $50,000 per annum;
(ii) any agreement concerning a partnership or joint venture;
(iii) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of $50,000
or under which it has imposed a Security Interest on any of its assets,
tangible or intangible;
(iv) any agreement concerning confidentiality or noncompetition;
(v) to Summit's Knowledge, any agreement with any holder (or
Affiliate thereof) of 5% or more of any class of securities of Summit or
any of its Subsidiaries;
(vi) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers,
employees or consultants that is not listed in Section 3(s) of the
Disclosure Schedule;
(vii) any collective bargaining agreement;
12
(viii) any agreement for the employment (other than at-will
employment) of any individual on a full-time, part-time, consulting, or
other basis providing annual compensation in excess of $50,000 or
providing severance benefits;
(ix) any agreement under which it has advanced or loaned any amount
to any of its directors, officers, employees or consultants;
(x) any agreement or license relating in whole or in part to the
Intangible Property of Summit (including, without limitation, any
agreement or license under which Summit has the right to use any
Intangible Property owned or held by a third party) which is material to
the business, financial condition or results of operations of Summit
(other than standard licenses for software that is commercially available
to the public in the Ordinary Course of Business);
(xi) any agreement under which the consequences of a default or
termination could have a Summit Material Adverse Effect;
(xii) any agreement pursuant to which material benefits accrue to
the other party or parties to such contract as a result of the
transactions contemplated by this Agreement, including, without
limitation, rights of termination or modification of such agreements;
(xiii) any agreement (or group of related agreements) the
performance of which involves payment to or by Summit or any of its
Subsidiaries (individually or collectively) in excess of $50,000 per
annum, except for insurance policies issued by the Insurance Subsidiaries
in the Ordinary Course of Business; or
(xiv) any other material agreement not made in the Ordinary Course
of Business.
Summit has delivered to Liberty a correct and complete copy of each
written agreement listed in Section 3(n) of the Disclosure Schedule and a
brief written summary setting forth the terms and conditions of each oral
agreement referred to in Section 3(n) of the Disclosure Schedule. With
respect to each such agreement and each agreement filed as a material
contract with any SEC Documents: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the transactions contemplated
hereby will not cause the agreement, to be illegal, invalid, non-binding,
non-enforceable or not to be in full force and effect for the benefit of the
Surviving Corporation on identical terms immediately subsequent to the
Effective Time and consummation of such transactions contemplated hereby; (C)
neither Summit, nor any of its Subsidiaries, nor, to Summit's Knowledge, any
other party, is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; (D) neither
Summit nor any of its Subsidiaries has delivered or received notice of a
cancellation of or an intent to cancel such agreement; and (E) no party has
repudiated any provision of the agreement.
13
(o) Banking Relations; Powers of Attorney. Set forth in Section 3(o) of
the Disclosure Schedule is an accurate and complete list of all credit
agreements and deposit accounts which Summit or any of its Subsidiaries has
with any banking institution. Except as set forth in Section 3(o) of the
Disclosure Schedule, neither Summit nor any of its Subsidiaries has any
outstanding powers of attorney of any nature and has no obligation or
liability (whether actual, accrued, accruing, contingent or otherwise) as
guarantor, surety, co-xxxxxx, endorser, co-maker, indemnitor or otherwise in
respect of the obligation to any Person, except as endorser or maker of
checks or letters of credit in the Ordinary Course of BusineSection
(p) Insurance. Set forth in Section 3(p) of the Disclosure Schedule is
a true and complete list, as of the date hereof, of all policies of insurance
maintained by or for the benefit of Summit or any of its Subsidiaries
relating to its or their assets, properties, business, operations, employees,
officers or directors. Prior to the Effective Time, each of Summit and its
Subsidiaries has maintained insurance relating to such assets, properties,
business and operations (including, without limitation, errors and omissions
insurance with respect to its employees, officers and directors) that is
reasonable for a company of its size that is engaged in the insurance
business and that is a member of a comparable affiliated group of companies.
With respect to each such insurance policy: (A) the policy is legal,
valid, binding, enforceable, and in full force and effect; (B) neither
Summit, nor its Subsidiaries, nor, to Summit's Knowledge, any other party to
the policy, is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with
notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy; and (C)
no party to the policy has repudiated any provision thereof. Set forth in
Section 3(p) of the Disclosure Schedule is a description of any
self-insurance arrangements maintained by Summit or any of its Subsidiaries.
(q) Litigation. Set forth in Section 3(q) of the Disclosure Schedule is
each instance in which Summit or any of its Subsidiaries (i) is subject to
any outstanding injunction, judgment, order, decree, ruling, or charge or
(ii) is a party or, to Summit's Knowledge, is threatened to be made a party
to any action, suit, proceeding, hearing, or investigation of, in, or before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator, other than such
actions and suits related solely to the denial of coverage under insurance
policies (none of which actions or suits seeks punitive damages against
Summit and/or any of its Subsidiaries in excess of $250,000).
(r) Employees.
(i) Summit and its Subsidiaries are in compliance in all material
respects with all applicable federal, state and local laws and regulations
respecting employment and employment practices, and the terms and
conditions of employment and wages and hours. Neither Summit nor any of
its Subsidiaries is a party to or bound by any collective bargaining
agreement, nor have they experienced any strikes, grievances, claims of
unfair labor practices, or other collective bargaining disputes within the
past year. There is no
14
labor strike, dispute, arbitration, grievance, slowdown, stoppage,
organizational effort, dispute or proceeding by or with any employee or
former employee of Summit or any of its Subsidiaries or any labor union
pending, or to Summit's Knowledge, threatened against Summit or any of its
Subsidiaries. Neither Summit nor any of its Subsidiaries is the subject of
any pending claim asserting that such entity has committed any unfair
labor practice.
(ii) Except as described in Section 3(r) of the Disclosure
Schedule, no employee of Summit or any of its Subsidiaries has any
employment contract or other agreement or arrangement by which such
employee is employed on any basis other than as an "at will" employee
or by which Summit or its Subsidiaries are restricted in any manner
from terminating the services of such employee at any time without
penalty or payment, subject only to the provisions of employee benefit
plans described in Section 3(s).
(s) Employee Benefits.
(i) Except as set forth in Section 3(s)(i) of the Disclosure
Schedule, Summit and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except
for such instances of noncompliance which have not resulted in, and
could not reasonably be expected to result in, a Summit Material
Adverse Effect. Set forth in Section 3(s)(i) of the Disclosure Schedule
is a list of each Plan of Summit and each ERISA Affiliate. Neither
Summit nor any ERISA Affiliate has incurred any liability pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the
Code relating to employee benefit plans (as defined in section 3 of
ERISA), and no event, transaction or condition has occurred that could
reasonably be expected to result in the incurrence of any such
liability by Summit or any ERISA Affiliate, or in the imposition of any
Lien on any of the rights, properties or assets of Summit or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such
penalty or excise tax provisions or to section 401(a)(29) or 412 of the
Code, other than such liabilities or Liens as would not individually or
in the aggregate result in a Summit Material Adverse Effect.
(ii) No Plan is subject to Title IV of ERISA.
(iii) Each Plan intended to qualify under Section 401(a) or Section
403(a) of the Code and each trust intended to qualify under Section 501(a)
of the Code is the subject of a favorable determination letter from the
Internal Revenue Service, and nothing has occurred which may reasonably be
expected to impair such determination or otherwise adversely affect the
tax-qualified status of the Plan.
(iv) No contributions are required to be made to any Plan pursuant
to Section 412 of the Code, or the terms of the Plan or any collective
bargaining agreement.
(v) There has been no amendment to or announcement (whether or not
written) by Summit or any ERISA Affiliate relating to, or change in
employee participation,
15
coverage or benefits under, any Plan that would increase materially the
expense of maintaining such Plan above the level of the expense incurred
in respect thereof for the fiscal year ended prior to the date hereof.
(vi) No employee, former employee, director or agent of Summit will
become entitled to any bonus, retirement, severance or similar benefit or
enhanced or accelerated benefit under any Plan as a result of the
transactions contemplated hereby (either alone or upon the occurrence of
any additional or subsequent events).
(vii) Subject to the applicable requirements of ERISA and the Code,
neither any provision of any Plan nor any agreement with any employee nor
any representation or course of conduct by or on behalf of Summit or any
ERISA Affiliate would prevent the amendment, termination or merger after
the Closing Date of any Plan without liability to Summit, Liberty or their
respective affiliates.
(viii) Except as set forth in Section 3(s)(viii) of the Disclosure
Schedule, there is no suit, action, dispute, claim, arbitration or legal,
administrative, or other proceeding or governmental investigation pending,
or, to Summit's Knowledge, threatened, alleging any breach of the terms of
any Plan or of any fiduciary duties thereunder or violation of any
applicable law with respect to any such Plan.
(ix) Except as set forth in Section 3(s)(ix) of the Disclosure
Schedule, no Plan constitutes a "multiple employer welfare arrangement"
within the meaning of Section 3(40) of ERISA.
(x) Except as set forth in Section 3(s)(x) of the Disclosure
Schedule, with respect to any Plan that is self-funded (in whole or in
part), no material claims have been made that have not yet been paid
other than as a result of routine processing of claims and, to Summit's
Knowledge, no injury, sickness, or other medical condition has occurred
with respect to which material claims may be made pursuant to such Plan.
(xi) Summit does not maintain or have any obligation to contribute
to any "voluntary employees' beneficiary association" (within the meaning
of Section 501(c)(9) of the Code) or other funding arrangement for the
provision of welfare benefits.
(xii) Summit and the ERISA Affiliates do not, and have not within
the past six years had any obligation to, contribute to any Multi-Employer
Plan.
(xiii) Summit and its Subsidiaries have no expected post-retirement
benefit obligation (determined as of the last day of the most recently
ended fiscal year of the Company in accordance with Financial Accounting
Standards Board Statement No. 106), without regard to liabilities
attributable to continuation coverage mandated by section 4980B of the
Code.
16
(xiv) Summit has delivered to Liberty correct and complete copies
of all Plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service for
Plans intended to be qualified under section 701(a) or 703(a) of the
Code, the two most recent Form 5500 Annual Reports, two most recent
audited financial statements, and all related trust agreements,
insurance contracts, and other funding agreements which implement each
Plan. In addition, Summit has listed on Section 3(s)(xiv) of the
Disclosure Schedule and delivered to Liberty correct and complete
copies of each other plan, arrangement and policy (written or oral)
relating to stock options, stock purchase, compensation, deferred
compensation, severance, fringe benefits or other employee benefits, in
each case maintained or contributed to, or required to be maintained or
contributed to, by Summit or any of its Subsidiaries for the benefit of
any present or former officers, employees, agents, directors, or
independent contractors of Summit or any of its Subsidiaries (all of
the foregoing being referred to as "Benefit Arrangements"). Except as
set forth in Section 3(s)(xiv) of the Disclosure Schedule, all Benefit
Arrangements have been administered in accordance with their terms,
except for such instances of non-compliance that have not resulted in
or are not reasonably likely to result in a Summit Material Adverse
Effect.
(t) Reinsurance and Retrocessions. Set forth in Section 3(t) of the
Disclosure Schedule is a list of all treaty reinsurance or retrocession
treaties and agreements in force (whether written or oral) to which Summit or
any of its Subsidiaries is a party (including any terminated or expired
treaty or agreement under which there remains any outstanding liability with
respect to paid or unpaid case reserves in excess of $100,000) (collectively,
the "Treaties"), the effective date of each such Treaty, and the termination
date of any Treaty that has a definite termination date. Neither Summit nor
any of its Subsidiaries is in material default in any respect as to any
provision of any reinsurance or retrocession Treaty or has failed to meet the
underwriting standards required for any reinsurance coverage thereunder.
Certain material terms (including, without limitation, percentages and
businesses covered, term, ceding commissions, exclusions to coverage, single
loss limits and termination provisions) of the oral reinsurance agreement
with Reliance Insurance Company are set forth in Section 3(t) of the
Disclosure Schedule.
(u) Environment, Health, and Safety.
(i) Summit and each of its Subsidiaries has complied in all material
respects with all Environmental, Health, and Safety Laws, and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against Summit or any of its
Subsidiaries alleging any failure so to comply. Without limiting the
generality of the preceding sentence, Summit and each of its Subsidiaries
has obtained and been in compliance with all of the terms and conditions
of all material permits, licenses, and other authorizations which are
required under, and has complied in all material respects with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained
in, all Environmental, Health, and Safety Laws.
17
(ii) Neither Summit nor any of its Subsidiaries has any Liability
(and has not handled or disposed of any substance, arranged for the
disposal of any substance, exposed any employee or other individual to any
substance or condition, or owned or operated any property or facility in
any manner that could form the basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against Summit giving rise to any Liability) for damage to any
site, location, or body of water (surface or subsurface), for any illness
of or personal injury to any employee or other individual, or for any
reason under any Environmental, Health, and Safety Law.
(iii) All properties and equipment used in the business of Summit
and its Subsidiaries are free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene, dioxins, dibenzofurans, and
Extremely Hazardous Substances.
(v) Transactions with Affiliates. Except as set forth in Section 3(v)
of the Disclosure Schedule, no executive officer or director of Summit or any
of its Subsidiaries or, to Summit's Knowledge, any employee of Summit, any
holder of 5% of more of any class of equity securities of Summit or any of
its Subsidiaries, or any agent of or consultant to Summit or any of its
Subsidiaries or any of their respective Affiliates owned within the past two
years, directly or indirectly, any material interest in, or serves or served
as an officer, employee or director of, any customer, competitor or supplier
of Summit or any of its Subsidiaries, or any organization that had or has a
material agreement or arrangement with Summit or any of its Subsidiaries.
Except as set forth in Section 3(v) of the Disclosure Schedule, no executive
officer or director of Summit or, to Summit's Knowledge, any employee of
Summit, any holder of 5% of more of any class of equity securities of Summit
or any of its Subsidiaries, or any agent of or consultant to Summit or any of
its Subsidiaries or any of their respective Affiliates owns directly or
indirectly any material asset or property used in or necessary to the
business of Summit or any of its Subsidiaries.
(w) Voting Requirements. The affirmative vote of a majority of the votes
cast by the holders of the shares of Summit Common Stock is the only vote of the
holders of any class or series of Summit's capital stock necessary to approve
this Agreement and the transactions contemplated hereby.
(x) Opinion of Financial Advisor. Summit has received the opinion of ABN
AMRO Incorporated, dated the date hereof, to the effect that, as of the date
hereof, the consideration to be received in the Merger by the holders of shares
of Summit Common Stock was fair from a financial point of view to such
shareholders.
(y) Option Agreements; Voting Agreements. Each of Xxxxxxx X. Xxxx, Xxxxxxx
X. Xxxxxx, X. X. Xxxxxxx and Xxxxxxx X. Xxxx has duly executed and delivered to
Liberty an Option Agreement substantially in the form of Exhibit A-1 hereto with
respect to all of his shares of Summit Common Stock. Each of Xxxxxxx X. Xxxx,
Xxxxxxx X. Xxxx, Xxxxxxx X. Xxxxxx, X. X. Xxxxxxx, Xxxx X. Xxxx, Xxxxxx X.
Xxxxxx, Xxxxxx X. Xxxxxxx and Xxxxxx Xxxxxx has duly executed and delivered to
Liberty a Voting Agreement substantially in the form of Exhibit A-2 hereto with
18
respect to, among other things, the voting of his shares of Summit Common Stock
in favor of the Merger and this Agreement.
(z) Portfolio Investments. Summit has previously delivered to Liberty
true, correct and complete lists as of March 31, 1998 of all assets held in the
investment portfolios of the Insurance Subsidiaries as of such date. The
Insurance Subsidiaries have good and marketable title to the investments in
their respective investment portfolios.
(aa) Reserves. Summit has delivered to Liberty true, correct and complete
copies of all actuarial reports or actuarial certificates dated January 1, 1995
or later in the possession or control of Summit or its Subsidiaries relating to
the adequacy of the claims reserves of any of the Insurance Subsidiaries.
(bb) Insurance Subsidiaries' Statutory Financial Statements. Summit has
previously furnished to Liberty copies of audited statutory financial statements
of (i) Bridgefield Employers Insurance Company as of and for the fiscal years
ended March 31, 1996 and 1997, and as of and for the nine-month period ended
December 31, 1997, and (ii) Bridgefield Casualty Insurance Company as of and for
the fiscal years ended December 31, 1996 and 1997, in each instance prepared in
conformity with accounting practices prescribed or permitted by the Florida
Department of Insurance (collectively, the "Statutory Financial Statements").
Each of the balance sheets included in the Statutory Financial Statements fairly
presents in all material respects the financial position of the Insurance
Subsidiaries as of its date and each of the statements of operation included in
the Statutory Financial Statements fairly presents in all material respects the
results of operations of the Insurance Subsidiaries for the periods therein set
forth, in each case in accordance with accounting practices prescribed or
permitted by the Florida Department of Insurance (as in effect at the time of
the respective statements) consistently applied.
(cc) Employment Agreement. Summit has entered into an Employment Agreement
with Xxxxxxx X. Xxxx substantially in the form of Exhibit B attached hereto (the
"Bull Employment Agreement").
(dd) Special Disability Trust Fund. All claims of Summit and its
Subsidiaries for amounts recoverable from the Special Disability Trust Fund
operated by the State of Florida have been or will be timely submitted, and
Summit shall, and shall cause its Subsidiaries to, use all reasonable efforts to
cause all such claims to be validly perfected and collectible.
(ee) Disclosure. The representations and warranties contained in this
Section 3, when taken together, do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements and information contained in this Section 3 not misleading in
light of the circumstances in which they were made.
4. Representations and Warranties of Liberty and the Acquisition Sub. Each
of Liberty and the Acquisition Sub represents and warrants to Summit that the
statements contained in this Section 4 are correct and complete in all material
respects as of the date of this Agreement.
19
(a) Organization. Liberty is an insurance company duly established,
validly existing and in good standing under the laws of The Commonwealth of
Massachusetts. The Acquisition Sub is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Florida. Each of
Liberty and the Acquisition Sub has full corporate power and authority and all
licenses, permits and authorizations necessary to carry on the business in which
it is engaged.
(b) Authority; Noncontravention. Each of Liberty and the Acquisition Sub
has the requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by each of Liberty and the Acquisition Sub and the
consummation by each of Liberty and the Acquisition Sub of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Liberty or the Acquisition Sub, as the case may be. This
Agreement has been duly executed and delivered by each of Liberty and the
Acquisition Sub and constitutes the valid and binding obligation of each of
Liberty and the Acquisition Sub, enforceable against it in accordance with its
terms.
No consent, approval or authorization of, or declaration or filing with,
or notice to, any Governmental Entity that has not been received or made, is
required by or with respect to Liberty or the Acquisition Sub in connection with
the execution and delivery of this Agreement by Liberty or the Acquisition Sub
or the consummation by Liberty or the Acquisition Sub of the transactions
contemplated hereby, except for (i) the filing of premerger notification and
report forms under the HSR Act, with respect to the transactions contemplated by
this Agreement, (ii) the filings, approvals and/or consents as required under
the applicable insurance laws and regulations of the jurisdictions set forth in
Section 3(c) of the Disclosure Schedule, and (iii) the filing of the Articles of
Merger with the Florida Department of State and appropriate documents with the
relevant authorities of other states in which the Acquisition Sub is qualified
to do business.
(c) Ownership of the Acquisition Sub. The Acquisition Sub has been formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement. Liberty owns all of the outstanding shares of capital stock of the
Acquisition Sub.
(d) Litigation. There is no action, suit, proceeding, hearing or
investigation instituted or pending or, to the Knowledge of Liberty, threatened
against Liberty or the Acquisition Sub or any of their executive officers or
directors, nor are there any orders, writs, judgments, injunctions, decrees,
rulings, determinations or awards currently in effect of any Governmental
Entities or arbitrators outstanding against Liberty or the Acquisition Sub or
any of their executive officers or directors that are, individually or in the
aggregate, reasonably likely to prevent, materially delay or materially impair
the ability of Liberty or the Acquisition Sub to consummate the transactions
contemplated by this Agreement.
20
(e) Financing. Liberty has, or will have prior to the Effective Time,
sufficient cash, available lines of credit or other sources of immediately
available funds to enable it to make the aggregate cash payments required to be
paid pursuant to Sections 2 and 6(o) of this Agreement.
5. Covenants Relating to Conduct of Business Prior to Merger. Except as
contemplated hereby, during the period from the date of this Agreement to the
Effective Time, Summit shall, and shall cause its Subsidiaries to, act and carry
on their respective businesses in the Ordinary Course of Business and, to the
extent consistent therewith, use reasonable efforts to preserve intact their
business organizations, keep available the services of their key officers and
employees and preserve the goodwill of those engaged in material business
relationships with them. Without limiting the generality of the foregoing,
except as otherwise expressly contemplated by this Agreement, during the period
from the date hereof to the Effective Time, Summit shall not, and shall not
permit any of its Subsidiaries to, without the prior consent of Liberty (which
consent shall be given or withheld based on Liberty's reasonable business
judgment):
(a) (i) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, stock or property) in respect of,
any of Summit's outstanding capital stock, (ii) split, combine or
reclassify any of its outstanding capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its outstanding capital stock, or (iii)
purchase, redeem or otherwise acquire any shares of outstanding capital
stock or any rights, warrants or options to acquire any such shares (other
than shares of Summit Common Stock purchased as employee investments under
the Summit Holding Southeast, Inc. Amended and Restated Retirement Plan
dated September 1, 1997);
(b) issue, sell, grant, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities, except for the
issuance of shares of Summit Common Stock upon exercise of options to
purchase shares of Summit Common Stock outstanding on the date hereof;
(c) amend its charter, by-laws or other comparable charter or
organizational documents;
(d) acquire any business or any corporation, limited liability
company, partnership, joint venture, association or other business
organization or division thereof;
(e) sell, mortgage or otherwise encumber or subject to any Lien or
otherwise dispose of any of its properties or assets that are material to
Summit and its Subsidiaries taken as a whole, except in the Ordinary
Course of Business;
(f) (i) incur any indebtedness for borrowed money (other than
incurred in the Ordinary Course of Business pursuant to Summit's existing
line of credit with SunTrust
21
Bank, Tampa Bay) or guarantee any such indebtedness of another Person or
(ii) make any loans or advances to any other Person, other than to any
direct or indirect wholly-owned Subsidiary of Summit and other than
routine advances to employees;
(g) make any tax election (other than elections required by law and
made in the Ordinary Course of Business not giving rise to additional
material tax liabilities) or settle or compromise any tax liability that
could reasonably be expected to be material to Summit and its Subsidiaries
taken as a whole;
(h) 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, in the
Ordinary Course of Business or in accordance with their terms (or on terms
more favorable to Summit), of liabilities reflected or reserved against
in, or contemplated by, the most recent consolidated financial statements
(or the notes thereto) of Summit included in the SEC Documents or incurred
since the date of such financial statements in the Ordinary Course of
Business;
(i) except in the Ordinary Course of Business, modify, amend or
terminate any material agreement, permit, concession, franchise, License
or similar instrument to which Summit or any Subsidiary is a party or
waive, release or assign any material rights or claims thereunder; or
(j) authorize any of, or commit or agree to take any of, the
foregoing actions.
6. Additional Agreements.
(a) Preparation of the Proxy Statement. As soon as practicable following
the date of this Agreement, Summit shall complete and file with the SEC the
Proxy Statement. Summit will use all reasonable efforts to cause the Proxy
Statement to be mailed to Summit's shareholders, as promptly as practicable.
(b) Meeting of Shareholders. Summit will take all action necessary in
accordance with applicable law and its Articles of Incorporation and by-laws
to convene the Shareholders' Meeting to consider and vote upon the approval
of the Merger and this Agreement. Subject to Section 6(g) below, Summit will,
through its Board of Directors, recommend to its shareholders approval of the
foregoing matters. Without limiting the generality of the foregoing, Summit
agrees that, subject to its rights pursuant to Section 6(g) below, its
obligations pursuant to the first sentence of this Section 6(b) shall not be
affected by (i) the commencement, public proposal, public disclosure or
communication to Summit of any Acquisition Proposal (as defined in paragraph
(g) below) or (ii) the withdrawal or modification by the Board of Directors
of Summit of its approval or recommendation of this Agreement or the Merger.
Summit will use all reasonable efforts to hold the Shareholders' Meeting as
soon as practicable after the date hereof.
22
(c) Access to Information; Cooperation; Confidentiality. Summit shall, and
shall cause each of its Subsidiaries to, afford to Liberty and to the officers,
employees, counsel, financial advisors and other representatives of Liberty
reasonable access during normal business hours during the period prior to the
Effective Time to all its properties, books, contracts, commitments, personnel,
employees and records, and, during such period, Summit shall, and shall cause
each of its Subsidiaries to, furnish as promptly as practicable to Liberty such
information concerning its business, properties, financial condition, operations
and personnel as Liberty may from time to time reasonably request. Summit shall,
and shall cause each of its Subsidiaries to, provide all reasonable cooperation
necessary to permit Liberty to communicate with the agents and customers of
Summit and its Subsidiaries, provided, however, that Liberty shall not engage in
any such communication without the prior consent of Summit, which shall not be
unreasonably withheld or delayed. Except as required by law, Liberty will hold,
and will cause its respective directors, officers, employees, accountants,
counsel, financial advisors and other representatives and affiliates to hold,
any nonpublic information obtained from Summit in confidence to the extent
required by, and in accordance with, the provisions of the letter dated
April 23, 1998, between Summit and Liberty (the "Confidentiality Agreement")
and will otherwise comply with the Confidentiality Agreement. Except as
required by law, Summit will hold, and will cause its directors, officers,
employees, accountants, counsel, financial advisors and other representatives
and affiliates to hold, any nonpublic information obtained from Liberty in
confidence to the extent required by, and in accordance with, the provisions
of the Confidentiality Agreement and will otherwise comply with the
Confidentiality Agreement.
(d) Reasonable Efforts. Upon the terms and subject to the conditions
and other agreements set forth in this Agreement, each of the Parties agrees
to use all reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other
Parties in doing, all things necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the Merger and
the other transactions contemplated by this Agreement, and the Parties shall,
and the Parties shall cause their respective subsidiaries to, use reasonable
efforts to avoid any action that would, or could reasonably be expected to,
result in any of the representations or warranties of such Party set forth in
this Agreement becoming untrue in any material respect or any of the
conditions of the Merger set forth in Section 7 not being satisfied. Neither
of the Parties shall, nor shall either of the Parties permit any of their
respective subsidiaries to, take any action that would, or could reasonably
be expected to, result in any of the representations or warranties of such
Party set forth in this Agreement not satisfying the conditions set forth in
Section 7 (b)(i) or Section 7 (c)(i), as applicable. Each of the Parties
shall execute such documents and other papers and perform such further acts
as may be reasonably required to carry out the provisions hereof and the
transactions contemplated hereby.
(e) Public Announcements. Liberty and Summit will consult with each other
before issuing, and provide each other the opportunity to review and comment
upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement, including the Merger, and shall not
issue any such press release or make any such public
23
statement prior to such consultation, except as may be required by applicable
law or court process.
(f) Acquisition Proposals. From the date hereof until the earlier of
the Effective Time or termination of this Agreement pursuant to Section 8(a),
Summit shall not, nor shall it permit any of its Subsidiaries to, nor shall
it authorize or permit any officer, director, employee, or any investment
banker, attorney or other advisor or representative, of Summit or any of its
Subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage
the submission of any Acquisition Proposal (as hereinafter defined) or (ii)
participate in any discussions or negotiations regarding, or furnish to any
Person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Acquisition Proposal, provided,
however, that on or after the date hereof, Summit, any of its Subsidiaries or
any officer, director or employee of, or any investment banker, attorney or
other advisor or representative of, Summit or any of its Subsidiaries may,
following the receipt of an Acquisition Proposal by Summit that the Board of
Directors of Summit determines in good faith, following consultation with
outside counsel, would permit the Board of Directors to take any of the
actions referred to in the first sentence of Section 6(g), furnish
information with respect to and participate in negotiations regarding such
Acquisition Proposal. Summit shall promptly advise Liberty orally and in
writing of the receipt by it (or any of the other Persons referred to above)
after the date hereof of any Acquisition Proposal, or any inquiry which could
reasonably be expected to lead to any Acquisition Proposal, the material
terms and conditions of such Acquisition Proposal or inquiry, and the
identity of the person making any such Acquisition Proposal or inquiry.
Summit will keep Liberty fully informed of the status and details of any such
Acquisition Proposal or inquiry. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the first
sentence of this Section 6(g) by any officer, director or employee of Summit
or any of its Subsidiaries or any investment banker, attorney or other
advisor or representative of Summit or any of its Subsidiaries, whether or
not such Person is purporting to act on behalf of Summit or any of its
Subsidiaries or otherwise, shall be deemed to be a breach of this Section
6(f) by Summit. For purposes of this Agreement, "Acquisition Proposal" means
any proposal (as such proposal may be amended, modified or supplemented from
time to time) with respect to a merger, consolidation, share exchange or
similar transaction involving Summit or any Subsidiary of Summit, or any
purchase of all or any significant portion of the assets of Summit or any
Subsidiary of Summit, or any equity interest in Summit or any Subsidiary of
Summit, other than the transactions contemplated hereby or any other similar
transaction with Liberty or any of its Affiliates.
(g) Fiduciary Duties. The Board of Directors of Summit shall not (i)
withdraw or modify in a manner adverse to Liberty or the Acquisition Sub, the
approval or recommendation by such Board of Directors of this Agreement or the
Merger, (ii) approve or recommend any Acquisition Proposal, or (iii) enter into
any agreement with respect to any Acquisition Proposal, unless Summit receives
an Acquisition Proposal and the Board of Directors of Summit determines in good
faith, following consultation with outside counsel, that in order to comply with
its fiduciary duties to shareholders under applicable law it is necessary for
the Board of Directors to withdraw or modify its approval or recommendation of
this Agreement or the Merger, approve
24
or recommend such Acquisition Proposal, enter into an agreement with respect
to such Acquisition Proposal or terminate this Agreement. In the event the
Board of Directors of Summit takes any of the foregoing actions, Summit shall
comply with its obligations pursuant to Section 6(i) below. Nothing contained
in this Section 6(g) shall prohibit Summit from taking and disclosing to its
shareholders a position contemplated by Rule 14d-9 or Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to Summit's
shareholders which, in the good faith judgment of the Board of Directors of
Summit based on the advice of outside counsel, is required under applicable
law, provided that Summit complies with the first two sentences of this
Section 6(g).
(h) Consents, Approval and Filings.
(i) Summit and Liberty will make and cause their respective
subsidiaries to make all necessary filings, as soon as practicable,
including, without limitation, those required under the HSR Act, the
Securities Act, the Exchange Act and applicable state insurance and
securities laws in order to facilitate prompt consummation of the Merger
and the other transactions contemplated by this Agreement. In addition,
Summit and Liberty will each use all reasonable efforts, and will
cooperate fully with each other (A) to comply as promptly as practicable
with all governmental requirements applicable to the Merger and the other
transactions contemplated by this Agreement and (B) to obtain as promptly
as practicable all necessary permits, orders or other consents of
Governmental Entities and consents of all third parties necessary for the
consummation of the Merger and the other transactions contemplated by this
Agreement, including, without limitation, any consents required under any
relevant insurance laws or regulations. Each of Summit and Liberty shall
use reasonable efforts to provide such information and communications to
Governmental Entities as such Governmental Entities may reasonably
request.
(ii) Each of the Parties shall provide to the other Party copies of
all applications in advance of filing or submission of such applications
to Governmental Entities in connection with this Agreement.
(i) Certain Fees and Expenses.
(i) If an Acquisition Proposal is commenced, publicly proposed,
publicly disclosed or communicated to Summit (or the willingness of any
Person to make an Acquisition Proposal is publicly disclosed or
communicated to Summit) on or before December 31, 1998 and (A) the Board
of Directors of Summit withdraws or modifies its approval or
recommendation of this Agreement or the Merger or approves or recommends
such Acquisition Proposal, (B) Summit or any of its Subsidiaries enters
into an agreement with respect to, or consummates, such Acquisition
Proposal, or (C) following the commencement, public proposal, public
disclosure or communication of an Acquisition Proposal to Summit (or the
public disclosure or communication to Summit of the willingness of any
Person to make an Acquisition Proposal), the requisite approval of
Summit's shareholders for the Merger is not obtained at the Shareholders'
Meeting, Summit shall (X) reimburse Liberty for all Expenses (as defined
below) upon demand and
25
(Y) in the event any Acquisition Proposal is consummated on or before
December 31, 1999, pay immediately to Liberty $10,000,000 (the "Section
6(i) Fee").
(ii) For purposes of this Section 6(i), "Expenses" shall mean all
reasonable fees and expenses incurred or paid by or on behalf of Liberty
in connection with the Merger or the consummation of any of the
transactions contemplated by this Agreement, including all reasonable
printing costs and reasonable fees and expenses of counsel, investment
banking firms, accountants, experts and consultants to Liberty.
(j) Shareholder Litigation. Summit shall give Liberty, at Liberty's
expense, the opportunity to participate in the defense or settlement of any
shareholder litigation against Summit and its directors relating to the
transactions contemplated by this Agreement, provided, however, that no such
settlement shall be agreed to without Liberty's consent, which consent shall not
be unreasonably withheld or delayed.
(k) Employment Agreement. The Surviving Corporation shall enter into and
perform the Bull Employment Agreement in the form attached as Exhibit B hereto.
(l) Indemnification and Insurance.
(i) Upon and following consummation of the Merger, except to the
extent prohibited by law, Liberty and the Surviving Corporation jointly
and severally shall indemnify, defend and hold harmless Xxxxxxx X. Xxxx,
the Chief Executive Officer of Summit, and each Person who is now, or has
been at any time prior to the date hereof or who becomes prior to the
Effective Time, a director (whether elected or appointed), of Summit or
any of its predecessor entities against any and all claims, damages,
liabilities, losses, costs, charges, expenses (including, without
limitation, reasonable costs of investigation, and the reasonable fees and
disbursements of legal counsel and other advisers and experts as incurred
(including, without limitation, incurred in connection with enforcing the
provisions of this Section 6(l))), judgments, fines, penalties and amounts
paid in settlement, asserted against, incurred by or imposed upon Mr. Wall
or any such director, in connection with, arising out of or relating to
any threatened, pending or completed claim, action, suit or proceeding,
whether asserted or claimed prior to, at or after the Effective Time
(whether civil, criminal, administrative or investigative, including,
without limitation any and all claims, actions, suits, proceedings or
investigations by or on behalf of or in the right of or against Summit or
any Subsidiary of Summit or their Affiliates, or by any present or former
shareholder of Summit (collectively, "Claims")), including, without
limitation, Mr. Wall's service as Chief Financial Officer and the
director's service as a member of Summit's Board of Directors, the events
leading up to the execution of this Agreement or any breach of any duty in
connection with any of the foregoing. Liberty or the Surviving Corporation
shall, before final disposition of a proceeding, advance funds to pay for
or reimburse reasonable expenses incurred by a Person covered by this
Section 6(l).
26
(ii) Upon the consummation of the Merger, and from and after the
Effective Time, to the fullest extent permitted by law, the Surviving
Corporation shall assume and honor any obligation of Summit immediately
prior to the Effective Time with respect to the indemnification of any
director (whether elected or appointed), officer or employee of Summit or
any Subsidiary or predecessor of Summit (collectively, the "indemnities")
arising out of Summit's Articles of Incorporation or By-Laws as if such
obligations were pursuant to a contract or arrangement between the
Surviving Corporation and such indemnities. In addition, Liberty
acknowledges and agrees that the Indemnity Agreements shall continue in
full force and effect as obligations of the Surviving Corporation
following the Effective Time.
(iii) Liberty shall cause Summit's current officers' and directors'
liability insurance to be continuously maintained in full force and effect
without reduction of coverage for a period of six years after the
Effective Time, provided that Liberty may substitute therefor policies of
at least the same coverage and amounts containing terms and conditions
which are not materially less advantageous to the indemnitees, and each of
which is issued by an insurer having a claims-paying rating at least as
good as the rating of the issuer of Summit's existing policy.
(m) Investment Portfolio.
(i) From the date hereof through the Closing Date, the Insurance
Subsidiaries shall manage the investment portfolios for the Insurance
Subsidiaries in accordance with their respective investment guidelines as
in place on the date hereof.
(ii) No more than three days prior to the Closing Date, Summit shall
deliver to Liberty a list of all investments in the investment portfolios
for Summit and its Subsidiaries as of a date not more than three business
days prior to the date such list is delivered to Liberty.
(n) Reinsurance Agreements. From the date hereof through the Closing
Date, Summit and each of its Subsidiaries shall not, without the prior
written approval of Liberty, except in the Ordinary Course of Business (i)
amend any reinsurance or retrocession agreement, (ii) enter into or commit to
enter into any loss portfolio transfer or other similar transaction,
agreement or arrangement or series of related transactions, agreements or
arrangements involving any ceded reinsurance of Summit or any of its
Subsidiaries, (iii) enter into or commit to enter into any reinsurance or
retrocession contract or treaty except to replace, renew or extend existing
reinsurance and retrocession agreements and treaties on terms which are not
different in any material respect from the terms of the agreement or treaty
being replaced, renewed or extended, as the case may be, or (iv) commute or
terminate any contract of reinsurance, which at the time of commutation or
termination is legally carried on the books of Summit and its Subsidiaries in
an amount of $1,000,000 or more. All reinsurance or retrocession agreements
or treaties permitted by this Section 6(n) shall not have a change of control
or similar provision which would
27
require Summit or any of its Subsidiaries to obtain a consent to consummate the
transactions contemplated hereby (unless such provisions shall have been waived
prior to Closing).
(o) Redemption of Series A Preferred Stock. At least three days prior to
the Effective Time, Summit shall provide in writing to Liberty the aggregate
amount required to redeem all of the outstanding shares of Series A Preferred
Stock at the Effective Time, which shall be the aggregate Liquidation Preference
(as defined in Summit's Articles of Incorporation) plus all cumulated and unpaid
dividends (the "Series A Amount"). On or prior to the Effective Time, Liberty
shall deposit with Xxxxx Xxxxxx an amount in cash equal to the Series A Amount.
Summit shall take, or cause to be taken, all such actions and give such notice
and take all such other actions as required pursuant to Summit's Articles of
Incorporation so that the Series A Preferred Stock will be redeemed
simultaneously with the Effective Time.
7. Conditions Precedent.
(a) 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 on or prior to the Closing Date of the following
conditions:
(i) Shareholder Approval. This Agreement and the Merger shall have
been approved and adopted by the shareholders of Summit in the manner
contemplated by Section 3(y) and in compliance with the Florida Business
Act and other applicable law.
(ii) Governmental and Regulatory Consents. All filings required to
be made prior to the Effective Time with, and all consents, approvals,
permits and authorizations required to be obtained prior to the Effective
Time from Governmental Entities, including, without limitation, those set
forth in Section 3(c) of the Disclosure Schedule, in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Liberty, the Acquisition Sub and
Summit, will have been made or obtained (as the case may be), provided,
however, that such consents, approvals, permits and authorizations may be
subject to conditions customarily imposed by state Governmental Entities
charged with the supervision of insurance companies.
(iii) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have otherwise expired.
(iv) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect, provided, however, that
Liberty and Summit shall use reasonable efforts to have any such order or
injunction vacated.
28
(b) Conditions to Obligations of Liberty and the Acquisition Sub. The
obligations of Liberty and the Acquisition Sub to effect the Merger are further
subject to the following conditions:
(i) Representations and Warranties. The representations and
warranties of Summit set forth in this Agreement shall be assessed as of
the date of this Agreement and as of the Effective Time with the same
effect as though all such representations and warranties had been made on
and as of the Effective Time (provided that representations and warranties
that speak of an earlier date shall speak only of such date). The
representations and warranties set forth in Section 3(b) shall be true and
correct (except for inaccuracies that are de minimus in amount). The
representations and warranties set forth in Section 3(c) shall be true and
correct in all material respects. There shall not exist inaccuracies in
the other representations and warranties of Summit set forth in this
Agreement such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, a Summit Material Adverse Effect, provided
that, for purposes of this sentence only, those representations and
warranties that are qualified by reference to "material" or are measured
in terms of a Summit Material Adverse Effect shall be deemed not to
include such qualification. Liberty shall have received a certificate
signed on behalf of Summit by the chief executive officer and the chief
financial officer of Summit to the effect set forth in this
Section 7(b)(i).
(ii) Performance of Obligations of Summit. Summit 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
Liberty shall have received a certificate signed on behalf of Summit by
the chief executive officer and the chief financial officer of Summit to
such effect.
(iii) Receipt of Legal Opinion. Liberty shall have received an
opinion, dated the Closing Date, from Xxxxxx & Bird LLP, counsel to
Summit, addressing the matters set forth on Exhibit C hereto.
(c) Conditions to Obligation of Summit. The obligation of Summit to effect
the Merger is further subject to the following conditions:
(i) Representations and Warranties. The representations and
warranties of Liberty and the Acquisition Sub set forth in Section 4
shall be true and correct in all material respects, in each case as of
the date hereof and as of the Closing Date as though made on and as of
the Closing Date, except to the extent such representations and
warranties speak as of an earlier date, and Summit shall have received
a certificate signed on behalf of Liberty by two executive officers of
Liberty to the effect set forth in this Section 7(c)(i).
(ii) Performance of Obligations of Liberty and Acquisition Sub.
Liberty and Acquisition Sub shall have performed in all material aspects
all obligations required to be performed by them under this Agreement at
or prior to the Closing Date, and Summit
29
shall have received a certificate signed on behalf of Liberty by two
executive officers of Liberty to such effect.
(iii) Receipt of Legal Opinion. Summit shall have received an
opinion, dated the Closing Date, from Xxxxxx, Hall & Xxxxxxx, counsel to
Liberty, addressing the matters set forth on Exhibit D hereto.
8. Termination, Amendment and Waiver.
(a) Termination. This Agreement may be terminated and abandoned at any
time prior to the Effective Time, whether before or after approval of matters
presented in connection with the Merger by the shareholders of Summit:
(i) by mutual written consent of Liberty and Summit; or
(ii) by either Liberty or Summit (by notice to the other):
(A) if any required approval of the shareholders of Summit,
upon a vote at a duly held Shareholders' Meeting or any adjournment
thereof, shall not have been obtained; or
(B) if the Merger shall not have been consummated on or before
December 31, 1998, unless the failure to consummate the Merger is
the result of a willful and material breach of this Agreement by the
party seeking to terminate this Agreement; or
(C) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and
nonappealable; or
(D) if the Board of Directors of Summit shall have taken any
action specified in clauses (i) through (iii) of the first sentence
of Section 6(g).
(b) Effect of Termination. In the event of termination of this
Agreement by either Summit or Liberty as provided in Section 8(a), this
Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Liberty, the Acquisition Sub or
Summit, other than the last two sentences of Section 6(c), Sections 6(i),
8(b) and Sections 9(b) through (i). Nothing contained in this Section 8(b)
shall relieve any party from any liability resulting from any willful and
material breach of the representations, warranties, covenants or agreements
set forth in this Agreement.
(c) Amendment. Subject to the applicable provisions of the Florida
Business Act, at any time prior to the Effective Time, the Parties hereto may
modify or amend this Agreement,
30
by written agreement executed and delivered by duly authorized officers of the
respective Parties, provided, however, that after approval of the Merger by the
shareholders of Summit, no amendment shall be made which reduces the
consideration payable in the Merger or adversely affects the rights of Summit's
shareholders hereunder without the approval of such shareholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the Parties.
(d) Extension; Waiver. At any time prior to the Effective Time, the
Parties may (i) extend the time for the performance of any of the obligations
or other acts of the other Parties, (ii) waive any inaccuracies in the
representations and warranties of the other Parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (iii)
subject to Section 8(c), waive compliance with any of the agreements or
conditions of the other Parties contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party. The
failure of any party to this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such rights.
(e) Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 8(a), an amendment of this
Agreement pursuant to Section 8(c) or an extension or waiver pursuant to
Section 8(d) shall, in order to be effective, require in the case of Liberty,
the Acquisition Sub or Summit, action by its Board of Directors or the duly
authorized designee of its Board of Directors.
9. General Provisions.
(a) Survival of Representations and Warranties. The representations and
warranties in this Agreement shall not survive the Closing. This Section 9(a)
shall not limit any covenant or agreement of the Parties which by its terms
contemplates performance after the Effective Time.
(b) Fees and Expenses. Except as provided otherwise in Section 6(i),
whether or not the Merger shall be consummated, each party hereto shall pay
its own expenses incident to preparing for, entering into and carrying out
this Agreement and the consummation of the transactions contemplated hereby.
(c) Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given and effective (i) if delivered personally, (ii) if sent by overnight
courier (providing proof of delivery) or (iii) upon the third business day
following mailing by registered mail, postage prepaid, to the Parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(i) if to Liberty or Acquisition Sub, to
Liberty Mutual Insurance Company
000 Xxxxxxxx Xxxxxx
00
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attn: General Counsel
with copies (which shall not constitute notice) to:
Xxxx X. Xxxxxxxx
Liberty Mutual Insurance Company
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Xxxxxx, Xxxx & Xxxxxxx
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxx, Esq.
(ii) if to Summit, to
Summit Holding Southeast, Inc.
0000 X-X Xxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxx
with copies (which shall not constitute notice) to:
Xxxxxx & Bird LLP
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
(d) Interpretation. When a reference is made in this Agreement to a
Section (Section), Exhibit or Schedule, such reference shall be to a Section
(Section) of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of this Agreement. Whenever the words "include," "includes" or "including"
are used in this Agreement, they shall be deemed to be followed by the words
"without limitation."
(e) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the Parties and delivered to the other Parties.
(f) Entire Agreement; Third-Party Beneficiaries. This Agreement and the
other agreements referred to herein, including without limitation the
Confidentiality Agreement,
32
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the Parties with respect to the
subject matter of this Agreement. This Agreement is not intended to confer upon
any Person other than the Parties hereto and the third party beneficiaries
referred to in the following sentence any rights or remedies. The Parties hereto
expressly intend the provisions of Section 6(l) to confer a benefit upon and be
enforceable by, as third party beneficiaries of this Agreement, the third
Persons referred to in, or intended to be benefitted by, such provisions and
such Person's heirs and legal representatives.
(g) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the domestic substantive laws of The Commonwealth of
Massachusetts, without giving effect to any choice or conflicts of laws rule or
provision that would result in the application of the domestic substantive laws
of any other jurisdiction.
(h) Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise by any of the Parties without the prior written
consent of the other Parties, and any such assignment that is not consented to
shall be null and void. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by, the Parties and
their respective successors and permitted assigns.
(i) Enforcement. The Parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement.
[The remainder of this page is left blank intentionally.]
33
IN WITNESS WHEREOF, Liberty, the Acquisition Sub and Summit have executed
this Agreement under seal as of the date first above written.
LIBERTY MUTUAL INSURANCE
COMPANY
/s/ Xxxxxxxx X. Xxxx
-------------------------------
By: Xxxxxxxx X. Xxxx
Title: Vice President
SPACE MOUNTAIN ACQUISITION CORP.
/s/ Xxxxxxxx X. Xxxx
-------------------------------
By: Xxxxxxxx X. Xxxx
Title: Vice President
SUMMIT HOLDING SOUTHEAST, INC.
/s/ Xxxxxxx X. Xxxx
-------------------------------
By: Xxxxxxx X. Xxxx
Title: President
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APPENDIX I
Certain Defined Terms
"Acquisition Sub" has the meaning set forth in the preface.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
Section 1504(a).
"Acquisition Proposal" has the meaning set forth in Section 6(f).
"Articles of Merger" has the meaning set forth in Section 2(c)(i).
"Audited Financial Statements" has the meaning set forth in Section 3(g).
"Benefit Arrangements" has the meaning set forth in Section 3(s).
"Bull Employment Agreement" has the meaning set forth in Section 3(cc).
"Claims" has the meaning set forth in Section 6(l).
"Closing" has the meaning set forth in Section 2(b).
"Closing Date" has the meaning set forth in Section 2(b).
"Code" means the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder.
"Confidentiality Agreement" has the meaning set forth in Section 6(c).
"Disclosure Schedule" has the meaning set forth in Section 3.
"Effective Time" has the meaning set forth in Section 2(c)(i).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or
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threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) that, together with Summit, would be treated as a single employer
under Section 4001(b) of ERISA, or that is a member of a group of which Summit
is a member and that is controlled within the meaning of Section 4971(e)(2)(B)
of the Code.
"Exchange Act" has the meaning set forth in Section 3(c).
"Expenses" has the meaning set forth in Section 6(i).
"Extremely Hazardous Substance" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Florida Business Act" has the meaning set forth in Section 2(a).
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Governmental Entity" has the meaning set forth in Section 2(d)(v).
"HSR Act" has the meaning set forth in Section 3(c).
"Incentive Plan" has the meaning set forth in Section 2(c)(viii).
"Indemnity Agreements" means collectively the eight Indemnity Agreements
entered into on May 28, 1997, between Summit and each of Xxxx X. Xxxxxx, Xxxxxxx
X. Xxxx, X. X. Xxxxxxx, Xxxx Xxxx, Xxxxxx X. Xxxxxx, Xx., Xxxxxx X. Xxxxxxx,
Xxxxxx Xxxxxx and Xxxxxxx X. Xxxx.
"Insurance Subsidiaries" has the meaning set forth in Section 3(i).
"Intangible Property" has the meaning set forth in Section 3(l).
"Knowledge" means actual knowledge after reasonable investigation.
Knowledge of Persons that are not individuals shall be deemed to include
Knowledge of such Persons' directors and executive officers.
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"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Liberty" has the meaning set forth in the preface.
"Licenses" has the meaning set forth in Section 3(i).
"Liens" has the meaning set forth in Section 3(b).
"Merger" has the meaning set forth in Section 2(a).
"Merger Consideration" has the meaning set forth in Section 2(c)(v).
"Multiemployer Plan" shall mean any Plan that is a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface.
"Paying Agent" has the meaning set forth in Section 2(d)(i).
"Payment Fund" has the meaning set forth in Section 2(d)(i).
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a Governmental Entity.
"Plan" means an "employee benefit plan" (as defined in Section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by Summit or any ERISA Affiliate or with
respect to which Summit or any ERISA Affiliate may have any liability.
"Proxy Statement" has the meaning set forth in Section 3(c).
"SEC" has the meaning set forth in Section 3(c).
"Section 6(i) Fee" has the meaning set forth in Section 6(i).
"SEC Documents" has the meaning set forth in Section 3(d).
"Securities Act" has the meaning set forth in Section 3(d).
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"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialman's, and
similar liens, (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Series A Amount" has the meaning set forth in Section 6(o).
"Series A Preferred Stock" has the meaning set forth in Section 3(b).
"Shareholders' Meeting" has the meaning set forth in Section 3(e).
"Statutory Financial Statements" has the meaning set forth in Section
3(bb).
"Subsidiary" means any of the direct or indirect, partially- or
wholly-owned, subsidiaries of Summit, but not including any entity of which
Summit owns, directly or indirectly, 5% or less of the equity, so owned by
Summit solely as an investment portfolio asset, and "Subsidiaries" means all of
such subsidiaries.
"Summit" has the meaning set forth in the preface.
"Summit Common Stock" means any share of the Common Stock, $.01 par value
per share, of Summit.
"Summit Material Adverse Effect" means an event, change or occurrence
that, individually or together with any other events, changes or occurrences,
has a material adverse effect on (a) the financial condition, business or
results of operations of Summit and its Subsidiaries taken as a whole, or (b)
the ability of Summit to perform its obligations under this Agreement or to
consummate the Merger or the other transactions contemplated by this Agreement,
provided, however, that a Summit Material Adverse Effect shall not include the
effect of any regulatory or statutory matter that has or may have an
industry-wide effect on the workers' compensation insurance industry in Florida.
"Summit Options" has the meaning set forth in Section 2(c)(viii).
"Summit Shares" has the meaning set forth in Section 3(b).
"Surviving Corporation" has the meaning set forth in Section 2(a).
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding,
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social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Treasury Regulation" means those regulations promulgated from time to
time under the Code.
"Treaties" has the meaning set forth in Section 3(t).
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