UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: April 28, 1998
FARM FAMILY HOLDINGS, INC.
A Delaware Corporation Commission File No. 1-11941 IRS No. 14-1789227
344 Route 9W, Glenmont, New York 12077-2910
Registrant's telephone number: (518) 431-5000
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Item 5. Other Events
On April 28, 1998, Farm Family Holdings, Inc. issued a press release
announcing the company's operating results for the three months ended March 31,
1998.
Item 7. Financial Statements and Exhibits
The following exhibits are filed as part of this report:
Exhibit Index
Exhibit 10.1 - Amended and Restated Option Purchase Agreement among Farm Family
Holdings, Inc. and the Shareholders of Farm Family Life Insurance
Company dated as of February 26, 1998, as amended by Amendment
No. 1 to Amended and Restated Option Purchase Agreement dated as
of April 28, 1998.
Exhibit 99 - Press Release
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FARM FAMILY HOLDINGS, INC.
(Registrant)
April 28, 1998 /s/ Philip P. Weber
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(Date) Philip P. Weber
President and CEO
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Exhibit 10.1
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AMENDED AND RESTATED
OPTION PURCHASE AGREEMENT
among
FARM FAMILY HOLDINGS, INC.
and
THE SHAREHOLDERS OF
FARM FAMILY LIFE INSURANCE COMPANY
Dated as of February 26, 1998
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TABLE OF CONTENTS
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Section 1. Definitions; Interpretation..............................................................1
(a) Definitions......................................................................1
(b) Interpretation...................................................................7
Section 2. Grant of Options.........................................................................8
Section 3. Fair Market Value per Share..............................................................8
Section 4. Exercise of Option.......................................................................9
Section 5. Expense Allocation......................................................................10
Section 6. Closing; Payment of Exercise Price......................................................10
Section 7. Conditions of Closing...................................................................11
Section 8. Representations and Warranties of Each
Shareholder.............................................................................13
(a) Corporate Existence.............................................................13
(b) Authorization; Enforcement......................................................13
(c) Capital Stock of the Company; Ownership
of Shares.......................................................................13
(d) Subsidiaries....................................................................14
(e) No Conflict.....................................................................14
(f) Consents........................................................................15
(g) Compliance with Law.............................................................15
(h) Insurance Licenses..............................................................15
(i) Litigation......................................................................15
(j) Financial Statements............................................................16
(k) Contracts.......................................................................16
(l) Taxes...........................................................................17
(m) Assets..........................................................................17
(n) Environmental Matters...........................................................18
(o) Employee Benefits...............................................................18
(p) Investment Purpose..............................................................19
Section 9. Representations and Warranties of the Optionee..........................................19
(a) Corporate Existence.............................................................19
(b) Authorization; Enforcement......................................................19
(c) Capital Stock of Optionee.......................................................19
(d) Subsidiaries....................................................................20
(e) No Conflict.....................................................................20
(f) Consents........................................................................20
(g) Compliance with Law.............................................................21
(h) Insurance Licenses..............................................................21
(i) Litigation......................................................................21
(j) Financial Statements............................................................21
(k) Contracts.......................................................................22
(l) Taxes...........................................................................22
(m) Assets..........................................................................23
(n) Environmental Matters...........................................................23
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(o) Employee Benefits...............................................................24
(p) Investment Purpose..............................................................24
Section 10. Covenants of each Shareholder; Restrictions on
Certain Actions.........................................................................24
(a) Covenants.......................................................................24
(b) Restrictions....................................................................25
Section 11. Adjustment Upon Changes in Capitalization...............................................26
Section 12. Access and Information..................................................................26
Section 13. Approvals of Governmental Authorities...................................................26
Section 14. Stockholder Approval....................................................................27
Section 15. Restrictive Legends.....................................................................27
Section 16. Termination; Survival of Representations and
Warranties..............................................................................27
Section 17. Binding Effect; No Assignment...........................................................28
Section 18. Specific Performance....................................................................28
Section 19. Entire Agreement........................................................................29
Section 20. Effectiveness of Agreement..............................................................29
Section 21. Further Assurances......................................................................29
Section 22. Validity................................................................................29
Section 23. Material Change in Law..................................................................29
Section 24. Notices.................................................................................31
Section 25. Governing Law...........................................................................31
Section 26. Descriptive Headings....................................................................31
Section 27. Counterparts............................................................................31
Section 28. Expenses................................................................................32
Section 29. Amendments; Waiver......................................................................32
Section 30. Action by the Shareholders..............................................................32
</TABLE>
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EXHIBITS
Exhibit A -- Shareholders
Exhibit B -- Valuation Procedures
Exhibit C -- Form of Certificate of Designations for Voting
Preferred Stock
Exhibit D -- Form of Opinion of Counsel to Shareholder
Exhibit E -- Form of Opinion of the General Counsel to Optionee
and Insurance Subsidiary
Exhibit F -- Form of Registration Rights Agreement
Exhibit G -- Form of Agreement and Plan of Reorganization
SCHEDULES
Schedule 8(i) -- Litigation
Schedule 8(l) -- Taxes
Schedule 8(n) -- Environmental Matters
Schedule 9(d) -- Subsidiaries
Schedule 9(i) -- Litigation
Schedule 9(l) -- Taxes
Schedule 9(n) -- Environmental Matters
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AMENDED AND RESTATED
OPTION PURCHASE AGREEMENT
THIS AMENDED AND RESTATED OPTION PURCHASE AGREEMENT (this
"Agreement"), dated as of February 26, 1998, by and among FARM FAMILY HOLDINGS,
INC., a Delaware corporation (the "Optionee"), and THE SHAREHOLDERS OF FARM
FAMILY LIFE INSURANCE COMPANY set forth on the signature pages hereof (each of
such shareholders, a "Shareholder" and collectively, the "Shareholders").
WHEREAS, the Optionee and the Shareholders have
previously entered into the Option Purchase Agreement, dated as
of February 14, 1996, as amended by Amendment No. 1 ("Amendment
No. 1") to Option Purchase Agreement, dated as of April 22, 1997
(as so amended, the "Option Purchase Agreement");
WHEREAS, the Optionee and the Shareholders desire to
amend and restate the Option Purchase Agreement as set forth
herein;
WHEREAS, the Plan of Conversion, as defined herein,
contemplates that the Optionee and the Shareholders will enter into this
Agreement and that the Optionee will reserve shares of the Optionee Common Stock
(as defined herein) and the Voting Preferred Stock (as defined herein) for
issuance to the Shareholders in the event the Option granted hereunder is
exercised;
WHEREAS, Farm Family Life Insurance Company, a New York
domiciled stock life insurance company (the "Company") has outstanding 60,011
shares of common stock, par value $50.00 per share (the "Common Stock"), which
constitute all of the issued and outstanding shares of capital stock of the
Company;
WHEREAS, each of the Shareholders owns the number of shares of
Common Stock set forth opposite its name on Exhibit A (each, a "Share" and,
collectively, the "Shares"); and
WHEREAS, each of the Shareholders desires to grant to the
Optionee an option to purchase the Shares owned by it, upon the terms and
subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements set forth herein, the parties hereto agree as
follows:
Section 1. Definitions; Interpretation.
(a) Definitions. The terms defined in this Section 1, whenever
used in this Agreement, shall have the following meanings for all purposes of
this Agreement:
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"Affiliate" of a specified Person means a Person that (at the
time when the determination is to be made) directly, or indirectly through one
or more intermediaries, controls, is controlled by, or is under common control
with, the specified Person. As used in the foregoing sentence, the term
"control" (including, with correlative meaning, the terms "controlling",
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" has the meaning set forth in the first
paragraph hereof.
"Agreement and Plan of Reorganization" means, with respect to
any Service Company, an agreement substantially in the form of Exhibit G hereto
between that Service Company and the Optionee.
"Amendment No. 1" has the meaning set forth in the
first recital hereof.
"Benefit Plan" has the meaning set forth in
Section 8(o).
"Business Day" means any day that is not a Saturday or Sunday
or a day on which banks in the State of New York are authorized or required by
law to close.
"Certificate of Designations" means the Certificate of
Designations for the Voting Preferred Stock, substantially in the form attached
as Exhibit C hereto.
"Change in Law" has the meaning set forth in Section
23.
"Closing" has the meaning set forth in Section 4(a).
"Closing Date" has the meaning set forth in
Section 4(a).
"Closing Price" means, with respect to any security on any
Trading Day, the last reported sale price, regular way, or, in case no such
reported sale takes place on such day, the average of the reported closing bid
and asked prices, regular way, in either case as reported on the principal
securities exchange on which such security is then listed or admitted to trading
or, if such security is not then listed or admitted to trading on any national
securities exchange, as quoted through the National Association of Securities
Dealers Automated Quotations National Market System or, if such security is not
then listed or admitted to trading on any securities exchange, or
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quoted through such National Market System, the average of the closing bid and
asked prices in the over-the-counter market as furnished by any New York Stock
Exchange member firm that makes a market in such security selected by the
Optionee and reasonably acceptable to the Shareholders.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Common Stock" has the meaning set forth in the fourth
recital hereof.
"Company" has the meaning set forth in the fourth
recital hereof.
"Company Benefit Plan" means any plan, fund, program or
arrangement (including any employee benefit plans as defined in ERISA Section
3(3)) established, maintained or to which contributions are made by the Company
or for which the Company has any obligation or liability.
"Company Contract" means every Contract to which the Company
or United is a party or by which it is bound that materially affects the
business or operations of the Company and United taken as a whole (other than
insurance or reinsurance policies written by the Company or United in the
ordinary course of business).
"Company Control Group" means the Company and any Person that
is considered a single employer with the Company within the meaning of ERISA
Section 4001(b)(1) or Code Sections 414(b), (c), (m) or (o).
"Contract" means any written or oral contract, agreement,
instrument, commitment or other arrangement.
"Effective Date" has the meaning set forth in
Section 5.2 of the Plan of Conversion.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and regulations issued thereunder.
"Exercise Date" means the date as of which the Fair Market
Value per Share is determined pursuant to Section 3.
"Exercise Notice" has the meaning set forth in
Section 4(a).
"Exercise Price" has the meaning set forth in
Section 2.
"Expense Allocation" has the meaning set forth in
Section 5."
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"Expiration Date" means the second anniversary of the
Effective Date; provided, however, that the Expiration Date may be extended to
the third anniversary of the Effective Date upon the mutual agreement in writing
of the Company and the Shareholders.
"Fair Market Value per Share" has the meaning set forth
in Section 3(a).
"Farm Bureau" means each of (i) New Hampshire Farm
Bureau Federation, (ii) Rhode Island Farm Bureau Federation,
Inc., (iii) Vermont Farm Bureau, Inc. and (iv) West Virginia Farm
Bureau, Inc.
"GAAP" means generally accepted accounting principles.
"Governmental Authority" means any foreign, federal, state,
local or other court, arbitration, administrative agency or commission,
insurance of securities regulatory or self-regulatory body or securities or
commodities exchange.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended.
"Insurance Subsidiary" means Farm Family Casualty
Insurance Company, a New York domiciled stock insurance company.
"knowledge" means, with respect to any representation or
warranty in which such term is contained to the best knowledge of any officer or
director or management employee of the Optionee, on the one hand, or such
Shareholder, on the other hand, after a due and diligent inquiry.
"Laws" has the meaning set forth in Section 8(g).
"Lien" means any lien, encumbrance, pledge, mortgage, security
interest, claim, charge, lease, option, right of first refusal, easement,
servitude, equity, claim or other third party right (including a right of
pre-emption), restriction or other limitation, in each case of any nature
whatsoever.
"Material Adverse Effect" means a material adverse effect on
the assets, results of operations, business, prospects or condition (financial
or otherwise) of the Company and United, taken as a whole, or the Optionee and
the Insurance Subsidiary, taken as a whole, as the case may be.
"Material Change in Law" has the meaning set forth in
Section 23.
"Option" has the meaning set forth in Section 2.
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"Option Purchase Agreement" has the meaning set forth
in the first recital hereof.
"Optionee" has the meaning set forth in the first
paragraph hereof.
"Optionee Appraiser" has the meaning set forth in
Section 3(a).
"Optionee Benefit Plan" means any plan, fund, program or
arrangement (including any employee benefit plans as defined in ERISA Section
3(3)) established, maintained or to which contributions are made by the Optionee
or the Insurance Subsidiary or for which the Optionee or the Insurance
Subsidiary has any obligation or liability.
"Optionee Common Stock" means the common stock, par value $.01
per share, of the Optionee.
"Optionee Common Stock Price" means the average Closing Price
per share of Optionee Common Stock during the twenty Trading Days prior to the
third Business Day preceding the Closing Date.
"Optionee Contract" means every Contract to which the Optionee
or the Insurance Subsidiary is a party or by which it is bound that materially
affects the business or operations of the Optionee and the Insurance Subsidiary,
taken as a whole (other than insurance or reinsurance policies written by the
Insurance Subsidiary in the ordinary course of business).
"Optionee Control Group" means the Optionee and any Person
that is considered a single employer with the Optionee within the meaning of
ERISA Section 4001(b)(1) or Code Sections 414(b), (c), (m) or (o).
"Optionee Valuation" has the meaning set forth in
Section 3(a).
"Permits" has the meaning set forth in Section 8(h) and
9(h).
"Person" means any individual, corporation, limited liability
company, partnership, firm, joint venture, association, trust, unincorporated
organization, Governmental Authority or other entity.
"Plan of Conversion" means the Plan of Reorganization and
Conversion of Farm Family Mutual Insurance Company dated February 14, 1996, as
amended from time to time in accordance
with its terms.
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"Policies" means all insurance policies, annuity contracts and
guaranteed interest contracts (including riders to any such policies or
contracts, certificates issued with respect to group life insurance or annuity
contracts and any contracts issued in connection with retirement plans or
arrangements) and assumption certificates issued (or filed pending current
review by applicable Governmental Authorities) by the Company, United or the
Insurance Subsidiary, as the case may be.
"property" means real, personal or mixed property,
tangible or intangible.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the Closing Date, among the Optionee and the Shareholders,
substantially in the form attached as Exhibit F hereto.
"Revised Shareholder Valuation" has the meaning set
forth in Section 3(b).
"SAP" has the meaning set forth in Section 8(j).
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Service Company" means each of (i) Connecticut Farm Bureau
Service Company, (ii) Delaware Farm Bureau Service Company, Inc., (iii) Maine
Farm Bureau Service Company, (iv) Massachusetts Farm Bureau Service Company,
Inc., (v) New Jersey Farm Bureau Service Company and (vi) New York Farm Bureau
Service Company, Inc.
"Shareholders" or "Shareholder" has the meaning set
forth in the first paragraph hereof.
"Shareholder Appraiser" has the meaning set forth in
Section 3(b).
"Shareholder Valuation" has the meaning set forth in
Section 3(b).
"Shares" or "Share" has the meaning set forth in the
fifth recital hereof.
"Stated Value" means the stated value per share of Voting
Preferred Stock, which shall equal the Optionee Common Stock Price.
"Subsidiary" means, with respect to any person, any
corporation, limited liability company, limited or general partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
or other entity analogous to any of the foregoing of which a majority of the
equity ownership
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(whether voting stock or comparable interest) is, at the time, owned, directly
or indirectly by such person.
"Target Range" has the meaning set forth in
Section 3(b).
"Tax" or "Taxes" means all federal, state, county, local,
foreign and other taxes (including, without limitation, income taxes, premium
taxes, excise taxes, sales taxes, use taxes, gross receipts taxes, franchise
taxes, ad valorem taxes, severance taxes, capital levy taxes, transfer taxes,
employment and payroll-related taxes, property taxes, import duties and other
governmental charges and assessments), and includes interest, additions to tax
and penalties with respect thereto.
"Third Appraiser" has the meaning set forth in
Section 3(c).
"Third Valuation" has the meaning set forth in
Section 3(c).
"Trading Day" means any day the New York Stock Exchange is
open for regular trading.
"United" means United Farm Family Insurance Company, a
New York domiciled property/casualty insurance and reinsurance
company.
"Valuation Procedures" means the procedures for determining
the Fair Market Value per Share set forth in Exhibit B.
"Voting Preferred Stock" means the Voting Preferred Stock, par
value $.01 per share, of the Optionee, the terms of which are set forth in the
Certificate of Designations substantially in the form attached as Exhibit C
hereto.
"Voting Preferred Stock Allocation" means, with respect to any
Shareholder, the number of shares of Voting Preferred Stock to be allocated to
such Shareholder as calculated pursuant to the following formula:
A/B x C/D
where: "A" equals $6,000,000; "B" equals the Stated Value of a share of Voting
Preferred Stock; "C" equals the number of Shares owned by such Shareholder; and
"D" equals the total number of Shares owned by all Shareholders.
(b) Interpretation. When a reference is made in this Agreement
to a Section, Schedule or Exhibit, such reference shall be to a Section,
Schedule or Exhibit of this Agreement unless otherwise indicated or unless the
context shall otherwise
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require. The table of contents and headings contained in this Agreement are for
reference purposes only and shall not effect in any way the meaning or
interpretation of this Agreement. The definitions of terms in this Agreement
shall be applicable to both the plural and the singular forms of the terms
defined when either such form is used in this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". The words "hereof",
"herein" and "hereunder", and other words of similar import, refer to this
Agreement as a whole and not to any particular Section, subsection, paragraph or
clause.
Section 2. Grant of Options. Each Shareholder hereby grants to
the Optionee, for the period beginning on the Effective Date and ending at
midnight (New York time) on the Expiration Date, the exclusive and irrevocable
right and option (the "Option") to purchase from such Shareholder all of the
Shares owned by such Shareholder at a price (subject, however, to Sections 5 and
6 hereof) equal to the product of (i) the Fair Market Value per Share and (ii)
the number of Shares sold by such Shareholder hereunder (as adjusted in
accordance with Section 5 hereof, the "Exercise Price"), payable in shares of
Optionee Common Stock and Voting Preferred Stock, as provided in Section 6.
Section 3. Fair Market Value per Share. (a) If the Optionee
proposes to exercise the Options, the Optionee shall so notify the Shareholders
in writing and instruct an investment banking firm of national reputation,
selected by the Optionee and reasonably acceptable to the Shareholders (the
"Optionee Appraiser"), to determine the fair market value of each Share as of
the date of such notice (the "Fair Market Value per Share") in accordance with
the Valuation Procedures (the "Optionee Valuation"). If, following receipt of
the Optionee Valuation, the Optionee continues to propose to exercise the
Options, the Optionee shall so notify the Shareholders in writing and supply the
Shareholders with the Optionee Valuation. The Shareholders and their authorized
representatives shall review the Optionee Valuation and, within 30 days after
the date of such receipt, the Shareholders shall notify the Optionee in writing
of their agreement or disagreement with the Optionee Valuation. In the event the
Shareholders agree with the Optionee Valuation, the Optionee Valuation shall be
the Fair Market Value per Share for purposes of this Agreement. In the event the
Shareholders disagree with the Optionee Valuation, the Shareholders and the
Optionee shall use their reasonable efforts to resolve such disagreement within
15 days after the date the Optionee has received notice of such disagreement. If
the Shareholders and the Optionee are able to resolve such disagreement within
such 15-day period, the valuation so agreed shall be the Fair Market Value per
Share for purposes of this Agreement.
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(b) In the event the Shareholders and the Optionee are unable
to resolve such disagreement within such 15-day period and the Optionee
continues to propose to exercise the Options, the Shareholders shall promptly
thereafter select an investment banking firm of national standing and reasonably
acceptable to the Optionee (the "Shareholder Appraiser") for purposes of
determining the Fair Market Value per Share in accordance with the Valuation
Procedures (the "Shareholder Valuation"). The Shareholders shall deliver the
Shareholder Valuation to the Optionee within the 30-day period next following
such 15-day period. If the Shareholder Valuation is within 5% (plus or minus) of
the Optionee Valuation (the "Target Range"), then the Fair Market Value per
Share for purposes of this Agreement shall equal the average of the Optionee
Valuation and the Shareholder Valuation. If the Shareholder Valuation is not
within the Target Range, then the Optionee and the Shareholders shall use their
reasonable efforts to resolve such disagreement within 15 days after the
Optionee's receipt of the Shareholder Valuation. If the Shareholders and the
Optionee are able to agree on a Shareholder Valuation within the Target Range
(the "Revised Shareholder Valuation"), then the Fair Market Value per Share for
purposes of this Agreement shall equal the average of the Optionee Valuation and
the Revised Shareholder Valuation.
(c) In the event the Shareholders and the Optionee are unable
to resolve such disagreement within such 15-day period and the Optionee
continues to propose to exercise the Options, the Optionee and the Shareholders
shall promptly thereafter jointly select an investment banking firm of national
standing and the firm so selected (the "Third Appraiser") shall be directed by
the Optionee and the Shareholders to determine the Fair Market Value per Share
in accordance with the Valuation Procedures (the "Third Valuation"). The Third
Appraiser shall deliver the Third Valuation to the Optionee and the Shareholders
within the 30-day period following its selection. The Fair Market Value per
Share for purposes of this Agreement shall be the middle valuation of the Third
Valuation, the Optionee Valuation and the Shareholder Valuation.
(d) The fees and expenses of the Optionee Appraiser shall be
paid by the Optionee. The fees and expenses of the Shareholder Appraiser shall
be paid by the Shareholders on a pro rata basis based on the number of Shares
owned by each of them. The fees and expenses of the Third Appraiser shall be
paid 50% by the Optionee and 50% by the Shareholders on a pro rata basis based
on the number of shares owned by each of them.
Section 4. Exercise of Option. (a) Within 45 days after any
determination of the Fair Market Value per Share pursuant to Section 3, the
Optionee may exercise the Options in whole but not in part by sending a written
notice (the "Exercise Notice") to the Shareholders specifying its election to
exercise the Options on the basis of such Fair Market Price per Share.
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The closing (the "Closing") of the transactions contemplated hereby shall take
place on the date that is five Business Days after the satisfaction or waiver of
the conditions set forth in Section 7 at the offices of LeBoeuf, Lamb, Greene &
MacRae, L.L.P., at 10:00 A.M., New York time. The "Closing Date" shall be the
date the Closing occurs.
(b) The Optionee shall acquire the Shares pursuant to the
exercise of the Option in exchange for Optionee Common Stock and Voting
Preferred Stock as set forth in Section 6 hereof and, in the case of a Service
Company Shareholder, in accordance with the Agreement and Plan of Reorganization
between the Optionee and such Shareholder.
Section 5. Expense Allocation. The Company shall pay the
reasonable out-of-pocket fees and expenses of the Shareholders incurred in
connection with the Agreement for (i) one legal counsel and one investment
banking firm, in each case engaged by the Shareholders' Committee appointed by
the Shareholders in connection with this Agreement, (ii) travel and per diem
expenses incurred in connection with attendance at meetings of the Shareholders'
Committee, and (iii) a real estate appraisal in respect of the Company's real
property (the amount paid on behalf of each Shareholder, being referred to as
such Shareholder's "Expense Allocation," shall equal the total amount paid by
the Company pursuant to this Section 5 multiplied by the number of Shares owned
by such Shareholder divided by the total number of Shares owned by all of the
Shareholders). The Expense Allocation paid on behalf of the Shareholders shall
be taken into account in determining the Exercise Price payable to the
Shareholders hereunder, as provided in Section 6.
Section 6. Closing; Payment of Exercise Price. (a) At the
Closing: (i) each Shareholder shall deliver to the Optionee (A) a certificate or
certificates representing all of the Shares owned by such Shareholder, duly
endorsed in blank or accompanied by duly executed instruments of transfer
acceptable to the Optionee and accompanied by all requisite stock transfer
stamps and taxes attached or provided for, and (B) all instruments and documents
required to be delivered by such Shareholder to the Optionee pursuant to this
Agreement; and (ii) the Optionee shall deliver to each Shareholder (A) a
certificate or certificates representing the number of shares of the Optionee
Common Stock and Voting Preferred Stock to be received by such Shareholder
pursuant to subsection (b) of this Section 6, such certificate or certificates
to be registered in the name of such Shareholder and to bear the legend set
forth in Section 14; and (B) all instruments and documents required to be
delivered by the Optionee to such Shareholder pursuant to this Agreement.
(b) In payment of the Exercise Price in respect of its
Shares, each Shareholder shall receive:
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(i) the number of shares of Voting Preferred
Stock (rounded to the nearest whole share) calculated using the following
formula:
A-(A/B x C)
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D
where: (A) "A" equals the product of the Stated Value and such Shareholder's
Voting Preferred Stock Allocation; (B) "B" equals the amount that would
constitute the Exercise Price hereunder in respect of such Shareholder's Shares
if Section 5 hereof were not given effect; (C) "C" equals the amount of such
Shareholder's Expense Allocation; and (D) "D" equals the Stated Value; plus
(ii) the number of shares of Optionee Common Stock
(rounded to the nearest whole share) calculated using the
following formula:
A-B-(C/A x D)
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E
where: (A) "A" equals the amount that would constitute the Exercise Price
hereunder in respect of such Shareholder's Shares if Section 5 hereof were not
given effect; (B) "B" equals the product of the Stated Value and such
Shareholder's Voting Preferred Stock Allocation; (C) "C" equals "A" minus "B";
(D) "D" equals the amount of such Shareholder's Expense Allocation; and (E) "E"
equals the Optionee Common Stock Price.
(c) All instruments and documents executed and delivered to
the Optionee pursuant hereto shall be in form and substance, and shall be
executed in a manner, reasonably satisfactory to the Optionee. All instruments
and documents executed and delivered to each Shareholder pursuant hereto shall
be in form and substance, and shall be executed in a manner, reasonably
satisfactory to such Shareholder.
Section 7. Conditions of Closing. (a) The obligation of the
Optionee to consummate the Closing is subject to satisfaction of the following
conditions at or prior to the Closing (unless expressly waived in writing by the
Optionee at or prior to the Closing): (i) all of the terms, covenants and
conditions of this Agreement to be complied with or performed by the
Shareholders at or prior to the Closing shall have been complied with and
performed by it in all material respects, and the representations and warranties
made by the Shareholders in this Agreement shall be true and correct in all
material respects at and as of the Closing, with the same force and effect as
though such representations and warranties had been made at and as of the
Closing, and the Optionee shall have received a certificate executed on behalf
of each of the Shareholders to the effect that the foregoing conditions have
been satisfied; (ii) all consents, approvals, orders or authorizations of, or
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registrations, declarations or filings with, any Governmental Authority required
in connection with the transactions contemplated hereby shall have been obtained
or made, as the case may be; (iii) the transactions contemplated hereby shall
have been approved by the affirmative vote of the holders of at least a majority
of the outstanding shares of the Optionee Common Stock; (iv) all waiting
periods, if any, including any extension thereof, under the HSR Act shall have
expired; (v) no preliminary or permanent injunction or other order by any court
of competent jurisdiction prohibiting or otherwise restraining the transactions
contemplated hereby shall be in effect; (vi) the Optionee shall have received
the opinion, dated the Closing Date, of counsel to each Shareholder
substantially to the effect set forth in Exhibit D; (vii) the Company's By-Laws
shall have been amended to permit the Optionee to acquire the Shares pursuant to
this Agreement; (viii) the Optionee shall have received an opinion, in form and
substance reasonably acceptable to the Optionee, from an investment banking firm
of national standing as to the fairness, from a financial point of view, to the
Optionee of the transactions contemplated by this Agreement; and (ix) since the
Exercise Date, there shall not have occurred any event that has had or is
reasonably likely to have a Material Adverse Effect on the Company and United,
taken as a whole.
(b) The obligation of each Shareholder to consummate the
Closing is subject to the satisfaction of the following conditions at or prior
to the Closing (unless expressly waived in writing by such Shareholder at or
prior to the Closing): (i) all of the terms, covenants and conditions of this
Agreement to be complied with or performed by the Optionee at or prior to the
Closing shall have been complied with and performed by it in all material
respects, and the representations and warranties made by the Optionee in this
Agreement shall be true and correct in all material respects at and as of the
Closing with the same force and effect as though such representations and
warranties had been made at and as of the Closing, and the Shareholder shall
have received a certificate executed on behalf of the Optionee to the effect
that the foregoing conditions have been satisfied; (ii) all consents, approvals,
orders or authorizations of, or registrations, declarations or filings with, any
Governmental Authority required in connection with the transactions contemplated
hereby shall have been obtained or made, as the case may be; (iii) the
transactions contemplated hereby shall have been approved by the affirmative
vote of the holders of at least a majority of the outstanding shares of the
Optionee Common Stock; (iv) all waiting periods, including any extensions
thereof, under the HSR Act shall have expired; (v) no preliminary or permanent
injunction or other order by any court of competent jurisdiction prohibiting or
otherwise restraining the transactions contemplated hereby shall be in effect;
(vi) such Shareholder shall have received the opinion, dated the Closing Date,
of general counsel to the Optionee and the Insurance Subsidiary, substantially
to the effect set forth in Exhibit E;
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(vii) the Optionee shall have executed and delivered the Registration Rights
Agreement; and (viii) the Company's By-Laws shall have been amended to permit
the Optionee to acquire the
Shares pursuant to this Agreement.
Section 8. Representations and Warranties of Each
Shareholder. Each Shareholder represents to the Optionee as
follows:
(a) Corporate Existence. (i) Each of the Company and United is
a corporation duly organized, validly existing and in good standing under the
laws of the State of New York. Each of the Company and United has all necessary
power and authority and possesses all rights, licenses, authorizations and
approvals, governmental or otherwise to own, lease and operate its properties
and to conduct its business as now being conducted. Each of the Company and
United is duly qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction in which the conduct of its business requires
such qualification, except when the failure to be so qualified would not have a
Material Adverse Effect.
(ii) Such Shareholder is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized. Such Shareholder has all necessary power
and authority and possesses all rights, licenses, authorizations and approvals,
governmental or otherwise to own, lease and operate its properties and to
conduct its business as now being conducted and to own the Shares.
(b) Authorization; Enforcement. Such Shareholder has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. Such Shareholder has taken all
necessary corporate action to duly and validly authorize its execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by such Shareholder
and is the legal, valid and binding obligation of such Shareholder, enforceable
against Shareholder, in accordance with its terms.
(c) Capital Stock of the Company; Ownership of Shares. (i) The
authorized capital stock of the Company consists of 61,000 shares of Common
Stock of which 60,011 are issued and outstanding. All of the issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable. The Shares have not been issued in
violation of, and none of the Shares or such shares of capital stock is subject
to, any preemptive or subscription rights. There are no outstanding warrants,
options, contracts, convertible or exchangeable securities or other commitments
(other than this Agreement) pursuant to which such Shareholder or
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the Company is or may be obligated to issue, sell, purchase, return or redeem
any shares of capital stock or other securities of the Company, and there are
not any equity securities of the Company reserved for issuance for any purpose.
(ii) Such Shareholder is the record and
beneficial owner of the number of Shares set forth opposite its name on Exhibit
A, free and clear of any Liens. Upon consummation of the transactions
contemplated by this Agreement, the Optionee will acquire record and beneficial
ownership of the Shares, free and clear of any Liens. Other than this Agreement
and Article II, Section 1 of the Company's By-laws, the Shares are not subject
to any voting trust agreement or other contract, agreement, arrangement,
commitment or understanding, including any such agreement, arrangement,
commitment or understanding restricting or otherwise relating to the voting,
dividend rights or disposition of the Shares.
(d) Subsidiaries. Except for United, the Company does
not have any Subsidiaries.
(e) No Conflict. Neither the execution, delivery and
performance of this Agreement by such Shareholder nor the consummation of the
transactions contemplated hereby will: (i) violate any provision of the
certificate of incorporation, by-laws or other charter or organizational
document of such Shareholder or, to the knowledge of such Shareholder, the
Company or United, other than Article II, Section 1 of the Company's Bylaws;
(ii) violate, conflict with or result in the breach of any of the terms of,
result in any modification of the effect of, otherwise give any other
contracting party the right to terminate, or constitute (or with notice or lapse
of time or both constitute) a default under, any Contract to which such
Shareholder or, to the knowledge of such Shareholder, the Company or United is a
party or by or to which any of them or their assets or properties may be bound
or subject, except for such of the foregoing as would not have a Material
Adverse Effect or interfere in any material way with the ability of such
Shareholder to consummate the transactions contemplated hereby; (iii) violate
any order, judgment, injunction, award or decree of any Governmental Authority
against, or binding upon, any Contract with, or condition imposed by, any
Governmental Authority binding upon such Shareholder or, to the knowledge of
such Shareholder, the Company or United or upon the business, properties or
assets of such Shareholder or, to the knowledge of such Shareholder, the Company
or United, except for such violations as would not have a Material Adverse
Effect or interfere in any material way with the ability of such Shareholder to
consummate the transactions contemplated hereby; (iv) violate any statute, law
or regulation of any jurisdiction as such statute, law or regulation relates to
such Shareholder or, to the knowledge of such Shareholder, the Company or
United, or to the business, properties or assets of such Shareholder or, to the
knowledge of such Shareholder, the
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Company or United, except for such violations as would not have a Material
Adverse Effect or interfere in any material way with the ability of such
Shareholder to consummate the transactions contemplated hereby; or (v) result in
the creation or imposition of any material Lien on any of the properties or
assets of such Shareholder or, to the knowledge of such Shareholder, the Company
or United (including any of the Shares).
(f) Consents. No consent, license, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Authority is required to be obtained, made or given by or with respect to such
Shareholder or, to the knowledge of such Shareholder, the Company, in connection
with the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby other than under: (i) the
insurance laws of the State of New York; (ii) the HSR Act; and (iii) any other
consents and approvals as shall have been obtained on or prior to the Closing
Date.
(g) Compliance with Law. To the knowledge of such Shareholder,
the Company and United have complied with, and are now complying, with all
foreign, federal, state and local statutes, laws, regulations, ordinances,
judgments, injunctions, orders, licenses, approvals, permits and other
requirements (collectively, "Laws") applicable to the Company, United or their
respective businesses, properties or assets, except where the failure to comply
would not have a Material Adverse Effect.
(h) Insurance Licenses. To the knowledge of such Shareholder,
each of the Company and United holds such licenses, certificates and permits
from governmental authorities (including, without limitation, insurance licenses
from the insurance regulatory authorities of the jurisdictions in which they
conduct an insurance business) (collectively, "Permits") that are necessary to
the conduct of their business as presently conducted; to the knowledge of such
Shareholder, the Company and United have fulfilled and performed all obligations
necessary to maintain such Permits; to the knowledge of such Shareholder, there
is no pending or threatened action, suit, proceeding or investigation (and, to
the best of such Shareholder's knowledge, no reasonable basis for any such
action, suit, proceeding or investigation exists) that may reasonably be
expected to lead to the revocation, termination or suspension of any such
Permits.
(i) Litigation. Except as set forth in Schedule 8(i), to the
knowledge of such Shareholder, there is no judicial, administrative or
regulatory action, proceeding, investigation or inquiry or administrative charge
or complaint pending or threatened against the Company or United the respective
assets, properties or businesses of the Company or United, which, either singly
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect or which questions the validity of this Agreement or any action taken or
to be taken by the Company or
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<PAGE>
such Shareholder pursuant to this Agreement or in connection with the
transactions contemplated hereby.
(j) Financial Statements. (i) The Company has made available
to the Optionee complete and correct copies of the Annual Statement of the
Company and United filed with the New York Insurance Department for the years
ended December 31, 1993, 1994 and 1995, together with the exhibits and schedules
thereto and the Statement of Actuarial Opinion and any affirmations and
certifications filed therewith. To the knowledge of such Shareholder, the
financial statements of the Company and United contained in such Annual
Statements and in all Quarterly Statements and Annual Statements filed with the
New York Insurance Department for the periods ending after December 31, 1995:
(A) have been prepared in accordance with statutory accounting practices
prescribed or permitted by the New York Insurance Department applied on a
consistent basis (except as set forth in the notes, exhibits or schedules
thereto) ("SAP"); (B) present fairly in all material respects, to the extent
required and in conformity with SAP, the financial condition of the Company or
United, as the case may be, at their respective dates, and its results of
operations, changes in capital and surplus, and cash flows for each of the
periods then ended; (C) were correct in all material respects when filed; and
(D) there were no material omissions therefrom when filed.
(ii) The Company will make available to the
Optionee, as soon as the same are available, complete and correct copies of the
audited consolidated financial statements and the audited statutory financial
statements and, in each case, the notes thereto of the Company and United for
the years ended December 31, 1993, 1994 and 1995. To the knowledge of such
Shareholder, such financial statements and the related notes thereto will have
been prepared in accordance with GAAP and SAP, as the case may be, consistently
applied throughout the periods involved and will fairly present the consolidated
financial condition, results of operations, cash flows and changes in
stockholders' equity of the Company and United at the dates and for the periods
presented.
(k) Contracts. With respect to the Company's or United's
performance of its respective obligations under the Company Contracts, to the
knowledge of such Shareholder, no event of default or non-compliance, or event
which with the passage of time, giving of notice or both, would constitute such
an event of default or non-compliance, has occurred or is continuing under any
such Company Contract. With respect to the performance by any other party of its
obligations under the Company Contracts, to the knowledge of such Shareholder,
no event of default or non-compliance, or event which with the passage of time,
giving of notice or both, would constitute such an event of default or
non-compliance, has occurred or is continuing under any such Company Contract.
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<PAGE>
(l) Taxes. Except as set forth in Schedule 8(l), to the
knowledge of such Shareholder, (A) the Company (the term "Company" as used in
this Section 8(l) includes United except where the context otherwise requires),
has duly and timely filed all federal and state Tax returns of the Company or
which include the Company (including information returns relating to Policies)
required to be filed as of the date hereof and prior to the Closing Date and, to
the knowledge of such Shareholder, filed reports with all other Governmental
Authorities having jurisdiction, with respect to Taxes withheld by or imposed
upon the Company except such returns and reports where the failure to file would
not, singly or in the aggregate, have a Material Adverse Effect; (B) all Taxes
shown on such Tax returns and all assessments received by such Shareholder or
the Company with respect to Taxes for which the Company has any liability for
payment have been paid or fully reserved for to the extent that such Taxes are
required to be reserved for in accordance with statutory accounting practices
prescribed or permitted by the New York Insurance Department; (C) neither such
Shareholder nor the Company has requested any extension of time within which to
file any Tax return of the Company or Tax return which includes the Company,
which return or returns have not since been filed, nor are there any Tax liens
upon any property or assets of the Company, except for Taxes not yet due and
payable; (D) there are no outstanding deficiencies assessed against such
Shareholder or the Company for any Taxes for which the Company has any liability
for payment, and there are no proceedings or actions pending, concerning either
(x) the liability of such Shareholder or the Company with respect to Taxes for
which the Company has any liability for payment, or (y) the collection or
assessment of Tax for any period for which Tax returns of the Company, or Tax
returns which include the Company, have been filed or were due; and (E) there is
no pending audit of any of the Tax returns of the Company or which include the
Company, and neither such Shareholder nor the Company has been notified in
writing that any taxing authority proposes to commence an audit of such Tax
returns.
(m) Assets. (i) To the knowledge of such Shareholder, each of
the Company and United has good and marketable title to, or valid leasehold or
license interests in, all the property and assets that they purport to own,
lease or license, including without limitation, property and assets reflected on
the 1995 Annual Statements of the Company and United (except assets disposed of
in the ordinary course of business between December 31, 1995 and the Closing
Date), and property and assets acquired since December 31, 1995, in each case
free and clear of all Liens, except (A) the Lien of current Taxes not yet due
and payable or of Taxes the validity of which is being contested in good faith
by appropriate proceedings, (B) Liens (if any) reflected in the 1995 Annual
Statement, (C) Liens related to required deposits with insurance departments,
(D) Liens the validity of which are being contested or litigated in good faith
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<PAGE>
by appropriate proceedings and for which the Company have provided adequate
reserves, and (E) such other Liens which as on the Closing Date will not,
individually or in the aggregate, materially detract from the values of such
property and assets or materially interfere with the present uses thereof.
(ii) With respect to any property leased by the
Company or United or that is material to the business, operations or financial
condition of the Company and United, taken as a whole, to the knowledge of such
Shareholder, there exists no default by the Company or United, or by any third
party, that materially and adversely affects any such lease. To the knowledge of
such Shareholder, the Company or United, as the case may be, enjoys peaceful and
undisturbed possession under each such lease to which it is a party.
(n) Environmental Matters. Except as set forth on Schedule
8(n) and, with respect to properties owned, operated or leased by the Company or
United prior to, but not on or after January 1, 1994, to such Shareholder's
knowledge:
(i) No portion of the property is being used or
has been used at any previous time, for the disposal, storage, treatment,
processing or other handling of waste contamination, polychlorinated biphenyl or
asbestos-containing material, or other toxic or hazardous substances; the
property violates no applicable federal, state, county or other municipal law,
ordinance, order, regulation or requirement, and neither the Company nor United
have received notice to that effect.
(ii) The Company and United have complied with
all requirements of any applicable department of environmental resources or
similar governmental agency, and there are no ongoing requirements ordered by
said agency or any other governmental body for environmental cleanup with
respect to the property.
(o) Employee Benefits. Except for ongoing contribution
requirements, all unpaid material liabilities with respect to employee benefit
plans, as that term is defined in ERISA Section 3(3) ("Benefit Plan"), of the
Company are included in the Company's financial statement. With respect to each
Company Benefit Plan, the Company has made available to the Optionee, true and
correct copies of all the plan, trust, insurance contracts and related
documents, financial, actuarial, employee communications and, where applicable,
Internal Revenue Service determination letters. Each Company Benefit Plan is
maintained and administered at all times in material compliance with its terms,
ERISA and applicable laws and regulations. There are no action, suits or claims
(other than routine claims for benefits), pending, or to the knowledge of the
Company, threatened with respect to any Company Benefit Plan or against
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<PAGE>
the assets of any Benefit Plan. Each Company Benefit Plan
subject to ERISA Section 601 is in compliance therewith.
(p) Investment Purpose. Such Shareholder is acquiring the
Optionee Common Stock and the Voting Preferred Stock for investment only and not
with a view to resale in connection with any distribution thereof except in
compliance with the Securities Act and all other applicable securities laws.
Such Shareholder understands that the Optionee Common Stock and the Voting
Preferred Stock have not been registered under the Securities Act or under the
securities laws of any state and that such shares may not be sold, transferred,
offered for sale, pledged, hypothecated or otherwise disposed of in the absence
of an effective registration under the Securities Act except pursuant to a valid
exemption from such registration.
Section 9. Representations and Warranties of the Optionee. The
Optionee hereby represents and warrants to each Shareholder as follows:
(a) Corporate Existence. Each of the Optionee and the
Insurance Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is organized. Each
of the Optionee and the Insurance Subsidiary has all necessary power and
authority and possesses all rights, licenses, authorizations and approvals,
governmental or otherwise to own, lease and operate its properties and to
conduct its business as now being conducted. Each of the Optionee and the
Insurance Subsidiary is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which the conduct of
its business requires such qualification, except when the failure to be so
qualified would not have a Material Adverse Effect.
(b) Authorization; Enforcement. The Optionee has all necessary
corporate power and authority to execute and deliver this Agreement and, subject
to approval of the transactions contemplated hereby by the stockholders of the
Optionee, to perform its obligations hereunder. The Optionee has taken all
necessary corporate action to duly and validly authorize its execution and
delivery of this Agreement and, subject to approval of the transactions
contemplated hereby by the stockholders of the Optionee, the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Optionee and is the legal, valid and binding obligation of the
Optionee, subject to approval of the transactions contemplated hereby by the
stockholders of the Optionee, enforceable against the Optionee in accordance
with its terms.
(c) Capital Stock of Optionee. The shares of Optionee
Common Stock and Voting Preferred Stock to be issued to the
Shareholders pursuant to this Agreement will be duly authorized
prior to the Closing Date and, when issued and delivered as
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provided in this Agreement, will be validly issued, fully paid and
nonassessable. Upon delivery of the shares of Optionee Common Stock and Voting
Preferred Stock to the Shareholders as provided in this Agreement, the
Shareholders will acquire such shares free and clear of any Liens.
(d) Subsidiaries. Schedule 9(d) sets forth a true,
correct and complete list of all Subsidiaries of the Optionee and
the Insurance Subsidiary.
(e) No Conflict. Neither the execution, delivery and
performance of this Agreement nor the consummation of the transactions
contemplated hereby will: (i) violate any provision of the certificate of
incorporation, by-laws or other charter or organizational document of the
Optionee or the Insurance Subsidiary; (ii) violate, conflict with or result in
the breach of any of the terms of, result in any modification of the effect of,
otherwise give any other contracting party the right to terminate, or constitute
(or with notice or lapse of time or both constitute) a default under, any
Contract to which the Optionee or the Insurance Subsidiary is a party or by or
to which any of them or their assets or properties may be bound or subject,
except for such of the foregoing as would not have a Material Adverse Effect or
interfere in any material way with the ability of the Optionee to consummate the
transactions contemplated hereby; (iii) violate any order, judgment, injunction,
award or decree of any Governmental Authority against, or binding upon, or any
Contract with, or condition imposed by, any Governmental Authority binding upon
the Optionee or the Insurance Subsidiary, or upon the business, properties or
assets of the Optionee or the Insurance Subsidiary, except for such violations
as would not have a Material Adverse Effect or interfere in any material way
with the ability of the Optionee to consummate the transactions contemplated
hereby; (iv) violate any statute, law or regulation of any jurisdiction as such
statute, law or regulation relates to the Optionee or the Insurance Subsidiary,
or to the business, properties or assets of the Optionee or the Insurance
Subsidiary, except for such violations as would not have a Material Adverse
Effect or interfere in any material way with the ability of the Optionee to
consummate the transactions contemplated hereby; or (v) result in the creation
or imposition of any material Lien on any of the properties or assets of the
Optionee or the Insurance Subsidiary.
(f) Consents. No consent, license, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Authority is required to be obtained, made or given by or with respect to the
Optionee or the Insurance Subsidiary in connection with the execution, delivery
and performance of this Agreement or the consummation of the transactions
contemplated hereby other than: (i) under the insurance laws of the State of New
York; (ii) under the HSR Act; (iii) under federal securities laws in connection
with the
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<PAGE>
approval required by the stockholders of the Optionee; and (iv) any other
consents and approvals as shall have been obtained on or prior to the Closing
Date.
(g) Compliance with Law. The Optionee and the Insurance
Subsidiary have complied with, and are now complying, with all Laws applicable
to the Optionee, the Insurance Subsidiary, or their respective business,
properties or assets, except when the failure to comply would not have a
Material Adverse Effect.
(h) Insurance Licenses. Each of the Optionee and the Insurance
Subsidiary holds such licenses, certificates and permits from governmental
authorities (including, without limitation, insurance licenses from the
insurance regulatory authorities of the jurisdictions in which they conduct an
insurance business) (collectively, "Permits") that are necessary to the conduct
of their business as presently conducted; the Optionee and the Insurance
Subsidiary have fulfilled and performed all obligations necessary to maintain
such Permits; there is no pending or, to the best of the Optionee's knowledge,
threatened action, suit, proceeding or investigation (and, to the best of the
Optionee's knowledge, no reasonable basis for any such action, suit, proceeding
or investigation exists) that may reasonably be expected to lead to the
revocation, termination or suspension of any such Permits.
(i) Litigation. Except as set forth on Schedule 9(i), there is
no judicial, administrative or regulatory action, proceeding, investigation or
inquiry or administrative charge or complaint pending or, to the knowledge of
the Optionee, threatened against the Optionee or the Insurance Subsidiary, the
respective assets, properties or businesses of the Optionee or the Insurance
Subsidiary, which, either singly or in the aggregate, could reasonably be
expected to have a Material Adverse Effect or which questions the validity of
this Agreement or any action taken or to be taken by the Optionee pursuant to
this Agreement or in connection with the transactions contemplated hereby.
(j) Financial Statements. (i) The Optionee has made available
to the Shareholders complete and correct copies of the Annual Statement of the
Insurance Subsidiary filed with the New York Insurance Department for the years
ended December 31, 1993, 1994 and 1995, together with the exhibits and schedules
thereto and the Statement of Actuarial Opinion and any affirmations and
certifications filed therewith. The financial statements of the Insurance
Subsidiary contained in such Annual Statements and in all Quarterly Statements
and Annual Statements filed with the New York Insurance Department for the
periods ending after December 31, 1995: (A) have been prepared in accordance
with SAP; (B) present fairly in all material respects, to the extent required
and in conformity with SAP, the financial condition of
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the Optionee at their respective dates, and its results of operations, changes
in capital and surplus, and cash flows for each of the periods then ended; (C)
were correct in all material respects when filed; and (D) there were no material
omissions therefrom when filed.
(ii) The Optionee has made available to the
Shareholders complete and correct copies of the audited consolidated financial
statements and audited statutory financial statements and, in each case, the
notes thereto of the Insurance Subsidiary for the years ended December 31, 1993,
1994 and 1995. Such financial statements and the related notes thereto were
prepared in accordance with GAAP and SAP, as the case may be, consistently
applied throughout the periods involved and fairly present the financial
condition, results of operations, cash flows and changes in stockholders' equity
of the Insurance Subsidiary at the dates and for the periods presented.
(k) Contracts. With respect to the Optionee's or the Insurance
Subsidiary's performance of its respective obligations under the Optionee
Scheduled Contracts, no event of default or non-compliance, or event which with
the passage of time, giving of notice or both, would constitute such an event of
default or non-compliance, has occurred or is continuing under any such Optionee
Scheduled Contract. With respect to the performance by any other party of its
obligations under the Optionee Scheduled Contracts, to the knowledge of the
Optionee, no event of default or non-compliance, or event which with the passage
of time, giving of notice or both, would constitute such an event of default or
non-compliance, has occurred or is continuing under any such Optionee Scheduled
Contract.
(l) Taxes. Except as set forth in Schedule 9(l), (A) the
Optionee or the Insurance Subsidiary (as appropriate) (the term "Optionee" as
used in this Section 9(l) includes the Insurance Subsidiary except where the
context otherwise requires) has duly and timely filed all federal and state Tax
returns of the Optionee (including information returns relating to Policies)
required to be filed as of the date hereof and prior to the Closing Date and, to
the knowledge of the Optionee, filed reports with all other Governmental
Authorities having jurisdiction, with respect to Taxes withheld by or imposed
upon the Optionee except such returns and reports where the failure to file
would not, singly or in the aggregate, have a Material Adverse Effect; (B) all
Taxes shown on such Tax returns and all assessments received by the Optionee
with respect to Taxes for which the Optionee has any liability for payment have
been paid or fully reserved for to the extent that such Taxes are required to be
reserved for in accordance with statutory accounting practices prescribed or
permitted by the New York Insurance Department; (C) the Optionee has not
requested any extension of time within which to file any Tax return of the
Optionee which return or returns have not since been filed, nor are there any
Tax liens
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upon any property or assets of the Optionee, except for Taxes not yet due and
payable; (D) there are no outstanding deficiencies assessed against the Optionee
for any Taxes for which the Optionee has any liability for payment, and there
are no proceedings or actions pending, concerning either (x) the liability of
the Optionee with respect to Taxes for which the Optionee has any liability for
payment, or (y) the collection or assessment of Tax for any period for which Tax
returns of the Optionee, have been filed or were due; and (E) there is no
pending audit of any of the Tax returns of the Optionee, and the Optionee has
not been notified in writing that any taxing authority proposes to commence an
audit of such Tax returns.
(m) Assets. (i) The Optionee and the Insurance Subsidiary have
good and marketable title to, or valid leasehold or license interests in, all
the property and assets that it purports to own, lease or license, including
without limitation, property and assets reflected on the Insurance Subsidiary's
1995 Annual Statement (except assets disposed of in the ordinary course of
business between December 31, 1995 and the Closing Date), and property and
assets acquired since December 31, 1995, in each case free and clear of all
Liens, except (A) the Lien of current Taxes not yet due and payable or of Taxes
the validity of which is being contested in good faith by appropriate
proceedings, (B) Liens (if any) reflected in the 1995 Annual Statement, (C)
Liens related to required deposits with insurance departments, (D) Liens the
validity of which are being contested or litigated in good faith by appropriate
proceedings and for which the Insurance Subsidiary has provided adequate
reserves, and (E) such other Liens which as on the Closing Date will not,
individually or in the aggregate, materially detract from the values of such
property and assets or materially interfere with the present uses thereof.
(ii) With respect to any property leased by the
Optionee and the Insurance Subsidiary or that is material to the business,
operations or financial condition of the Optionee and the Insurance Subsidiary,
there exists no default by the Optionee or the Insurance Subsidiary, or to the
knowledge of the Optionee, by any third party, that materially and adversely
affects any such lease. The Optionee and the Insurance Subsidiary, as the case
may be, enjoy peaceful and undisturbed possession under each such lease to which
it is a party.
(n) Environmental Matters. Except as set forth on Schedule
9(n) and, with respect to properties owned, operated or leased by the Optionee
or the Insurance Subsidiary prior to, but not on or after January 1, 1994, to
the Optionee's knowledge:
(i) No portion of the property is being used or
has been used at any previous time, for the disposal, storage, treatment,
processing or other handling of waste contamination, PCBs, or other toxic or
hazardous substances; the property
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<PAGE>
violates no applicable federal, state, county or other municipal law, ordinance,
order, regulation or requirement, and the Optionee has received no notice to
that effect.
(ii) The Optionee and the Insurance Subsidiary
have complied with all requirements of any applicable department of
environmental resources or similar governmental agency, and there are no ongoing
requirements ordered by said agency or any other governmental body for
environmental cleanup with respect to the property.
(o) Employee Benefits. Except for ongoing contribution
requirements, all unpaid material liabilities with respect to the Optionee
Benefit Plans are included in Optionee's financial statements. With respect to
each Optionee Benefit Plan, the Optionee has made available to the Shareholders
true and correct copies of all the plan, trust, insurance contracts and related
documents, financial, actuarial, employee communications and, where applicable,
Internal Revenue Service determination letters. Each Optionee Benefit Plan is
maintained and administered at all time in material compliance with its terms,
ERISA and applicable laws and regulations. There are no action, suits or claims
(other than routine claims for benefits), pending, or to the knowledge of the
Optionee, threatened with respect to any Optionee Benefit Plan or against the
assets of any Optionee Benefit Plan. Each Optionee Benefit Plan subject to ERISA
Section 601 is in compliance therewith.
(p) Investment Purpose. The Optionee is acquiring the Shares
for investment only and not with a view to resale in connection with any
distribution of any of the Shares except in compliance with the Securities Act
and all other applicable securities laws. The Optionee understands that the
Shares have not been registered under the Securities Act or under the securities
laws of any state and that the Shares may not be sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of in the absence of an
effective registration under the Securities Act except pursuant to a valid
exemption from such registration.
Section 10. Covenants of each Shareholder;
Restrictions on Certain Actions.
(a) Covenants. (i) From the date hereof through the later of
the Expiration Date and any extension thereof or the Closing Date, each
Shareholder hereby covenants and agrees that it will do or use its reasonable
efforts to cause to be done all things necessary to preserve, renew and keep in
full force and effect the corporate existence of the Company and that, without
the prior written consent of the Optionee (which consent shall not be
unreasonably withheld), it shall, and shall use its reasonable efforts to cause
the Company and United to:
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<PAGE>
(A) operate the business of the Company and
United in the usual, regular and ordinary manner and, to the extent consistent
with such operation, use its best efforts to preserve intact the present
business organization, keep available the services of the present officers,
employees and agency personnel of the Company and United and preserve their
present relationships with persons having business dealings with the Company and
United;
(B) maintain the books, accounts and records
relating to the business of the Company and United in the usual,
regular and ordinary manner, on a basis consistent with past
practice;
(C) use all reasonable efforts not to permit any
event to occur that would result in any of the representations and warranties
contained in this Agreement not being, except as specifically contemplated by
this Agreement, materially true and correct; and
(D) amend Article II, Section 1 of the Company's
By-laws so as to permit the transactions contemplated by this Agreement.
(ii) Each Shareholder hereby covenants and agrees
that it will do or cause to be done all things necessary as promptly as
practicable after the date hereof to amend the Bylaws of the Company to permit
the Optionee to acquire the Shares pursuant to this Agreement.
(b) Restrictions. Except as otherwise contemplated by this
Agreement, from the date hereof through the later of the Expiration Date and any
extension thereof or the Closing Date, without the prior written consent of the
Optionee, each Shareholder shall not, and shall use its reasonable efforts to
cause the Company and United not to:
(i) enter into an agreement or incur any
obligation the terms of which would violate this Agreement or be
violated by the consummation of the transactions contemplated by
this Agreement;
(ii) issue, pledge, sell, transfer, distribute,
dispose of or otherwise encumber all or any part of the capital stock of the
Company including any Shares owned by such Shareholder, or the outstanding
shares of capital stock of United, or (in one or a series of transactions) any
material portion of the assets or properties of the Company and United taken as
a whole;
(iii) redeem or otherwise acquire any shares of
the Company's Common Stock or issue any capital stock or any
-25-
<PAGE>
option, warrant or right relating thereto or any securities
convertible into or exchangeable for any shares of capital stock;
(iv) declare or pay any dividend or make any
other distribution, in cash, securities or otherwise, on the outstanding shares
of Common Stock or any capital stock of the Company or United, except for
dividends on the Common Stock not to exceed $480,088 per annum in the aggregate;
(v) provide for the consolidation with or merger
of the Company or United into another corporation or other entity
or the liquidation or dissolution of the Company or United;
(vi) amend the Company's Certificate of
Incorporation or By-laws, or adopt any shareholders' or directors' resolution or
take any other action which would restrict the alienation, voting, dividend or
other rights of the Shares; or
(vii) take any other action or enter into any
agreement similar to the foregoing which could have the effect of frustrating
the purpose of this Agreement.
Section 11. Adjustment Upon Changes in Capitalization. In the
event of any change in the Common Stock by reason of stock dividend, splitups,
mergers, recapitalizations, combinations, exchange of shares or the like, the
type and number of shares subject to the Options and the Fair Market Value per
Share shall be adjusted appropriately.
Section 12. Access and Information. Prior to the later to
occur of the Expiration Date and any extension thereof or the Closing Date, the
Shareholders shall cause the Company and United to afford to the Optionee and
the Optionee's authorized representatives reasonable access during normal
business hours to all of their properties, books, contracts, commitments and
records and, during such period, the Shareholders shall furnish promptly to the
Optionee all information concerning the business, properties and personnel of
the Company and United as the Optionee may reasonably request.
Section 13. Approvals of Governmental Authorities. (a) Upon
the Optionee's election to exercise the Options, the Optionee and the
Shareholders shall take, and the Shareholders shall cause the Company and United
to take, all reasonable steps necessary or appropriate, and shall use, and shall
cause the Company to use, all commercially reasonable efforts, to obtain as
promptly as practicable all consents, approvals, authorizations, licenses and
orders of Governmental Authorities required to be obtained by the Optionee or
the Shareholders, the Company or United, as the case may be, in connection with
the consummation of the transactions contemplated by this Agreement.
-26-
<PAGE>
(b) The Optionee and the Shareholders shall cooperate with
each other and each other's respective Affiliates in seeking to obtain all such
consents, approvals, authorizations, licenses and orders, and shall provide, and
shall cause their respective Affiliates to provide, such information and
communications to Governmental Authorities as such Governmental Authorities may
reasonably request in connection therewith.
Section 14. Stockholder Approval. In the event the Optionee
notifies the Shareholders of its election to exercise the Options, the Optionee
shall call a meeting of its stockholders for purposes of approving the exercise
of the Options pursuant to this Agreement.
Section 15. Restrictive Legends. Each certificate representing
shares of Optionee Common Stock and Voting Preferred Stock delivered to the
Shareholders at the Closing, shall include a legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
Whenever any such shares cease to be restricted securities,
the holder thereof shall be entitled to receive from the Optionee, without
expense, upon surrender to the Optionee of the certificate representing such
shares, a new certificate for such shares, of like form but without a legend of
the character set forth above.
Section 16. Termination; Survival of Representations
and Warranties. (a) (i) This Agreement shall terminate
automatically if the Optionee has not notified the Shareholders
in writing of its election to exercise the Options prior to
midnight (New York time) on the Expiration Date.
(ii) This Agreement may be terminated at any time
prior to the Closing Date:
(A) by mutual agreement in writing of the
Optionee and the Shareholders;
(B) by either the Optionee or the
Shareholders upon written notice to the other if (1) the Effective Date has not
occurred by December 31, 1997 or (2) the Closing has not occurred by the first
anniversary of the Exercise Date, provided, that the right to terminate this
Agreement pursuant to this clause (B) shall not be available to any party whose
failure to fulfill any of its obligations under this Agreement resulted in the
Closing not occurring by such date.
-27-
<PAGE>
(iii) In the event of the termination of this
Agreement pursuant to this Section 16, this Agreement shall thereafter become
void and have no effect and no party shall have a liability hereunder; provided,
however, that no party shall be released from liability if this Agreement is
terminated by reason of (A) willful failure of such party to have performed its
obligations hereunder, or (B) any knowing misrepresentation made by such party
of any matter set forth herein.
(b) Notwithstanding any right of the Optionee and the
Shareholders fully to investigate the affairs of the Company and the
Shareholders, as the case may be, and notwithstanding any knowledge of facts
determined or determinable by the Optionee and the Shareholders pursuant to such
investigation or right of investigation, the Optionee, and each of the
Shareholders have the right to rely fully upon the representations and
warranties of the Optionee and each of the Shareholders contained in this
Agreement. All of the representations, warranties, covenants and agreements
contained in this Agreement or in any certificate or other instrument delivered
at Closing shall survive the execution and delivery of this Agreement and the
Closing until the first anniversary of the Closing Date, except for the
representations, warranties, covenants and agreements of the Optionee and each
Shareholder, as the case may be (i) contained in Sections 8(a), 8(c), 9(a) and
9(c), which shall survive the Closing Date indefinitely, and (ii) contained in
Sections 8(l), 8(o), 9(l) and 9(o), which shall survive the Closing Date until
the applicable statute of limitations has expired.
Section 17. Binding Effect; No Assignment. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors, and permitted assigns. Except as expressly provided for
in this Agreement, neither this Agreement nor the rights or the obligations of
any party hereto are assignable, except by operation of law, or with the written
consent of the other parties. Nothing contained in this Agreement, express or
implied, is intended to confer upon any person other than the parties hereto and
their respective permitted assigns any rights or remedies of any nature
whatsoever by reason of this Agreement.
Section 18. Specific Performance. The parties recognize and
agree that if for any reason any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise breached,
immediate and irreparable harm or injury would be caused for which money damages
would not be an adequate remedy. Accordingly, each party agrees that, in
addition to other remedies, the other parties shall be entitled to an injunction
restraining any violation or threatened violation of the provisions of this
Agreement. In the event that any action should be brought in equity to enforce
the provisions of this Agreement, no party will allege, and each
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<PAGE>
party hereby waives the defense, that there is adequate remedy at
law.
Section 19. Entire Agreement. This Agreement
(including the exhibits and schedules thereto) constitutes the
entire agreement among the parties with respect to the subject
matter hereof.
Section 20. Effectiveness of Agreement. Notwithstanding
anything herein to the contrary, this Agreement shall not become effective
unless and until it shall be executed by the Optionee and Shareholders owning in
the aggregate at least 80% of the issued and outstanding shares of the Common
Stock.
Section 21. Further Assurances. Each party will execute and
deliver all such further documents and instruments and take all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
Section 22. Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of the other provisions of this Agreement, which shall remain in full force and
effect. In the event any court or other competent authority holds any provisions
of this Agreement to be null, void or unenforceable, the parties hereto shall
negotiate in good faith the execution and delivery of an amendment to this
Agreement in order, as nearly as possible, to effectuate, to the extent
permitted by law, the intent of the parties hereto with respect to such
provision. Each party agrees that, should any court or other competent authority
hold any provision of this Agreement or part hereof to be null, void or
unenforceable, or order any party to take any action inconsistent herewith, or
not take any action required herein, the other party shall not be entitled to
specific performances of such provision or part hereof or to any other remedy,
including but not limited to money damages, for breach hereof or of any other
provision of this Agreement or part hereof as the result of such holding or
order.
Section 23. Material Change in Law. In the event of a Material
Change in Law (as defined below), the parties hereto agree to negotiate in good
faith to amend or modify the terms of the Voting Preferred Stock, to arrange for
substitute consideration or otherwise to restructure the transactions
contemplated hereby (x) so as to eliminate the effect of such Material Change in
Law on the eligibility of the transactions contemplated hereby to qualify (i) in
respect of each Service Company (other than a Service Company described in
clause (ii) immediately following), as a reorganization under section
368(a)(1)(C) of the Code (without reliance on section 368(a)(2)(B) of the Code)
or (ii) as to any Service Company described in clause (t) of the definition of
"Material Change in Law" below, as a reorganization under section 368(a)(1)(B)
of the
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<PAGE>
Code, in either such case, having the same tax effects applicable to such form
of reorganization as under current law, (y) in a manner that substantially
preserves the anticipated respective economic positions of the parties hereto;
provided, however, that if the parties shall not be able to agree on the terms
of any such amendment or modification, substitute consideration or
restructuring, despite their good faith efforts to do so, the Optionee and the
Shareholders hereby agree that (i) neither the Optionee nor any Shareholder
shall be obligated to consummate the Closing under this Agreement, (ii) the
amendments to the Option Purchase Agreement made by this Agreement shall be void
ab initio (other than clauses (i) through (v) of this proviso) and
correspondingly, the terms of the Option Purchase Agreement (as amended by
Amendment No. 1) shall continue in full force and effect as if this Agreement
had never become effective, (iii) any Exercise Notice delivered pursuant to
Section 4(a) of this Agreement shall be void ab initio, (iv) the Optionee
Valuation, dated as of June 26, 1997, prepared by the Optionee Appraiser
pursuant to the Option Purchase Agreement and the Shareholder Valuation, dated
as of September 5, 1997, prepared by the Shareholder Appraiser pursuant to the
Option Purchase Agreement shall remain in effect and shall be deemed to be
delivered under the reinstated Option Purchase Agreement as of the date of such
reinstatement of the Option Purchase Agreement pursuant to the immediately
foregoing clause (ii), and (v) the Expiration Date under the Option Purchase
Agreement shall be extended until the date which is "X" plus 120 days following
the date of reinstatement of the Option Purchase Agreement pursuant to the
immediately foregoing clause (ii), where "X" equals the sum of (A) that number
of days from (and including) the date of delivery of the Exercise Notice under
this Agreement to (and including) the date on which there is determined to be a
Material Change in Law for purposes of Section 23 of this Agreement and (B) that
number of days, if any, remaining until the original Expiration Date under the
Option Purchase Agreement.
For purposes of this Section 23:
(I) "Material Change in Law" shall mean a Change in Law
occurring on or before the Closing Date that, in the opinion of tax
counsel to the Shareholders, poses a significant risk to any Service
Company that the inclusion in the transaction of the Voting Preferred
Stock contemplated hereby (employing the assumption in making such
determination that the Voting Preferred Stock constitutes nonqualified
preferred stock within the meaning of section 351(g) of the Code) would
preclude the transactions contemplated hereby from qualifying as a
reorganization within the meaning of (s) section 368(a)(1)(C) of the
Code (without reliance on section 368(a)(2)(B) of the Code) or (t) as
to any Service Company that resolves not to liquidate as contemplated
by the Agreement and Plan of Reorganization, section 368(a)(1)(B) of
the Code, in either such case,
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<PAGE>
having the same tax effects applicable to such form of
reorganization as under current law; and
(II) "Change in Law" shall mean (a) the promulgation of
temporary or final Treasury regulations (or proposed regulations having
a proposed effective date on or before the Closing Date), (b) the
issuance of any Internal Revenue Service notice, ruling or other
administrative pronouncement or any other issuance of official
interpretative guidance, (c) the enactment of any law (including any
technical corrections to the Taxpayer Relief Act of 1997) or (d) the
proposal of any law having a proposed effective date on or before the
Closing Date.
Section 24. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if (i) delivered
personally, or (ii) sent by reputable overnight courier service, or (iii)
telecopied (which is confirmed), or (iv) five days after being mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to the Optionee, to:
Farm Family Holdings, Inc.
P.O. Box 656
Albany, New York 12201-0656
Attention: General Counsel
Telephone: (518) 431-5409
Telecopy: (518) 431-5999
(b) If to the Shareholders, to:
The addresses of each Shareholder listed on Exhibit A
hereto.
Section 25. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State and without
regard to its choice of law principles.
Section 26. Descriptive Headings. The descriptive
headings herein are inserted for convenience of reference only
and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
Section 27. Counterparts. This Agreement may be
executed in two counterparts, each of which shall be deemed to be
an original, but both of which, taken together, shall constitute
one and the same instrument.
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<PAGE>
Section 28. Expenses. Except as otherwise expressly provided
herein, all costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
Section 29. Amendments; Waiver. This Agreement may be amended
by the parties hereto and the terms and conditions hereof may be waived only by
an instrument in writing signed on behalf of each of the parties hereto, or, in
the case of a waiver, by an instrument signed on behalf of the party waiving
compliance.
Section 30. Action by the Shareholders. Notwithstanding any
provision of this Agreement to the contrary, any action or decision required to
be taken or made by the Shareholders pursuant to this Agreement may be taken or
made by the written consent of the holders of a majority of the Shares held by
the Shareholders; provided, however, that no such action or decision shall,
without the written consent of all the Shareholders, reduce the percentage of
Shareholders required to approve any such action or decision pursuant to this
Section 30. Any action or decision taken or made by the written consent of the
holders of a majority of the Shares pursuant to this Section 30 shall apply
equally to all Shareholders and shall be binding upon all of them.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective duly authorized officers as of the
date first above written.
FARM FAMILY HOLDINGS, INC.
By /s/ Philip P. Weber
----------------------
Name:Philip P. Weber
Title: President & C.E.O.
CONNECTICUT FARM BUREAU SERVICE
COMPANY
By /s/ Norma R. O'Leary
-----------------------
Name: Norma R. O'Leary
Title: President
DELAWARE FARM BUREAU SERVICE
COMPANY, INC.
By /s/ Joseph E. Calhoun
------------------------
Name: Joseph E. Calhoun
Title: President
MAINE FARM BUREAU SERVICE COMPANY
By /s/ Sandra A. George
-----------------------
Name: Sandra A. George
Title: President
MASSACHUSETTS FARM BUREAU SERVICE
COMPANY, INC.
By /s/ Arthur D. Keown, Jr.
---------------------------
Name: Arthur D. Keown, Jr.
Title: President
By /s/ James F. Slattery
---------------------------
Name: James F. Slattery
Title: Clerk
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<PAGE>
NEW HAMPSHIRE FARM BUREAU
FEDERATION
By /s/ Gordon H. Gowen
----------------------
Name: Gordon H. Gowen
Title: President
NEW JERSEY FARM BUREAU SERVICE
COMPANY
By /s/ John I. Rigolizzo, Jr.
-----------------------------
Name: John I. Rigolizzo, Jr.
Title: Vice President
NEW YORK FARM BUREAU SERVICE
COMPANY, INC.
By /s/ John W. Lincoln
----------------------
Name: John W. Lincoln
Title: President
RHODE ISLAND FARM BUREAU
FEDERATION, INC.
By /s/ William M. Stamp, Jr.
----------------------------
Name: William M. Stamp, Jr.
Title: President
VERMONT FARM BUREAU, INC.
By /s/ Clark W. Hinsdale III
----------------------------
Name: Clark W. Hinsdale III
Title: President
WEST VIRGINIA FARM BUREAU, INC.
By /s/ Charles A. Wilfong
-------------------------
Name: Charles A. Wilfong
Title: President
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<PAGE>
Schedules to Amended and Restated Option Purchase Agreement not filed.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
FARM FAMILY LIFE INSURANCE COMPANY
SHAREHOLDERS
<S> <C>
Registered Holder Number of Shares
Connecticut Farm Bureau Service Company
510 Pigeon Hill Road
Windsor, Connecticut 06095-2112 .................................................................................4,864
Delaware Farm Bureau Service Company, Inc.
233 S. Dupont Highway
Camden-Wyoming, Delaware 19934 ..................................................................................2,702
Maine Farm Bureau Service Company
RR 5, Box 1254
4 Gabriel Drive
Augusta, Maine 04330-9322 .......................................................................................1,082
Massachusetts Farm Bureau Service Company, Inc.
466 Chestnut Street
Ashland, Massachusetts 01721-2299 ...............................................................................7,026
New Hampshire Farm Bureau Federation
295 Sheep Davis Road
Concord, New Hampshire 03301 ........................................................................................2
New Jersey Farm Bureau Service Company
168 W. State Street
Trenton, New Jersey 08608.......................................................................................16,215
New York Farm Bureau Service Company, Inc.
Route 9W, Box 992
Glenmont, New York 12077-0992...................................................................................23,783
Rhode Island Farm Bureau Federation, Inc.
201 Comstock Parkway
Cranston, Rhode Island 02921-2007................................................................................2,163
Vermont Farm Bureau, Inc.
RR 2, Box 123
Richmond, Vermont 05477-9605........................................................................................11
West Virginia Farm Bureau, Inc.
1 Red Rock Road
Buckhannon, West Virginia 26201..................................................................................2,163
Total 60,011
</TABLE>
<PAGE>
EXHIBIT B
VALUATION PROCEDURES
The Fair Market Value per Share shall be based on the fully
distributed, independent, public market value of the Common Stock as of the
Exercise Date including any reallocation of participating policyholder surplus,
but without giving effect to the percentage ownership represented by the Common
Stock being valued (individually or in the aggregate), the aggregate amount of
the valuation of the Company or the relationship between the Company and the
Insurance Subsidiary, including the Company's lack of stand-alone management,
infrastructure or distribution system. In determining such value, consideration
may be given to the trading value of the publicly traded common stock of
comparable companies as well as any other valuation methods or criteria that are
deemed relevant.
<PAGE>
EXHIBIT C
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF PREFERRED
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
OF
FARM FAMILY HOLDINGS, INC.
PREFERRED STOCK, SERIES A
Pursuant to Section 151
of the General Corporation Law of the State of Delaware
The following resolution has been duly adopted by the Board of
Directors (such Board, including any committee thereof duly authorized to act on
behalf of such Board, herein referred to as the "Board") of Farm Family
Holdings, Inc., a Delaware corporation (the "Corporation"), pursuant to the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, which resolution remains in full force and effect as of the date
hereof:
WHEREAS the Board is authorized, within the limitations and
restrictions stated in the Certificate of Incorporation of the Corporation, to
fix by resolution or resolutions the voting rights, if any, of each series of
Preferred Stock, par value $.01 per share (the "Preferred Stock"), of the
Corporation and the designations, preferences and relative, participating,
optional and other special rights and qualifications, limitations and
restrictions thereof; and
WHEREAS it is the desire of the Board, pursuant to its
authority as aforesaid, to authorize and fix the terms of a series of Preferred
Stock and the number of shares constituting such series;
NOW, THEREFORE, BE IT
RESOLVED that there is hereby authorized and created a series
of Preferred Stock on the terms and with the provisions
-1-
<PAGE>
(in addition to those set forth in the Certificate of
Incorporation of the Corporation that are applicable to all
Preferred Stock) as follows:
SECTION 1. Designation, Number of Shares and Stated Value. The
series of Preferred Stock shall be designated the "Preferred Stock, Series A"
(the "Series A Preferred Stock"). The number of authorized shares of Series A
Preferred Stock shall be [ ]. The number of shares of Series A Preferred Stock
may be decreased (but not below the number of shares of Series A Preferred Stock
at the time outstanding), in the manner specified in the General Corporation Law
of the State of Delaware, by an amendment of this Section 1 approved by the
Board, but may not be increased or otherwise decreased without the affirmative
vote of the holders of a majority of the outstanding shares of Series A
Preferred Stock. The stated value of each share of Series A Preferred Stock
("Stated Value") shall be $[ ].
SECTION 2. Rank. The Series A Preferred Stock shall, as to the
payment of dividends and the distribution of assets upon the liquidation,
dissolution or winding up of the Corporation, rank (i) prior to the Common
Stock, par value $.01 per share (the "Common Stock"), of the Corporation and any
other capital stock of the Corporation (other than any class or series of a
class of capital stock of the Corporation the terms of which expressly provide
that the shares thereof rank senior or on a parity as to the payment of
dividends and the distribution of assets upon the liquidation, dissolution or
winding up of the Corporation with the shares of the Series A Preferred Stock)
(such securities, other than those described in the immediately preceding
parenthetical clause, collectively referred to herein as the "Junior
Securities") and (ii) on a parity with any class or series of a class of capital
stock of the Corporation the terms of which expressly provide that the shares
thereof rank on a parity as to the payment of dividends and the distribution of
assets upon the liquidation, dissolution or winding up of the Corporation with
the shares of the Series A Preferred Stock (the "Parity Securities").
SECTION 3. Dividends. (a) The holders of outstanding shares of
Series A Preferred Stock, in preference to the holders of outstanding shares of
any Junior Securities, shall be entitled to receive, when, as and if declared by
the Board, out of funds of the Corporation legally available for the payment of
dividends, a cumulative quarterly cash dividend per share in an amount for each
Dividend Period (as defined below) calculated by multiplying the Stated Value by
the Dividend Rate (as defined below) for such Dividend Period. "Dividend Rate"
means, for a Dividend Period, the product of (i) 61/8%, multiplied by (ii) a
fraction, the numerator of which is the number of days in such Dividend Period
and the denominator of which is 360. Quarterly dividends shall be payable on
each January 15, April 15, July 15 and October 15 (each a "Dividend Payment
Date"), commencing on
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<PAGE>
the first Dividend Payment Date occurring on or after the Closing Date (as
defined in Section 7) (the "Initial Dividend Payment Date"). Each such quarterly
dividend shall be cumulative and shall accumulate, whether or not earned or
declared and whether or not there are funds of the Corporation legally available
for payment of dividends, for the period (each, a "Dividend Period") commencing
on and including the most recent Dividend Payment Date to which dividends have
been paid or accumulated to but excluding the next succeeding Dividend Payment
Date, except that (x) the Dividend Period terminating on the Initial Dividend
Payment Date (the "Initial Dividend Period") shall commence on and include the
Closing Date and (y) with respect to shares of Series A Preferred Stock which
are redeemed pursuant to Section 4(a) or Section 4(b) or redeemed upon a
Liquidation Transaction (as defined in Section 5), as the case may be, the final
Dividend Period shall terminate on the applicable redemption date or
distribution date, as the case may be. Dividends shall be payable, net of any
amounts required to be withheld for or with respect to taxes, to holders of
record as they appear on the stock books of the Corporation at the close of
business on such record dates, not more than 60 days nor less than 10 days prior
to the respective Dividend Payment Date, as shall be fixed by the Board. If any
Dividend Payment Date is not a business day, the quarterly dividend to be paid
on such Dividend Payment Date shall be paid on the next following business day.
A "business day" means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are required or authorized by law to be
closed. Payments of quarterly dividends shall be made in coin or currency of the
United States that as of the date of payment shall be legal tender for payment
of public and private debts by mailing a check to each holder of shares of
Series A Preferred Stock at the address of such holder as shown on the stock
books of the Corporation.
(b) All dividends paid with respect to shares of Series A
Preferred Stock shall be paid pro rata to the holders entitled thereto.
(c) When dividends are not paid in full upon the Series A
Preferred Stock, any dividends declared or paid upon shares of Series A
Preferred Stock and any Parity Securities shall be declared or paid, as the case
may be, pro rata so that the amounts of dividends declared or paid, as the case
may be, per share on the Series A Preferred Stock and such other Parity
Securities in all cases bear to each other the same ratio that accumulated and
unpaid dividends per share on the shares of Series A Preferred Stock and such
other Parity Securities bear to each other. No interest, or sum of money in lieu
of interest, shall be payable in respect of any dividend payment or payments on
the Series A Preferred Stock or any Parity Securities which may be in arrears.
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(d) Unless full cumulative dividends have been or
contemporaneously are declared by the Board and paid or declared and a sum set
apart sufficient for such payment by the Corporation on the Series A Preferred
Stock for all Dividend Periods terminating on or prior to the date of payment of
dividends on any Junior Securities or Parity Securities, as the case may be, no
dividends shall be declared or paid or sum set apart for such payment or any
other distribution made on or with respect to such Junior Securities or Parity
Securities, as the case may be, for any period, except (i) in the case of Junior
Securities, other than dividends payable or distributions made in shares of
Junior Securities, and (ii) in the case of Parity Securities, pro rata so that
the amounts of dividends declared, paid or set apart or other distributions made
per share on the Series A Preferred Stock and such other Parity Securities bear
in all cases bear to each other the same ratio that accumulated and unpaid
dividends per share on the shares of Series A Preferred Stock and such other
Parity Securities bear to each other.
(e) Unless full cumulative dividends have been or
contemporaneously are declared by the Board and paid or declared and a sum set
apart sufficient for such payment by the Corporation on the Series A Preferred
Stock for all Dividend Periods terminating on or prior to the date of any event
described in clause (i) or (ii) of this Section 3(e), the Corporation shall not,
and shall not permit its Subsidiaries (as defined in Section 7) to, (i) redeem,
purchase, retire or otherwise acquire for any consideration any shares of Series
A Preferred Stock, unless (x) all shares of Series A Preferred Stock outstanding
shall be redeemed, repurchased, retired or otherwise acquired or (y) the shares
of Series A Preferred Stock are redeemed, purchased, retired or otherwise
acquired pro rata from among the holders of the shares then outstanding or (ii)
redeem, purchase, retire or otherwise acquire for any consideration, or make any
payment on account of a sinking fund or other similar fund for redemption,
purchase, retirement or acquisition of, any Junior Securities or any Parity
Securities, or any warrant, right or option to purchase any thereof, or make any
distribution in respect thereof, directly or indirectly, whether in cash,
obligations or securities of the Corporation or other property, except, (x) in
the case of Junior Securities, other than redemptions, purchases, retirements,
acquisitions or distributions made in shares of Junior Securities, and (y) in
the case of Parity Securities, pro rata so that the amounts redeemed, purchased,
retired or otherwise acquired or paid or distributed in respect thereof, as the
case may be, per share on the Series A Preferred Stock and such other Parity
Securities in all cases bear to each other the same ratio that accumulated and
unpaid dividends and required redemption payments per share on the shares of
Series A Preferred Stock and such other Parity Securities bear to each other.
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SECTION 4. Redemption. (a) On and after the tenth anniversary
of the date of issuance of each share of Series A Preferred Stock then
outstanding, such share shall be subject to redemption, at the option of the
Corporation, at any time in whole or from time to time in part, at a redemption
price per share equal to the Stated Value, together with accumulated and unpaid
dividends thereon to the redemption date, without interest. In lieu of a cash
payment of the amounts due upon such redemption, the Corporation may issue
shares of Common Stock to the holders of shares of Series A Preferred Stock in
full payment of all such amounts, by giving written notice (in the manner
described in Section 4(d)) to such holders. If such notice is so given, the
Corporation shall issue and deliver or cause to be delivered to each holder of
shares of Series A Preferred Stock out of its authorized but unissued Common
Stock or Common Stock held in treasury that number of shares of Common Stock
determined by dividing the aggregate Stated Value of all shares of Series A
Preferred Stock to be redeemed that are owned by such holder as shown on the
stock books of the Corporation, together with accumulated and unpaid dividends
thereon to the redemption date, by the Current Market Price (as defined in
Section 7) as of the redemption date. The Corporation shall, in lieu of issuing
any fractional shares of Common Stock to any holder, pay to such holder cash in
an amount equal to that fraction of the Current Market Price as of the
redemption date. If less than all shares of Series A Preferred Stock then
outstanding are to be redeemed, the shares of Series A Preferred Stock will be
redeemed pro rata from among the holders of shares of Series A Preferred Stock
then outstanding.
(b) On the date following the twentieth anniversary of the
date of issuance of each share of Series A Preferred Stock then outstanding, the
Corporation shall redeem such share of Series A Preferred Stock, in each case at
a redemption price per share equal to the Stated Value, together with
accumulated and unpaid dividends thereon to the redemption date, without
interest. If the date that is one day after the twentieth anniversary of the
issuance of the Series A Preferred Stock is not a business day (as defined in
Section 3(a) hereof), the Series A Preferred Stock shall be redeemed by the
Corporation on the next following business day. In lieu of a cash payment of the
amounts due upon such mandatory redemption, the Corporation may issue shares of
Common Stock to the holders of shares of Series A Preferred Stock in full
payment of all such amounts, by giving written notice (in the manner described
in Section 4(d)) to such holders. If such notice is so given, the Corporation
shall issue and deliver or cause to be delivered to each holder of shares of
Series A Preferred Stock out of its authorized but unissued Common Stock or
Common Stock held in treasury that number of shares of Common Stock determined
by dividing the aggregate Stated Value of all shares of Series A Preferred Stock
to be redeemed that are owned by such holder as shown on the stock books of the
Corporation, together with accumulated and
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<PAGE>
unpaid dividends thereon to the redemption date, by the Current Market Price as
of the redemption date. The Corporation shall, in lieu of issuing any fractional
shares of Common Stock to any holder, pay to such holder cash in an amount equal
to that fraction of the Current Market Price as of the redemption date.
(c) All shares of Common Stock issued and delivered pursuant
to Section 4(a) or Section 4(b) will upon issuance by the Corporation and
delivery be duly and validly issued, fully paid and nonassessable and free from
all documentary, stamp, transfer or other transactional taxes and all liens and
charges with respect to the issuance thereof and the Corporation shall take no
action which will cause a contrary result.
(d) Notice of any redemption pursuant to Section 4(a) or
Section 4(b) will be given to the holders of shares of Series A Preferred Stock
not less than 10 nor more than 30 days prior to the date fixed for redemption or
the mandatory redemption date, as the case may be. Notice of redemption will be
given by first class mail to such holders' respective addresses as shown on the
stock books of the Corporation and will specify (i) the date fixed for
redemption or the mandatory redemption date, as the case may be, and (ii) the
applicable redemption price. In the case of a partial redemption pursuant to
Section 4(a), such notice shall also specify the number of shares of Series A
Preferred Stock to be redeemed from each holder and the aggregate number of
shares of Series A Preferred Stock which will be outstanding after such
redemption.
(e) If funds for the redemption of any or all shares of Series
A Preferred Stock shall have been irrevocably set apart for redemption on the
redemption date, such shares of Series A Preferred Stock shall from and after
the redemption date cease to accumulate dividends and the only right of the
holders of such shares shall be to receive payment of the redemption price and
all accumulated and unpaid dividends on such shares to the date of redemption.
(f) If the Corporation shall fail at any time to discharge its
obligation to redeem shares of Series A Preferred Stock pursuant to paragraph
(4)(b) (a "Mandatory Redemption Obligation"), such Mandatory Redemption
Obligation shall be discharged as soon as the Corporation is able to discharge
such Mandatory Redemption Obligation. If and for so long as such Mandatory
Redemption Obligation shall not have been fully discharged, the Corporation
shall not (i) declare, pay or set apart for payment dividends or make any other
distribution on or with respect to any Parity Securities, except that dividends
may be declared, paid or set apart for payment or other distributions made upon
shares of Series A Preferred Stock and any Parity Securities pro rata so that
the amounts of dividends declared, paid or set apart or other distributions made
per share on the Series A Preferred Stock and such other Parity Securities bear
to
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<PAGE>
each other the same ratio that accumulated and unpaid dividends and required
redemption payments, if any, per share on the shares of Series A Preferred Stock
and such other Parity Securities bear to each other; (ii) declare, pay or set
apart for payment dividends or make any other distribution on or with respect to
any Junior Securities, other than dividends paid or distributions made in shares
of Junior Securities; or (iii) redeem, purchase, retire or otherwise acquire for
any consideration, or make any payment on account of a sinking fund or other
similar fund for redemption, purchase, retirement or acquisition of, any Junior
Securities or any Parity Securities, or any warrant, right or option to purchase
any thereof, or make any distribution in respect thereof, directly or
indirectly, whether in cash, obligations or securities of the Corporation or
other property, except, (x) in the case of Junior Securities, other than
redemptions, purchases, retirements, acquisitions or distributions made in
shares of Junior Securities and (y) in the case of Parity Securities, pro rata
so that the amounts redeemed, purchased, retired or otherwise acquired or paid
or distributed in respect thereof, as the case may be, per share on the Series A
Preferred Stock and such other Parity Securities in all cases bear to each other
the same ratio that accumulated and unpaid dividends and required redemption
payments per share on the shares of Series A Preferred Stock and such other
Parity Securities bear to each other.
(g) Any cash payment to a holder of shares of Series A
Preferred Stock on any redemption date shall be made in coin or currency of the
United States that as of the date of payment shall be legal tender for payment
of public and private debts by mailing a check to such holder at the address of
such holder as shown on the stock books of the Corporation.
SECTION 5. Liquidation. The shares of Series A Preferred Stock
shall rank prior to the shares of Junior Securities upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary
(a "Liquidation Transaction"), so that in the event of any Liquidation
Transaction, the holders of shares of Series A Preferred Stock then outstanding
shall be entitled to receive out of the assets or surplus funds of the
Corporation available for distribution to its stockholders, or proceeds thereof,
whether from capital, surplus or earnings, before any distribution is made to
holders of any Junior Securities, a liquidation preference in an amount per
share of Series A Preferred Stock equal to the Stated Value, plus an amount
equal to all dividends (whether or not earned or declared) accumulated and
unpaid on the shares of Series A Preferred Stock to the date of final
distribution. If, upon any Liquidation Transaction, the assets or surplus funds
of the Corporation, or proceeds thereof, whether from capital, surplus or
earnings, distributable among the holders of shares of Series A Preferred Stock
and any Parity Securities then outstanding are insufficient to pay in full the
preferential liquidation payments
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<PAGE>
due to such holders, such assets or proceeds shall be distributable among such
holders ratably in accordance with the amounts that would be payable on such
shares of Series A Preferred Stock and Parity Securities if all amounts payable
thereon were payable in full. In the event of a Liquidation Transaction, the
Corporation shall give written notice to the holders of shares of Series A
Preferred Stock, by first class mail to such holders' respective addresses as
shown on the stock books of the Corporation. Neither the consolidation, merger
or other business combination of the Corporation with or into any other person
or persons nor the sale of all or substantially all the assets of the
Corporation shall be deemed to be a Liquidation Transaction.
SECTION 6. Voting Rights. (a) The holders of shares
of Series A Preferred Stock shall not be entitled to any voting
rights except as provided in this Section 6, the Certificate of
Incorporation of the Corporation or as otherwise required by law.
(b) Each share of Series A Preferred Stock shall be entitled
to vote on all matters required or permitted to be voted upon by the
stockholders of the Corporation, not voting separately as a class but together
with all other stockholders, each such share carrying one vote.
(c) For purposes of any vote or consent under this Section 6
by the holders of shares of the Series A Preferred Stock, any shares of Series A
Preferred Stock owned by the Corporation or by any of its Subsidiaries shall be
deemed not to be outstanding (unless otherwise provided by the General
Corporation Law of the State of Delaware).
SECTION 7. Definitions. For purposes of this
Certificate:
(a) "Closing Date" means the date of the closing of
the Option Purchase Agreement (as defined below);
(b) "Closing Price" means, for any Trading Day (as defined
below), the last reported sales price, regular way, per share of Common
Stock or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices, regular way, per
share of Common Stock, in either case as reported on the New York Stock
Exchange Composite Tape or, if the Common Stock is not then listed or
admitted to trading on such exchange, on the principal national
securities exchange on which the Common Stock is then listed or
admitted to trading or, if the Common Stock is not then listed or
admitted to trading on any national securities exchange, as quoted
through the National Association of Securities Dealers Automated
Quotations National Market System or, if the Common Stock is not then
listed or admitted to trading on any national
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<PAGE>
securities exchange or quoted through such National Market System, the
average of the closing bid and asked prices per share of Common Stock
in the over-the-counter market as furnished by any New York Stock
Exchange member firm that makes a market in the Common Stock selected
from time to time by the Corporation for that purpose with the consent
of the Required Holders (as defined below);
(c) "Current Market Price" means, as of any date, the average
of the Closing Prices for the 30 consecutive Trading Days ending on the
Trading Day prior to such date;
(d) "Option Purchase Agreement" means the Amended and Restated
Option Purchase Agreement, dated as of February 26, 1998, among the
Corporation and the stockholders of Farm Family Life Insurance Company,
as amended from time to time;
(e) "Required Holders" means, at any date, the holders of at
least two-thirds of the aggregate Stated Value of the shares of Series
A Preferred Stock then outstanding disregarding the aggregate Stated
Value of any of such shares owned by the Corporation or by any of its
Subsidiaries;
(f) "Subsidiary" has the meaning ascribed to such term
in the Option Purchase Agreement; and
(g) "Trading Day" means any day the New York Stock
Exchange is open for regular trading.
IN WITNESS WHEREOF, Farm Family Holdings, Inc. has caused this
Certificate of Designations, Preferences and Relative, Participating, Optional
and other Special Rights of Preferred Stock and Qualifications, Limitations and
Restrictions thereof of its Preferred Stock, Series A, to be duly executed by
its [ ] and attested to by its [ ] and has caused its corporate seal to be
affixed hereto, as of this [ ] day of [ ].
------------------------------
Name:
Title:
Corporate Seal
ATTEST:
- ----------------------------------
Name:
Title:
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<PAGE>
EXHIBIT D
FORM OF OPINION OF COUNSEL TO SHAREHOLDER
1. Shareholder is a corporation duly organized, validly
existing and in good standing under the laws of [the jurisdiction in which it is
organized]. Shareholder has all necessary power and authority and possesses all
rights, licenses, authorizations and approvals, governmental or otherwise to
own, lease and operate its properties and to conduct its business as now being
conducted and to own the Shares.
2. Shareholder has all necessary corporate power and authority
to execute and deliver the Agreement and to perform its obligations thereunder.
Shareholder has taken all necessary corporate action to duly and validly
authorize its execution and delivery of the Agreement and the consummation of
the transactions contemplated thereby. The Agreement has been duly executed and
delivered by Shareholder and is the legal, valid and binding obligation of
Shareholder, enforceable against Shareholder, in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, conservatorship, receivership, moratorium or other similar laws
relating to or effecting the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether enforceability is considered
in a proceeding in equity or at law).
3. The authorized capital stock of the Company consists of
61,000 shares of Common Stock of which 60,011 are issued and outstanding. The
Shares [pertains only to what is owned by Shareholder] have been duly authorized
and validly issued and are fully paid and nonassessable. The Shares have not
been issued in violation of, and none of the Shares are subject to, any
preemptive or subscription rights. There are no outstanding warrants, options,
contracts, convertible or exchangeable securities or other commitments (other
than the Agreement) pursuant to which Shareholder or the Company is or may be
obligated to issue, sell, purchase, return or redeem any Shares. Shareholder is
the record and beneficial owner of the Shares free and clear of any Liens. Upon
consummation of the transactions contemplated by the Agreement, the Optionee
will acquire record and beneficial ownership of the Shares, free and clear of
any Liens. Other than the Agreement, the Shares are not subject to any voting
trust agreement or other contract, agreement, arrangement, commitment or
understanding, including any such agreement, arrangement, commitment or
understanding restricting or otherwise relating to the voting, dividend rights
or disposition of the Shares.
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<PAGE>
4. Neither the execution, delivery and performance of the Agreement by
Shareholder nor the consummation of the transactions contemplated thereby will:
(i) violate any provision of the certificate of incorporation, by-laws or other
charter or organizational document of Shareholder; (ii) violate, conflict with
or result in the breach of any of the terms of, result in any modification of
the effect of, otherwise give any other contracting party the right to
terminate, or constitute (or with notice or lapse of time or both constitute) a
default under, any Contract to which Shareholder is a party or by or to which
any of them or their assets or properties may be bound or subject, except for
such of the foregoing as would not have a Material Adverse Effect or interfere
in any material way with the ability of Shareholder to consummate the
transactions contemplated thereby; (iii) violate any order, judgment,
injunction, award or decree of any Governmental Authority against, or binding
upon, any Contract with, or condition imposed by, any Governmental Authority
binding upon Shareholder or upon the business, properties or assets of such
Shareholder, except for such violations as would not have a Material Adverse
Effect or interfere in any material way with the ability of Shareholder to
consummate the transactions contemplated hereby; (iv) violate any statute, law
or regulation of any jurisdiction as such statute, law or regulation relates to
Shareholder or to the business, properties or assets of Shareholder, except for
such violations as would not have a Material Adverse Effect or interfere in any
material way with the ability of such Shareholder to consummate the transactions
contemplated hereby; or (v) result in the creation or imposition of any material
Lien on any of the properties or assets of such Shareholder (including any of
the Shares).
5. No consent, license, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Authority is
required to be obtained, made or given by or with respect to Shareholder, in
connection with the execution, delivery and performance of the Agreement or the
consummation of the transactions contemplated thereby other than under: (i) the
insurance laws of the State of New York; and (ii) the HSR Act.
6. There is no judicial, administrative or regulatory action,
proceeding, investigation or inquiry or administrative charge or complaint
pending or, to our knowledge, threatened against Shareholder, or the assets,
properties or businesses of Shareholder, which, either singly or in the
aggregate, could reasonably be expected to have a Material Adverse Effect or
which questions the validity of the Agreement or any action taken or to be taken
by Shareholder pursuant to the Agreement or in connection with the transactions
contemplated thereby.
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EXHIBIT E
FORM OF OPINION OF GENERAL COUNSEL
TO THE OPTIONEE AND INSURANCE SUBSIDIARY
1. Each of the Optionee and the Insurance Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized. Each of the Optionee and the
Insurance Subsidiary has all necessary power and authority and possesses all
rights, licenses, authorizations and approvals, governmental or otherwise to
own, lease and operate its properties and to conduct its business as now being
conducted.
2. Optionee has all necessary corporate power and authority to
execute and deliver the Agreement and to perform its obligations thereunder.
Optionee has taken all necessary corporate action to duly and validly authorize
its execution and delivery of the Agreement and the consummation of the
transactions contemplated thereby. The Agreement has been duly executed and
delivered by Optionee and is the legal, valid and binding obligation of
Optionee, enforceable against Optionee, in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency, reorganization,
conservatorship, receivership, moratorium or other similar laws relating to or
effecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
3. The shares of Optionee Common Stock and Voting Preferred
Stock to be issued to the Shareholders pursuant to the Agreement will be duly
authorized prior to the Closing Date and, when issued and delivered as provided
in the Agreement, will be validly issued, fully paid and nonassessable. Upon
delivery of the shares of Optionee Common Stock and Voting Preferred Stock to
the Shareholders as provided in the Agreement, the Shareholders will acquire
such shares free and clear of any Liens.
4. Neither the execution, delivery and performance of the
Agreement nor the consummation of the transactions contemplated hereby will: (i)
violate any provision of the certificate of incorporation, by-laws or other
charter or organizational document of the Optionee or the Insurance Subsidiary;
(ii) violate, conflict with or result in the breach of any of the terms of,
result in any modification of the effect of, otherwise give any other
contracting party the right to terminate, or constitute (or with notice or lapse
of time or both constitute) a default under, any Contract to which the Optionee
or the Insurance Subsidiary is a party or by or to which any of them or their
assets or properties may be bound or subject, except for such of the foregoing
as would not have a Material
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<PAGE>
Adverse Effect or interfere in any material way with the ability of the Optionee
to consummate the transactions contemplated hereby; (iii) violate any order,
judgment, injunction, award or decree of any Governmental Authority against, or
binding upon, or any Contract with, or condition imposed by, any Governmental
Authority binding upon the Optionee or the Insurance Subsidiary, or upon the
business, properties or assets of the Optionee or the Insurance Subsidiary,
except for such violations as would not have a Material Adverse Effect or
interfere in any material way with the ability of the Optionee to consummate the
transactions contemplated hereby; (iv) violate any statute, law or regulation of
any jurisdiction as such statute, law or regulation relates to the Optionee or
the Insurance Subsidiary, or to the business, properties or assets of the
Optionee or the Insurance Subsidiary, except for such violations as would not
have a Material Adverse Effect or interfere in any material way with the ability
of the Optionee to consummate the transactions contemplated hereby; or (v)
result in the creation or imposition of any material Lien on any of the
properties or assets of the Optionee or the Insurance Subsidiary.
5. No consent, license, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Authority is
required to be obtained, made or given by or with respect to the Optionee or the
Insurance Subsidiary in connection with the execution, delivery and performance
of the Agreement or the consummation of the transactions contemplated thereby
other than: (i) under the insurance laws of the State of New York; (ii) under
the HSR Act; and (iii) under federal securities laws in connection with the
approval required by the stockholders of the Optionee.
6. There is no judicial, administrative or regulatory action,
proceeding, investigation or inquiry or administrative charge or complaint
pending or, to my knowledge, threatened against the Optionee or the Insurance
Subsidiary, the respective assets, properties or businesses of the Optionee or
the Insurance Subsidiary, which, either singly or in the aggregate, could
reasonably be expected to have a Material Adverse Effect or which questions the
validity of the Agreement or any action taken or to be taken by the Optionee
pursuant to the Agreement or in connection with the transactions contemplated
thereby.
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<PAGE>
EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
[ ], by and among FARM FAMILY HOLDINGS, INC., a Delaware corporation (the
"Company"), and THE SHAREHOLDERS OF THE COMPANY set forth on the signature pages
hereof (each, a "Shareholder" and collectively, the "Shareholders").
WHEREAS, each of the Shareholders is the owner of the number
of shares of common stock, par value $.01 per share, of the Company (the "Common
Stock") set forth opposite the name of such Shareholder on Exhibit A hereto
(collectively, the "Shares"); and
WHEREAS, pursuant to the Amended and Restated Option Purchase
Agreement, dated as of February 26, 1998 (the "Option Purchase Agreement"), by
and among the Company and each of the Shareholders, the Company agreed to grant
to the Shareholders certain registration rights with respect to the Shares upon
the terms and subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
Section 1. Demand Registration.
1.1 Notice. Upon the terms and subject to the conditions set
forth herein, upon written notice by the holders of a majority of the Shares
held by the Shareholders or their Permitted Transferees (as defined in Section
1.3) (the Shareholders and such Permitted Transferees being collectively
referred to herein as the "Holders") requesting that the Company effect the
registration under the Securities Act of 1933, as amended (the "Securities
Act"), of the Shares held by such Holders, which notice shall specify the
intended method or methods of disposition of such Shares, the Company will
promptly give written notice of the proposed registration to all other Holders
and will use its best efforts to effect (at the earliest possible date) the
registration under the Securities Act of such Shares (and the Shares of any
other Holders joining in such request as are specified in a written notice
received by the Company within 20 days after receipt of the Company's written
notice of the proposed registration) for disposition in accordance with the
intended method or methods of disposition stated in such request; provided,
however, that:
(a) if the Company shall have previously effected
a registration, the Company shall not be required to effect a registration
pursuant to this Section 1 until 180 days shall have elapsed from the effective
date of the most recent such previous registration;
<PAGE>
(b) if, upon receipt of a registration request
pursuant to this Section 1, the Company is advised in writing, with a copy to
the Holders of Shares proposed to be included in the offering (the "Selling
Holders"), by a recognized independent investment banking firm selected by the
Company that, in such firm's opinion, a registration at the time and on the
terms requested would adversely affect any public offering of securities by the
Company (other than in connection with employee benefit and similar plans) (a
"Company Offering") that had been contemplated by the Company prior to the
notice by the Holders requesting registration, the Company shall not be required
to effect a registration pursuant to this Section 1 until the earliest of (i)
180 days after the completion of such Company Offering, (ii) the termination of
any "blackout" period required by the underwriters, if any, to be applicable to
the Holders in connection with such Company Offering, (iii) promptly after
abandonment of such Company Offering or (iv) 180 days after the date of written
notice by the Holders requesting registration;
(c) if, while a registration request is pending
pursuant to this Section 1, the Company determines in the good faith judgment of
the general counsel of the Company that the filing of a registration statement
would require the disclosure of material information that the Company has a bona
fide business purpose for preserving as confidential or the Company is unable to
comply with the requirements of the Securities and Exchange Commission ("SEC"),
the Company shall not be required to effect a registration pursuant to this
Section 1 until the earlier of (i) the date upon which such material information
is disclosed to the public or ceases to be material or (ii) 120 days after the
Company makes such good faith determination;
(d) subject to Section 2.3(b), Holders shall have
the right to exercise registration rights pursuant to this
Section 1 only once; and
(e) the number of Shares registered pursuant to a
registration requested pursuant to this Section 1, (i) shall represent more than
35% of the Shares and (ii) shall have an aggregate expected offering price of at
least $10 million.
1.2 Registration Expenses. All Registration Expenses (as
defined in Section 6) for any registration requested pursuant to this Section 1
shall be paid 50% by the Company and 50% by the Selling Holders, on the basis of
the respective amounts of the securities then being registered on behalf of each
of such Selling Holder; provided that if any securities are registered for sale
for the account of any Person (as such term is defined in Section 2(2) of the
Securities Act) other than the Selling Holders pursuant to Section 1, each such
other Person shall bear its pro rata share of the Registration Expenses.
1.3 Permitted Transferees. As used in this Agreement,
"Permitted Transferees" shall mean any transferee, whether direct
or indirect, of Shares designated by any Shareholder in a written
notice to the Company as provided for in Section 7.5. Such
written notice shall be signed by such Shareholder and the
<PAGE>
Permitted Transferee so designated and shall include an undertaking by the
Permitted Transferees to comply with the terms and conditions of this Agreement
applicable to such Shareholder. Permitted Transferees will be entitled to the
benefits of this Agreement.
1.4 Third Person Shares. The Company shall have the right to
cause the registration of securities for sale for its own account or for the
account of any Person in any registration of Shares requested pursuant to this
Section 1; provided that the Company shall not have the right to cause the
registration of such securities if the managing underwriter of any underwritten
offering shall advise the Company in writing (with a copy to each Selling
Holder) that, in such firm's opinion, registration of such securities would
materially and adversely affect the offering and sale of Shares then
contemplated by the Selling Holders.
1.5 Selection of Underwriters. If a requested registration
pursuant to this Section 1 involves an underwritten offering, there shall be
selected one or more underwriters for such Shares, such underwriters to be
selected by the holders of a majority of the Shares held by the Selling Holders
requesting such registration.
1.6 Priority in Requested Registrations. If a requested
registration pursuant to this Section 1 involves an underwritten offering, and
the managing underwriter shall advise the Selling Holders requesting
registration of Shares in writing (with a copy to the Company) that, in its
opinion, the inclusion of all the securities to be included in such registration
would interfere with the sale of the Shares to be sold in such offering by the
Selling Holders within a price range acceptable to the majority (by number of
Shares) of the Selling Holders requesting such registration, the Company will
include in such registration (i) first, Shares requested to be included in such
registration by such Selling Holders, pro rata among such Selling Holders on the
basis of the number of Shares which are requested by them and (ii) second,
securities of the Company proposed by the Company to be sold for its own account
or for the account of any Person.
1.7 Effective Registration. Notwithstanding any
provision herein to the contrary, a registration requested
pursuant to Section 1.1 hereof shall not be deemed to have been
effected (and not requested for purposes of Section 1.1) (i)
<PAGE>
unless the registration statement relating thereto has become effective under
the Securities Act, (ii) if after it has become effective such registration is
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court for any reason other than a
misrepresentation or omission by a Selling Holder and, as a result thereof, the
Shares requested to be registered cannot be completely distributed in accordance
with the plan of distribution, (iii) if the conditions to closing specified in
the purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied or waived other than by reason of some act
or omission by a Selling Holder or (iv) if, pursuant to Section 1.6, less than
all of the Shares requested to be registered were actually registered.
Section 2. Registration Procedures.
2.1 Registration and Qualification. If and whenever the
Company is required to use its best efforts to effect the registration of any
Shares under the Securities Act as provided in Section 1, the Company will as
promptly as is practicable:
(a) prepare, file and use its best efforts to
cause to become effective a registration statement under the Securities Act
regarding such Shares, which registration statement will be on a form consistent
with the intended method of distribution thereof; provided, however, that before
filing with the SEC a registration statement or prospectus, the Company shall
furnish to counsel for the Selling Holders copies of all such documents proposed
to be filed, which documents shall be subject to the reasonable and timely
review of counsel for the Selling Holders. The Company will also notify counsel
for the Selling Holders of any stop order issued or threatened by the SEC and
take all reasonable actions required to prevent the entry of such stop order or
to remove it if entered;
(b) prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of such Shares until the earlier of (i) such time as such
Shares have been disposed of in accordance with the intended methods of
disposition by the Selling Holders set forth in such registration statement or
(ii) such time as such Shares are no longer required to be registered for the
sale thereof by the Holder thereof by reason of Rule 144(k) of the SEC under the
Securities Act or any other rule of similar effect;
(c) furnish to the Selling Holders and to any
underwriter of such Shares such number of conformed copies of
such registration statement and of each such amendment and
<PAGE>
supplement thereto (in each case including all exhibits), such number of copies
(one of which will be fully executed) of the prospectus included in such
registration statement (including each preliminary prospectus and any summary
prospectus), in conformity with the requirements of the Securities Act, such
documents incorporated by reference in such registration statement or
prospectus, and such other documents as the Selling Holders or such underwriter
may reasonably request;
(d) use its best efforts to register or qualify
all Shares covered by such registration statement under such other securities or
blue sky laws of such United States jurisdictions as the Selling Holders or any
underwriter of such Shares shall reasonably request, and do any and all other
acts and things which may be necessary or advisable to enable the Selling
Holders or any underwriter to consummate the disposition in such jurisdictions
of its Shares covered by such registration statement, except that the Company
shall not for any such purpose be required to qualify generally to do business
as a foreign corporation in any jurisdiction where it is not so qualified, or to
subject itself to taxation in any such jurisdiction, or to consent to general
service of process in any such jurisdiction;
(e) (i) furnish to the Selling Holders, addressed
to them, an opinion of counsel for the Company, dated the date of the closing
under the underwriting agreement, and (ii) use its best efforts to furnish to
the Selling Holders, addressed to them, a "cold comfort" letter signed by the
independent public accountants who have certified the Company's financial
statements included in such registration statement, covering substantially the
same matters with respect to such registration statement (and the prospectus
included therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities and such other
matters as the Selling Holders may reasonably request;
(f) immediately notify the Selling Holders at any
time when a prospectus relating to a registration pursuant to Section 1 is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and at the request of the Selling Holders prepare and furnish to
the Selling Holders a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Shares, such prospectus shall not include an
untrue statement of a material fact or omit to
<PAGE>
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading;
(g) make available senior management personnel to participate
in, and cause them to cooperate with the underwriters in connection with, the
"road show" and other customary marketing activities, including "one-on-one"
meetings with prospective purchasers of the Shares; and
(h) otherwise use commercially reasonable efforts to comply
with all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering a period of at least 12 months, beginning with the first month after
the effective date of the registration statement (as the term "effective date"
is defined in Rule 158(c) under the Securities Act), which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.
The Company may require the Selling Holders to furnish the
Company with such information regarding the Selling Holders and the distribution
of such securities as the Company may from time to time reasonably request in
writing and as shall be required by law, the SEC or any securities exchange on
which any shares of Common Stock are then listed for trading in connection with
any registration.
Each Selling Holder agrees that upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
2.1(f), such Selling Holder will forthwith discontinue its disposition of Shares
pursuant to the registration statement relating to such Shares until such
Selling Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 2.1(f) and, if so directed by the Company, such Selling
Holder will deliver to the Company (at the Company's expense) all copies (other
than permanent file copies then in such Selling Holder's possession) of the
prospectus relating to such Shares current at the time of receipt of such
notice.
2.2 Underwriting. If requested by the underwriters for any
underwritten offering of Shares pursuant to a registration requested hereunder
(including any registration under Section 2 which involves, in whole or in part,
an underwritten offering), the Company will use reasonable efforts to enter into
an underwriting agreement with such underwriters for such offering, such
agreement to be reasonably satisfactory in substance and form to the Company and
to contain such representations and warranties by the Company and such other
terms and provisions as are customarily contained in underwriting agreements
with respect to secondary distributions, including, without limitation,
indemnities and contribution to the effect
<PAGE>
and to the extent provided in Section 4 and the provision of opinions of counsel
and accountants' letters to the effect and to the extent provided in Section
2.1(e). The Selling Holders of Shares to be distributed by such underwriters
shall be parties to any such underwriting agreement, and the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such Selling Holders.
2.3 Blackout Periods. (a) At any time when a registration
statement effected pursuant to Section 1 relating to Shares is effective, upon
written notice from the Company to the Selling Holders that the Company
determines in the good faith judgment of the general counsel of the Company that
the Selling Holders sale of Shares pursuant to the registration statement would
require disclosure of material information which the Company has a bona fide
business purpose for preserving as confidential or the Company is unable to
comply with SEC requirements (an "Information Blackout"), the Selling Holders
shall suspend sales of Shares pursuant to such registration statement until the
earlier of (i) the date upon which such material information is disclosed to the
public or ceases to be material, (ii) 120 days after the Company makes such good
faith determination or (iii) such time as the Company notifies the Selling
Holders that sales pursuant to such registration statement may be resumed (the
number of days from such suspension of sales of the Selling Holders until the
day when such sales may be resumed hereunder is hereinafter called a "Sales
Blackout Period").
(b) Any delivery by the Company of notice of an
Information Blackout during the 120 days immediately following effectiveness of
any registration statement effected pursuant to Section 1 shall give the Selling
Holders the right, by notice to the Company within 20 days after the end of such
blackout period, to cancel such registration and obtain for the Holders one
additional registration right (a "Blackout Termination Right") under Section
1.1(d).
(c) If there is an Information Blackout and the
Selling Holders do not exercise the cancellation right, if any, pursuant to
clause (b) of this Section 2.3, or, if such cancellation right is not available,
the period set forth in Section 2.1(b)(ii) shall be extended for a number of
days equal to the number of days in the Sales Blackout Period.
2.4 Listing. In connection with the registration of any
offering of Shares pursuant to this Agreement, the Company agrees to use its
best efforts to effect the listing of such Shares on any securities exchange on
which any shares of the Common Stock are then listed or otherwise facilitate the
public trading of such Shares.
<PAGE>
2.5 Holdback Agreement. To the extent not inconsistent with
applicable law, each Shareholder agrees not to effect any public sale or
distribution of any equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities, during the
seven days prior to and the 90 days after any registration pursuant to Section 1
has become effective, except as part of such registration, if and to the extent
requested by the Company in the case of a non-underwritten public offering or if
and to the extent requested by the managing underwriter or underwriters in the
case of an underwritten public offering.
Section 3. Preparation; Reasonable Investigation. In
-------------------------------------
connection with the preparation and filing of each registration
statement registering Shares under the Securities Act pursuant to
this Agreement, the Company will give the Selling Holders and the
underwriters, if any, and their respective counsel and
accountants, such reasonable and customary access to its books
and records and such opportunities to discuss the business,
financial condition and results of operations of the Company with
its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the
opinion of the Selling Holders and such underwriters or their
respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
Section 4. Indemnification and Contribution.
4.1 Indemnification and Contribution. (a) In the event of any
registration of any Shares hereunder, the Company will enter into customary
indemnification arrangements to indemnify and hold harmless each of the Selling
Holders, each of their respective directors and officers, each Person who
participates as an underwriter in the offering or sale of such securities, each
officer and director of each underwriter, and each Person, if any, who controls
each such Selling Holder or any such underwriter within the meaning of the
Securities Act against any losses, claims, damages, liabilities and expenses,
joint or several, to which such Person may be subject under the Securities Act
or otherwise insofar as such losses, claims, damages, liabilities or expenses
(or actions or proceedings in respect thereof) arise out of are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such securities were registered under
the Securities Act, any preliminary prospectus or final prospectus included
therein, or any amendment or supplement thereto, or any document incorporated by
reference therein, or (ii) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company will reimburse each such Person, as
incurred, for any legal or any other expenses reasonably incurred by such Person
in connection with investigating or defending any such loss, claim,
<PAGE>
liability, action or proceeding; provided, however, that the Company shall not
be liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus or final prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by the Selling
Holders or such underwriter specifically for use in the preparation thereof and
provided further that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Shares or any other
Person, if any, who controls such underwriter within the meaning of the
Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person's failure to send or give a copy of the final prospectus, as
the same may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Shares to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Selling Holders or any such Person and shall survive the
transfer of such securities by the Selling Holders. The Company also shall agree
to provide for contribution as shall reasonably be requested by the Selling
Holders or any underwriters in circumstances where such indemnity is held
unenforceable.
(b) The Selling Holders, by virtue of exercising
their respective registration rights hereunder, agree and undertake, jointly and
severally, to enter into customary indemnification arrangements to indemnify and
hold harmless (in the same manner and to the same extent as set forth in clause
(a) of this Section 4), jointly and severally, the Company, each director of the
Company, each officer of the Company who shall sign such registration statement,
each Person who participates as an underwriter in the offering or sale of such
securities, each officer and director of each underwriter, and each Person, if
any, who controls the Company or any such underwriter within the meaning of the
Securities Act, with respect to any statement in or omission from such
registration statement, any preliminary prospectus or final prospectus included
therein, or any amendment or supplement thereto, if, but only to the extent
that, such statement or omission was made in reliance upon and in conformity
with written information furnished by the Selling Holders to the Company
specifically for inclusion in such registration statement or prospectus. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any such director, officer or controlling
Person and shall survive the transfer of the registered securities by the
Selling Holders. The Selling Holders also shall agree to
<PAGE>
provide for contribution as shall reasonably be requested by the Company for any
underwriters in circumstances where such indemnity is held unenforceable.
(c) Indemnification and contribution similar to
that specified in the preceding subdivisions of this Section 4 (with appropriate
modifications) shall be given by the Company and the Selling Holders with
respect to any required registration or other qualification of such Shares under
any federal or state law or regulation of governmental authority other than the
Securities Act.
Section 5. Benefits and Termination of Registration Rights.
The Shareholders may jointly exercise the registration rights granted hereunder
in such manner and proportions as they shall agree among themselves; provided,
however, any Permitted Transferees of Shares shall be subject to and bound by
all of the terms and conditions hereof applicable to any Shareholder and, to the
extent that a Permitted Transferee requests to be included in an offering, to
those terms and conditions expressly applicable to Selling Holders. The
registration rights hereunder shall cease to apply to Shares: (a) when a
registration statement with respect to the sale of such Shares shall have become
effective under the Securities Act and such Shares shall have been disposed of
in accordance with the intended methods of disposition by the Selling Holders
set forth in such registration statement; (b) such time as such Shares are no
longer required to be registered for the sale thereof by the Holder thereof by
reason of Rule 144(k) of the SEC under the Securities Act or any other rule of
similar effect; (c) when they shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent public distribution of them
shall not require registration or qualification of them under the Securities Act
or any similar state law then in force; (d) when they shall have ceased to be
outstanding; or (e) in all events, on the second anniversary of the date of this
Agreement.
Section 6. Registration Expenses. As used in this Agreement,
the term "Registration Expenses" means all expenses incident to the Company's
performance of or compliance with the registration requirements set forth in
this Agreement including, without limitation, the following: (a) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of Shares to be disposed of under the
Securities Act; (b) all expenses in connection with the preparation, printing
and filing of the registration statement, any preliminary prospectus or final
prospectus, any other offering document and amendments and supplements thereto
and the mailing and delivering of copies thereof to the underwriters and
dealers; (c) the cost of printing and producing any agreement(s) among
underwriters, underwriting agreement(s), and blue sky or legal investment
memoranda, any selling agreements and any
<PAGE>
amendments thereto or other documents in connection with the offering, sale or
delivery of Shares to be disposed of; (d) all expenses in connection with the
qualification of Shares to be disposed of for offering and sale under state
securities laws, including the fees and disbursements of counsel for the
underwriters in connection with such qualification and in connection with any
blue sky and legal investment surveys; (e) the filing fees incident to securing
any required review by the securities exchange on which any shares of the Common
Stock are then listed of the terms of the sale of Shares to be disposed of; (f)
the costs of preparing stock certificates; and (g)the costs and charges of the
Company's transfer agent and registrar. Registration Expenses shall not include
underwriting discounts and underwriters commissions attributable to the Shares
being registered for sale on behalf of the Selling Holders, which shall be paid
by the Selling Holders.
Section 7. Miscellaneous.
7.1 No Inconsistent Agreements. The Company shall not on or
after the date of this Agreement enter into any agreement with respect to its
securities that violates the rights expressly granted to the Shareholders in
this Agreement.
7.2 Assignment. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and with respect to
the Company, its respective successors and assigns, and with respect to any
Shareholder, any Permitted Transferees of the Shares.
7.3 Governing Law; Jurisdiction. This Agreement shall be
construed, performed and enforced in accordance with, and governed by, the laws
of the State of New York applicable to contracts executed in and to be performed
in that State.
7.4 Severability. In the event that any part of this Agreement
is declared by any court or other judicial or administrative body to be null,
void or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in full
force and effect.
7.5 Rule 144. If and for so long as the Company is subject to
the reporting requirements of the Exchange Act, the Company shall take measures
and file such information, documents, and reports as shall be required by the
SEC as a condition to the availability of Rule 144 (or any successor provision)
under the Securities Act.
7.6 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if (i) delivered personally, or
(ii) sent by reputable overnight courier service, or (iii) telecopied (which is
confirmed), or
<PAGE>
(iv) five days after being mailed by registered or certified mail return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) If to the Company, to:
Farm Family Holdings, Inc.
P.O. Box 656
Albany, New York 12201-0656
Attention: General Counsel
Telephone: (518) 431-5409
Telecopy: (518) 431-5999
(b) If to the Shareholders, to:
The addresses of each Shareholder listed on Exhibit A
hereto.
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
Attention: Jeff Liebmann
7.7 Amendments; Waivers. This Agreement may be amended or
modified, and any of the terms, covenants or conditions hereof may be waived,
only by a written instrument executed by the parties hereto, or in the case of a
waiver, by the party waiving compliance. Any waiver by any party of any
condition, or of the breach of any provision, term or covenant contained in this
Agreement, in any one or more instances, shall not be deemed to be nor construed
as furthering or continuing waiver of any such condition or of the breach of any
other provision, term or covenant of this Agreement.
7.8 Section and Paragraph Headings. The section and
paragraph headings in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this
Agreement.
7.9 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
FARM FAMILY HOLDINGS, INC.
By___________________________
Name:
Title:
CONNECTICUT FARM BUREAU
SERVICE COMPANY
By___________________________
Name:
Title:
DELAWARE FARM BUREAU SERVICE
COMPANY, INC.
By___________________________
Name:
Title:
MAINE FARM BUREAU SERVICE
COMPANY
By___________________________
Name:
Title:
MASSACHUSETTS FARM BUREAU
SERVICE COMPANY, INC.
By___________________________
Name:
Title:
<PAGE>
NEW HAMPSHIRE FARM BUREAU
FEDERATION
By___________________________
Name:
Title:
NEW JERSEY FARM BUREAU SERVICE
COMPANY
By___________________________
Name:
Title:
NEW YORK FARM BUREAU SERVICE
COMPANY, INC.
By___________________________
Name:
Title:
RHODE ISLAND FARM BUREAU
FEDERATION, INC.
By___________________________
Name:
Title:
VERMONT FARM BUREAU, INC.
By___________________________
Name:
Title:
WEST VIRGINIA FARM BUREAU, INC.
By___________________________
Name:
Title:
<PAGE>
EXHIBIT A
FARM FAMILY HOLDINGS, INC.
SHAREHOLDERS
Registered Holder Number of Shares*
Connecticut Farm Bureau Service Company
510 Pigeon Hill Road
Windsor, Connecticut 06095-2112
Delaware Farm Bureau Service Company, Inc.
233 S. Dupont Highway
Camden-Wyoming, Delaware 19934
Maine Farm Bureau Service Company
RR 4, Box 1254
4 Gabriel Drive
Augusta, Maine 04330-9322
Massachusetts Farm Bureau Service Company, Inc.
466 Chestnut Street
Ashland, Massachusetts 01721-2299
New Hampshire Farm Bureau Federation
295 Sheep Davis Road
Concord, New Hampshire 03301
New Jersey Farm Bureau Service Company
168 W. State Street
Trenton, New Jersey 08608
New York Farm Bureau Service Company, Inc.
Route 9W, Box 992
Glenmont, New York 12077-0992
Rhode Island Farm Bureau Federation, Inc.
201 Comstock Parkway
Cranston, Rhode Island 02921-2007
Vermont Farm Bureau, Inc.
RR 2, Box 123
Richmond, Vermont 05477-9605
West Virginia Farm Bureau, Inc.
1 Red Rock Road
Buckhannon, West Virginia 26201
Total
[* To be completed upon closing of Option Purchase Agreement.]
<PAGE>
<PAGE>
Exhibit G
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), dated
as of February 26, 1998, by and between Farm Family Holdings, Inc. ("FFH") and
[Name of Service Company] (the "Company"),
W I T N E S S E T H:
--------------------
WHEREAS, FFH and the Company are parties to that certain
Option Purchase Agreement, dated as of February 14, 1996, as amended by
Amendment No. 1, dated as of April 22, 1997, and as further amended by and
restated as the Amended and Restated Option Purchase Agreement, dated as of
February 26, 1998 (the "Option Agreement") pursuant to which FFH has the option
to acquire from the Company all shares of stock in Farm Family Life Insurance
Company ("Life") held by the Company (the "Option"), such shares representing
substantially all of the assets of the Company, in exchange for FFH Common Stock
and FFH Voting Preferred Stock (collectively, the "FFH Stock");
WHEREAS, on April 30, 1997 FFH first notified the Company
that it proposes to exercise the Option;
WHEREAS, FFH thereafter engaged Salomon Brothers Inc.
("Salomon") to determine the "Fair Market Value per Share" of the Life stock,
pursuant to section 3(a) of the Option Agreement;
WHEREAS, following receipt of Salomon's valuation of the Life
stock (the "Optionee Valuation"), FFH provided the Company with a copy of the
Optionee Valuation and notice that it continued to propose to exercise the
Option, in accordance with section 3(a) of the Option Agreement;
WHEREAS, the Company and the other shareholders of Life
(collectively, the "Shareholders") disagreed with the Optionee Valuation and
hired Donaldson, Lufkin & Jenrette Securities Corp. to value the Life stock (the
"Shareholder Valuation");
<PAGE>
WHEREAS, FFH disagreed with the Shareholder Valuation, and the
parties have endeavored to resolve their valuation differences pursuant to
section 3 of the Option Agreement;
WHEREAS, concurrent herewith the parties have amended and
restated the Option Agreement;
WHEREAS, upon issuance of a notice of election to exercise the
Option (the "Exercise Notice") pursuant to section 4(a) of the Option Agreement,
FFH shall be bound to acquire the Company's shares of stock in Life in exchange
for the FFH Stock in accordance with the terms of the Option Agreement, subject
only to (i) the approval of the shareholders of FFH as provided for in section
14 thereof and (ii) the satisfaction of the closing conditions set forth in
section 7(a) thereof, and provided that the Option Agreement is not terminated
pursuant to section 16 thereof;
WHEREAS, in order to obtain the approval of its shareholders,
FFH is required to issue a proxy statement to its shareholders seeking their
approval; and
WHEREAS, the parties wish to set forth their understanding of
certain matters pertaining to the acquisition by FFH of the Life stock held by
the Company;
NOW, THEREFORE, in consideration of the foregoing and the
respective covenants, agreements and conditions hereinafter set forth, and
intending to be legally bound hereby, provided FFH shall have issued the
Exercise Notice, the parties hereto agree as follows:
1. Following receipt of the Exercise Notice, (i) the Board
of Directors of the Company shall adopt a resolution
generally in the form of Exhibit A attached hereto (or
such comparable form of resolution that effects the
same result), authorizing the Company to distribute all
of its assets in liquidation as part of an overall plan
of reorganization, (ii) the Company shall adopt a Plan
of Distribution generally in the form of Exhibit B
attached hereto (or such comparable form of plan of
distribution that effects the same result) and (iii) in
2
<PAGE>
due course the Company shall seek the approval of its
shareholders therefor.
2. FFH shall prepare a proxy statement for the purpose of
obtaining shareholder approval of the acquisition of
the Life stock pursuant to the Option Agreement, and
shall provide the Company and its counsel a reasonable
opportunity for review and comment.
3. Following FFH shareholder approval and the satisfaction
or waiver of the other closing conditions set forth in
the Option Agreement, the exchange of shares will close
(the "Closing") in accordance with the terms of the
Option Agreement.
4. Following receipt of the FFH Stock, as an integral part
of the plan of reorganization described in this
Agreement, the Company shall distribute all of its
assets in liquidation in accordance with the Plan of
Distribution, provided that (i) the Company shall have
obtained any requisite shareholder approvals and (ii)
any conditions to dissolution pursuant to the Plan of
Distribution shall have been satisfied (or waived in
the sole discretion of the Board of Directors of the
Company).
5. (a) It is the intent of the parties hereto that the
transactions contemplated hereby will qualify as a
"reorganization" within the meaning of section
368(a)(1)(C) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the parties hereby agree,
provided steps 1 through 4 above shall have been
completed as contemplated, to file their tax returns in
a manner consistent with such classification and
otherwise to act in a manner consistent therewith.
(b) Upon advance written notice, the Company shall
grant FFH reasonable access to information contained in
the records and files of the Company concerning its
federal income tax attributes as the same shall be
3
<PAGE>
relevant to FFH under sections 362 and 381 of the Code.
6. (a) The parties agree to execute such other documents
and to take such other actions or corporate proceedings
as may be necessary or desirable to carry out the terms
hereof.
(b) FFH further agrees to deliver, at Closing, a
representation letter in the form previously agreed
upon by counsel to the parties (subject to such
revisions as unforeseen circumstances occurring
hereafter may require) so as to facilitate the
rendering of an opinion by tax counsel to the Company
as to the federal income tax consequences of the
transactions contemplated hereby.
7. The parties may amend, modify and supplement this
Agreement in such manner as may be agreed upon by them
in writing.
8. This Agreement may be executed in one or more written
counterparts, each of which shall be deemed an
original, but all of which together shall constitute
one and the
4
<PAGE>
same instrument and which shall be effective as of the
date first above written.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
FARM FAMILY HOLDINGS, INC.
By ________________________
Name:
Title:
Date:
[NAME OF SERVICE COMPANY]
By ________________________
Name:
Title:
Date:
5
<PAGE>
Exhibit A
Sample Board Resolution of [State] Farm Bureau Service Company
The Board of Directors of [Name of Service Company] (the
"Company") hereby [unanimously] adopts the following resolution:
"RESOLVED, that the Company be voluntarily dissolved pursuant to
the Plan of Distribution hereby approved by the Board of Directors
and in accordance with [statutory section reference] of the
[State] [Business Corporation] Law of [year], as amended,
[provided, however, the Board of Directors may determine to
proceed under [alternative statutory section reference of the
[State statute] rather than [prior cite] prior to the time when
[articles of dissolution] are filed in the [State] [Department of
State], notwithstanding the adoption by the shareholders of this
resolution] and provided, [further] however, that no such
dissolution under the Plan of Distribution [or alternative
statutory dissolution] shall take place unless the Company has
obtained a satisfactory tax opinion of Dewey Ballantine LLP as to
the federal income tax consequences of the acquisition by Farm
Family Holdings, Inc. of the stock of Farm Family Life Insurance
Company held by the Company and the distribution of assets in
liquidation of the Company following such acquisition as
contemplated hereby.
A copy of a sample Plan of Distribution of the Company is attached as Exhibit B
to the Agreement and Plan of Reorganization dated as of February 26, 1998, by
and between Farm Family Holdings, Inc. and the Company.
<PAGE>
EXHIBIT B
Sample Plan of Distribution of [State] Farm Bureau Service Company
[NAME OF SERVICE COMPANY]
PLAN OF DISTRIBUTION
This Plan of Distribution (the "Plan") is for the purpose of
effecting the dissolution and distribution of assets in liquidation of [Name of
Service Company], a [State] corporation (the "Company"), in accordance with and
pursuant to the provisions of the [State] [Business Corporation] Law and Section
368(a) of the Internal Revenue Code of 1986, as amended, in substantially the
following manner:
1. Effective Date. The Plan shall be effective on the date (the "Effective
Date") on which it is adopted by the affirmative vote of the holders of [a
majority] of the outstanding shares of the Common Stock [and any other
applicable classes of stock] of the Company, voting separately as a class
and together, [at a meeting (the "Meeting") of] [pursuant to a proxy
completed by] the Company's shareholders (the "Shareholders").1
2. Cessation of Business. After the Effective Date, the Company shall not
engage in any business activities except for the purposes of (i)
prosecuting or defending lawsuits by or against the Company, (ii) enabling
the Company gradually to settle and close its business, dispose of and
convey its property, discharge liabilities and wind up its business affairs
and (iii) making the Liquidation Distribution (as hereinafter defined) and
distributing its remaining assets, if any, in accordance with the Plan. The
Board of Directors of the Company (the "Board") and, at its pleasure, the
officers, shall continue in office solely for these purposes. After
[Articles of Dissolution] are filed with the [State] Department of State,
the Company will not plan to hold any further annual meetings of its
Shareholders.
3. Dissolution. As promptly as practicable after the Effective Date and upon
the filing of Articles of Dissolution with the [State] Department of State
the Company shall be dissolved pursuant to [statutory references] of the
[State] [Business Corporation] Law.
(1) This document assumes that the Service Company shareholders
will vote on the Plan of Distribution after the Closing Date of the transaction
set forth in the Amended and Restated Option Purchase Agreement. If a Service
Company prefers another approach, this paragraph should be revised accordingly.
<PAGE>
4. Disposition of Assets. As part of an overall plan of reorganization, the
Company has entered into (a) the Option Purchase Agreement dated as of
February 14, 1996 (as amended by Amendment No.1 dated as of April 22, 1997,
and as further amended by and restated as the Amended and Restated Option
Purchase Agreement dated as of February 26, 1998) between the Company (as a
shareholder of Farm Family Life Insurance Company ("FF Life"), a New York
domiciled stock life insurance company)) and Farm Family Holdings, Inc., a
Delaware corporation ("Holdings") providing Holdings with an option to
acquire the Company's stockholdings in FF Life (such stockholdings
constituting substantially all of the assets of the Company) in exchange
for shares of Holdings Common Stock and Voting Preferred Stock
(collectively, the "Holdings Shares") (the transaction by which Holdings
acquires the FF Life stock is referred to herein as the "Acquisition") and
(b) an Agreement and Plan of Reorganization between Holdings and the
Company, dated as of February 26, 1998, setting forth the common
understanding and agreement of the Company and Holdings as to certain
matters pertaining to the Acquisition in the event Holdings shall exercise
its option. This Plan is adopted pursuant to such Agreement and Plan of
Reorganization. After the Effective Date, the Company shall have continuing
authority to sell, lease, exchange or otherwise convert all or any part of
its assets as contemplated by the terms and provisions of the Plan.
5. Payment of Debts. The Company shall pay or make proper provision for the
payment of all known or ascertainable liabilities of the Company, including
all amounts estimated by the Board to be necessary, appropriate or
desirable, in its absolute discretion, for the payment of estimated
expenses, taxes and contingent liabilities (including expenses of
dissolution, liquidation and termination of existence), all as provided
[under applicable law] [or insert statutory references].
6. Liquidating Distribution. The Company shall distribute pro rata to the
Shareholders all of its properties, including the Holdings Shares, subject
to such liabilities as may exist (the "Liquidating Distribution"). The
Liquidating Distribution may be made in a series of distributions and will
be made in Holdings Shares (to the extent thereof) but otherwise may be in
cash or kind, in such manner and at such time or times as the Board, in its
absolute discretion, may determine.
7. Cancellation of Stock. The Liquidating Distribution shall be in complete
redemption and cancellation of all of the outstanding Common Stock [and all
other applicable classes of stock] of the Company. The Board may direct
that the Company's stock transfer books be closed at the close of business
on the record date fixed by the Board for the first or any subsequent
installment of any Liquidating Distribution as the Board, in its absolute
discretion, may determine (the "Record Date") and thereafter certificates
representing Common Stock [and all other applicable classes of stock] shall
not be assignable or transferable on the books of the Company except by
2
<PAGE>
will, intestate succession or operation of law. The Shareholders shall
surrender stock certificates (or, if so required by the Board in its
absolute discretion, furnish indemnity bonds in case of lost or destroyed
certificates) as a condition to their receipt of any Liquidating
Distribution immediately following the Record Date.
8. Missing Shareholders. If any Liquidating Distribution to a Shareholder
cannot be made, whether because the Shareholder cannot be located, has not
surrendered a certificate evidencing the Common Stock [and all other
applicable classes of stock] as required hereunder, or for any other
reason, then the distribution to which such Shareholder is entitled shall
be transferred to and deposited with the state official authorized by the
laws of the [Commonwealth/State of ___________] to receive the proceeds of
such distribution. The proceeds of such distribution shall thereafter be
held solely for the benefit of and for ultimate distribution to such
Shareholder as the sole equitable owner thereof and shall escheat to the
[Commonwealth/State of ___________] or be treated as abandoned property in
accordance with the laws of the [Commonwealth/State of ___________]. In no
event shall the proceeds of any such distribution revert to or become the
property of the Company.
9. Amendments. Notwithstanding the adoption of the Plan by the Company's
Shareholders, the Board may modify or amend the Plan (including, without
limitation, proceeding under the provisions of [statutory reference] of the
[State] [Business Corporation] Law) and, prior to the filing of [Articles
of Dissolution] with the Department of State of the [Commonwealth/State of
___________], may abandon the Plan, without further action by the
Shareholders to the extent permitted by [State] law.
10. Indemnification. The Company shall continue to indemnify its officers,
directors, employees and agents in accordance with applicable law, its
articles and bylaws and any contractual arrangements for actions taken in
connection with the Plan and the winding up of the affairs of the Company.
The Board and the trustees, in their absolute discretion, are authorized to
obtain and maintain insurance for the benefit of such officers, directors,
employees and agents to the extent permitted by law.
11. Power of Board Directors. The Board and, if authorized by the Board, the
officers, shall have authority to do or authorize any and all acts and
things as provided for in the Plan and any and all such further acts and
things as they may consider desirable to carry out the purposes of the
Plan, including the execution and filing of all such certificates,
documents, information returns, tax returns, and other documents which may
be necessary or appropriate to implement the Plan. The Board may authorize
such variations from or amendments to the provisions of the Plan as may be
necessary or appropriate to effectuate the complete liquidation and
dissolution of the Company and the distribution of its assets to its
Shareholders in accordance with the [State] [Business Corporation] Law. The
death, resignation, or other disability of any director or officer of the
Company shall not impair the authority of the surviving or remaining
director(s) or officer(s) to exercise any of the powers provided for in the
Plan. Upon such death, resignation or other disability, the surviving or
remaining director(s), or, if there be none, to the extent permitted by law
3
<PAGE>
the surviving or remaining officer(s) shall have authority to fill the
vacancy or vacancies so created, but the failure to fill such vacancy or
vacancies shall not impair the authority of the surviving or remaining
director(s) or officer(s) to exercise any of the powers provided for in the
Plan. [In connection with and for the purpose of implementing and assuring
completion of the Plan, the Company may, in the absolute discretion of the
Board, pay to the Company's officers, directors and employees, or any of
them, compensation or additional compensation above their regular
compensation, in money or property, in recognition of the extraordinary
efforts they, or any of them, will be required to undertake or actually
undertake, in successful implementation of the Plan. Adoption of the Plan
by the Shareholders shall constitute the approval of the Shareholders of
the payment of any such compensation.] The dissolution of the Company shall
not subject its directors or officers to standards of conduct different
from those prescribed by or pursuant to [statutory reference] of the
[State] [Business Corporation] Law. Compliance by the Company with Section
[insert] of the [State] Business Corporation Law shall protect the
directors of the Company from personal liability to the claimants of the
Company.
[IN WITNESS WHEREOF, [Name of Service Company] has caused this Plan to
be signed by its [title of Officer] effective this ____ day of _______, 1998.
[NAME OF SERVICE COMPANY]
By ________________________
Name: _____________________
Title: ______________________]
4
<PAGE>
AMENDMENT NO. 1 TO AMENDED AND RESTATED OPTION PURCHASE AGREEMENT
This AMENDMENT NO. 1 TO AMENDED AND RESTATED OPTION PURCHASE
AGREEMENT, dated as of April 28, 1998 (this "Amendment"), by and among FARM
FAMILY HOLDINGS, INC., a Delaware Corporation (the "Optionee"), and THE
SHAREHOLDERS OF FARM FAMILY LIFE INSURANCE COMPANY set forth on the signature
pages hereof (individually, a "Shareholder" and collectively, the
"Shareholders").
WHEREAS, the Optionee and the Shareholders have previously
entered into the Amended and Restated Option Purchase Agreement, dated as of
February 26, 1998, (the "Option Purchase Agreement"); and
WHEREAS, the Optionee and the Shareholders desire to further
amend the Option Purchase Agreement as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Optionee and the
Shareholders hereby agree that the Option Purchase Agreement shall be, and
hereby is, amended and modified as follows:
1. Section 4(a) of the Option Purchase Agreement is amended by adding
the following phrase at the end of the second sentence of Section 4(a):
", unless another date, time or place is agreed to by the
parties hereto."
2. Sections 7(a)(iii) and 7(b)(iii) of the Option Purchase Agreement
are amended by deleting the existing Sections 7(a)(iii) and 7(b)(iii) and
inserting in their place a new Section 7(a)(iii) and 7(b)(iii), which read as
follows:
"the transactions contemplated hereby shall have been approved by the
affirmative vote of a majority of the outstanding shares of the
Optionee Common Stock present in person or by proxy at a meeting of
stockholders of the Optionee or such other vote of the stockholders of
the Optionee as may be required by applicable Law, the Certificate of
Incorporation and By-laws of the Optionee and the rules of the New York
Stock Exchange, Inc.;"
This Amendment may be executed in two or more counterparts,
each of which shall be considered one in the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
-1-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective duly authorized officers as of the
date first above written.
FARM FAMILY HOLDINGS, INC.
By /s/ Philip P. Weber
----------------------
Name:Philip P. Weber
Title: President & C.E.O.
CONNECTICUT FARM BUREAU SERVICE
COMPANY
By /s/ Norma R. O'Leary
-----------------------
Name: Norma R. O'Leary
Title: President
DELAWARE FARM BUREAU SERVICE
COMPANY, INC.
By /s/ Joseph E. Calhoun
------------------------
Name: Joseph E. Calhoun
Title: President
MAINE FARM BUREAU SERVICE COMPANY
By /s/ Sandra A. George
-----------------------
Name: Sandra A. George
Title: President
MASSACHUSETTS FARM BUREAU SERVICE
COMPANY, INC.
By /s/ Arthur D. Keown, Jr.
---------------------------
Name: Arthur D. Keown, Jr.
Title: President
-2-
<PAGE>
NEW HAMPSHIRE FARM BUREAU
FEDERATION
By /s/ Gordon H. Gowen
----------------------
Name: Gordon H. Gowen
Title: President
NEW JERSEY FARM BUREAU SERVICE
COMPANY
By /s/ John I. Rigolizzo, Jr.
-----------------------------
Name: John I. Rigolizzo, Jr.
Title: Vice President
NEW YORK FARM BUREAU SERVICE
COMPANY, INC.
By /s/ John W. Lincoln
----------------------
Name: John W. Lincoln
Title: President
RHODE ISLAND FARM BUREAU
FEDERATION, INC.
By /s/ William M. Stamp, Jr.
----------------------------
Name: William M. Stamp, Jr.
Title: President
VERMONT FARM BUREAU, INC.
By /s/ Clark W. Hinsdale III
----------------------------
Name: Clark W. Hinsdale III
Title: President
WEST VIRGINIA FARM BUREAU, INC.
By /s/ Charles A. Wilfong
-------------------------
Name: Charles A. Wilfong
Title: President
-3-
<PAGE>
Exhibit 99
News Release
FOR IMMEDIATE RELEASE CONTACT:Timothy A. Walsh
Executive Vice President - Finance
& Treasurer
(518) 431-5410
Farm Family Holdings Reports Continued Premium Growth and Profitability for the
First Quarter Ended March 31, 1998
Glenmont, New York - April 28, 1998 - - Farm Family Holdings, Inc. (NYSE: FFH)
today announced that operating earnings for the first quarter ended March 31,
1998 were $3,126,000 compared to $3,115,000 for the same period in 1997. On a
diluted per share basis, operating earnings were $0.59 for the first quarter
ended March 31, 1998 and $0.59 for the same period in 1997. Operating earnings
exclude the impact of realized investment gains (losses), extraordinary items,
nonrecurring charges, and the related taxes thereon.
Operating earnings for the first quarter of 1998 were adversely impacted by
approximately $2,600,000 of losses attributable to severe ice storms which
primarily affected the upstate New York and Maine territories in which the
Company writes business.
Philip P. Weber, President & CEO of Farm Family Holdings, Inc. said, "Although
the impact of the first quarter ice storms negatively impacted our short-term
operating results, we did an outstanding job assisting our insureds in the
affected areas. We remain committed to the agribusiness, rural, and suburban
communities we serve and continue to enhance our penetration into these
markets."
Premiums
Premium revenue increased $7,842,000 or 22.4% to $42,815,000 for the first
quarter of 1998 compared to $34,973,000 for the same period in 1997. The
increase in premium revenue for the first quarter of 1998 was primarily
attributable to an increase of $5,908,000 in premium revenue from our direct
writings and a reduction of $2,100,000 in premiums ceded to the Company's
affiliate, United Farm Family Insurance Company ("United Farm Family").
Effective December 31, 1997, the Company's reinsurance agreements with United
Farm Family were terminated. As a result, the Company's retention per claim net
of reinsurance increased from $100,000 in 1997 to $300,000 in 1998.
<PAGE>
Net written premiums increased $10,627,000 or 28.9% to $47,355,000 for the first
quarter of 1998 compared to $36,728,000 for the same period in 1997. The
increase in net written premiums for the first quarter of 1998 was primarily
attributable to an increase of $6,000,000 or 15.7% in direct writings to the
customers we serve (excluding assigned risk automobile business premiums
received by the Company) and to a lesser extent, a reduction in premiums ceded
to the Company's reinsurers and an increase in the Company's written voluntary
assumed reinsurance business. Direct writings for the first quarter of 1998
increased primarily as a result of an increase in writings of all of the
Company's primary products. Geographically, the increase in the direct writings
from New Jersey accounted for $3,407,000 ($2,279,000 of which represents
increased personal auto business) of the increase in the Company's direct
writings during the first quarter of 1998 compared to the same period in 1997.
Mr. Weber said, "We have continued to increase writings of all of our primary
products: personal and commercial automobile, the Special Farm Package,
businessowners, and homeowners products. The increase in our direct writings
during the first quarter of 1998 came from New Jersey, New York, Massachusetts,
Connecticut, Delaware, West Virginia, Rhode Island, Vermont, and New Hampshire."
Combined Ratio
Farm Family Casualty Insurance Company's statutory combined ratio was 100.7% for
the first quarter of 1998 compared to 98.4% for the same period in 1997. Loss
and loss adjustment expenses were 75.1% of premium revenue for the first quarter
of 1998 compared to 70.6% for the same period in 1997. The increase in the loss
and loss adjustment expense ratio was primarily attributable to an increase in
weather related losses incurred during the first quarter of 1998 as compared to
the same period in 1997. Storm and weather related losses were $4,110,000 for
the first quarter of 1998 compared to $2,069,000 for the same period in 1997.
Investment Income
Net investment income for the first quarter of 1998 increased 7.9% to $4,767,000
compared to $4,416,000 for the same period in 1997.
Net Income
Net income for the first quarter of 1998 increased to $3,208,000 compared to
$3,056,000 for the same period in 1997. On a diluted per share basis, net income
for the first quarter of 1998 was $0.61 compared to $0.58 for the same period in
1997. Net income for the first quarter of 1998 included the impact of losses
attributable to the ice storms that affected the upstate New York and Maine
territories in which the Company writes business.
Mr. Weber said, "We remain focused on providing outstanding service to our
customers and creating value for our shareholders."
<PAGE>
Annual Meeting
At the annual meeting of shareholders held today, the nominees for directors
were elected and the appointment of Coopers & Lybrand L.L.P. as the Company's
independent auditors for 1998 was ratified.
Farm Family Life Insurance Company
On February 26, 1998, the Company's Board of Directors approved the exercise of
the Company's option to acquire Farm Family Life Insurance Company ("Farm Family
Life") pursuant to the terms of an Amended and Restated Option Purchase
Agreement (the "Amended and Restated Option Purchase Agreement") among the
Company and the shareholders of Farm Family Life.
The Company will pay an exercise price of $37.5 million to acquire Farm Family
Life consisting of $31.5 million of the Company's common stock and $6 million
stated value of the Company's 6-1/8% voting preferred stock, less certain
expenses to be paid by Farm Family Life in connection with the acquisition on
behalf of the shareholders of Farm Family Life. The proposed acquisition is
subject to certain closing conditions, including the approval of the Company's
stockholders and receipt of all required governmental approvals. The transaction
is expected to be completed in the third quarter of 1998.
The unaudited pro forma selected consolidated financial data included as part of
this press release gives effect to the acquisition of Farm Family Life using the
purchase method of accounting as if the acquisition had occurred at the
beginning of each period presented. The pro forma information is provided for
informational purposes only and is not necessarily indicative of actual results
that would have been achieved had the acquisition been consummated at the
beginning of the period presented or of future periods.
Farm Family Holdings is the parent of Farm Family Casualty Insurance Company, a
specialized, regional property and casualty insurer of farms, agricultural
related businesses and residents and businesses of rural and suburban
communities.
- ----------------------------------
Safe Harbor Statement under The Private Securities Litigation Reform Act of
1995: This press release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 that are based on
management's current knowledge, expectations, estimates, beliefs and
assumptions. The forward-looking statements in this press release include, but
are not limited to, statements with respect to the Company's potential
acquisition of Farm Family Life, the impact of the potential acquisition of Farm
Family Life on the earnings and shareholder value of the Company, statements of
the plans and objectives of the Company or its management, and statements of
future economic performance and assumptions underlying statements regarding the
Company or its business. Readers are hereby cautioned that certain events or
circumstances could cause actual results to differ materially from those
estimated, projected, or predicted. The forward-looking statements in this press
release are not guarantees of future performance and are subject to a number of
important risks and uncertainties, many of which are outside the Company's
control, that could cause actual results to differ materially. These risks and
uncertainties include, but are not limited to, the results of operations of the
Company and Farm Family Life, fluctuations in the market value of shares of the
Company's common stock, the satisfaction of the closing conditions set forth in
the Amended and Restated Option Purchase Agreement (which conditions include,
but are not limited to, the approval of the Company's shareholders and receipt
of all required government approvals), exposure to catastrophic loss, geographic
concentration of loss exposure, general economic conditions and conditions
specific to the property and casualty insurance industry, including its cyclical
nature, regulatory changes and conditions, rating agency policies and practices,
competitive factors, claims development and the impact thereof on loss reserves
and the Company's reserving policy, the adequacy of the Company's reinsurance
programs, developments in the securities markets and the impact thereof on the
Company's investment portfolio and other risks listed from time to time in the
Company's Securities and Exchange Commission filings, including the Form 10-K
filed for the fiscal year ended December 31, 1997 and the Prospectus dated July
22, 1996. Accordingly, there can be no assurance that actual results will
conform to the forward-looking statements in this press release.
***More***
<PAGE>
<TABLE>
FARM FAMILY HOLDINGS, INC.
Condensed Consolidated Balance Sheets
($ in thousands)
<CAPTION>
03/31/98 12/31/97
Assets:
<S> <C> <C>
Investments $286,186 $280,431
Cash 5,327 5,841
Insurance receivables 47,542 40,484
Deferred acquisition costs 13,401 12,613
Accrued investment income 4,820 5,408
Other assets 23,463 23,501
------------ -------------
Total Assets $380,739 $368,278
------------ -------------
Liabilities:
Reserves for losses and loss adjustment expenses 163,498 156,622
Unearned premium reserve 69,119 66,069
Debt 1,264 1,268
Other liabilities 13,756 14,392
------------ -------------
Total Liabilities 247,637 238,351
------------ -------------
Stockholders' equity 133,102 129,927
------------ -------------
Total Liabilities and Stockholders' Equity $380,739 $368,278
------------ -------------
Book Value Per Share $25.33 $24.73
------------ -------------
Book Value Per Share (excluding SFAS 115 adjustment) $23.93 $23.32
------------ -------------
Shares Outstanding 5,253,813 5,253,813
------------ -------------
</TABLE>
***More***
<PAGE>
<TABLE>
FARM FAMILY HOLDINGS, INC.
Condensed Consolidated Statements of Income
($ in thousands except per share date)
<CAPTION>
Three
Months Ended
March 31,
1998 1997
---- ----
Revenues:
<S> <C> <C>
Premiums $42,815 $34,973
Net investment income 4,767 4,416
Realized investment gains (losses), net 126 (90)
Other income 219 220
------------- -----------
Total Revenues 47,927 39,519
------------- -----------
Losses and Expenses:
Losses and loss adjustment expenses 32,139 24,697
Underwriting expenses 11,213 10,090
Interest expense 25 26
Dividends to policyholders 50 38
------------- -----------
Total Losses and Expenses 43,427 34,851
------------- -----------
Income before federal income tax expense and extraordinary item 4,500 4,668
Federal income tax expense 1,292 1,612
------------- -----------
Net Income $3,208 $3,056
------------- -----------
Operating Income (1) $3,126 $3,115
------------- -----------
Per share data:
Net income per share-Diluted $0.61 $0.58
------------- -----------
Net operating income per share-Diluted (1) $0.59 $0.59
------------- -----------
Weighted average shares outstanding-Diluted 5,301,498 5,253,813
------------- -----------
(1) Operating income excludes the impact of realized investment gains (losses),
and the related taxes thereon.
</TABLE>
***More***
<PAGE>
Unaudited Pro Forma Selected Consolidated Financial Data
(dollars in millions, except per share data)
The following table sets forth selected unaudited pro forma consolidated
financial information for the three months ended March 31, 1998 and for the year
ended December 31, 1997, giving effect to the acquisition of Farm Family Life
using the purchase method of accounting. Statement of Income and Balance Sheet
Data give effect to the acquisition of Farm Family Life as if it occurred at the
beginning of each period. The pro forma information is provided for
informational purposes only and is not necessarily indicative of actual results
that would have been achieved had the acquisition of Farm Family Life been
consummated at the beginning of the period presented or of future results.
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, 1998 December 31, 1997
-------------- -----------------
Statement of Income Data:
Revenues:
<S> <C> <C>
Premiums from property/casualty operations $42.8 $158.2
Premiums from life and health operations 8.8 33.4
Net investment income 18.6 73.0
Realized investment gains, net 0.8 8.3
Policy and contract charges 1.2 5.1
Other income 0.3 1.4
------------------------ ------------------------
Total Revenues 72.5 279.4
------------------------ ------------------------
Losses, Benefits and Expenses:
Losses and loss adjustment expenses 32.6 113.3
Benefits to policyholders 9.2 31.6
Underwriting & operating expenses 13.0 48.9
Non-recurring charges 0.1 0.7
Interest credited to policyholders 5.4 24.3
Amortization of present value of future profits 0.5 2.2
Interest and other expenses 0.1 0.4
------------------------ ------------------------
Total Losses, Benefits and Expenses 60.9 221.4
------------------------ ------------------------
Income before federal income tax expense 11.6 58.0
Federal income tax expense 3.7 19.8
------------------------ ------------------------
Income before participating policyholders' interest 7.9 38.2
Participating policyholders' interest 3.7 16.1
------------------------ ------------------------
Net Income 4.2 22.1
Preferred stock dividends 0.1 0.4
------------------------ ------------------------
------------------------ ------------------------
Income applicable to common shareholders $4.1 $21.7
------------------------ ------------------------
------------------------ ------------------------
Net Income per Common Share - Basic $0.67 $3.58
------------------------ ------------------------
Net Income per Common Share - Diluted $0.67 $3.57
------------------------ ------------------------
Weighted average shares - Basic (1) 6,078,463 6,078,463
------------------------ ------------------------
Weighted average shares - Diluted (1) 6,126,148 6,095,597
------------------------ ------------------------
</TABLE>
***More***
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, 1998 December 31, 1997
-------------- -----------------
Balance Sheet Data (at period end):
<S> <C>
Total investments $1,075.6 --
Total assets 1,206.5 --
Long-term debt 1.3 --
Participating policyholders' interest 109.1 --
Total liabilities 1,036.8 --
Redeemable preferred stock 5.9 --
Total equity 163.8 --
------------------------
Book value per share (1) $26.96 --
------------------------
------------------------
</TABLE>
(1) Weighted average shares and book value per share are computed as if the
Closing of the acquisition of Farm Family Life had occurred on April 6,
1998, and assuming an average closing price of the Company's common stock of
37 9/32. The actual average closing price of the Company's common stock and
the actual number of shares of the Company's common stock that will be
issued in connection with the acquisition of Farm Family Life may vary
significantly from these amounts.
***End***
