EXHIBIT 2.1
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
dated as of
November 22, 1998
between
XXXXXX CORPORATION
and
CMAC INVESTMENT CORPORATION
TABLE OF CONTENTS
Page
ARTICLE 1
The Merger
Section 1.1. The Merger....................................... 2
Section 1.2. Conversion of Shares............................. 2
Section 1.3. CMAC Stock....................................... 3
Section 1.4. Surrender and Payment............................ 3
Section 1.5. Stock Options and Restricted Stock............... 4
Section 1.6. Adjustments...................................... 5
Section 1.7. Fractional Shares................................ 5
Section 1.8. Withholding Rights............................... 5
Section 1.9. Lost Certificates................................ 6
ARTICLE 2
The Surviving Corporation
Section 2.1. Certificate of Incorporation..................... 6
Section 2.2. Bylaws........................................... 6
Section 2.3. Board and Board Committees of the Surviving
Corporation....................................... 7
Section 2.4. Management....................................... 7
Section 2.5. Headquarters..................................... 7
ARTICLE 3
Representations and Warranties of Xxxxxx
Section 3.1. Corporate Existence and Power.................... 7
Section 3.2. Corporate Authorization.......................... 8
Section 3.3. Governmental Authorization....................... 8
Section 3.4. Non-Contravention................................ 9
Section 3.5. Capitalization................................... 9
Section 3.6. Assets Necessary................................. 10
Section 3.7. Subsidiaries..................................... 10
Section 3.8. Licenses and Permits; Policies; Regulatory
Matters.......................................... 11
Section 3.9. SEC Filings...................................... 12
Section 3.10. Financial Statements............... ............. 12
Section 3.11. Registration Statement; Joint Proxy
Statement........................................ 13
Section 3.12. Absence of Certain Changes or Events............. 14
Section 3.13. Material Liabilities; Investments................ 14
Section 3.14. Compliance with Laws and Court Orders............ 15
Section 3.15. Material Contracts............................... 15
Section 3.16. Non-Claims Litigation............................ 17
Section 3.17. Reserves; Reinsurance............................ 17
Section 3.18. Loans and Advances............................... 18
Section 3.19. Finders' Fees.................................... 19
Section 3.20. Opinion of Financial Advisor..................... 19
Section 3.21. Taxes............................................ 19
Section 3.22. Employee Benefit Plans........................... 20
Section 3.23. Environmental Matters............................ 22
Section 3.24. Intellectual Property; Software.................. 23
Section 3.25. Properties....................................... 24
Section 3.26. Pooling; Tax Treatment........................... 24
Section 3.27. Takeover Statutes................................ 24
Section 3.28. Transactions with Affiliates..................... 25
Section 3.29. Business Information............................. 25
Section 3.30. Year 2000........................................ 25
Section 3.31. Rights Agreement................................. 25
ARTICLE 4
Representations and Warranties of CMAC
Section 4.1. Corporate Existence and Power.................... 26
Section 4.2. Corporate Authorization.......................... 26
Section 4.3. Governmental Authorization....................... 26
Section 4.4. Non-Contravention................................ 27
Section 4.5. Capitalization................................... 27
Section 4.6. Assets Necessary................................. 28
Section 4.7. Subsidiaries..................................... 28
Section 4.8. Licenses and Permits; Policies; Regulatory
Matters.......................................... 29
Section 4.9. SEC Filings...................................... 30
Section 4.10. Financial Statements............................. 30
Section 4.11. Registration Statement; Joint Proxy
Statement........................................ 31
Section 4.12. Absence of Certain Changes or Events............. 31
Section 4.13. Material Liabilities; Investments................ 32
Section 4.14. Compliance with Laws and Court Orders............ 32
Section 4.15. Material Contracts............................... 32
Section 4.16. Non-Claims Litigation............................ 34
Section 4.17. Reserves; Reinsurance............................ 35
Section 4.18. Loans and Advances............................... 36
Section 4.19. Finders' Fees.................................... 36
Section 4.20. Opinion of Financial Advisor..................... 36
Section 4.21. Taxes............................................ 36
Section 4.22. Employee Benefit Plans........................... 37
Section 4.23. Environmental Matters............................ 39
Section 4.24. Intellectual Property; Software.................. 39
Section 4.25. Properties....................................... 40
Section 4.26. Pooling; Tax Treatment........................... 40
Section 4.27. Takeover Statutes................................ 41
Section 4.28. Transactions with Affiliates..................... 41
Section 4.29. Business Information............................. 41
Section 4.30. Year 2000........................................ 41
Section 4.31. Rights Agreement................................. 42
ARTICLE 5
Covenants
Section 5.1. Conduct of Xxxxxx................................ 42
Section 5.2. Conduct of CMAC.................................. 45
Section 5.3. Stockholder Meetings; Proxy Materials;
Form S-4......................................... 48
Section 5.4. Director and Officer Liability................... 49
Section 5.5. Registration of Substitute Option Shares......... 50
Section 5.6. Stock Exchange Listing........................... 50
Section 5.7. Employee Benefits................................ 50
Section 5.8. Access to Information............................ 50
Section 5.9. Non-Solicitation by Xxxxxx; Other Offers......
for Xxxxxx....................................... 51
Section 5.10. Non-Solicitation by CMAC; Other Offers for
CMAC............................................. 52
Section 5.11. Notices of Certain Events........................ 54
Section 5.12. Appropriate Action; Consents; Filings............ 54
Section 5.13. Cooperation...................................... 56
Section 5.14. Public Announcements............................. 56
Section 5.15. Affiliates; Pooling of Interests;
Reorganization................................... 56
Section 5.16. Takeover Statutes................................ 56
Section 5.17. Employment Agreement............................. 57
ARTICLE 6
Conditions to the Merger
Section 6.1. Conditions to the Obligations of Each Party...... 57
Section 6.2. Conditions to the Obligations of CMAC............ 58
Section 6.3. Conditions to the Obligations of Xxxxxx.......... 59
ARTICLE 7
Termination
Section 7.1. Termination...................................... 60
Section 7.2. Effect of Termination............................ 63
Section 7.3. Certain Fees..................................... 63
ARTICLE 8
Miscellaneous
Section 8.1. Notices.......................................... 64
Section 8.2. Nonsurvival of Representations, Warranties,
Covenants and Agreements......................... 65
Section 8.3. Amendments; No Waivers........................... 65
Section 8.4. Expenses......................................... 65
Section 8.5. Successors and Assigns........................... 65
Section 8.6. Governing Law.................................... 65
Section 8.7. Jurisdiction..................................... 66
Section 8.8. Waiver of Jury Trial............................. 66
Section 8.9. Counterparts; Effectiveness...................... 66
Section 8.10. Entire Agreement................................. 66
Section 8.11. Captions......................................... 66
Section 8.12. Severability..................................... 66
Section 8.13. Specific Performance............................. 67
Section 8.14. Definitions and Usage............................ 67
Xxxxxx Schedule of Exceptions
CMAC Schedule of Exceptions
Exhibit A Certificate of Incorporation
Exhibit B-1 Affiliate's Letter (CMAC)
Exhibit B-2 Affiliate's Letter (Xxxxxx)
Exhibit C Tax Opinion of Xxxxxx, Xxxxx & Xxxxxxx
Exhibit D Tax Opinion of Xxxxx Xxxx & Xxxxxxxx
Exhibit E-1 Xxxxxx Tax Representation Letter
Exhibit E-2 CMAC Tax Representation Letter
Exhibit F Employment Agreement
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
November 22, 1998 between Xxxxxx Corporation, a Delaware corporation
("Xxxxxx"), and CMAC Investment Corporation, a Delaware corporation ("CMAC").
W I T N E S S E T H
WHEREAS, the Boards of CMAC and Xxxxxx xxxx it advisable and
in the best interests of each corporation and its respective stockholders that
CMAC and Xxxxxx enter into a strategic business combination in order to
advance the long-term business interests of CMAC and Xxxxxx, and have
therefore declared this Agreement to be advisable and approved this Agreement,
the Merger (as hereinafter defined) and the other transactions contemplated by
this Agreement; and
WHEREAS, the combination of CMAC and Xxxxxx shall be effected
by the terms of this Agreement through a transaction in which Xxxxxx will
merge with and into CMAC, CMAC will continue as the surviving corporation and
the stockholders of Xxxxxx will become stockholders of CMAC, which will be
renamed a name mutually agreed upon between the parties prior to Closing (as
hereinafter defined); and
WHEREAS, for Federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for financial accounting purposes, it is intended that
the Merger will be accounted for as a pooling of interests transaction; and
WHEREAS, CMAC and Xxxxxx desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement;
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, and
intending to be legally bound, the parties agree as follows:
ARTICLE 1
The Merger
Section 1.1. The Merger. (a) At the Effective Time, Xxxxxx
shall be merged (the "Merger") with and into CMAC in accordance with the
General Corporation Law of the State of Delaware ("Delaware Law"), whereupon
the separate existence of Xxxxxx shall cease, and CMAC shall continue as the
surviving corporation (the "Surviving Corporation").
(b) The closing of the Merger (the "Closing") shall take place at
10:00 a.m. on a date to be specified by the parties (the "Closing Date"),
which date shall be no later than the second business day after satisfaction of
the conditions set forth in Article 6, at the offices of Xxxxxx, Xxxxx &
Bockius LLP, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000, unless another time,
date or place is agreed in writing by the parties hereto.
(c) Upon the Closing, Xxxxxx and CMAC will file a certificate of
merger (the "Certificate of Merger") with the Delaware Secretary of State and
make all other filings or recordings required by Delaware Law in connection
with the Merger. The Merger shall become effective at such time (the
"Effective Time") as the Certificate of Merger is duly filed with the Delaware
Secretary of State (or at such later time as may be agreed in writing by the
parties hereto and specified in the Certificate of Merger).
(d) From and after the Effective Time, the Surviving Corporation
shall possess all the rights, powers, privileges and franchises and be subject
to all of the obligations, liabilities, restrictions and disabilities of
Xxxxxx and CMAC, all as provided under Delaware Law.
Section 1.2. Conversion of Shares. At the Effective Time:
(a) each share of common stock, par value $.01 per share, of Xxxxxx
outstanding immediately prior to the Effective Time (the "Xxxxxx Stock"),
together with the preferred share purchase rights issued to the holders thereof
pursuant to that certain Rights Agreement (the "Xxxxxx Rights Agreement")
dated as of October 14, 1998 between Xxxxxx and Norwest Bank Minnesota,
National Association (the "Xxxxxx Stockholder Rights") and attached thereto,
shall (except as otherwise provided in Section 1.2(b) and subject to Section
1.07) be converted into the right to receive .5333 (the "Exchange Ratio")
fully paid and nonassessable shares of the common stock, par value $.001 per
share, of CMAC (the "CMAC Stock"), together with the same number of preferred
share purchase rights issued to the holders thereof pursuant to that certain
Rights Agreement (the "CMAC Rights Agreement") dated as of April 14, 1998
between CMAC and The Bank of New York (the "CMAC Stockholder Rights") and
attached thereto, subject to adjustment as provided in Section 1.06 (the
"Merger Consideration"); and
(b) each share of Xxxxxx Stock held by Xxxxxx as treasury stock or
owned by CMAC or any of its Subsidiaries immediately prior to the Effective
Time shall be canceled, and no payment shall be made with respect thereto.
Section 1.3. CMAC Stock. At and after the Effective Time, each
share of CMAC Stock issued and outstanding immediately prior to the Effective
Time shall remain an issued and outstanding share of common stock of the
Surviving Corporation and shall not be affected by the Merger.
Section 1.4. Surrender and Payment. (a) Prior to the
Effective Time, CMAC shall appoint an agent (the "Exchange Agent") for the
purpose of exchanging certificates representing Xxxxxx Stock (the
"Certificates") for the Merger Consideration. As of the Effective Time, the
Surviving Corporation will make available to the Exchange Agent, as needed,
the Merger Consideration to be paid in respect of shares of Xxxxxx Stock.
Promptly after the Effective Time, CMAC will send, or will cause the Exchange
Agent to send, to each holder of shares of Xxxxxx Stock at the Effective Time
a letter of transmittal for use in such exchange (which shall specify that the
delivery shall be effected, and risk of loss and title shall pass, only upon
proper delivery of the Certificates to the Exchange Agent).
(b) Each holder of shares of Xxxxxx Stock that have been converted
into the right to receive the Merger Consideration will be entitled to receive,
upon surrender to the Exchange Agent of a Certificate, together with a
properly completed letter of transmittal, the Merger Consideration in respect
of the Xxxxxx Stock represented by such Certificate. Until so surrendered,
each such Certificate shall, after the Effective Time, represent for all
purposes only the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid to a
person other than the person in whose name the Certificate is registered, it
shall be a condition to such payment that the Certificate so surrendered shall
be properly endorsed or otherwise be in proper form for transfer and that the
person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a person other than the
registered holder of such Certificate or shall establish to the satisfaction
of the Exchange Agent that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no further
registration of transfers of shares of Xxxxxx Stock. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
canceled and exchanged for the consideration provided for, and in accordance
with the procedures set forth, in this Section.
(e) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 1.4(a) that remains unclaimed by the
holders of shares of Xxxxxx Stock six months after the Effective Time shall be
returned to the Surviving Corporation, upon demand, and any such holder who
has not exchanged shares of Xxxxxx Stock for the Merger Consideration prior
to that time shall thereafter look only to the Surviving Corporation for
payment of the Merger Consideration in respect of such shares of Xxxxxx Stock.
Notwithstanding the foregoing, the Surviving Corporation shall not be liable
to any holder of shares of Xxxxxx Stock for any amount paid to a public
official pursuant to applicable abandoned property laws. Any amounts
remaining unclaimed by holders of shares of Xxxxxx Stock two years after the
Effective Time (or such earlier date immediately prior to such time as such
amounts would otherwise escheat to or become property of any Governmental
Entity) shall, to the extent permitted by applicable law, become the property
of the Surviving Corporation free and clear of any claims or interest of any
person previously entitled thereto.
(f) No dividends, interest or other distributions with respect to
CMAC Stock constituting part of the Merger Consideration shall be paid to the
holder of any unsurrendered Certificates until such Certificates are
surrendered as provided in this Section. Upon such surrender, there shall be
paid, without interest, to the person in whose name the CMAC Stock has been
registered, all dividends, interest and other distributions payable in respect
of such securities on a date subsequent to, and in respect of a record date
after, the Effective Time.
Section 1.5. Stock Options and Restricted Stock. (a) At the
Effective Time, each option to purchase shares of Xxxxxx Stock outstanding
under any employee or director stock option or compensation plan or
arrangement of Xxxxxx, whether or not exercisable and whether or not vested,
shall be assumed by CMAC and shall constitute an option (a "Substitute
Option") to acquire, on the same terms and conditions as were applicable under
such assumed option (giving effect to any acceleration of vesting arising in
connection with the transactions contemplated hereby), that number of shares
of CMAC Stock equal to the product of the Exchange Ratio times the number of
shares of Xxxxxx Stock subject to such option, at a price per share (rounded
to the nearest $0.001) equal to the aggregate exercise price for the shares of
Xxxxxx Stock subject to such option divided by the number of full shares of
CMAC Stock deemed to be purchasable pursuant to such option; provided,
however, that (i) subject to the provisions of clause (ii) below, the number of
shares of CMAC Stock that may be purchased upon exercise of such Substitute
Option shall not include any fractional shares, and, upon the last such
exercise of such Substitute Option, CMAC shall pay to the holder thereof an
amount of cash equal to such fraction multiplied by the closing price of CMAC
Stock as reported on the NYSE on the date of such exercise, and (ii) in the
case of any Substitute Option to which Section 421 of the Code applies by
reason of its qualification under Section 422 of the Code, the option price,
the number of shares purchasable pursuant to such Substitute Option and the
terms and conditions of exercise of such Substitute Option shall be determined
in order to comply with Section 424 of the Code. The provisions of this
Section 1.05 shall in all events be interpreted and effected in a manner that
is consistent with the parties' obligations under Section 5.15.
(b) If any shares of Xxxxxx Stock outstanding at the Effective Time
are subject to any contractual restrictions (other than contractual
restrictions that lapse or cease as a result of consummation of the Merger)
relating to the continued performance of services to Xxxxxx or any of its
Subsidiaries by the holder, such restrictions shall continue to apply to the
CMAC Stock received by such holder pursuant to this Article 1 in respect of
such restricted shares of Xxxxxx Stock and shall thereafter relate to the
continuing performance of services by the holder to the Surviving Corporation.
(c) Prior to the Effective Time, Xxxxxx will obtain such consents,
if any, as may be necessary to give effect to the provisions of this Section.
In addition, prior to the Effective Time, CMAC and Xxxxxx will make such
amendments, if any, to the terms of the stock option or compensation plans or
arrangements of CMAC and Xxxxxx, as the case may be, and take such other
actions as are necessary to give effect to the provisions of this Section.
(d) Promptly after the Effective Time, the Surviving Corporation
shall send to each holder of a Substitute Option a notice informing such
holder of the amendments to the terms of such holder's Xxxxxx option
effected pursuant to this Section 1.05.
Section 1.6. Adjustments. If at any time during the period
between the date of this Agreement and the Effective Time, any change in the
outstanding shares of capital stock of Xxxxxx or CMAC shall occur, including
by reason of any reclassification, recapitalization, stock split or
combination, exchange or readjustment of shares, or any stock dividend thereon
with a record date during such period, the Merger Consideration shall be
equitably adjusted to eliminate the effects of such event.
Section 1.7. Fractional Shares. No fractional shares of CMAC
Stock shall be issued in connection with the Merger. In lieu of the issuance
of any such fractional share, the Surviving Corporation shall pay to each
former Amerin stockholder who otherwise would be entitled to receive such
fractional share as a result of the Merger an amount in cash determined by
multiplying the closing sale price of CMAC Stock on the New York Stock
Exchange (the "NYSE") on the trading day immediately preceding the Effective
Time by the fraction of a share of CMAC Stock to which such holder otherwise
would have been entitled.
Section 1.8. Withholding Rights. The Surviving Corporation
shall be entitled to deduct and withhold from the consideration otherwise
payable to any person pursuant to this Article such amounts as it is required
to deduct and withhold with respect to the making of such payment under any
provision of federal, state, local or foreign tax law. To the extent that
amounts are so withheld by the Surviving Corporation, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Xxxxxx Stock in respect of which such deduction and
withholding was made by the Surviving Corporation.
Section 1.9. 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 determine is
reasonably necessary as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed Certificate the Merger Consideration
deliverable in respect thereof pursuant to this Agreement.
ARTICLE 2
The Surviving Corporation
Section 2.1. Certificate of Incorporation. The certificate of
incorporation of the Surviving Corporation after the Effective Time shall be as
set forth in Exhibit A until thereafter changed or amended as provided therein
or by applicable law.
Section 2.2. Bylaws. The bylaws of CMAC in effect immediately
prior to the Effective Time shall be the bylaws of the Surviving Corporation
after the Effective Time until thereafter changed or amended as provided
therein or by applicable law, except that (i) Section 4.02 thereof shall be
amended to provide that the size of the Surviving Corporation Board may be
changed, until the Surviving Corporation's annual stockholder meeting to be
held in the year 2000 (the "2000 Annual Meeting"), only with the approval of
two-thirds of the entire Surviving Corporation Board and, thereafter, only with
the approval of a majority of the directors present at a meeting at which a
quorum is present, (ii) Section 4.04(a) thereof shall be amended to provide
that vacancies and newly created directorships resulting from any increase in
the authorized number of directors of the Surviving Corporation Board may be
filled, until the 2000 Annual Meeting, only with the approval of two-thirds of
the remaining Board members and, thereafter, only with the approval of a
majority of the remaining directors present at a meeting at which a quorum is
present, (iii) Section 4.10(a) thereof shall be amended to provide that, until
the 2000 Annual Meeting, two-thirds of the entire Surviving Corporation Board
shall constitute a quorum for the transaction of business and, thereafter, a
majority of the entire Surviving Corporation Board shall constitute a quorum
for the transaction of business.
Section 2.3. Board and Board Committees of the Surviving
Corporation. CMAC shall take all action necessary so that at the Effective
Time (i) the Surviving Corporation Board shall consist of the number of
members mutually agreed upon by CMAC and Xxxxxx prior to the Effective Time;
provided that such number shall not be less than nine or more than fourteen,
(ii) approximately 62% of the Surviving Corporation Board shall consist of
members designated by CMAC prior to the Effective Time, all of whom are either
members of the CMAC Board on the date of this Agreement or are designees
acceptable to Xxxxxx (the "CMAC Director Designees"), (iii) approximately 38%
of the Surviving Corporation Board shall consist of members designated by
Amerin prior to the Effective Time, all of whom are either members of the
Xxxxxx Board on the date of this Agreement or are designees acceptable to CMAC
(the "Amerin Director Designees"), (iv) the CMAC Director Designees and the
Amerin Director Designees shall be divided as evenly as possible among the
classes of the Surviving Corporation Board, (v) each committee of the
Surviving Corporation Board that does not have more than four members shall
consist of at least one Xxxxxx Director Designee, (vi) each committee of the
Surviving Corporation Board that does have more than four members shall
consist of that number of Amerin Director Designees that corresponds to their
proportionate representation on the Surviving Corporation Board and (vii) Xxx
X. Xxxxxx shall be a member of the Executive Committee of the Surviving
Corporation Board.
Section 2.4. Management. CMAC shall take all action necessary
to appoint (i) Xxxxx X. Xxxxxxx as Chairman of the Board and Chief Executive
Officer of the Surviving Corporation at the Effective Time and (ii) Xxx X.
Xxxxxx as President and Chief Operating Officer of the Surviving Corporation
at the Effective Time. Xx. Xxxxxxx and Xx. Xxxxxx shall consult with each
other on the selection of the other executive officers of the Surviving
Corporation.
Section 2.5. Headquarters. The Surviving Corporation shall
cause its headquarters to be located in Philadelphia, Pennsylvania.
ARTICLE 3
Representations and Warranties of Xxxxxx
Xxxxxx represents and warrants to CMAC that, except as
disclosed in the Xxxxxx Schedule of Exceptions (which will identify exceptions
by specific Section references) or as otherwise expressly contemplated by this
Agreement:
Section 3.1. Corporate Existence and Power. Xxxxxx is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all corporate powers and all
governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Xxxxxx. Xxxxxx is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction where
such qualification is necessary, except for those jurisdictions where failure
to be so qualified would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Xxxxxx. Xxxxxx has heretofore
delivered to CMAC true and complete copies of the certificate of incorporation
and bylaws of Xxxxxx as currently in effect.
Section 3.2. Corporate Authorization. (a) The execution,
delivery and performance by Xxxxxx of this Agreement and the consummation of
the transactions contemplated hereby are within the corporate powers of Xxxxxx
and, except for the required approval of Xxxxxx'x stockholders in connection
with the consummation of the Merger, have been duly authorized by all
necessary corporate action. The affirmative vote of the holders of a majority
of the outstanding shares of Xxxxxx Stock is the only vote of the Xxxxxx
stockholders necessary in connection with the consummation of the Merger. No
other vote of the Xxxxxx stockholders is necessary in connection with this
Agreement or the consummation of the transactions contemplated hereby. This
Agreement constitutes a valid and binding agreement of Xxxxxx.
(b) The Xxxxxx Board, at a meeting duly called and held, has (i)
determined that this Agreement and the transactions contemplated hereby
(including the Merger) are fair to and in the best interests of Xxxxxx'x
stockholders, (ii) declared advisable and approved and adopted this Agreement
and the transactions contemplated hereby (including the Merger) and (iii)
resolved to recommend approval and adoption of this Agreement by its
stockholders.
Section 3.3. Governmental Authorization. The execution,
delivery and performance by Xxxxxx of this Agreement and the consummation by
Xxxxxx of the transactions contemplated hereby require no action by or in
respect of, or filing with, any domestic or foreign governmental body, agency,
official or authority ("Governmental Entity") other than (i) the filing of a
certificate of merger in accordance with Delaware Law, (ii) compliance with
any applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976 ("HSR Act"), the Securities Act of 1933 ("Securities Act"), the
Securities Exchange Act of 1934 ("Exchange Act") or any other applicable
securities laws, (iii) approvals and filings under the insurance laws of the
jurisdictions set forth in Section 3.03 of the Xxxxxx Schedule of Exceptions
and (iv) any other filings, approvals or authorizations which, if not obtained
or made, would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Xxxxxx.
Section 3.4. Non-Contravention. The execution, delivery and
performance by Xxxxxx of this Agreement and the consummation by Amerin of the
transactions contemplated hereby do not and will not (i) contravene or violate
the certificate of incorporation or bylaws of Xxxxxx or the equivalent
documents of any of its Subsidiaries, (ii) assuming compliance with the matters
referred to in Section 3.3, contravene or violate any applicable law, rule,
regulation, judgment, injunction, order or decree binding upon or applicable to
Xxxxxx or any of its Subsidiaries, (iii) require any consent or other action by
any person under, constitute a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of Xxxxxx
or any of its Subsidiaries or to a loss of any benefit to which Xxxxxx or any
of its Subsidiaries is entitled under any provision of any agreement or other
instrument binding upon Xxxxxx or any of its Subsidiaries or any license,
franchise, permit, certificate, approval or other similar authorization
affecting, or relating in any way to, the assets or business of Amerin or any
of its Subsidiaries or (iv) result in the creation or imposition of any Lien
on any asset of Amerin or any of its Subsidiaries except, in the case of
clauses (ii), (iii) and (iv), for such matters as would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
Amerin. For purposes of this Agreement, "Lien" means, with respect to any
property or asset, any mortgage, lien, pledge, charge, security interest,
encumbrance or other adverse claim of any kind in respect of such property or
asset.
Section 3.5. Capitalization. The authorized capital stock of
Amerin consists of (i) 100,000,000 shares of Amerin Stock, of which 50,000,000
shares are voting common stock ("Voting Xxxxxx Stock") and 50,000,000 shares
are nonvoting common stock ("Nonvoting Xxxxxx Stock"); (ii) 10,000,000 shares
of Preferred Stock, par value $.01 per share, of which 300,000 shares have
been designated Series A Participating Cumulative Preferred Stock (the "Series
A Preferred Stock"); and (iii) 113,173 shares of 13.5% Convertible Preferred
Stock, par value $.01 per share. As of November 16, 1998, there were
outstanding 26,507,948 shares of Xxxxxx Stock, of which 24,851,039 shares are
Voting Xxxxxx Stock and 1,656,909 shares are Nonvoting Xxxxxx Stock, and no
shares of Preferred Stock (including Series A Preferred Stock) and 13.5%
Convertible Preferred Stock. As of November 16, 1998, there were outstanding
options to purchase an aggregate of 1,832,326 shares of Voting Xxxxxx Stock at
an average exercise price of $17.75 per share (of which options to purchase an
aggregate of 436,020 shares of Voting Xxxxxx Stock were exercisable). All
outstanding shares of capital stock of Xxxxxx have been duly authorized and
validly issued and are fully paid and non-assessable. Except for the Xxxxxx
Stockholder Rights, except as set forth in this Section and except for changes
since November 16, 1998 resulting from the exercise of employee stock options
outstanding on such date, there are no outstanding (i) shares of capital stock
or voting securities of Xxxxxx, (ii) securities of Xxxxxx or any of its
Subsidiaries convertible into or exchangeable for shares of capital stock or
voting securities of Xxxxxx or (iii) options or other rights to acquire from
Xxxxxx or any of its Subsidiaries or other obligations of Xxxxxx to issue, any
capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Xxxxxx. There are no
outstanding obligations of Xxxxxx or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any securities referred to in clauses (i), (ii) or
(iii) above.
Section 3.6. Assets Necessary. Amerin and its Subsidiaries
own, lease or license all material property and assets (including without
limitation Intellectual Property and Software) necessary to carry on their
businesses and operations as presently conducted. All such material assets
and properties (other than as CMAC and Amerin may mutually agree) will be
owned, leased or licensed by Amerin and its Subsidiaries at the Effective Time
and will as of the Effective Time permit the Surviving Corporation and its
Subsidiaries to conduct such businesses and operations in substantially the
same manner as such businesses and operations have been conducted by Amerin
prior to the Effective Time.
Section 3.7. Subsidiaries. (a) Each Subsidiary of Xxxxxx is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, has all corporate powers and all
governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Xxxxxx. Each Subsidiary of Xxxxxx is duly
qualified, or otherwise authorized, to transact business as a corporation and
is in good standing in each jurisdiction where such qualification is necessary,
except for those jurisdictions where failure to be so qualified would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Xxxxxx. Section 3.07(a) of the Xxxxxx Schedule of
Exceptions sets forth a complete and correct list of all Xxxxxx'x
Subsidiaries. Neither Xxxxxx nor any of its Subsidiaries holds any interest
in a partnership or joint venture of any kind.
(b) All of the outstanding capital stock of, or other voting
securities or ownership interests in, each Subsidiary of Xxxxxx is owned by
Xxxxxx, directly or indirectly, free and clear of any Lien and free of any
other limitation or restriction (including any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other voting
securities or ownership interests), other than any restrictions imposed under
the Securities Act. Except as set forth in this Section, there are no
outstanding (i) shares of capital stock or other voting securities or
ownership interests in any of Xxxxxx'x Subsidiaries, (ii) securities of Xxxxxx
or any of its Subsidiaries convertible into or exchangeable for shares of
capital stock or other voting securities or ownership interests in any of
Xxxxxx'x Subsidiaries or (iii) options or other rights to acquire from Xxxxxx
or any of its Subsidiaries, or other obligations of Xxxxxx or any of its
Subsidiaries to issue, any capital stock or other voting securities or
ownership interests in, or any securities convertible into or exchangeable for
any capital stock or other voting securities or ownership interests in, any of
Xxxxxx'x Subsidiaries. There are no outstanding obligations of Xxxxxx or any
of its Subsidiaries to repurchase, redeem or otherwise acquire any of the
securities referred to in clauses (i), (ii) or (iii) above.
Section 3.8. Licenses and Permits; Policies; Regulatory
Matters. (a) Xxxxxx and its Subsidiaries hold all material consents,
licenses, franchises, permits, waivers, approvals or other similar
authorizations (the "Permits") necessary for the ownership and conduct of the
respective businesses of Xxxxxx and its Subsidiaries, in the manner now
conducted, in each of the jurisdictions in which Xxxxxx and its Subsidiaries
conduct or operate their respective businesses, and such Permits are in full
force and effect in all material respects. No material violations exist in
respect of any Permit of Xxxxxx and its Subsidiaries, and no proceeding or
investigation is pending, or to the Knowledge of Xxxxxx threatened, that would
be reasonably likely to result in the suspension, revocation, limitation or
restriction of any Permit and, to the Knowledge of Xxxxxx, there is no
reasonable basis for the assertion of any such material violation or the
institution of any such proceeding.
(b) All insurance policies issued by any Subsidiary of Xxxxxx as
now in force are, to the extent required under applicable law, in a form
acceptable to applicable regulatory authorities, or have been filed with and
not objected to by such authorities within the period provided for such
objection.
(c) Xxxxxx and each Subsidiary of Xxxxxx has filed all material
reports, statements, documents, registrations, filings or submissions required
to be filed by Xxxxxx or any Subsidiary of Xxxxxx, respectively, with any
applicable federal, state or local regulatory authorities, including but not
limited to state insurance regulatory authorities. All such material reports,
statements, documents, registrations, filings and submissions complied in all
material respects with applicable law in effect when filed and no material
deficiencies have been asserted by any such regulatory authority with respect
to such reports, statements, documents, registrations, filings or submissions
that have not been satisfied. All premium rates, rating plans and policy forms
established or used by Xxxxxx or any Subsidiary of Xxxxxx that are required
to be filed with or approved by insurance regulatory authorities have been so
filed or approved, the premiums charged conform in all material respects to
the premiums so filed or approved and comply in all material respects with the
insurance laws applicable thereto, except where the failure to make such filing
or obtain such approval would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Xxxxxx.
(d) None of the information to be supplied by Xxxxxx for inclusion
in the approvals and filings under the insurance laws of the jurisdictions set
forth in Section 3.03 of the Xxxxxx Schedule of Exceptions will contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading.
Section 3.9. SEC Filings. (a) Xxxxxx has delivered to CMAC
(i) its annual report on Form 10-K for its fiscal year ended December 31, 0000
(xxx "Xxxxxx 00-X"), (xx) its quarterly reports on Form 10-Q for its fiscal
quarters ended after December 31, 1997, (iii) its proxy or information
statements relating to meetings of, or actions taken without a meeting by, the
stockholders of Xxxxxx held since December 31, 1997 and (iv) all of its other
reports, statements, schedules, prospectuses and registration statements filed
with the Securities and Exchange Commission (the "SEC") since December 31, 1997
(the documents referred to in this Section 3.9(a) being referred to
collectively as the "Xxxxxx SEC Filings"). Xxxxxx'x quarterly report on Form
10-Q for its fiscal quarter ended September 30, 1998 is referred to herein as
the "Xxxxxx 10-Q".
(b) As of its filing date, each Xxxxxx SEC Filing complied as to
form in all material respects with the applicable requirements of the
Securities Act and the Exchange Act.
(c) As of its filing date, each Xxxxxx SEC Filing filed pursuant
to the Exchange Act did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(d) Each such registration statement, if any, as amended or
supplemented, if applicable, filed pursuant to the Securities Act did not, as
of the date such statement or amendment became effective, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
Section 3.10. Financial Statements. (a) The audited
consolidated financial statements and unaudited consolidated interim financial
statements of Xxxxxx included in the Xxxxxx SEC Filings fairly present, in
conformity with GAAP applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of Xxxxxx and its
Subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject to normal
year-end adjustments in the case of any unaudited consolidated interim
financial statements). For purposes of this Agreement, "Xxxxxx Balance Sheet"
means the audited consolidated balance sheet of Xxxxxx as of December 31, 1997
set forth in the Xxxxxx 10-K and "Xxxxxx Balance Sheet Date" means December
31, 1997. For purposes of this Agreement, the "Xxxxxx Unaudited September
Balance Sheet" means the unaudited consolidated balance sheet of Xxxxxx and its
Subsidiaries as of September 30, 1998.
(b) The audited balance sheets of Xxxxxx'x Subsidiaries as of
December 31, 1997, and the related statements of operations and statements of
cash flows for the year then ended, and their respective annual statements for
the fiscal year ended December 31, 1997 (the "Xxxxxx Annual Statements") filed
with the insurance regulatory authorities in their respective jurisdictions
of domicile (collectively, the "Regulators"), copies of which have been
delivered to CMAC, fairly present in all material respects their respective
statutory financial conditions as of such date and the results of their
respective operations and cash flows for the year then ended in conformity
with SAP. The other information contained in the Xxxxxx Annual Statements
fairly presents in all material respects the information required to be
contained therein in conformity with SAP. The balance sheets of Xxxxxx and its
Subsidiaries in respect of any period ending after December 31, 1997, and the
related statements of operations and statements of cash flows, which have been
filed with Regulators, copies of which have been delivered to CMAC, fairly
present in all material respects their respective statutory financial
conditions as of such date and the results of their respective operations and
cash flows for the period then ended in conformity with SAP consistently
applied.
Section 3.11. Registration Statement; Joint Proxy Statement.
None of the information to be supplied by Xxxxxx for inclusion or
incorporation by reference in the joint proxy statement relating to the
meetings of Xxxxxx'x shareholders and CMAC's shareholders to be held in
connection with the Merger (together with any amendments thereof or
supplements thereto, the "Joint Proxy Statement") and in the registration
statement on Form S-4 to be filed by CMAC with the SEC with respect to the
CMAC Stock to be issued to Xxxxxx'x shareholders in connection with the Merger
(together with any amendments thereto, the "Registration Statement") in which
the Joint Proxy Statement shall be included as a prospectus will (i) in the
case of the Joint Proxy Statement, at the time of the mailing thereof, at the
time of the Xxxxxx Stockholder Meeting, and at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading or (ii) in the case of the Registration Statement, at the time it
becomes effective, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading. The Joint Proxy Statement and the
Registration Statement will comply (with respect to information relating to
Xxxxxx) as to form in all material respects with the applicable provisions of
the Securities Act and the Exchange Act. Notwithstanding the foregoing,
Xxxxxx makes no representation or warranty with respect to any information
supplied by CMAC which is contained in the Registration Statement or the Joint
Proxy Statement.
Section 3.12. Absence of Certain Changes or Events. Since
December 31, 1997, Xxxxxx and its Subsidiaries have conducted their businesses
only in the ordinary course and in a manner consistent with past practice and,
since such date, there has not been (a) any event, occurrence, development or
state of circumstances or facts which would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Xxxxxx (other than
an event, occurrence, development or state of circumstances or facts related
to (i) the United States economy or securities markets in general, (ii) this
Agreement or the transactions contemplated hereby or the announcement thereof
or (iii) the mortgage insurance industry in general), (b) any event that could
reasonably be expected to prevent or materially delay the performance of this
Agreement by Xxxxxx, or (c) any action taken by Xxxxxx or any of its
Subsidiaries that, if taken during the period from the date of this Agreement
through the Effective Time, would constitute a breach of Section 5.1.
Section 3.13. Material Liabilities; Investments. (a) There
are no liabilities of Xxxxxx or any Subsidiary of Xxxxxx of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, and there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in such a
liability, other than:
(i) liabilities provided for in the Xxxxxx Balance Sheet;
(ii) liabilities incurred since the Xxxxxx Balance Sheet Date
in the ordinary course of business, which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Xxxxxx;
and
(iii) liabilities or obligations under this Agreement.
(b) Section 3.13(b) of the Amerin Schedule of Exceptions describes
in reasonable detail all of Xxxxxx'x Investment Assets as of September 30,
1998.
"Investment Assets" means, with respect to any person, any
investment assets (whether or not required by GAAP or SAP to be reflected on
a balance sheet) beneficially owned (within the meaning of Rule 13d-3 under
the Exchange Act) by such person or any Subsidiary of such person, including
but not limited to bonds, notes, debentures, mortgage loans, collateral loans
and all other instruments of indebtedness, stocks, partnership or joint venture
interests and all other equity interests, certificates issued by or interests
in trusts, derivatives and all other assets acquired for investment purposes.
Section 3.14. Compliance with Laws and Court Orders. Amerin
and each of its Subsidiaries is and has been in compliance with, and to the
Knowledge of Xxxxxx, is not under investigation with respect to and has not
been threatened to be charged with or given notice of any violation of, any
applicable law, rule, regulation, judgment, injunction, order or decree, except
for such matters as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Xxxxxx.
Section 3.15. Material Contracts. (a) Neither Xxxxxx nor any
of its Subsidiaries is a party to or bound by:
(i) any agreement any of the benefits or costs of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement;
(ii) any insurance related agreement with outside parties
(other than any such agreement that is cancelable within 60 days without the
payment of any penalty and other than insurance policies or other similar
agreements issued by any Subsidiary of Xxxxxx in the ordinary course of its
business as to which Xxxxxx has provided the principal forms to CMAC),
including, but not limited to, those relating to borrower counseling and
contract underwriting;
(iii) any agreement which is a "material contract" (as such
term is defined in Item 601(b)(10) of Regulation S-K under the Securities Act
and the Exchange Act) that has not been filed or incorporated by reference in
the Xxxxxx SEC Filings;
(iv) any agreement which would prohibit or materially delay
the consummation of the Merger or any of the transactions contemplated by this
Agreement;
(v) any agreement relating to indebtedness for borrowed
money or any guarantee or similar agreement relating thereto, other than any
such agreement with, or relating to, an aggregate outstanding principal amount
or guaranteed obligation not exceeding $1,000,000;
(vi) any material license, franchise or similar agreement
necessary for the operation of the business of Xxxxxx and its Subsidiaries,
taken as a whole;
(vii) any material agency, dealer, sales representative,
marketing or other similar agreement, other than any agency agreement on the
relevant Subsidiaries' standard independent agency form;
(viii) any agreement that restricts or prohibits Xxxxxx or any
Subsidiary or Affiliate of Amerin from competing with any person in any line
of business or from competing in, engaging in or entering into any line of
business in any area and which would so restrict or prohibit Xxxxxx or any
Subsidiary or Affiliate of Xxxxxx after the Effective Time;
(ix) any reinsurance agreement (in each case applicable to
insurance in force);
(x) any agreement containing "change in control" or similar
provisions relating to a change in control of Xxxxxx or any of its
Subsidiaries;
(xi) any "stop loss" agreement, other than those entered into
in the ordinary course of business consistent with past practice;
(xii) any agreement (other than insurance policies or other
similar agreements issued by any Subsidiary of Xxxxxx in the ordinary course
of its business) pursuant to which Xxxxxx or any Subsidiary of Xxxxxx is
obligated to indemnify any other person;
(xiii) any agreement (other than any option agreement) with any
Affiliate of Xxxxxx or any director, officer or employee of Xxxxxx or any of
its Subsidiaries or Affiliates;
(xiv) any other material agreement; or
(xv) any guaranty of any of the foregoing.
For the purposes of this Section 3.15(a), "agreement" means any
agreement, contract, arrangement, commitment or understanding (whether written
or oral).
(b) Xxxxxx has heretofore furnished or made available to CMAC
complete and correct copies (or, if oral, accurate written summaries) of the
items listed in Section 3.15 of the Xxxxxx Schedule of Exceptions, each as
amended or modified to the date hereof, including any waivers with respect
thereto (the "Xxxxxx Significant Agreements"). Except as specifically
disclosed therein: (i) each of the Xxxxxx Significant Agreements is valid and
binding on Xxxxxx or of its Subsidiaries as applicable, and in full force and
effect; (ii) Xxxxxx and each of its Subsidiaries, as applicable, have in all
material respects performed all material obligations required to be performed
by them to date under each Xxxxxx Significant Agreement; (iii) neither Xxxxxx
nor any of its Subsidiaries knows of, or has received notice of, any violation
or default (or any condition which with the passage of time or the giving of
notice would cause such a violation of or a default) by any party under any
Xxxxxx Significant Agreement, except as, in the case of clauses (ii) and
(iii), such matters as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Xxxxxx. Set forth on Section
3.15 of the Xxxxxx Schedule of Exceptions is a description of any material
changes as of the date hereof to the amount and terms of the indebtedness of
Xxxxxx and its Subsidiaries from that described in the notes to the Xxxxxx
10-K.
Section 3.16. Non-Claims Litigation. Except for any action,
suit, investigation or proceeding that involves a claim under any insurance,
reinsurance or indemnity policy, fidelity bond, surety bond or similar contract
or undertaking issued or entered into by Xxxxxx or any Subsidiary of Xxxxxx,
there is no action, suit, investigation or proceeding pending against, or to
the Knowledge of Xxxxxx threatened against or affecting, Amerin or any
Subsidiary of Xxxxxx or any of their respective properties before any court,
arbitrator, or any Governmental Entity which is reasonably likely to result in
actual damages individually in excess of $500,000 or actual damages in the
aggregate in excess of $1,000,000. There is no action, suit, investigation or
proceeding pending against, or to the Knowledge of Amerin threatened against
or affecting, Xxxxxx or any Subsidiary of Xxxxxx or any of their respective
properties before any court, arbitrator, or any Governmental Entity which
would reasonably be expected to prevent, enjoin, alter or materially delay the
transactions contemplated hereby. Neither Xxxxxx nor any Subsidiary of Xxxxxx
nor any of their respective properties is subject to any material order or
judgment which would prevent or delay the consummation of the transactions
contemplated hereby.
Section 3.17. Reserves; Reinsurance. (a) Each reserve and
other liability amount in respect of the insurance business, including without
limitation reserve and other liability amounts in respect of insurance
policies, established or reflected in the Xxxxxx Annual Statements was
reviewed and certified by an independent actuary in accordance with applicable
state insurance laws and regulations. Each reserve and other liability amount
in respect of the insurance business, including without limitation reserve and
other liability amounts in respect of insurance policies, established or
reflected in the Xxxxxx Unaudited September Balance Sheet was reviewed by an
independent actuary to the extent required by applicable state insurance laws
and regulations. Each reserve and other liability amount established or
reflected in the Xxxxxx Annual Statements or the Xxxxxx Unaudited September
Balance Sheet was in conformity with SAP and in compliance with the
requirements of the insurance laws, rules and regulations of the respective
jurisdictions of domicile of each Subsidiary of Amerin as of the date thereof.
Each Subsidiary of Amerin owns assets that qualify as admitted assets under
the insurance laws, rules and regulations of the respective jurisdictions of
domicile of such Subsidiary in an amount equal to the sum of all such reserves
and liability amounts and its minimum statutory capital and surplus as required
by the insurance laws, rules and regulations of the respective jurisdictions of
domicile of such Subsidiary. The reserves set forth in the Xxxxxx Annual
Statements for the years indicated for payment of all insurance policy
benefits, losses, claims and expenses were considered adequate as of the date
of such statements by management of Xxxxxx to cover the total amount of all
reasonably anticipated liabilities of Xxxxxx and its Subsidiaries.
(b) Section 3.17(b) of the Xxxxxx Schedule of Exceptions lists, to
the extent not otherwise set forth in Section 3.15 of the Xxxxxx Schedule of
Exceptions, all ceded reinsurance agreements in force as of the date hereof to
which any Subsidiary of Xxxxxx is a party and under which there is liability
by either party to the agreement (collectively, the "Xxxxxx Existing
Reinsurance Agreements"). Section 3.17(b) of the Xxxxxx Schedule of
Exceptions also lists any reinsurance agreement pursuant to which Xxxxxx or
any of its Subsidiaries has assumed any insurance obligations. Neither Xxxxxx
nor any of its Subsidiaries has any reason to believe that any amount
recoverable by any of the Subsidiaries of Xxxxxx pursuant to any Xxxxxx
Existing Reinsurance Agreement is not fully collectible in due course and, to
the Knowledge of Xxxxxx, there is no reason to believe that the financial
condition of any such other party is impaired to the extent that a default
thereunder may reasonably be anticipated. Each of the Subsidiaries of Xxxxxx
is entitled to take full credit in its statutory financial statements pursuant
to applicable insurance laws for ceded reinsurance under the Xxxxxx Existing
Reinsurance Agreements to which it is a party, and there is no claim under any
Xxxxxx Existing Reinsurance Agreement that is disputed by any other party to
such agreement.
Section 3.18. Loans and Advances. Other than in the ordinary
course of its portfolio investment activities or loss mitigation activities,
neither Xxxxxx nor any of its Subsidiaries has any contractual commitment to
make any loan, advance or capital contribution to, or investment in, any other
person in excess of $500,000.
Section 3.19. Finders' Fees. Except for Xxxxxxxxx, Xxxxxx &
Xxxxxxxx Securities Corporation ("DLJ") and Xxxxxx Xxxxxxx, there is no
investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of Xxxxxx or any of its
Subsidiaries who might be entitled to any fee or commission in connection with
the transactions contemplated by this Agreement.
Section 3.20. Opinion of Financial Advisor. The Xxxxxx Board
has received the opinion of DLJ, financial advisor to Xxxxxx, to the effect
that, as of the date of this Agreement, the Exchange Ratio is fair from a
financial point of view to Xxxxxx'x stockholders.
Section 3.21. Taxes. Except as set forth in the Xxxxxx
Balance Sheet (including the notes thereto) and except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Xxxxxx, (i) all Tax returns, statements, reports, forms, and
similar filings (collectively, the "Xxxxxx Returns") required to be filed with
any taxing authority by, or with respect to, Xxxxxx and its Subsidiaries with
respect to Taxes have been filed in accordance with all applicable laws, (ii)
Xxxxxx and its Subsidiaries have timely paid all Taxes shown as due and
payable on the Xxxxxx Returns that have been so filed, and, as of the time of
filing, the Amerin Returns correctly reflected the facts regarding the income,
business, assets, operations, activities and the status of Xxxxxx and its
Subsidiaries (other than Taxes which are being contested in good faith and for
which adequate reserves are reflected on the Xxxxxx Balance Sheet), (iii)
Xxxxxx and its Subsidiaries have made provision for all Taxes payable by
Xxxxxx and its Subsidiaries for which no Xxxxxx Return has yet been filed,
(iv) the charges, accruals and reserves for Taxes with respect to Xxxxxx and
its Subsidiaries reflected on each of the Xxxxxx Balance Sheet and the Xxxxxx
Unaudited September Balance Sheet are adequate under GAAP to cover the Tax
liabilities accruing through the date thereof, (v) there is no action, suit,
proceeding, audit or claim now proposed or pending against or with respect to
Xxxxxx or any of its Subsidiaries in respect of any Tax, (vi) no Xxxxxx
Returns have been examined by the Internal Revenue Service ("IRS"), and the
IRS has not made assessments with respect to such returns, and (vii) there is
in effect no extension or waiver of the applicable statute of limitations of
any jurisdiction regarding the assessment or collection of any Tax.
For purposes of this Agreement, "Taxes" or "Tax" means any
taxes, duties, assessments, fees, levies, or similar governmental charges,
together with any interest, penalties, and additions to tax, imposed by any
taxing authority, wherever located (i.e., whether federal, state, local,
municipal, or foreign), including, without limitation, all net income, gross
income, gross receipts, net receipts, sales, use, transfer, franchise,
privilege, profits, social security, disability, withholding, payroll,
unemployment, employment, excise, severance, property, windfall profits, value
added, ad valorem, occupation, or any other similar governmental charge or
imposition.
Section 3.22. Employee Benefit Plans. (a) Section 3.22 of the
Xxxxxx Schedule of Exceptions identifies each "employee benefit plan", as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA"), each employment, severance or similar contract, plan, arrangement
or policy applicable to any director or officer of Xxxxxx and each plan, fund,
program, policy, contract, commitment or arrangement providing for
compensation, bonuses, profit-sharing, stock option or other stock related
rights or other forms of incentive or deferred compensation, vacation benefits,
insurance coverage (including any self-insured arrangements), health or
medical benefits, disability benefits, workers' compensation, supplemental
unemployment benefits, severance benefits and post-employment or retirement
benefits (including compensation, pension, health, medical or life insurance
benefits), whether formal or informal, written or oral, which (i) is sponsored,
maintained, administered or contributed to by Xxxxxx or any of its ERISA
Affiliates (as defined below) or under which Xxxxxx or any of its ERISA
Affiliates has any obligation to contribute to, or any liability and (ii)
covers any employee or former employee, director or former director,
consultant or former consultant, independent contractor or former independent
contractor, or present or former beneficiary, dependent or assignee of any
such employee, former employee, director, former director, independent
contractor, former independent contractor, consultant or former consultant of
Xxxxxx or any of its Subsidiaries. Such plans are referred to collectively
herein as the "Xxxxxx Employee Plans." Xxxxxx has delivered or made available
to CMAC, with respect to all Xxxxxx Employee Plans, true, complete and correct
copies of the following (including all amendments thereto): all plan
documents, handbooks, manuals, material employee communications and similar
documents governing employment policies, practices and procedures; all of the
most recent summary plan descriptions and any subsequent summaries of material
modifications; Forms series 5500 as filed with the IRS (including all required
reports and supporting schedules) for the most recent plan year; all trust
agreements with respect to the Xxxxxx Employee Plans; copies of any contracts
with service providers and insurers providing benefits for participants or
liability insurance or bonding for the sponsors, administrators or trustees of
any Xxxxxx Employee Plan; most recent annual audit and accounting of plan
assets for all funded plans; and, as applicable, the most recent IRS
determination letters and IRS opinion letters for all plans qualified under
Section 401(a) of the Code. An "ERISA Affiliate" of an entity is any
enterprise which, with such entity, forms or formed at any time since
September 2, 1994, a controlled group of corporations within the meaning of
Section 414(b) of the Code, a group of trades or businesses under common
control within the meaning of Section 414(c) of the Code, or any affiliated
service group within the meaning of Section 414(m) of the Code.
(b) Each Xxxxxx Employee Plan has been maintained in compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations (including but not limited to ERISA and the
Code) which are applicable to such Plan, including without limitation
requirements as to contributions, insurance premiums, fiduciary administration,
plan operations, employee classification and plan design, except where
failure(s) to so comply would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Xxxxxx.
(c) No Xxxxxx Employee Plan constitutes a "multiemployer plan", as
defined in Section 3(37) of ERISA (a "Multiemployer Plan"), and no Xxxxxx
Employee Plan is maintained in connection with any trust described in Section
501(c)(9) of the Code. No Xxxxxx Employee Plans are subject to Title IV of
ERISA, Section 302 of ERISA or Section 412 of the Code. Neither Xxxxxx nor
any of its Subsidiaries has ever sponsored, maintained or contributed to, or
incurred any liability with respect to, any employee benefit plan subject to
Title IV of ERISA (including any Multiemployer Plan). Neither CMAC nor any of
its ERISA Affiliates has incurred any material liability under Title IV of
ERISA arising in connection with the termination of, or complete or partial
withdrawal from, any plan covered or previously covered by Title IV of ERISA.
Nothing done or omitted to be done and no transaction or holding of any asset
under or in connection with any Amerin Employee Plan has or will make Xxxxxx
or any Subsidiary, any officer or director of Xxxxxx or any Subsidiary subject
to any liability under Title I of ERISA or liable for any tax or penalty
pursuant to Section 4975 of the Code or Part 4 of Subtitle I of ERISA that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Xxxxxx.
(d) Each Xxxxxx Employee Plan which is intended to be qualified
under Section 401(a) of the Code has been determined by the IRS to be so
qualified and has been so qualified during the period from its adoption to
date, and each trust forming a part thereof has been determined by the IRS to
be exempt from tax pursuant to Section 501(a) of the Code and, to the Knowledge
of Xxxxxx, nothing has occurred and no facts have arisen since such IRS
determination that would jeopardize the tax qualified status of any such
Xxxxxx Employee Plan or the tax-exempt status of any related trust.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by Xxxxxx or any of its ERISA Affiliates
relating to, or change in employee participation or coverage under, any Xxxxxx
Employee Plan which would increase materially the expense of maintaining such
Xxxxxx Employee Plan above the level of the expense incurred in respect
thereof for the fiscal year ended on the Xxxxxx Balance Sheet Date.
(f) Neither Xxxxxx nor any Subsidiary is a party to or subject to
any union contract or any employment contract or arrangement providing for
annual future compensation of $500,000 or more with any officer, consultant,
director or employee.
Section 3.23. Environmental Matters. (a) Except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Xxxxxx,
(i) no notice, notification, demand, request for information,
citation, summons or order has been received by, no complaint has been filed
against, no penalty has been assessed against, and no investigation, action,
claim, suit, proceeding or review is pending or, to the Knowledge of Xxxxxx,
is threatened by any Governmental Entity or other person against, Xxxxxx or
any of its Subsidiaries, in each case relating to or arising out of any
Environmental Law;
(ii) Xxxxxx and each of its Subsidiaries are and have been in
compliance with all Environmental Laws and all Environmental Permits; and
(iii) there are no liabilities of or relating to Xxxxxx or any
of its Subsidiaries of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, arising under or relating to
any Environmental Law and there are no facts, conditions, situations or set of
circumstances which could reasonably be expected to result in or be the basis
for any such liability.
(b) The following terms shall have the meaning set forth below:
"Environmental Laws" means any federal, state, local or foreign
law (including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or governmental
restriction or requirement or any agreement with any Governmental Entity,
relating to human health and safety, the environment or to pollutants,
contaminants, wastes or chemicals or any toxic, radioactive, ignitable,
corrosive, reactive or otherwise hazardous substances, wastes or materials.
"Environmental Permits" means, with respect to any person, all
permits, licenses, franchises, certificates, approvals and other similar
authorizations of Governmental Entities required by Environmental Laws and
necessary to the business of such person as currently conducted.
"Xxxxxx" and "its Subsidiaries" shall, for purposes of this
Section, include any entity which is, in whole or in part, a corporate
predecessor of Xxxxxx or any of its Subsidiaries.
Section 3.24. Intellectual Property; Software. (a) Xxxxxx and
its Subsidiaries own or otherwise have rights to use and, as of and from the
Effective Time, will own or otherwise have rights to use (in each case, free
and clear of any material Liens or other material limitations or restrictions)
all Intellectual Property used in their respective businesses as currently
conducted and as contemplated to be conducted; the use of any Intellectual
Property by Xxxxxx and its Subsidiaries does not infringe on or otherwise
violate the rights of any person; and, to the Knowledge of Amerin, no person
is challenging, infringing on or otherwise violating any right of Amerin or
any Subsidiary of Xxxxxx with respect to any Intellectual Property owned by
and/or licensed to Xxxxxx and its Subsidiaries.
(b) Xxxxxx and its Subsidiaries own or have valid and enforceable
licenses or other rights to use (in each case, free and clear of any material
Liens or other material limitations or restrictions) all Software used in the
conduct of their respective businesses and operations as currently conducted;
the use of the Software by Xxxxxx and its Subsidiaries does not infringe on or
otherwise violate the rights of any person; and, to the Knowledge of Xxxxxx,
no person is challenging, infringing on or otherwise violating any right of
Xxxxxx or any Subsidiary of Xxxxxx with respect to any Software used by Xxxxxx
and its Subsidiaries. Except as set forth in Section 3.24(b) of the Xxxxxx
Schedule of Exceptions, from and after the Effective Time, Xxxxxx and its
Subsidiaries will own or have valid and enforceable licenses or other rights
to use (in each case, free and clear of any material Liens or other material
limitations or restrictions) all Software used in the conduct of their
respective businesses and operations as currently conducted in the same manner
as such Software has been used to conduct such businesses and operations prior
to the date hereof.
"Intellectual Property" shall mean: trademarks, service marks,
brand names, certification marks, trade dress, assumed names, trade names and
other indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of
any such registration or application; inventions, discoveries and ideas,
whether patentable or not in any jurisdiction; patents, applications for
patents (including but not limited to divisions, continuations, continuations
in part and renewal applications), and any renewals, extensions or reissues
thereof, in any jurisdiction; nonpublic information, trade secrets and
confidential information and rights in any jurisdiction to limit the use or
disclosure thereof by any person; writings and other works, whether
copyrightable or not in any jurisdiction; registrations or applications for
registration of copyrights in any jurisdiction, and any renewals or extensions
thereof; and any similar intellectual property or proprietary rights; provided
that "Intellectual Property" shall not include Software.
"Software" shall mean all computer and telecommunication
software including source and object code and documentation and any other media
(including but not limited to manuals, journals and reference books).
Section 3.25. Properties. Xxxxxx and its Subsidiaries have
good title to, or in the case of leased property have valid leasehold
interests in, all of their respective properties and assets (whether real or
personal, tangible or intangible) except for imperfections in title or
invalidities in leasehold interests that do not, individually or in the
aggregate, materially detract from the value reflected on the Xxxxxx Balance
Sheet. None of such properties or assets is subject to any Liens, except:
(i) Liens reflected on the Xxxxxx Balance Sheet;
(ii) Liens for Taxes not yet due or being contested in good
faith (and for which adequate accruals or reserves have been established on
the Xxxxxx Balance Sheet); and
(iii) Liens which do not, individually or in the aggregate,
materially detract from the value reflected on the Xxxxxx Balance Sheet or
materially interfere with any present or intended use of any material
properties or assets.
Section 3.26. Pooling; Tax Treatment. (a) Xxxxxx intends that
the Merger be accounted for under the "pooling of interests" method under the
requirements of Opinion No. 16 (Business Combinations) of the Accounting
Principles Board of the American Institute of Certified Public Accountants
(APB No. 16), as amended by Statements of the Financial Accounting Standards
Board, and the related interpretations of the American Institute of Certified
Public Accountants, the Financial Accounting Standards Board, and the rules
and regulations of the SEC.
(b) To the best of Xxxxxx'x Knowledge, neither Xxxxxx nor any of
its Affiliates has taken or agreed to take any action that would prevent the
Merger from qualifying (i) for "pooling of interests" accounting treatment as
described in (a) above or (ii) as a reorganization within the meaning of
Section 368(a) of the Code.
Section 3.27. Takeover Statutes. The Xxxxxx Board has approved
the Merger and this Agreement, and such approval is sufficient to render
inapplicable to the Merger, this Agreement and the transactions contemplated
by this Agreement the restrictions on "business combinations" set forth in
Section 203 of the Delaware Law. To the best of Xxxxxx'x Knowledge, no other
"fair price", "moratorium", "control share acquisition" or other similar
antitakeover statute or regulation enacted under state or federal laws in the
United States applicable to Xxxxxx or any of its Subsidiaries is applicable to
the Merger or the other transactions contemplated hereby.
Section 3.28. Transactions with Affiliates. Since December
31, 1997, there have been no transactions, agreements, arrangements or
understandings between Xxxxxx or its Subsidiaries, on the one hand, and
Xxxxxx'x Affiliates (other than wholly-owned Subsidiaries of Xxxxxx) or other
persons, on the other hand, that would be required to be disclosed under Item
404 of Regulation S-K under the Securities Act and the Exchange Act.
Section 3.29. Business Information. The information Xxxxxx has
heretofore provided to CMAC regarding the composition and performance of
Xxxxxx'x portfolios of primary and pool insurance and reinsurance is accurate
and includes all material information concerning such portfolios. Xxxxxx has
provided CMAC with complete copies of all contracts and other business
arrangements with respect to the provision of insurance and any related
services (including without limitation primary insurance plans, pool insurance
commitments, reinsurance agreements, and contract underwriting arrangements).
Prior to the date of this Agreement, Xxxxxx has disclosed to CMAC the terms
and provisions of any insurance or ancillary product, plan or service that are
not fully set forth in formal business agreements.
Section 3.30. Year 2000. Xxxxxx has undertaken a concerted
effort to ensure that all of the Software, databases, computer firmware,
computer hardware (where general or special purpose), and other similar or
related items of automated, computerized, and/or software system(s) that are
used or relied on by Xxxxxx or by any of its Subsidiaries in the conduct of
their respective businesses will not malfunction, will not cease to function,
will not generate incorrect data, and will not provide incorrect results when
processing, providing and/or receiving date-related data with respect to any
dates after December 31, 1999. Xxxxxx reasonably believes that such effort
will be successful.
Section 3.31. Rights Agreement. Xxxxxx has taken all necessary
action with respect to all of the outstanding Amerin Stockholder Rights so
that, as of immediately prior to the Effective Time, as a result of entering
into this Agreement or consummating the Merger and the other transactions
contemplated by this Agreement, (i) neither Xxxxxx nor CMAC will have any
obligations under the Xxxxxx Stockholder Rights or the Xxxxxx Rights Agreement
and (ii) the holders of the Xxxxxx Stockholder Rights will have no rights
under the Xxxxxx Stockholder Rights or the Xxxxxx Rights Agreement.
ARTICLE 4
Representations and Warranties of CMAC
CMAC represents and warrants to Xxxxxx that, except as
disclosed in the CMAC Schedule of Exceptions (which will identify
exceptions by specific Section references) or as otherwise expressly
contemplated by this Agreement:
Section 4.1. Corporate Existence and Power. CMAC is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all corporate powers and all
governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on CMAC. CMAC is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on CMAC. CMAC has heretofore
delivered to Xxxxxx true and complete copies of the certificate of
incorporation and bylaws of CMAC as currently in effect.
Section 4.2. Corporate Authorization. (a) The execution,
delivery and performance by CMAC of this Agreement and the consummation of the
transactions contemplated hereby are within the corporate powers of CMAC and,
except for the required approval of CMAC's stockholders in connection with the
consummation of the Merger, have been duly authorized by all necessary
corporate action. The affirmative vote of the holders of not less than a
majority of the outstanding shares of CMAC Stock is the only vote of the CMAC
stockholders necessary in connection with the consummation of the Merger. No
other vote of the CMAC stockholders is necessary in connection with this
Agreement or the consummation of the transactions contemplated hereby. This
Agreement constitutes a valid and binding agreement of CMAC.
(b) The CMAC Board, at a meeting duly called and held, has (i)
determined that this Agreement and the transactions contemplated hereby
(including the Merger) are fair to and in the best interests of CMAC's
stockholders, (ii) declared advisable and approved and adopted this Agreement
and the transactions contemplated hereby (including the Merger and the
issuance of CMAC Stock pursuant to this Agreement), and (iii) resolved to
recommend approval and adoption of this Agreement by its stockholders.
Section 4.3. Governmental Authorization. The execution,
delivery and performance by CMAC of this Agreement and the consummation by
CMAC of the transactions contemplated hereby require no action by or in
respect of, or filing with, any Governmental Entity other than (i) the filing
of a certificate of merger in accordance with Delaware Law, (ii) compliance
with any applicable requirements of the HSR Act, the Securities Act, the
Exchange Act or any other applicable securities laws, (iii) approvals and
filings under the insurance laws of the jurisdictions set forth in Section
4.03 of the CMAC Schedule of Exceptions and (iv) any other filings, approvals
or authorizations which, if not obtained or made, would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
CMAC.
Section 4.4. Non-Contravention. The execution, delivery and
performance by CMAC of this Agreement and the consummation by CMAC of the
transactions contemplated hereby do not and will not (i) contravene or violate
the certificate of incorporation or bylaws of CMAC or the equivalent documents
of any of its Subsidiaries, (ii) assuming compliance with the matters referred
to in Section 4.3, contravene or violate any applicable law, rule, regulation,
judgment, injunction, order or decree binding upon or applicable to CMAC or
any of its Subsidiaries, (iii) require any consent or other action by any
person under, constitute a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of CMAC
or any of its Subsidiaries or to a loss of any benefit to which CMAC or any of
its Subsidiaries is entitled under any provision of any agreement or other
instrument binding upon CMAC or any of its Subsidiaries or any license,
franchise, permit, certificate, approval or other similar authorization
affecting, or relating in any way to, the assets or business of CMAC or any
of its Subsidiaries or (iv) result in the creation or imposition of any Lien
on any asset of CMAC or any of its Subsidiaries except, in the case of clauses
(ii), (iii) and (iv), for such matters as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on CMAC.
Section 4.5. Capitalization. The authorized capital stock of
CMAC consists of 80,000,000 shares of CMAC Stock and 20,000,000 shares of
Preferred Stock, par value $.001 per share, of which 800,000 shares have been
designated $4.125 Preferred Stock ( the "$4.125 Preferred Stock"). As of
November 16, 1998, there were outstanding 22,703,958 shares of CMAC Stock, and
800,000 shares of Preferred Stock, all of which are shares of $4.125 Preferred
Stock. As of November 16, 1998, there were outstanding options to purchase an
aggregate of 1,461,152 shares of CMAC Stock at an average exercise price of
$21.33 per share (of which options to purchase an aggregate of 736,577 shares
of CMAC Stock were exercisable). All outstanding shares of capital stock of
CMAC have been duly authorized and validly issued and are fully paid and
non-assessable. Except for the CMAC Stockholder Rights, except as set forth
in this Section, except for changes since November 16, 1998 resulting from the
exercise of employee stock options outstanding on such date and except for the
transactions contemplated hereby, there are no outstanding (i) shares of
capital stock or voting securities of CMAC, (ii) securities of CMAC or any of
its Subsidiaries convertible into or exchangeable for shares of capital stock
or voting securities of CMAC or (iii) options or other rights to acquire from
CMAC or any of its Subsidiaries or other obligations of CMAC to issue, any
capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of CMAC. There are no
outstanding obligations of CMAC or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any securities referred to in clauses (i), (ii) or
(iii) above.
Section 4.6. Assets Necessary. CMAC and its Subsidiaries own,
lease or license all material property and assets (including without limitation
Intellectual Property and Software) necessary to carry on their businesses and
operations as presently conducted. All such material assets and properties
(other than as CMAC and Xxxxxx may mutually agree) will be owned, leased or
licensed by CMAC and its Subsidiaries at the Effective Time and will as of the
Effective Time permit the Surviving Corporation and its Subsidiaries to
conduct such businesses and operations substantially in the same manner as
such businesses and operations have been conducted by CMAC prior to the
Effective Time.
Section 4.7. Subsidiaries. (a) Each Subsidiary of CMAC is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, has all corporate powers and all
governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on CMAC. Each Subsidiary of CMAC is duly qualified,
or otherwise authorized, to transact business as a corporation and is in good
standing in each jurisdiction where such qualification is necessary, except
for those jurisdictions where failure to be so qualified would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on CMAC. Section 4.07(a) of the CMAC Schedule of Exceptions
sets forth a complete and correct list of all CMAC's Subsidiaries. Neither
CMAC nor any of its Subsidiaries holds any interest in a partnership or joint
venture of any kind.
(b) All of the outstanding capital stock of, or other voting
securities or ownership interests in, each Subsidiary of CMAC is owned by CMAC,
directly or indirectly, free and clear of any Lien and free of any other
limitation or restriction (including any restriction on the right to vote,
sell or otherwise dispose of such capital stock or other voting securities or
ownership interests), other than any restrictions imposed under the Securities
Act. Except as set forth in this Section, there are no outstanding (i) shares
of capital stock or other voting securities or ownership interests in any of
CMAC's Subsidiaries, (ii) securities of CMAC or any of its Subsidiaries
convertible into or exchangeable for shares of capital stock or other voting
securities or ownership interests in any of CMAC's Subsidiaries or (iii)
options or other rights to acquire from CMAC or any of its Subsidiaries, or
other obligations of CMAC or any of its Subsidiaries to issue, any capital
stock or other voting securities or ownership interests in, or any securities
convertible into or exchangeable for any capital stock or other voting
securities or ownership interests in, any of CMAC's Subsidiaries. There are no
outstanding obligations of CMAC or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any of the securities referred to in clauses (i),
(ii) or (iii) above.
Section 4.8. Licenses and Permits; Policies; Regulatory
Matters. (a) CMAC and its Subsidiaries hold all Permits necessary for the
ownership and conduct, in the manner now conducted, of the respective
businesses of CMAC and its Subsidiaries in each of the jurisdictions in which
CMAC and its Subsidiaries conduct or operate their respective businesses, and
such Permits are in full force and effect in all material respects. No
material violations exist in respect of any Permit of CMAC and its
Subsidiaries, and no proceeding or investigation is pending, or to the
Knowledge of CMAC threatened, that would be reasonably likely to result in the
suspension, revocation, limitation or restriction of any Permit and, to the
Knowledge of CMAC, there is no reasonable basis for the assertion of any such
material violation or the institution of any such proceeding.
(b) All insurance policies issued by any Subsidiary of CMAC as now
in force are, to the extent required under applicable law, in a form acceptable
to applicable regulatory authorities, or have been filed with and not objected
to by such authorities within the period provided for such objection.
(c) CMAC and each Subsidiary of CMAC has filed all material
reports, statements, documents, registrations, filings or submissions required
to be filed by CMAC or any Subsidiary of CMAC, respectively, with any
applicable federal, state or local regulatory authorities, including but not
limited to state insurance regulatory authorities. All such material reports,
statements, documents, registrations, filings and submissions complied in all
material respects with applicable law in effect when filed and no material
deficiencies have been asserted by any such regulatory authority with respect
to such reports, statements, documents, registrations, filings or submissions
that have not been satisfied. All premium rates, rating plans and policy forms
established or used by CMAC or any Subsidiary of CMAC that are required to be
filed with or approved by insurance regulatory authorities have been so filed
or approved, the premiums charged conform in all material respects to the
premiums so filed or approved and comply in all material respects with the
insurance laws applicable thereto, except where the failure to make such filing
or obtain such approval would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on CMAC. None of the
information to be supplied by CMAC for inclusion in the approvals and filings
under the insurance laws of the jurisdictions set forth in Section 4.03 of the
CMAC Schedule of Exceptions will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading.
Section 4.9. SEC Filings. (a) CMAC has delivered to Xxxxxx
(i) its annual report on Form 10-K for its fiscal year ended December 31, 0000
(xxx "XXXX 00-X"), (xx) its quarterly reports on Form 10-Q for its fiscal
quarters ended after December 31, 1997, (iii) its proxy or information
statements relating to meetings of, or actions taken without a meeting by, the
stockholders of CMAC held since December 31, 1997 and (iv) all of its other
reports, statements, prospectuses, schedules and registration statements filed
with the SEC since December 31, 1997 (the documents referred to in this Section
4.9(a) being referred to collectively as the "CMAC SEC Filings"). CMAC's
quarterly report on Form 10-Q for its fiscal quarter ended September 30, 1998
is referred to herein as the "CMAC 10-Q".
(b) As of its filing date, each CMAC SEC Filing complied as to form
in all material respects with the applicable requirements of the Securities Act
and the Exchange Act.
(c) As of its filing date, each CMAC SEC Filing filed pursuant to
the Exchange Act did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(d) Each such registration statement, if any, as amended or
supplemented, if applicable, filed pursuant to the Securities Act did not, as
of the date such statement or amendment became effective, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
Section 4.10. Financial Statements. (a) The audited
consolidated financial statements and unaudited consolidated interim financial
statements of CMAC included in the CMAC SEC Filings fairly present, in
conformity with GAAP applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of CMAC and its
Subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject to normal
year-end adjustments in the case of any unaudited consolidated interim
financial statements). For purposes of this Agreement, "CMAC Balance Sheet"
means the audited consolidated balance sheet of CMAC as of December 31, 1997
set forth in the CMAC 10-K and "CMAC Balance Sheet Date" means December 31,
1997. For the purposes of this Agreement, the "CMAC Unaudited September
Balance Sheet" means the unaudited consolidated balance sheet of CMAC and its
Subsidiaries as of September 30, 1998.
(b) The audited balance sheets of CMAC's Subsidiaries as of
December 31, 1997, and the related statements of operations and statements of
cash flows for the year then ended, and their respective annual statements for
the fiscal year ended December 31, 1997 (the "CMAC Annual Statements") filed
with the Regulators, copies of which have been delivered to Xxxxxx, fairly
present in all material respects their respective statutory financial
conditions as of such date and the results of their respective operations and
cash flows for the year then ended in conformity with SAP. The other
information contained in the CMAC Annual Statements fairly presents in all
material respects the information required to be contained therein in
conformity with SAP. The balance sheets of CMAC and its Subsidiaries in
respect of any period ending after December 31, 1997, and the related
statements of operations and statements of cash flows, which have been filed
with Regulators, copies of which have been delivered to Xxxxxx, fairly present
in all material respects their respective statutory financial conditions as of
such date and the results of their respective operations and cash flows for
the period then ended in conformity with SAP consistently applied.
Section 4.11. Registration Statement; Joint Proxy Statement.
None of the information to be supplied by CMAC for inclusion or incorporation
by reference in the Joint Proxy Statement and the Registration Statement and
any amendments thereto will (i) in the case of the Joint Proxy Statement, at
the time of the mailing thereof, at the time of the CMAC Stockholder Meeting,
and at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading or (ii) in the case of the Registration
Statement, at the time it becomes effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. The
Joint Proxy Statement and the Registration Statement will comply (with respect
to information relating to CMAC) as to form in all material respects with the
applicable provisions of the Securities Act and the Exchange Act.
Notwithstanding the foregoing, CMAC makes no representation or warranty with
respect to any information supplied by Xxxxxx which is contained in the
Registration Statement or the Joint Proxy Statement.
Section 4.12. Absence of Certain Changes or Events. Since
December 31, 1997, CMAC and its Subsidiaries have conducted their businesses
only in the ordinary course and in a manner consistent with past practice and,
since such date, there has not been (a) any event, occurrence, development or
state of circumstances or facts which would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on CMAC (other than
an event, occurrence, development or state of circumstances or facts related
to (i) the United States economy or securities markets in general, (ii) this
Agreement or the transactions contemplated hereby or the announcement thereof
or (iii) the mortgage insurance industry in general), (b) any event that could
reasonably be expected to prevent or materially delay the performance of this
Agreement by CMAC, or (c) any action taken by CMAC or any of its Subsidiaries
that, if taken during the period from the date of this Agreement through the
Effective Time, would constitute a breach of Section 5.2.
Section 4.13. Material Liabilities; Investments. (a) There
are no liabilities of CMAC or any Subsidiary of CMAC of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
and there is no existing condition, situation or set of circumstances which
could reasonably be expected to result in such a liability, other than:
(i) liabilities provided for in the CMAC Balance Sheet;
(ii) liabilities incurred since the CMAC Balance Sheet Date in
the ordinary course of business, which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on CMAC;
and
(iii) liabilities or obligations under this Agreement.
(b) Section 4.13(b) of the CMAC Schedule of Exceptions describes in
reasonable detail all of CMAC's Investment Assets as of September 30, 1998.
Section 4.14. Compliance with Laws and Court Orders. CMAC and
each of its Subsidiaries is and has been in compliance with, and to the
Knowledge of CMAC, is not under investigation with respect to and has not been
threatened to be charged with or given notice of any violation of, any
applicable law, rule, regulation, judgment, injunction, order or decree, except
for such matters as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on CMAC.
Section 4.15. Material Contracts. (a) Neither CMAC nor any of
its Subsidiaries is a party to or bound by:
(i) any agreement any of the benefits or costs of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement;
(ii) any insurance related agreement with outside parties
(other than any such agreement that is cancelable within 60 days without the
payment of any penalty and other than insurance policies or other similar
agreements issued by any Subsidiary of CMAC in the ordinary course of its
business as to which CMAC has provided the principal forms to Xxxxxx),
including, but not limited to, those relating to borrower counseling and
contract underwriting;
(iii) any agreement which is a "material contract" (as such
term is defined in Item 601(b)(10) of Regulation S-K under the Securities Act
and the Exchange Act) that has not been filed or incorporated by reference in
the CMAC SEC Filings;
(iv) any agreement which would prohibit or materially delay
the consummation of the Merger or any of the transactions contemplated by this
Agreement;
(v) any agreement relating to indebtedness for borrowed
money or any guarantee or similar agreement relating thereto, other than any
such agreement with, or relating to, an aggregate outstanding principal amount
or guaranteed obligation not exceeding $1,000,000;
(vi) any material license, franchise or similar agreement
necessary for the operation of the business of CMAC and its Subsidiaries,
taken as a whole;
(vii) any material agency, dealer, sales representative,
marketing or other similar agreement, other than any agency agreement on the
relevant Subsidiaries' standard independent agency form;
(viii) any agreement that restricts or prohibits CMAC or any
Subsidiary or Affiliate of CMAC from competing with any person in any line of
business or from competing in, engaging in or entering into any line of
business in any area and which would so restrict or prohibit CMAC or any
Subsidiary or Affiliate of CMAC after the Effective Time;
(ix) any reinsurance agreement (in each case applicable to
insurance in force);
(x) any agreement containing "change in control" or similar
provisions relating to a change in control of CMAC or any of its Subsidiaries;
(xi) any "stop loss" agreement, other than those entered into
in the ordinary course of business consistent with past practice;
(xii) any agreement (other than insurance policies or other
similar agreements issued by any Subsidiary of CMAC in the ordinary course of
its business) pursuant to which CMAC or any Subsidiary of CMAC is obligated to
indemnify any other person;
(xiii) any agreement (other than any option agreement) with any
Affiliate of CMAC or any director, officer or employee of CMAC or any of its
Subsidiaries or Affiliates;
(xiv) any other material agreement; or
(xv) any guaranty of any of the foregoing.
For the purposes of this Section 4.15(a), "agreement" means any
agreement, contract, arrangement, commitment or understanding (whether written
or oral).
(b) CMAC has heretofore furnished or made available to Xxxxxx
complete and correct copies (or, if oral, accurate written summaries) of the
items listed in Section 4.15 of the CMAC Schedule of Exceptions, each as
amended or modified to the date hereof, including any waivers with respect
thereto (the "CMAC Significant Agreements"). Except as specifically disclosed
therein: (i) each of the CMAC Significant Agreements is valid and binding on
CMAC or its Subsidiaries as applicable and in full force and effect; (ii) CMAC
and each of its Subsidiaries, as applicable, have in all material respects
performed all material obligations required to be performed by them to date
under each CMAC Significant Agreement; (iii) neither CMAC nor any of its
Subsidiaries knows of, or has received notice of, any violation or default (or
any condition which with the passage of time or the giving of notice would
cause such violation of or a default) by any party under any CMAC Significant
Agreement or any other loan or credit agreement, note, bond, mortgage,
indenture or loan, except as, in the case of clauses (ii) and (iii), such
matters would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on CMAC. Set forth on Section 4.15 of the CMAC
Schedule of Exceptions is a description of any material changes as of the date
hereof to the amount and terms of the indebtedness of CMAC and its
Subsidiaries from that described in the notes to the CMAC 10-K.
Section 4.16. Non-Claims Litigation. Except for any action,
suit, investigation or proceeding that involves a claim under any insurance,
reinsurance or indemnity policy, fidelity bond, surety bond or similar contract
or undertaking issued or entered into by CMAC or any Subsidiary of CMAC, there
is no action, suit, investigation or proceeding pending against, or to the
Knowledge of CMAC threatened against or affecting, CMAC or any Subsidiary of
CMAC or any of their respective properties before any court, arbitrator, or
any Governmental Entity which is reasonably likely to result in actual damages
individually in excess of $500,000 or actual damages in the aggregate in
excess of $1,000,000. There is no action, suit, investigation or proceeding
pending against, or to the Knowledge of CMAC threatened against or affecting,
CMAC or any Subsidiary of CMAC or any of their respective properties before
any court, arbitrator, or any Governmental Entity which would reasonably be
expected to prevent, enjoin, alter or materially delay the transactions
contemplated hereby. Neither CMAC nor any Subsidiary of CMAC nor any of their
respective properties is subject to any material order or judgment which would
prevent or delay the consummation of the transactions contemplated hereby.
Section 4.17. Reserves; Reinsurance. (a) Each reserve and
other liability amount in respect of the insurance business, including without
limitation reserve and other liability amounts in respect of insurance
policies, established or reflected in the CMAC Annual Statements was reviewed
and certified by an independent actuary in accordance with applicable state
insurance laws and regulations. Each reserve and other liability amount in
respect of the insurance business, including without limitation reserve and
other liability amounts in respect of insurance policies, established or
reflected in the CMAC Unaudited September Balance Sheet was reviewed by an
independent actuary to the extent required by applicable state insurance laws
and regulations. Each reserve and other liability amount established or
reflected in the CMAC Annual Statements or the CMAC Unaudited September
Balance Sheet was in conformity with SAP and in compliance with the
requirements of the insurance laws, rules and regulations of the respective
jurisdictions of domicile of each Subsidiary of CMAC as of the date thereof.
Each Subsidiary of CMAC owns assets that qualify as admitted assets under the
insurance laws, rules and regulations of the respective jurisdictions of
domicile of such Subsidiary in an amount equal to the sum of all such reserves
and liability amounts and its minimum statutory capital and surplus as required
by the insurance laws, rules and regulations of the respective jurisdictions of
domicile of such Subsidiary. The reserves set forth in the CMAC Annual
Statements for the years indicated for payment of all insurance policy
benefits, losses, claims and expenses were considered adequate as of the date
of such statements by management of CMAC to cover the total amount of all
reasonably anticipated liabilities of CMAC and its Subsidiaries.
(b) Section 4.17(b) of CMAC Schedule of Exceptions lists, to the
extent not otherwise listed on Schedule 4.15 of the CMAC Schedule of
Exceptions, all ceded reinsurance agreements in force as of the date hereof to
which any Subsidiary of CMAC is a party and under which there is liability by
either party to the agreement (collectively, the "CMAC Existing Reinsurance
Agreements"). Section 4.17(b) of the CMAC Schedule of Exceptions also lists
any reinsurance agreement pursuant to which CMAC or any of its Subsidiaries
has assumed any insurance obligations. Neither CMAC nor any of its
Subsidiaries has any reason to believe that any amount recoverable by any of
the Subsidiaries of CMAC pursuant to any CMAC Existing Reinsurance Agreement
is not fully collectible in due course and, to the Knowledge of CMAC, there is
no reason to believe that the financial condition of any such other party is
impaired to the extent that a default thereunder may reasonably be
anticipated. Each of the Subsidiaries of CMAC is entitled to take full credit
in its statutory financial statements pursuant to applicable insurance laws
for ceded reinsurance under the CMAC Existing Reinsurance Agreements to which
it is a party, and there is no claim under any CMAC Existing Reinsurance
Agreement that is disputed by any other party to such agreement.
Section 4.18. Loans and Advances. Other than in the ordinary
course of its portfolio investment activities or loss mitigation activities,
neither CMAC nor any of its Subsidiaries has any contractual commitment to make
any loan, advance or capital contribution to, or investment in, any other
person in excess of $500,000.
Section 4.19. Finders' Fees. Except for Xxxxxxxx & Co. Inc.,
there is no investment banker, broker, finder or other intermediary which has
been retained by or is authorized to act on behalf of CMAC or any of its
Subsidiaries who might be entitled to any fee or commission in connection with
the transactions contemplated by this Agreement.
Section 4.20. Opinion of Financial Advisor. The CMAC Board has
received the opinion of Xxxxxxxx & Co. Inc., financial advisor to CMAC, to the
effect that, as of the date of this Agreement, the Exchange Ratio is fair from
a financial point of view to CMAC.
Section 4.21. Taxes. Except as set forth in the CMAC Balance
Sheet (including the notes thereto) and except as would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
CMAC, (i) all Tax returns, statements, reports, forms, and similar filings
(collectively, the "CMAC Returns") required to be filed with any taxing
authority by, or with respect to, CMAC and its Subsidiaries with respect to
Taxes have been filed in accordance with all applicable laws, (ii) CMAC and
its Subsidiaries have timely paid all Taxes shown as due and payable on the
CMAC Returns that have been so filed, and, as of the time of filing, the CMAC
Returns correctly reflected the facts regarding the income, business, assets,
operations, activities and the status of CMAC and its Subsidiaries (other than
Taxes which are being contested in good faith and for which adequate reserves
are reflected on the CMAC Balance Sheet), (iii) CMAC and its Subsidiaries have
made provision for all Taxes payable by CMAC and its Subsidiaries for which no
CMAC Return has yet been filed, (iv) the charges, accruals and reserves for
Taxes with respect to CMAC and its Subsidiaries reflected on each of the CMAC
Balance Sheet and the CMAC Unaudited September Balance Sheet are adequate
under GAAP to cover the Tax liabilities accruing through the date thereof, (v)
there is no action, suit, proceeding, audit or claim now proposed or pending
against or with respect to CMAC or any of its Subsidiaries in respect of any
Tax, (vi) all CMAC Returns for fiscal years ending on or before December 31,
1985 have been examined by the Internal Revenue Service, and any assessments
with respect to such returns have been paid in full, and (vii) there is in
effect no extension or waiver of the applicable statute of limitations of any
jurisdiction regarding the assessment or collection of any Tax.
Section 4.22. Employee Benefit Plans. (a) Section 4.22 of the
CMAC Schedule of Exceptions identifies each "employee benefit plan", as
defined in Section 3(3) of ERISA, each employment, severance or similar
contract, plan, arrangement or policy applicable to any director or officer of
CMAC and each plan, fund, program, policy, contract, commitment or
arrangement, providing for compensation, bonuses, profit-sharing, stock option
or other stock related rights or other forms of incentive or deferred
compensation, vacation benefits, insurance coverage (including any
self-insured arrangements), health or medical benefits, disability benefits,
workers' compensation, supplemental unemployment benefits, severance benefits
and post-employment or retirement benefits (including compensation, pension,
health, medical or life insurance benefits), whether formal or informal,
written or oral, which (i) is sponsored, maintained, administered or
contributed to by CMAC or any of its ERISA Affiliates or under which CMAC or
any of its ERISA Affiliates has any liability and (ii) covers any employee or
former employee of CMAC or any of its Subsidiaries. Copies of such plans and
arrangements (and, if applicable, related trust agreements) and all amendments
thereto and written interpretations thereof have been furnished or made
available to Xxxxxx together with the most recent annual report (Form 5500
including, if applicable, Schedule B thereto) prepared in connection with any
such plan. Such plans are referred to collectively herein as the "CMAC
Employee Plans".
(b) Each CMAC Employee Plan has been maintained in compliance with
its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations (including but not limited to ERISA and the
Code) which are applicable to such plan, including without limitation
requirements as to contributions, insurance premiums, fiduciary administration,
plan operations, employee classification and plan design, except where
failure(s) to so comply would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on CMAC.
(c) No CMAC Employee Plan constitutes a Multiemployer Plan, and
neither CMAC nor any ERISA Affiliate contributes to, and has ever contributed
to or had any other liability with respect to a Multiemployer Plan. No CMAC
Employee Plan is maintained in connection with any trust described in Section
501(c)(9) of the Code. The only CMAC Employee Plans that are subject to Title
IV of ERISA, Section 302 of ERISA or Section 412 of the Code (the "CMAC
Retirement Plans") are identified in Section 4.22 of the CMAC Schedule of
Exceptions. As of the CMAC Balance Sheet Date, the fair market value of the
assets of each CMAC Retirement Plan (excluding for these purposes any accrued
but unpaid contributions) exceeded the present value of all benefits accrued
under such CMAC Retirement Plans determined by using the interest rate and
actuarial assumptions used for funding purposes in the January 1, 1998
actuarial report. No "accumulated funding deficiency", as defined in Section
412 of the Code, has been incurred with respect to any CMAC Retirement Plan,
whether or not waived. CMAC knows of no "reportable event", within the
meaning of Section 4043 of ERISA, and no event described in Section 4041,
4042, 4062 or 4063 of ERISA has occurred in connection with any CMAC Employee
Plan, other than a "reportable event" that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on CMAC.
No condition exists and no event has occurred that could constitute grounds
for termination of any CMAC Retirement Plan and neither CMAC nor any of its
ERISA Affiliates has incurred any material liability under Title IV of ERISA
arising in connection with the termination of, or complete or partial
withdrawal from, any plan covered or previously covered by Title IV of ERISA.
Nothing done or omitted to be done and no transaction or holding of any asset
under or in connection with any CMAC Employee Plan has or will make CMAC or any
Subsidiary, any officer or director of CMAC or any Subsidiary subject to any
liability under Title I of ERISA or liable for any tax or penalty pursuant to
Section 4975 of the Code or Part 4 of Subtitle I of ERISA that, individually or
in the aggregate, would reasonably be expected to have a Material Adverse
Effect on CMAC.
(d) Each CMAC Employee Plan which is intended to be qualified
under Section 401(a) of the Code has been determined by the IRS to be so
qualified and has been so qualified during the period from its adoption to
date, and each trust forming a part thereof has been determined by the IRS to
be exempt from tax pursuant to Section 501(a) of the Code and to the Knowledge
of CMAC, nothing has occurred and no facts have arisen since such IRS
determination that would jeopardize the tax-qualified status of any such CMAC
Employee Plan or the tax-exempt status of any related trust.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by CMAC or any of its ERISA Affiliates
relating to, or change in employee participation or coverage under, any CMAC
Employee Plan which would increase materially the expense of maintaining such
CMAC Employee Plan above the level of the expense incurred in respect thereof
for the fiscal year ended on the CMAC Balance Sheet Date.
(f) Neither CMAC nor any Subsidiary is a party to or subject to any
union contract or any employment contract or arrangement providing for annual
future compensation of $500,000 or more with any officer, consultant, director
or employee.
Section 4.23. Environmental Matters. (a) Except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on CMAC,
(i) no notice, notification, demand, request for information,
citation, summons or order has been received by, no complaint has been filed
against, no penalty has been assessed against, and no investigation, action,
claim, suit, proceeding or review is pending or, to the Knowledge of CMAC, is
threatened by any Governmental Entity or other person against, CMAC or any of
its Subsidiaries, in each case relating to or arising out of any Environmental
Law;
(ii) CMAC and each of its Subsidiaries are and have been in
compliance with all Environmental Laws and all Environmental Permits; and
(iii) there are no liabilities of or relating to CMAC or any
of its Subsidiaries of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, arising under or relating to
any Environmental Law and there are no facts, conditions, situations or set of
circumstances which could reasonably be expected to result in or be the basis
for any such liability.
(b) The following terms shall have the meaning set forth below:
"CMAC" and "its Subsidiaries" shall, for purposes of this
Section, include any entity which is, in whole or in part, a corporate
predecessor of CMAC or any of its Subsidiaries.
Section 4.24. Intellectual Property; Software. (a) CMAC and
its Subsidiaries own or otherwise have rights to use and, as of and from the
Effective Time, will own or otherwise have rights to use (in each case, free
and clear of any material Liens or other material limitations or restrictions)
all Intellectual Property used in their respective businesses as currently
conducted and as contemplated to be conducted; the use of any Intellectual
Property by CMAC and its Subsidiaries does not infringe on or otherwise
violate the rights of any person; and, to the Knowledge of CMAC, no person is
challenging, infringing on or otherwise violating any right of CMAC or any
Subsidiary of CMAC with respect to any Intellectual Property owned by and/or
licensed to CMAC and its Subsidiaries.
(b) CMAC and its Subsidiaries own or have valid and enforceable
licenses or other rights to use (in each case, free and clear of any material
Liens or other material limitations or restrictions) all Software used in the
conduct of their respective businesses and operations as currently conducted;
the use of the Software by CMAC and its Subsidiaries does not infringe on or
otherwise violate the rights of any person; and, to the Knowledge of CMAC, no
person is challenging, infringing on or otherwise violating any right of CMAC
or any Subsidiary of CMAC with respect to any Software used by CMAC and its
Subsidiaries. Except as set forth in Section 4.24(b) of the CMAC Schedule of
Exceptions, from and after the Effective Time, CMAC and its Subsidiaries will
own or have valid and enforceable licenses or other rights to use (in each
case, free and clear of any material Liens or other material limitations or
restrictions) all Software used in the conduct of their respective businesses
and operations as currently conducted in the same manner as such Software has
been used to conduct such businesses and operations prior to the date hereof.
Section 4.25. Properties. CMAC and its Subsidiaries have good
title to, or in the case of leased property have valid leasehold interests in,
all of their respective properties and assets (whether real or personal,
tangible or intangible) except for imperfections in title or invalidities in
leasehold interests that do not, individually or in the aggregate, materially
detract from the value reflected on the CMAC Balance Sheet. None of such
properties or assets is subject to any Liens, except:
(i) Liens reflected on the CMAC Balance Sheet;
(ii) Liens for Taxes not yet due or being contested in good
faith (and for which adequate accruals or reserves have been established on
the CMAC Balance Sheet); and
(iii) Liens which do not, individually or in the aggregate,
materially detract from the value reflected on the CMAC Balance Sheet or
materially interfere with any present or intended use of any material
properties or assets.
Section 4.26. Pooling; Tax Treatment. (a) CMAC intends that
the Merger be accounted for under the "pooling of interests" method under the
requirements of Opinion No. 16 (Business Combinations) of the Accounting
Principles Board of the American Institute of Certified Public Accountants
(APB No. 16), as amended by Statements of the Financial Accounting Standards
Board, and the related interpretations of the American Institute of Certified
Public Accountants, the Financial Accounting Standards Board, and the rules
and regulations of the SEC.
(b) To the best of CMAC's Knowledge, neither CMAC nor any of its
Affiliates has taken or agreed to take any action that would prevent the Merger
from qualifying (i) for "pooling of interests" accounting treatment as
described in (a) above or (ii) as a reorganization within the meaning of
Section 368(a) of the Code.
Section 4.27. Takeover Statutes. The CMAC Board has approved
the Merger and this Agreement, and such approval is sufficient to render
inapplicable to the Merger, this Agreement and the transactions contemplated
by this Agreement the restrictions on "business combinations" set forth in
Section 203 of the Delaware Law. To the best of CMAC's Knowledge, no other
"fair price", "moratorium", "control share acquisition" or other similar
antitakeover statute or regulation enacted under state or federal laws in the
United States applicable to CMAC or any of its Subsidiaries is applicable to
the Merger or the other transactions contemplated hereby.
Section 4.28. Transactions with Affiliates. Since December 31,
1997, there have been no transactions, agreements, arrangements or
understandings between CMAC or its Subsidiaries, on the one hand, and CMAC's
Affiliates (other than wholly-owned Subsidiaries of CMAC) or other persons, on
the other hand, that would be required to be disclosed under Item 404 of
Regulation S-K under the Securities Act and the Exchange Act.
Section 4.29. Business Information. The information CMAC has
heretofore provided to Xxxxxx regarding the composition and performance of
CMAC's portfolios of primary and pool insurance and reinsurance is accurate
and includes all material information concerning such portfolios. CMAC has
provided Xxxxxx with complete copies of all contracts and other business
arrangements with respect to the provision of insurance and any related
services (including without limitation primary insurance plans, pool insurance
commitments, reinsurance agreements, and contract underwriting arrangements).
Prior to the date of this Agreement, CMAC has disclosed to Xxxxxx the terms
and provisions of any insurance or ancillary product, plan or service that are
not fully set forth in formal business agreements.
Section 4.30. Year 2000. CMAC has undertaken a concerted
effort to ensure that all of the Software, databases, computer firmware,
computer hardware (whether general or special purpose), and other similar or
related items of automated, computerized, and/or software system(s) that are
used or relied on by CMAC or by any of its Subsidiaries in the conduct of their
respective businesses will not malfunction, will cease to function, will not
generate incorrect data, and will not provide incorrect results when
processing, providing and/or receiving date-related data with respect to any
dates after December 31, 1999. CMAC reasonably believes that such effort will
be successful.
Section 4.31. Rights Agreement. CMAC has taken all necessary
action with respect to all of the outstanding CMAC Stockholder Rights so that,
as of immediately prior to the Effective Time, as a result of entering into
this Agreement or consummating the Merger and the other transactions
contemplated by this Agreement, (i) neither Xxxxxx nor CMAC will have any
obligations under the CMAC Stockholder Rights or the CMAC Rights Agreement and
(ii) the holders of the CMAC Stockholder Rights will have no rights under the
CMAC Stockholder Rights or the CMAC Rights Agreement.
ARTICLE 5
Covenants
Section 5.1. Conduct of Xxxxxx. Xxxxxx agrees that from the
date hereof until the Effective Time, except as set forth in Section 5.1 of the
Xxxxxx Schedule of Exceptions or as otherwise contemplated by this Agreement
or with the prior written consent of CMAC, Xxxxxx and its Subsidiaries shall
conduct their business in the ordinary course consistent with past practice
and shall use their reasonable best efforts to preserve intact their business
organizations and relationships with third parties and to keep available the
services of their present officers and employees. Without limiting the
generality of the foregoing, from the date hereof until the Effective Time,
except as set forth in Section 5.1 of the Xxxxxx Schedule of Exceptions or as
otherwise contemplated by this Agreement or with the prior written consent of
CMAC, Xxxxxx will not, and will not permit any of its Subsidiaries to:
(a) adopt or propose any change in its certificate of
incorporation or bylaws or equivalent documents;
(b) amend any material term of any outstanding security of Xxxxxx
or any of its Subsidiaries, or reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital
stock;
(c) merge or consolidate with any other person;
(d) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee, encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license, guarantee or encumbrance of (i)
any shares of capital stock of Xxxxxx or any of its Subsidiaries of any class,
or securities convertible or exchangeable or exercisable for any shares of
such capital stock, or any options, warrants or other rights of any kind to
acquire any shares of such capital stock or such convertible or exchangeable
securities, or any other ownership interest of Xxxxxx or any of its
Subsidiaries or (ii) except in the ordinary course of business and in a manner
consistent with past practice, any property or assets of Xxxxxx or any of its
Subsidiaries, except (A) the issuance of Xxxxxx Stock upon the exercise of
Xxxxxx options, (B) pursuant to contracts or agreements in force at the date
of this Agreement and set forth in the Xxxxxx Schedule of Exceptions or (C)
sales, transfers or dispositions of receivables in connection with the
securitization of such receivables;
(e) acquire, sell, lease, license, mortgage, otherwise encumber or
dispose of any assets outside the ordinary course of business and which
involve amounts in excess of $1,000,000 individually, or $2,000,000 in the
aggregate, or enter into any contract, agreement, commitment or transaction
with respect thereto outside the ordinary course of business consistent with
past practice;
(f) create or assume any Lien on any material asset, other than in
the ordinary course consistent with past practice;
(g) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to
any of its capital stock (except for dividends paid by any wholly-owned
Subsidiary of Xxxxxx to Xxxxxx or to any other wholly-owned Subsidiary of
Xxxxxx in the ordinary course) or repurchase, redeem or acquire any of its
outstanding shares of capital stock, or enter into any agreement with respect
to the voting of its capital stock;
(h) (i) incur any indebtedness for borrowed money or issue any debt
securities to assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person for borrowed money,
except for (A) indebtedness incurred to refinance any existing indebtedness of
CMAC, Xxxxxx or any of their respective Subsidiaries in connection with the
Merger or (B) other indebtedness for borrowed money with a maturity of not
more than one year in a principal amount not, in the aggregate, in excess of
$1,000,000, (ii) terminate, cancel or request any material change in, or agree
to any material change in, any Xxxxxx Significant Agreement or, except in
connection with transactions permitted under this Section 5.1, enter into any
contract or agreement material to the business, results of operations or
financial condition of Xxxxxx and its Subsidiaries taken as a whole, in either
case other than in the ordinary course of business, consistent with past
practice, (iii) make or authorize any capital expenditure, other than capital
expenditures that are not, in the aggregate, in excess of $1,000,000 for
Xxxxxx and its Subsidiaries taken as a whole; or (iv) enter into or amend any
contract, agreement, commitment or arrangement that, if fully performed, would
not be permitted under this Section 5.1;
(i) make any material loan, advance or capital contributions to or
investments in any person other than loans, advances or capital contributions
to or investments in wholly-owned Subsidiaries of Xxxxxx made in the ordinary
course consistent with past practices;
(j) change any of its investment policies or any of the accounting
principles, practices, methods or policies (including but not limited to any
reserving methods, practices or policies) used by it, except as may be required
as a result of a change in law, GAAP, SAP or Regulation S-X promulgated under
the Securities Act and Exchange Act;
(k) change the method of determining the GAAP reserves for any
guaranty fund assessment, special insurance assessment or similar assessment
or tax;
(l) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice or in accordance with their
terms of liabilities reflected or reserved against in the consolidated
financial statements (or the notes thereto) of Xxxxxx and its Subsidiaries or
incurred in the ordinary course of business consistent with past practice;
(m) make any Tax election or settle or compromise any material Tax
liability;
(n) (i) increase the compensation payable or to become payable to
its officers or employees (except for increases in accordance with past
practices in salaries or wages of employees of Xxxxxx or any of its
Subsidiaries), (ii) grant any rights to severance or termination pay to, or
enter into any employment or severance agreement with, any director, officer
or other employee of Amerin or any Subsidiary, or establish, adopt, enter into
or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer or
employee, except as contemplated by this Agreement or to the extent required
by applicable law or the terms of a collective bargaining agreement, (iii)
increase the benefits payable under any existing severance or termination pay
policies or employment agreements, (iv) enter into any employment, deferred
compensation or other similar agreement (or amendment to any such existing
agreement), (v) take any affirmative action to accelerate the vesting of any
stock-based compensation or (vi) make any loans or advances to any directors,
officers or employees, except in connection with transfers or for ordinary
travel and business expenses in the ordinary course of business consistent with
past practice;
(o) (i) enter into any reinsurance contract, other than in the
ordinary course of business consistent with past practice, or (ii) enter into
any treaty reinsurance contract, or (iii) commute any reinsurance contract, or
(iv) enter into or commute any reinsurance contract purchased by any
Subsidiary of Xxxxxx, except where required by a Regulator or a Governmental
Entity;
(p) enter into, extend or renew any traditional or modified pool
insurance policy, transaction or arrangement, other than in the ordinary course
of business consistent with past practice;
(q) take any action that would or would reasonably be expected to
make any representation and warranty of Amerin hereunder untrue in any
material respect at, or as of any time prior to, the Effective Time; or
(r) agree or commit to do any of the foregoing.
Section 5.2. Conduct of CMAC. CMAC agrees that from the date
hereof until the Effective Time, except as set forth in Section 5.02 of the
CMAC Schedule of Exceptions or as otherwise contemplated by this Agreement or
with the prior written consent of Xxxxxx, CMAC and its Subsidiaries shall
conduct their business in the ordinary course consistent with past practice
and shall use their reasonable best efforts to preserve intact their business
organizations and relationships with third parties and to keep available the
services of their present officers and employees. Without limiting the
generality of the foregoing, from the date hereof until the Effective Time,
except as set forth in Section 5.02 of the CMAC Schedule of Exceptions or as
otherwise contemplated by this Agreement or with the prior written consent of
Xxxxxx, CMAC will not, and will not permit any of its Subsidiaries to:
(a) adopt or propose any change in its certificate of
incorporation or bylaws or equivalent documents, except as contemplated by
this Agreement;
(b) amend any material term of any outstanding security of CMAC or
any of its Subsidiaries, or reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital
stock;
(c) merge or consolidate with any other person;
(d) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee, encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license, guarantee or encumbrance of (i)
any shares of capital stock of CMAC or any of its Subsidiaries of any class,
or securities convertible or exchangeable or exercisable for any shares of
such capital stock, or any options, warrants or other rights of any kind to
acquire any shares of such capital stock or such convertible or exchangeable
securities, or any other ownership interest of CMAC or any of its Subsidiaries
or (ii) except in the ordinary course of business and in a manner consistent
with past practice, any property or assets of CMAC or any of its Subsidiaries,
except (A) the issuance of CMAC Stock upon the exercise of CMAC options, (B)
the award of options in the ordinary course of business and consistent with
past practice, (C) pursuant to contracts or agreements in force at the date of
this Agreement or (D) sales, transfers or dispositions of receivables in
connection with the securitization of such receivables;
(e) acquire, sell, lease, license, mortgage, otherwise encumber or
dispose of any assets outside the ordinary course of business and which
involve amounts in excess of $1,000,000 individually, or $2,000,000 in the
aggregate, or enter into any contract, agreement, commitment or transaction
with respect thereto outside the ordinary course of business consistent with
past practice;
(f) create or assume any Lien on any material asset, other than in
the ordinary course consistent with past practice;
(g) except for a redemption of the $4.125 Preferred Stock in order
to comply with the condition set forth in Section 6.01(h), declare, set aside,
make or pay any dividend or other distribution, payable in cash, stock,
property or otherwise, with respect to any of its capital stock (except for
dividends paid by any wholly-owned Subsidiary of CMAC to CMAC or to any other
wholly-owned Subsidiary of CMAC in the ordinary course and except for regular
quarterly cash dividends of $.03 per share on the CMAC Stock or regular
quarterly cash dividends of $1.03125 per share on the $4.125 Preferred Stock)
or repurchase, redeem or acquire any of its outstanding shares of capital
stock, or enter into any agreement with respect to the voting of its capital
stock;
(h) (i) incur any indebtedness for borrowed money or issue any debt
securities to assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person for borrowed money,
except for (A) indebtedness incurred to refinance any existing indebtedness of
CMAC, Xxxxxx or any of their respective Subsidiaries in connection with the
Merger, (B) other indebtedness for borrowed money with a maturity of not more
than one year in a principal amount not, in the aggregate, in excess of
$1,000,000, (C) indebtedness incurred to finance the payment by CMAC of the
dividends on the $4.125 Preferred Stock permitted by Section 5.02(g) or (D)
indebtedness in the form of variable rate subordinated notes issued to
depository institution customers of Commonwealth Mortgage Assurance Company in
the ordinary course of business, (ii) terminate, cancel or request any
material change in, or agree to any material change in, any CMAC Significant
Agreement or, except in connection with transactions permitted under this
Section 5.2, enter into any contract or agreement material to the business,
results of operations or financial condition of Xxxxxx and its Subsidiaries
taken as a whole, in either case other than in the ordinary course of
business, consistent with past practice, (iii) make or authorize any capital
expenditure, other than capital expenditures that are not, in the aggregate, in
excess of $1,000,000 for CMAC and its Subsidiaries taken as a whole; or (iv)
enter into or amend any contract, agreement, commitment or arrangement that,
if fully performed, would not be permitted under this Section 5.2;
(i) make any material loan, advance or capital contributions to or
investments in any person other than loans, advances or capital contributions
to or investments in wholly-owned Subsidiaries of CMAC made in the ordinary
course consistent with past practices;
(j) change any of its investment policies or any of the accounting
principles, practices, methods or policies (including but not limited to any
reserving methods, practices or policies) used by it, except as may be required
as a result of a change in law, GAAP, SAP or Regulation S-X promulgated under
the Securities Act and Exchange Act;
(k) change the method of determining the GAAP reserves for any
guaranty fund assessment, special insurance assessment or similar assessment
or tax;
(l) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice or in accordance with their
terms of liabilities reflected or reserved against in the consolidated
financial statements (or the notes thereto) of CMAC and its Subsidiaries or
incurred in the ordinary course of business consistent with past practice;
(m) make any Tax election or settle or compromise any material Tax
liability;
(n) (i) increase the compensation payable or to become payable to
its officers or employees (except for increases in accordance with past
practices in salaries or wages of employees of CMAC or any of its
Subsidiaries), (ii) grant any rights to severance or termination pay to, or
enter into any employment or severance agreement with, any director, officer
or other employee of CMAC or any Subsidiary, or establish, adopt, enter into
or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer or
employee, except as contemplated by this Agreement or to the extent required
by applicable law or the terms of a collective bargaining agreement, (iii)
increase the benefits payable under any existing severance or termination pay
policies or employment agreements, (iv) enter into any employment, deferred
compensation or other similar agreement (or amendment to any such existing
agreement), (v) take any affirmative action to accelerate the vesting of any
stock-based compensation or (vi) make any loans or advances to any directors,
officers or employees, except in connection with transfers or for ordinary
travel and business expenses in the ordinary course of business consistent with
past practice;
(o) (i) enter into any reinsurance contract, other than in the
ordinary course of business consistent with past practice, or (ii) enter into
any treaty reinsurance contract, or (iii) commute any reinsurance contract, or
(iv) enter into or commute any reinsurance contract purchased by any
Subsidiary of CMAC, except where required by a Regulator or a Governmental
Entity;
(p) enter into any traditional or modified pool insurance policy,
transaction or arrangement, other than in the ordinary course of business
consistent with past practice;
(q) take any action that would or would reasonably be expected to
make any representation and warranty of CMAC hereunder untrue in any material
respect at, or as of any time prior to, the Effective Time; or
(r) agree or commit to do any of the foregoing.
Section 5.3. Stockholder Meetings; Proxy Materials; Form S-4.
(a) Xxxxxx shall cause a meeting of its stockholders (the "Xxxxxx Stockholder
Meeting") to be duly called and held as soon as reasonably practicable after
the date of this Agreement for the purpose of voting on the approval and
adoption of this Agreement and the Merger (the "Xxxxxx Stockholder Approval").
Subject to Section 5.09, the Xxxxxx Board shall recommend approval and
adoption of this Agreement and the Merger by Xxxxxx'x stockholders. In
connection with the Xxxxxx Stockholder Meeting, Xxxxxx (i) will promptly
prepare and file with the SEC, will use its best efforts to have cleared by
the SEC and will thereafter mail to its stockholders as promptly as
practicable the Joint Proxy Statement and all other proxy materials for such
meeting, (ii) will use its best efforts to obtain the Xxxxxx Stockholder
Approval and (iii) will otherwise comply with all legal requirements applicable
to such meeting.
(b) CMAC shall cause a meeting of its stockholders (the "CMAC
Stockholder Meeting") to be duly called and held as soon as reasonably
practicable after the date of this Agreement for the purpose of voting on the
approval and adoption of this Agreement and the Merger and the issuance of
CMAC Stock pursuant to the Agreement (the "CMAC Stockholder Approval").
Subject to Section 5.10, the CMAC Board shall recommend approval and adoption
of this Agreement, the Merger and the issuance of CMAC Stock pursuant to this
Agreement by CMAC's stockholders. In connection with the CMAC Stockholder
Meeting, CMAC (i) will promptly prepare and file with the SEC, will use its
best efforts to have cleared by the SEC and will thereafter mail to its
stockholders as promptly as practicable the Joint Proxy Statement and all
other proxy materials for such meeting, (ii) will use its best efforts to
obtain the CMAC Stockholder Approval and (iii) will otherwise comply with all
legal requirements applicable to such meeting.
(c) Xxxxxx and CMAC shall cooperate and promptly prepare and CMAC
shall file with the SEC as soon as practicable the Registration Statement, a
portion of which Registration Statement shall also serve as the Joint Proxy
Statement. The respective parties will cause the Joint Proxy Statement and
the Registration Statement to comply as to form in all material respects with
the applicable provisions of the Securities Act, the Exchange Act and the
rules and regulations thereunder. CMAC shall use its best efforts, and Xxxxxx
will cooperate with CMAC, to have the Registration Statement declared
effective by the SEC as promptly as practicable. CMAC shall use its best
efforts to obtain, prior to the effective date of the Registration Statement,
all necessary state securities law or "blue sky" permits or approvals required
to carry out the transactions contemplated by this Agreement and Xxxxxx shall
provide all reasonable assistance requested by CMAC in connection therewith.
No amendment or supplement to the Joint Proxy Statement will be made by Xxxxxx
or CMAC without the approval of the other party, which will not be
unreasonably withheld. CMAC will advise Xxxxxx, promptly after it receives
notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, the issuance of any
stop order, the suspension of the qualification of the CMAC Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Joint Proxy Statement or the
Registration Statement or comments thereon and responses thereto or requests
by the SEC for additional information. If at any time prior to the Effective
Time any information relating to Xxxxxx or CMAC, or any of their respective
Affiliates, officers or directors, should be discovered by Xxxxxx or CMAC
which should be set forth in an amendment or supplement to any of the
Registration Statement or the Joint Proxy Statement, so that any of such
documents would not include any misstatement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other party hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated
to the stockholders of Xxxxxx and CMAC.
Section 5.4. Director and Officer Liability. (a) CMAC agrees
that all rights to indemnification and exculpation from liabilities for acts
or omissions occurring at or prior to the Effective Time now existing in favor
of the current or former directors or officers of Xxxxxx and its Subsidiaries
as provided in their respective certificates of incorporation or bylaws (or
comparable organizational documents) and any indemnification agreements of
Xxxxxx, the existence of which does not constitute a breach of this Agreement,
shall be assumed by CMAC, as the Surviving Corporation in the Merger, without
further action, as of the Effective Time and shall survive the Merger and shall
continue in full force and effect in accordance with their terms. In addition,
from and after the Effective Time, directors and officers of Amerin who become
directors and officers of CMAC will be entitled to the same indemnity rights
and protections as are afforded to other directors and officers of the
Surviving Corporation.
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
is not 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 such case, proper
provision will be made so that the successors and assigns of the Surviving
Corporation assume the obligations set forth in this Section 5.4.
(c) For six years after the Effective Time, the Surviving
Corporation shall maintain in effect directors' and officers' liability
insurance covering acts or omissions occurring prior to the Effective Time
with respect to those persons who are currently covered by Xxxxxx'x directors'
and officers' liability insurance policy on terms with respect to such
coverage and amount which, in the aggregate, are no less favorable than those
of Xxxxxx'x current policy in effect on the date hereof; provided that in no
event shall the Surviving Corporation be required to pay more than 175% of the
current annual premium.
(d) The provisions of this Section 5.4 are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her
heirs and his or her personal representatives and are in addition to, and not
in substitution for, any other rights to indemnification or contribution that
any such person may have by contract or otherwise.
Section 5.5. Registration of Substitute Option Shares. CMAC
shall take such action as is necessary to ensure that the offer and sale of
CMAC Stock pursuant to the Substitute Options is effected in compliance with
the Securities Act, and that the CMAC Stock underlying such Substitute Options
is fully resalable by the holders thereof upon exercise without regard to any
holding period therefor. CMAC shall promptly take any action required to be
taken under foreign or state securities or Blue Sky laws in connection with the
issuance of CMAC Stock pursuant to the Substitute Options.
Section 5.6. Stock Exchange Listing. CMAC shall use its best
efforts to cause the shares of CMAC Stock to be issued in connection with the
Merger (and upon the exercise of Substitute Options) to be listed on the NYSE,
subject to official notice of issuance.
Section 5.7. Employee Benefits. From and after the Effective
Time, the Surviving Corporation shall cause the employees of Xxxxxx and its
Subsidiaries to receive compensation and employee benefits that are, in the
aggregate, no less generous than those currently received by similarly situated
employees of CMAC and its Subsidiaries.
Section 5.8. Access to Information. (a) From the date hereof
until the Effective Time, Xxxxxx will give CMAC, its counsel, financial
advisors, auditors and other authorized representatives reasonable access
during normal business hours to the offices, properties, books and records of
Xxxxxx and its Subsidiaries, will furnish to CMAC, its counsel, financial
advisors, auditors and other authorized representatives such financial and
operating data and other information as such Persons may reasonably request
and will instruct Xxxxxx'x employees, auditors, counsel and financial advisors
to cooperate with CMAC in its investigation of the business of Xxxxxx and its
Subsidiaries; provided that no investigation pursuant to this Section shall
affect any representation or warranty given by Amerin to CMAC hereunder. Such
information shall be held in confidence to the extent required by, and in
accordance with, the provisions of the confidentiality agreement dated July 29,
1997 between CMAC and Xxxxxx (the "Confidentiality Agreement").
(b) From the date hereof until the Effective Time, CMAC will give
Xxxxxx, its counsel, financial advisors, auditors and other authorized
representatives reasonable access during normal business hours to the offices,
properties, books and records of CMAC and its Subsidiaries, will furnish to
Xxxxxx, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
Persons may reasonably request and will instruct CMAC's employees, auditors,
counsel and financial advisors to cooperate with Xxxxxx in its investigation
of the business of CMAC and its Subsidiaries; provided that no investigation
pursuant to this Section shall affect any representation or warranty given by
CMAC to Xxxxxx hereunder. Such information shall be held in confidence to the
extent required by, and in accordance with, the Confidentiality Agreement.
Section 5.9. Non-Solicitation by Amerin; Other Offers for
Xxxxxx. (a) Xxxxxx agrees that it shall not, nor shall it permit any of its
Subsidiaries to, nor shall it authorize or permit any officer, director or
employee or any investment banker, attorney, accountant, agent or other
advisor or representative of Xxxxxx or any of its Subsidiaries to, (i)
solicit, initiate or knowingly encourage the submission of any Amerin
Acquisition Proposal, (ii) enter into any agreement with respect to any Amerin
Acquisition Proposal or (iii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take
any other action to facilitate any inquiries or the making of any proposal
that constitutes, or may reasonably be expected to lead to, any Amerin
Acquisition Proposal; provided, however, that Xxxxxx may, in response to
unsolicited requests therefor, participate in discussions or negotiations
with, or furnish information pursuant to a confidentiality agreement no less
favorable to such party than the Confidentiality Agreement to, any person who
indicates a willingness to make a Xxxxxx Superior Proposal and the Xxxxxx
Board determines in good faith after consultation with its financial advisor
that such Xxxxxx Superior Proposal is reasonably capable of being completed on
the terms proposed. For all purposes of this Agreement, "Xxxxxx Acquisition
Proposal" means any proposal for a merger, consolidation, share exchange,
business combination or other similar transaction involving Xxxxxx or any of
its Subsidiaries or any proposal or offer to acquire, directly or indirectly,
an equity interest in, any voting securities of, or a substantial portion of
the assets of, Xxxxxx or any of its Subsidiaries, other than the transactions
contemplated by this Agreement. Xxxxxx immediately shall cease and cause to
be terminated all existing discussions or negotiations with any persons
conducted heretofore with respect to, or that could reasonably be expected to
lead to, any Amerin Acquisition Proposal.
(b) Neither the Xxxxxx Board nor any committee thereof shall (i)
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
CMAC, the approval or recommendation by the Xxxxxx Board or any such committee
of this Agreement and the transactions contemplated by this Agreement or (ii)
approve or recommend, or propose to approve or recommend, any Xxxxxx
Acquisition Proposal. Notwithstanding the foregoing, (i) the Xxxxxx Board may
approve or recommend a Xxxxxx Superior Proposal (and, in connection therewith,
withdraw or modify its approval or recommendation of this Agreement or the
Merger) if the Xxxxxx Board determines in good faith, after taking into
account its fiduciary duties, that such action is in the best interests of
Xxxxxx'x stockholders and (ii) nothing contained in this Agreement shall
prevent the Xxxxxx Board from complying with Rule 14d-9 and Rule 14e-2
promulgated under the Exchange Act with regard to a Xxxxxx Acquisition
Proposal. For all purposes of this Agreement, "Xxxxxx Superior Proposal"
means a bona fide written proposal made by a third party to acquire Xxxxxx
pursuant to a tender or exchange offer, a merger, a share exchange, a sale of
all or substantially all its assets or otherwise on terms which a majority of
the members of the Xxxxxx Board determines in good faith, after taking into
account the advice of independent financial advisors and after taking into
account the strategic benefits anticipated to be derived from the Merger and
the prospects of CMAC and Xxxxxx as a combined company, to be more favorable
over the long term to Xxxxxx and its stockholders than the Merger and for
which financing, to the extent required, is then fully committed or reasonably
determined to be available by the Xxxxxx Board.
(c) Xxxxxx shall notify CMAC promptly (but in no event later than
24 hours) after receipt by Xxxxxx or any of its advisors of a Xxxxxx
Acquisition Proposal or any request for nonpublic information in connection
with a Xxxxxx Acquisition Proposal or for access to the properties, books or
records of Xxxxxx or any of its Subsidiaries by any person that informs CMAC
or any of its advisors that it is considering making, or has made, a Amerin
Acquisition Proposal. Such notice to CMAC shall be made orally and in writing
and shall indicate the identity of the offeror and the terms and conditions of
such proposal, inquiry or contact. Xxxxxx shall keep CMAC informed, on a
current basis, of the status and details (including amendments or proposed
amendments) of any such Xxxxxx Acquisition Proposal or request and the status
of any negotiations or discussions.
Section 5.10. Non-Solicitation by CMAC; Other Offers for CMAC.
(a) CMAC agrees that it shall not, nor shall it permit any of its Subsidiaries
to, nor shall it authorize or permit any officer, director or employee or any
investment banker, attorney, accountant, agent or other advisor or
representative of CMAC or any of its Subsidiaries to, (i) solicit, initiate or
knowingly encourage the submission of any CMAC Acquisition Proposal, (ii)
enter into any agreement with respect to any CMAC Acquisition Proposal or
(iii) participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any CMAC Acquisition Proposal;
provided, however, that CMAC may, in response to unsolicited requests
therefor, participate in discussions or negotiations with, or furnish
information pursuant to a confidentiality agreement no less favorable to such
party than the Confidentiality Agreement to, any person who indicates a
willingness to make a CMAC Superior Proposal and the CMAC Board determines in
good faith after consultation with its financial advisor that such CMAC
Superior Proposal is reasonably capable of being completed on the terms
proposed. For all purposes of this Agreement, "CMAC Acquisition Proposal"
means any proposal for a merger, consolidation, share exchange, business
combination or other similar transaction involving CMAC or any of its
Subsidiaries or any proposal or offer to acquire, directly or indirectly, an
equity interest in, any voting securities of, or a substantial portion of the
assets of, CMAC or any of its Subsidiaries, other than the transactions
contemplated by this Agreement. CMAC immediately shall cease and cause to be
terminated all existing discussions or negotiations with any persons conducted
heretofore with respect to, or that could reasonably be expected to lead to,
any CMAC Acquisition Proposal.
(b) Neither the CMAC Board nor any committee thereof shall (i)
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Xxxxxx, the approval or recommendation by the CMAC Board or any such committee
of this Agreement and the transactions contemplated by this Agreement or (ii)
approve or recommend, or propose to approve or recommend, any CMAC Acquisition
Proposal. Notwithstanding the foregoing, (i) the CMAC Board may approve or
recommend a CMAC Superior Proposal (and, in connection therewith, withdraw or
modify its approval or recommendation of this Agreement or the Merger) if the
CMAC Board determines in good faith, after taking into account its fiduciary
duties, that such action is in the best interests of CMAC's stockholders and
(ii) nothing contained in this Agreement shall prevent the CMAC Board from
complying with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act
with regard to a CMAC Acquisition Proposal. For all purposes of this
Agreement, "CMAC Superior Proposal" means a bona fide written proposal made by
a third party to acquire CMAC pursuant to a tender or exchange offer, a
merger, a share exchange, a sale of all or substantially all its assets or
otherwise on terms which a majority of the members of the CMAC Board
determines in good faith, after taking into account the advice of independent
financial advisors and after taking into account the strategic benefits
anticipated to be derived from the Merger and the prospects of CMAC and Xxxxxx
as a combined company, to be more favorable over the long term to CMAC and its
stockholders than the Merger and for which financing, to the extent required,
is then fully committed or reasonably determined to be available by the CMAC
Board.
(c) CMAC shall notify Xxxxxx promptly (but in no event later than
24 hours) after receipt by CMAC or any of its advisors of a CMAC Acquisition
Proposal or any request for nonpublic information in connection with a CMAC
Acquisition Proposal or for access to the properties, books or records of CMAC
or any of its Subsidiaries by any person that informs CMAC or any of its
advisors that it is considering making, or has made, a CMAC Acquisition
Proposal. Such notice to Xxxxxx shall be made orally and in writing and shall
indicate the identity of the offeror and the terms and conditions of such
proposal, inquiry or contact. CMAC shall keep Xxxxxx informed, on a current
basis, of the status and details (including amendments or proposed amendments)
of any such CMAC Acquisition Proposal or request and the status of any
negotiations or discussions.
Section 5.11. Notices of Certain Events. (a) Xxxxxx and CMAC
shall promptly notify each other 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 by this Agreement; and
(ii) any notice or other communication from any Governmental
Entity in connection with the transactions contemplated by this Agreement.
(b) Xxxxxx shall promptly notify CMAC of any actions, suits,
claims, investigations or proceedings commenced or, to its Knowledge threatened
against, relating to or involving or otherwise affecting Xxxxxx or any
Subsidiary of Xxxxxx which, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to Section 3.16 or which
relate to the consummation of the transactions contemplated by this Agreement.
(c) CMAC shall promptly notify Xxxxxx of any actions, suits,
claims, investigations or proceedings commenced or, to its Knowledge threatened
against, relating to or involving or otherwise affecting CMAC or any
Subsidiary of CMAC which, if pending on the date of this Agreement, would have
been required to have been disclosed pursuant to Section 4.16 or which relate
to the consummation of the transactions contemplated by this Agreement.
Section 5.12. Appropriate Action; Consents; Filings. (a)
Subject to the terms and conditions of this Agreement, Xxxxxx and CMAC shall
use their best efforts to (i) take, or cause to be taken, all actions, and do,
or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations, to consummate the Merger and the other
transactions contemplated by this Agreement as promptly as practicable, (ii)
obtain from any Governmental Entity any Permits required to be obtained or
made by CMAC or Xxxxxx or any of their Subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the consummation
of the transactions contemplated herein, and (iii) make all necessary filings,
and thereafter make any other required submissions, with respect to this
Agreement and the Merger required under the Securities Act and the Exchange
Act any other applicable law; provided that Xxxxxx and CMAC shall cooperate
with each other in connection with the making of all such filings, including
providing copies of all such documents to the non-filing party and its advisors
prior to filing and, if requested, accepting all reasonable additions,
deletions or changes suggested in connection therewith. Xxxxxx and CMAC shall
furnish to each other all information required for any application or other
filing to be made pursuant to the rules and regulations of any applicable law
in connection with the transactions contemplated by this Agreement.
(b) Xxxxxx and CMAC shall give (or shall cause their respective
Subsidiaries to give) any notices to third parties, and use (or shall cause
their respective Subsidiaries to use) all reasonable efforts to obtain any
third party consents (i) necessary, proper or advisable to consummate the
transactions contemplated by this Agreement or (ii) required to prevent the
occurrence of a Material Adverse Effect on Xxxxxx or CMAC. In the event that
either party shall fail to obtain any third party consent described in this
Section 5.12(b), such party shall use all reasonable efforts, and shall take
any such actions reasonably requested by the other party hereto, to minimize
any adverse effect upon Xxxxxx and CMAC, their respective Subsidiaries and
their respective businesses resulting, or which could reasonably be expected
to result after the Effective Time, from the failure to obtain such consent.
(c) No later than 30 days after the date hereof, CMAC shall
determine whether to seek the consent of the holders of the $4.125 Preferred
Stock to the Merger or to redeem the $4.125 Preferred Stock in accordance with
its terms and shall notify Xxxxxx of its decision. Promptly thereafter CMAC
shall take all actions necessary to obtain the required consent or redeem the
$4.125 Preferred Stock, as the case may be, including, without limitation,
calling any required meeting of the holders of $4.125 Preferred Stock or
seeking their written consent (and, in such case, establishing a date by which
such consent must be given), giving all required notices of redemption and
obtaining all required financing required in order to effect the redemption of
the $4.125 Preferred Stock. If CMAC elects to seek the consent of the holders
of the $4.125 Preferred Stock and such holders refuse or fail to give their
consent on or before the date set by CMAC to receive such consent, then, CMAC
shall take immediately thereafter all actions necessary to redeem, as of the
Effective Time, the $4.125 Preferred Stock.
Section 5.13. Cooperation. CMAC and Xxxxxx shall cooperate
with each other (i) with respect to the timing of the CMAC Stockholder Meeting
and the Xxxxxx Stockholder Meeting and shall use their reasonable efforts to
hold such meetings on the same day, (ii) in connection with the preparation of
the Joint Proxy Statement, (iii) 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
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement, and (iv) in seeking any such
actions, consents, approvals or waivers or making any such filings, furnishing
information required in connection therewith or with the Joint Proxy Statement
and seeking timely to obtain any such actions, consents, approvals or waivers.
Section 5.14. Public Announcements. So long as this Agreement
is in effect, CMAC and Xxxxxx will consult with each other before issuing any
press release or making any SEC filing or other public statement with respect
to this Agreement or the transactions contemplated hereby and, except as may
be required by applicable law, court process or any listing agreement with any
national securities exchange, will not issue any such press release or make any
such SEC filing or other public statement prior to such consultation and
providing the other party with a reasonable opportunity to comment thereon.
Section 5.15. Affiliates; Pooling of Interests;
Reorganization. Within 30 days of the date of this Agreement, each of CMAC
and Xxxxxx shall deliver to the other a letter identifying all persons whom
such party believes may be deemed to be, at the date of the CMAC Stockholder
Meeting or the Xxxxxx Stockholder Meeting, as the case may be, an Affiliate of
CMAC or Xxxxxx, as the case may be under Rule 145 of the Securities Act or
under applicable SEC accounting releases with respect to pooling of interests
accounting treatment (each such person, a "Rule 145 Affiliate"). Each of CMAC
and Xxxxxx shall use their best efforts to obtain a written agreement from
each person who is identified as a person who may be deemed to be a Rule 145
Affiliate in the applicable letter referred to above as soon as practicable
and, in any event, within 45 days of the date of this Agreement, substantially
in the form of Exhibit B-1 or B-2, as applicable. Each of the parties hereto
shall use their best efforts to cause the transactions contemplated by this
Agreement to qualify, and shall not knowingly take any action, except for the
transactions contemplated by this Agreement, which could prevent such
transactions from qualifying (i) for pooling of interests accounting treatment
and (ii) as a reorganization within the meaning of Section 368(a) of the Code.
Section 5.16. Takeover Statutes. If any takeover statute is
or may become applicable to the Merger, each of CMAC and Xxxxxx shall take such
actions as are necessary so that the Merger may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate
or minimize the effects of any takeover statute on the Merger.
Section 5.17. Employment Agreement. CMAC and Xxx X. Xxxxxx
shall enter into the Employment Agreement no later than the date on which all
conditions to the Merger set forth in Section 6.01 and 6.03 (other than the
condition set forth in Section 6.03(f)) have been satisfied.
ARTICLE 6
Conditions to the Merger
Section 6.1. Conditions to the Obligations of Each Party. The
obligations of Xxxxxx and CMAC to consummate the Merger are subject to the
satisfaction of the following conditions:
(a) this Agreement, the Merger and the transactions
contemplated by the this Agreement shall have been approved and adopted by
the common stockholders of Xxxxxx and CMAC in accordance with Delaware Law
and applicable stock exchange rules;
(b) any applicable waiting period under the HSR Act relating
to the Merger and the transactions contemplated by this Agreement shall have
expired or been terminated;
(c) CMAC and Xxxxxx shall have obtained regulatory approvals
permitting the Surviving Corporation to operate in states accounting for more
than 90% of the premiums earned from new insurance written by CMAC and Xxxxxx
during the nine full calendar months immediately preceding the Effective Time;
provided that, in any event, all required approvals in the states set forth in
Section 6.01(c) of the CMAC Schedule of Exceptions shall have been obtained;
(d) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of the
Merger;
(e) the Registration Statement shall have been declared
effective by the SEC and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such
purpose shall be pending before or threatened by the SEC;
(f) the shares of CMAC Stock to be issued in connection with
the Merger and upon exercise of the Substitute Options shall have been approved
for listing on the NYSE, subject to official notice of issuance;
(g) CMAC and Xxxxxx each shall have received a letter from
their respective independent accountants addressed to CMAC or Xxxxxx, as
the case may be, and dated as of the Closing Date to the effect that the
Merger will qualify for "pooling of interests" accounting treatment under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations; and
(h) The Merger shall have been approved by the holders of
at least two-thirds of the outstanding shares of $4.125 Preferred Stock or all
of the outstanding shares of $4.125 Preferred Stock shall have been redeemed.
Section 6.2. Conditions to the Obligations of CMAC. The
obligations of CMAC to consummate the Merger are subject to the satisfaction
of the following further conditions:
(a) the representations and warranties of Xxxxxx set forth in this
Agreement that are qualified as to Material Adverse Effect (including the
representation and warranty set forth in Section 3.12) shall be true and
correct as of the Effective Time and the representations and warranties that
are not so qualified, taken together, shall be true and correct in all
material respects, in each case as though made as of the Effective Time
(except to the extent any such representation or warranty expressly speaks as
of an earlier date or time); and CMAC shall have received a certificate signed
on behalf of Xxxxxx by an executive officer of Xxxxxx to such effect;
(b) Xxxxxx shall have complied in all respects with the
covenants contained in Sections 5.01(a), (b), (c) or (g) and in all
material respects with the other covenants required to be complied with by
it under this Agreement and shall have performed in all material respects
each obligation and agreement required to be performed by it under this
Agreement, in each case at or prior to the Effective Time; and CMAC shall
have received a certificate signed on behalf of Xxxxxx by an executive
officer of Xxxxxx to such effect;
(c) CMAC shall have received an opinion of Xxxxxx, Xxxxx &
Bockius LLP, in form and substance reasonably satisfactory to CMAC and
substantially in the form of Exhibit C (following Xxxxxx, Xxxxx & Xxxxxxx
LLP's receipt of representations of officers of Xxxxxx and CMAC
substantially in the form of Exhibits E-1 and E-2), on the basis of certain
facts, representations and assumptions set forth in such opinion, dated the
Closing Date, to the effect that the Merger will be treated for federal
income tax purposes as a reorganization qualifying under the provisions of
Section 368(a) of the Code and that each of CMAC and Xxxxxx will be a party
to the reorganization within the meaning of Section 368(b) of the Code;
(d) there shall not have been any downgrading of the claims-
paying ability rating of Xxxxxx Guaranty Corporation below the level of "Aa3"
as determined by Xxxxx'x Investors Service, Inc. and "AA" as determined by
Standard & Poor's Rating Group, a Division of XxXxxx-Xxxx Corporation, nor
shall either rating agency have given any indication of an intention to
downgrade Xxxxxx Guaranty Corporation or Commonwealth Mortgage Assurance
Company below "Aa3" or "AA", as the case may be, in each case after giving
effect to the transactions contemplated by this Agreement; and
(e) there shall not have been any change in either (i) the
laws, statutes or regulations governing Xxxxxx, or (ii) in the interpretation
of any laws, statutes or regulations governing Xxxxxx by a court of competent
jurisdiction or any Governmental Entity that would materially impair the
ability of Xxxxxx to conduct its business in the ordinary course and in a
manner consistent with past practice.
Section 6.3. Conditions to the Obligations of Xxxxxx. The
obligations of Xxxxxx to consummate the Merger are subject to the satisfaction
of the following further conditions:
(a) the representations and warranties of CMAC set forth in
this Agreement that are qualified as to Material Adverse Effect (including the
representation and warranty set forth in Section 4.12) shall be true and
correct as of the Effective Time and the representations and warranties that
are not so qualified, taken together, shall be true and correct in all
material respects, in each case as though made as of the Effective Time
(except to the extent any such representation or warranty expressly speaks as
of an earlier date or time); and Xxxxxx shall have received a certificate
signed on behalf of CMAC by an executive officer of CMAC to such effect;
(b) CMAC shall have complied in all respects with the covenants
contained in Sections 5.02(a), (b), (c) or (g) and in all material respects
with the other covenants required to be complied with by it under this
Agreement and shall have performed in all material respects each obligation and
agreement required to be performed by it under this Agreement, in each case
at or prior to the Effective Time; and Xxxxxx shall have received a certificate
signed on behalf of CMAC by an executive officer of CMAC to such effect;
(c) Xxxxxx shall have received an opinion of Xxxxx Xxxx &
Xxxxxxxx, in form and substance reasonably satisfactory to Xxxxxx and
substantially in the form of Exhibit D (following Xxxxx Xxxx & Xxxxxxxx'x
receipt of representations of officers of Xxxxxx and CMAC substantially in the
form of Exhibits E-1 and E-2), on the basis of certain facts, representations
and assumptions set forth in such opinion, dated the Closing Date, to the
effect that the Merger will be treated for federal income tax purposes as a
reorganization qualifying under the provisions of Section 368(a) of the Code
and that each of CMAC and Xxxxxx will be a party to the reorganization within
the meaning of Section 368(b) of the Code;
(d) there shall not have been any downgrading of the claims-
paying ability rating of Commonwealth Mortgage Assurance Company below the
level of "Aa3" as determined by Xxxxx'x Investors Service, Inc. and "AA" as
determined by Standard & Poors Rating Group, a Division of XxXxxx-Xxxx
Corporation, nor shall either rating agency have given any indication of an
intention to downgrade Commonwealth Mortgage Assurance Company or Xxxxxx
Guaranty Corporation below "Aa3" or "AA", as the case may be, after giving
effect to the transactions contemplated by this Agreement;
(e) there shall not have been any change in either (i) the
laws, statutes or regulations governing CMAC, or (ii) in the interpretation
of any laws, statutes or regulations governing CMAC by a court of competent
jurisdiction or any Governmental Entity that would materially impair the
ability of CMAC to conduct its business in the ordinary course and in a manner
consistent with past practice; and
(f) CMAC and Xxx X. Xxxxxx shall have executed the Employment
Agreement.
ARTICLE 7
Termination
Section 7.1. Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement and the Merger by the Boards
or stockholders of Xxxxxx or CMAC):
(a) by mutual written agreement of Xxxxxx and CMAC;
(b) by either Xxxxxx or CMAC, if
(i) (x) at the CMAC Stockholder Meeting (or any adjournment
or postponement thereof), the CMAC Stockholder Approval shall not have been
obtained or (y) at the Xxxxxx Stockholder Meeting (or any adjournment or
postponement thereof), the Xxxxxx Stockholder Approval shall not have been
obtained;
(ii) the Merger has not been consummated on or before April
30, 1999; provided that the right to terminate this Agreement pursuant to this
Section 7.1(b) shall not be available to any party whose breach of or failure
to perform any provision of this Agreement results in the failure of the
Merger to be consummated by such time and provided, further, that such date
may be extended for up to two months by either party by written notice to the
other party if the Merger would have been consummated by April 30, 1999 but
for the failure to obtain any regulatory approval necessary to consummate the
Merger and such regulatory approval can reasonably be expected to be obtained
within such two-month period;
(iii) any judgment, injunction, order or decree enjoining any
party from consummating the Merger shall have been entered and become final
and non-appealable;
(iv) the Xxxxxx Board shall have determined to recommend a
Xxxxxx Acquisition Proposal to its stockholders and to enter into a binding
written agreement concerning such Xxxxxx Acquisition Proposal after
determining, pursuant to Section 5.09, that such Xxxxxx Acquisition Proposal
constitutes a Xxxxxx Superior Proposal; provided that Xxxxxx may not exercise
its right to terminate under this Section 7.01(b)(iv) (and may not enter into
a binding written agreement with respect to such Xxxxxx Acquisition Proposal)
unless and until Xxxxxx shall have provided CMAC prior written notice at least
two business days prior to such termination that the Xxxxxx Board has
authorized and intends to effect the termination of this Agreement pursuant to
this Section 7.01(b)(iv), specifying the material terms and conditions of such
Xxxxxx Acquisition Proposal; or
(v) the CMAC Board shall have determined to recommend a CMAC
Acquisition Proposal to its stockholders and to enter into a binding written
agreement concerning such CMAC Acquisition Proposal after determining,
pursuant to Section 5.10, that such CMAC Acquisition Proposal constitutes a
CMAC Superior Proposal; provided that CMAC may not exercise its right to
terminate under this Section 7.01(b)(v) (and may not enter into a binding
written agreement with respect to such CMAC Acquisition Proposal) unless and
until CMAC shall have provided Xxxxxx prior written notice at least two
business days prior to such termination that the CMAC Board has authorized and
intends to effect the termination of this Agreement pursuant to this Section
7.01(b)(v), specifying the material terms and conditions of such CMAC
Acquisition Proposal;
(c) by CMAC, if:
(i) any of the representations and warranties of Xxxxxx set
forth in this Agreement that are qualified as to Material Adverse Effect shall
fail to be true and correct as of the date hereof or any of the other
representations and warranties of Xxxxxx set forth in this Agreement, taken
together, shall fail to be true and correct in all material respects as of the
date hereof and, in either case, either (x) the senior officers of Xxxxxx
shall have had, as of the date hereof, actual knowledge of such failure or (y)
such senior officers shall not have had such knowledge and such failure could
not reasonably be expected to be cured by the Closing Date without causing
material delay of the Closing or requiring Xxxxxx to take an action that would
violate the terms of this Agreement or cause any of the conditions to closing
set forth herein to fail to be satisfied; provided that, before exercising any
such right to terminate, CMAC shall provide Xxxxxx 10 business days prior
written notice of its intent to terminate, specifying, in reasonable detail,
the basis for termination;
(ii) there shall have occurred a breach or failure to perform
any covenant or agreement set forth in this Agreement that, if not cured by
the Closing Date, would cause the condition set forth in Section 6.02(b) to
fail to be satisfied or there shall have occurred any event, or any fact shall
have arisen that, if not cured by the Closing Date, would cause the conditions
set forth in Section 6.02(a) to fail to be satisfied and, in either case, such
breach or failure could not reasonably be expected to be cured by the Closing
Date, without causing a material delay in the Closing or requiring Xxxxxx to
take an action that would violate the terms of this Agreement or cause another
failure of a condition to closing to be satisfied, or reasonably could be
expected to be cured within such time period but Xxxxxx shall fail to pursue
expeditiously such cure; provided that, before exercising any such right to
terminate, CMAC shall provide Xxxxxx with 10 business days prior written
notice of its intent to terminate, specifying in reasonable detail, the basis
for termination;
(iii) the Xxxxxx Board shall withdraw or modify, or propose to
withdraw or modify, in a manner adverse to CMAC, its approval or
recommendation of this Agreement or the Merger or shall have resolved to do
so; or
(iv) Xxxxxx or any of its Affiliates shall have materially and
knowingly breached the covenant contained in Section 5.09;
(d) by Xxxxxx, if:
(i) any of the representations and warranties of CMAC set
forth in this Agreement that are qualified as to Material Adverse Effect shall
fail to be true and correct as of the date hereof or any of the other
representations and warranties of CMAC set forth in this Agreement, taken
together, shall fail to be true and correct in all material respects as of the
date hereof and, in either case, either (x) the senior officers of CMAC shall
have had, as of the date hereof, actual knowledge of such failure or (y) such
senior officers shall not have had such knowledge and such failure could not
reasonably be expected to be cured by the Closing Date without causing
material delay of the Closing or requiring CMAC to take an action that would
violate the terms of this Agreement or cause any of the conditions to closing
set forth herein to fail to be satisfied; provided that, before exercising any
such right to terminate, Xxxxxx shall provide CMAC 10 business days prior
written notice of its intent to terminate, specifying, in reasonable detail,
the basis for termination;
(ii) there shall have occurred a breach or failure to perform
any covenant or agreement set forth in this Agreement that, if not cured by
the Closing Date, would cause the condition set forth in Section 6.03(b) to
fail to be satisfied or there shall have occurred any event, or any fact shall
have arisen that, if not cured by the Closing Date, would cause the conditions
set forth in Section 6.03(a) to fail to be satisfied and, in either case, such
breach or failure could not reasonably be expected to be cured by the Closing
Date, without causing a material delay in the Closing or requiring CMAC to
take an action that would violate the terms of this Agreement or cause another
failure of a condition to closing to be satisfied, or reasonably could be
expected to be cured within such time period but CMAC shall fail to pursue
expeditiously such cure; provided that, before exercising any such right to
terminate, Xxxxxx shall provide CMAC with 10 business days prior written
notice of its intent to terminate, specifying in reasonable detail, the basis
for termination;
(iii) the CMAC Board shall withdraw or modify, in a manner
adverse to Xxxxxx, its approval or recommendation of this Agreement or the
Merger or shall have resolved to do so; or
(iv) CMAC or any of its Affiliates shall have materially and
knowingly breached the covenant contained in Section 5.10.
The party desiring to terminate this Agreement pursuant to this
Section 7.1 (other than pursuant to Section 7.1(a)) shall give notice of such
termination to the other party.
Section 7.2. Effect of Termination. If this Agreement is
terminated pursuant to Section 7.1, this Agreement shall become void and of no
effect with no liability on the part of any party hereto, except that (i) the
agreements contained in Sections 7.03, 8.04, 8.06, 8.07 and 8.08 and this
Section 7.02 shall survive the termination hereof and (ii) no such termination
shall release any party of any liabilities or damages resulting from any
willful or grossly negligent breach by that party of any provision of this
Agreement.
Section 7.3. Certain Fees. (a) In addition to any amount
payable pursuant to Section 7.2, Xxxxxx shall pay to CMAC, as a fee and in
reimbursement of expenses relating to the transactions contemplated by this
Agreement, $22,000,000 upon the termination of this Agreement pursuant to
Section 7.1(b)(iv), 7.01(c)(iii) or 7.01(c)(iv). Such payment shall be made
within two business days of any such termination.
(b) In addition to any amount payable pursuant to Section 7.2,
CMAC shall pay to Xxxxxx, as a fee and in reimbursement of expenses relating to
the transactions contemplated by this Agreement, $22,000,000 upon the
termination of this Agreement pursuant to Section 7.01(b)(v), 7.01(d)(iii) or
7.01(d)(iv). Such payment shall be made within two business days of any such
termination.
ARTICLE 8
Miscellaneous
Section 8.1. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including
facsimile transmission) and shall be given,
if to CMAC, to:
CMAC Investment Corporation
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxx & Bockius LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxx X. XxXxxxxx, Xx., Esq.
Facsimile No.: (000) 000-0000
if to Xxxxxx, to:
Xxxxxx Corporation
000 Xxxx Xxxxxxxx Xxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxx XX, Esq.
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
Facsimile No.: (000) 000-0000
or such other address or fax number as such party may hereafter specify for
the purpose by notice to the other parties hereto. All such notices, requests
and other communications shall be deemed received on the date of receipt by
the recipient thereof if received prior to 5 p.m. in the place of receipt and
such day is a business day in the place of receipt. Otherwise, any such
notice, request or communication shall be deemed not to have been received
until the next succeeding business day in the place of receipt.
Section 8.2. Nonsurvival of Representations, Warranties,
Covenants and Agreements. None of the representations, warranties, covenants
and agreements contained herein or in any certificate or other writing
delivered pursuant hereto shall survive the Effective Time, except for
covenants and agreements which, by their terms, are to be performed after the
Effective Time.
Section 8.3. Amendments; No Waivers. (a) Any provision of this
Agreement may be amended or waived prior to the Effective Time if, but only
if, such amendment or waiver is in writing and is signed, in the case of an
amendment, by each party to this Agreement or in the case of a waiver, by the
party against whom the waiver is to be effective; provided that after the
adoption of this Agreement by the stockholders of either Xxxxxx or CMAC, there
shall be made no amendment that by law requires further approval by such
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.
Section 8.4. Expenses. Except as otherwise provided in this
Agreement, all costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense.
Section 8.5. 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 assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of each other party hereto.
Section 8.6. Governing Law. This Agreement shall be governed
by and construed in accordance with the law of the State of Delaware, without
regard to principles of conflicts of laws.
Section 8.7. Jurisdiction. Any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or
in connection with, this Agreement or the transactions contemplated hereby may
be brought in any federal court located in the State of Delaware or any
Delaware state court, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to
the laying of the venue of any such suit, action or proceeding in any such
court or that any such suit, action or proceeding which is brought in any such
court has been brought in an inconvenient form. Process in any such suit,
action or proceeding may be served on any party anywhere in the world, whether
within or without the jurisdiction of any such court. Without limiting the
foregoing, each party agrees that service of process on such party as provided
in Section 8.1 shall be deemed effective service of process on such party.
Section 8.8. Waiver of Jury Trial. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
Section 8.9. Counterparts; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
Except for Section 5.04 hereof, no provision of this Agreement is intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
Section 8.10. Entire Agreement. This Agreement and the
Confidentiality Agreement constitute the entire agreement between the parties
with respect to the subject matter of this Agreement and supersedes all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter hereof and thereof.
Section 8.11. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof
Section 8.12. Severability. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction
or other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any parts. Upon
such a determination, such term, provision, covenant or restriction shall be
deemed reformed in such jurisdiction to the maximum limitations permitted by
the applicable law of such jurisdiction.
Section 8.13. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this
Agreement was not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof in
addition to any other remedy to which they are entitled at law or in equity.
Section 8.14. Definitions and Usage. (a) For purposes of this
Agreement:
"Affiliate" means, with respect to any person, any other person
directly or indirectly controlling, controlled by, or under common control with
such person. The term "control" means possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise.
"Board" means with respect to any corporation the Board of
Directors of such corporation.
"Employment Agreement" means the employment agreement to be
executed between CMAC and Xxx X. Xxxxxx, substantially in accordance with the
terms set forth on Exhibit F.
"GAAP" means U.S. generally accepted accounting principles.
"Knowledge" of any person which is not an individual means the
Knowledge of such person's officers after reasonable inquiry.
"Material Adverse Effect" means with respect to CMAC or Xxxxxx a
material adverse effect (i) on the business, properties, assets, liabilities
(contingent or otherwise), condition (financial or otherwise) or results of
operations of CMAC and its Subsidiaries, taken as a whole, or Xxxxxx and its
Subsidiaries, taken as a whole, as the case may be, or (ii) on the ability of
CMAC or Xxxxxx, as the case may be, to perform its obligations under, or to
consummate the transactions contemplated by, this Agreement.
"officer" means, in the case of CMAC and Xxxxxx, any executive
officer of CMAC or Xxxxxx, as applicable, within the meaning of Rule 3b-7 of
the Exchange Act.
"person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
"SAP" means the accounting procedures and practices prescribed
or permitted from time to time by the National Association of Insurance
Commissioners and adopted, permitted or promulgated by the respective states
of incorporation of Xxxxxx and its Subsidiaries or CMAC and its Subsidiaries,
as the case may be, and employed in a consistent manner throughout the periods
involved.
"Subsidiary" means, with respect to any person, any entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the Board or other persons performing similar functions
are at any time directly or indirectly owned by such person.
A reference in this Agreement to any statute shall be to such
statute as amended from time to time, and to the rules and regulations
promulgated thereunder.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
Term Section
---- -------
$4.125 Preferred Stock........................... 4.05
Affiliate........................................ 8.14(a)
Agreement........................................ preamble
Xxxxxx........................................... Preamble
Xxxxxx 10-K...................................... 3.9(a)(i)
Amerin 10-Q...................................... 3.9(a)(iv)
Xxxxxx Annual Statements......................... 3.10(b)
Xxxxxx Acquisition Proposal...................... 5.09
Xxxxxx Annual Statements......................... 3.10(b)
Xxxxxx Balance Sheet............................. 3.10(a)
Xxxxxx Balance Sheet Date........................ 3.10(a)
Amerin Director Designees........................ 2.03
Xxxxxx Employee Plans............................ 3.22(a)
Xxxxxx Existing Reinsurance Agreements........... 3.17(b)
Xxxxxx Returns................................... 3.21(i)
Xxxxxx SEC Filings............................... 3.9(a)(iv)
Xxxxxx Significant Agreements.................... 3.15(b)
Xxxxxx Stock..................................... 1.2(a)
Xxxxxx Stockholder Approval...................... 5.3(a)
Xxxxxx Stockholder Meeting....................... 5.3(a)
Xxxxxx Stockholder Rights........................ 1.02(a)
Xxxxxx Superior Proposal......................... 5.09(b)
Xxxxxx Unaudited September Balance Sheet......... 3.10(a)
Certificate of Merger............................ 1.1(c)
Certificates..................................... 1.4(a)
Closing.......................................... 1.04(b)
Closing Date..................................... 1.04(b)
CMAC............................................. Preamble
CMAC 10-K........................................ 4.9(a)(i)
CMAC 10-Q........................................ 4.9(a)(iv)
CMAC Annual Statements........................... 4.10(b)
CMAC Acquisition Proposal........................ 5.10
CMAC Balance Sheet............................... 4.10(a)
CMAC Balance Sheet Date.......................... 4.10(a)
CMAC Director Designees.......................... 2.03
CMAC Employee Plans.............................. 4.22(a)(ii)
CMAC Existing Reinsurance Agreements............. 4.17(b)
CMAC Retirement Plans............................ 4.22(c)
CMAC Returns..................................... 4.21(i)
CMAC SEC Filings................................. 4.9(a)(iv)
CMAC Significant Agreements...................... 4.15(b)
CMAC Stock....................................... 1.2(a)
CMAC Stockholder Approval........................ 5.3(b)
CMAC Stockholder Meeting......................... 5.3(b)
CMAC Stockholder Rights.......................... 1.02(a)
CMAC Superior Proposal........................... 5.10(b)
CMAC Unaudited September Balance Sheet........... 4.10(a)
Code............................................. Preamble
Confidentiality Agreement........................ 5.8(a)
Corporation...................................... 2.01
Delaware Law..................................... 1.1(a)
DLJ.............................................. 3.19
Effective Time................................... 1.1(c)
Employment Agreement............................. 8.14(a)
Environmental Laws............................... 3.23(b)
Environmental Permits............................ 3.23(b)
ERISA............................................ 3.22(a)
ERISA Affiliate.................................. 3.22(a)
Exchange Act..................................... 3.03(ii)
Exchange Agent................................... 1.4(a)
Exchange Ratio................................... 1.2(a)
Existing Reinsurance Agreements.................. 3.17(b)
GAAP............................................. 8.14(a)
Governmental Entity.............................. 3.3
HSR Act.......................................... 3.3..(ii)
Intellectual Property............................ 3.23(b)
Investment Assets................................ 3.13(b)
IRS.............................................. 3.21
Joint Proxy Statement............................ 3.11
Knowledge........................................ 8.14(a)
Lien............................................. 3.4
Material Adverse Effect.......................... 8.14(a)
Merger........................................... 1.1(a)
Merger Consideration............................. 1.2(a)
Multiemployer Plan............................... 3.22(c)
Nonvoting Xxxxxx Stock........................... 3.05
NYSE............................................. 1.07
officer.......................................... 8.14(a)
Permits.......................................... 3.8(a)
person........................................... 8.14(a)
Registration Statement........................... 3.11
Regulators....................................... 3.10(b)
Rule 145 Affiliate............................... 5.15
SAP.............................................. 8.14(a)
SEC.............................................. 3.9(a)(iv)
Securities Act................................... 3.03(ii)
Series A Preferred Stock......................... 3.05
Significant Agreements........................... 3.15(b)
Software......................................... 3.24(b)
Subsidiary....................................... 8.14(a)
Substitute Option................................ 1.05(a)
Surviving Corporation............................ 1.1(a)
Tax/Taxes........................................ 3.21
2000 Annual Meeting.............................. 2.02
Voting Xxxxxx Stock.............................. 3.05
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.
CMAC INVESTMENT CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President and Chief Executive
Officer
XXXXXX CORPORATION
By: /s/ Xxx X. Xxxxxx
--------------------------------------
Name: Xxx X. Xxxxxx
Title: President and Chief Operating
Officer
