EXHIBIT 2.1
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
by and among
GREAT AMERICAN FINANCIAL RESOURCES, INC.,
PROJECT GARDEN ACQUISITION INC.
and
CERES GROUP, INC.
Dated as of May 1, 2006
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TABLE OF CONTENTS
PAGE
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ARTICLE I
THE MERGER
Section 1.1 The Merger.................................................. 1
Section 1.2 Closing..................................................... 1
Section 1.3 Effective Time.............................................. 2
ARTICLE II
EFFECTS OF THE MERGER
Section 2.1 Effects of the Merger....................................... 2
Section 2.2 Certificate of Incorporation................................ 2
Section 2.3 Bylaws...................................................... 2
Section 2.4 Officers.................................................... 2
Section 2.5 Directors................................................... 2
Section 2.6 Cancellation of Treasury Stock and Parent Owned Stock....... 2
Section 2.7 Conversion of Company Common Stock.......................... 3
Section 2.8 Conversion of the Capital Stock of Acquisition Sub.......... 3
Section 2.9 Option and Warrant Consideration............................ 3
Section 2.10 Exchange of Certificates.................................... 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization................................................ 6
Section 3.2 Authorization............................................... 7
Section 3.3 Consents and Approvals; No Violations....................... 7
Section 3.4 Capitalization.............................................. 8
Section 3.5 Subsidiaries................................................ 10
Section 3.6 SEC Documents............................................... 10
Section 3.7 Financial Statements; No Undisclosed Liabilities............ 10
Section 3.8 Proxy Statement............................................. 11
Section 3.9 Absence of Material Adverse Changes, etc.................... 11
Section 3.10 Taxes....................................................... 12
Section 3.11 Employee Benefit Plans...................................... 12
Section 3.12 Environmental Matters....................................... 14
Section 3.13 Litigation; Compliance with Laws............................ 14
Section 3.14 Intellectual Property....................................... 14
Section 3.15 Material Contracts.......................................... 15
Section 3.16 Insurance................................................... 15
Section 3.17 Real Estate; Assets......................................... 15
Section 3.18 Labor and Employment........................................ 16
Section 3.19 Opinion of Financial Advisors............................... 16
Section 3.20 Finders' and Other Fees..................................... 16
Section 3.21 State Takeover Statutes..................................... 17
Section 3.22 Reserves.................................................... 17
Section 3.23 Reinsurance and Retrocessions............................... 17
Section 3.24 Investment Company.......................................... 17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB
Section 4.1 Organization................................................ 17
Section 4.2 Authorization............................................... 18
Section 4.3 Consents and Approvals; No Violations....................... 18
Section 4.4 Proxy Statement............................................. 18
Section 4.5 Acquisition Sub's Operations................................ 19
Section 4.6 Ownership of Company Common Stock........................... 19
Section 4.7 Financing................................................... 19
Section 4.8 Brokers..................................................... 19
Section 4.9 Litigation.................................................. 19
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.1 Conduct of the Business of the Company...................... 19
Section 5.2 Stockholders' Meeting; Proxy Material....................... 22
Section 5.3 Access to Information....................................... 23
Section 5.4 No Solicitation............................................. 23
Section 5.5 Real Estate Transfer Taxes.................................. 24
Section 5.6 Director and Officer Liability.............................. 24
Section 5.7 Certain Filings............................................. 25
Section 5.8 Commercially Reasonable Best Efforts........................ 27
Section 5.9 Public Announcements........................................ 27
Section 5.10 State Takeover Laws......................................... 27
Section 5.11 Certain Notifications....................................... 27
Section 5.12 Third Party Consents........................................ 28
Section 5.13 Advisory Fees, etc.......................................... 28
Section 5.14 Employees and Employee Benefit Plans........................ 28
Section 5.15 Delisting................................................... 28
Section 5.16 Cooperation Relating to Pre-Closing Transaction............. 29
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1 Conditions to Each Party's Obligations to Effect the
Merger...................................................... 29
Section 6.2 Conditions to the Company's Obligation to Effect the
Merger...................................................... 29
Section 6.3 Conditions to Parent's and Acquisition Sub's Obligations
to Effect the Merger........................................ 30
ARTICLE VII
TERMINATION
Section 7.1 Termination................................................. 31
Section 7.2 Effect of Termination....................................... 32
Section 7.3 Fees and Expenses........................................... 32
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ARTICLE VIII
MISCELLANEOUS
Section 8.1 Definitions................................................. 33
Section 8.2 Notices..................................................... 40
Section 8.3 Survival of Representations, Warranties and Covenants....... 41
Section 8.4 Interpretation.............................................. 41
Section 8.5 Amendments, Modification and Waiver......................... 41
Section 8.6 Successors and Assigns...................................... 42
Section 8.7 Specific Performance........................................ 42
Section 8.8 Governing Law; Consent to Jurisdiction; Waiver of Trial
by Jury..................................................... 42
Section 8.9 Severability................................................ 43
Section 8.10 Third Party Beneficiaries................................... 43
Section 8.11 Entire Agreement............................................ 43
Section 8.12 Counterparts; Fax Signatures; Effectiveness................. 43
SCHEDULES
Section 2.9 Option and Warrant Consideration
Section 3.3 Consents and Approvals; No Violations
Section 3.4 Capitalization
Section 3.5 Subsidiaries
Section 3.7 Financial Statements; No Undisclosed Liabilities
Section 3.10 Taxes
Section 3.11 Employee Benefit Plans
Section 3.15 Material Contracts
Section 3.17 Real Estate; Assets
Section 3.18 Labor and Employment
Section 3.20 Finders' and Other Fees
Section 3.23 Reinsurance and Retrocessions
Section 5.1 Conduct of the Business of the Company
Section 5.6 Director and Officer Liability
Section 5.14 Employees and Employee Benefit Plans
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 1, 2006 (this
"Agreement"), by and among Great American Financial Resources, Inc., a Delaware
corporation ("Parent"), Project Garden Acquisition Inc., a Delaware corporation
("Acquisition Sub"), and Ceres Group, Inc., a Delaware corporation (the
"Company") (Acquisition Sub and the Company being hereinafter collectively
referred to as the "Constituent Corporations").
WITNESSETH:
WHEREAS, the Board of Directors of the Company (the "Company Board"),
based upon the recommendation of a special committee thereof consisting solely
of disinterested directors (the "Special Committee"), has approved and adopted
this Agreement and the transactions contemplated hereby, has determined that the
merger of Acquisition Sub with and into the Company (the "Merger"), with the
Company being the surviving corporation (the "Surviving Corporation"), whereby
each issued and outstanding share of Common Stock, par value $.001 per share, of
the Company (the "Company Common Stock"), not owned directly or indirectly by
Parent, Acquisition Sub or the Company, will, upon the terms and subject to the
conditions set forth herein, be converted into the right to receive cash in an
amount equal to $6.13 per share, is fair to, and in the best interests of, the
holders of such shares of Company Common Stock and has recommended that the
Company's stockholders adopt this Agreement and approve the Merger; and
WHEREAS, the respective Boards of Directors of Parent and Acquisition
Sub have each approved and adopted this Agreement and the Merger, upon the terms
and subject to the conditions set forth herein; and
WHEREAS, Parent, concurrently with the execution and delivery of this
Agreement, is approving this Agreement and the transactions contemplated hereby,
including the Merger, as the sole stockholder of Acquisition Sub, upon the terms
and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions set forth
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the satisfaction
or waiver (subject to Applicable Law) of the conditions set forth in this
Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), Acquisition Sub shall be merged with and into the Company at the
Effective Time and the separate corporate existence of Acquisition Sub shall
thereupon cease. Following the Effective Time, the Company, as the Surviving
Corporation, shall succeed to and assume all of the rights and obligations of
Acquisition Sub in accordance with the DGCL.
Section 1.2 Closing. The closing of the Merger (the "Closing") shall
take place at 10:00 a.m., local time, on the second Business Day after
satisfaction or waiver (subject to Applicable Law) of the conditions set forth
in Article VI (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the fulfillment
or waiver (subject to Applicable Law) of those conditions), at the headquarters
of the Company in Cleveland, Ohio, unless another time, date or place is agreed
to by the parties hereto (the "Closing Date").
Section 1.3 Effective Time. The Merger shall become effective at the
close of business on the date when a certificate of merger relating to the
Merger (the "Certificate of Merger"), in such form and as required by and
executed in accordance with the relevant provisions of the DGCL, is duly filed
with the Secretary of State of the State of Delaware, or at such other date and
time as the Constituent Corporations shall agree should be specified in the
Certificate of Merger. When used in this Agreement, the term "Effective Time"
means the later of the close of business on the date on which the Certificate of
Merger is duly filed with the Secretary of State of the State of Delaware or
such later date and time established by the Certificate of Merger. The filing of
the Certificate of Merger shall be made as soon as practicable after the
satisfaction or waiver (subject to Applicable Law) of the conditions to the
Merger set forth in Article VI.
ARTICLE II
EFFECTS OF THE MERGER
Section 2.1 Effects of the Merger. The Merger shall have the effects
set forth in Section 259 of the DGCL. Without limiting the generality of the
foregoing, at the Effective Time, all the property, rights, privileges, powers
and franchises of the Company and Acquisition Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and
Acquisition Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
Section 2.2 Certificate of Incorporation. The Certificate of
Incorporation of Acquisition Sub (the "Acquisition Sub Certificate of
Incorporation"), as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation of the Surviving Corporation, until thereafter
changed or amended as provided therein or by Applicable Law.
Section 2.3 Bylaws. The Bylaws of Acquisition Sub (the "Acquisition
Sub Bylaws"), as in effect immediately prior to the Effective Time, shall be the
Bylaws of the Surviving Corporation, until thereafter changed or amended as
provided therein, by Applicable Law or the Certificate of Incorporation.
Section 2.4 Officers. From and after the Effective Time, the officers
of the Company immediately prior to the Effective Time shall be the officers of
the Surviving Corporation, until the earlier of their resignation or removal or
until their respective successors are duly elected, as the case may be.
Section 2.5 Directors. From and after the Effective Time, the
directors of Acquisition Sub shall be the directors of the Surviving Corporation
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
Section 2.6 Cancellation of Treasury Stock and Parent Owned Stock. At
the Effective Time, by virtue of the Merger and without any action on the part
of the holder thereof, (i) each share of Company Common Stock that is held by
the Company or any of its Subsidiaries shall automatically be canceled and
retired and shall cease to exist, and no consideration shall be paid or
delivered in exchange therefor, and (ii) each issued and outstanding share of
Company
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Common Stock that is owned by Parent or Acquisition Sub shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and no consideration shall be paid or delivered in exchange therefor.
Section 2.7 Conversion of Company Common Stock. At the Effective Time,
by virtue of the Merger and without any action on the part of any holder
thereof, each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares to be canceled in accordance with
Section 2.6 and Dissenting Shares) shall be converted into the right to receive
$6.13 in cash (the "Merger Consideration"). As of the Effective Time, all such
shares of Company Common Stock shall no longer remain outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate that immediately prior to the Effective Time represented such
shares of Company Common Stock (a "Certificate") shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration to be
paid in consideration therefor upon surrender of such Certificate in accordance
with Section 2.10, without interest or dividends.
Section 2.8 Conversion of the Capital Stock of Acquisition Sub. At the
Effective Time, by virtue of the Merger and without any action on the part of
the holder thereof, each issued and outstanding share of capital stock of
Acquisition Sub shall be converted into and become one validly issued, fully
paid and nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
Section 2.9 Option and Warrant Consideration. Each Company Stock
Option which is outstanding under the plan and agreement listed in Section
2.9(a) of the Company Disclosure Schedule immediately prior to the Effective
Time and the warrant to purchase 25,000 shares of Company Common Stock (the
"Company Warrant"), whether or not exercisable, shall be canceled, effective as
of the Effective Time, in exchange for a single lump sum cash payment from the
Surviving Corporation (less any applicable income or employment Tax withholding)
equal to the product of (i) the number of shares of Company Common Stock subject
to such Company Stock Option or Company Warrant immediately prior to the
Effective Time and (ii) the excess, if any, of the Merger Consideration over the
exercise price per share of such Company Stock Option (the "Option
Consideration") or Company Warrant (the "Warrant Consideration"). The Company
shall offer the holders of Company Stock Options outstanding under the plans and
agreements listed in Section 2.9(b) of the Company Disclosure Schedule the
opportunity to receive a cash payment in lieu of exercise of such Company Stock
Options and the receipt of Merger Consideration.
Section 2.10 Exchange of Certificates. (a) Paying Agent. Prior to the
Effective Time, National City Bank, or such other bank or trust company
reasonably acceptable to the Company and Parent, shall be designated by Parent
to act as the Paying Agent (the "Paying Agent") for payment of the Merger
Consideration.
(b) Deposit with Paying Agent. At the Effective Time, Parent shall
cause the Surviving Corporation to, and the Surviving Corporation shall, deposit
or cause to be deposited with the Paying Agent, separate and apart from its
other funds, as a trust fund for the benefit of the holders of issued and
outstanding shares of Company Common Stock, other than such shares held by
Parent, Acquisition Sub, the Company or any Subsidiary of the Company (each, a
"Holder"), cash in the amount equal to the aggregate Merger Consideration which
Holders are entitled to receive pursuant to this Article II, with irrevocable
instructions and authority to such
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Paying Agent to pay to each respective Holder, as evidenced by a list of such
Holders certified by an officer of the Company or the Company's transfer agent,
for each share of Company Common Stock, the Merger Consideration upon surrender
of their respective Certificates as provided herein. Except as provided in
Sections 2.10(c), 2.10(d) and 2.10(e), any such deposit of funds shall be
irrevocable.
(c) Exchange Procedures. As soon as practicable after the Effective
Time, the Surviving Corporation shall cause the Paying Agent to mail (and, if
permitted by the Paying Agent, to make available for collection by hand) to each
holder of record of a Certificate or Certificates, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Paying Agent and which shall be in the form and have such other customary
provisions as Parent and the Surviving Corporation may specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the cash (pursuant to Section 2.7) to be received by the holder thereof
pursuant to this Agreement. Upon surrender of a Certificate for cancellation to
the Paying Agent, together with a letter of transmittal duly completed and
validly executed in accordance with the instructions thereto, and such other
documents as may be reasonably required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive promptly in exchange
therefor the Merger Consideration for each share of Company Common Stock
formerly represented by such Certificate, to be mailed (or made available for
collection by hand if so elected by the surrendering holder of a Certificate;
provided, that payment by hand is permitted by the Paying Agent) within three
(3) Business Days of receipt thereof, and the Certificate so surrendered shall
be forthwith cancelled. The Paying Agent shall accept such Certificates upon
compliance with such reasonable terms and conditions as the Paying Agent may
impose to effect an orderly exchange thereof in accordance with normal exchange
practices. No interest shall be paid or accrued for the benefit of the Holders
on the Merger Consideration payable upon the surrender of the Certificates. At
the Effective Time, the stock transfer books of the Company shall be closed, and
thereafter there shall be no further registration of transfers of shares of
Company Common Stock theretofore outstanding on the records of the Company. If
Certificates are presented to the Company for transfer following the Effective
Time, they shall be canceled against delivery of the Merger Consideration. All
cash paid upon conversion of shares of Company Common Stock in accordance with
the terms of this Article II shall be deemed to have been paid in full
satisfaction of all rights of the respective Holders pertaining to such shares
of Company Common Stock.
(d) Termination of Merger Fund. Any portion of the Merger
Consideration deposited with the Paying Agent pursuant to this Section 2.10 and
any interest received with respect thereto (the "Merger Fund") that remains
undistributed to the holders of the Certificates for nine (9) months after the
Effective Time shall be delivered to the Surviving Corporation, upon, and in
accordance with, any demand by the Surviving Corporation therefor, and any
holders of Certificates who have not theretofore complied with this Section 2.10
shall thereafter look, as general creditors thereof, only to the Surviving
Corporation for payment of their claim, if any, for the cash to which such
holders may be entitled at such time, subject to applicable escheat and
abandoned property and similar laws.
(e) No Liability. None of Parent, Acquisition Sub, the Surviving
Corporation, any of their respective Affiliates or the Paying Agent shall be
liable to any Person in respect of any cash held in the Merger Fund delivered to
a public official pursuant to any applicable escheat, abandoned property or
similar law. If any Certificate shall not have been surrendered
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prior to two years after the Effective Time (or immediately prior to such
earlier date on which any cash in respect of such Certificate would otherwise
escheat to or become the property of any Governmental Entity), any such cash in
respect of such Certificate shall, to the extent permitted by Applicable Law,
become the property of the Surviving Corporation, free and clear of all claims
or interest of any Person previously entitled thereto.
(f) Investment of Merger Fund. The Paying Agent shall invest the cash
included in the Merger Fund as directed by the Surviving Corporation; provided,
that such investments shall be in obligations of or guaranteed by the United
States of America, in commercial paper obligations rated A-1 or P-1 or better by
Xxxxx'x Investors Service, Inc. or Standard & Poor's Corporation, respectively,
or in certificates of deposit, bank repurchase agreements or banker's
acceptances of commercial banks with capital exceeding $1,000,000,000. Any
interest or other income resulting from such investments shall be paid to the
Surviving Corporation; provided, that any such investment or any such payment of
interest or other income may not delay the receipt by Holders of any Merger
Consideration.
(g) Transfer Taxes. If any cash is to be remitted to a Person (other
than the Person in whose name the Certificate surrendered in exchange therefor
is registered), it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed and otherwise 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 the Merger
Consideration to a Person other than the registered holder of the Certificate so
surrendered, or shall establish to the satisfaction of the Paying Agent that
such Tax either has been paid or is not applicable.
(h) Withholding Rights. The Surviving Corporation shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any Holder of a Certificate such amounts as are required to be
deducted and withheld with respect to the making of such payment under the Code
or any provisions of applicable state, local or foreign Tax law. To the extent
that amounts are so deducted and withheld and paid over to the appropriate
Taxing authority by the Surviving Corporation, such deducted and withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the Holder of the Certificate in respect of which such deduction and
withholding was made by the Surviving Corporation.
(i) Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as indemnity against
any claim that may be made against it with respect to such Certificate, the
Paying Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration to which the Holder thereof is entitled
pursuant to this Agreement.
(j) Dissenting Shares. Notwithstanding any provision of this Agreement
to the contrary and to the extent available under the DGCL, any shares of
Company Common Stock outstanding immediately prior to the Effective Time that
are held by a holder of Company Common Stock (a "Dissenting Stockholder") who
has neither voted in favor of the adoption of this Agreement nor consented
thereto in writing and who has demanded properly in writing appraisal for such
shares and otherwise properly perfected and not withdrawn or lost such
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holder's rights (the "Dissenting Shares") in accordance with Section 262 of the
DGCL shall not be converted into, or represent the right to receive, the Merger
Consideration. Such Dissenting Stockholders will be entitled to receive payment
of the appraised value of Dissenting Shares held by them in accordance with the
provisions of such Section 262, except that all Dissenting Shares held by
stockholders who have failed to perfect or who effectively have withdrawn or
lost their rights to appraisal of such Dissenting Shares under such Section 262
will thereupon be deemed to have been converted into, and represent the right to
receive, the Merger Consideration in the manner provided in this Article II.
Notwithstanding anything to the contrary contained in this Section 2.10, if the
Merger is rescinded or abandoned, then the right of any stockholder to be paid
the fair value of such stockholder's Dissenting Shares pursuant to Section 262
of the DGCL will cease. The Company will give Parent prompt notice of any
written demands for appraisal, attempted withdrawals of such demands, and any
other instruments served pursuant to applicable Law received by the Company
relating to stockholders' rights of appraisal. The Company will not, except with
the prior written consent of Parent, make any payment with respect to any
demands for appraisal of Dissenting Shares, offer to settle or settle any such
demands or approve any withdrawal or other treatment of any such demands.
(k) Adjustments to Prevent Dilution or Unjust Enrichment. If prior to
the Effective Time, solely as a result of a reclassification, stock split
(including a reverse stock split), stock dividend or stock distribution which in
any such event is made on a pro rata basis to all holders of Company Common
Stock, there is a change in the number of shares of Company Common Stock
outstanding or issuable upon the conversion, exchange or exercise of securities
or rights convertible or exchangeable or exercisable for shares of Company
Common Stock, then the Merger Consideration shall be equitably adjusted to
eliminate the effects of such event.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except (i) as set forth in the corresponding section of the Company
Disclosure Schedule, it being understood that matters disclosed pursuant to one
section of the Company Disclosure Schedule shall be deemed disclosed with
respect to any other section of the Company Disclosure Schedule where it is
readily apparent that the matters so disclosed are applicable to such other
sections, (ii) as disclosed in reasonable detail in the Company SEC Documents
filed prior to the date of this Agreement or (iii) as expressly contemplated or
permitted under this Agreement or any agreement contemplated hereby or thereby,
the Company hereby represents and warrants to Parent and to Acquisition Sub as
follows:
Section 3.1 Organization. The Company and each of its Subsidiaries are
duly organized, validly existing and in good standing under the laws of the
jurisdiction of their respective organization and have the requisite power and
authority to carry on their respective businesses as now being conducted, except
where the failure to be so organized, existing and in good standing or to have
such power and authority could not reasonably be expected to have a Company
Material Adverse Effect. The Company and each of its Subsidiaries are duly
qualified or licensed to do business and are in good standing in each
jurisdiction in which the nature of their respective businesses or the ownership
or leasing of their respective properties makes such qualification or licensing
necessary, other than where the failure to be so duly qualified, licensed and in
good standing could not reasonably be expected to have a Company Material
Adverse Effect. The Company has heretofore made available to Parent and
Acquisition Sub true and complete copies of the Company's Certificate of
Incorporation, as amended, in effect as of the
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date of this Agreement (the "Company Certificate of Incorporation") and the
Company's Amended and Restated Bylaws in effect as of the date of this Agreement
(the "Company Bylaws") and the charter and bylaws (or similar organizational
documents) of each of its Subsidiaries.
Section 3.2 Authorization. (a) The Company has the requisite corporate
power and authority to execute and deliver this Agreement and (subject to
receipt of the Company Stockholder Approval) to perform its obligations
hereunder. The execution and delivery of this Agreement and the performance of
its obligations hereunder have been duly and validly authorized, and this
Agreement has been approved by the Special Committee and the Company Board, and
no other corporate proceedings on the part of the Company are necessary to
authorize the execution, delivery and performance of this Agreement (subject to
receipt of the Company Stockholder Approval). This Agreement has been duly
executed and delivered by the Company, and constitutes, assuming due
authorization, execution and delivery of this Agreement by Parent and
Acquisition Sub, a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting the rights and remedies of creditors generally and to general
principles of equity (regardless of whether considered in a proceeding in equity
or at law).
(b) The Special Committee, at a meeting duly called and held, has by
vote of all its members approved and declared this Agreement and the Merger
advisable and has determined that the Merger is fair to the Company's
stockholders. The Company Board, at a meeting duly called and held, based upon
the recommendation of the Special Committee and subject to the terms and
conditions set forth herein, (i) has approved and declared this Agreement and
the Merger advisable and has determined that the Merger is fair to the Company's
stockholders and (ii) has recommended approval by the stockholders of the
Company of this Agreement and the Merger, subject to the right of the Company
Board to withdraw or modify its recommendation of this Agreement and the Merger.
(c) Under Applicable Law and the Company Certificate of Incorporation,
the affirmative vote of a majority of the votes represented by the shares of
Company Common Stock outstanding on the record date, established by the Company
Board in accordance with the Company Bylaws, Applicable Law and this Agreement,
at the Special Meeting (the "Company Stockholder Approval") is the only vote of
the Company's stockholders required to approve this Agreement and the
transactions contemplated hereby, including the Merger.
Section 3.3 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the Securities Act, the HSR
Act, the DGCL, state insurance laws, state blue sky, securities or takeover laws
and Nasdaq National Market requirements, neither the execution, delivery or
performance of this Agreement by the Company nor the consummation by the Company
of the transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the Company Certificate of Incorporation or the
Company Bylaws or of the similar organizational documents of any Subsidiary
thereof, (ii) result in a violation or breach of, constitute (with or without
due notice or lapse of time or both) a default under, require the consent from
or the giving of notice to a Third Party pursuant to, or give rise to any right
of termination, cancellation or acceleration or obligation to repurchase, repay,
redeem or acquire or any similar right or obligation under, any of the terms,
conditions or
7
provisions of any Contract to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their assets is bound, (iii) require any
filing or registration with, or permit, authorization, consent or approval of,
any Governmental Entity on the part of the Company or any of its Subsidiaries or
(iv) violate any order, injunction, decree, statute, rule or regulation of any
Governmental Entity to which the Company or any of its Subsidiaries is subject,
excluding from the foregoing clauses (ii), (iii) and (iv) such conflicts,
requirements, obligations, defaults, failures, breaches, rights or violations
that could not reasonably be expected to have a Company Material Adverse Effect.
Section 3.4 Capitalization. (a) As of the date hereof, the authorized
capital stock of the Company consists of (i) 50,000,000 shares of Company Common
Stock, (ii) 1,900,000 shares of non-voting preferred stock, par value $0.001 per
share (the "Company Non-Voting Preferred Stock") and (iii) 100,000 shares of
convertible voting preferred stock, par value $0.001 per share (the "Company
Voting Preferred Stock").
(b) (i) At the close of business on April 26, 2006, 33,295,044 shares
of Company Common Stock were issued and outstanding, all of which were validly
issued, fully paid and nonassessable and free of preemptive rights;
(ii) At the close of business on April 26, 2006, no shares of
Company Non-Voting Preferred Stock were issued and outstanding;
(iii) At the close of business on April 26, 2006, no shares of
Company Voting Preferred Stock were issued and outstanding;
(iv) At the close of business on April 26, 2006, 1,703,703 shares
of Company Common Stock were held in the treasury of the Company or by
its Subsidiaries;
(v) At the close of business on April 26, 2006, 3,000,000 shares
of Company Common Stock were reserved for issuance upon the exercise
of outstanding stock options issued under the Company's 1998 Key
Employee Share Incentive Plan (the "Company 1998 Share Incentive
Plan") of which 1,170,103 shares were subject to outstanding stock
options;
(vi) At the close of business on April 26, 2006, no shares of
Company Common Stock were reserved for issuance upon the exercise of
outstanding stock options issued under the Company's 1998 Employee
Stock Option Plan (the "Company 1998 Employee Stock Option Plan") and
285,000 shares were subject to outstanding stock options;
(vii) At the close of business on April 26, 2006, no shares of
Company Common Stock were reserved for issuance upon the exercise of
outstanding stock options issued under the Company's 1999 Special
Agents' Stock Option Plan (the "Company 1999 Special Agents' Stock
Option Plan") and 78,706 shares were subject to outstanding stock
options;
(viii) At the close of business on April 26, 2006, 426,535 shares
of Company Common Stock were reserved for future issuance under the
Employee Stock Purchase Plan and the Agent Stock Purchase Plan;
8
(ix) At the close of business on April 26, 2006, 321,214 shares
of Company Common Stock were reserved for future issuance under the
Company's 401(k) Savings Plan;
(x) At the close of business on April 26, 2006, 315,000 shares of
Company Common Stock were subject to outstanding stock options under
the agreements with individuals described in Section 3.4(c) below;
(xi) At the close of business on April 26, 2006, restricted stock
awards relating to 55,000 shares of Company Common Stock (the "Company
Restricted Stock Awards") had been issued under the 1998 Key Employee
Share Incentive Plan; and
(xii) At the close of business on April 26, 2006, a Company
Warrant relating to 25,000 shares of Company Common Stock was issued
and outstanding.
(c) The Company has delivered to Parent a correct and complete list as
of the date set forth in Section 3.4(c) of the Company Disclosure Schedule of
each outstanding option (collectively, the "Company Stock Options") to purchase
shares of Company Common Stock issued under the Company 1998 Share Incentive
Plan, the Company 1998 Employee Stock Option Plan and the Company 1999 Special
Agents' Stock Option Plan (collectively, the "Company Stock Option Plans") and
to purchase shares of Company Common Stock issued under the Stock Option
Agreement for Xxxxxx X. Xxxxx dated October 11, 2000, the Retainer Agreement for
Xxxxx Xxxx dated June 30, 1998 (as amended September 21, 1999 and April 10,
2001), the Employment Agreement for Xxx Xxxxx dated June 30, 1998 (as amended by
the Settlement and Consulting Agreement dated August 10, 1999, as amended
December 31, 2000) and the Employment Agreement for Xxxxxxx Xxxxxx dated October
1, 1998 (as amended April 10, 2001 and as amended by the Separation Agreement
and Release dated February 4, 2003), and each outstanding share of Company
Common Stock subject to the Company Restricted Stock Awards that is still
subject to forfeiture conditions granted under the Company 1998 Share Incentive
Plan, including the holder, date of grant, exercise price (if applicable),
number of shares of Company Common Stock subject thereto, the Company Stock Plan
under which such Company Stock Option or Company Restricted Stock Award, as the
case may be, was granted and, with respect to any Company Stock Option, whether
the option is vested and exercisable.
(d) Except for Company Stock Options, Company Restricted Stock Awards
and the Company Warrant, and except as may be permitted to be issued, delivered
or sold after the date hereof in accordance with Section 5.1, there are no
options, warrants, calls, rights or agreements to which the Company or any of
its Subsidiaries is a party or by which any of them is bound obligating the
Company or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock of the Company or
any of its Subsidiaries or obligating the Company or any of its Subsidiaries to
grant, extend or enter into any such option, warrant, call, right or agreement,
and there are no outstanding contractual rights, including (without limitation)
"phantom" equity contract or plan rights, to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound the value of which is or are based on the value of the capital stock or
other equity securities of the Company or of any Subsidiary. There are no
outstanding contractual obligations of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
any capital stock of or any equity interests in any Subsidiary.
9
(e) The Company does not have any outstanding bonds, debentures, notes
or other obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the stockholders of the Company on any matter.
Section 3.5 Subsidiaries. Section 3.5 of the Company Disclosure
Schedule sets forth a list of all of the Subsidiaries of the Company and their
respective jurisdictions of incorporation. Except for an interest in XXXxxx.xxx,
Inc. of not more than 1% percent which is owned by certain Company agents, all
of the issued and outstanding shares of capital stock or other equity interests
of each Subsidiary of the Company are owned by the Company, by one or more
Subsidiaries of the Company or by the Company and one or more Subsidiaries of
the Company, free and clear of all Liens, and are validly issued, fully paid and
nonassessable and there are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants with respect to any such
Subsidiary's capital stock or equity interests, including any right obligating
any such Subsidiary to issue, deliver or sell additional shares of its capital
stock or other equity interests. Except for the capital stock and equity
interests of its Subsidiaries, the Company does not own, directly or indirectly:
(i) any capital stock or other ownership interest in any corporation, limited
liability company or other limited liability entity which is material to the
business of the Company and its Subsidiaries, taken as a whole; or (ii) any
ownership interest in any partnership, joint venture or other entity for or with
respect to which the Company or any of its Subsidiaries has or would have
unlimited liability.
Section 3.6 SEC Documents. The Company has filed all reports, proxy
statements, registration statements, forms and other documents required to be
filed by it with the SEC since December 31, 2003 (collectively, including any
exhibits and schedules thereto and all documents incorporated by reference
therein, the "Company SEC Documents"). No Subsidiary of the Company is required
to file any report, proxy statement, registration statement, form or other
document with the SEC. None of the Company SEC Documents (other than the
financial statements and notes and schedules thereto contained therein, as to
which representations and warranties are made in Section 3.7), as of their
respective filing and effective dates (or, if amended prior to the date of this
Agreement, as of the respective filing and effective dates of such amendment),
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. All of
such Company SEC Documents (as amended prior to the date of this Agreement, if
amended prior to the date of this Agreement) complied in form and substance, in
all material respects, with the applicable requirements of the Securities Act
and the Exchange Act, each as in effect on the date so filed.
Section 3.7 Financial Statements; No Undisclosed Liabilities. (a) The
consolidated financial statements of the Company (including any notes and
schedules thereto) included in the Company SEC Documents (i) complied as of
their respective dates as to form in all material respects with all applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto as in effect on the date of filing and effectiveness
thereof, (ii) were prepared in accordance with GAAP as in effect on the dates of
such financial statements, applied on a consistent basis (except as may be
indicated therein or in the notes thereto and, in the case of unaudited
statements, as permitted by the rules and regulations of the SEC) during the
periods involved, (iii) are consistent, in all material respects, with the books
and records of the Company and its Subsidiaries, and (iv) fairly present, in all
material respects, the
10
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods therein indicated (subject, in the case of unaudited
statements, to normal year-end and audit adjustments which were not expected to
be material in amount).
(b) Except (i) as set forth, reflected or reserved against in the
consolidated balance sheet (including the notes thereto) of the Company included
in its annual report on Form 10-K for the fiscal year ended December 31, 2005,
(ii) as set forth, reflected or reserved against in any consolidated balance
sheet (including the notes thereto) of the Company included in any other Company
SEC Documents filed with the SEC after the filing date of such annual report,
(iii) for liabilities and obligations incurred since December 31, 2005 in the
usual, regular and ordinary course of business consistent with past practice and
not otherwise prohibited pursuant to this Agreement or (iv) for liabilities and
obligations incurred in connection with the Merger or any other transaction or
agreement contemplated by this Agreement, neither the Company nor any of its
Subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise), except in each case for such liabilities and
obligations which could not reasonably be expected to have a Company Material
Adverse Effect.
(c) The annual statement for the fiscal year ended December 31, 2005
of each of Provident American Life & Health Insurance Company, United Benefit
Life Insurance Company and Central Reserve Life Insurance Company filed with the
Ohio Department of Insurance and of Continental General Insurance Company filed
with the Nebraska Department of Insurance (collectively, the "Company State
Regulatory Filings"), copies of which have been made available to Parent prior
to the date hereof, fairly present in all material respects each such
Subsidiary's respective financial condition as of the dates thereof and their
respective results of operations and cash flows for the periods then ended in
conformity with SAP, except as may be reflected in the notes thereto and subject
to normal year-end adjustments. The other information contained in such annual
statements presents in all material respects the information required to be
contained therein in conformity with SAP consistently applied.
Section 3.8 Proxy Statement. None of the information contained in the
Proxy Statement (and any amendments thereof or supplements thereto) will at the
time of the mailing of the Proxy Statement to the Company's stockholders, at the
time of the Special Meeting, and at the time of any amendments thereof or
supplements thereto, contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation is made by the Company with respect to statements made or
omitted in the Proxy Statement relating to Parent, Acquisition Sub or their
respective Affiliates based on information supplied by Parent, Acquisition Sub
or their respective Affiliates for inclusion in the Proxy Statement. The Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act, except that no representation is made by the Company with
respect to the statements made or omitted in the Proxy Statement relating to
Parent, Acquisition Sub or their respective Affiliates based on information
supplied by Parent, Acquisition Sub or their respective Affiliates for inclusion
in the Proxy Statement.
Section 3.9 Absence of Material Adverse Changes, etc. Other than in
connection with or arising out of this Agreement, and the transactions and other
agreements contemplated hereby, since December 31, 2005, the Company and its
Subsidiaries have conducted their respective businesses in all material respects
only in the usual, regular and ordinary course
11
consistent with past practice, and there has not been (i) a Company Material
Adverse Effect, (ii) any declaration, setting aside or payment of any dividend
or other distribution with respect to its capital stock, (iii) any split,
combination or reclassification of any of its 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 capital stock, (iv) any material change
in accounting methods, principles or practices by the Company, except for such
changes required by changes in SEC guidelines, GAAP or SAP, (v) any material
damage, destruction or other casualty loss with respect to any material asset or
property owned, leased or otherwise used by the Company or any of its
Subsidiaries which is not covered by insurance or (vi) any material amendment of
any of the Plans of the Company or any of its Subsidiaries.
Section 3.10 Taxes. Except for such matters as could not reasonably be
expected to have a Company Material Adverse Effect, (i) the Company and each of
its Subsidiaries have filed all Tax Returns required to be filed and have paid
all Taxes shown to be due on such Tax Returns, (ii) all Tax Returns filed by the
Company and each of its Subsidiaries are complete and accurate and disclose all
Taxes required to be paid by the Company and each of its Subsidiaries for the
periods covered thereby, (iii) none of the Company or any of its Subsidiaries
has waived in writing any statute of limitations in respect of Federal income
Taxes which waiver is currently in effect, (iv) the Tax Returns referred to in
clause (i) relating to Federal income Taxes, in the case of the Company and each
of its Subsidiaries (excluding Continental General Insurance Company) through
December 31, 2003 and, in the case of Continental General Insurance Company
through December 31, 2002, have been examined by the IRS or the period for
assessment of the Taxes in respect of which such Tax Returns were required to be
filed has expired, (v) there is no material action, suit, investigation, audit,
claim or assessment pending or proposed or, to the Knowledge of the Company,
threatened in writing with respect to Taxes of the Company or any of its
Subsidiaries, (vi) all deficiencies asserted or assessments made in writing as a
result of any examination of the Tax Returns referred to in clause (i) have been
paid in full, (vii) there are no Liens for Taxes upon the assets of the Company
or any of its Subsidiaries except Liens relating to current Taxes not yet due,
(viii) all Taxes which the Company or any of its Subsidiaries are required by
Applicable Law to withhold or to collect for payment have been duly withheld and
collected, and have been paid or accrued, reserved against and entered on the
books of the Company, (ix) no power of attorney has been granted by or with
respect to the Company or any of the Subsidiaries with respect to any matter
relating to Taxes other than for tax years which have been closed, (x) neither
the Company nor any of its Subsidiaries is a party to, is bound by, or has any
obligation under, any Tax sharing agreement other than as disclosed in Section
3.10 of the Company Disclosure Schedule and (xi) neither the Company nor any of
its Subsidiaries is treated as a partner in a partnership, joint venture or any
other entity treated as a partnership other than interests in the Subsidiaries
or interests in entities arising in the ordinary course of investing activities
of the Company or the Subsidiaries.
Section 3.11 Employee Benefit Plans. (a) The Company has heretofore
delivered or made available to Parent true and complete copies of (i) each
"employee benefit plan" as such term is defined in section 3(3) of ERISA, (ii)
each material employment, consulting, bonus, deferred compensation, incentive
compensation, stock purchase, stock option, stock appreciation or other
equity-based, severance or termination pay, retention, change of control,
collective bargaining, hospitalization or other medical, life or other employee
benefit-related insurance, supplemental unemployment benefits, profit-sharing,
pension, or retirement plan, program, agreement or arrangement sponsored,
maintained or contributed to or required to be contributed to by the Company for
the benefit of any employee or former employee of the
12
Company or any Subsidiary of the Company (collectively, the "Plans"), (iii) if
any Plan is funded through a trust or any third party funding vehicle (including
insurance), copies of such trust or other vehicle and (iv) with respect to each
Plan (as applicable), the most recent actuarial and trust reports, the most
recent Form 5500 and all schedules thereto, the most recent IRS determination
letter and the current summary plan descriptions.
(b) Section 3.11 of the Company Disclosure Schedule contains a true
and complete list of all Plans, including all Plans pursuant to which any
amounts may become vested or payable as a result of the consummation of the
transactions contemplated hereby (either alone or in combination with other
events). The consummation of the transactions contemplated hereby will not give
rise to any payment or benefit (or acceleration of vesting of any amounts or
benefits) that will be an "excess parachute payment" as defined in Section 280G
of the Code.
(c) The Company has no legally binding plan or commitment to create
any additional Plan or modify or change any existing Plan that would be
reasonably expected to result in material liabilities to the Company, except as
may be required by Applicable Law or to avoid adverse tax consequences under
Section 409A of the Code.
(d) The Company has not incurred and does not reasonably expect to
incur (i) any material liability under Title IV of ERISA, including any such
liability arising out of proceedings instituted by the PBGC, or (ii) any
material liability under Title I of ERISA. No Plan is a "multiemployer plan" (as
such term is defined in section 3(37) of ERISA).
(e) Each of the Plans has been operated and administered in accordance
with the terms of such Plan and all Applicable Laws, including ERISA and the
Code, except where such noncompliance could not reasonably be expected to have a
Company Material Adverse Effect, and no governmental audits, actions, suits or
claims are pending (other than routine claims for benefits) or, to the Knowledge
of the Company, threatened which, if adversely resolved, would reasonably be
expected to have a Company Material Adverse Effect.
(f) Each of the Plans which is intended to be "qualified" within the
meaning of section 401(a) of the Code is so qualified, and the trust (if any)
forming a part thereof, has received a favorable determination letter from the
IRS as to its qualification under the Code and to the effect that each such
trust is exempt from taxation under section 501(a) of the Code, and the Company
has no Knowledge of an occurrence of an event since the date of such
determination letter that would reasonably be expected to adversely affect such
qualification or tax-exempt status, except in each case for any such failure to
be qualified, failure to receive a favorable determination letter or occurrence
which could not reasonably be expected to have a Company Material Adverse
Effect. No Plan is a "multiple employer plan" for purposes of sections 4063 or
4064 of ERISA.
(g) None of the Plans or any trust established thereunder has incurred
any "accumulated funding deficiency" (as defined in section 302 of ERISA and
section 412 of the Code), whether or not waived, as of the last day of the most
recent fiscal year of each of the Plans ended prior to the date of this
Agreement.
(h) No employee, director or consultant of the Company or any
Subsidiary of the Company is or will become entitled to death or medical
post-employment benefits by reason of service to the Company or its
Subsidiaries, other than coverage mandated by section 4980B of
13
the Code or similar state law, where the payment of any such benefits would
reasonably be expected to have a Company Material Adverse Effect.
Section 3.12 Environmental Matters. Except for matters that could not
reasonably be expected to have a Company Material Adverse Effect: (i) the
Company and its Subsidiaries are in compliance with all applicable Environmental
Laws, (ii) the operations of the Company and its Subsidiaries have not resulted
in any contamination of any property currently owned or operated by the Company
or any of its Subsidiaries (including soils, groundwater or surface water) with
any Hazardous Substance which contamination would require remediation pursuant
to any Environmental Law, (iii) to the Knowledge of the Company, no property
currently or formerly owned or operated by the Company or any of its
Subsidiaries was contaminated with any Hazardous Substance during or prior to
such period of ownership or operation which contamination would require
remediation pursuant to any Environmental Law, (iv) to the Knowledge of the
Company, neither the Company nor any of its Subsidiaries has arranged for the
treatment or disposal of any Hazardous Substance on any Third Party property
undergoing cleanup pursuant to Environmental Laws, (v) neither the Company nor
any of its Subsidiaries has received any written notice, demand, letter, claim
or request for information alleging that the Company or any of its Subsidiaries
may be in violation of or subject to liability under any Environmental Law and
(vi) neither the Company nor any of its Subsidiaries is subject to any written
order, decree, injunction or indemnity with any Governmental Entity or any Third
Party relating to liability under any Environmental Law or relating to Hazardous
Substances. This Section 3.12 sets forth the sole representations and warranties
of the Company with respect to environmental or workplace health or safety
matters, including all matters arising under Environmental Laws.
Section 3.13 Litigation; Compliance with Laws. (a) As of the date of
this Agreement, there is no action, suit, proceeding or investigation pending
or, to the Knowledge of the Company, threatened against the Company or any
Subsidiary of the Company that could reasonably be expected to have a Company
Material Adverse Effect.
(b) The businesses of the Company and its Subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, except for possible violations that could not reasonably be expected to
have a Company Material Adverse Effect. Each of the Company and its Subsidiaries
is in possession of all certificates of authority, franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions, consents,
approvals and orders of any Governmental Entity necessary for the Company or any
of its Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Company Permits"), except where the
failure to have any of the Company Permits could not reasonably be expected to
have a Company Material Adverse Effect. As of the date of this Agreement, no
suspension or cancellation of any of the Company Permits is pending or
threatened, except where the suspension or cancellation of any of the Company
Permits could not reasonably be expected to have a Company Material Adverse
Effect.
Section 3.14 Intellectual Property. The Company and its Subsidiaries
own or have a valid right to use all patents, trademarks, trade names, service
marks, domain names, copyrights, and any applications and registrations
therefor, technology, trade secrets, know-how, computer software and tangible
and intangible proprietary information and materials (collectively,
"Intellectual Property Rights") as are necessary in connection with the business
of the Company and its Subsidiaries, taken as a whole, except where the failure
to so own or have a
14
valid right to use such Intellectual Property Rights could not reasonably be
expected to have a Company Material Adverse Effect. Neither the Company nor any
of its Subsidiaries has infringed, misappropriated or violated in any material
respect any Intellectual Property Rights of any Third Party, except where such
infringement, misappropriation or violation could not reasonably be expected to
have a Company Material Adverse Effect. No Third Party infringes,
misappropriates or violates any Intellectual Property Rights owned or
exclusively licensed by or to the Company or any of its Subsidiaries, except
where such infringement, misappropriation or violation could not reasonably be
expected to have a Company Material Adverse Effect.
Section 3.15 Material Contracts. Neither the Company nor any of its
Subsidiaries is a party to or bound by any Contract that (i) is a "material
contract" (as such term is defined in Item 601(b)(10) of Regulation S-K
promulgated by the SEC) except for Contracts that are filed as exhibits to
Company SEC Documents, (ii) materially limits or otherwise materially restricts
the Company or any of its Subsidiaries from engaging or competing in any
material line of business in any geographic area, except for such limitations or
restrictions that are customary for such Contracts, (iii) would be required to
be disclosed under Item 404 of Regulation S-K promulgated by the SEC or (iv) may
provide any person with a claim to indemnification under Section 5.6 of this
Agreement (except as set forth in Section 5.6 of the Company Disclosure Schedule
and in the Company Certificate of Incorporation and Company Bylaws). Each
Contract of the type described in the first sentence of this Section 3.15 is
referred to herein as a "Company Material Contract." Each Company Material
Contract is a valid and binding obligation of the Company (or, if a Subsidiary
of the Company is a party, such Subsidiary) and is in full force and effect, and
the Company and each Subsidiary have performed all obligations required to be
performed by them to date under each Company Material Contract, except where
such noncompliance or nonperformance could not reasonably be expected to have a
Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries
has received notice of, any violation of or default under (or any condition
which with the passage of time or the giving of notice would cause such a
violation of or default under) any Company Material Contract or any other
Contract to which it is a party or by which it or any of its properties or
assets is bound, except in each case for violations or defaults that could not
reasonably be expected to have a Company Material Adverse Effect.
Section 3.16 Insurance. All material insurance policies carried by or
covering the Company and the Subsidiaries with respect to their business, assets
and properties are in full force and effect, and no written notice of
cancellation has been received by the Company or any of its Subsidiaries with
respect to any such insurance policy which has not been cured by the payment of
premiums that are due, other than as could not reasonably be expected to have a
Company Material Adverse Effect. The insurance coverage provided by such
insurance policies (including as to deductibles and self-insured retentions) is
reasonable and customary as compared to similarly situated companies engaged in
a similar business.
Section 3.17 Real Estate; Assets. (a) The Company or one of its
Subsidiaries has good, valid and marketable title to each material parcel of
real property owned in fee by the Company or any of its Subsidiaries (the
"Company Fee Property") and a good and valid leasehold interest in each material
parcel of real property leased by the Company or any of its Subsidiaries (the
"Company Leased Property" and together with the Company Fee Property, the
"Company Real Property") pursuant to a lease set forth in Section 3.17 of the
Company Disclosure Schedule (the "Company Leases"), in each case where any such
real property is necessary to the conduct of the business of the Company and its
Subsidiaries as it is presently
15
conducted. Section 3.17 of the Company Disclosure Schedule sets forth a true and
complete list of all Company Real Property which is necessary to the conduct of
the business of the Company and its Subsidiaries as it is presently conducted.
(i) The Company or one of its Subsidiaries has the right to use and occupancy of
the Company Leased Property for the full term of the Company Lease relating
thereto, except for any failure which could not reasonably be expected to have a
Company Material Adverse Effect, (ii) each Company Lease is a legal, valid and
binding agreement, enforceable in accordance with its terms, of the parties
thereto and there is no, nor has the Company or any of its Subsidiaries received
notice of any, default (or any condition or event, which, after notice or a
lapse of time or both would constitute a default thereunder) which would
reasonably be expected to have a Company Material Adverse Effect and (iii)
neither the Company nor any of its Subsidiaries has assigned its interest under
any Company Lease or sublet any part of the premises covered thereby or
exercised any option or right thereunder except as could not reasonably be
expected to have a Company Material Adverse Effect.
(b) The Company Fee Property is not subject to any Liens, except for:
(i) any such Liens for Taxes, assessments and other governmental charges not yet
due and payable, or, if due, not delinquent or being contested in good faith by
appropriate proceedings during which collection or enforcement against the
Company Real Property is stayed, (ii) Liens imposed or promulgated by Applicable
Law or any Governmental Entity with respect to real property, including zoning,
building, environmental or similar restrictions, (iii) easements, licenses,
covenants, conditions, minor title defects, mechanic's liens, rights-of-way and
other similar restrictions and encumbrances, including any other agreements,
restrictions or encumbrances which would be shown on a current title report or
survey or similar report or listing and any other matters of record or (iv)
where the existence of any such Liens could not reasonably be expected to have a
Company Material Adverse Effect.
Section 3.18 Labor and Employment. The Company and its Subsidiaries
are in compliance with all Applicable Laws respecting employment and employment
practices, terms and conditions of employment (including termination of
employment), wages, hours of work, occupational safety and health, and worker
classification, and are not engaged in any unfair labor practices, except for
such violations which could not reasonably be expected to have a Company
Material Adverse Effect. Neither the Company nor any of its Subsidiaries has
received written notice of the intent of any Governmental Entity responsible for
the enforcement of labor or employment laws to conduct an investigation with
respect to or relating to employees and no such investigation is in progress
which could reasonably be expected to have a Company Material Adverse Effect.
Section 3.19 Opinion of Financial Advisors. The Special Committee and
the Company Board have received the opinion of at least one of its financial
advisors to the effect that, as of the date of such opinion, the Merger
Consideration is fair, from a financial point of view, to the holders of the
Company Common Stock.
Section 3.20 Finders' and Other Fees. Except for UBS Securities LLC
and Xxxxxxx Xxxxxxx Xxxxxx LLC, whose fees are disclosed in Section 3.20 of the
Company Disclosure Schedule and will be paid by the Company, there is no
investment banker, broker, finder or other similar intermediary which has been
retained by, or is authorized to act on behalf of, the Special Committee, the
Company or any Subsidiary of the Company, or any employee or consultant of the
Company or any Subsidiary of the Company, that would be entitled to any fee,
commission, sale bonus or similar payment from the Special Committee, the
Company, any
16
Subsidiary of the Company, Parent, Acquisition Sub or any of Parent's or
Acquisition Sub's Affiliates upon consummation of the transactions contemplated
hereby.
Section 3.21 State Takeover Statutes. The Company Board has, to the
extent such statutes are applicable, taken all action (including appropriate
approvals of the Company Board) necessary to render the business combination
provisions of Section 203 of the DGCL inapplicable to the Merger, this Agreement
and the transactions contemplated hereby. To the Knowledge of the Company, no
other state takeover statute or similar charter or bylaw provisions are
applicable to the Merger, this Agreement or the transactions contemplated
hereby.
Section 3.22 Reserves. The loss and loss adjustment expense reserves
of the Company and the Subsidiaries reflected on the Company's December 31, 2005
balance sheet included in the financial statements that are in the Company SEC
Documents have been prepared in accordance with loss reserving standards and
principles accepted for use in the preparation of GAAP financial statements and
the loss and loss adjustment expense reserves of the Subsidiaries of the Company
that are insurance companies reflected on their respective December 31, 2005
balance sheets included in their annual statements filed with the respective
insurance departments of their domiciliary states have been prepared in
accordance with SAP, applied on a consistent basis, except where such accounting
practices have been amended, supplemented or otherwise prescribed by the
appropriate Governmental Authority.
Section 3.23 Reinsurance and Retrocessions. Section 3.23 of the
Company Disclosure Schedule sets forth a true and complete list of each
reinsurance and retrocession treaty or agreement in force as of the date of this
Agreement to which the Company or any of its Subsidiaries is a ceding party, any
terminated or expired treaty or agreement under which there remains any
outstanding liability from one reinsurer, in each case with respect to reserves
ceded to such reinsurer in excess of $1,000,000 and any treaty or agreement with
any Affiliate of the Company or any of its Subsidiaries, the effective date of
each such treaty or agreement, and the termination date of any treaty or
agreement which has a definite termination date. To the Knowledge of the
Company, neither the Company nor any of its Subsidiaries is in default in any
respect as to any provision of any reinsurance or retrocession treaty or
agreement or has failed to meet the underwriting standards required for any
business reinsurance thereunder except for defaults which would not,
individually or in the aggregate, have a Company Material Adverse Effect.
Section 3.24 Investment Company. None of the Company or any of its
Subsidiaries is an investment company required to be registered under the
Investment Company Act of 1940, as amended.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION SUB
Each of Parent and Acquisition Sub (each, an "Acquiror Entity") hereby
jointly and severally represents and warrants to the Company as follows:
Section 4.1 Organization. Each Acquiror Entity is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the requisite power and authority to carry
on its business as now being conducted, except where
17
the failure to be so organized, existing and in good standing or to have such
power and authority could not reasonably be expected to have an Acquiror Entity
Material Adverse Effect. Each Acquiror Entity is duly qualified or licensed to
do business and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than where the failure to be so duly
qualified, licensed and in good standing could not reasonably be expected to
have an Acquiror Entity Material Adverse Effect.
Section 4.2 Authorization. Each Acquiror Entity has the requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
and the performance of its obligations hereunder have been duly and validly
authorized, and this Agreement has been approved and adopted by the Board of
Directors of each Acquiror Entity, and no other corporate proceedings (such as
approval by the stockholders of Parent) on the part of either Acquiror Entity
are necessary to authorize the execution, delivery and performance of this
Agreement. Concurrently with the execution of this Agreement, Parent, as the
sole stockholder of Acquisition Sub, is approving this Agreement and the
transactions contemplated hereby, including the Merger. This Agreement has been
duly executed and delivered by each Acquiror Entity and constitutes, assuming
due authorization, execution and delivery of this Agreement by the Company, a
valid and binding obligation of each Acquiror Entity, enforceable against each
Acquiror Entity in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
the rights and remedies of creditors generally and to general principles of
equity (regardless of whether considered in a proceeding in equity or at law).
Section 4.3 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the Securities Act, the HSR
Act, the DGCL, state blue sky, securities or takeover laws and stock exchange
requirements, neither the execution, delivery or performance of this Agreement
by each Acquiror Entity nor the consummation by each Acquiror Entity of the
transactions contemplated hereby will (i) conflict with or result in a breach of
any provision of the charter or bylaws of such Acquiror Entity, (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, vesting,
amendment, cancellation or acceleration or impose on either of the Acquiror
Entities any obligation to repurchase, repay, redeem or acquire or any similar
right or obligation) under any of the terms, conditions or provisions of any
Contract to which any Acquiror Entity is a party or by which it or its assets is
bound, (iii) require any filing or registration with, or permit, authorization,
consent or approval of, any Governmental Entity on the part of either Acquiror
Entity or (iv) violate any order, injunction, decree, statute, rule or
regulation of any Governmental Entity to which such Acquiror Entity is subject,
excluding from the foregoing clauses (ii), (iii) and (iv) such conflicts,
requirements, defaults, failures, breaches, rights or violations that could not
reasonably be expected to have an Acquiror Entity Material Adverse Effect.
Section 4.4 Proxy Statement. None of the information relating to the
Acquiror Entities and supplied or to be supplied by either Acquiror Entity or
its respective Affiliates specifically for inclusion in the Proxy Statement (and
any amendments thereof or supplements thereto) will, at the time of the mailing
of the Proxy Statement to the stockholders of the Company, at the time of the
Special Meeting, and as of the time of any amendments thereof or
18
supplements thereto, contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Notwithstanding the foregoing, no representation is made by any Acquiror Entity
with respect to statements made in any of the foregoing documents based upon
information supplied by the Company or its Subsidiaries.
Section 4.5 Acquisition Sub's Operations. Acquisition Sub was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement and has not, other than in connection with the transactions
contemplated hereby or thereby and other than those incidental to its
organization and maintenance of corporate existence, (i) engaged in any business
activities, (ii) conducted any operations, (iii) incurred any liabilities or
(iv) owned any assets or property.
Section 4.6 Ownership of Company Common Stock. Neither Acquiror Entity
nor any of its respective "affiliates" or "associates" (as such terms are
defined in Rule 12b-2 of the Exchange Act) is the "beneficial owner" (as such
term is defined in the Company Certificate of Incorporation) of any shares of
Company Common Stock.
Section 4.7 Financing. Parent and Acquisition Sub have, and will
continue to have through the Closing Date, sufficient funds available to them in
cash or under existing credit lines to finance the payment of the Merger
Consideration as contemplated by this Agreement and to otherwise perform their
obligations hereunder.
Section 4.8 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by either
Acquiror Entity.
Section 4.9 Litigation. As of the date of this Agreement, there is no
action, suit, proceeding or investigation pending or, to the Knowledge of Parent
or Acquisition Sub, threatened against either Acquiror Entity, at law or in
equity, that could reasonably be expected to have an Acquiror Entity Material
Adverse Effect.
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.1 Conduct of the Business of the Company. During the period
from the date of this Agreement and continuing until the Effective Time, the
Company agrees as to itself and each of its Subsidiaries that (except as (i)
expressly permitted or required by any other provision of this Agreement, (ii)
as set forth in Section 5.1 of the Company Disclosure Schedule, (iii) as
required by any Applicable Law, (iv) as required by a Governmental Entity of
competent jurisdiction, (v) to the extent approved in writing by Parent prior
to, or contemporaneously with, this Agreement or (vi) to the extent that Parent
shall otherwise consent in writing, which consent shall not be unreasonably
withheld or delayed):
(a) Ordinary Course.
(i) The Company and each of its Subsidiaries shall in all
material respects carry on their respective businesses in the usual,
regular and ordinary course and consistent with past practice. Without
limiting the foregoing, the Company and its Subsidiaries shall use
their commercially reasonable efforts to preserve
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substantially intact their present lines of business, maintain their
rights and franchises and preserve substantially intact their current
relationships with customers, suppliers and others having business
dealings with them and keep available the services of their present
officers and employees, in each case to the end that their ongoing
businesses shall not be impaired in a manner that would reasonably be
expected to have a Company Material Adverse Effect at the Effective
Time.
(ii) The Company shall not, and shall not permit any of its
Subsidiaries to, incur or commit to any capital expenditures, except
for (x) capital expenditures up to the aggregate amount set forth in a
capital expenditure budget plan delivered to Parent prior to the date
of this Agreement, (y) capital expenditures not covered by clause (x)
up to an aggregate amount of $1,000,000 or (z) such other capital
expenditures consented to by Parent.
(b) Dividends; Changes in Share Capital. The Company shall not, and
shall not permit any of its Subsidiaries to (i) declare, set aside or pay any
dividend or other distribution with respect to any of its capital stock (except
for dividends by wholly-owned Subsidiaries of the Company), (ii) split, combine
or reclassify any of its capital stock or issue any other securities in respect
of, in lieu of or in substitution for, shares of its capital stock, except for
any such transaction by a wholly-owned Subsidiary of the Company which remains a
wholly-owned Subsidiary after consummation of such transaction, or (iii)
repurchase, redeem or otherwise acquire any shares of its capital stock or any
securities convertible into or exercisable for any shares of its capital stock.
(c) Issuance of Securities. The Company shall not, and shall not
permit any of its Subsidiaries to, issue, deliver or sell any shares of its
capital stock of any class, any Company Voting Debt or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares of capital stock or Company Voting Debt, other than (i)
the issuance of shares of Company Common Stock (u) upon the exercise of Company
Stock Options outstanding on the date of this Agreement in accordance with the
terms of the Company Stock Option Plans in effect as of the date of this
Agreement, (v) upon the exercise of the Company Warrant, (w) in connection with
Company Restricted Stock Awards, (x) to directors for payment of a portion of
their directors' fees consistent with the Company's past practice, (y) pursuant
to the 401(k) Savings Plan or (z) under the Employee Stock Purchase Plan and the
Agent Stock Purchase Plan or (ii) issuances by a wholly-owned Subsidiary of the
Company of capital stock to such Subsidiary's parent or another wholly-owned
Subsidiary of the Company.
(d) Governing Documents. The Company shall not amend or restate the
Company Certificate of Incorporation or the Company Bylaws.
(e) No Acquisitions. The Company shall not, and shall not permit any
of its Subsidiaries to, acquire (or agree to acquire), in a single transaction
or in a series of related transactions, any business or assets, other than
transactions that are in the usual, regular and ordinary course of business or
which involve assets having a purchase price not in excess of $250,000
individually or $1,000,000 in the aggregate.
(f) No Dispositions. The Company shall not, and shall not permit any
of its Subsidiaries to, sell, dispose of, transfer or divest any assets
(including capital stock of its
20
Subsidiaries), businesses or divisions other than transactions that are in the
usual, regular and ordinary course of business or which involve assets having a
current value of not in excess of $250,000 individually or $1,000,000 in the
aggregate.
(g) No Liens. The Company shall not, and shall not permit any of its
Subsidiaries to, create, assume or otherwise consensually incur any Lien on any
asset other than Liens (i) pursuant to, or permitted under, the Credit Facility,
(ii) incurred in the usual, regular and ordinary course of business consistent
with past practice and (iii) which could not reasonably be expected to have a
Company Material Adverse Effect.
(h) Compensation; Severance. Except (i) as required by Applicable Law,
(ii) to satisfy contractual obligations existing on the date hereof or (iii) in
the usual, regular and ordinary course of business consistent with past
practice, the Company shall not, and shall not permit any of its Subsidiaries
to, (1) pay or commit to pay any severance or termination pay other than
severance or termination pay that is required to be paid pursuant to the terms
of an existing Plan or contemplated by Section 5.1(h) of the Company Disclosure
Schedule, (2) enter into any employment, deferred compensation, consulting,
severance or other similar agreement (or any amendment to any such existing
agreement) with any director or officer or key employee of the Company or any of
its Subsidiaries, (3) increase or commit to increase in any material respect any
employee benefits payable to any director, officer or employee of the Company or
any of its Subsidiaries, including wages, salaries, compensation, pension,
severance, termination pay or other benefits or payments (except as required by
an existing Plan or Applicable Law), (4) adopt or make any commitment to adopt
any additional employee benefit plan, (5) make any contribution to any Plan,
other than (A) regularly scheduled contributions and (B) contributions required
pursuant to the terms thereof or Applicable Law, or (6) amend or extend or make
any commitments to amend or extend any Plan in any material respect, except for
amendments required by Applicable Law or to avoid adverse tax consequences under
Section 409A of the Code.
(i) Accounting Methods; Income Tax Elections. The Company shall not,
and shall not permit any of its Subsidiaries to, (i) change in any material
respect its methods of accounting or accounting practice as in effect at
December 31, 2005, except for any such change as required by reason of a change
in SEC guidelines, GAAP or SAP, (ii) change its fiscal year, (iii) prepare or
file any Tax Return materially inconsistent with past practice or, on any such
Tax Return, take any position, make any election, or adopt any accounting method
that is materially inconsistent with positions taken, elections made or
accounting methods used in preparing or filing similar Tax Returns in prior
periods or (iv) settle or compromise any material claim relating to Taxes.
(j) Certain Agreements. The Company shall not, and shall not permit
any of its Subsidiaries to, enter into any Contracts that limit or restrain the
Company or any of its Subsidiaries or any of their respective Affiliates or
successors, or that would, after the Effective Time, limit or restrict Parent,
the Surviving Corporation or any of their respective Affiliates or successors,
from engaging or competing in any business or in any geographic area or
location.
(k) Corporate Structure. The Company shall not, and shall not permit
any of its Subsidiaries to, alter (through merger, liquidation, reorganization,
restructuring or any other fashion) the corporate structure of the Company or
the corporate structure or ownership of the Subsidiaries.
21
(l) Certain Prohibited Actions. The Company shall not, and shall not
permit any of its Subsidiaries to, agree, authorize or enter into any commitment
to take any action described in the foregoing subsections (a)-(k) of this
Section 5.1, except as otherwise permitted by this Agreement.
Section 5.2 Stockholders' Meeting; Proxy Material. (a) Subject to the
next two sentences of this Section 5.2(a), the Company shall, acting through the
Company Board and in accordance with Applicable Law and the Company Certificate
of Incorporation and the Company Bylaws, use its commercially reasonable best
efforts to duly call, give notice of, convene and hold a special meeting of its
stockholders (the "Special Meeting") as promptly as practicable after the date
hereof for the purpose of considering and taking action upon this Agreement and
the Merger and shall use its reasonable best efforts to solicit proxies in favor
of approval of this Agreement and the transactions contemplated hereby,
including the Merger. The Company Board shall recommend that holders of shares
of Company Common Stock vote for approval of this Agreement and the transactions
contemplated hereby, including the Merger (the "Company Recommendation");
provided, that, notwithstanding anything in this Agreement to the contrary, the
Company Board may determine (i) not to make or may withdraw, modify or change in
any manner adverse to Parent or Acquisition Sub such recommendation (a "Change
in Recommendation") and (ii) not to solicit proxies in favor of approval of this
Agreement and the transactions contemplated hereby, including the Merger, if, in
the case of both clauses (i) and (ii), the Company Board has determined in good
faith, after consultation with its independent legal and financial advisors,
that (A) the Company has received a Superior Proposal or (B) it would be
consistent with its fiduciary responsibilities to the Company's stockholders
under Applicable Law to so withdraw, modify or change such recommendation
(regardless of the existence of a Superior Proposal at such time). The Company
may, if it receives an Acquisition Proposal, delay the mailing of the Proxy
Statement or the holding of the Special Meeting, in each case for such time as
is necessary for the Company Board to consider such Acquisition Proposal and to
determine the effect, if any, on its recommendation in favor of the Merger.
(b) Promptly following the date of this Agreement, the Company shall
prepare and file with the SEC a proxy statement relating to the approval of the
Merger by the Company's stockholders (as amended or supplemented, the "Proxy
Statement"). Parent, Acquisition Sub and the Company shall cooperate with each
other in connection with the preparation of the Proxy Statement. The Company
will use its commercially reasonable best efforts to have the Proxy Statement
cleared by the SEC as promptly as practicable after such filing.
(c) The Company shall as promptly as practicable notify Parent and
Acquisition Sub of the receipt of any oral or written comments from the SEC
relating to the Proxy Statement. Subject to the last two sentences of Section
5.2(a), the Company will use its commercially reasonable best efforts to cause
the Proxy Statement to be mailed to the Company's stockholders as promptly as
practicable after the Proxy Statement is cleared by the SEC. The Company shall
cooperate and provide Parent and Acquisition Sub with a reasonable opportunity
to review and comment on the draft of the Proxy Statement (including each
amendment or supplement thereto) and all responses to requests for additional
information by and replies to comments of the SEC, prior to filing such with or
sending such to the SEC, and the parties hereto will provide each other with
copies of all such filings made and correspondence with the SEC. If at any time
prior to the Effective Time, any information should be discovered by any party
which should be set forth in an amendment or supplement to the Proxy Statement
so that the Proxy Statement would not include any misstatement of a material
fact or omit to state any material fact necessary to
22
make the statements therein, in the light of the circumstances under which they
were made, not misleading, the party which discovers such information shall
promptly notify the other parties hereto and, to the extent required by
Applicable Law, an appropriate amendment or supplement describing such
information shall be promptly filed by the Company with the SEC and disseminated
by the Company to the stockholders of the Company. Notwithstanding the
foregoing, the Company shall not be required to take any of the actions provided
for under Section 5.2(b) or this Section 5.2(c) if the Company Board determines
in good faith, after consultation with its independent legal and financial
advisors, that (A) the Company has received a Superior Proposal or (B) it would
not be consistent with its fiduciary responsibilities to the Company's
stockholders under Applicable Law to take such actions (regardless of the
existence of a Superior Proposal at such time).
Section 5.3 Access to Information. Upon reasonable advance notice,
between the date of this Agreement and the Closing Date, the Company shall (i)
give Parent, Acquisition Sub, and its and their respective counsel, financial
advisors, Affiliates, auditors and other authorized representatives
(collectively, "Acquiror's Representatives") reasonable access during normal
business hours to the offices, properties, books and records (including Tax
Returns and other Tax-related information) of the Company and its Subsidiaries,
(ii) furnish to Acquiror's Representatives such financial and operating data and
other information (including Tax Returns and other Tax-related information)
relating to the Company, its Subsidiaries and their respective operations as
such Persons may reasonably request and (iii) instruct the employees, counsel
and financial advisors of the Company and its Subsidiaries to cooperate with
Parent and Acquisition Sub in their investigation of the business of the Company
and its Subsidiaries; provided, however, that such access shall only be provided
to the extent that such access would not violate Applicable Laws or the terms of
any Contract to which the Company or any of its Subsidiaries is a party or by
which any of their respective assets are subject. Any information relating to
the Company or its Subsidiaries made available pursuant to this Section 5.3,
shall be subject to the provisions of the Confidentiality Agreement. Neither
Parent nor Acquisition Sub shall, and Parent and Acquisition Sub shall cause
each of the Acquiror's Representatives not to, use any information acquired
pursuant to this Section 5.3 for any purpose unrelated to the consummation of
the transactions contemplated hereby.
Section 5.4 No Solicitation. From the date of this Agreement until the
Effective Time or, if earlier, the termination of this Agreement in accordance
with its terms, the Company shall not (whether directly or indirectly through
Affiliates, advisors, agents or other intermediaries), and the Company shall
direct and cause its and its Subsidiaries' respective officers, directors,
Affiliates, advisors, representatives or other agents of the Company not to,
directly or indirectly, (i) solicit, initiate, knowingly encourage or knowingly
facilitate (including by way of furnishing non-public information) any inquiries
or the making or submission of any proposal that constitutes an Acquisition
Proposal, (ii) participate or engage in discussions or negotiations with, or
disclose any non-public information or data relating to the Company or its
Subsidiaries or afford access to the properties, books or records of the Company
or its Subsidiaries to, any Person that has made an Acquisition Proposal or to
any Person that has disclosed to the Company that it is in contemplation of an
Acquisition Proposal or (iii) accept an Acquisition Proposal or enter into any
agreement or agreement in principle (other than an Acceptable Confidentiality
Agreement), providing for or relating to an Acquisition Proposal or enter into
any agreement or agreement in principle requiring the Company to abandon,
terminate or fail to consummate the transactions contemplated hereby.
Notwithstanding the previous sentence, if at any time prior to the consummation
of the Merger, (a) the Company has received
23
an Acquisition Proposal from a Third Party and (b) the Company Board determines
in good faith, after consultation with its independent legal and financial
advisors, that such Acquisition Proposal could result in a Superior Proposal,
then the Company may take any of the actions described in clause (ii) of this
Section 5.4; provided, that the Company (A) will provide notice to Parent and
Acquisition Sub of the receipt of such Acquisition Proposal within two (2)
Business Days after the Company Board has Knowledge of the receipt thereof, (B)
will not disclose any information to such Person without entering into an
Acceptable Confidentiality Agreement and (C) will promptly provide to Parent and
Acquisition Sub any non-public information concerning the Company provided to
such other Person which was not previously provided to Parent and Acquisition
Sub. Nothing contained in this Section 5.4 shall prohibit the Company or the
Company Board from taking and disclosing to the Company's stockholders a
position with respect to a tender or exchange offer by a Third Party pursuant to
Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or from making any
disclosure required by Applicable Law or any disclosure to the Company's
stockholders if, in the good faith judgment of the Company Board, after
consultation with its independent legal and financial advisors, such disclosure
is consistent with its fiduciary responsibilities to the Company's stockholders
under Applicable Law.
Section 5.5 Real Estate Transfer Taxes. The Company shall pay all
state or local real property transfer, gains or similar Taxes, if any
(collectively, the "Transfer Taxes"), attributable to the transfer of the
beneficial ownership of the Company's and any of its Subsidiaries' real
properties, and any penalties or interest with respect thereto, payable in
connection with the consummation of the Merger. The Company shall cooperate with
Parent in the filing of any returns with respect to the Transfer Taxes,
including supplying in a timely manner a complete list of all real property
interests held by the Company and any of its Subsidiaries and any information
with respect to such properties that is reasonably necessary to complete such
returns. The portion of the consideration allocable to the real properties of
the Company and any of its Subsidiaries shall be determined by Parent in its
reasonable discretion. The stockholders of the Company (who are intended
third-party beneficiaries of this Section 5.5) shall be deemed to have agreed to
be bound by the allocation established pursuant to this Section 5.5 in the
preparation of any return with respect to the Transfer Taxes.
Section 5.6 Director and Officer Liability. (a) Parent shall, or shall
cause the Surviving Corporation to, honor all rights to indemnification and
exculpation from liability for acts and omissions occurring at or prior to the
Effective Time and rights to advancements of expenses relating thereto now
existing in favor of the current or former directors, officers, employees or
agents of the Company and its Subsidiaries (the "Indemnitees") as provided in
their respective charters (or similar constitutive documents) or bylaws or in
any indemnification agreement set forth in Section 5.6 of the Company Disclosure
Schedule and all such rights shall survive the Merger and shall not be amended,
repealed or otherwise modified in any manner that would materially and adversely
affect the rights thereunder of any such Indemnitees, unless an alteration or
modification of such documents is required by Applicable Law or the Indemnitee
affected thereby otherwise consents in writing thereto.
(b) For six years after the Effective Time, the Surviving Corporation
shall provide officers' and directors' liability insurance in respect of acts or
omissions occurring at or prior to the Effective Time covering each such Person
covered at or prior to the Effective Time by the Company's officers' and
directors' liability insurance policy maintained by the Company and in effect as
of the date hereof on terms with respect to coverage and amount no less
24
favorable than those of the policy in effect on the date hereof and described in
Section 5.6 of the Company Disclosure Schedule; provided, however, that in no
event shall the Surviving Corporation be required to expend more than an amount
per year equal to 200% of the current annual premium paid by the Company for
such insurance (the "Maximum Amount") to maintain or procure insurance coverage
pursuant hereto, it being understood that if the Surviving Corporation is
purchasing multi-year coverage the Maximum Amount shall be deemed to be the
Maximum Amount computed using such 200% factor multiplied by the number of years
of such coverage; provided, further, that if the amount of the annual premiums
necessary to maintain or procure such insurance coverage exceeds the Maximum
Amount, the Surviving Corporation shall maintain or procure, for such six-year
period, the most advantageous policy of directors' and officers' insurance
obtainable for an average annual premium equal to the Maximum Amount. Section
5.6 of the Company Disclosure Schedule sets forth the last annual premium paid
prior to the date hereof.
(c) This Section 5.6 shall survive the consummation of the Merger and
is intended to be for the benefit of, and shall be enforceable by, the
Indemnitees referred to herein, their heirs and personal representatives and
shall be binding on the Surviving Corporation and its successors and assigns.
(d) If the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any Person, then, and in each case, to the extent necessary, proper provision
shall be made so that the successors and assigns of the Surviving Corporation
shall assume the obligations set forth in this Section 5.6, and none of the
actions described in clause (i) or (ii) of this sentence shall be taken until
such provision is made.
(e) The obligations of the Company and the Surviving Corporation under
this Section 5.6 shall not be terminated or modified in such a manner as to
adversely affect any Indemnitee to whom this Section 5.6 applies without the
consent of such affected Indemnitee.
Section 5.7 Certain Filings. (a) Parent, Acquisition Sub and the
Company shall cooperate with one another (i) in connection with the preparation
of the Proxy Statement, (ii) in determining whether any action by or in respect
of, or filing with, any Governmental Entity is required, or any actions,
consents, approvals or waivers are required to be obtained from any
non-governmental Third Parties to any Company Material Contracts, in connection
with the consummation of the transactions contemplated hereby (it being
understood that each party shall consult with the other in connection with any
material modifications to the relevant regulatory filing to obtain the Ohio
Approval Order and the Nebraska Approval Order, and shall not modify such
filings in any manner that would contravene such party's obligation to use
commercially reasonable best efforts to obtain such regulatory approvals as
promptly as practicable) and (iii) in seeking any such actions, consents,
approvals or waivers or making any such filings, furnishing information required
in connection therewith or with the Proxy Statement and seeking timely to obtain
any such actions, consents, approvals or waivers. Without limiting the
provisions of this Section 5.7, the Company shall, and Parent and Acquisition
Sub shall, cause its "ultimate parent entity" to file with the Department of
Justice and the Federal Trade Commission a Pre-Merger Notification and Report
Form pursuant to the HSR Act in respect of the transactions contemplated hereby
within ten (10) Business Days of the date of this Agreement, and, subject to
Section 5.7(c), each party will use its reasonable best efforts to take or cause
to be taken all
25
actions necessary, including to comply promptly and fully with any requests for
information from regulatory Governmental Entities, to obtain any clearance,
waiver, approval or authorization that is necessary to enable the parties to
consummate the transactions contemplated hereby. Further, without limiting the
provisions of this Section 5.7, Parent and Acquisition Sub shall make Form A
filings with the respective Insurance Regulatory Authorities in each of the
States of Ohio and Nebraska with respect to the transactions contemplated hereby
within ten (10) Business Days of the date of this Agreement with respect to
seeking the Ohio Approval Order and the Nebraska Approval Order, respectively.
Parent shall promptly make any and all other filings and submissions of
information with the Insurance Regulatory Authorities which are required or
requested by Insurance Regulatory Authorities to obtain the approvals required
by such Insurance Regulatory Authorities to consummate the transactions
contemplated hereby. The Company agrees to furnish Parent with such information
and reasonable assistance as Parent may reasonably request in connection with
its preparation of the Form A filings and other filings or submissions. Parent
shall keep the Company apprised on a timely basis in reasonable detail of its
actions with respect to all such filings and submissions and shall provide the
Company with copies of any Form A filings and other filings or submissions in
connection with the transactions contemplated by this Agreement.
(b) Subject to Section 5.7(c), (i) the Company, Parent and Acquisition
Sub shall each use its commercially reasonable best efforts to resolve such
objections, if any, as may be asserted with respect to the transactions
contemplated hereby under any Regulatory Law and (ii) if any administrative,
judicial or legislative action or proceeding, including any proceeding by a
private party, is instituted (or threatened to be instituted) challenging the
transactions contemplated hereby as violative of any Regulatory Law, the
Company, Parent and Acquisition Sub shall each cooperate in all respects and use
its respective commercially reasonable best efforts to contest and resist any
such action or proceeding and to have vacated, lifted, reversed or overturned
any decree, judgment, injunction or other order (whether temporary, preliminary
or permanent) that is in effect and that restricts, prevents or prohibits
consummation of the transactions contemplated hereby, including by pursuing all
reasonable avenues of administrative and judicial appeal.
(c) Each of the Company, Parent and Acquisition Sub shall (i) subject
to any restrictions under any Regulatory Law, to the extent practicable,
promptly notify each other of any communication to that party from any
Governmental Entity (including the Federal Trade Commission, the Antitrust
Division of the Department of Justice, the Ohio Department of Insurance and the
Nebraska Department of Insurance) with respect to this Agreement and the
transactions and other agreements contemplated hereby and permit the other party
to review in advance any proposed written communication to any Governmental
Entity, (ii) unless required by Applicable Law, not agree to participate in any
meeting with any Governmental Entity in respect of any filings, investigation or
other inquiry with respect to this Agreement and the transactions and other
agreements contemplated hereby unless it consults with the other party in
advance and, to the extent permitted by such Governmental Entity, gives the
other party the opportunity to attend and participate thereat, in each case to
the extent practicable, (iii) subject to any restrictions under any Regulatory
Law, furnish the other party with copies of all correspondence, filings and
communications (and memoranda setting forth the substance thereof) between it
and its Affiliates and their respective representatives on the one hand, and any
Governmental Entity or members of its staff on the other hand, with respect to
this Agreement and the transactions and other agreements contemplated hereby
(excluding documents and communications which are subject to preexisting
confidentiality agreements and
26
to the attorney client privilege or work product doctrine) and (iv) furnish the
other party with such necessary information and reasonable assistance as such
other party and its Affiliates may reasonably request in connection with their
preparation of necessary filings, registrations, or submissions of information
to any Governmental Entities in connection with this Agreement and the
transactions and other agreements contemplated hereby and thereby, including any
filings necessary or appropriate under the provisions of any Regulatory Law.
(d) Between the date of this Agreement and the Closing Date, the
Company shall furnish to Parent any federal Tax Return prior filing such Tax
Return with the IRS.
Section 5.8 Commercially Reasonable Best Efforts. Upon the terms and
subject to the conditions of this Agreement, each party hereto shall use its
commercially reasonable best efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable under
Applicable Laws to consummate the transactions contemplated hereby.
Section 5.9 Public Announcements. None of the Company, Parent,
Acquisition Sub, or any of their respective Affiliates shall issue or cause the
publication of any press release or other public announcement with respect to
this Agreement or the transactions contemplated hereby without the prior
approval of the other parties, except to the extent required by law or by any
listing agreement with, or the policies of, a national securities exchange and
after reasonable prior notice to the other parties hereto.
Section 5.10 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation is or may become applicable to the transactions contemplated hereby,
the Company, Parent and Acquisition Sub shall use their respective commercially
reasonable best efforts to grant such approvals not take such actions as are
necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate or minimize the effects of any such statute or regulation on the
transactions contemplated hereby.
Section 5.11 Certain Notifications. Between the date hereof and the
Effective Time, the Company shall promptly notify Parent and Acquisition Sub of
(i) any notice or other communication from any Person alleging that the consent
of such Person is or may be required in connection with the transactions
contemplated hereby, other than where the failure to obtain such consent could
not reasonably be expected to have a Company Material Adverse Effect, (ii) any
notice or communication from any Governmental Entity in connection with the
transactions contemplated hereby and (iii) any action, suit, charge, complaint,
grievance or proceeding commenced or, to the Company's Knowledge, threatened
against the Company or any Subsidiary which, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to Section
3.13 or which relates to the consummation of the transactions contemplated
hereby. Between the date hereof and the Effective Time, Parent and Acquisition
Sub shall promptly notify the Company of any action, suit, charge, complaint,
grievance or proceeding commenced or, to the Knowledge of Parent or Acquisition
Sub, threatened against Parent or Acquisition Sub which, if pending on the date
of this Agreement, would have been required to have been disclosed pursuant to
Section 4.10 or which relates to the consummation of the transactions
contemplated hereby. Between the date hereof and the Effective Time, each party
shall promptly notify the other parties hereto in writing after becoming aware
of the
27
occurrence of any event which will, or is reasonably likely to, result in the
failure to satisfy any of the conditions specified in Article VI.
Section 5.12 Third Party Consents. Between the date hereof and the
Effective Time, the Company shall use commercially reasonable best efforts to
obtain the third party consents set forth in Section 3.3 of the Company
Disclosure Schedule.
Section 5.13 Advisory Fees, etc. Pursuant to engagement letters
entered into between the Company and each of UBS Securities LLC and Xxxxxxx
Xxxxxxx Xxxxxx LLC each dated as of December 5, 2005, the Company agrees (and
Parent and Acquisition Sub agree) that, if the Closing occurs, the Company will
provide to each of UBS Securities LLC and Xxxxxxx Xxxxxxx Xxxxxx LLC at the
Closing a cash amount sufficient to pay in full all of such financial advisors'
respective fees and expenses with respect to the transactions contemplated
hereby up to the amounts disclosed in Section 3.20 of the Company Disclosure
Schedule but only the extent not previously paid or reimbursed.
Section 5.14 Employees and Employee Benefit Plans. (a) For a period of
not less than one year following the Closing Date, the Surviving Corporation
shall provide all individuals who are employees of the Company and the
Subsidiaries (including employees who are not actively at work on account of
illness, disability or leave of absence) on the Closing Date (the "Affected
Employees"), while employed by the Company or the Subsidiaries, with
compensation and benefits which are substantially comparable in the aggregate to
the compensation and benefits provided to such Affected Employees as of the date
of this Agreement. Nothing contained in this Section 5.14 shall be deemed to
grant any Affected Employee any right to continued employment after the Closing
Date. The Surviving Corporation shall continue to provide and recognize all
accrued but unused paid time off of Affected Employees as of the Closing Date.
Any preexisting condition clause in any of the welfare plans (including medical,
dental and disability coverage) established or maintained by the Surviving
Corporation after the Closing Date shall be waived for the Affected Employees,
and Affected Employees shall be credited with service with the Company for all
purposes under such plans.
(b) For the period beginning on the Closing Date and ending no earlier
than the first anniversary of the Closing Date, the Surviving Corporation shall
provide notice of termination or pay in lieu thereof and severance pay, if
applicable, to Affected Employees that is no less favorable than under the
current practices of the Company and the Subsidiaries as in effect as of the
date hereof, which are disclosed in Section 5.14 of the Company Disclosure
Schedule.
(c) The Surviving Corporation and the Subsidiaries shall be
responsible for all liabilities or obligations under the Worker Adjustment and
Retraining Notification Act and similar state and local rules, statutes and
ordinances resulting from the Closing or from the actions of the Surviving
Corporation or any Subsidiary following the Closing. The Surviving Corporation
shall be liable for any workers' compensation or similar workers' protection
claims of any Affected Employee incurred prior to the Closing Date.
Section 5.15 Delisting. Each of the parties agrees to cooperate with
each other in taking, or causing to be taken, all actions necessary to delist
the Company Common Stock from the Nasdaq National Market and terminate
registration under the Exchange Act; provided, that such delisting and
termination shall not be effective until after the Effective Time.
28
Section 5.16 Cooperation Relating to Pre-Closing Transaction. The
Company shall, subject to the proviso that follows, cooperate in good faith with
Parent if and when Parent reasonably requests that certain Company assets or
insurance reserves be transferred to a Third Party immediately prior to the
Effective Time or that a reinsurance transaction be entered into
contemporaneously with or immediately prior to the Effective Time ("Pre-Closing
Transaction"); provided, however, that the Company shall not be required with
respect to a Pre-Closing Transaction if Parent does not, prior to consummation
of the Pre-Closing Transaction, deposit the executed Certificate of Merger with
a mutually agreed agent in Delaware for filing and also deposit the Merger
Consideration with the Paying Agent or if the Company is otherwise not satisfied
in its good faith judgment that there is no risk that the Merger will not be
consummated.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1 Conditions to Each Party's Obligations to Effect the
Merger. The respective obligations of the Company, Parent and Acquisition Sub to
effect the Merger are subject to the satisfaction or, to the extent permitted by
Applicable Law, the waiver on or prior to the Effective Time of each of the
following conditions:
(a) The Company Stockholder Approval shall have been obtained at the
Special Meeting.
(b) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(c) Other than the filing provided for in Section 1.3, all notices,
reports and other filings required to be made prior to the Effective Time by the
Company or Parent or any of their respective Subsidiaries with, and all
consents, registrations, approvals, permits and authorizations required to be
obtained prior to the Effective Time by the Company or Parent or any of their
respective Subsidiaries from, any Governmental Entity in connection with the
execution and delivery of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby by the Company, Parent and
Acquisition Sub (including the Ohio Approval Order and the Nebraska Approval
Order) shall have been made or obtained (as the case may be), except for those
(other than the Ohio Approval Order and the Nebraska Approval Order) the failure
to be made or obtained could not reasonably be expected to have a Company
Material Adverse Effect or an Acquiror Entity Material Adverse Effect.
(d) No Governmental Entity of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, law, ordinance,
rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) that is in effect and prohibits
consummation of the Merger, and no federal or state Governmental Entity shall
have instituted any proceeding that is pending seeking any such judgment,
decree, injunction or other order to prohibit the consummation of the Merger.
Section 6.2 Conditions to the Company's Obligation to Effect the
Merger. The obligation of the Company to effect the Merger shall be further
subject to the satisfaction or, to the extent permitted by Applicable Law, the
waiver on or prior to the Effective Time of each of the following conditions:
29
(a) The representations of Parent and Acquisition Sub contained in the
first sentence of Section 4.1 (Organization) and in Section 4.2 (Authorization)
shall be true and correct in all respects with regard to any such
representations containing the qualifications "materially" or "material" or any
other qualifications based on such terms or based on the defined term Acquiror
Entity Material Adverse Effect, and shall be true and correct in all material
respects, both individually and in the aggregate, with regard to any
representation not so qualified, in each case as of the Effective Time (or, to
the extent such representations and warranties speak as of an earlier date, they
shall be true and correct in all respects as of such earlier date). The
representations and warranties of Parent and Acquisition Sub contained in this
Agreement other than those listed in the preceding sentence shall be true and
correct in all respects when made and as of the Effective Time as if made at
such time (or, to the extent such representations and warranties speak as of a
specified date, they need only be true and correct in all respects as of such
specified date) interpreted without giving effect to the words "materially" or
"material" or to any qualifications based on such terms or based on the defined
term "Acquiror Entity Material Adverse Effect," except where the failure of all
such representations and warranties to be true and correct could not reasonably
be expected to have an Acquiror Entity Material Adverse Effect.
(b) Parent and Acquisition Sub shall have performed in all material
respects their respective agreements and covenants contained in or contemplated
by this Agreement that are required to be performed by them at or prior to the
Effective Time pursuant to the terms hereof.
(c) The Company shall have received certificates signed on behalf of
Parent and Acquisition Sub by an executive officer of each of Parent and
Acquisition Sub, dated the Closing Date, to the effect that the conditions set
forth in Sections 6.2(a) and 6.2(b) have been satisfied.
Section 6.3 Conditions to Parent's and Acquisition Sub's Obligations
to Effect the Merger. The obligations of Parent and Acquisition Sub to effect
the Merger shall be further subject to the satisfaction, or to the extent
permitted by Applicable Law, the waiver on or prior to the Closing of each of
the following conditions:
(a) The representations of the Company contained in the first sentence
of Section 3.1 (Organization), in Section 3.2 (Authorization) and in Section 3.4
(Capitalization) shall be true and correct in all respects with regard to any
such representations containing the qualifications "materially" or "material" or
any other qualifications based on such terms or based on the defined term
Company Material Adverse Effect, and shall be true and correct in all material
respects, both individually and in the aggregate, with regard to any
representation not so qualified, in each case as of the Effective Time (or, to
the extent such representations and warranties speak as of an earlier date, they
shall be true and correct in all respects as of such earlier date). The
representations and warranties of the Company contained in this Agreement other
than those listed in the preceding sentence shall be true and correct in all
respects when made and as of the Effective Time as if made at such time (or, to
the extent such representations and warranties speak as of a specified date,
they need only be true and correct in all respects as of such specified date)
interpreted without giving effect to the words "materially" or "material" or to
any qualifications based on such terms or based on the defined term "Company
Material Adverse Effect," except where the failure of all such representations
and warranties to be true and correct could not reasonably be expected to have a
Company Material Adverse Effect.
30
(b) The Company shall have performed in all material respects each of
its agreements and covenants contained in or contemplated by this Agreement that
are required to be performed by it at or prior to the Effective Time pursuant to
the terms hereof.
(c) Parent and Acquisition Sub shall have received certificates signed
on behalf of the Company by an executive officer of the Company, dated the
Closing Date, to the effect that the conditions set forth in Sections 6.3(a) and
6.3(b) have been satisfied.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after obtaining the Company
Stockholder Approval, by action taken by the Board of Directors of the
terminating party or parties:
(a) by mutual written consent of Parent, Acquisition Sub and the
Company;
(b) by the Company, Parent or Acquisition Sub if the Closing shall not
have occurred on or before December 31, 2006 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 7.1(b)
shall not be available to any party whose failure to fulfill any obligation
(including such party's obligation under Section 5.7) or other breach under this
Agreement has been the cause of, or resulted in, the failure of the Merger to
occur on or before the Termination Date;
(c) by the Company, Parent or Acquisition Sub if any Governmental
Entity of competent jurisdiction shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby, and such order, decree, ruling
or other action shall have become final and nonappealable;
(d) by the Company, Parent or Acquisition Sub if at the Special
Meeting or any adjournment thereof the Company Stockholder Approval shall not
have been obtained;
(e) by Parent or Acquisition Sub, if (i) the Company Board or any
committee thereof shall have effected a Change in Recommendation or (ii) the
Company Board or any committee thereof shall have approved or recommended any
Acquisition Proposal;
(f) by the Company, if there is a breach by Parent or Acquisition Sub
of any representation, warranty, covenant or agreement contained in this
Agreement that would give rise to a failure of a condition set forth in Section
6.2(a) or 6.2(b) and which has not been cured (or is not capable of being cured)
within twenty (20) Business Days following receipt by Parent or Acquisition Sub,
as the case may be, of written notice from the Company of such breach;
(g) by Parent or Acquisition Sub, if there is a breach by the Company
of any representation, warranty, covenant or agreement contained in this
Agreement that would give rise to a failure of a condition set forth in Section
6.3(a) or 6.3(b) and which has not been cured (or is not capable of being cured)
within twenty (20) Business Days following receipt by the Company of written
notice from Parent and Acquisition Sub of such breach; or
(h) by the Company if (A) the Company Board authorizes the Company,
subject to complying with the terms of this Agreement, to enter into a
definitive agreement concerning a
31
transaction that constitutes a Superior Proposal and the Company notifies Parent
in writing that it intends to enter into such an agreement and (B) the Company
prior to or concurrently with such termination pays to Parent in immediately
available funds the Termination Fee.
The party desiring to terminate this Agreement shall give written
notice of such termination to the other party.
Section 7.2 Effect of Termination. If this Agreement is terminated by
either the Company, Parent or Acquisition Sub as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of the Company, Parent or Acquisition Sub or their
respective officers or directors, except as provided in this Article VII, which
provisions shall survive such termination, and except that, notwithstanding
anything to the contrary contained in this Agreement, neither the Company nor
Parent or Acquisition Sub shall be relieved or released from any liabilities or
damages arising out of any willful or knowing breach of this Agreement and
except that the Confidentiality Agreement shall survive such termination.
Section 7.3 Fees and Expenses. (a) The Company agrees to pay Parent
(or its designees) the sum of $6,150,000 (the "Termination Fee") if this
Agreement is terminated by the Company pursuant to Section 7.1(h) or by Parent
or Acquisition Sub pursuant to Section 7.1(e).
(b) The Company agrees to reimburse Parent (or its designees) for all
out-of-pocket expenses of Parent and its Affiliates (the "Expenses"), including
fees and expenses of financial advisors, outside legal counsel and accountants,
incurred in connection with the transactions contemplated hereby and fees and
expenses incurred in connection with the proposed financing of the Merger, up to
a maximum amount of Expenses of $500,000, if this Agreement is terminated by the
Company, Parent or Acquisition Sub pursuant to Section 7.1(d) or Section 7.1(g);
provided, that on or before the date of any such termination described in this
Section 7.3(b), an Acquisition Proposal with respect to the Company shall have
been publicly announced, disclosed or otherwise communicated to the Company
Board and, in the case of Section 7.1(d) only, such Acquisition Proposal shall
not have been withdrawn prior to the Special Meeting.
(c) In addition to the amounts payable to Parent (or its designees)
under Section 7.3(b), the Company agrees to pay Parent (or its designees) the
Termination Fee (less the amounts payable under Section 7.3(b)) if this
Agreement is terminated by the Company, Parent or Acquisition Sub pursuant to
Section 7.1(d) or Section 7.1(g); provided, that (I) on or before the date of
any such termination described in this Section 7.3(c), an Acquisition Proposal
with respect to the Company shall have been publicly announced, disclosed or
otherwise communicated to the Company Board and, in the case of Section 7.1(d)
only, such Acquisition Proposal shall not have been withdrawn prior to the
Special Meeting, (II) within nine (9) months of any such termination the Company
or a Third Party consummates, or the Company enters into a definitive agreement
with a Third Party for, a transaction that would qualify as a Superior Proposal
and (III) in the case of a termination pursuant to Section 7.1(g) only, the
breach giving rise to such termination was intentional.
(d) Any payment required to be made pursuant to Section 7.3(a), (b) or
(c) shall be made (X) concurrently with a termination by the Company giving rise
to the payments provided for in Section 7.3(a) or Section 7.3(b) or (Y) not more
than three (3) Business Days
32
after the satisfaction of the conditions provided for in Section 7.3(c). All
payments under this Section 7.3 shall be made by wire transfer of immediately
available funds to an account designated by the party entitled to receive
payment.
(e) Except as otherwise provided in this Section 7.3, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Definitions. As used in this Agreement, the following
terms have the meanings specified or referred to in this Section 8.1 and shall
be equally applicable to both singular and plural forms. Any agreement referred
to below means such agreement as amended, supplemented or modified from time to
time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"ACCEPTABLE CONFIDENTIALITY AGREEMENT" means a confidentiality agreement
with terms and conditions no less favorable to the Company than the
Confidentiality Agreement, but which may exclude standstill provisions.
"ACQUIROR ENTITY" has the meaning set forth in the first sentence of
Article IV.
"ACQUIROR ENTITY MATERIAL ADVERSE EFFECT" means any effect, change or
development that, individually or in the aggregate, with other effects, changes
or developments, is material and adverse to the financial condition, business
operations or results of operations of the Acquiror Entities taken as a whole or
could be reasonably expected to adversely affect the ability of any Acquiror
Entity to consummate the Merger or other transactions contemplated hereby;
provided, however, that to the extent any effect, change or development is
caused by or results from any of the following, it shall not be taken into
account in determining whether there has been an "Acquiror Entity Material
Adverse Effect": (i) the announcement of the execution of this Agreement,
actions contemplated by this Agreement or the performance of obligations under
this Agreement, (ii) factors affecting the economy or financial markets as a
whole or generally affecting the life or health insurance industries and not
disproportionately affecting the Acquiror Entities, (iii) the suspension of
trading in securities generally on the New York Stock Exchange or the Nasdaq
National Market, and (iv) the commencement, occurrence or continuation of any
war, armed hostilities or acts of terrorism involving or affecting the United
States of America or any part thereof.
"ACQUIROR'S REPRESENTATIVES" has the meaning set forth in Section 5.3.
"ACQUISITION PROPOSAL" means any offer or proposal regarding a merger,
consolidation, share exchange, recapitalization, reclassification, liquidation
or other business combination involving the Company or the acquisition or
purchase of 20% or more of any class of equity securities of the Company or any
of its Material Subsidiaries then outstanding, or any tender offer (including
self-tenders) or exchange offer that if consummated would result in any Person
beneficially owning 20% or more of any class of equity securities of the Company
or any of its Material Subsidiaries, or a substantial portion of the assets of,
the Company or any of its Subsidiaries taken as a whole, other than the
transactions contemplated hereby.
33
"ACQUISITION SUB" has the meaning set forth in the introductory paragraph
of this Agreement.
"ACQUISITION SUB BYLAWS" has the meaning set forth in Section 2.3.
"ACQUISITION SUB CERTIFICATE OF INCORPORATION" has the meaning set forth in
Section 2.2.
"AFFECTED EMPLOYEES" has the meaning set forth in Section 5.14(a).
"AFFILIATE" has the meaning as defined in Rule 12b-2 under the Exchange
Act.
"AGREEMENT" means this Agreement and Plan of Merger by and among Parent,
Acquisition Sub and the Company.
"APPLICABLE LAW" means all applicable laws, statutes, orders, rules,
regulations and all applicable legally binding policies or guidelines
promulgated, or judgments, decisions or orders entered, by any Governmental
Entity.
"BUSINESS DAY" means any day on which banks are not required or authorized
to close in the City of New York.
"CERTIFICATE" has the meaning set forth in Section 2.7.
"CERTIFICATE OF MERGER" has the meaning set forth in Section 1.3.
"CHANGE IN RECOMMENDATION" has the meaning set forth in Section 5.2(a).
"CLOSING" has the meaning set forth in Section 1.2.
"CLOSING DATE" has the meaning set forth in Section 1.2.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the introductory paragraph of this
Agreement.
"COMPANY 1998 SHARE INCENTIVE PLAN" has the meaning set forth in Section
3.4(b)(v).
"COMPANY 1998 EMPLOYEE STOCK OPTION PLAN" has the meaning set forth in
Section 3.4(b)(vi).
"COMPANY 1999 SPECIAL AGENTS' STOCK OPTION PLAN" has the meaning set forth
in Section 3.4(b)(vii).
"COMPANY BOARD" has the meaning set forth in the first recital of this
Agreement.
"COMPANY BYLAWS" has the meaning set forth in Section 3.1.
"COMPANY CERTIFICATE OF INCORPORATION" has the meaning set forth in Section
3.1.
34
"COMPANY COMMON STOCK" has the meaning set forth in the first recital of
this Agreement.
"COMPANY DISCLOSURE SCHEDULE" means the disclosure schedule delivered by
the Company to Parent dated the date hereof, which disclosure schedule relates
to this Agreement and is designated therein as the Company Disclosure Schedule.
"COMPANY FEE PROPERTY" has the meaning set forth in Section 3.17(a).
"COMPANY LEASED PROPERTY" has the meaning set forth in Section 3.17(a).
"COMPANY LEASES" has the meaning set forth in Section 3.17(a).
"COMPANY MATERIAL ADVERSE EFFECT" means any effect, change or development
that, individually or in the aggregate, with other effects, changes or
developments, is material and adverse to the financial condition, business
operations or results of operations of the Company and its Subsidiaries taken as
a whole, as the case may be, or could reasonably be expected to materially and
adversely affect the ability of the Company to consummate the Merger or other
transactions contemplated hereby; provided, however, that to the extent any
effect, change or development is caused by or results from any of the following,
it shall not be taken into account in determining whether there has been a
"Company Material Adverse Effect": (i) the announcement of the execution of this
Agreement, actions contemplated by this Agreement or the performance of
obligations under this Agreement (in each case, including any reduction in
sales, any disruption in supplier, distributor, partner or similar relationships
or any loss of employees), (ii) factors affecting the economy or financial
markets as a whole or generally affecting the life or health insurance
industries or the lines of business of the type in which the Company engages and
not disproportionately affecting the Company or any of its Subsidiaries, (iii)
the suspension of trading in securities generally on the New York Stock Exchange
or the Nasdaq National Market and (vi) the commencement, occurrence or
continuation of any war, armed hostilities or acts of terrorism involving or
affecting the United States of America or any part thereof.
"COMPANY MATERIAL CONTRACT" has the meaning set forth in Section 3.15.
"COMPANY NON-VOTING PREFERRED STOCK" has the meaning set forth in Section
3.4(a)(ii).
"COMPANY PERMITS" has the meaning set forth in Section 3.13(b).
"COMPANY REAL PROPERTY" has the meaning set forth in Section 3.17(a).
"COMPANY RECOMMENDATION" has the meaning set forth in Section 5.2(a).
"COMPANY RESTRICTED STOCK AWARDS" has the meaning set forth in Section
3.4(b)(viii).
"COMPANY SEC DOCUMENTS" has the meaning set forth in Section 3.6.
"COMPANY STATE REGULATORY FILINGS" has the meaning set forth in Section
3.7(c).
"COMPANY STOCK OPTION PLANS" has the meaning set forth in Section 3.4(c).
35
"COMPANY STOCK OPTIONS" has the meaning set forth in Section 3.4(c).
"COMPANY STOCK PLANS" means the Company Stock Option Plans, the Company's
2000 Employee Stock Purchase Plan and the Company's 2000 Agent Stock Purchase
Plan.
"COMPANY STOCKHOLDER APPROVAL" has the meaning set forth in Section 3.2(c).
"COMPANY VOTING PREFERRED STOCK" has the meaning set forth in Section
3.4(a)(iii).
"COMPANY WARRANT" has the meaning set forth in Section 2.9.
"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement, dated as
of January 5, 2006 and amended on March 20, 2006, by and between Great American
Financial Resources, Inc. and UBS Securities LLC and Xxxxxxx Xxxxxxx Xxxxxx LLC,
on behalf of the Company.
"CONSTITUENT CORPORATIONS" has the meaning set forth in the introductory
paragraph of this Agreement.
"CONTRACT" means any written or oral agreement, contract, commitment,
lease, license, contract, note, bond, mortgage, indenture, arrangement or other
instrument or obligation.
"CREDIT FACILITY" means the Credit and Security Agreement dated as of
December 23, 2003, as amended, by and among the Company, certain of its
Subsidiaries, National City Bank, The CIT Group/Equipment Financing, Inc. and
each of the lenders, guarantors and financial institutions party thereto.
"DGCL" has the meaning set forth in Section 1.1.
"DISSENTING SHARES" has the meaning set forth in Section 2.10(j).
"DISSENTING STOCKHOLDER" has the meaning set forth in Section 2.10(j).
"EFFECTIVE TIME" has the meaning set forth in Section 1.3.
"ENVIRONMENTAL LAW" means any federal, state, local or foreign statute,
law, regulation, order, decree, permit, authorization, common law or legally
binding agency requirement relating to: (i) the protection, investigation or
restoration of the environment, health, safety or natural resources, (ii) the
handling, use, presence, disposal, release or threatened release of any
Hazardous Substance or (iii) noise, odor, indoor air, employee exposure,
wetlands, pollution, contamination or any injury or threat of injury to Persons
or property relating to any Hazardous Substance.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"EXPENSES" has the meaning set forth in Section 7.3(a).
"GAAP" means United States generally accepted accounting principles.
36
"GOVERNMENTAL ENTITY" means any federal, state or local government or any
court, tribunal, administrative agency or commission or other governmental or
other regulatory authority or agency, domestic, foreign or supranational.
"HAZARDOUS SUBSTANCE" means (i) any substance that is listed, classified,
regulated or for which liability is imposed pursuant to any Environmental Law,
(ii) any petroleum product or by-product, asbestos-containing material,
lead-containing paint or plumbing, polychlorinated biphenyls, radioactive
material or radon and (iii) any other substance which is the subject of
regulatory action by any Governmental Entity in connection with any
Environmental Law.
"HOLDER" has the meaning set forth in Section 2.10(b).
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976.
"INDEMNITEES" has the meaning set forth in Section 5.6(a).
"INSURANCE CONTRACT" means any of the insurance policies, Contracts of
insurance, policy endorsements, certificates of insurance and application forms
pertaining to the Insurance Products underwritten or reinsured by the Company or
any of its Subsidiaries.
"INSURANCE PRODUCTS" means (a) any of the health insurance coverage
underwritten or reinsured in whole or in part by the Company or any of its
Subsidiaries on a traditional indemnity basis or as part of a preferred provider
organization health benefit plan or product, (b) any indemnity life, disability,
accidental death and dismemberment, dental or other insurance coverages
underwritten or reinsured in whole or in part by the Company or any of its
Subsidiaries, (c) any discount or preferred price arrangement included as part
of a Contract offered by the Company or any of its Subsidiaries with respect to
products or services provided by third parties and (d) any stop-loss coverage or
other insurance offered, underwritten or reinsured by the Company or any of its
Subsidiaries.
"INSURANCE REGULATORY AUTHORITY" shall mean, with respect to any Subsidiary
that is an insurance company, the Governmental Entity of such Subsidiary's state
of domicile with which such Subsidiary is required to file its annual financial
statement prepared in accordance with SAP.
"INSURED" means any individual who is covered under an Insurance Product
pursuant to an Insurance Contract.
"INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in Section 3.14.
"IRS" means the Internal Revenue Service.
"KNOWLEDGE" means the actual knowledge after reasonable inquiry of the
executive officers of the Company or the executive officers of Parent and
Acquisition Sub, as the case may be.
"LIENS" means any mortgages, pledges, claims, liens, charges, encumbrances,
easements, servitudes, restrictive covenants, options, rights of first refusal,
transfer restrictions and security interests of any kind or nature whatsoever,
except, in the case of securities, for limitations on transfer imposed by
federal or state securities laws.
37
"MATERIAL SUBSIDIARY" means any Subsidiary whose consolidated revenues, net
income or assets constitute 10% or more of the revenues, net income or assets of
the Company and its Subsidiaries, taken as a whole.
"MAXIMUM AMOUNT" has the meaning set forth in Section 5.6(b).
"MERGER" has the meaning set forth in the first recital of this Agreement.
"MERGER CONSIDERATION" has the meaning set forth in Section 2.7.
"MERGER FUND" has the meaning set forth in Section 2.10(d).
"NEBRASKA APPROVAL ORDER" means the approval of the Nebraska Department of
Insurance with respect to the acquisition of control by Parent of Continental
General Insurance Company.
"OHIO APPROVAL ORDER" means the approval of the Ohio Department of
Insurance with respect to the acquisition of control by Parent of each of
Provident American Life & Health Insurance Company, United Benefit Life
Insurance Company and Central Reserve Life Insurance Company.
"OPTION CONSIDERATION" has the meaning set forth in Section 2.9.
"PARENT" has the meaning set forth in the introductory paragraph of this
Agreement.
"PAYING AGENT" has the meaning set forth in Section 2.10(a).
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERSON" means any person, employee, individual, corporation, limited
liability company, partnership, trust, joint venture, or any other
non-governmental entity or any governmental or regulatory authority or body.
"PLANS" has the meaning set forth in Section 3.11(a).
"PRE-CLOSING TRANSACTION" has the meaning set forth in Section 5.16.
"PROXY STATEMENT" has the meaning set forth in Section 5.2(b).
"REGULATORY LAW" means (i) the Xxxxxxx Act, the Xxxxxxx Act, the HSR Act,
the Federal Trade Commission Act and all other federal, state and foreign, if
any, statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines and other laws that are designed or intended to prohibit, restrict or
regulate (x) foreign investment, (y) foreign exchange or currency controls or
(z) actions having the purpose or effect of monopolization or restraint of trade
or lessening of competition and (ii) the laws governing any Insurance Regulatory
Authority.
"SAP" means, with respect to any Subsidiary that is an insurance company,
the statutory accounting practices prescribed or permitted by the insurance laws
or regulations of the Insurance Regulatory Authority in the jurisdiction of the
domicile of such Subsidiary, for the preparation of financial statements and
other financial reports by insurance companies of the
38
same type as such Subsidiary. Statutory accounting practices shall be deemed to
be applied on a "consistent basis" when the practices applied in a current
period are comparable in all material respects to the practices applied in a
preceding period.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933.
"SPECIAL COMMITTEE" has the meaning set forth in the first recital of this
Agreement.
"SPECIAL MEETING" has the meaning set forth in Section 5.2(a).
"SUBSIDIARY" of any Person means another Person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first Person.
"SUPERIOR PROPOSAL" means a proposal made by a Third Party to enter into
(i) (a) a merger, reorganization, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company as a result of which either (A) the Company's stockholders
(other than such Third Party) prior to any such transaction, by virtue of their
ownership of Company Common Stock, in the aggregate cease to own at least 50% of
the voting securities of the entity surviving or resulting from such transaction
(or the ultimate parent entity thereof) or (B) the individuals comprising the
Company Board prior to such transaction do not constitute a majority of the
board of the entity surviving or resulting from such transaction or such
ultimate parent entity following the transaction, (b) a sale, lease, exchange,
transfer or other disposition of at least 50% of the assets of the Company and
its Subsidiaries, taken as a whole, in a single transaction or a series of
related transactions or (c) the acquisition, directly or indirectly, by a Person
of beneficial ownership of 50% or more of the Company Common Stock whether by
merger, consolidation, share exchange, business combination, tender or exchange
offer or otherwise, and which is (ii) otherwise on terms which the Company Board
in good faith determines (based on such matters as it deems relevant, including
the advice of its independent legal and financial advisors, the identity of the
offeror and all legal, financial, regulatory and other aspects of the proposal,
including the terms of any financing and the likelihood that the transaction
will be consummated), (a) would, if consummated, result in a transaction that is
more favorable to its stockholders (in their capacities as stockholders), from a
financial point of view, than the transactions contemplated hereby, (b) is with
a Person that has, or is reasonably likely to obtain, the necessary funds to
consummate the proposed transaction and (c) is reasonably capable of being, and
is reasonably likely to be, completed without undue delay.
"SURVIVING CORPORATION" has the meaning set forth in the first recital of
this Agreement.
"TAX" and "TAXES" means any federal, state, local or foreign net income,
gross income, gross receipts, windfall profit, severance, property, production,
sales, use, license, excise, franchise, employment, payroll, withholding,
alternative or add-on minimum, ad valorem, value added, transfer, stamp, or
environmental tax, or any other tax, custom, duty, governmental fee or
39
other like assessment or charge of any kind whatsoever, together with any
interest or penalty, addition to tax or additional amount imposed by any
Governmental Entity.
"TAX RETURN" means any return, report or similar statement required to be
filed with respect to any Tax including any information return, claim for
refund, amended return or declaration of estimated Tax.
"TERMINATION DATE" has the meaning set forth in Section 7.1(b).
"TERMINATION FEE" has the meaning set forth in Section 7.3(a).
"THIRD PARTY" means any Person or group of Persons (other than the Company
and its Affiliates or Parent and its Affiliates).
"TRANSFER TAXES" has the meaning set forth in Section 5.5.
"WARRANT CONSIDERATION" has the meaning set forth in Section 2.9.
Section 8.2 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement to any
party hereunder shall be in writing and deemed given if addressed as provided
below (or at such other address as the addressee shall have specified by notice
actually received by the addressor) and if either (i) actually delivered in
fully legible form, to such address, (ii) in the case of any nationally
recognized express mail service, one (1) Business Day shall have elapsed after
the same shall have been deposited with such service or (iii) if by fax, on the
day on which such fax was sent; provided, that a copy is sent the same day by
overnight courier or express mail service.
If to the Company, to:
Ceres Group, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxxxxxxxx, Xxxx 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Sidley Austin LLP
Xxx Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
40
If to Parent or Acquisition Sub, to:
Great American Financial Resources, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxx Xxxxxxxx & Xxxxxxx PLL
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000.
Section 8.3 Survival of Representations, Warranties and Covenants. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time. All
other covenants and agreements contained herein which by their terms are to be
performed in whole or in part, or which prohibit actions, subsequent to the
Effective Time, shall survive the Effective Time in accordance with their terms.
Section 8.4 Interpretation. For purposes of this Agreement, (i) the
words "include," "includes" and "including" shall be deemed to be followed by
the words "without limitation," (ii) the word "or" is not exclusive and (iii)
the words "herein," "hereof," "hereby," "hereto" and "hereunder" refer to this
Agreement as a whole. Unless the context otherwise requires, a reference herein:
(i) to an Article or Section means an Article and Section of this Agreement,
(ii) to an agreement, instrument or other document means such agreement,
instrument or other document as amended, supplemented and modified from time to
time to the extent permitted by the provisions thereof and by this Agreement and
(iii) to a statute means such statute as amended from time to time and includes
any successor legislation thereto and any rules or regulations promulgated
thereunder. Titles to Articles and headings of Sections are inserted for
convenience of reference only and shall not be deemed a part of or to affect the
meaning or interpretation of this Agreement. This Agreement shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting an instrument or causing any
instrument to be drafted.
Section 8.5 Amendments, Modification and Waiver. (a) Except as may
otherwise be provided herein, any provision of this Agreement may be amended,
modified or waived by the parties hereto, by action taken by or authorized by
their respective Boards of Directors, prior to the Closing Date if, and only if,
such amendment or waiver is in writing and signed, in the case of an amendment,
by the Company, Parent and Acquisition Sub or, in the case of a waiver, by the
party against whom the waiver is to be effective; provided, that no such
amendment, modification or waiver by the Company shall be effective unless it is
authorized by the Company Board; and provided, further, that, after the Company
Stockholder Approval has
41
been obtained, there shall not be made any amendment that by Applicable Law
requires further approval by the Company's stockholders without such further
approval.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law or in equity.
Section 8.6 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, that none of the Company,
Parent or Acquisition Sub may assign, delegate or otherwise transfer any of its
rights or obligations under this Agreement, in whole or in part (whether by
operation of law or otherwise), without the consent of the other parties hereto
and, in the case of the Company, the Company Board. Notwithstanding anything to
the contrary herein, Acquisition Sub may assign any of its rights hereunder to
any other Subsidiary of Parent.
Section 8.7 Specific Performance. The parties acknowledge and agree
that any breach of the terms of this Agreement would give rise to irreparable
harm for which money damages would not be an adequate remedy and accordingly the
parties agree that, in addition to any other remedies, each party shall be
entitled to enforce the terms of this Agreement by a decree of specific
performance without the necessity of proving the inadequacy of money damages as
a remedy.
Section 8.8 Governing Law; Consent to Jurisdiction; Waiver of Trial by
Jury. (a) This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware (regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof).
(b) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the exclusive jurisdiction of the Court
of Chancery of the State of Delaware in any action or proceeding arising out of
or relating to this Agreement or the agreements delivered in connection herewith
or the transactions contemplated hereby or thereby or for recognition or
enforcement of any judgment relating thereto, and each of the parties hereby
irrevocably and unconditionally (i) agrees not to commence any such action or
proceeding except in such court, (ii) agrees that any claim in respect of any
such action or proceeding may be heard and determined in such court, (iii)
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any such
action or proceeding in such court and (iv) waives, to the fullest extent
permitted by Applicable Law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in such court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by Applicable Law. Each party to this Agreement
irrevocably consents to service of process in the manner provided for notices in
Section 8.2. Nothing in this Agreement shall affect the right of any party to
this Agreement to serve process in any other manner permitted by Applicable Law.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO
42
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS
VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.8(c).
Section 8.9 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated herein are not affected in any manner
materially adverse to any party hereto. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
may be consummated as originally contemplated to the fullest extent possible.
Section 8.10 Third Party Beneficiaries. Except as provided in Section
5.5, this Agreement is solely for the benefit of the Company and its successors
and permitted assigns, with respect to the obligations of Parent and Acquisition
Sub under this Agreement, and for the benefit of Parent and Acquisition Sub, and
their respective successors and permitted assigns, with respect to the
obligations of the Company under this Agreement, and this Agreement shall not be
deemed to confer upon or give to any other third party any remedy, claim,
liability, reimbursement, cause of action or other right; provided, that the
Indemnitees referred to in Section 5.6 shall be third party beneficiaries
entitled to enforce the provisions of Section 5.6 of this Agreement; and
provided, further, that the Affected Employees referred to in Section 5.14(a)
shall be third party beneficiaries entitled to enforce the provisions of Section
5.14(a) of this Agreement.
Section 8.11 Entire Agreement. This Agreement, including any exhibits
or schedules hereto, and the Confidentiality Agreement constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersede all other prior agreements or understandings, both written and oral,
between the parties or any of them with respect to the subject matter hereof.
Section 8.12 Counterparts; Fax Signatures; Effectiveness. This
Agreement may be signed in any number of counterparts, each of which shall be
deemed an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. Each of the parties hereto (i) has agreed to
permit the use, from time to time and where appropriate, of faxed signatures in
order to expedite the Closing, (ii) intends to be bound by its respective faxed
signature, (iii) is aware that the other parties hereto will rely on the faxed
signature and
43
(iv) acknowledges such reliance and waives any defenses to the enforcement of
the documents effecting the transactions contemplated hereby contemplated by
this Agreement based on the fact that a signature was sent by fax. This
Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
(Remainder of page intentionally blank; signature page follows.)
44
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
GREAT AMERICAN FINANCIAL RESOURCES, INC.
By: /s/ Xxxx X. Xxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Executive Vice President
PROJECT GARDEN ACQUISITION INC.
By: /s/ Xxxx X. Xxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: President
CERES GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President and Chief Executive
Officer
45
