<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported): June 21, 1996 (June 6, 1996)
-------------------------------
RIVERSIDE GROUP, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 0-9209 59-1144172
- --------------------------- --------------------- ----------------------
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification Number)
7800 BELFORT PARKWAY, JACKSONVILLE, FLORIDA 32256
- ------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
904-281-2200
----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
LIFE INSURANCE REORGANIZATION
As previously reported, on March 8, 1996, Riverside Group, Inc.
("Riverside") and its 99%-owned subsidiary, American Financial Acquisition
Corporation ("AFAC") entered into a Merger Agreement (the "Circle Merger
Agreement") dated March 8, 1996 with Circle Investors, Inc. ("Circle"). Circle
is a privately-held financial services company located in Indianapolis, Indiana.
Pursuant to the Circle Merger Agreement, on June 6, 1996, AFAC contributed its
wholly-owned subsidiaries, American Founders Life Insurance Company ("American
Founders"), Laurel Life Insurance Company and Aztec Life Insurance Company, to a
newly-formed wholly-owned subsidiary of AFAC ("Newco"), and thereupon a
newly-formed wholly-owned subsidiary of Circle merged (the "Merger") with and
into Newco with Newco surviving as a wholly-owned subsidiary of Circle.
In the Merger, the shares of Newco's capital stock held by AFAC were
converted into $35,000,000 in cash, 2,267,000 newly-issued shares of Circle's
common stock (the "Circle Common Shares"), without par value, and 3,600
newly-issued shares of Circle's Series C Preferred Stock (the "Circle Preferred
Shares") with an aggregate liquidation preference of $3,600,000. The Circle
Preferred Shares are non-voting, bear no dividends (except that dividends are to
be imputed upon liquidation) and are convertible into Circle common stock in
certain events (generally, (i) conversion of shares of Circle's Series A
Preferred Stock, (ii) completion of an initial public offering by Circle, (iii)
payment in full of the Riverside Notes (as defined below) or (iv) change in
control of Circle) at a conversion price of 150% of book value per common share
(as defined), subject to adjustment. The Circle Common Shares constitute
approximately 30.5% of Circle's outstanding shares of common stock.
In connection with the Merger, AFAC paid in full the $18,000,000
principal balance under its bank loan agreement.
Also in connection with the Merger, 951,486 shares of Wickes Lumber
Company ("Wickes") Common Stock and certain other assets formerly held by
American Founders were distributed to AFAC. Also, Riverside purchased from
American Founders certain real estate with a net appraised value of
approximately $19,775,000 for $1,977,500 in cash and seven-year non recourse
promissory notes (the "Riverside Notes") in the aggregate principal amount of
$17,797,500. The Riverside Notes bear interest at LIBOR plus 3.0%, payable
annually, and principal is payable annually based upon a 20-year amortization
schedule (except that additional principal payments may be required to maintain
specified loan-to-value ratios, and all proceeds of sale of the real estate
securing the Riverside Notes is to be applied to principal and interest). The
Riverside Notes are secured by mortgages on the real estate acquired and the
pledge of the Circle Common Shares, the Circle Preferred Shares and 1,000,000
shares of Wickes Common Stock.
Also in connection with the Merger, Circle, AFAC and Riverside entered
into a shareholders, agreement pursuant to which, among other things, (i)
Riverside agreed to vote all of the shares of Circle's common stock held by it
in excess of 9% of Circle's outstanding shares as recommended by Circle's board
of directors, (ii) Circle appointed J. Steven Wilson, Chairman, President and
Chief Executive Officer of Riverside, to Circle's board of directors and agreed
to recommend that a Riverside designee be elected to its board of directors
during the effectiveness of the agreement, (iii) certain restrictions were
placed upon transfer of the Circle Common Shares and the Circle Preferred Shares
and (iv) certain registration rights were provided with respect to the Circle
Common Shares and the Circle Preferred Shares.
The terms of all of the above transactions were determined through
arm's-length negotiations with Circle.
<PAGE> 3
WICKES INVESTMENT
On June 20, 1996, pursuant to the previously reported Stock Purchase
Agreement (the "Wickes Agreement") dated January 11, 1996 between Riverside and
Wickes, Riverside purchased from Wickes 2,000,000 newly-issued shares of Wickes'
common stock, par value $.01 per share ("Wickes Common Stock"), for $10,000,000
in cash. As a result of this transaction, Riverside beneficially owns 4,217,288
shares of Wickes Common Stock, constituting approximately 55% of Wickes'
outstanding voting common stock and approximately 52% of all outstanding shares
of Wickes' common stock.
The terms of the Wickes Agreement were reviewed and recommended to the
boards of directors of Riverside and Wickes by committees comprised of the
independent directors of each company. The Wickes board committee received the
opinion of its financial advisor that the consideration received by Wickes
pursuant to the Wickes Agreement was fair, from a financial point of view, to
Wickes as of the date of the opinion.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) PRO FORMA FINANCIAL INFORMATION.
The following pro forma financial information is set forth on Annex A
hereto:
Unaudited Pro Forma Consolidated Statements of Operations of Riverside
Group, Inc. and Subsidiaries for the year ended December 31, 1995 and
the quarter ended March 31, 1996
Unaudited Pro Forma Consolidated Balance Sheet of Riverside Group, Inc.
and Subsidiaries as of March 31, 1996
(c) EXHIBITS.
Exhibit
Number Description of Exhibit
------ ----------------------
2.1* Merger Agreement dated March 8, 1996 among American
Financial Acquisition Corporation, Riverside Group,
Inc., Securus Corporation and Circle Investors, Inc.
(incorporated by reference to Exhibit 10.11 to the
registrant's Annual Report on Form 10-K for the year
ended December 31, 1995). Certain schedules and
exhibits are omitted. The registrant agrees to
provide supplementally to the Commission a copy of
any omitted schedule or exhibit upon request.
2.2* Stock Purchase Agreement dated January 11, 1996,
between Riverside Group, Inc. and Wickes Lumber
Company (incorporated by reference to Exhibit 99.1 to
the registrant's Current Report on Form 8-K dated
January 23, 1996)
99.1 Shareholders' Agreement dated June 6, 1996 among
American Financial Acquisition Corporation, Riverside
Group, Inc. and Circle Investors, Inc.
*Incorporated by reference.
<PAGE> 4
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 hereunto duly authorized.
RIVERSIDE GROUP, INC.
Date: June 21, 1996 By: /s/ Catherine J. Gray
-----------------------
Catherine J. Gray
Vice President
<PAGE> 5
ANNEX A
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial statements of
Riverside and its subsidiaries are based upon the unaudited condensed
consolidated financial statements of Riverside and its subsidiaries contained in
the Quarterly Report on Form 10-Q filed by Riverside for the period ended March
31, 1996, the unaudited condensed consolidated financial statements of Wickes
and its subsidiaries contained in the Quarterly Report on Form 10-Q filed by
Wickes for the period ended March 30, 1996, the consolidated financial
statements of Riverside and its subsidiaries and the consolidated financial
statements of Wickes contained in the Annual Report on Form 10-K filed by
Riverside for the year ended December 31, 1995, and unaudited consolidated
financial statements of Circle and its subsidiaries provided by Circle to
Riverside at and for the period ended March 31, 1996, and audited consolidated
financial statements of Circle and its subsidiaries provided by Circle to
Riverside at and for the year ended December 31, 1995.
The unaudited pro forma condensed consolidated balance sheet reflects
Riverside's March 31, 1996, unaudited consolidated condensed balance sheet,
adjusted to reflect the transactions completed under the Circle Merger Agreement
and the Wickes Agreement as though these transactions had been completed on
March 31, 1996, consolidated with Wickes' March 30, 1996, unaudited consolidated
condensed balance sheet. The unaudited pro forma condensed consolidated
statements of operations reflect Riverside's historical results for the three
months ended March 31, 1996, and the year ended December 31, 1995, adjusted to
reflect the transactions completed under the Circle Merger Agreement and the
Wickes Agreement as though these transactions had been completed on January 1,
1995, consolidated with Wickes' unaudited condensed consolidated statements of
operations for the three months ended March 30, 1996, and consolidated statement
of operations for the year ended December 30, 1995.
The unaudited consolidated condensed balance sheet of Riverside at March 31,
1996, and Wickes at March 30, 1996, and the unaudited consolidated condensed
statements of operations of Riverside for the three months ended March 31, 1996,
and of Wickes for the three months ended March 30, 1996, have been prepared on
the same basis as the historical information derived from audited financial
statements. Circle has informed Riverside that the unaudited consolidated
balance sheet of Circle at March 31, 1996, and the unaudited consolidated
statement of operations of Circle for the three months ended March 31, 1996,
have been prepared on the same basis as the historical information derived from
audited financial statements. In the opinion of management of Riverside, Wickes
and Circle, respectively, the unaudited financial statements of Riverside,
Wickes and Circle referred to above, as the case may be, from which such data
have been derived contain all adjustments, consisting of normal recurring
accruals, necessary for the fair presentation of the results for such periods.
THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ARE
PRESENTED FOR ILLUSTRATIVE PURPOSES ONLY AND SHOULD NOT BE CONSTRUED TO BE
INDICATIVE OF THE OPERATING RESULTS OR FINANCIAL POSITION THAT WOULD HAVE
OCCURRED IF THE TRANSACTIONS REFLECTED THEREBY HAD BEEN CONSUMMATED AT THE DATES
ASSUMED, NOR SHOULD THEY BE CONSIDERED PROJECTIONS OF THE FUTURE OPERATING
RESULTS OR FINANCIAL POSITION OF RIVERSIDE.
After completion of the above transactions Riverside will utilize the equity
method of accounting for its ongoing investment in Circle and will prepare
consolidated financial statements with Wickes as a result of ownership of a
majority of Wickes outstanding common stock. Previously Riverside had reported
consolidated results of the life insurance operations and used the equity method
of accounting for its investment in Wickes.
A-1
<PAGE> 6
Riverside Group, Inc. and Subsidiaries ANNEX A
Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 1995
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Merger &
Riverside Wickes Inv. Consolidate Riverside
Historical Adjustments Wickes (g) Pro Forma
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ -- $ -- $ 972,612 $ 972,612
Cost of sales -- -- 751,800 751,800
----------------------------------------------------------------------
Gross profit -- -- 220,812 220,812
Net realized investment losses (234) (966)a -- (1,200)
Equity in earnings (losses) life insurance subsidiaries -- (122)b -- (122)
Equity in losses of Wickes Lumber Company (5,849) (2,250)c 8,099 --
Equity in losses of Wickes Lumber Company affiliates -- -- (3,543) (3,543)
Other operating income 1,513 (453)a 5,831 6,891
Premiums and annuity considerations 8,298 (8,298)a -- --
Net investment income 14,492 (14,492)d -- --
----------------------------------------------------------------------
Total revenues 18,220 (26,581) 231,199 222,838
Selling, general and administrative expenses 5,221 (1,892)d 201,111 204,440
Depreciation, goodwill and trademark amortization -- -- 6,286 6,286
Restructuring and unusual items 10,972 (10,972)e 17,798 17,798
Interest expense 3,280 (267)f 23,551 26,564
Policyholder benefits 15,417 (15,417)a -- --
Policy acquisition expenses 3,085 (3,085)a -- --
----------------------------------------------------------------------
Total expenses 37,975 (31,633) 248,746 255,088
Minority interest -- __ 7,104 7,104
Loss from continuing operations before income taxes (19,755) 5,052 (10,443) (25,146)
Income tax expense (benefit):
Current -- -- 1,353 1,353
Deferred (1,910) 1,910 e (11,796) (11,796)
----------------------------------------------------------------------
Net loss from continuing operations $ (17,845) $ 3,142 $ -- $ (14,703)
======================================================================
Loss per share from continuing operations $ (3.38) $ (2.78)
=========== ==============
Weighted average number of common shares
used in computing earnings per share 5,284,280 5,284,280
</TABLE>
See accompanying Notes to Pro Forma Condensed Consolidated Financial Statements
A-2
<PAGE> 7
Riverside Group, Inc. and Subsidiaries ANNEX A
Pro Forma Condensed Consolidated Statement of Operations
Three Months Ended March 31, 1996
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Merger &
Riverside Wickes Inv. Consolidate Riverside
Historical Adjustments Wickes (g) Pro Forma
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ -- $ -- $ 152,508 $ 152,508
Cost of sales -- -- 117,578 117,578
------------------------------------------------------------------
Gross profit -- -- 34,930 34,930
Net realized investment losses 474 (474)a -- --
Equity in earnings (losses) life insurance subsidiaries -- (5)b -- (5)
Equity in losses of Wickes Lumber Company (2,295) (912)c 3,207 --
Equity in losses of Wickes Lumber Company affiliates -- -- (1,058) (1,058)
Other operating income 280 (87)a 888 1,081
Premiums and annuity considerations 1,966 (1,966)a -- --
Net investment income 3,157 (3,157)d -- --
------------------------------------------------------------------
Total revenues 3,582 (6,601) 37,967 34,948
Selling, general and administrative expenses 952 (416)d 37,049 37,585
Depreciation, goodwill and trademark amortization -- -- 1,532 1,532
Interest expense 789 (18)f 5,506 6,277
Policyholder benefits 3,578 (3,578)a -- --
Policy acquisition expenses 1,057 (1,057)a -- --
------------------------------------------------------------------
Total expenses 6,376 (5,069) 44,087 45,394
Minority interest -- -- 2,867 2,867
Loss from continuing operations before income taxes (2,794) (1,532) (3,253) (7,579)
Income tax expense (benefit):
Current -- -- -- --
Deferred -- -- (3,253) (3,253)
------------------------------------------------------------------
Net loss from continuing operations $ (2,794) $(1,532) $ -- $ (4,326)
==================================================================
Loss per share from continuing operations $ (0.53) $ (0.81)
=========== ===========
Weighted average number of common shares
used in computing earnings per share 5,311,123 5,311,123
</TABLE>
See accompanying Notes to Pro Forma Condensed Consolidated Financial Statements
A-3
<PAGE> 8
Riverside Group, Inc. and Subsidiaries ANNEX A
Pro Forma Condensed Consolidated Balance Sheet
as of March 31, 1996
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Merger &
Riverside Wickes Inv. Consolidate Riverside
Historical Adjustments Wickes (l) Pro Forma
--------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash, short-term and other investments $ 9,061 $ (3,552)h $ 2,321 $ 7,830
Accounts receivable - - 60,858 60,858
Inventory - - 103,029 103,029
Deferred tax assets - - 25,906 25,906
Prepaid expenses - - 3,738 3,738
-------------------------------------------------------------
Total current assets 9,061 (3,552) 195,852 201,361
Investment real estate 17,851 (525)i - 17,326
Investment in life insurance subsidiaries, at equity - 5,900 j - 5,900
Investment in Wickes Lumber Company, at equity 8,915 10,000 j (18,915) -
Property, plant and equipment, net - - 53,796 53,796
Trademark - - 7,115 7,115
Deferred tax asset 825 - 250 1,075
Excess of cost over fair value of assets acquired - - 9,545 9,545
Other assets 3,886 (2,756)i 17,958 19,088
Fixed maturities 147,398 (147,398)i - -
Equity securities 1,064 (1,064)i - -
Mortgage and construction loans 27,566 (27,566)i - -
Policy loans 19,572 (19,572)i - -
Accrued investment income 2,905 (2,905)i - -
Reinsurance receivables 25,669 (25,669)i - -
Value of acquired insurance in force 18,065 (18,065)i - -
Deferred policy acquisition costs 2,020 (2,020)i - -
-------------------------------------------------------------
Total assets $284,797 $(235,192) $ 265,601 $315,206
=============================================================
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ - $ - $ 328 $ 328
Accounts payable - - 38,776 38,776
Accrued liabilities 4,464 (2,750)k 31,181 32,895
-------------------------------------------------------------
Total current liabilities 4,464 (2,750) 70,285 71,999
Long-term debt, less current maturities 28,849 (18,000)j 184,288 195,137
Mortgage debt - 17,798 j - 17,798
Other long-term liabilities - - 2,378 2,378
Future life insurance benefits 137,349 (137,349)i - -
Policyholder contract deposits and other funds 94,011 (94,011)i - -
Unpaid claims 1,147 (1,147)i - -
Minority interest - - 8,650 8,650
Common stock 531 - - 531
Additional paid-in capital 17,209 - - 17,209
Retained earnings 1,129 375 j - 1,504
Unrealized investment appreciation
(depreciation) 108 (108)i - -
-------------------------------------------------------------
Total common stockholders' equity 18,977 267 - 19,244
-------------------------------------------------------------
Total liabilities and common
stockholders' equity $284,797 $(235,192) $ 265,601 $315,206
=============================================================
</TABLE>
See accompanying Notes to Pro Forma Condensed Consolidated Financial Statements
A-4
<PAGE> 9
ANNEX A
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
STATEMENTS OF OPERATIONS
(a) These adjustments relate solely to the elimination of the historical results
of the life insurance operations, which were merged with those of Circle.
(b) Reflects the equity in net losses of Circle common shareholders at 30.5% of
Circle pro forma net income less preferred stock dividend requirements.
(c) Reflects the pro forma additional equity in Wickes' losses resulting from
purchase of two million additional shares of Wickes common stock. Pro forma
adjustments to Wickes historical results are as follows:
<TABLE>
<CAPTION>
Three Mos.
Year Ended Ended
12/31/95 3/31/96
-------- --------
(in thousands)
<S> <C> <C>
Wickes historical losses $(15,599) $ (6,174)
Interest expense savings*
800 200
-------- --------
Adjusted Wickes losses $(14,799) $ (5,974)
======== ========
Pro forma equity in adjusted Wickes losses (52%) $ (7,695) $ (3,106)
Goodwill amortization** (404) (101)
-------- --------
Adjusted equity in Wickes losses (8,099) (3,207)
Historical equity in Wickes losses (36%) (5,849) (2,295)
-------- --------
Net adjustment to equity in Wickes losses $ (2,250) $ (912)
======== ========
</TABLE>
* Pro forma reduction in interest expense for net reduction in Wickes
long term debt of $9 million from proceeds of the Stock Purchase
Agreement.
** Amortization of the excess of cost of Wickes shares acquired over
value of Wickes net assets. Pro forma amounts attributable to the two
million additional Wickes shares acquired are $200,000 and $50,000 for
the year ended December 31, 1995 and three months ended March 31, 1996,
respectively.
(d) Includes reclassification of net investment expense related to real estate
and mortgage lending operations to general expenses in addition to elimination
of historical net investment income and general expenses of life insurance
operations merged with those of Circle as follows:
A-5
<PAGE> 10
ANNEX A
<TABLE>
<CAPTION>
Three Mos.
Year Ended Ended
12/31/95 3/31/96
-------- -------
(in thousands)
<S> <C> <C>
Net investment income of life insurance operations merged $(15,780) $ (3,495)
Reclass expenses of real estate and mortgage lending
operations 1,288 338
-------- --------
Pro forma adjustment to net investment income $(14,492) $ (3,157)
======== ========
General expenses of life insurance operations merged $ (3,180) $ (754)
Reclass expenses of real estate and mortgage lending
operations 1,288 338
-------- --------
Pro forma adjustment to S, G & A expenses $ (1,892) $ (416)
======== ========
</TABLE>
(e) Eliminates nonrecurring, restructuring charges incurred in 1995, net of
income tax benefits, related to the Circle Merger Agreement.
(f) Net adjustment in interest expense is as follows:
<TABLE>
<CAPTION>
Three Mos.
Year Ended Ended
12/31/95 3/31/96
---------- ----------
(in thousands)
<S> <C> <C>
Eliminate interest expense on bank debt repaid $(1,780) $ (396)
Add interest expense on mortgage debt
1,513 378
------- -------
Net decrease in interest expense $ (267) $ (18)
======= =======
</TABLE>
(g) Adjustments required to consolidate the historical results, eliminate the
equity entry and record minority interest for Wickes. Includes pro forma
adjustments to Wickes historical results for goodwill amortization and interest
expense as previously discussed.
BALANCE SHEET
Cash and assets received in the Circle Merger (other than 951,486 shares of
Wickes common stock distributed by American Founders to AFAC) of approximately
$41.3 million are applied as follows (in thousands):
<TABLE>
<S> <C>
Net cash retained (before taxes and expenses)* $ 4,868
Wickes stock purchase 10,000
Real estate down payment and other assets purchased 2,525
Circle stock 5,900
Repay bank debt and accrued interest 18,037
-------
Total $41,330
=======
</TABLE>
* Includes additional payment of $430,000 received by Riverside for the value of
tax loss carryforwards utilized by the life insurance operations from January 1,
1996, through closing of the Circle Merger. Historical and pro forma balance
sheets include accrued liabilities of $600,000 for closing costs and deferred
tax assets have been reduced by $600,000 for accrued income taxes related to
the Circle Merger.
A-6
<PAGE> 11
ANNEX A
(h) Eliminates cash and short-term investments of life insurance operations net
of cash retained under Circle Merger Agreement as disclosed above.
(i) Eliminate historical balances of life insurance operations.
(j) Record investments in Circle stock received, purchase of two million shares
of Wickes common stock, repayment of bank debt, mortgage debt on purchase of
real estate and estimated net gain on merger transaction.
(k) Eliminate accrued liabilities of life insurance operations net of accrued
closing costs of $600,000 less accrued interest on bank debt repaid of $37,000.
(l) Adjustments to consolidate historical results, eliminate the equity entry
and record minority interest of Wickes. Excess of cost over fair value of assets
acquired includes approximately $5 million attributable to the two million
additional Wickes shares acquired and $4.5 million from previous purchases of
Wickes stock. Includes pro forma adjustment reducing Wickes long-term debt by
approximately $9 million for use of proceeds of the Wickes Agreement after stock
issue and related transaction costs incurred by Wickes.
A-7
<PAGE> 1
EXHIBIT 99.1
CIRCLE INVESTORS, INC.
SHAREHOLDERS' AGREEMENT
SHAREHOLDERS' AGREEMENT (this "Agreement"), dated as of March
8, 1996, among Circle Investors, Inc., an Indiana corporation ("Circle"),
Riverside Group, Inc., a Florida corporation ("Riverside"), and American
Financial Acquisition Corporation, a Delaware corporation and a Subsidiary of
Riverside ("AFAC").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution and delivery of
this Agreement, Circle and AFAC are entering into a Merger Agreement, dated as
of the date hereof (the "Merger Agreement"), which provides for the combination
of Circle's and Riverside's life insurance businesses pursuant to a merger of a
wholly owned subsidiary of Circle with and into a wholly owned subsidiary of
AFAC (the "Merger");
WHEREAS, the Merger Agreement provides that AFAC is to receive
pursuant to the Merger 3,600 shares of Circle's Series C Preferred Stock and
2,267,000 shares of Circle's Common Shares, and the parties desire to make their
agreements set forth herein regarding the voting, disposition and registration
of such shares; and
WHEREAS, in order to induce Circle and AFAC to enter into and
consummate the transactions contemplated by the Merger Agreement, the parties
hereto desire to make their other agreements set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
Certain Definitions
For purposes of this Agreement, the following terms shall have
the following meanings:
1.1. Affiliate. With respect to any Person, any (a) director,
officer or partner of such Person; (b) any other Person that beneficially owns,
directly or indirectly, equity securities having 50% or more of the voting power
to elect the directors of such Person; (c) any other Person of which such Person
beneficially owns, directly or indirectly, equity securities having 50% or more
of the voting power to elect the directors of such other Person; and (d) any
other Person Controlling, Controlled by or under common Control with where the
term "Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of equity securities or otherwise.
1.2. Commission. The United States Securities and Exchange
Commission or any successor agency.
-1-
<PAGE> 2
1.3. Common Shares. The Common Shares, without par value, of
Circle and any other class or series of common stock of Circle that may be
authorized after the date hereof.
1.4. Conseco Group. Conseco, Inc. and its permitted
transferees having any registration rights granted to them in connection with
the transactions contemplated by the Conseco Commitment (as defined in the
Merger Agreement).
1.5. Conseco Group's Registrable Securities. The Securities
subject to any registration rights granted to the Conseco Group in connection
with the transactions contemplated by the Conseco Commitment.
1.6. Exchange Act. The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect from time to time.
1.7. IPO. The closing of the initial public offering by Circle
of Common Shares pursuant to an effective registration statement (other than a
registration statement on Form S-4 or Form S-8 or any replacement of any such
form) under the Securities Act, and the listing of the Common Shares on a
national securities exchange or admission thereof for trading on the Nasdaq
Stock Market.
1.8. Permitted Transferee. The meaning ascribed to that term
in Section 6.3(a)(iii) below.
1.9. Person. An individual, corporation, partnership, limited
liability company, firm, joint venture, trust or other entity or association of
any nature whatsoever.
1.10. Pledged Shares. The Shares that are pledged or could be
required to be pledged to Circle or any Subsidiary of Circle as contemplated by
Exhibit F to the Merger Agreement.
1.11. Registrable Securities. All Common Shares, including
Common Shares issued or issuable upon conversion of the Series C Preferred
Stock, that are owned by AFAC, any Affiliate of AFAC or any Permitted
Transferee.
1.12. Securities. The Common Shares, the Series C Preferred
Stock and any other equity securities, and any securities convertible into or
exchangeable for equity securities, of any class or series issued by Circle, and
any options, warrants or other rights to acquire any of the foregoing.
1.13. Securities Act. The Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder, all as the same
shall be in effect from time to time.
1.14. Selling Shareholder. A Shareholder who has advised
Circle in writing of its intention to include Registrable Securities in a
registration statement filed pursuant to Article VII hereof.
1.15. Series C Preferred Stock. The Series C Preferred Stock,
$1,000 liquidation value per share, of Circle.
1.16. Shares. The 2,267,000 Common Shares to be issued to AFAC
pursuant to the Merger Agreement, the 3,600 shares of Series C Preferred Stock
to be issued to AFAC pursuant to the Merger Agreement, the Common Shares issued
or issuable upon conversion of such shares of Series C Preferred Stock, and any
other securities which may be issued in respect of any of the foregoing as
contemplated by Section 8.3 hereof.
-2-
<PAGE> 3
1.17. Subsidiary. Any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient securities to elect
a majority of the directors.
1.18. Shareholder. AFAC and any future owner of any of the
Shares.
1.19. Transfer. Any sale, transfer, assignment, pledge,
hypothecation, gift, conveyance, security interest or other encumbrance, or any
contract therefor, any voting trust or other agreement with respect to the
transfer of voting rights or any other beneficial interest in, or any other
transfer or disposition (including, without limitation, any disposition that
would constitute a "sale" within the meaning of the Securities Act) whatsoever
affecting the right, title, interest or possession in or to any Securities.
1.20. Voting Securities. Securities having the right (or
convertible into, or exercisable or exchangeable for, Securities having the
right) to vote on an election of directors of Circle.
ARTICLE II
Representations and Warranties of Riverside and AFAC
Riverside and AFAC, jointly and severally, hereby represent
and warrant to Circle as follows:
2.1. Corporate Organization. Riverside is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida; and AFAC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
2.2. Authorization, Execution and Delivery. Each of Riverside
and AFAC has full corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement by each of Riverside and AFAC and the consummation by each of
them of the transactions contemplated hereby have been duly authorized by the
Board of Directors of each of Riverside and AFAC, and no other corporate
proceedings on the part of Riverside or AFAC are necessary to authorize the
execution and delivery of this Agreement and the consummation by each of them of
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of Riverside and AFAC and constitutes a valid and binding
obligation of each of Riverside and AFAC, enforceable against each of them in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
2.3. Noncontravention. Neither the execution and the delivery
of this Agreement by Riverside and AFAC, nor the consummation by each of them of
the transactions contemplated hereby, will (a) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
Riverside or AFAC is subject or, any provision of its articles of incorporation
or bylaws or (b) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
Riverside or AFAC is a party or by which either of them is bound or to which any
of their respective assets is subject.
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2.4. No Required Consents. Neither Riverside nor AFAC is
required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government or governmental agency or
other Person in order for Riverside and AFAC to execute and deliver this
Agreement and consummate the transactions contemplated hereby.
2.5. Investment Representations. Each of Riverside and AFAC
understands and agrees that:
(a) The Shares have not been registered under the Securities
Act or any state securities laws and that, therefore, the Shares may not be
Transferred unless they are registered under the Securities Act and any
applicable state securities laws or unless an exemption from registration
thereunder is available; and that this Agreement contains further restrictions
on Transfer of the Shares.
(b) AFAC is acquiring the Shares solely for its own account
for the purpose of investment and not with a view to or for sale in connection
with any distribution thereof, except in compliance with the Securities Act, any
applicable state securities laws and the rules and regulations thereunder.
(c) The certificate or certificates representing the Shares
will bear the following legend, unless such certificate(s) bear a substantially
similar legend at the date hereof:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY
THE HOLDER SOLELY FOR ITS OWN ACCOUNT FOR THE PURPOSE OF INVESTMENT AND
NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION
THEREOF IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
HAVE NOT BEEN REGISTERED UNDER THE ACT OR STATE SECURITIES LAWS AND MAY
NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION
THEREFROM. OWNERSHIP, ENCUMBRANCE, PLEDGE, ASSIGNMENT, TRANSFER OR
OTHER DISPOSITION OF ANY SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE RESTRICTIONS (INCLUDING AN IRREVOCABLE PROXY) CONTAINED
IN THE SHAREHOLDERS' AGREEMENT BETWEEN THE CORPORATION AND THE HOLDER,
A COPY OF WHICH IS ON FILE AT THE OFFICE OF THE CORPORATION."
ARTICLE III
Representations and Warranties of Circle
Circle hereby represents and warrants to Riverside and AFAC as
follows:
3.1. Corporate Organization. Circle is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Indiana.
3.2. Authorization, Execution and Delivery. Circle has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Circle and the consummation by it of the transactions contemplated
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hereby have been duly authorized by the Board of Directors of Circle, and no
other corporate proceedings on the part of Circle are necessary to authorize the
execution and delivery of this Agreement and the consummation by Circle of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Circle and constitutes a valid and binding obligation of Circle,
enforceable against Circle in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
3.3. Noncontravention. Neither the execution and the delivery
of this Agreement by Circle, nor the consummation by Circle of the transactions
contemplated hereby, will (a) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which Circle is subject or,
any provision of its articles of incorporation or bylaws or (b) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which Circle is a party or by which it is bound or to
which any of its assets is subject.
3.4. No Required Consents. Circle is not required to give any
notice to, make any filing with, or obtain any authorization, consent or
approval of any government or governmental agency or other Person in order for
Circle to execute and deliver this Agreement and consummate the transactions
contemplated hereby.
ARTICLE IV
Agreements Relating to the Merger Agreement
4.1. Certain Defined Terms. Capitalized terms used in this
Article IV and not otherwise defined in this Agreement shall have the meanings
ascribed to them in the Merger Agreement.
4.2. Employment Benefits. (a) Prior to Closing, Riverside
shall amend each Employee Benefit Plan that is set forth in clauses (a), (b) and
(c) of the definition of "Employee Benefit Plan" in the Merger Agreement in
which any employee of Newco, the Company or any of its Subsidiaries is a
participant to provide that the accrued benefits under such Plan of any
participant who is an employee of Newco, the Company or any of its Subsidiaries
at the Closing Date shall become one hundred percent (100%) vested and
nonforfeitable at the Closing Date. AFAC and Riverside shall take all actions
necessary to terminate, as of the Closing Date, the status of Newco, the Company
and its Subsidiaries as participating employers under all Employee Pension
Benefit Plans maintained by any member of the Controlled Group of Corporations
that includes Newco, the Company and its Subsidiaries. In addition, AFAC and
Riverside shall take all further action required to ensure that, under the terms
of each such Employee Pension Benefit Plan, each participant who is an employee
of Newco, the Company or any of its Subsidiaries at the Closing Date will be
treated, as of the Closing Date, as a terminated or retired employee entitled to
receive a distribution of his or her vested accrued benefits under such Plan.
(b) For a reasonable period after the Closing, each of
Riverside and AFAC agrees to reasonably cooperate with Circle in connection with
the transition of the current employees of the Company and its Subsidiaries to
becoming covered by Benefit Plans of Circle and shall make available Riverside's
and AFAC's personnel and provide reasonable access to Riverside's books and
records as shall be necessary to assist in the transition.
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(c) The Parties acknowledge that this Section 4.2 does not
require AFAC to amend or terminate Duane T. Miller's employment agreement with
AFAC or his stock option agreement for Riverside stock, which in each case will
remain governed by the terms and conditions of those agreements.
4.3. Exclusivity. Riverside will not, and will cause AFAC, the
Company and its Subsidiaries not to (and AFAC will not cause or permit the
Company to) solicit, initiate, encourage or accept the submission of any
proposal or offer from any Person relating to, or agree to or otherwise
facilitate, the acquisition of all or any part of the capital stock or the
assets of Newco, the Company or any of its Subsidiaries (including any
acquisition structured as a merger, consolidation, or share exchange), except
for sales or dispositions of assets in the Ordinary Course of Business and sales
of real estate. AFAC or Riverside shall promptly inform Circle of any such
proposals or offers received.
4.4. Intercompany Arrangements. During the period prior to the
Closing, all settlements of intercompany liabilities between or among Newco, the
Company or any of its Subsidiaries and their respective Affiliates shall be
made, and all allocations of intercompany expenses shall be applied, on a basis
substantially consistent with past practice in accordance with the intercompany
arrangements set forth in Section 4(x) of AFAC's Disclosure Schedule.
Immediately prior to the Closing, all such intercompany arrangements between or
among Newco, the Company or any of its Subsidiaries, on the one hand, and
Riverside, AFAC and their other Affiliates, on the other hand, shall be
terminated and all amounts payable by or to the Company and its Subsidiaries, to
or by Riverside, Newco, AFAC and their other Affiliates shall be settled and
paid in full. However, this Section 4.4. shall not apply to the sale of real
estate and transfer of Excluded Assets.
4.5. Transfer of Certain Employees. Prior to the Closing, AFAC
and Riverside shall cause the employees listed on Exhibit H to the Merger
Agreement to cease to be employees of the Company or any of its Subsidiaries,
either by transfer of employment to Riverside or any of its other Affiliates, or
by termination of employment, at the option of AFAC and Riverside. AFAC and
Riverside, jointly and severally, shall be responsible for all severance
payments and other benefits, if any, due to any such employees as a result of
any such transfer or termination of employment. Further, AFAC and Riverside
shall be responsible for any disability payments due to Greg Tatum or Leslie
Gunter that are not covered by the disability insurance that was in place prior
to Closing.
4.6. Section 338 Election. It is the parties' intent that the
acquisition of the Company Shares pursuant to the Merger Agreement be treated as
a purchase and sale of the assets of the Company and its Subsidiaries for
federal income tax purposes, and the parties hereto shall, in cooperation with
each other, prepare a form of election under Section 338(h)(10) of the Code to
treat the acquisition of the Company Shares for federal income tax purposes as
if all the assets of Newco, the Company and its Subsidiaries have been sold to
Circle in a fully taxable transaction. AFAC or Riverside shall pay all Taxes of
Riverside and its Affiliates (including the Company and its Subsidiaries)
arising as a result of such treatment, including any tax liability related to
the deemed or actual distribution of the policyholders' surplus accounts of the
Company and its Subsidiaries (i.e., the Phase III tax). AFAC or Riverside and
Circle will comply with the Section 338(h)(10)(c) reporting requirements and
will take all such other actions as are reasonably necessary to effect such
Section 338(h)(10) election. Circle shall cause any refunds of Taxes with
respect to Newco, the Company and its Subsidiaries for the periods ending prior
to or on the Closing Date to be paid to AFAC.
4.7. Press Releases and Public Announcements. No party to this
Agreement shall issue any press release or make any public announcement relating
to the subject matter of this Agreement or the Merger Agreement prior to the
Closing without the prior written approval of Circle and Riverside;
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provided, however, that any party may make any public disclosure it believes in
good faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the disclosing party
will use its best efforts to advise the other parties prior to making the
disclosure).
4.8. Further Assurances. Riverside shall cause AFAC to use its
reasonable best efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effective the transactions
contemplated by the Merger Agreement (including satisfaction, but not waiver, of
the closing conditions set forth in Section 8 of the Merger Agreement).
4.9. Guarantee. (a) In order to induce Circle to enter into
the Merger Agreement and to consummate the transactions contemplated thereby,
Riverside hereby unconditionally guarantees to Circle the full and prompt
payment of AFAC's indemnification obligations set forth in Sections 9 and 9A of
the Merger Agreement, subject and pursuant to the terms and conditions of
Sections 9 and 9A of the Merger Agreement.
(b) As to Riverside's obligations under this guarantee,
Riverside hereby waives and agrees not to assert:
(i) any right to require Circle to marshall any assets or to
pursue any other remedy in Circle's power before proceeding against
Riverside;
(ii) any defense arising by virtue of the lack of authority of
Circle; and
(iii) any defense based upon an election of remedies by
Circle, including without limitation, an election which terminates or
otherwise impairs the subrogation rights of Riverside or the right of
Riverside to proceed against Circle for reimbursement, or both.
4.10. Survival. The agreements of the parties set forth in
Sections 4.2, 4.3, 4.4, 4.5, 4.7 and 4.8 above shall survive the Closing and
continue in full force and effect until January 1, 1998 (or such shorter period
as a particular Section may specifically provide), and then expire. The
agreements of the parties set forth in Sections 4.1, 4.6 and 4.9 above, and this
Section 4.10, shall survive the Closing (and any later termination of this
Agreement) and continue in full force and effect for a survival period of
forever thereafter.
ARTICLE V
Certain Agreements Regarding the Shares
5.1. Voting of Shares by AFAC and Affiliates. (a) All of the
Shares owned by AFAC and its Affiliates constituting more than 9.0% of the
aggregate number of votes entitled to be cast by all outstanding Voting
Securities shall, on any matter on which such Shares are entitled to vote, be
voted in accordance with the recommendation of the Board of Directors of Circle.
(b) Riverside and AFAC each hereby irrevocably appoints the
Board of Directors of Circle, or any member of the Board of Directors of Circle
designated by a resolution of such Board, as its proxy, with full power of
substitution, to vote all of the Shares held by them and collectively
constituting more than 9.0% of the aggregate number of votes entitled to be cast
by all outstanding Voting Securities, in their discretion on any matter on which
the Merger Shares are entitled to vote.
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(c) The parties agree that the proxy appointments made in
subsection (b) above is irrevocable and is coupled with an interest within the
meaning of Indiana Code Section 23-1-30-3(d) because (i) as provided in Exhibit
F to the Merger Agreement, the Shares will be pledged to Circle, (ii) AFAC will
be a purchaser of the Shares under the Merger Agreement, (iii) Circle is
requiring the appointment as a condition to accepting the note and the mortgage
referred to in Exhibit F of the Merger Agreement and (iv) this Section 5.1
constitutes a voting agreement under Indiana Code Section 23-1-31-2.
(d) This Section 5.1 shall terminate upon the first date on
which the Shares owned by Riverside and its Affiliates collectively constitute,
on a fully-converted basis, less than 9.0% of the aggregate number of votes
entitled to be cast by all outstanding Voting Securities on an election of
directors of Circle. This Section 5.1 shall not apply to any Shares held by a
Permitted Transferee (as hereinafter defined) or by any Person who acquired such
Shares in a transaction registered under the Securities Act or exempt from such
registration pursuant to Rule 144 promulgated thereunder or any similar rule or
regulation hereafter adopted by the Commission.
5.2. Board Representation. (a) Effective upon the Effective
Time of the Merger (as defined in the Merger Agreement), the Board of Directors
of Circle shall appoint J. Steven Wilson or another individual designated by
Riverside and reasonably acceptable to the Board of Directors of Circle (as the
case may be, the "Riverside Representative"), as a member of the Board of
Directors of Circle. Thereafter, the Board of Directors shall nominate the
Riverside Representative for election as a member of the Board of Directors of
Circle by Circle's shareholder at each annual election of the Board of
Directors, and all Shares referred to in Section 5.1 above shall be voted in
favor of the election of the Riverside Representative.
(b) This Section 5.2 shall terminate upon later of (i) the
first date on which the Shares owned by Riverside and its Affiliates
collectively constitute, on a fully-converted basis, less than 9.0% of the
aggregate number of votes entitled to be cast by all outstanding Voting
Securities on an election of directors of Circle and (ii) the first date on
which Riverside and its Affiliates collectively own fewer than 1,000 shares of
Series C Preferred Stock.
ARTICLE VI
Restrictions on Transfer of Shares
6.1. Restrictions on Transfer. AFAC shall not Transfer any
Shares or any interest therein to any Person, unless such Transfer is made in
strict compliance with the terms of this Agreement and in compliance with the
Securities Act and all applicable state securities laws. No Transfer in
violation of this Agreement shall be made or recorded on the books of Circle and
any such Transfer shall be void and of no effect.
6.2. Limitation on Transfers of Pledged Shares. AFAC shall not
Transfer any of the Pledged Shares or any interest therein to any Person (other
than (i) to Circle as provided in any pledge agreement and (ii) Shares disposed
of in Transfers in strict compliance with the terms of Article VII of this
Agreement or pursuant to Rule 144 under the Securities Act or any similar rule
or regulation hereafter adopted provided that in any such case the net proceeds
of such disposition is simultaneously paid to the holder of the Note (as defined
in the Merger Agreement)).
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6.3. Permitted Transfers of Shares Other than the Pledged
Shares. Subject to Section 6.3(b) below, the following Transfers of Shares other
than Pledged Shares shall be deemed to be in compliance with this Agreement:
(i) a Transfer made to an Affiliate of AFAC;
(ii) a Transfer made by an Affiliate of AFAC to any other
Affiliate of AFAC (including a Transfer back to AFAC);
(iii) subject to the final sentence of this clause (iii), a
Transfer made prior to an IPO in a negotiated private placement or in
connection with a financing transaction to any Person who is not an
Affiliate of AFAC; provided, however, that (A) immediately after such
Transfer, the transferee (together with all Affiliates of such Person),
shall own Voting Securities constituting less than 5.0% of the
aggregate number of votes entitled to be cast by all outstanding Voting
Securities and (B) the transferee shall enter into a written agreement,
in form and substance satisfactory to Circle, to become bound, and does
become bound, by all of the terms and conditions of this Agreement. A
transferee of a Transfer made pursuant to this clause (iii) is herein
called a "Permitted Transferee". There shall be no more than four
Permitted Transferees who own Shares at any one time during the term of
this Agreement;
(iv) a Transfer by a Permitted Transferee back to AFAC or any
Affiliate of AFAC;
(v) a Transfer made in strict compliance with the terms of
Article VII of this Agreement;
or
(vi) subject to Section 7.8 below, any Transfer made after an
IPO in compliance with the condition set forth in Section 6.3(b) below.
(b) No Transfer pursuant to this Section 6.3 attempted to be
made to any Person other than AFAC or an Affiliate of AFAC shall be made or
recorded on the books of Circle unless such Transfer is made pursuant to either
(i) an effective registration statement under the Securities Act and all
applicable state securities laws, or (ii) an available exemption from the
registration requirements of the Securities Act and such laws and, prior to such
Transfer, the Shareholder delivers to Circle a written opinion of counsel, in
form and substance satisfactory to Circle, to the effect that the proposed
Transfer is exempt from such registration requirements.
ARTICLE VII
Registration Rights
7.1. Consideration of IPO. (a) At any time and from time to
time prior to an IPO, but no more frequently than once in an 12-month period,
the holders of a majority of the Registrable Securities may demand in writing
that Circle use its best efforts to effect an IPO. Within 30 days after the date
of its receipt of such demand, Circle shall select a managing underwriter (which
shall be reasonably acceptable to the holders of a majority of the holders of
Registrable Securities making such demand) for that purpose, and shall
thereafter cooperate with such underwriter in its investigation of Circle and
the potential public market for the Common Shares. Within 30 days after Circle's
selection of the managing underwriter: (a) the managing underwriter shall advise
the Board of Directors of Circle of its opinion regarding (i) the total number
of Common Shares that could reasonably be sold in the proposed IPO without
adversely affecting the price or distribution of the Common Shares, (ii) the
range
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of the public offering price of the Common Shares in the proposed IPO and (iii)
whether an IPO is advisable at that time; and (b) the Board of Directors shall
determine, based upon the managing underwriter's opinion and all other
information presented to it, and in light of its business judgment, whether the
proposed IPO is in the best interest of Circle. The Board's determination shall
be conclusive and binding on all parties. If the Board determines that an IPO is
advisable, it shall use its best efforts to effect an IPO as expeditiously as
possible on the terms recommended to it by its managing underwriter or upon such
other terms as it determines appropriate.
(b) In connection with any IPO effected pursuant to this
Section 7.1, the holders of Registrable Securities shall be offered "piggy-back"
registration rights pursuant to Section 7.2 below. Any holder of Registrable
Securities that does request registration of all of such holder's Registrable
Securities as provided for in Section 7.2 shall not have any "demand"
registration rights under Section 7.3 below.
7.2. "Piggy-Back" Registration Rights. If, at any time, Circle
proposes to register any of its equity securities under the Securities Act,
whether or not for sale for its own account, in a manner that would permit
registration of Registrable Securities for sale to the public under the
Securities Act, Circle will each such time give prompt written notice to each
Shareholder of its intention to do so, which notice shall set forth the intended
method of disposition of the securities proposed to be registered by Circle. The
notice shall offer to include in such registration such aggregate number of
Registrable Securities as each Shareholder may request, upon the terms and
conditions of this Article VII. Each Shareholder shall advise Circle in writing
within 15 days after the date of receipt of such offer from Circle, setting
forth the aggregate number of Registrable Securities, if any, for which
registration is requested. Circle shall thereupon include in such registration
the number of Registrable Securities for which registration is so requested and
shall use its best efforts to effect registration under the Securities Act of
such Registrable Securities, to the extent requisite to permit their public
sale; provided, that:
(a) if the registration involves an underwritten offering,
each Selling Shareholder must sell the Registrable Securities to be registered
to the underwriters selected by Circle on the same terms and conditions as apply
to Circle; provided, however, that if any Selling Shareholder disapproves of
such terms and conditions, such Shareholder may withdraw from such registration
by delivering a written notice thereof to Circle at least five business days
prior to the effective date of the registration statement;
(b) if the managing underwriter (which shall be selected by
Circle) advises Circle in writing that, in its opinion, the total number of
shares that Circle and the Selling Shareholders intend to include in such
registration exceeds the number that can reasonably be sold without adversely
affecting the price or distribution of securities offered, Circle shall include
in such registration, to the extent of the number of shares that Circle is
advised can be so sold in the offering (the "Maximum Includable Shares"), (i)
first, 100% of the Securities Circle proposes to sell, (ii) second, 100% of the
Conseco Group's Registrable Securities requested to be registered by the Conseco
Group pursuant to the Conseco Group's own "piggy back" registration rights
granted in connection with the transactions contemplated by the Conseco
Commitment, and (iii) third, the number of Registrable Securities requested to
be registered by the Selling Shareholders, pro rata in proportion to the number
of shares requested to be registered by them; provided, however, that if the
offering is an IPO and Circle notified Riverside of its intention to effect the
offering as provided for in Section 7.2(a) within 180 days after the date of any
demand delivered by Riverside to Circle pursuant to Section 7.1 above, Circle
shall include in such offering, (x) first, (A) that number of the Conseco
Group's Registrable Securities requested to be registered by the Conseco Group
pursuant to the Conseco Group's own "piggy back" registration rights granted in
connection with the transactions contemplated by the Conseco Commitment, equal
to not more than 25% of the Maximum Includable Shares, and (B) that number of
Registrable Securities requested to be
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registered by the Selling Shareholders equal to not more than 25% of the Maximum
Includable Shares, pro rata in proportion to the number of shares requested to
be registered by them, and (y) second, the Securities Circle proposes to sell to
the extent that the inclusion thereof would not cause the aggregate number of
shares to be registered to exceed the Maximum Includable Shares;
(c) if, at any time after giving written notice of its
intention to register any of its equity securities and prior to the effective
date of the registration statement filed in connection therewith, the Board of
Directors of Circle shall determine for any reason not to register any such
equity securities, Circle may, at its option, give written notice of such
determination to the Selling Shareholders and, thereupon, shall be relieved of
its obligation to register any Registrable Securities in connection with such
registration (but not of its obligation to pay the registration expenses set
forth in Section 7.6 hereof that then have been incurred in connection
therewith).
7.3. Demand Registration Rights. (a) Subject to Section 7.1(b)
above, after an IPO, upon the written demand of the holders of a majority of the
sum of (i) the Registrable Securities having rights under this Section 7.3 and
(ii) the Conseco Group's Registrable Securities having "demand" registration
rights under the registration rights granted in connection with the transactions
contemplated by the Conseco Commitment, Circle shall, as expeditiously as
reasonably practicable, use its best efforts to effect the registration under
the Securities Act of such number of Registrable Securities included in such
demand, to the extent requisite to permit their public sale; provided, that
Circle may postpone the filing or the effectiveness of such registration (i) if
a registration statement under the Securities Act has been filed, for a period
of 180 days after such filing, (ii) until such time as a registration statement
may be filed and become effective after the expiration of any holdback period
agreed to by Circle pursuant to Section 7.8 below, (iii) until such time as such
registration statement may be filed and become effective without the necessity
of Circle having conducted any special audit of its financial statements solely
for the purpose such registration, or (iv) by delivering to the shareholders
demanding such registration a duly adopted resolution of Circle' Board of
Directors stating the Board's determination that the filing or effectiveness of
such registration statement would be likely to have a material adverse effect on
any plan or proposal by Circle with respect to any financing or acquisition;
provided, that the aggregate number of days for which the filing and
effectiveness of such registration statement may be postponed under clause (iv)
above shall not exceed 180 days after receipt by Circle of the demand for
registration referred to above.
(b) If the registration demanded involves an underwritten
offering:
(i) the shareholders owning a majority of the sum of the
Registrable Securities and the Conseco Group's Registrable Securities
to be included in such registration shall have the right to select the
managing underwriter (which shall be of national standing and which
shall be reasonably acceptable to Circle); and
(ii) if the managing underwriter advises Circle in writing
that, in its opinion, the total number of shares that the Selling
Shareholders and the Conseco Group intend to include in such
registration exceeds the number that can reasonably be sold without
affecting the price or distribution of securities offered in a manner
unacceptable to the shareholders owning a majority of the sum of the
Registrable Securities and the Conseco Group's Registrable Securities
to be included in such registration, Circle shall include in such
registration only that aggregate number of the Registrable Securities
and the Conseco Group's Registrable Securities that Circle is advised
can be so sold in the offering, pro rata in proportion to the number of
shares proposed to be registered by the Selling Shareholders and the
Conseco Group. Neither Circle nor any other Person shall have the right
to include any securities in such registration unless all Registrable
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Securities proposed to be sold by the Selling Shareholders and the
Conseco Group shall have been included in such registration.
(c) Registrations under this Section 7.3 shall be on such
appropriate registration form of the Commission eligible for use by Circle (i)
as shall be reasonably acceptable to the holders of a majority of the sum of the
Registrable Securities and the Conseco Group Registrable Securities so to be
registered and (ii) as shall permit the disposition of such Registrable
Securities and Conseco Group Registrable Securities in accordance with the
intended method or methods of disposition specified in their request for such
registration.
(d) Circle shall be obligated to effect only one registration
under this Section 7.3. A registration requested pursuant to this Section 7.3
shall not be deemed to have been effected:
(i) unless a registration statement with respect thereto has
become effective, provided that a registration which does not become
effective after Circle has filed a registration statement with respect
thereto solely by reason of the refusal to proceed of the Selling
Shareholders (other than a refusal to proceed based upon the advice of
counsel relating to a matter with respect to Circle) shall be deemed to
have been effected by Circle at the request of such Selling
Shareholders unless the Selling Shareholders shall have paid all
registration expenses in connection with such registration (pro rated
in accordance with the respective numbers of shares proposed to be
registered by the Selling Shareholders and the Conseco Group);
(ii) if, after it has become effective, such registration is
interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for
any reason other than some act or omission by the Selling Shareholders,
or such registration statement does not remain effective for a period
of 180 days or such shorter period as shall permit the intended
disposition of the securities subject thereto for any reason other than
some act or omission by the Selling Shareholders; or
(iii) the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with
such registration are not satisfied, other than by reason of some act
or omission by the Selling Shareholders.
7.4. Registration Procedures. Whenever Circle is required by
this Agreement to effect the registration of any of the Registrable Securities,
Circle shall, as expeditiously as reasonably practicable:
(a) prepare and file with the Commission the requisite
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become and remain effective
for a period of time required for the disposition of such Registrable Securities
by the Selling Shareholders; provided, however, that before filing such
registration statement or any amendments thereto, Circle will furnish to the
counsel selected by the holders of a majority of the Registrable Securities to
be included in such registration copies of all such documents proposed to be
filed, which documents will be subject to the review of such counsel; and
provided further, that Circle shall not be required to keep such registration
statement effective for more than 180 days;
(b) prepare and file with the Commission 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 and the Exchange Act with
respect to the sale or other disposition of the Registrable Securities covered
by such registration
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<PAGE> 13
statement until the earlier of such time as all of such Registrable Securities
have been disposed of or the expiration of 180 days;
(c) as soon as available, furnish to the Selling Shareholders
such number of copies of such registration statement and of each amendment or
supplement thereto, and of each prospectus (including each preliminary
prospectus or summary prospectus) included therein, in conformity with the
requirements of the Securities Act, and such other documents, as the Selling
Shareholders may reasonably request;
(d) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions within the United States as
the Selling Shareholders shall request (provided, however, Circle shall not be
obligated to qualify as a foreign corporation to do business under the laws of
any jurisdiction in which it is not then qualified or to file any general
consent to service of process), and do such other reasonable acts and things as
may be required of it to enable the Selling Shareholders to consummate the
disposition in such jurisdictions of the Registrable Securities included in such
registration statement;
(e) use its best efforts to list such Registrable Securities
on any securities exchange on which the securities of the class being so
registered are then listed;
(f) furnish, on the date that the Registrable Securities are
delivered to the underwriters for sale pursuant to such registration or, if the
Registrable Securities are not being sold through underwriters, on the effective
date of such registration statement, (i) an opinion of counsel to Circle for the
purposes of such registration (or, if no such opinion is being provided to
underwriters, a certificate signed by two executive officers of Circle), dated
such date, addressed to the underwriters, if any, and the Selling Shareholders,
stating that such registration statement has become effective under the
Securities Act and that (w) to the best knowledge of such counsel (or officers),
no stop order suspending the effectiveness thereof has been issued and no
proceedings for that purpose have been instituted or are pending or contemplated
under the Securities Act, (x) the registration statement, the related
prospectus, and each amendment or supplement thereto, comply as to form in all
material respects with the requirements of the Securities Act and the applicable
rules and regulations of the Commission thereunder (except that, in the case of
an opinion of counsel, such counsel need to express no opinion as to financial
statements contained therein), (y) the descriptions in the registration
statement or the prospectus, or any amendment or supplement thereto, of all
legal matters and contracts and other legal documents or instruments are
accurate and fairly present the information required to be shown, and (z) such
counsel (or officers) do not know of any legal or governmental proceedings,
pending or contemplated, required to be described in the registration statement
or prospectus, or any amendment or supplement thereto, which are not described
as required, nor of any contracts or documents or instruments of a character
required to be described in the registration statement or prospectus, or any
amendment or supplement thereto, or to be filed as exhibits to the registration
statement which are not described and filed or incorporated by reference as
required; such counsel (or officers) shall also render such other customary
opinions as may reasonably be requested by the underwriters or the Selling
Shareholders and confirm that nothing has come to their attention that would
lead them to believe that either the registration statement or the prospectus,
or any amendment or supplement thereto (other than, in the case of an opinion of
counsel, financial material as to which such counsel need make no statement)
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which made, not misleading, and (ii) a letter
dated such date, from the independent certified public accountants of Circle,
addressed to such underwriters and to the Selling Shareholders (or, if such
accountants refuse to deliver such letter to the Selling Shareholders because
they are not then deemed underwriters under the Securities Act, then to Circle)
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<PAGE> 14
stating that they are independent certified public accounts within the meaning
of the Securities Act and containing such other statements as Circle and such
underwriters may agree;
(g) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of the Registrable
Securities; and
(h) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, but no later than 18 months
after the effective date of such registration statement, an earnings statement
which shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder.
It shall be a condition precedent to the obligation of Circle
to take any action pursuant to this Agreement in respect of the Registrable
Securities which are to be registered that the Selling Shareholders shall
furnish to Circle such information regarding the securities held by them and the
intended method of disposition thereof as Circle shall reasonably request and as
shall be required in connection with such registration by Circle.
7.5. Notification to Selling Shareholders. Whenever Selling
Shareholders are participating in a registration effected hereunder:
(a) Circle will notify the Selling Shareholders of (i) the
issuance of any stop order suspending the effectiveness of the registration
statement or the institution or threatening of any proceeding for such purpose
or (ii) the receipt by Circle of any notification with respect to the suspension
of the qualification of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose. Immediately
upon receipt of any such notice, the Selling Shareholders shall cease to offer
or sell any Registrable Securities pursuant to the registration statement in the
jurisdiction to which such stop order or suspension relates. Circle will use
every reasonable effort to prevent the issuance of any such stop order or the
suspension of any such qualification and, if any such stop order is issued or
any such qualification is suspended, to obtain as soon as possible the
withdrawal or revocation thereof, and will notify the Selling Shareholders at
the earliest practicable date of the date on which the Selling Shareholders may
offer and sell Registrable Securities pursuant to the registration statement.
(b) Circle will notify the Selling Shareholders promptly if
any event shall occur or if any state of facts shall exist that, in the judgment
of Circle, should be set forth in any preliminary or final prospectus then being
used by the Selling Shareholders in connection with the sale of any Registrable
Securities. Immediately upon receipt of such notice, the Selling Shareholders
shall cease to offer or sell any Registrable Securities pursuant to such
preliminary or final prospectus, cease to deliver or use such preliminary or
final prospectus and, if so requested by Circle, use their respective best
efforts to return to Circle, at Circle' expense, all copies (other than
permanent file copies) of such preliminary or final prospectus. Circle will, as
promptly as practicable, take such action as may be necessary to amend or
supplement such preliminary or final prospectus in order to set forth or reflect
such event or state of facts.
(c) If, pursuant to the provisions of this Section 7.5, the
Selling Shareholders are required to cease to offer or sell any Registrable
Securities pursuant to the registration statement, the termination of the period
during which such registration statement is required to be kept effective
pursuant to Section 7.4(a) of this Agreement shall be postponed by a number of
days equal to the number of days during which the Selling Shareholders are so
required to cease to offer or sell Registrable Securities.
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<PAGE> 15
7.6. Expenses. All expenses incident to performance of or
compliance with this Article VII, including, without limitation, all
registration and filing fees (including all filing fees incident to filing with
the National Association of Securities Dealers, Inc.), listing fees and
expenses, printing expenses, fees and disbursements of counsel and accountants
for Circle, expenses of any audits incident to or required by any such
registration of Registrable Securities and expenses of complying with the
securities or blue sky laws of any jurisdictions, shall be paid by Circle;
provided, that Circle shall not be liable for the fees and disbursements of
counsel for any Selling Shareholder or any transfer taxes, fees, discounts or
commissions in respect of the Registrable Securities sold by any Selling
Shareholder.
7.7. Indemnification. (a) In the event of any registration of
any Registrable Securities under the Securities Act pursuant to this Agreement,
Circle shall indemnify and hold harmless each Selling Shareholder and each other
Person (including each underwriter) who participated in the offering of such
Registrable Securities and each other Person, if any, who controls such
participating Person within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which the Selling
Shareholders or any such participating Person or controlling Person may become
subject under the Securities Act or any other statute or at common law, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any 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 contained therein, or any amendment or supplement thereto, or (ii)
any alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and shall
reimburse the Selling Shareholders or any such participating Person or
controlling Person for any legal or any other expenses reasonably incurred by
the Selling Shareholders or any such participating Person or controlling Person
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that Circle shall not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon any alleged untrue statement or alleged omission made in
such registration statement, preliminary prospectus, prospectus or amendment or
supplement in reliance upon and in conformity with written information furnished
to Circle by any Selling Shareholder specifically for use therein or (in the
case of any registration pursuant to Section 7.3 if Circle is not a party to the
underwriting agreement) so furnished for such purposes by any underwriter. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of any Selling Shareholder or any such participating Person
or controlling Person, and shall survive the transfer of such Registrable
Securities by any Selling Shareholder.
Such indemnification with respect to any preliminary
prospectus shall not inure to the benefit of any Selling Shareholder or, if
Circle is not a party to the underwriting agreement, of any underwriter (or any
officer, director of employee of, or Person controlling, such underwriter) from
whom the Person asserting any such loss, claim, damage or liability purchased
the Registrable Securities which are the subject thereof if such Person did not
receive a copy of the final prospectus with respect to such Registrable
Securities (or such final prospectus as amended or supplemented) at or prior to
the confirmation of the sale of such Registrable Securities to such Person
(provided that such final prospectus was made available by Circle as required by
this Agreement prior to the confirmation) in any case where such delivery is
required by the Securities Act and the untrue statement or omission of a
material fact contained in such preliminary prospectus was corrected in such
final prospectus (or such final prospectus as amended or supplemented).
(b) In the event of any registration of any Registrable
Securities under the Securities Act pursuant to this Agreement, each Selling
Shareholder, severally and not jointly (except that the obligations of Riverside
and its Affiliates hereunder shall be joint and several) agrees to indemnify and
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<PAGE> 16
hold harmless Circle, its directors and officers and each other Person, if any,
who controls Circle within the meaning of the Securities Act against any losses,
claims, damages or liabilities, joint or several, to which Circle or any such
director or officer or any such Person may become subject under the Securities
Act or any other statute or at common law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon information provided in writing to Circle by such Selling Shareholder for
use in connection with such registration and which is contained in any
registration statement under which Registrable Securities were registered under
the Securities Act at the request of Riverside, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereto;
provided, that no Selling Shareholder shall be required pursuant to this Section
7.7(b) to contribute any amount in excess of the aggregate proceeds to such
Selling Shareholder of the Registrable Securities being offered by the Selling
Shareholder pursuant to such registration statement.
(c) Indemnification similar to that specified in the preceding
subsections of this Section 7.7 (with appropriate modifications) shall be given
by Circle and each Selling Shareholder with respect to any required registration
or other qualification of securities under any state securities or "blue sky"
law or regulation of any jurisdiction.
(d) The indemnification required by this Section 7.7 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
(e) If the indemnification provided for in the preceding
subsections of this Section 7.7 is unavailable to an indemnified party in
respect of any expense, loss, damage or liability referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such expense, loss, damage or liability (i) in such proportion as it
appropriate to reflect the relative benefits received by Circle on the one hand
and the Selling Shareholder or underwriter, as the case may be, on the other
from the distribution of the Registrable Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of Circle on the one hand and
of the Selling Shareholder or underwriter, as the case may be, on the other in
connection with the statements or omissions which resulted in such expense,
loss, damage or liability, as well as any other relevant equitable
considerations; provided, that the foregoing contribution agreement shall not
inure to the benefit of any indemnified Person if indemnification would be
unavailable to such indemnified Person by reason of the proviso contained in the
second paragraph of subsection 7.7(a) hereof, and in no event shall the
obligation of any indemnifying party to contribute under this subsection (e)
exceed the amount that such indemnifying party would have been obligated to pay
by way of indemnification if the indemnification provided for under subsection
(a) or (b) of this Section 7.7 had been available under the circumstances.
Circle and the Selling Shareholders agree that it would not be
just and equitable if contribution pursuant to this subsection 7.7(e) were
determined by pro rata allocation (even if the Selling Shareholders and any
underwriters were treated as one entity for such purpose) or by any other method
of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth in the preceding sentence, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
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<PAGE> 17
Notwithstanding the provisions of this subsection 7.7(e), no
Selling Shareholder or underwriter shall be required to contribute any amount in
excess of the amount by which (i) in the case of any Selling Shareholder, the
net proceeds received by such Shareholder from the sale of Registrable
Securities or (ii) in the case of an underwriter, the total price at which the
Registrable Securities purchased by it and distributed to the public were
offered to the public exceeds, in any such case, the amount of any damages that
such Shareholder or underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
7.8. Holdback Agreement. Riverside agrees that, if requested
by the managing underwriter of any underwritten offering of Securities, neither
Riverside nor any of its Subsidiaries shall sell or otherwise Transfer any
Securities (except pursuant to a pledge, hypothecation, security interest or
other encumbrance) during the 180-day period after the effective date of the
first registration statement to become effective after the date of this
Agreement, unless such Securities are included in such registration statement
pursuant to this Article VII. Circle may issue stop-transfer instructions with
respect to any Securities subject to the foregoing restriction until the
expiration of such 180-day period.
7.9 Rule 144. (a) After the IPO, Circle shall timely file the
reports required to be filed by it under the Securities Act and the Exchange Act
(including but not limited to the reports under Sections 13 and 15(d) of the
Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the
Commission under the Securities Act) and the rules and regulations adopted by
the Commission thereunder (or, if Circle is not required to file such reports,
will, upon the request of any holder of Registrable Securities, make publicly
available other information) and will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (ii) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any holder of Registrable Securities, Circle
will deliver to such holder a written statement as to whether it has complied
with such requirements.
(b) If any Shares are disposed of in accordance with Rule 144
under the Securities Act or otherwise by a holder of Registrable Securities,
such holder shall deliver to Circle at or prior to the time of such disposition
such documentation as Circle may reasonably request in connection therewith and,
in the case of a disposition in accordance with Rule 144, an executed copy of
Form 144 required to be filed with the Commission (if required to be filed by
Rule 144).
ARTICLE VIII
Miscellaneous
8.1. Binding Effect; Assignment. Except as provided in the
next sentence, this Agreement may not be assigned by any party hereto without
the prior written consent of all other parties, but shall inure to the benefit
of and be binding upon each party hereto and its successors and permitted
assigns (including each Permitted Transferee but excluding Persons who acquire
Shares in transactions registered under the Securities Act or exempt from such
registration pursuant to Rule 144 promulgated thereunder or any similar rule or
registration hereafter adopted by the Commission). The rights of the holders of
Registrable Securities under Article VII hereof are personal to AFAC and its
Affiliates, except that such rights may be assigned by AFAC and its Affiliates
to up to four (4) Permitted Transferees in
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<PAGE> 18
connection with Transfers of Shares pursuant to Section 6.3(a)(iii), and no
Transfer of Securities by any of them to any other Person shall effect any
assignment to the transferee of any rights under any such Article.
8.2. Enforcement Rights. Each party to this Agreement
acknowledges and agrees that the agreements set forth herein are fundamental to
their willingness to enter into and be bound by this Agreement and the Merger
Agreement. Accordingly, each party hereby agrees that any party hereto may
institute and maintain any action, suit or proceeding, at equity or in law,
against any other party (including any Permitted Transferee or other
Shareholder) to enforce, or otherwise act in respect of, the agreements of such
other party set forth in this Agreement.
8.3. Recapitalizations, Exchanges, Etc. The provisions of this
Agreement shall apply, to the full extent set forth herein, to any and all
Securities of Circle or the securities of any successor or assign of Circle
(whether by merger, consolidation, sale of all or substantially all of Circle'
assets or otherwise) which may be issued in respect of, in exchange for, upon
conversion of, or in substitution of, any of the Shares by reason of any stock
dividend, stock split, stock issuance, reverse stock split, combination,
recapitalization, reclassification, conversion, merger, consolidation or
otherwise (any such securities being included within the Shares subject to this
Agreement).
8.4. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all other agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof.
8.5. Modification or Amendment. This Agreement may be modified
or amended only by a written instrument duly executed and delivered by each of
the parties hereto.
8.6. Termination. This Agreement shall continue in full force
and effect until the first to occur of (a) the termination of the Merger
Agreement for any reason whatsoever, (b) the termination of this Agreement
pursuant to a writing duly executed and delivered by each of the parties hereto,
and (c) the date that is [10] years after the date of this Agreement. Upon any
termination of this Agreement, no party hereto shall have any liability or
further obligation hereunder to any other party, except that nothing herein
shall relieve any party from liability for any breach of this Agreement prior to
the date of such termination, and except that Sections 4.1, 4.6, 4.9 and 4.10 of
this Agreement shall survive any such termination as provided for in Section
4.10 above.
8.7. Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
(a) If to Riverside or AFAC, to Riverside or AFAC as the case
may be, at:
c/o Kenneth M. Kirschner, Esquire
One Independent Drive, Suite 2000
Jacksonville, FL 32202
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With a copy to:
Kirschner, Main, Petrie,
Graham, Tanner & Demont
Professional Association
One Independent Drive, Suite 2000
Jacksonville, FL 32202
Facsimile: (904) 358-2199
Attention: Barry C. Averitt, Esquire
(b) If to Circle, to:
Circle Investors, Inc.
251 N. Illinois Street, Suite 1680
Indianapolis, IN 46204
Facsimile: (317) 237-3371
Attention: R. Matthew Neff, President
With a copy to:
Baker & Daniels
300 North Meridian Street, Suite 2700
Indianapolis, IN 46204-1782
Facsimile: (317) 237-1000
Attention: J. Jeffrey Brown, Esquire
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other parties
notice in the manner herein set forth.
8.8. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana, without regard to
the conflicts of laws principles thereof.
8.9. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of each of Circle, Riverside and AFAC
as of the date first written above.
CIRCLE INVESTORS, INC.
By ___________________________
Name:
Title:
RIVERSIDE GROUP, INC.
By ___________________________
Name:
Title:
AMERICAN FINANCIAL ACQUISITION
CORPORATION
By ___________________________
Name:
Title:
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