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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
(AMENDMENT NO. 31)
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AMERICAN BANKERS INSURANCE GROUP, INC.
(NAME OF SUBJECT COMPANY)
SEASON ACQUISITION CORP.
CENDANT CORPORATION
(Bidders)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
(Title of Class of Securities)
024456 10 5
(CUSIP Number of Class of Securities)
JAMES E. BUCKMAN, ESQ.
SENIOR EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
CENDANT CORPORATION
6 SYLVAN WAY
PARSIPPANY, NEW JERSEY 07054
TELEPHONE: (973) 428-9700
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
WITH A COPY TO:
DAVID FOX, ESQ.
ERIC J. FRIEDMAN, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 735-3000
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This Amendment No. 31 amends the Tender Offer Statement on Schedule 14D-1
initially filed on January 27, 1998 (as amended, the "Schedule 14D-1") by
Cendant Corporation, a Delaware corporation ("Parent"), and its wholly owned
subsidiary, Season Acquisition Corp., a New Jersey corporation ("Purchaser"),
relating to Purchaser's tender offer for 23,501,260 outstanding shares of
common stock, par value $1.00 per share, of American Bankers Insurance Group,
Inc., a Florida corporation (the "Company"). Unless otherwise defined herein,
all capitalized terms used herein shall have the respective meanings given
such terms in the Schedule 14D-1.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
The information set forth in subsection (b) of the Schedule 14D-1 is hereby
amended and supplemented by the following information:
On March 23, 1998, in accordance with the terms of the Settlement
Agreement, the Company and AIG terminated the Amended AIG Merger Agreement,
the Amended AIG Lockup Option Agreement and the AIG Voting Agreement, and the
Company, Parent and Purchaser entered into a definitive merger agreement
(the "Parent Merger Agreement"), pursuant to which Parent will acquire the
Company through the Offer to be followed by the merger of the Company and
Purchaser (the "Merger").
In the Merger, Common Shares not purchased in the Offer at
$67.00 in cash per Common Share will be converted into shares of Parent Common
Stock having a value of $67.00 (based on the average closing price of the
Parent Common Stock as reported on the NYSE for the ten trading days ending on
the third trading day prior to the consummation of the Merger). In addition,
pursuant to the Merger, each Preferred Share will be converted into a share of
Parent Preferred Stock having substantially identical terms as the Preferred
Shares, except that they will be convertible into Parent Common Stock.
As a result of the Company Board approving both the Merger and the Parent
Merger Agreement, the termination of the Amended AIG Lockup Option Agreement
and the Company's amendment of the Rights Agreement, each of the Affiliated
Transaction Condition, the Control Share Condition, the Supermajority Vote
Condition, the Rights Condition and the Lockup Termination Condition have been
satisfied and are no longer applicable to the Offer. Consummation of the Offer
remains subject to, among other things, satisfaction of the Minimum Condition
and the Insurance Regulatory Condition.
Simultaneously upon termination of the Amended AIG Merger Agreement, the
Company paid $100 million to AIG which includes the Increased AIG Termination
Fee and amounts payable under the Amended AIG Lockup Option Agreement and upon
execution of the Parent Merger Agreement, Parent paid AIG $5 million to cover
AIG's expenses incurred in connection with its efforts to aquire control of
the Company.
A copy of the Parent Merger Agreement is included as an exhibit hereto and
is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
Item 7 is hereby amended and supplemented by incorporation herein by
reference of the information set forth above under Item 3 ("Past Contacts,
Transactions or Negotiations with the Subject Company").
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
Item 11 is hereby amended as follows:
(a)(38) Text of Press Release issued by Parent on March 23, 1998.
(c)(2) Merger Agreement, dated as of March 23, 1998, among the Company,
Parent and Purchaser.
2
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SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: March 23, 1998
CENDANT CORPORATION
By: /s/ James E. Buckman
-------------------------------
Name: James E. Buckman
Title: Senior Executive Vice
President
and General Counsel
SEASON ACQUISITION CORP.
By: /s/ James E. Buckman
-------------------------------
Name: James E. Buckman
Title: Executive Vice President
3
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EXHIBIT INDEX
Exhibit No.
- -----------
(a)(38) Text of Press Release issued by Parent on March 23, 1998.
(c) (2) Merger Agreement, dated as of March 23, 1998, among the Company,
Parent and Purchaser.
4
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For Immediate Release
---------------------
CENDANT AND AMERICAN BANKERS REACH AGREEMENT ON $67 PER SHARE
MERGER TRANSACTION
Stamford, CT and Miami, FL, March 23, 1998 -- Cendant Corporation (NYSE:CD)
and American Bankers Insurance Group, Inc. (NYSE:ABI) today announced they
have signed a definitive merger agreement under which Cendant will acquire
American Bankers for cash and stock valued at $67 per share, for an aggregate
consideration of approximately $3.1 billion.
Walter A. Forbes, Chairman, and Henry R. Silverman, President and Chief
Executive Officer of Cendant, stated, "We are pleased to have reached this
agreement with American Bankers. We are very enthusiastic about the potential
of our combination and look forward to taking advantage of the many
opportunities it will create to generate additional value for our shareholders.
We are confident that this transaction will provide many creative new outlets
for Cendant and American Bankers, will open new horizons for the careers of
American Bankers' employees and will be beneficial to the South Florida
community.
"We note that AIG, too, has served its shareholders very well and look forward
to doing business with AIG in the future."
R. Kirk Landon, Chairman of the Board of American Bankers, said, "The
agreement with Cendant provides our shareholders with exceptional value. Our
Board has acted throughout this process in the best interest of our
shareholders, employees, policyholders and our local communities. We believe
everyone is very pleased with the outcome."
Cendant will purchase 23.5 million shares of American Bankers at $67 per share
through its pending cash tender offer, to be followed by a merger in which
Cendant will deliver Cendant shares with a value of $67 for each remaining
share of American Bankers common stock outstanding.
In the merger, each share of $3.125 Series B Convertible Preferred stock of ABI
shall be converted into, and become exchangeable for, one share of Series A
Preferred stock of Cendant with terms substantially similar to the terms of the
ABI Preferred stock and shall be convertible into Cendant's common stock.
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Cendant has already received anti-trust clearance to acquire American Bankers.
The tender offer is subject to the receipt of tenders representing at least
51 percent of the common shares of American Bankers as well as customary
closing conditions, including regulatory approvals. American Bankers will
schedule shareholder meetings to vote on the merger with Cendant as soon as
practicable. The transaction is expected to be completed in the latter part
of the 2nd quarter.
Pursuant to a separate agreement among Cendant, American Bankers and AIG, AIG
has recieved a termination fee of $100 million from American Bankers, plus $5
million of merger-related expenses received from Cendant, which will be followed
by an additional $5 million at the closing of the transaction.
In addition, all lawsuits among the parties will be dropped, and AIG has agreed
not to oppose Cendant's Form A applications in any venue.
American Bankers Insurance Group, Inc. concentrates on marketing affordable,
specialty insurance products and services through financial institutions,
retailers and other entities offering consumer financing as part of their
business. ABI, through its insurance subsidiaries, operates in the United
States, Canada, Latin America, the Caribbean and the United Kingdom.
Cendant (NYSE: CD) is the world's premier provider of consumer and business
services. With a market capitalization in excess of $30 billion, it ranks
among the 100 largest U.S. corporations. Cendant operates in three principal
segments: Membership, Travel and Real Estate Services. In Membership Serices,
Cendant provides access to travel, shopping, auto, dining, and other services
through more than 66.5 million memberships worldwide. In Travel Services,
Cendant is the leading franchisor of hotels and rental car agencies
worldwide, the premier provider of vacation exchange services and the second
largest fleet management company. In Real Estate Services. Cendant is the
world's premier franchisor of residential real estate brokerage offices, a
major provider of mortgage services to consumers and a global leader in
corporate employee relocation. Headquartered in Stamford, CT and Parsippany,
NJ, the company has more than 34,000 employees, operates in over 100 countries
and makes approximately 100 million customer contacts annually.
Investor Contact: Media Contact: or:
Laura P. Hamilton Elliot Bloom Jim Fingeroth/Thomas Davies
Senior Vice President Vice President Kekst and Company
Corporate Communications Public Relations (212) 521-4800
and Investor Relations (973) 496-8414
(203) 965-5114
<PAGE>
AGREEMENT AND PLAN OF MERGER
Among
AMERICAN BANKERS INSURANCE GROUP, INC.,
CENDANT CORPORATION
and
SEASON ACQUISITION CORP.
Dated as of March 23, 1998
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS..........................................................................................................2
ARTICLE I The Merger; Closing; Effective Time; Tender Offer.......................................................2
1.1 The Merger............................................................................................2
1.2 Closing...............................................................................................3
1.3 Effective Time........................................................................................3
1.4 Tender Offer..........................................................................................3
1.5 The Tender Offer......................................................................................3
ARTICLE II Charter and By-Laws of the Surviving Corporation.......................................................5
2.1 The Charter...........................................................................................5
2.2 The By-Laws...........................................................................................5
ARTICLE III Officers and Directors of the Surviving Corporation...................................................5
3.1 Directors.............................................................................................5
3.2 Officers..............................................................................................6
ARTICLE IV Effect of the Merger on Capital Stock; Exchange of Certificates........................................6
4.1 Effect on Capital Stock...............................................................................6
4.2 Exchange of Certificates for Shares...................................................................7
4.3 Dissenters' Rights....................................................................................9
4.4 Adjustments to Prevent Dilution.......................................................................9
ARTICLE V Representations and Warranties.........................................................................10
5.1 Representations and Warranties of the Company........................................................10
5.2 Representations and Warranties of Parent and Merger Subsidiary.......................................26
ARTICLE VI Covenants.............................................................................................29
6.1 Interim Operations...................................................................................29
6.2 Acquisition Proposals................................................................................31
6.3 Information Supplied.................................................................................32
6.4 Stockholders Meetings................................................................................32
6.5 Filings; Other Actions; Notification.................................................................33
6.6 Taxation.............................................................................................34
6.7 Access...............................................................................................34
6.8 Affiliates...........................................................................................35
6.9 Stock Exchange Listing and De-listing................................................................35
6.10 Publicity............................................................................................36
6.11 Benefits; Corporate Headquarters; School and Day Care Facility.......................................36
6.12 Expenses.............................................................................................37
6.13 Indemnification; Directors' and Officers' Insurance..................................................37
6.14 [Reserved]...........................................................................................39
6.15 Other Actions by the Company and Parent..............................................................39
ARTICLE VII Conditions...........................................................................................39
7.1 Conditions to Each Party's Obligation to Effect the Merger...........................................39
7.2 Conditions to Obligations of Parent and Merger Subsidiary............................................40
7.3 Conditions to Obligation of the Company..............................................................41
ARTICLE VIII Termination.........................................................................................41
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8.1 Termination by Mutual Consent........................................................................41
8.2 Termination by Either Parent or the Company..........................................................41
8.3 Termination by the Company...........................................................................41
8.4 Termination by Parent................................................................................42
8.5 Effect of Termination and Abandonment................................................................42
ARTICLE IX Miscellaneous and General.............................................................................44
9.1 Survival.............................................................................................44
9.2 Modification or Amendment............................................................................44
9.3 Waiver of Conditions.................................................................................44
9.4 Counterparts.........................................................................................44
9.5 GOVERNING LAW; WAIVER OF JURY TRIAL..................................................................44
9.6 Notices..............................................................................................45
9.7 Entire Agreement; No Other Representations...........................................................46
9.8 No Third Party Beneficiaries.........................................................................46
9.9 Obligations of Parent and of the Company.............................................................46
9.10 Severability.........................................................................................46
9.11 Interpretation.......................................................................................46
9.12 Assignment...........................................................................................47
9.13 Alternative Transaction Structure....................................................................47
9.14 Effectiveness........................................................................................47
Exhibit A -- Form of Affiliate Letter
Exhibit B -- Amendment of Severance Agreement (Form A)
Exhibit C -- Amendment of Severance Agreement (Form B)
ii
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 23, 1998,
hereinafter this "Agreement"), among AMERICAN BANKERS INSURANCE GROUP, INC., a
Florida corporation (the "Company"), CENDANT CORPORATION, a Delaware
corporation ("Parent"), and SEASON ACQUISITION CORP., a New Jersey corporation
and a wholly-owned subsidiary of Parent ("Merger Subsidiary," the Company and
Merger Subsidiary sometimes being hereinafter collectively referred to as the
"Constituent Corporations.")
RECITALS
WHEREAS, the Board of Directors of the Company (the "Board")
has, in light of and subject to the terms and conditions set forth herein, (i)
determined that each of the Tender Offer and the Merger (each as defined below)
is fair to the shareholders of the Company and in the best interests of such
shareholders and the Company and (ii) approved and adopted this Agreement and
the transactions contemplated hereby and resolved to recommend acceptance of
the Tender Offer and approval and adoption by the shareholders of the Company
of this Agreement; and
WHEREAS, in furtherance thereof, it is proposed that Merger
Subsidiary shall amend its outstanding tender offer (the "Tender Offer") to
acquire 23,501,260 shares of common stock, par value $1.00 per share of the
Company (the "Common Shares") together with the associated Rights (as
hereinafter defined) at a price of $67.00 per Share (such amount, or any
greater amount per share paid pursuant to the Tender Offer, being hereinafter
referred to as the "Per Share Amount"), net to the seller in cash, in
accordance with the terms and subject to the conditions provided herein.
WHEREAS, it is intended that, for federal income tax
purposes, the Merger shall qualify as a reorganization under the provisions of
Section 368(a) of the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder (the "Code");
WHEREAS, the Company, Parent and Merger Subsidiary desire to
make certain representations, warranties, covenants and agreements in
connection with this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
The Merger; Closing; Effective Time; Tender Offer
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time (as defined in Section 1.3) the Company
shall be merged with and into Merger Subsidiary and the separate corporate
existence of the Company shall thereupon cease. Merger Subsidiary shall be the
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation"), and the separate corporate existence of Merger
Subsidiary with all its rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger, except as set forth in Article III.
The Merger shall have the effects
<PAGE>
specified in the Florida Business Corporation Act, as amended (the "FBCA") and
the New Jersey Business Corporation Act (the "NJBCA").
1.2 Closing. The closing of the Merger (the "Closing") shall take place
(i) at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third
Avenue, New York, New York at 9:00 A.M. on the business day designated by
Parent, which shall be not earlier than the first business day on which, and
not later than the fifth business day following the first business day on
which, the last to be fulfilled or waived of the conditions set forth in
Article VII (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions) shall be satisfied or waived in accordance with this Agreement or
(ii) at such other place and time and/or on such other date as the Company and
Parent may agree in writing (the "Closing Date").
1.3 Effective Time. As soon as practicable following the Closing, the
Company and Parent will cause Articles of Merger (the "Florida Articles of
Merger") to be executed, acknowledged and filed with the Secretary of State of
the State of Florida (the "Florida Secretary") as provided in Section 607.1105
of the FBCA and a Certificate of Merger (the "New Jersey Certificate of Merger"
and together the "Articles of Merger") to be executed and filed with the
Secretary of State of the State of New Jersey (the "New Jersey Secretary") as
provided in Section 14A:10-4.1 of the NJBCA. The Merger shall become effective
at the time the later of when the Florida Secretary accepts for record the
Florida Articles of Merger or when the New Jersey Secretary accepts for filing
the New Jersey Certificate of Merger or at such later time agreed by the
parties and established under the Articles of Merger (the "Effective Time").
1.4 Tender Offer. Merger Subsidiary shall accept for payment Common Shares
which have been validly tendered and not withdrawn pursuant to the Tender Offer
at the earliest time following expiration of the Tender Offer that all
conditions to the Tender Offer shall have been satisfied or waived by Merger
Subsidiary. The obligation of Merger Subsidiary to accept for payment, purchase
and pay for Common Shares tendered pursuant to the Tender Offer shall be
subject only to the conditions set forth in Annex I hereto.
1.5 The Tender Offer.
(a) Conditions; Consideration; Schedule 14D-1. As soon as practicable
after the date hereof Parent and Merger Subsidiary shall file with the SEC an
amendment to its Tender Offer Statement on Schedule 14D-1 dated January 27,
1998, as amended (the "Schedule 14D-1"), with respect to the Tender Offer which
will reflect the existence of this Agreement, amend the conditions to the
Tender Offer in accordance herewith and contain a supplement to Merger
Subsidiary's Offer to Purchase dated January 27, 1998 to reflect the foregoing
and related letter of transmittal (together with any supplements or amendments
thereto, collectively the "Offer Documents"). The Company shall have the
opportunity to review the amendment to the Schedule 14D-1 prior to its being
filed with the SEC. Without the prior written consent of the Company, Merger
Subsidiary shall not decrease the price per Common Share or change the form of
consideration payable in the Tender Offer, decrease the number of Common Shares
sought, impose additional conditions to the Tender Offer or amend any other
term of the Tender Offer in any manner adverse to the holders of Common Shares,
including any increase in the number of Common Shares sought that would cause
the covenant in Section 6.6 to be violated. Upon the
3
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terms and subject to the conditions of the Tender Offer, Merger Subsidiary will
accept for payment and will purchase, as soon as permitted under the terms of
the Tender Offer, all Common Shares validly tendered and not withdrawn prior to
the expiration of the Tender Offer. Notwithstanding anything in this Agreement
to the contrary, if during the pendency of the Tender Officer any Person shall
make or propose an Acquisition Proposal, Merger Subsidiary shall have the right
to increase the number of Common Shares sought in the Tender Offer to up to
100% (such Tender Offer, an "Increased Tender Offer"). If an Increased Tender
Offer is commenced and consummated and Common Shares representing more than the
Minimum Tender Condition (as defined in Annex I hereto) are purchased by Merger
Subsidiary pursuant to the Increased Tender Offer, each Common Share issued and
outstanding immediately prior to the Effective Time (other than Excluded Common
Shares) shall be converted into, and become exchangeable for, at Parent's
election, either (i) provided that the Merger would still be treated for
Federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code, and that each of Parent, Merger Subsidiary and the Company
would be party to that reorganization within the meaning of Section 368(b) of
the Code, that number of shares of Parent Common Stock determined as set forth
in Section 4.1(a) below or (ii) cash in an amount equal to the amount paid per
Common Share in the Increased Tender Offer. In the event that Parent elects to
consummate the Merger as contemplated by clause (ii) in the preceding sentence,
the parties to this Agreement acknowledge and agree that the Merger will not be
treated for Federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, each of Parent, Merger Subsidiary and the
Company would not be treated as a party to a reorganization within the meaning
of Section 368(b) of the Code, the parties to this Agreement will be deemed to
have waived the covenant contained in Section 6.6 and the conditions to the
consummation of the Merger contained in Section 7.2(a) and Section 7.3(a) and
the Merger shall be consummated by merging Merger Subsidiary into the Company
in lieu of merging the Company into Merger Subsidiary.
(b) Expiration Date. Parent and Merger Subsidiary agree that, except as
provided thereby, Merger Subsidiary shall not terminate or withdraw the Tender
Offer prior to the expiration date thereof (the "Expiration Date"). If, at the
Expiration Date, the conditions to the Tender Offer described in Annex I hereto
shall not have been satisfied or earlier waived, Merger Subsidiary, at its sole
option, may extend the Expiration Date on one or more occasions for an
additional period or periods of time and, unless this Agreement has been
terminated in accordance with its terms, shall extend it until a date that is
not later than the one hundred and twentieth day from the date hereof
(including, for purposes of calculating such 120 days, the date hereof as the
first day), if requested to do so by the Company and Parent is otherwise going
to let the Tender Offer expire without the purchase of Common Shares
thereunder. Parent and Merger Subsidiary shall use their reasonable efforts to
consummate the Tender Offer in accordance with the terms of this Agreement and
the conditions to the Tender Offer set forth in Annex I.
(c) Schedule 14D-9; Meetings of Stockholders. The Company agrees that it
shall, on the same day that Merger Subsidiary and Parent file with the SEC the
Schedule 14D-1, file with the SEC an amendment to its
Solicitation/Recommendation Statement on Schedule 14D-9 dated February 6, 1998,
as amended, with respect to the Tender Offer (including exhibits, and as
amended from time to time, the "Schedule 14D-9"), which shall contain, subject
to applicable law regarding fiduciary duties, the recommendation of the
Company's board of directors that the holders of Common Shares accept the
Tender Offer. Parent and Merger
4
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Subsidiary shall have the opportunity to review the amendment to the Schedule
14D-9 prior to its being filed with the SEC.
(d) Mailing and Content of Offer Documents and Schedule 14D-9. The Company
agrees that copies of the amendment to the Schedule 14D-9 (excluding exhibits),
shall be enclosed with the Offer Documents to be mailed by Merger Subsidiary to
the stockholders of the Company in connection with the Tender Offer. In
connection with the Tender Offer, the Company will furnish Parent and Merger
Subsidiary with such information, including lists of the stockholders of the
Company, mailing labels and lists of security positions, and such assistance as
Parent or Merger Subsidiary or their agents may request in communicating the
Tender Offer to the record and beneficial holders of the Common Shares.
(e) Directors. Promptly following Merger Subsidiary's purchase of and
payment for Common Shares pursuant to the Tender Offer, Parent and Merger
Subsidiary shall be entitled to designate two members of the board of directors
to the Company. Accordingly, the Company shall, upon request by Parent or
Merger Subsidiary, promptly increase the size of the board of directors of the
Company to the extent permitted by the Company's charter and by-laws, and shall
thereafter cause Parent's designees promptly to be elected or appointed to the
board of directors of the Company.
ARTICLE II
Charter and By-Laws of the Surviving Corporation
2.1 The Charter. The Certificate of Incorporation of Merger Subsidiary as
in effect immediately prior to the Effective Time shall be the charter of the
Surviving Corporation (the "Charter"), until duly amended as provided therein
or by applicable law.
2.2 The By-Laws. The by-laws of Merger Subsidiary in effect at the
Effective Time shall be the by-laws of the Surviving Corporation (the
"By-Laws"), until thereafter amended as provided therein or by applicable law.
ARTICLE III
Officers and Directors of the Surviving Corporation
3.1 Directors. The directors of Merger Subsidiary at the Effective Time
shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Charter and the By-Laws. Parent shall cause all of the directors of
the Surviving Corporation to resign immediately following the Effective Time
and shall thereafter cause to be appointed as directors of the Surviving
Corporation each person that was a director of the Company immediately prior to
the Effective Time who is willing to serve as a director of the Surviving
Corporation plus two additional persons designated by Parent.
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3.2 Officers. The officers of the Company at the Effective Time shall,
from and after the Effective Time, be the officers of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Charter and the By-Laws.
ARTICLE IV
Effect of the Merger on Capital Stock; Exchange of Certificates
4.1 Effect on Capital Stock. At the Effective Time, as a result of the
Merger and without any action on the part of the holder of any capital stock of
the Company:
(a) Common Stock Merger Consideration. (i) Each share of Common Stock, par
value $1.00 per share, of the Company (a "Common Share" or, collectively, the
"Common Shares") issued and outstanding immediately prior to the Effective Time
(other than Common Shares owned by Parent, Merger Subsidiary or any other
direct or indirect subsidiary of Parent (collectively, the "Parent Companies")
or Common Shares that are owned by the Company or any direct or indirect
subsidiary of the Company and in each case not held on behalf of third parties
(collectively, "Excluded Common Shares")) shall be converted into, and become
exchangeable for, that number of shares of Common Stock, par value $0.01 per
share, of Parent ("Parent Common Stock") equal to the amount (the "Exchange
Ratio") derived by dividing $67.00 by the average of the closing prices per
share of Parent Common Stock as reported on the NYSE composite transactions
reporting system (as reported in the New York City edition of the Wall Street
Journal) for the ten trading days ending on the third trading day prior to the
date of the consummation of the Merger (the "Common Stock Merger
Consideration").
(b) Preferred Stock Merger Consideration. Each share of $3.125 Series B
Convertible Preferred Stock, no par value, of the Company (a "Preferred Share"
or, collectively, the "Preferred Shares" and, together with the Common Shares,
the "Shares") issued and outstanding immediately prior to the Effective Time
(other than Preferred Shares owned by Parent Companies or Preferred Shares that
are owned by the Company or any direct or indirect subsidiary of the Company
and in each case not held on behalf of third parties (collectively, "Excluded
Preferred Shares" and, together with the Excluded Common Shares, the "Excluded
Shares") shall be converted into, and become exchangeable for one share (the
"Preferred Stock Merger Consideration," and, together with the Common Stock
Merger Consideration, the "Merger Consideration"), of Series A Preferred Stock,
par value $0.01 per share, of Parent ("Parent Preferred Stock") which shall
contain terms substantially similar to the terms of the Preferred Shares (after
making the conversion adjustments required to be made for a Non-Stock
Fundamental Change pursuant to the Company's Third Amended and Restated
Articles of Incorporation as a result of the Merger) and shall be convertible
into Parent Common Stock.
(c) Cancellation of Shares. At the Effective Time, all Shares shall no
longer be outstanding and shall be canceled and retired and shall cease to
exist, and each certificate (a "Certificate") formerly representing any of such
Shares (other than Excluded Shares) shall thereafter represent only the right
to the Merger Consideration and the right, if any, to receive
6
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pursuant to Section 4.2(e) cash in lieu of fractional shares into which such
Shares have been converted pursuant to Section 4.1(a) and any distribution or
dividend pursuant to Section 4.2(c). Each Share issued and outstanding
immediately prior to the Effective Time and owned by any of the Parent
Companies or owned by the Company or any direct or indirect subsidiary of the
Company (in each case other than Shares that are owned on behalf of third
parties), shall, by virtue of the Merger and without any action on the part of
the holder thereof, cease to be outstanding, shall be canceled and retired
without payment of any consideration therefore and shall cease to exist.
(d) Merger Subsidiary. At the Effective Time, each share of Common Stock,
par value $.01 per share, of Merger Subsidiary issued and outstanding
immediately prior to the Effective Time shall be converted into one share of
common stock of the Surviving Corporation.
4.2 Exchange of Certificates for Shares.
(a) Exchange Agent. Promptly after the Effective Time, Parent shall
deposit, or shall cause to be deposited, with an exchange agent selected by
Parent with the Company's prior approval, which shall not be unreasonably
withheld (the "Exchange Agent"), for the benefit of the holders of Shares,
certificates representing the shares of Parent Common Stock and Parent
Preferred Stock and, after the Effective Time, if applicable, any cash,
dividends or other distributions with respect to the Parent Common Stock and
Parent Preferred Stock to be issued or paid pursuant to this Agreement in
exchange for Shares outstanding immediately prior to the Effective Time upon
due surrender of the Certificates (or affidavits of loss in lieu thereof)
pursuant to the provisions of this Article IV (such certificates for shares of
Parent Common Stock and Parent Preferred Stock, together with the amount of any
cash, dividends or other distributions payable with respect thereto, being
hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures. Promptly after the Effective Time, the Surviving
Corporation shall cause the Exchange Agent to mail to each holder of record of
Shares (other than holders of Excluded Shares) (i) a letter of transmittal
specifying that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates (or affidavits
of loss in lieu thereof) to the Exchange Agent, such letter of transmittal to
be in such form and have such other provisions as Parent and the Company may
reasonably agree, and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for (A) certificates representing shares of Parent
Common Stock or Parent Preferred Stock, as applicable, and (B) if applicable,
unpaid dividends or other distributions and cash in lieu of fractional shares.
Subject to Section 4.2(h), upon surrender of a Certificate for cancellation to
the Exchange Agent together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor
(x) a certificate representing that number of whole shares of Parent Common
Stock or Parent Preferred Stock, as applicable, that such holder is entitled to
receive pursuant to this Article IV, (y) a check in the amount (after giving
effect to any required tax withholdings) of (A) any cash in lieu of fractional
shares plus (B) any cash, including unpaid non-stock dividends and any other
dividends or other distributions, that such holder has the right to receive
pursuant to the provisions of this Article IV, and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
any amount payable upon due surrender of the Certificates. In the event of a
transfer of ownership of Shares that is not registered in the transfer records
of the Company, a certificate
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representing the proper number of shares of Parent Common Stock or Parent
Preferred Stock, as applicable, together with a check for any cash to be paid
upon due surrender of the Certificate and any other dividends or distributions
in respect thereof, may be issued and/or paid to such a transferee if the
Certificate formerly representing such Shares is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer taxes have been
paid. If any certificate for shares of Parent Common Stock or Parent Preferred
Stock, as applicable, is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the Person (as defined below) requesting such
exchange shall pay any transfer or other taxes required by reason of the
issuance of certificates for shares of Parent Common Stock or Parent Preferred
Stock, as applicable, in a name other than that of the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of Parent or
the Exchange Agent that such tax has been paid or is not applicable.
For the purposes of this Agreement, the term "Person" shall mean any
individual, corporation (including not-for-profit), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity (as defined in Section 5.1(d))
or other entity of any kind or nature.
(c) Distributions with Respect to Unexchanged Shares. All shares of Parent
Common Stock and Parent Preferred Stock to be issued pursuant to the Merger
shall be deemed issued and outstanding as of the Effective Time and whenever a
dividend or other distribution is declared by Parent in respect of the Parent
Common Stock or Parent Preferred Stock, as applicable, the record date for
which is at or after the Effective Time, that declaration shall include
dividends or other distributions in respect of all shares issuable pursuant to
this Agreement. No dividends or other distributions in respect of the Parent
Common Stock or Parent Preferred Stock, as applicable, shall be paid to any
holder of any unsurrendered Certificate until such Certificate is surrendered
for exchange in accordance with this Article IV. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
issued and/or paid to the holder of the certificates representing whole shares
of Parent Common Stock and Parent Preferred Stock, as applicable, issued in
exchange therefor, without interest, (A) at the time of such surrender, the
dividends or other distributions with a record date after the Effective Time
theretofore payable with respect to such whole shares of Parent Common Stock
and Parent Preferred Stock, as applicable, and not paid and (B) at the
appropriate payment date, the dividends or other distributions payable with
respect to such whole shares of Parent Common Stock and Parent Preferred Stock,
as applicable, with a record date after the Effective Time but with a payment
date subsequent to surrender.
(d) Transfers. After the Effective Time, there shall be no transfers on
the stock transfer books of the Company of the Shares that were outstanding
immediately prior to the Effective Time.
(e) Fractional Shares. Notwithstanding any other provision of this
Agreement, no fractional shares of Parent Common Stock will be issued. Each
holder of Common Shares who would be entitled to receive a fractional share of
Parent Common Stock but for this Section 4.2(e) shall be entitled to receive,
in lieu thereof, a cash payment in an amount equal to such fractional share of
Parent Common Stock multiplied by the average of the
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closing prices per share of Parent Common Stock as reported on the NYSE
composite transactions reporting system (as reported in the New York City
edition of the Wall Street Journal) for the ten trading days ending on the
third trading day prior to the date of the consummation of the Merger.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
(including the proceeds of any investments thereof and any Parent Common Stock
and Parent Preferred Stock) that remains unclaimed by the stockholders of the
Company for 180 days after the Effective Time shall be paid to Parent. Any
stockholders of the Company who have not theretofore complied with this Article
IV shall thereafter look only to Parent for payment of their shares of Parent
Common Stock and Parent Preferred Stock, as applicable, and any cash, dividends
and other distributions in respect thereof payable and/or issuable pursuant to
Section 4.1 and Section 4.2(c) upon due surrender of their Certificates (or
affidavits of loss in lieu thereof), in each case, without any interest
thereon.
Notwithstanding the foregoing, none of Parent, the Surviving Corporation,
the Exchange Agent or any other Person shall be liable to any former holder of
Shares for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(g) Lost, Stolen or Destroyed Certificates. In the event any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Certificate to be lost, stolen or
destroyed and, if required by Parent, the posting by such Person of a bond in
customary amount as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the shares of Parent Common Stock or
Parent Preferred Stock, as applicable, and any cash payable and any unpaid
dividends or other distributions in respect thereof pursuant to Section 4.1 and
4.2(c) upon due surrender of and deliverable in respect of the Shares
represented by such Certificate pursuant to this Agreement.
(h) Affiliates. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any "affiliate" (as determined
pursuant to Section 6.8) of the Company shall not be exchanged until Parent has
received a written agreement from such Person as provided in Section 6.8
hereof.
4.3 Dissenters' Rights. In accordance with Section 607.1302 of the FBCA,
no appraisal rights shall be available to holders of Shares in connection with
the Merger.
4.4 Adjustments to Prevent Dilution. In the event that the Company
changes the number of Shares or securities convertible or exchangeable into or
exercisable for Shares, or Parent changes the number of shares of Parent Common
Stock or securities convertible or exchangeable into or exercisable for shares
of Parent Common Stock, issued and outstanding prior to the Effective Time as a
result of a reclassification, stock split (including a reverse split), stock
dividend or distribution, recapitalization, merger, subdivision or other
similar transaction, the Merger Consideration shall be equitably adjusted.
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ARTICLE V
Representations and Warranties
5.1 Representations and Warranties of the Company. (i) Except as set forth
in the corresponding sections or subsections of the disclosure letter delivered
to Parent by the Company on or prior to entering into this Agreement (the
"Company Disclosure Letter") or in any Company Report (as hereinafter defined)
filed prior to the date hereof, the Company hereby represents and warrants to
Parent and Merger Subsidiary that as of the date hereof (except for Section 5.1
(h), (k), (m), (p), (s) and (t) for which the Company hereby represents and
warrants to Parent and Merger Subsidiary as of December 21, 1997 and for which
the Company also hereby represents and warrants to Parent and Merger Subsidiary
as of the date hereof only to the knowledge of Gerald Gaston and Floyd Denison
without any independent inquiry or investigation):
(a) Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Florida and each of its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of organization and each of the Company and its
Subsidiaries has all requisite corporate or similar power and authority to own
and operate its properties and assets and to carry on its business as presently
conducted and is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership or operation of its
properties or conduct of its business requires such qualification, except where
the failure to be so qualified or in good standing, when taken together with
all other such failures, is not reasonably likely to have a Company Material
Adverse Effect (as defined below). The Company has made available to Parent a
complete and correct copy of the Company's and its Subsidiaries' charter and
by-laws, each as amended to date. The Company's and its Subsidiaries' charter
and by-laws so delivered are in full force and effect.
As used in this Agreement, the term (i) "Subsidiary" means, with respect
to the Company, Parent or Merger Subsidiary, as the case may be, any entity,
whether incorporated or unincorporated, of which at least a majority of the
securities or ownership interests having by their terms ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions is directly or indirectly owned or controlled by such party
or by one or more of its respective Subsidiaries or by such party and any one
or more of its respective Subsidiaries, and (ii) "Company Material Adverse
Effect" means a material adverse effect on the financial condition, properties,
business or results of operations of the Company and its Subsidiaries taken as
a whole.
The Company conducts its insurance operations through the Subsidiaries set
forth on Section 5.1(a) of the Company Disclosure Letter (collectively, the
"Company Insurance Subsidiaries"). Each of the Company Insurance Subsidiaries
is (i) duly licensed or authorized as an insurance company and, where
applicable, a reinsurer in its jurisdiction of incorporation, (ii) duly
licensed or authorized as an insurance company and, where applicable, a
reinsurer in each other jurisdiction where it is required to be so licensed or
authorized, and (iii) duly authorized in its jurisdiction of incorporation and
each other applicable jurisdiction to write each line of business reported as
being written in the Company SAP Statements (as hereinafter defined),
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except, in any such case, where the failure to be so licensed or authorized is
not reasonably likely to have a Company Material Adverse Effect. The Company
has made all required filings under applicable insurance holding company
statutes except where the failure to file is not reasonably likely to have a
Company Material Adverse Effect.
(b) Capital Structure. The authorized stock of the Company consists of
100,000,000 Common Shares, of which 42,300,775 Common Shares were outstanding
as of the close of business on February 27, 1998, and 10,000,000 shares of
Preferred Stock, no par value, of which (i) 350,000 shares have been authorized
as Series A Participating Preferred Stock and 1,000,000 shares have been
authorized as Series C Participating Preferred Stock, none of which were
outstanding as of December 21, 1997 and (ii) 2,300,000 shares have been
authorized as Preferred Shares, of which 2,115,950 Preferred Shares were
outstanding as of February 27, 1998. All of the outstanding Common Shares and
Preferred Shares have been duly authorized and are validly issued, fully paid
and nonassessable. The Company has no commitments to issue or deliver Common
Shares, except that, as of February 27, 1998, there were approximately
4,713,000 Common Shares subject to issuance (i) pursuant to the Company's 1997
Equity Incentive Plan, 1994 Amended and Restated Directors' Deferred
Compensation Plan, 1994 Key Executive Debenture Plan, 1994 Non-Employee
Directors' Stock Option Plan, 1994 Senior Management Stock Option Plan, 1991
Stock Option/Restricted Stock Plan, 1991 Stock Incentive Plan, and 1987
Executive Stock Option/Dividend Accrual Plan (collectively, the "Company Stock
Plans") and (ii) upon conversion of the Preferred Shares. The Company has no
commitments to issue or deliver preferred shares, except that as of the date
hereof, there were shares of Series A Participating Preferred Stock subject to
issuance pursuant to the Rights Agreement, as amended and restated as of
November 14, 1990, and as further amended, between the Company and ChaseMellon
Shareholder Services, LLC (as successor to Manufacturers Hanover Trust
Company), as Rights Agent (the "Rights Agreement") and as of the date hereof,
there were shares of Series C Participating Preferred Stock subject to issuance
pursuant to the Rights Agreement, dated as of February 19, 1998, between the
Company and ChaseMellon Shareholder Services, LLC, as Rights Agent (the "New
Rights Agreement"). The Company Disclosure Letter contains a correct and
complete list as of December 21, 1997 of each outstanding option to purchase or
acquire Common Shares under each of the Company Stock Plans (each a "Company
Option"), including the plan, the holder, date of grant, exercise price and
number of Shares subject thereto. Each of the outstanding shares of capital
stock or other securities of each of the Company's Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable and owned by the
Company or a direct or indirect wholly-owned subsidiary of the Company, free
and clear of any lien, pledge, security interest, claim or other encumbrance.
Except as set forth above, there are no preemptive or other outstanding rights,
options, warrants, conversion rights, stock appreciation rights, redemption
rights, repurchase rights, agreements, arrangements or commitments to issue or
sell any shares of capital stock or other securities of the Company or any of
its Subsidiaries or any securities or obligations convertible or exchangeable
into or exercisable for, or giving any Person a right to subscribe for or
acquire, any securities of the Company or any of its Subsidiaries, and no
securities or obligations evidencing such rights are authorized, issued or
outstanding. Except for the Convertible Notes, the Company does not have
outstanding any bonds, debentures, notes or other obligations the holders of
which have the right to vote (or, except as referred to in this subsection (b),
convertible into or exercisable for securities having the right to vote) with
the stockholders of the Company on any matter ("Voting Debt").
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(c) Corporate Authority; Approval and Fairness. (i) The Company has all
requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement and to consummate, subject only to approval of the Merger by the
holders of at least a majority of the outstanding Common Shares voting
separately as a class (the "Company Common Stock Requisite Vote") and a
majority of the outstanding Preferred Shares voting separately as a class (the
"Company Preferred Stock Requisite Vote" and, together with the Company Common
Stock Requisite Vote, the "Company Requisite Vote"), the Merger. This Agreement
is a valid and binding agreement of the Company enforceable against the Company
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
(the "Bankruptcy and Equity Exception").
(ii) The board of directors of the Company (A) has declared that the
Agreement, the Tender Offer, the Merger and the other transactions contemplated
hereby and thereby are advisable and in the best interests of the Company, (B)
has authorized, approved and adopted in all respects the Agreement, the Tender
Offer, the Merger and the other transactions contemplated hereby and thereby,
and (C) has received the opinion of its financial advisors, Salomon Smith
Barney, to the effect that the consideration to be received by the holders of
the Shares in the Tender Offer and the Merger, taken together, is fair from a
financial point of view to such holders.
(d) Governmental Filings; No Violations. (i) Other than the filings and/or
notices (A) pursuant to Section 1.3, (B) under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the Securities Act of 1933,
as amended (the "Securities Act"), (C) to comply with state securities or
"blue-sky" laws, (D) required to be made with the NYSE or Nasdaq, and (E) the
filing of appropriate documents with, and approval of, the respective
Commissioners of Insurance or similar regulatory authorities of Arizona,
Florida, Georgia, New York, South Carolina, Texas, Puerto Rico, Mexico, Cayman
Islands, Argentina, Turks & Caicos, Dominican Republic and the United Kingdom
and such notices and consents as may be required under the antitrust
notification insurance laws of any state in which the Company, Parent or any of
their respective subsidiaries is domiciled or does business, no notices,
reports or other filings are required to be made by the Company with, nor are
any consents, registrations, approvals, permits or authorizations required to
be obtained by the Company from, any governmental or regulatory authority,
agency, commission, body or other governmental entity ("Governmental Entity"),
in connection with the execution and delivery of this Agreement by the Company
and the consummation by the Company of the Merger and the other transactions
contemplated hereby, except those that the failure to make or obtain are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect or prevent, materially delay or materially impair the ability of
the Company to consummate the transactions contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement by the
Company does not, and the consummation by the Company of the Merger and the
other transactions contemplated hereby will not, constitute or result in (A) a
breach or violation of, or a default under, the charter or by-laws of the
Company or the comparable governing instruments
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of any of its Subsidiaries, (B) a breach or violation of, or a default under,
the acceleration of any obligations or the creation of a lien, pledge, security
interest or other encumbrance on the assets of the Company or any of its
Subsidiaries (with or without notice, lapse of time or both) pursuant to, any
agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation ("Contracts") binding upon the Company or any of its Subsidiaries or
(provided, as to consummation, the filings and notices are made, and approvals
are obtained, as referred to in Section 5.1(d)(i)), any Law (as defined in
Section 5.1(i)) or governmental or non-governmental permit or license to which
the Company or any of its Subsidiaries is subject or (C) any change in the
rights or obligations of any party under any of the Contracts, except, in the
case of clause (B) or (C) above, for any breach, violation, default,
acceleration, creation or change that, individually or in the aggregate, is not
reasonably likely to have a Company Material Adverse Effect or prevent,
materially delay or materially impair the ability of the Company to consummate
the transactions contemplated by this Agreement. Section 5.1(d) of the Company
Disclosure Letter sets forth, to the knowledge of the executive officers of the
Company, a correct and complete list of Contracts of the Company and its
Subsidiaries pursuant to which consents or waivers are or may be required prior
to consummation of the transactions contemplated by this Agreement (whether or
not subject to the exception set forth with respect to clauses (B) and (C)
above), except those the failure to obtain, individually or in the aggregate,
is not reasonably likely to have a Company Material Adverse Effect.
(e) Company Reports; Financial Statements. (i) The Company has made
available to Parent each registration statement, report, proxy statement or
information statement prepared by it since December 31, 1994 including (i) the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 (the
"Audit Date"), and (ii) the Company's Quarterly Reports on Form 10-Q for the
periods ended March 31, 1997, June 30, 1997 and September 30, 1997, each in the
form (including exhibits, annexes and any amendments thereto) filed with the
Securities and Exchange Commission (the "SEC") (collectively, including any
such reports filed subsequent to the date hereof, the "Company Reports"). As of
their respective dates, the Company Reports did not, and any Company Reports
filed with the SEC subsequent to the date hereof will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of
the circumstances in which they were made, not misleading. Each of the
consolidated balance sheets included in or incorporated by reference into the
Company Reports (including the related notes and schedules) fairly presents, or
will fairly present, the consolidated financial position of the Company and its
Subsidiaries as of its date and each of the consolidated statements of income
and of changes in financial position included in or incorporated by reference
into the Company Reports (including any related notes and schedules) fairly
presents, or will fairly present, the results of operations, retained earnings
and changes in financial position, as the case may be, of the Company and its
Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to notes and normal year-end audit adjustments that will
not be material in amount or effect), in each case in accordance with generally
accepted accounting principles ("GAAP") consistently applied during the periods
involved, except as may be noted therein.
(ii) The Company has made available to Parent true and complete copies of
the annual and quarterly statements of each of the Company Insurance
Subsidiaries as filed with the applicable insurance regulatory authorities for
the years ended December 31, 1994, 1995 and 1996 and the quarterly periods
ended March 31, 1997, June 30, 1997 and September 30, 1997,
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including all exhibits, interrogatories, notes, schedules and any actuarial
opinions, affirmations or certifications or other supporting documents filed in
connection therewith (collectively, the "Company SAP Statements"). The Company
SAP Statements were prepared in conformity with statutory accounting practices
prescribed or permitted by the applicable insurance regulatory authority
consistently applied for the periods covered thereby and present fairly the
statutory financial position of such Company Insurance Subsidiaries as at the
respective dates thereof and the results of operations of such Subsidiaries for
the respective periods then ended. The Company SAP Statements complied in all
material respects with all applicable laws, rules and regulations when filed,
and, to the knowledge of the executive officers of the Company, no material
deficiency has been asserted with respect to any Company SAP Statements by the
applicable insurance regulatory body or any other governmental agency or body.
The statutory balance sheets and income statements included in the Company SAP
Statements have been audited by Price Waterhouse LLP, and the Company has made
available to Parent true and complete copies of all audit opinions related
thereto. The Company has made available to Parent true and complete copies of
all examination reports of insurance departments and any insurance regulatory
agencies since January 1, 1994 relating to the Company Insurance Subsidiaries.
The term "knowledge" when used in this Agreement with respect to the executive
officers of the Company shall mean the actual knowledge, after reasonable
inquiry, of the executive officers of the Company.
(f) Absence of Certain Changes. Except as disclosed in the Company Reports
filed prior to the date hereof, since the Audit Date the Company and its
Subsidiaries have conducted the businesses of the Company and its Subsidiaries,
taken as a whole, only in, and have not engaged in any material transaction
other than according to, the ordinary and usual course of such businesses and
there has not been (i) any change in the financial condition, management,
properties, prospects, business or results of operations of the Company and its
Subsidiaries or, to the knowledge of the executive officers of the Company, any
development or combination of developments which, individually or in the
aggregate, has had or is reasonably likely to have a Company Material Adverse
Effect; (ii) any material damage, destruction or other casualty loss with
respect to any material asset or property owned, leased or otherwise used by
the Company or any of its Subsidiaries, whether or not covered by insurance;
(iii) any declaration, setting aside or payment of any dividend or other
distribution in respect of the stock of the Company, except for regular
quarterly cash dividends on its Common Shares publicly announced prior to the
date hereof and regular quarterly cash dividends on its Preferred Shares paid
in accordance with the Company's Articles of Incorporation prior to the date
hereof; (iv) any change by the Company in accounting principles, practices or
methods other than those required by GAAP or SAP; (v) any material addition, or
any development involving a prospective material addition, to the Company's
consolidated reserves for future policy benefits or other policy claims and
benefits; or (vi) any material change in the accounting, actuarial, investment,
reserving, underwriting or claims administration policies, practices,
procedures, methods, assumptions or principles of any Company Insurance
Subsidiary. Since the Audit Date, except as provided for herein or as disclosed
in the Company Reports filed prior to the date hereof, there has not been any
increase in the compensation payable or that could become payable by the
Company or any of its Subsidiaries to officers or key employees or any
amendment of any of the Compensation and Benefit Plans (as hereinafter defined)
other than increases or amendments in the ordinary course and increases or
amendments approved by Parent.
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(g) Litigation and Liabilities. Except as disclosed in the Company Reports
filed prior to the date hereof, there are no (i) civil, criminal or
administrative actions, suits, claims, hearings, investigations or proceedings
pending or, to the knowledge of the executive officers of the Company,
threatened against the Company or any of its Subsidiaries, directors or
officers or (ii) obligations or liabilities of any nature, whether or not
accrued, contingent or otherwise and whether or not required to be disclosed,
including those relating to environmental and occupational safety and health
matters, or any other facts or circumstances of which the executive officers of
the Company have knowledge that could result in any claims against, or
obligations or liabilities of, the Company or any of its affiliates, except for
those that are not, individually or in the aggregate, reasonably likely to have
a Company Material Adverse Effect or prevent or materially burden or materially
impair the ability of the Company to consummate the transactions contemplated
by this Agreement.
(h) Employee Benefits.
(i) A copy of each bonus, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock
purchase, restricted stock, stock option, employment, termination, severance,
change of control, compensation, medical, health or other plan, agreement,
policy or arrangement that covers employees, directors, former employees or
former directors of the Company and its Subsidiaries (the "Compensation and
Benefit Plans") and any trust agreement or insurance contract forming a part of
such Compensation and Benefit Plans has been made available to Parent prior to
the date hereof. The Compensation and Benefit Plans are listed in Section
5.1(h) of the Company Disclosure Letter and any "change of control" or similar
provisions therein are specifically identified in Section 5.1(h) of the Company
Disclosure Letter.
(ii) All Compensation and Benefit Plans are in substantial compliance with
all applicable law, including the Code and the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). Each Compensation and Benefit Plan
that is an "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA (a "Pension Plan") and that is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service (the "IRS") with respect to "TRA" (as defined in
Section 1 of Rev. Proc. 93-39), and the Company is not aware of any
circumstances reasonably likely to result in revocation of any such favorable
determination letter. There is no pending or, to the knowledge of the executive
officers of the Company, threatened material litigation relating to the
Compensation and Benefit Plans. Neither the Company nor any of its Subsidiaries
has engaged in a transaction with respect to any Compensation and Benefit Plan
that, assuming the taxable period of such transaction expired as of the date
hereof, would subject the Company or any of its Subsidiaries to a material tax
or penalty imposed by either Section 4975 of the Code or Section 502 of ERISA.
(iii) No liability under Subtitle C or D of Title IV of ERISA has been or
is expected to be incurred by the Company or any Subsidiary with respect to any
ongoing, frozen or terminated "single-employer plan", within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them,
or the single-employer plan of any entity which is considered one employer with
the Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"). The Company and its Subsidiaries have not contributed, or
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been obligated to contribute, to a multiemployer plan under Subtitle E of Title
IV of ERISA at any time since September 26, 1980. No notice of a "reportable
event", within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived, has been required to be filed for
any Pension Plan or by any ERISA Affiliate within the 12-month period ending on
the date hereof.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan as of the date hereof have been timely made or
have been reflected on the most recent consolidated balance sheet filed or
incorporated by reference in the Company Reports prior to the date hereof.
Neither any Pension Plan nor any single-employer plan of an ERISA Affiliate has
an "accumulated funding deficiency" (whether or not waived) within the meaning
of Section 412 of the Code or Section 302 of ERISA. Neither the Company nor its
Subsidiaries has provided, or is required to provide, security to any Pension
Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code.
(v) Under each Pension Plan which is a single-employer plan, as of the
last day of the most recent plan year ended prior to the date hereof, the
actuarially determined present value of all "benefit liabilities", within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the Pension Plan's most recent actuarial
valuation), did not exceed the then current value of the assets of such Pension
Plan, and there has been no material change in the financial condition of such
Pension Plan since the last day of the most recent plan year.
(vi) Neither the Company nor its Subsidiaries have any obligations for
retiree health and life benefits under any Compensation and Benefit Plan,
except as set forth in the Company Disclosure Letter. The Company or its
Subsidiaries may amend or terminate any such plan under the terms of such plan
at any time without incurring any material liability thereunder.
(vii) The consummation of the Merger and the other transactions
contemplated by this Agreement, either alone or in connection with a subsequent
termination of employment, will not (x) entitle any employees of the Company or
its Subsidiaries to severance pay, (y) accelerate the time of payment or
vesting or trigger any payment of compensation or benefits under, increase the
amount payable or trigger any other material obligation pursuant to, any of the
Compensation and Benefit Plans or (z) result in any breach or violation of, or
a default under, any of the Compensation and Benefit Plans.
(viii) All Compensation and Benefit Plans covering current or former
non-U.S. employees or former employees of the Company and its Subsidiaries
comply in all material respects with applicable local law. The Company and its
Subsidiaries have no material unfunded liabilities with respect to any Pension
Plan that covers such non-U.S. employees.
(ix) No amount that could be received (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated by
this Agreement by any employee, officer, director or independent contractor of
the Company who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment arrangement
would be treated as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code). Schedule 5.1(h)(ix) contains a true and
complete
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list of each such employment arrangement in existence as of the date hereof. To
the extent that any employment arrangement set forth on Schedule 5.1(h)(ix) has
been superseded, the new arrangement is not materially different than the
superseded arrangement.
(i) Compliance with Laws; Permits. (i) The business and operations of the
Company and the Company Insurance Subsidiaries have been conducted in
compliance with all applicable statutes and regulations regulating the business
of insurance and all applicable orders and directives of insurance regulatory
authorities and market conduct recommendations resulting from market conduct
examinations of insurance regulatory authorities (collectively, "Insurance
Laws"), except where the failure to so conduct such business and operations is
not, individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect. Notwithstanding the generality of the foregoing,
except where the failure to do so would not, individually or in the aggregate,
be reasonably likely to have a Company Material Adverse Effect, each Company
Insurance Subsidiary and, to the knowledge of the executive officers of the
Company, its agents have marketed, sold and issued insurance products in
compliance, in all material respects, with Insurance Laws applicable to the
business of such Company Insurance Subsidiary and in the respective
jurisdictions in which such products have been sold, including, without
limitation, in compliance with (i) all applicable prohibitions against
"redlining" or withdrawal of business lines, (ii) all applicable requirements
relating to the disclosure of the nature of insurance products as policies of
insurance and (iii) all applicable requirements relating to insurance product
projections and illustrations. In addition, (i) there is no pending or, to the
knowledge of the executive officers of the Company, threatened charge by any
insurance regulatory authority that any of the Company Insurance Subsidiaries
has violated, nor any pending or, to the knowledge of the executive officers of
the Company, threatened investigation by any insurance regulatory authority
with respect to possible violations of, any applicable Insurance Laws where
such violations are, individually or in the aggregate, reasonably likely to
have a Company Material Adverse Effect; (ii) none of the Company Insurance
Subsidiaries is subject to any order or decree of any insurance regulatory
authority relating specifically to such Company Insurance Subsidiary (as
opposed to insurance companies generally) which is, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect; and
(iii) the Company Insurance Subsidiaries have filed all reports required to be
filed with any insurance regulatory authority on or before the date hereof as
to which the failure to file such reports is, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect.
In addition to Insurance Laws, except as set forth in the Company Reports
filed prior to the date hereof, the businesses of each of the Company and its
Subsidiaries have not been, and are not being, conducted in violation of any
federal, state, local or foreign law, statute, ordinance, rule, regulation,
judgment, order, injunction, decree, arbitration award, agency requirement,
license or permit of any Governmental Entity (collectively with Insurance Laws,
"Laws"), except for violations or possible violations that are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect or prevent or materially burden or materially impair the ability
of the Company to consummate the transactions contemplated by this Agreement.
Except as set forth in the Company Reports filed prior to the date hereof, no
investigation or review by any Governmental Entity with respect to the Company
or any of its Subsidiaries is pending or, to the knowledge of the executive
officers of the Company, threatened, nor, to the knowledge of the executive
officers of the Company, has any
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Governmental Entity indicated an intention to conduct the same, except for
those the outcome of which are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect or prevent or
materially burden or materially impair the ability of the Company to consummate
the transactions contemplated by this Agreement. To the knowledge of the
executive officers of the Company, no material change is required in the
Company's or any of its Subsidiaries' processes, properties or procedures in
connection with any such Laws, and the Company has not received any notice or
communication of any material noncompliance with any such Laws that has not
been cured as of the date hereof. The Company and its Subsidiaries each has all
permits, licenses, trademarks, patents, trade names, copyrights, service marks,
franchises, variances, exemptions, orders and other governmental
authorizations, consents and approvals necessary to conduct its business as
presently conducted except those the absence of which are not, individually or
in the aggregate, reasonably likely to have a Company Material Adverse Effect
or prevent or materially burden or materially impair the ability of the Company
to consummate the Merger and the other transactions contemplated by this
Agreement.
(j) Takeover Statutes. The Company has taken all actions necessary such
that no restrictive provision of any "fair price," "moratorium," "control share
acquisition," "interested shareholder" or other similar anti-takeover statute
or regulation (including, without limitation, Sections 607.0901 and 607.0902 of
the FBCA) (each a "Takeover Statute") or restrictive provision of any
applicable anti-takeover provision in the charter or by-laws of the Company
(including Article VIII of the Company's Third Amended and Restated Articles of
Incorporation) is, or at the Effective Time will be, applicable to the Company,
Parent, the Shares, the Tender Offer, the Merger or any other transaction
contemplated by this Agreement.
(k) Environmental Matters. Except as disclosed in the Company Reports
filed prior to the date hereof and except for such matters as are not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect: (i) the Company and its Subsidiaries have complied with all
applicable Environmental Laws; (ii) the properties currently owned or operated
by the Company (including soils, groundwater, surface water, buildings or other
structures) are not contaminated with any Hazardous Substances; (iii) the
properties formerly owned or operated by the Company or any of its Subsidiaries
were not contaminated with Hazardous Substances during the period of ownership
or operation by the Company or any of its Subsidiaries; (iv) neither the
Company nor any of its Subsidiaries is subject to liability for any Hazardous
Substance disposal or contamination on any third party property; (v) neither
the Company nor any of its Subsidiaries has been associated with any release or
threat of release of any Hazardous Substance; (vi) neither the Company nor any
of its Subsidiaries has received any notice, demand, letter, claim or request
for information alleging that the Company or any of its Subsidiaries may be in
violation of or liable under any Environmental Law; (vii) neither the Company
nor any of its Subsidiaries is subject to any orders, decrees, injunctions or
other arrangements with any Governmental Entity or is subject to any indemnity
or other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (viii) there are no
circumstances or conditions involving the Company or any of its Subsidiaries
that could reasonably be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use, or transfer of any
property of the Company pursuant to any Environmental Law.
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As used herein, the term "Environmental Law" means any federal, state,
local or foreign law, statute, ordinance, regulation, judgment, order, decree,
arbitration award, agency requirement, license, permit, authorization or
opinion, relating to: (A) the protection, investigation or restoration of the
environment, health and safety, or natural resources, (B) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance or
(C) noise, odor, wetlands, pollution, contamination or any injury or threat of
injury to persons or property.
As used herein, the term "Hazardous Substance" means any substance that
is: (A) listed, classified or regulated pursuant to any Environmental Law; (B)
any petroleum product or by-product, asbestos-containing material,
lead-containing paint polychlorinated biphenyls, radioactive materials or
radon; or (C) any other substance which may be the subject of regulatory action
by any Government Authority pursuant to any Environmental Law.
(l) Tax Matters. As of the date hereof, neither the Company nor any of its
Affiliates has taken or agreed to take any action, nor do the executive
officers of the Company have any knowledge of any fact or circumstance, that
would prevent the Merger and the other transactions contemplated by this
Agreement from qualifying as a "reorganization" within the meaning of Section
368(a) of the Code.
(m) Taxes. Except as provided in Section 5.1(m) of the Company Disclosure
Letter and except for such matters as are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect:
(i) the Company and each of its Subsidiaries have filed completely and
correctly all Tax Returns (as defined below) that are required by all
applicable laws to be filed by them, and (x) have paid, or made adequate
provision for the payment of, all Taxes (as defined below) which have or may
become due and payable pursuant to those Tax Returns and have paid all
estimated Taxes due and (y) have paid all other charges, claims and assessments
received to date other than those charges, claims and assessments for Taxes
being contested in good faith for which adequate provision has been made on the
most recent balance sheet included in the Company Reports;
(ii) all Taxes which the Company and its Subsidiaries are required by law
to withhold and collect have been duly withheld and collected, and have been
paid over, in a timely manner, to the proper Taxing Authorities (as defined
below) to the extent due and payable;
(iii) neither the Company nor any of its Subsidiaries have executed any
waiver to extend, or otherwise taken or failed to take any action that would
have the effect of extending, the applicable statute of limitations in respect
of any Tax liabilities of the Company or its Subsidiaries for the fiscal years
prior to and including the most recent fiscal year;
(iv) the Company and its Subsidiaries have never been members of any
consolidated group for income tax purposes other than the consolidated group of
which the Company is the common parent; and the Company and its Subsidiaries
are not parties to any tax sharing agreement or arrangement, other than with
each other;
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(v) no liens for Taxes exist with respect to any of the assets or
properties of the Company or its Subsidiaries, except for statutory liens for
Taxes not yet due or payable or that are being contested in good faith;
(vi) all of the income Tax Returns filed by or on behalf of each of the
Company and its Subsidiaries have been examined by and settled with the
Internal Revenue Service or appropriate Taxing Authority, or the statute of
limitations with respect to the relevant Tax liability has expired, for all
taxable periods through and including the period ending on the date on which
the Effective Time occurs;
(vii) all Taxes due with respect to any completed and settled audit,
examination or deficiency litigation with any Taxing Authority have been paid
in full;
(viii) there is no audit, examination, deficiency, or refund litigation
pending with respect to any Taxes and during the past three years no Taxing
Authority has given written notice of the commencement of any audit,
examination, deficiency or refund litigation, with respect to any Taxes;
(ix) the Company is not bound by any currently effective private ruling,
closing agreement or similar agreement with any Taxing Authority relating to a
material amount of Taxes;
(x) the Company shall not be required to include in a taxable period
ending after the Effective Time, any taxable income attributable to income that
economically accrued in a prior taxable period as a result of Section 481 of
the Code, the installment method of accounting or any comparable provision of
state or local Tax law;
(xi) (A) no material amount of property of the Company is "tax exempt
property" within the meaning of Section 168(h) of the Code, (B) no material
amount of assets of the Company is subject to a lease under Section 7701(h) of
the Code, and (C) the Company is not a party to any material lease made
pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect prior to the date of enactment of the Tax Equity and Fiscal
Responsibility Act of 1982;
(xii) immediately following the Merger, the Company will not have any
material amount of income or gain that has been deferred under Treasury
Regulation Section 1.1502-13, or any material excess loss account in a
Subsidiary under Treasury Regulation Section 1.1502-19; and
(xiii) the Company is not a "consenting corporation" within the meaning of
Section 341(f) of the Code.
As used in this Agreement, (i) the term "Tax" (including, with correlative
meaning, the terms "Taxes" and "Taxable") shall mean, with respect to any
Person, (a) all taxes, domestic or foreign, including without limitation any
income (net, gross or other, including recapture of any tax items such as
investment tax credits), alternative or add-on minimum tax, gross income, gross
receipts, premium, gains, sales, use, ad valorem, transfer, recording,
franchise, profits, property (real or personal, tangible or intangible), fuel,
license, withholding
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(whether on amounts paid to or by such Person), payroll, employment,
unemployment, social security, excise, severance, stamp, occupation, or
environmental tax, customs, duties, or other like assessments or governmental
charges of any kind whatsoever, together with any interest, penalties,
additions or additional amounts imposed with respect thereto (including,
without limitation, penalties for failure to file Tax Returns), (b) any joint
or several liability of such Person with any other Person for the payment of
any amounts of the type described in clause (a) hereof and (c) any liability of
such Person for the payment of any amounts of the type described in (a) as a
result of any express or implied obligation to indemnify any other Person; (ii)
the term "Tax Return(s)" shall mean all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Taxing Authority; and (iii) the term "Taxing Authority" shall mean any
authority responsible for the imposition, collection or administration of any
Tax.
(n) Labor Matters. Neither the Company nor any of its Subsidiaries is a
party to or otherwise bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization.
(o) Intellectual Property.
(i) The Company and/or each of its Subsidiaries owns, or is licensed or
otherwise possesses legally enforceable rights to use all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
technology, know-how, computer software programs or applications, and tangible
or intangible proprietary information or materials that are used in the
business of the Company and its Subsidiaries as currently conducted, except for
any such failures to own, be licensed or possess that are not, individually or
in the aggregate, reasonably likely to have a Company Material Adverse Effect,
and to the knowledge of the executive officers of the Company all patents,
trademarks, trade names, service marks and copyrights held by the Company
and/or its Subsidiaries are valid and subsisting.
(ii) Except as disclosed in Company Reports filed prior to the date hereof
or as are not, individually or in the aggregate, reasonably likely to have a
Company Material Adverse Effect:
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(A) the Company is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations
hereunder, in violation of any licenses, sublicenses and other agreements
as to which the Company is a party and pursuant to which the Company is
authorized to use any third-party patents, trademarks, service marks, and
copyrights ("Third-Party Intellectual Property Rights");
(B) no claims with respect to (I) the patents, registered and material
unregistered trademarks and service marks, registered copyrights, trade
names, and any applications therefor owned by the Company or any its
Subsidiaries (the "Company Intellectual Property Rights"); (II) any trade
secret material to the Company; or (III) Third-Party Intellectual Property
Rights are currently pending or, to the knowledge of the executive
officers of the Company, are threatened by any Person;
(C) the executive officers of the Company do not know of any valid grounds
for any bona fide claims (I) to the effect that the sale, licensing or use
of any product as now used, sold or licensed or proposed for use, sale or
license by the Company or any of its Subsidiaries, infringes on any
copyright, patent, trademark, service mark or trade secret; (II) against
the use by the Company or any of its Subsidiaries, of any trademarks,
trade names, trade secrets, copyrights, patents, technology, know-how or
computer software programs and applications used in the business of the
Company or any of its Subsidiaries as currently conducted or as proposed
to be conducted; (III) challenging the ownership, validity or
effectiveness of any of the Company Intellectual Property Rights or other
trade secret material to the Company; or (IV) challenging the license or
legally enforceable right to use of the Third-Party Intellectual Rights by
the Company or any of its Subsidiaries; and
(D) to the knowledge of the executive officers of the Company, there is no
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property Rights by any third party, including any employee or
former employee of the Company or any of its Subsidiaries.
(p) Material Contracts. All of the material contracts of the Company and
its Subsidiaries that are required to be described in the Company Reports or to
be filed as exhibits thereto are described in the Company Reports or filed as
exhibits thereto and are in full force and effect. True and complete copies of
all such material contracts have been delivered or have been made available by
the Company to Parent. Neither the Company nor any of its Subsidiaries nor any
other party is in breach of or in default under any such contract except for
such breaches and defaults as are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect. Neither the
Company nor any of its Subsidiaries is party to any agreement containing any
provision or covenant limiting in any material respect the ability of the
Company or any of its Subsidiaries or, except as specifically identified on
Section 5.1(p) of the Company Disclosure Letter, assuming the consummation of
the transactions contemplated by this Agreement, Parent or any of its
Subsidiaries to (A) sell any products or services of or to any other person,
(B) engage in any line of business or (C) compete with or to obtain products or
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services from any person or limiting the ability of any person to provide
products or services to the Company or any of its Subsidiaries.
(q) Rights Plan.
(i) The Company has taken all actions necessary such that, for all
purposes under the New Rights Agreement, Parent shall not be deemed an
Acquiring Person (as defined in the New Rights Agreement), the Distribution
Date (as defined in the New Rights Agreement) shall not be deemed to occur and
the rights issuable pursuant to the New Rights Agreement (the "New Rights")
will not separate from the Common Shares, as a result of Parent's entering into
this Agreement or consummating the Tender Offer, the Merger and/or the other
transactions contemplated hereby or thereby.
(ii) The Company has taken all necessary action with respect to all of the
outstanding New Rights so that, as of immediately prior to the Effective Time
and immediately prior to the consummation of the Tender Offer, (A) neither the
Company nor Parent will have any obligations under the Rights or the New Rights
or the New Rights Agreement and (B) the holders of New Rights will have no
rights under the New Rights or the New Rights Agreement.
(r) Brokers and Finders. Neither the Company nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders, fees in connection
with the Merger or the other transactions contemplated in this Agreement except
that the Company has employed Salomon Smith Barney as its financial advisor,
the arrangements with which have been disclosed to Parent prior to the date
hereof.
(s) Insurance Matters.
(i) Except as otherwise are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect, all policies,
binders, slips, certificates, annuity contracts and participation agreements
and other agreements of insurance, whether individual or group, in effect as of
the date hereof (including all applications, supplements, endorsements, riders
and ancillary agreements in connection therewith) that are issued by the
Company Insurance Subsidiaries (the "Company Insurance Contracts") and any and
all marketing materials, are, to the extent required under applicable law, on
forms approved by applicable insurance regulatory authorities or which have
been filed and not objected to by such authorities within the period provided
for objection, and such forms comply in all material respects with the
insurance statutes, regulations and rules applicable thereto and, as to premium
rates established by the Company or any Company Insurance Subsidiary which are
required to be filed with or approved by insurance regulatory authorities, the
rates have been so filed or approved, the premiums charged conform thereto in
all material respects, and such premiums comply in all material respects with
the insurance statutes, regulations and rules applicable thereto.
(ii) All reinsurance and coinsurance treaties or agreements, including
retrocessional agreements, to which the Company or any Company Insurance
Subsidiary is a party or under which the Company or any Company Insurance
Subsidiary has any existing
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rights, obligations or liabilities are in full force and effect, except for
such treaties or agreements the failure to be in full force and effect of which
are not, individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect. Neither the Company nor any Company Insurance
Subsidiary, nor, to the knowledge of the executive officers of the Company, any
other party to a reinsurance or coinsurance treaty or agreement to which the
Company or any Company Insurance Subsidiary is a party, is in default in any
material respect as to any provision thereof, and no such agreement contains
any provision providing that the other party thereto may terminate such
agreement by reason of the transactions contemplated by this Agreement. The
Company has not received any notice to the effect that the financial condition
of any other party to any such agreement is impaired with the result that a
default thereunder may reasonably be anticipated, whether or not such default
may be cured by the operation of any offset clause in such agreement. No
insurer or reinsurer or group of affiliated insurers or reinsurers accounted
for the direction to the Company and the Company Insurance Subsidiaries or the
ceding by the Company and the Company Insurance Subsidiaries of insurance or
reinsurance business in an aggregate amount equal to two percent or more of the
consolidated gross premium income of the Company and the Company Insurance
Subsidiaries for the year ended December 31, 1996.
(iii) Prior to the date hereof, the Company has delivered or made
available to Parent a true and complete copy of any actuarial reports prepared
by actuaries, independent or otherwise, with respect to the Company or any
Company Insurance Subsidiary since December 31, 1994, and all attachments,
addenda, supplements and modifications thereto (the "Company Actuarial
Analyses"). The information and data furnished by the Company or any Company
Insurance Subsidiary to its independent actuaries in connection with the
preparation of the Company Actuarial Analyses were accurate in all material
respects. Furthermore, to the knowledge of the executive officers of the
Company, each Company Actuarial Analysis was based upon an accurate inventory
of policies in force for the Company and the Company Insurance Subsidiaries, as
the case may be, at the relevant time of preparation, was prepared using
appropriate modeling procedures accurately applied and in conformity with
generally accepted actuarial standards consistently applied, and the
projections contained therein were properly prepared in accordance with the
assumptions stated therein.
(iv) None of Standard & Poor's Corporation, Moody's Investors Service,
Inc. or A.M. Best Company has announced that it has under surveillance or
review its rating of the financial strength or claims-paying ability of any
Company Insurance Subsidiary and the Company has no reason to believe that any
rating presently held by the Company Insurance Subsidiaries is likely to be
modified, qualified, lowered or placed under such surveillance for any reason,
including as a result of the transactions contemplated hereby.
(v) Except as would not reasonably be expected to have a Company Material
Adverse Effect, all annuity contracts and life insurance policies issued by
each Company Insurance Subsidiary to an annuityholder domiciled in the United
States meet all definitional or other requirements for qualification under the
Code section applicable (or intended to be applicable) to such annuity
contracts or life insurance policies, including, without limitation, the
following: (A) each life insurance policy meets the requirements of sections
101(f), 817(h) or 7702 of the Code, as applicable; (B) no life insurance
contract issued by any Company Insurance Company is a "modified endowment
contract" within the meaning of section 7702A of the Code unless and to the
extent that the holders of the policies have been notified of their
classification;
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(C) each annuity contract issued, entered into or sold by any Company Insurance
Subsidiary qualifies as an annuity under federal tax law; (D) each annuity
contract meets the requirements of, and has been administered consistent with
section 817(h) and 72 of the Code including but not limited to section 72(s) of
the Code (except for those contracts specifically excluded from such
requirement pursuant to section 72(s)(5) of the Code); (E) each annuity
contract intended to qualify under sections 130, 403(a), 403(b) or 408(b) of
the Code contains all provisions required for qualification under such sections
of the Code; (F) each annuity contract marketed as, or in connection with,
plans that are intended to qualify under section 401, 403, 408 or 457 of the
Code complies with the requirements of such section; and (G) none of the
Company Insurance Subsidiaries have entered into any agreement or are involved
in any discussions or negotiations and there are no audits, examinations,
investigations or other proceedings with the IRS with respect to the failure of
any life insurance policy under section 7702 or 817(h) of the Code or the
failure of any annuity contract to meet the requirements of section 72(s) of
the Code. There are no "hold harmless" indemnification agreements respecting
the tax qualification or treatment of any product or plan sold, issued, entered
into or administered by the Company Insurance Subsidiaries, and there have been
no claims asserted by any Person under such "hold harmless" indemnification
agreements so set forth.
(t) Liabilities and Reserves.
(i) The reserves carried on the Company SAP Statements of each Company
Insurance Subsidiary for future insurance policy benefits, losses, claims and
similar purposes were, as of the respective dates of such Company SAP
Statements, in compliance in all material respects with the requirements for
reserves established by the insurance departments of the state of domicile of
such Company Insurance Subsidiary, were determined in all material respects in
accordance with generally accepted actuarial standards and principles
consistently applied, and were fairly stated in all material respects in
accordance with sound actuarial and statutory accounting principles. Such
reserves were adequate in the aggregate to cover the total amount of all
reasonably anticipated liabilities of the Company and each Company Insurance
Subsidiary under all outstanding insurance, reinsurance and other applicable
agreements as of the respective dates of such Company SAP Statements. The
admitted assets of each Company Insurance Subsidiary as determined under
applicable Laws are in an amount at least equal to the minimum amounts required
by applicable Laws. In addition, the Company has delivered or made available to
Parent copies of all work papers used as the basis for establishing the
reserves for the Company and the Company Insurance Subsidiaries at December 31,
1995 and December 31, 1996, respectively.
(ii) Except for regular periodic assessments in the ordinary course of
business or assessments based on developments which are publicly known within
the insurance industry, to the knowledge of the executive officers of the
Company, no claim or assessment is pending or threatened against any Company
Insurance Subsidiary which is peculiar or unique to such Company Insurance
Subsidiary by any state insurance guaranty associations in connection with such
association's fund relating to insolvent insurers which if determined
adversely, would, individually or in the aggregate, be reasonably likely to
have a Company Material Adverse Effect.
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(u) Investment Company. None of the Company Insurance Subsidiaries
maintains any separate accounts. Neither the Company nor any of its
Subsidiaries conducts activities of or is otherwise deemed under applicable law
to control an "investment advisor" as such term is defined in Section 2(a)(20)
of the 1940 Act, whether or not registered under the Investment Advisers Act of
1940, as amended. Neither the Company nor any of its Subsidiaries is an
"investment company" as defined under the 1940 Act, and neither the Company nor
any of its Subsidiaries sponsors any Person that is such an investment company.
5.2 Representations and Warranties of Parent and Merger Subsidiary. Except
as set forth in any Parent Report (as hereinafter defined) filed prior to the
date hereof, Parent and Merger Subsidiary each hereby represent and warrant to
the Company that:
(a) Capitalization of Merger Subsidiary. The authorized stock of Merger
Subsidiary consists of 1,000 shares of Common Stock, par value $.01 per share,
100 of which are duly authorized, validly issued and outstanding, fully paid
and non-assessable. All of the issued and outstanding stock of Merger
Subsidiary is, and at the Effective Time will be, owned by Parent, and there
are (i) no other shares of stock or voting securities of Merger Subsidiary,
(ii) no securities of Merger Subsidiary convertible into or exchangeable for
shares of stock or voting securities of Merger Subsidiary and (iii) no options
or other rights to acquire from Merger Subsidiary, and no obligations of Merger
Subsidiary to issue or deliver, any stock, voting securities or securities
convertible into or exchangeable for stock or voting securities of Merger
Subsidiary. Merger Subsidiary has not conducted any business prior to the date
hereof (except in connection with the Tender Offer) and has no, and prior to
the Effective Time will have no, assets, liabilities or obligations of any
nature other than those incident to its formation and pursuant to this
Agreement and the Merger and the other transactions contemplated by this
Agreement and except pursuant to the Tender Offer.
(b) Organization, Good Standing and Qualification. (i) Each of Parent and
Merger Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own and operate its properties and
assets and to carry on its business as presently conducted and is qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction where the ownership or operation of its properties or conduct of
its business requires such qualification, except where the failure to be so
qualified or in such good standing, is not reasonably likely, individually or
in the aggregate, to have a Parent Material Adverse Effect (as defined below).
Parent has made available to the Company a complete and correct copy of
Parent's and Merger Subsidiary's charter and by-laws, each as amended to the
date hereof. Parent's and Merger Subsidiary's charter and by-laws so delivered
are in full force and effect.
As used in this Agreement, the term "Parent Material Adverse Effect" means
a material adverse effect on the financial condition, properties, business or
results of operations of Parent and its Subsidiaries taken as a whole.
(c) Capital Structure. The authorized capital stock of Parent consists of
2,000,000,000 shares of Parent Common Stock, of which 849,656,710 shares were
outstanding as of the close of business on March 18,
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1998, and 10,000,000 shares of Preferred Stock, par value $0.01 per share, none
of which was outstanding as of the close of business on March 18, 1998. All of
the outstanding shares of Parent Common Stock are duly authorized, validly
issued, fully paid and nonassessable.
(d) Corporate Authority.
(i) Each of the Parent and Merger Subsidiary has all requisite corporate
power and authority and has taken all corporate action necessary in order to
execute, deliver and perform its obligations under this Agreement and to
consummate the Tender Offer and the Merger. This Agreement is a valid and
binding agreement of Parent and Merger Subsidiary, enforceable against each of
Parent and Merger Subsidiary in accordance with its terms, subject to the
Bankruptcy and Equity Exception.
(ii) Prior to the Effective Time, Parent will have taken all necessary
action to permit it to issue the number of shares of Parent Common Stock and
Parent Preferred Stock required to be issued pursuant to Article IV. The Parent
Common Stock and Parent Preferred Stock, when issued, will be duly authorized,
validly issued, fully paid and nonassessable, and no stockholder of Parent will
have any preemptive right of subscription or purchase in respect thereof. The
Parent Common Stock and Parent Preferred Stock, when issued, will be registered
under the Securities Act and Exchange Act and registered or exempt from
registration under any applicable state securities or "blue sky" laws.
(e) Governmental Filings; No Violations. (i) Other than the filings and/or
notices (A) pursuant to Section 1.3, (B) under the HSR Act, the Securities Act
and the Exchange Act, (C) to comply with state securities or "blue sky" laws,
(D) required to be made with the NYSE or Nasdaq, and (E) the filing of
appropriate documents with, and approval of, the respective Commissioners of
Insurance of the states of Arizona, Florida, Georgia, New York, South Carolina,
Texas, Puerto Rico, Mexico, Cayman Islands, Argentina, Turks & Caicos,
Dominican Republic and the United Kingdom, and such notices and consents as may
be required under the antitrust notification insurance laws of any state in
which the Company, Parent or any of their respective subsidiaries is domiciled
or does business, no notices, reports or other filings are required to be made
by Parent or Merger Subsidiary with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by Parent or
Merger Subsidiary from, any Governmental Entity, in connection with the
execution and delivery of this Agreement by Parent and Merger Subsidiary and
the consummation by Parent and Merger Subsidiary of the Merger and the other
transactions contemplated hereby, except those that the failure to make or
obtain are not, individually or in the aggregate, reasonably likely to have a
Parent Material Adverse Effect or prevent, materially delay or materially
impair the ability of Parent or Merger Subsidiary to consummate the
transactions contemplated by this Agreement.
(i) The execution, delivery and performance of this Agreement by Parent
and Merger Subsidiary do not, and the consummation by Parent and Merger
Subsidiary of the Merger and the other transactions contemplated hereby will
not, constitute or result in (A) a breach or violation of, or a default under,
the certificate or by-laws of Parent and Merger Subsidiary or the comparable
governing instruments of any of its Subsidiaries, (B) a breach or violation of,
or a default under, the acceleration of any obligations or the creation of a
lien, pledge, security interest or other encumbrance on the assets of Parent or
any of its Subsidiaries (with or without notice, lapse of time or both)
pursuant to, any Contracts binding upon Parent or
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any of its Subsidiaries or (provided, as to consummation, the filings and
notices are made, and approvals are obtained, as referred to in Section
5.2(e)(i)) or any Law or governmental or non-governmental permit or license to
which Parent or any of its Subsidiaries is subject or (C) any change in the
rights or obligations of any party under any of the Contracts, except, in the
case of clause (B) or (C) above, for breach, violation, default, acceleration,
creation or change that is not, individually or in the aggregate, reasonably
likely to have a Parent Material Adverse Effect or prevent, materially delay or
materially impair the ability of Parent or Merger Subsidiary to consummate the
transactions contemplated by this Agreement.
(f) Parent Reports; Financial Statements. Parent has made available to the
Company each report or proxy statement prepared by it or its predecessors since
January 31, 1995, including (i) Parent's Annual Report on Form 10-K for the
year ended January 31, 1997 (the "Parent Audit Date"), and (ii) Parent's
Quarterly Reports on Form 10-Q for the periods ended April 30, 1997, July 31,
1997 and October 31, 1997, each in the form (including exhibits, annexes and
any amendments thereto) filed with the SEC (collectively, including any such
reports filed subsequent to the date hereof, the "Parent Reports"). As of their
respective dates, the Parent Reports did not, and any Parent Reports filed with
the SEC subsequent to the date hereof will not, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
in which they were made, not misleading. Each of the consolidated balance
sheets included in or incorporated by reference into the Parent Reports
(including the related notes and schedules) fairly presents, or will fairly
present, the consolidated financial position of Parent and its Subsidiaries as
of its date and each of the consolidated statements of income and of changes in
financial position included in or incorporated by reference into the Parent
Reports (including any related notes and schedules) fairly presents, or will
fairly present, the results of operations, retained earnings and changes in
financial position, as the case may be, of Parent and its Subsidiaries for the
periods set forth therein (subject, in the case of unaudited statements, to
notes and normal year-end audit adjustments that will not be material in amount
or effect), in each case in accordance with GAAP consistently applied during
the periods involved, except as may be noted therein.
(g) Absence of Certain Changes. Except as disclosed in registration
statements filed by Parent with the SEC or in the Parent Reports filed prior to
the date hereof, since the Parent Audit Date Parent and its Subsidiaries have
conducted the business of Parent and its Subsidiaries, taken as a whole, only
in, and have not engaged in any transaction material to the Company and its
Subsidiaries, taken as a whole, other than according to, the ordinary and usual
course of such businesses and there has not been (i) any change in the
financial condition, management, properties, prospects, business or results of
operations of Parent and its Subsidiaries or any development or combination of
developments of which management of Parent has knowledge that, individually or
in the aggregate, is reasonably likely to have a Parent Material Adverse
Effect; (ii) any material damage, destruction or other casualty loss with
respect to any material asset or property owned, leased or otherwise used by
Parent or any of its Subsidiaries, whether or not covered by insurance that,
individually or in the aggregate, is reasonably likely to have a Parent
Material Adverse Affect; (iii) any declaration, setting aside or payment of any
dividend or other distribution in respect of the capital stock of Parent,
except for dividends or other distributions on its capital stock publicly
announced prior to the date hereof or declared and paid consistent with past
practice (including customary increases); or (iv) any
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material addition, or any development involving a prospective material
addition, to Parent's consolidated reserves for future policy benefits.
(h) Tax Matters. As of the date hereof, neither Parent nor any of its
Affiliates has taken or agreed to take any action, nor do the officers of
Parent have any knowledge of any fact or circumstance, that would prevent the
Merger and the other transactions contemplated by this Agreement from
qualifying as a "reorganization" within the meaning of Section 368(a) of the
Code.
(i) Brokers and Finders. Neither Parent nor any of its officers, directors
or employees has employed any broker or finder or incurred any liability for
any brokerage fees, commissions or finders, fees in connection with the Merger
or the other transactions contemplated by this Agreement, except that Parent
has employed Lehman Brothers Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated as its financial advisors.
ARTICLE VI
Covenants
6.1 Interim Operations. The Company covenants and agrees as to itself and
its Subsidiaries that, after the date hereof and prior to the Effective Time
(unless Parent shall otherwise approve in writing, and except as otherwise
expressly contemplated by this Agreement or set forth in Section 6.1 of the
Company Disclosure Schedule and except for the acceleration of the vesting of
outstanding options to purchase 26,000 Common Shares held by directors under
the Company's 1997 Equity Incentive Plan):
(a) its and its Subsidiaries' businesses shall be conducted in the
ordinary and usual course (it being understood and agreed that nothing
contained herein shall permit the Company to enter into or engage in (through
acquisition, product extension or otherwise) the business of selling any
products or services materially different from existing products or services of
the Company and its Subsidiaries or to enter into or engage in new lines of
business without Parent's prior written approval);
(b) to the extent consistent with (a) above it and its Subsidiaries shall
use their respective reasonable best efforts to preserve its business
organization intact and maintain its existing relations and goodwill with
customers, suppliers, reinsurers, distributors, creditors, lessors, employees
and business associates;
(c) it shall not (i) issue, sell, pledge, dispose of or encumber any
capital stock owned by it in any of its Subsidiaries; (ii) amend its charter or
by-laws or amend, modify or terminate the New Rights Agreement; (iii) split,
combine or reclassify its outstanding shares of capital stock; (iv) authorize,
declare, set aside or pay any dividend payable in cash, stock or property in
respect of any capital stock other than dividends from its direct or indirect
wholly-owned Subsidiaries and other than regular quarterly dividends paid by
the Company on its Common Shares not in excess of $0.11 per share and regular
quarterly dividends paid by the Company on its Preferred Shares in accordance
with the Company's Articles of Incorporation; or (v) repurchase, redeem or
otherwise acquire, except in connection with any of the Company
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Stock Plans, or permit any of its Subsidiaries to purchase or otherwise
acquire, any shares of its stock or any securities convertible into or
exchangeable or exercisable for any shares of its stock;
(d) neither it nor any of its Subsidiaries shall (i) issue, sell, pledge,
dispose of or encumber any shares of, or securities convertible into or
exchangeable or exercisable for, or options, warrants, calls, commitments or
rights of any kind to acquire, any shares of its capital stock of any class or
any other property or assets (other than pursuant to exercise of the New Rights
and Shares issuable pursuant to options outstanding on the date hereof under
any of the Company Stock Plans or upon conversion of the Preferred Shares);
(ii) other than in the ordinary and usual course of business, transfer, lease,
license, guarantee, sell, mortgage, pledge, dispose of or encumber any other
property or assets (including capital stock of any of its Subsidiaries) or
incur or modify any material indebtedness or other liability; or (iii) make or
authorize or commit for any capital expenditures other than in amounts not
exceeding $5 million in the aggregate or, by any means, make any acquisition
of, or investment in, assets or stock of any other Person or entity, including
by way of assumption reinsurance, in excess of $2 million individually or $5
million in the aggregate (other than in connection with ordinary course
investment activities);
(e) neither it nor any of its Subsidiaries shall terminate, establish,
adopt, enter into, make any new grants or awards under, amend or otherwise
modify, any Compensation and Benefit Plans, other than awards made in the
normal course under the Management Incentive Plan in respect of 1997
performance or increase the salary, wage, bonus or other compensation of any
employees except increases occurring in the ordinary and usual course of
business (which shall include normal periodic performance reviews and related
compensation and benefit increases);
(f) neither it nor any of its Subsidiaries shall pay, discharge, settle or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction of claims, liabilities or obligations legally due and payable and
arising in the ordinary and usual course of business, claims arising under the
terms of products, contracts or policies issued by the Company Insurance
Subsidiaries in the ordinary and usual course of business and such other
claims, liabilities or obligations as shall not exceed $5 million in the
aggregate;
(g) neither it nor any of its Subsidiaries shall make or change any Tax
election, settle any material audit, file any amended tax returns or permit any
insurance policy naming it as a beneficiary or loss-payable payee to be
canceled or terminated except in the ordinary and usual course of business;
(h) neither it nor any of its Subsidiaries shall enter into any agreement
containing any provision or covenant limiting in any material respect the
ability of the Company or any Subsidiary or affiliate to (A) sell any products
or services of or to any other person, (B) engage in any line of business or
(C) compete with or to obtain products or services from any person or limiting
the ability of any person to provide products or services to the Company or any
of its Subsidiaries or affiliates;
(i) neither it nor any of its Subsidiaries shall enter into any new quota
share or other reinsurance transaction (A) which does not contain standard
cancellation and termination
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provisions, (B) which, except in the ordinary course of business, materially
increases or reduces the Company Insurance Subsidiaries' consolidated ratio of
net written premiums to gross written premiums or (C) pursuant to which $5
million or more in gross written premiums are ceded by the Company Insurance
Subsidiaries to any Person other than the Company or any of its Subsidiaries;
(j) neither it nor any of the Company Insurance Subsidiaries will alter or
amend in any material respect their existing investment guidelines or policies;
(k) neither it nor any of its Subsidiaries shall take any action or omit
to take any action that would cause any of its representations and warranties
herein to become untrue in any material respect; and
(l) neither it nor any of its Subsidiaries will authorize or enter into an
agreement to do any of the foregoing.
6.2 Acquisition Proposals. The Company will not, and will not permit or
cause any of its Subsidiaries or any of the officers and directors of it or its
Subsidiaries to, and shall direct its and its Subsidiaries' employees, agents
and representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly,
initiate, solicit, encourage or otherwise facilitate any inquiries or the
making of any proposal or offer with respect to a merger, reorganization, share
exchange, consolidation or similar transaction involving, or any purchase of
15% or more of the assets or any equity securities of, the Company or any of
its Subsidiaries (any such proposal or offer being hereinafter referred to as
an "Acquisition Proposal"). The Company will not, and will not permit or cause
any of its Subsidiaries or any of the officers and directors of it or its
Subsidiaries to and shall direct its and its Subsidiaries' employees, agents
and representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any Person relating to an Acquisition
Proposal, whether made before or after the date of this Agreement, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal
(including, without limitation, by means of an amendment to the New Rights
Agreement); provided, however, that nothing contained in this Agreement shall
prevent the Company or its Board of Directors from (i) complying with Rule
14e-2 promulgated under the Exchange Act with regard to an Acquisition Proposal
or (ii) at any time prior to the earlier of (x) payment for Common Shares
pursuant to the Tender Offer or (y) the approval of the Merger by the Company
Requisite Vote (A) providing information in response to a request therefor by a
Person who has made an unsolicited bona fide written Acquisition Proposal if
the Board of Directors receives from the Person so requesting such information
an executed confidentiality agreement on terms substantially equivalent to
those contained in the Confidentiality Agreement (as defined in Section 9.7);
(B) engaging in any negotiations or discussions with any Person who has made an
unsolicited bona fide written Acquisition Proposal; or (C) recommending such an
Acquisition Proposal to the stockholders of the Company, if and only to the
extent that, (i) in each such case referred to in clause (A), (B) or (C) above,
the Board of Directors of the Company determines in good faith after
consultation with outside legal counsel that such action is necessary in order
for its directors to comply with their respective fiduciary duties under
applicable law and (ii) in each case referred to in clause
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(B) or (C) above, the Board of Directors of the Company determines in good
faith (after consultation with its financial advisor) that such Acquisition
Proposal, if accepted, is reasonably likely to be consummated, taking into
account all legal, financial and regulatory aspects of the proposal and the
Person making the proposal and would, if consummated, result in a more
favorable transaction than the transaction contemplated by this Agreement,
taking into account the long-term prospects and interests of the Company and
its stockholders (any such more favorable Acquisition Proposal being referred
to in this Agreement as a "Superior Proposal"). The Company will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. The Company agrees that it will take the necessary steps to promptly
inform the individuals or entities referred to in the first sentence hereof of
the obligations undertaken in this Section 6.2 and in the Confidentiality
Agreement (as defined in Section 9.7). The Company will notify Parent
immediately if any such inquiries, proposals or offers are received by, any
such information is requested from, or any such discussions or negotiations are
sought to be initiated or continued with, any of its representatives
indicating, in connection with such notice, the name of such Person and the
material terms and conditions of any proposals or offers and thereafter shall
keep Parent informed, on a current basis, on the status and terms of any such
proposals or offers and the status of any such negotiations or discussions. The
Company also will promptly request each Person that has heretofore executed a
confidentiality agreement in connection with its consideration of an
Acquisition Proposal to return all confidential information heretofore
furnished to such Person by or on behalf of it or any of its Subsidiaries.
6.3 Information Supplied. The Company and Parent each agrees, as to itself
and its Subsidiaries, that none of the information supplied or to be supplied
by it or its Subsidiaries for inclusion or incorporation by reference in (i)
the Offer Documents, the Schedule 14D-1 and the Schedule 14D-9 will, at the
time of filing thereof and at the time of distribution thereof, contain any
untrue statement of material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, (ii) the
Registration Statement on Form S-4 filed with the SEC by Parent in connection
with the issuance of shares of Parent Common Stock and Parent Preferred Stock
in the Merger (including the information statement or proxy statement (as
applicable) and prospectus (the "Prospectus/Proxy Statement") constituting a
part thereof) (the "S-4 Registration Statement") will, at the time the S-4
Registration Statement becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (iii) the
Prospectus/Proxy Statement and any amendment or supplement thereto will, at the
date of mailing to stockholders and at the times of the meetings of
stockholders of the Company to be held in connection with the Merger, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
6.4 Stockholders Meetings. The Company will take, in accordance with its
charter and by-laws, all action necessary to convene meetings of holders of
Shares (the "Stockholders Meetings") as promptly as practicable after the S-4
Registration Statement is declared effective, to consider and vote upon the
approval of the Merger. Subject to fiduciary obligations under applicable law,
the Company's board of directors shall recommend such
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approval, shall not withdraw or modify such recommendation and shall take all
lawful action to solicit such approval. Without limiting the generality of the
foregoing, in the event that the Company's board of directors withdraws or
modifies its recommendation, the Company nonetheless shall cause such
stockholders meetings to be convened and a vote taken with respect to the
Merger and the board of directors shall communicate to the Company's
stockholders its basis for such withdrawal or modification as contemplated by
Section 607.1103(2)(a) of the FBCA.
6.5 Filings; Other Actions; Notification.
(a) Parent and the Company shall promptly prepare and file with the SEC a
revised Prospectus/Proxy Statement, and Parent shall prepare and file with the
SEC amendments to the S-4 Registration Statement as promptly as practicable.
Parent and the Company each shall use all reasonable efforts to have the S-4
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing, and promptly thereafter mail the
Prospectus/Proxy Statement to the stockholders of the Company. Parent shall
also use all reasonable efforts to obtain prior to the effective date of the
S-4 Registration Statement all necessary state securities law or "blue sky"
permits and approvals required in connection with the Merger and to consummate
the other transactions contemplated by this Agreement and will pay all expenses
incident thereto.
(b) The Company and Parent shall cooperate with each other and use (and
shall cause their respective Subsidiaries to use) all best efforts (i) to cause
to be done all things, necessary, proper or advisable on its part under this
Agreement and applicable Laws to consummate and make effective the Tender
Offer, the Merger and the other transactions contemplated by this Agreement as
soon as practicable, including preparing and filing (and in the case of
Parent's Form A and other insurance regulatory filings, amending and
supplementing) as promptly as practicable all documentation to effect all
necessary notices, reports and other filings, and (ii) to obtain as promptly as
practicable all consents, registrations, approvals, permits and authorizations
necessary or advisable to be obtained from any third party and/or any
Governmental Entity in connection with, as a result of or in order to
consummate the Tender Offer, the Merger or any of the other transactions
contemplated by this Agreement, including, without limitation, upon request of
Parent, all material consents required in connection with the consummation of
the Tender Offer and the Merger; provided, however, that nothing in this
Section 6.5 shall require, or be construed to require, Parent, in connection
with the receipt of any regulatory approval, to proffer to, or agree to (i)
sell or hold separate and agree to sell or to discontinue to or limit, before
or after the Effective Time, any assets, businesses, or interest in any assets
or businesses of Parent, the Company or any of their respective Affiliates (or
to consent to any sale, or agreement to sell, or discontinuance or limitation
by the Company of any of its assets or businesses) or (ii) agree to any
conditions relating to, or changes or restriction in, the operations of any
such asset or businesses which, in either case, could, in the judgment of the
Board of Parent, materially and adversely impact the economic or business
benefits to Parent of the transactions contemplated by this Agreement. Subject
to applicable laws relating to the exchange of information, Parent and the
Company shall have the right to review in advance, and to the extent
practicable each will consult the other on, all the information relating to
Parent or the Company, as the case may be, and any of their respective
Subsidiaries, that appear in any filing made with, or written materials
submitted to, any third party and/or any Governmental Entity in connection with
the Tender Offer, the Merger and the other transactions contemplated
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by this Agreement. In exercising the foregoing right, each of the Company and
Parent shall act reasonably and as promptly as practicable.
(c) The Company and Parent each shall, upon request by the other, furnish
the other with all information concerning itself, its Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with the Offer Documents, the Schedule 14D-1, the
Schedule 14D-9, the Prospectus/Proxy Statement, the S-4 Registration Statement
or any other statement, filing, notice or application made by or on behalf of
Parent, the Company or any of their respective Subsidiaries to any third party
and/or any Governmental Entity in connection with the Tender Offer, the Merger
and the other transactions contemplated by this Agreement.
(d) The Company and Parent each shall keep the other apprised of the
status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be, or any of
its Subsidiaries, from any third party and/or any Governmental Entity with
respect to the Tender Offer, the Merger and the other transactions contemplated
by this Agreement. The Company and Parent each shall give prompt notice to the
other of any change that is reasonably likely to result in a Company Material
Adverse Effect or Parent Material Adverse Effect, respectively.
(e) The Company shall enter into and cooperate with Parent in Parent's
attempts to cause each of the persons listed in Section 6.5(e) of the Company
Disclosure Schedule to enter into prior to the earlier of the consummation of
the Tender Offer and the Effective Time an Amendment of Severance Agreement in
the form attached hereto as Exhibit B or C, as applicable.
6.6 Taxation. Subject to Section 6.2, neither Parent nor the Company
shall take or cause to be taken any action, whether before or after the
Effective Time, that would disqualify the Merger as a "reorganization" within
the meaning of Section 368(a) of the Code. Each of Parent and the Company
agrees to use all reasonable efforts to cure any impediment to the
qualification of the Merger as a "reorganization" within the meaning of Section
368(a) of the Code.
6.7 Access. (a) Upon reasonable notice, and except as may otherwise be
required by applicable law, the Company shall (and shall cause its Subsidiaries
to) afford Parent's officers, employees, counsel, accountants and other
authorized representatives ("Representatives") access, during normal business
hours throughout the period prior to the Effective Time, to the Company's and
its Subsidiaries' management, properties, books, contracts and records and,
during such period, shall (and shall cause its Subsidiaries to) furnish
promptly to Parent all information concerning the Company's and its
Subsidiaries' business, properties and personnel as may reasonably be
requested, provided that no investigation pursuant to this Section shall affect
or be deemed to modify any representation or warranty made by the Company, and
provided, further, that the foregoing shall not require the Company to permit
any inspection, or to disclose any information, that in the reasonable judgment
of the Company would result in the disclosure of any trade secrets of third
parties or violate any of its obligations with respect to confidentiality if
the Company shall have used all reasonable efforts to obtain the consent of
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such third party to such inspection or disclosure. All requests for information
made pursuant to this Section 6.7(a) shall be directed to an executive officer
of the Company or such Person as may be designated by the Company's officers.
All such information, and all information obtained pursuant to the immediately
preceding paragraph, shall be governed by the terms of the Confidentiality
Agreement (as hereinafter defined).
The Company will provide, and will cause its Subsidiaries to provide, to
Parent all information relating to financial and market conduct examinations
or other investigations by any Governmental Entity of the Company and/or its
Subsidiaries, including, but not limited to, copies of all correspondence with
any Governmental Entity. The Company and its Subsidiaries will notify Parent
of any meetings or communications with any Governmental Entity on market
conduct or financial examinations and related issues and will permit
representatives of the Parent to participate in all conference calls or
meetings relating to such examinations or investigations. In addition, the
Company and its Subsidiaries will take all actions, including waiving any
confidentiality restrictions, that may be necessary or required to allow any
Governmental Entity to discuss all aspects of their examinations and/or
investigations with Parent; provided, that a representative of the Company
shall be given the opportunity to be present during any such discussions. Prior
to the Effective Time, the Company will use its best efforts to resolve in a
manner reasonably acceptable to Parent any regulatory compliance issues,
including, without limitation, issues arising out of market conduct
examinations.
(b) Upon reasonable notice, and except as may otherwise be required by
applicable law, Parent shall afford the Company's Representatives such access
as is reasonably requested (giving due consideration to the size and
capitalization of, and availability of public information concerning, Parent
and the pricing and other terms contained in this Agreement), during normal
business hours throughout the period prior to the Effective Time, to a limited
number of Parent's management personnel and all relevant books and records,
provided that no investigation pursuant to this Section shall affect or be
deemed to modify any representation or warranty made by Parent, and provided,
further, that the foregoing shall not require Parent to permit any inspection,
or to disclose any information, that in the reasonable judgment of Parent would
result in the disclosure of any trade secrets of third parties or violate any
of its obligations with respect to confidentiality. All requests for
information made pursuant to this Section 6.7(b) shall be directed to an
executive officer of Parent or such Person as may be designated by Parent's
officers. All such information shall be governed by the terms of the
Confidentiality Agreement (as hereinafter defined).
6.8 Affiliates. Prior to the date of consummation of the Tender Offer,
the Company shall deliver to Parent a list of names and addresses of those
Persons who will be, in the opinion of the Company, as of the time of the
Stockholders Meetings referred to in Section 6.4, "affiliates" of the Company
within the meaning of Rule 145 under the Securities Act. There shall be added
to such list the names and addresses of any other Person subsequently
identified by either Parent or the Company as a Person who may be deemed to be
such an affiliate of the Company; provided, however, that no such Person
identified by Parent shall be added to the list of affiliates of the Company
unless Parent delivers to the Company, on or before the date of consummation of
the Tender Offer, an opinion of counsel reasonably satisfactory to the Company
to the effect that such Person is such an affiliate. The Company shall exercise
its reasonable best efforts to deliver or cause to be delivered to Parent,
prior to the date of the consummation of the Tender Offer, from each affiliate
of the Company identified in the foregoing list (as the same may be
supplemented as aforesaid), a letter dated as of the date of consummation of
the Tender Offer, substantially in the form attached as Exhibit A (the
"Affiliates Letter"). Parent shall not be required to maintain the
effectiveness of the S-4 Registration Statement or any other registration
statement under the Securities Act for the purposes of resale of Parent Common
Stock or Parent Preferred Stock by such affiliates received in the Merger and
the certificates representing Parent Common Stock and Parent Preferred Stock
received by such affiliates shall bear a customary legend regarding applicable
Securities Act restrictions and the provisions of this Section.
6.9 Stock Exchange Listing and De-listing. Parent shall use its reasonable
best efforts to cause (i) the shares of Parent Common Stock to be issued in the
Merger to be approved for listing on the NYSE subject to official notice of
issuance and (ii) the shares of Parent Preferred Stock to be issued in the
Merger to be approved for listing on the NYSE subject to official notice of
issuance, prior to the Closing Date. The Surviving Corporation shall use its
best efforts to cause (i) the Common Shares to be de-listed from the NYSE and
de-registered under
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the Exchange Act as soon as practicable following the Effective Time and (ii)
the Preferred Shares to be de-listed from the NYSE and de-registered under the
Exchange Act as soon as practicable following the Effective Time.
6.10 Publicity. The initial press release shall be a joint press release
and thereafter the Company and Parent each shall consult with each other prior
to issuing any press releases or otherwise making public announcements with
respect to the Tender Offer, the Merger and the other transactions contemplated
by this Agreement and prior to making any filings with any third party and/or
any Governmental Entity (including any national securities exchange) with
respect thereto, except as may be required by law or by obligations pursuant to
any listing agreement with or rules of any national securities exchange
interdealer quotation service.
6.11 Benefits; Corporate Headquarters; School and Day Care Facility.
(a) Stock Options.
(i) At the Effective Time, each Company Option whether vested or unvested,
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Company Option, the same number of
shares of Parent Common Stock as the holder of such Company Option would have
been entitled to receive pursuant to the Merger had such holder exercised such
option in full immediately prior to the Effective Time, at a price per share
(rounded up to the nearest whole cent) equal to (y) the aggregate exercise
price for the Common Shares otherwise purchasable pursuant to such Company
Option divided by (z) the number of full shares of Parent Common Stock deemed
purchasable pursuant to such Company Option in accordance with the foregoing;
provided, however, that in the case of any Company Option to which Section 422
of the Code applies, the option price, the number of shares purchasable
pursuant to such option and the terms and conditions of exercise of such option
shall be determined in accordance with the foregoing, subject to such
adjustments as are necessary in order to satisfy the requirements of Section
424(a) of the Code; provided, further, that to the extent that Common Shares
acquired upon exercise of a Company Option would be subject to vesting or other
restrictions under the terms of the relevant Company Stock Plan under which
such Company Option was issued ("Company Restricted Shares"), the number of
shares of Parent Common Stock to be issued upon exercise of an assumed Company
Option in accordance with the foregoing that bears the same ratio to the total
shares of Parent Common Stock deemed purchasable pursuant to such assumed
Company Option as the number of Company Restricted Shares bears to the total
number of Company Shares issuable under such Company Option shall be subject to
the same vesting and other restrictions as would be applicable to the Company
Restricted Shares. At or prior to the Effective Time, the Company shall make
all necessary arrangements with respect to the Company Stock Plans to permit
the assumption of the unexercised Company Options by Parent pursuant to this
Section.
(ii) Effective at the Effective Time, Parent shall assume each Company
Option in accordance with the terms of the relevant Company Stock Plan under
which it was issued and the stock option agreement by which it is evidenced. At
or prior to the Effective Time, Parent shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery upon exercise of Company Options assumed by it in
accordance with this Section. As soon as practicable after the Effective Time,
Parent shall file a
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registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), or another appropriate form (or shall
cause such Company Option to be deemed to be an option issued pursuant to a
Parent Stock Plan for which shares of Parent Common Stock have previously been
registered pursuant to an appropriate registration form) with respect to the
Parent Common Stock subject to such Company Options, and shall use its
reasonable best efforts to maintain the effectiveness of such registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such Company Options remain outstanding.
(b) Employee Benefits. Parent agrees that, during the period commencing at
the Effective Time and ending on the first anniversary thereof, the employees
of the Company and its Subsidiaries will continue to be provided with benefits
under the Company's and its Subsidiaries' existing employee benefit plans
(other than plans involving the issuance or award of Shares or rights to
acquire Shares) that are no less favorable in the aggregate than those
currently provided by the Company and its Subsidiaries to such employees. Any
such employees will receive credit under any plans of Parent or any of its
Subsidiaries for service with the Company or any of its Subsidiaries or
predecessors (to the extent service with such predecessors was credited under
the Compensation and Benefit Plans disclosed in the Company Disclosure Letter)
prior to the Effective Time for the purpose of determining eligibility and
vesting; and Parent shall cause any and all pre-existing condition limitations
(to the extent such limitations did not apply to a pre-existing condition under
the Compensation and Benefit Plans) and eligibility waiting periods under group
health plans of the Parent or any of its Subsidiaries to be waived with respect
to such participants and their eligible dependents. All discretionary awards
and benefits under any employee benefit plans of Parent or any of its
Subsidiaries shall be subject to the discretion of the persons or committee
administering such plans.
(c) Corporate Headquarters. Parent shall maintain the corporate
headquarters of the Surviving Corporation at the Company's current Miami
location for the foreseeable future, and in any event, for not less than five
years from the Effective Time.
(d) School and Day Care Facility. Parent shall ensure, to the extent
within its reasonable control, that the public school and day care facility
operated on or adjacent to the Company's current Miami location shall remain in
operation at their current locations for so long as the Surviving Corporation's
corporate headquarters shall be maintained at the Company's current Miami
location.
6.12 Expenses. The Surviving Corporation shall pay all charges and
expenses, including those of the Exchange Agent, in connection with the
transactions contemplated in Article IV. Except as otherwise provided in
Section 8.5(b), whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the Tender Offer, the
Merger and the other transactions contemplated by this Agreement shall be paid
by the party incurring such expense, except that expenses incurred in
connection with the filing fee for the S-4 Registration Statement and printing
and mailing the Offer Documents, the Schedule 14D-1, the Schedule 14D-9, the
Prospectus/Proxy Statement and the S-4 Registration Statement shall be shared
equally by Parent and the Company.
6.13 Indemnification; Directors' and Officers' Insurance.
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(a) From and after the Effective Time, Parent agrees that it will
indemnify and hold harmless each present and former director and officer of the
Company, (when acting in such capacity) determined as of the Effective Time
(each, an Indemnified Party and, collectively, the "Indemnified Parties"),
against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively,
"Costs") incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
arising out of matters existing or occurring at or prior to the Effective Time,
whether asserted or claimed prior to, at or after the Effective Time, including
without limitation any and all shareholder lawsuits existing on the date
hereof, to the fullest extent that the Company would have been permitted under
Florida law and its charter or by-laws in effect on the date hereof to
indemnify such Person (and Parent shall also advance expenses as incurred to
the fullest extent permitted under applicable law provided the Person to whom
expenses are advanced provides a written affirmation of his or her good faith
belief that the standard of conduct necessary for indemnification has been
met), and an undertaking to repay such advances if it is ultimately determined
that such Person is not entitled to indemnification).
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 6.13, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Parent thereof, but the
failure to so notify shall not relieve Parent of any liability it may have to
such Indemnified Party if such failure does not materially prejudice the
indemnifying party. Parent is hereby deemed notified of all shareholder
lawsuits existing on the date hereof. In the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the
Effective Time), (i) Parent or the Surviving Corporation shall have the right
to assume the defense thereof and Parent shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if Parent or the Surviving Corporation elects
not to assume such defense or counsel for the Indemnified Parties advises that
there are issues which raise conflicts of interest between Parent or the
Surviving Corporation and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and Parent or the Surviving Corporation
shall pay all reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received; provided, however, that
Parent shall be obligated pursuant to this paragraph (b) to pay for only one
firm of counsel for all Indemnified Parties in any jurisdiction unless the use
of one counsel for such Indemnified Parties would present such counsel with a
conflict of interest, (ii) the Indemnified Parties will cooperate in the
defense of any such matter and (iii) Parent shall not be liable for any
settlement effected without its prior written consent; and provided, further,
that Parent shall not have any obligation hereunder to any Indemnified Party if
and when a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law.
(c) The Surviving Corporation shall maintain the Company's existing
officers' and directors' liability insurance ("D&O Insurance") or D&O Insurance
that is substantially comparable to the Company's existing D&O Insurance for a
period of two years after the Effective Time so long as the annual premium
therefor is not in excess of 200% of the last annual premium paid prior to the
date hereof (such last annual premium being hereinafter referred to as the
"Current Premium"); provided, however, that if the existing D&O Insurance or
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substantially comparable D&O Insurance cannot be acquired during the two-year
period for not in excess of 200% of the Current Premium, then the Surviving
Corporation will obtain as much D&O Insurance as can be obtained for the
remainder of such period for a premium not in excess (on an annualized basis)
of 200% of the Current Premium. If the D&O Insurance is terminated prior to the
end of the sixth anniversary of the Effective Time, the Surviving Corporation
will purchase extended reporting coverage under D&O Insurance covering claims
made during the remainder of such period with respect to acts which occurred
prior to the Effective Time.
(d) The provisions of this Section are intended to be for the benefit of,
and shall be enforceable by, each of the Indemnified Parties, their heirs and
their representatives.
6.14 [Reserved]
6.15 Other Actions by the Company and Parent.
(a) Rights. If requested by Parent at least three business days prior to
the Expiration Date or the Effective Time, as the case may be, the board of
directors of the Company shall take all necessary action to terminate or redeem
all of the outstanding New Rights and to terminate the New Rights Agreement,
effective immediately prior to the Expiration Date or the Effective Time, as
the case may be.
(b) Takeover Statute. If any Takeover Statute is or may become applicable
to the Tender Offer, the Merger or the other transactions contemplated by this
Agreement, each of Parent and the Company and its board of directors shall
grant such approvals and take such actions as are necessary so that such
transactions may be consummated as promptly as practicable on the terms
contemplated by this Agreement or by the Tender Offer or the Merger and
otherwise act to eliminate or minimize the effects of such statute or
regulation on such transactions.
(c) Dividends. The Company shall coordinate with Parent the declaration,
setting of record dates and payment dates of dividends on Common Shares and
Preferred Shares so that holders of Common Shares and Preferred Shares do not
receive dividends on (i) both Common Shares and Parent Common Stock received in
the Merger or (ii) both Preferred Shares and Parent Preferred Stock received in
the Merger in respect of any calendar quarter or portion thereof or fail to
receive a dividend on (i) either Common Shares or Parent Common Stock received
in the Merger or on (ii) either Preferred Shares or Parent Preferred Stock
received in the Merger in respect of any calendar quarter.
ARTICLE VII
Conditions
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) Listing. The shares of Parent Common Stock issuable to the holders of
Common Shares pursuant to this Agreement shall have been authorized for listing
on the NYSE
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upon official notice of issuance. The shares of Parent Preferred Stock issuable
to the holders of Preferred Shares pursuant to this Agreement shall have been
authorized for listing on the NYSE upon official notice of issuance.
(b) Litigation. No court or Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any law, statute,
ordinance, rule, regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) that is in effect and restrains,
enjoins or otherwise prohibits consummation of the Merger (collectively, an
"Order").
(c) S-4. The S-4 Registration Statement shall have become effective under
the Securities Act. No stop order suspending the effectiveness of the S-4
Registration Statement shall have been issued, and no proceeding for that
purpose shall have been initiated or be threatened, by the SEC.
(d) Blue Sky Approvals. Parent shall have received all state securities
and "blue sky" permits and approvals, if any, necessary to consummate the
transactions contemplated hereby.
(e) Purchase of Shares in the Tender Offer. Merger Subsidiary shall have
purchased Common Shares pursuant to the Tender Offer, except that this
condition shall not constitute a condition to Merger Subsidiary's and Parent's
obligations to effect the Merger if Merger Subsidiary shall have failed to
purchase Shares pursuant to the Tender Offer in breach of its or Parent's
obligations under this Agreement.
7.2 Conditions to Obligations of Parent and Merger Subsidiary. The
obligations of Parent and Merger Subsidiary to effect the Merger are also
subject to the satisfaction or waiver by Parent at or prior to the Effective
Time of the following conditions:
(a) Tax Opinion. Parent shall have received, prior to the effective date
of the S-4 Registration Statement, the opinion of Skadden, Arps, Slate, Meagher
& Flom LLP, counsel to Parent, to the effect that the Merger will be treated
for Federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code, and that each of Parent, Merger Subsidiary and the
Company will be a party to that reorganization within the meaning of Section
368(b) of the Code, and such firm shall have reconfirmed such opinion as of the
Closing Date. In rendering such opinion, Skadden, Arps, Slate, Meagher & Flom
LLP may rely upon and require such certificates of the Company, Parent and
Merger Subsidiary and/or their officers or principal stockholders as are
customary for such opinions.
(b) Affiliates Letters. Parent shall have received an Affiliates Letter
from each Person identified as an affiliate of the Company pursuant to Section
6.8.
(c) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent shall have
received a certificate signed on behalf of the Company by an executive officer
of the Company to such effect. Notwithstanding the foregoing, if, immediately
prior to the Effective Time, at least one-half of the members of the
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board of directors of the Company are nominees or designees of Parent, this
condition shall be deemed to be waived in all respects by Parent and Merger
Subsidiary.
7.3 Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company at or prior to the Effective Time of the following conditions:
(a) Tax Opinion. The Company shall have received, prior to the effective
date of the S-4 Registration Statement, the opinion of Jorden Burt Boros
Cicchetti Berenson & Johnson LLP, counsel to the Company, to the effect that
the Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, and that each of Parent,
Merger Subsidiary and the Company will be a party to that reorganization within
the meaning of Section 368(b) of the Code, and such firm shall have reconfirmed
such opinion as of the Closing Date. In rendering such opinion, Jorden Burt
Boros Cicchetti Berenson & Johnson LLP may rely upon and require such
certificates of the Company, Parent and Merger Subsidiary and/or their officers
or principal stockholders as are customary for such opinions.
ARTICLE VIII
Termination
8.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, by mutual
written consent of the Company and Parent by action of their respective Boards
of Directors.
8.2 Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of either Parent or the Company if (a) Merger Subsidiary shall have terminated
the Tender Offer, in accordance with the terms of Section 1.4 without
purchasing any Common Shares pursuant thereto (b) the purchase of Common Shares
pursuant to the Tender Offer shall not have been consummated by December 31,
1998, whether such date is before or after the approval by the stockholders of
the Company or (c) any Order permanently restraining, enjoining or otherwise
prohibiting consummation of the Tender Offer or the Merger shall become final
and non-appealable (whether before or after the approval by the stockholders of
the Company or Parent); provided, that the right to terminate this Agreement
pursuant to clause (a) or clause (b) above shall not be available to any party
that has breached in any material respect its obligations under this Agreement
in any manner that shall have proximately contributed to the occurrence of the
failure of the Tender Offer or the Merger to be consummated.
8.3 Termination by the Company. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the earlier of (x) acceptance for
payment of Common Shares pursuant to the Tender Offer or (y) the approval of
the Merger by the Company Requisite Vote, in the case of clause (a), or the
Effective Time, in the case of clause (b), by action of the Board of Directors
of the Company:
(a) if (i) the Company is not in material breach of any of the terms of
this Agreement, (ii) the Board of Directors of the Company authorizes the
Company, subject to
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complying with the terms of this Agreement, to enter into a binding written
agreement concerning a transaction that constitutes a Superior Proposal and the
Company notifies Parent in writing that it intends to enter into such an
agreement, attaching the most current version of such agreement to such notice,
(iii) Parent does not make, prior to five business days after receipt of the
Company's written notification of its intention to enter into a binding
agreement for a Superior Proposal (the "Alternative Transaction Notice"), an
offer that the Board of Directors of the Company determines, in good faith
after consultation with its financial advisors, is at least as favorable as the
Superior Proposal, taking into account the long term prospects and interests of
the Company and its stockholders, and (iv) the Company prior to such
termination pays to Parent in immediately available funds the fees required to
be paid pursuant to Section 8.5. Without limiting the generality of the
foregoing, the Company agrees and acknowledges (x) that it cannot terminate
this Agreement pursuant to this Section 8.3(a) in order to enter into a binding
agreement referred to in clause (ii) above until at least five business days
after receipt of the Alternative Transaction Notice and (y) to notify Parent
promptly if its intention to enter into a written agreement referred to in its
Alternative Transaction Notice shall change at any time after giving such
notification;
(b) if there has been a material breach by Parent or Merger Subsidiary of
any representation, warranty, covenant or agreement contained in this Agreement
that is not curable or, if curable, is not cured within 20 days after written
notice of such breach is given by the Company to the party committing such
breach.
8.4 Termination by Parent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the earlier of (x) acceptance for
payment of Common Shares pursuant to the Tender Offer or (y) the approval of
the Merger by the Company Requisite Vote, in the case of clause (a), or the
Effective Time, in the case of clause (b), by action of the Board of Directors
of Parent if (a) the Company enters into a binding agreement for, or
recommends, a Superior Proposal or the Board of Directors of the Company shall
have withdrawn or adversely modified its approval or recommendation of this
Agreement or, after the mailing of the Prospectus/Proxy Statement or the Offer
Documents, failed to reconfirm its recommendation of this Agreement within ten
business days after a reasonable written request by Parent to do so, or (b)
there has been a material breach by the Company of any representation,
warranty, covenant or agreement contained in this Agreement that is not curable
or, if curable, is not cured within 20 days after written notice of such breach
is given by Parent to the party committing such breach.
8.5 Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article VIII, this Agreement (other than as set
forth in Section 9.1) shall become void and of no effect with no liability
(other than the liabilities arising under the provisions, including this
Section 8.5, set forth in Section 9.1) on the part of any party hereto (or of
any of its directors, officers, employees, agents, legal and financial advisors
or other representatives); provided, however, except as otherwise provided
herein, no such termination shall relieve any party hereto of any liability or
damages resulting from any breach of this Agreement.
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(b) In the event that this Agreement is terminated (i) by the Company
pursuant to Section 8.3(a), (ii) by Parent pursuant to Section 8.4(a) or (iii)
by either Parent or the Company pursuant to Section 8.2(a) or 8.2(b) (and at
the time of such termination pursuant to Section 8.2(a) or 8.2(b) any Person
shall then be making or proposing an Acquisition Proposal to the Company or any
of its Subsidiaries or any of its stockholders), then the Company shall, not
later than immediately prior to the time of such termination or, in the case of
clause (i), not later than immediately prior to the time of entering into an
agreement concerning a transaction that constitutes a Superior Proposal, pay
Parent a termination fee of $94.9 million plus an amount equal to Parent's
charges and expenses incurred in connection with the transactions contemplated
by this Agreement, up to a maximum of $5,000,000 in each case by wire transfer
of same day funds. In order to facilitate the timely making of the foregoing
payment, in the event that Parent elects to terminate this Agreement, Parent
shall notify the Company thereof not later than 10:00 a.m. (New York City time)
on the business day immediately preceding the date of such termination. In the
event that Parent fails to provide such advance notice of its election to
terminate this Agreement, the Company shall be obligated to make the foregoing
payment not later than 12:00 p.m. (New York City time) on the business day
immediately following the date of such termination. The Company acknowledges
that the agreements contained in this Section 8.5(b) are an integral part of
the transactions contemplated by this Agreement, and that, without these
agreements, Parent and Merger Subsidiary would not have entered into this
Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to this Section 8.5(b), and, in order to obtain such payment, Parent
or Merger Subsidiary commences a suit which results in a judgment against the
Company for the fee set forth in this paragraph (b), the Company shall pay to
Parent or Merger Subsidiary its costs and expenses (including attorneys' fees)
in connection with such suit, together with interest from the date of
termination of this Agreement on the amounts owed at the prime rate of The
Chase Manhattan Bank, in effect from time to time during such period plus two
percent.
(c) In the event this Agreement is terminated by the Company or Parent
pursuant to Section 8.2(a) or 8.2(b) and at the time of such termination no
Person is then making or proposing an Acquisition Proposal to the Company or
any of its Subsidiaries or any of its stockholders, then the Company shall
promptly, but in no event later than two business days after Parent shall have
requested payment of its charges and expenses incurred in connection with the
transactions contemplated hereby ("Expenses"), pay to Parent the amount of such
Expenses up to a maximum of $5,000,000 and, if within 18 months of such
termination, the Company enters into an agreement concerning a transaction that
constitutes an Acquisition Proposal, the Company at the time of entering into
such agreement, shall pay to Parent the termination fee of $94.9 million, in
each case payable by wire transfer of same day funds.
(d) Notwithstanding anything contained herein to the contrary, any payment
owed by the Company to Parent pursuant to this Section 8.5 shall by payable as
follows: (i) any amounts up to the first $70 million shall be payable in cash
and (ii) the balance shall be payable by delivery of a note, which shall (i)
bear interest at the prime rate of The Chase Manhattan Bank in effect from time
to time plus two percent, (ii) have a final maturity of the earlier of the
consummation of a transaction contemplated by an Acquisition Proposal or one
year from the date of termination of this Agreement and (iii) have other
customary terms and conditions.
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ARTICLE IX
Miscellaneous and General
9.1 Survival. This Article IX and the agreements of the Company, Parent
and Merger Subsidiary contained in Sections 6.11 (Benefits) and 6.13
(Indemnification; Directors' and Officers' Insurance) shall survive the
consummation of the Merger. This Article IX, the agreements of the Company,
Parent and Merger Subsidiary contained in Section 6.7 (Access), insofar as it
relates to the Company's and Parent's respective confidentiality obligations,
Section 6.12 (Expenses) and Section 8.5 (Effect of Termination and Abandonment)
shall survive the termination of this Agreement. All other representations,
warranties, covenants and agreements in this Agreement shall not survive the
consummation of the Merger or the termination of this Agreement.
9.2 Modification or Amendment. Subject to the provisions of applicable
law, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties.
9.3 Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
9.4 Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.5 GOVERNING LAW; WAIVER OF JURY TRIAL.
(A) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL
BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE
STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF,
EXCEPT THAT MATTERS RELATING TO THE VALIDITY AND EFFECTS OF THE MERGER AND THE
FIDUCIARY OBLIGATIONS OF THE DIRECTORS OF THE COMPANY REFERRED TO IN SECTION
6.2 AND 6.4 HEREOF SHALL BE GOVERNED BY THE APPLICABLE PROVISIONS OF THE
FLORIDA BUSINESS CORPORATION LAW.
(B) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (I) NO
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REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER, (II) EACH PARTY UNDERSTANDS AND HAS CONSIDERED
THE IMPLICATIONS OF THIS WAIVER, (III) EACH PARTY MAKES THIS WAIVER
VOLUNTARILY, AND (IV) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
9.5.
(C) THE COMPANY AND MERGER SUBSIDIARY EACH AGREES THAT, IN CONNECTION WITH
ANY LEGAL SUIT OR PROCEEDING ARISING WITH RESPECT TO THIS AGREEMENT, IT SHALL
SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT
OF DELAWARE AND AGREES TO VENUE IN SUCH COURTS. THE COMPANY AND MERGER
SUBSIDIARY EACH HEREBY APPOINTS THE SECRETARY OF THE COMPANY AND MERGER
SUBSIDIARY, RESPECTIVELY, AS ITS AGENT FOR SERVICE OF PROCESS FOR PURPOSES OF
THE FOREGOING SENTENCE ONLY.
9.6 Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:
if to Parent or Merger Subsidiary
Cendant Corporation
6 Sylvan Way
Parsippany, New Jersey 07054
Attention: General Counsel
fax: (973) 496-5335
(with a copy to
David Fox, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
fax: (212) 735-2000
if to the Company
American Bankers Insurance Group, Inc.
11222 Quail Roost Drive
Miami, Florida 33157
Attention: Chief Executive Officer
fax: (305) 252-7068
(with a copy to Josephine Cicchetti, Esq.,
Jorden Burt Boros Cicchetti Berenson & Johnson LLP
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777 Brickell Avenue, Suite 500
Miami, Florida 33131
fax: (305) 372-9928
and
Jonathan L. Freedman, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
fax: (212) 259-6333)
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
9.7 Entire Agreement; No Other Representations. This Agreement (including
any exhibits hereto), the Company Disclosure Letter, the Parent Disclosure
Letter and the Confidentiality Agreement between Parent and the Company (the
"Confidentiality Agreement") constitute the entire agreement, and supersede all
other prior agreements, understandings, representations and warranties both
written and oral, among the parties, with respect to the subject matter hereof.
9.8 No Third Party Beneficiaries. Except as provided in Section 6.13
(Indemnification; Directors' and Officers' Insurance), this Agreement is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
9.9 Obligations of Parent and of the Company. Whenever this Agreement
requires a Subsidiary of Parent to take any action, such requirement shall be
deemed to include an undertaking on the part of Parent to cause such Subsidiary
to take such action. Whenever this Agreement requires a Subsidiary of the
Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
9.10 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
9.11 Interpretation. The table of contents and headings herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed
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to limit or otherwise affect any of the provisions hereof. Where a reference in
this Agreement is made to a Section or Exhibit, such reference shall be to a
Section of or Exhibit to this Agreement unless otherwise indicated. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
9.12 Assignment. This Agreement shall not be assignable by operation of
law or otherwise; provided, however, that Parent may designate, by written
notice to the Company, another wholly-owned direct or indirect Subsidiary to be
a Constituent Corporation in lieu of Merger Subsidiary, in which event all
references herein to Merger Subsidiary shall be deemed references to such other
Subsidiary, except that all representations and warranties made herein with
respect to Merger Subsidiary as of the date of this Agreement shall be deemed
representations and warranties made with respect to such other Subsidiary as of
the date of such designation.
9.13 Alternative Transaction Structure. Notwithstanding anything to the
contrary contained in this Agreement, if the Company Preferred Stock Requisite
Vote is not obtained at the meeting duly convened to consider the Merger or
Parent reasonably determines that the Company Preferred Stock Requisite Vote is
not likely to be obtained pursuant to the Agreement (other than pursuant to
this Section 9.13), Parent shall, subject to the Company Common Stock Requisite
Vote and the other terms and conditions of this Agreement, merge Merger
Subsidiary with and into the Company such that the separate corporate existence
of Merger Subsidiary shall cease and the Company shall continue as the
Surviving Corporation. In connection with the alternative transaction
contemplated by the prior sentence, the Company shall take all actions
reasonably requested by Parent including, without limitation, promptly amending
this Agreement, as Parent may reasonably deem necessary or appropriate,
including, if applicable, to provide that the Preferred Shares shall remain
outstanding after the Merger pursuant to the same terms and conditions as are
in effect on the date hereof (except that the Preferred Shares shall be
convertible into Parent Common Stock) and eliminating the covenant contained in
Section 6.6 and the conditions to closing contained in Sections 7.2(a) and
7.3(a).
9.14 Effectiveness. This Agreement shall be effective simultaneously with
the termination of that certain Amended and Restated Agreement and Plan of
Merger dated as of December 21, 1997, as amended and restated as of January 7,
1998, as amended by Amendment No. 1 thereto dated as of January 28, 1998, and
as amended and restated as of February 28, 1998 among the Company, American
International Group, Inc. and AIGF, Inc.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first written above.
AMERICAN BANKERS INSURANCE GROUP, INC.
By: /s/ Gerald N. Gaston
-------------------------------------
Name: Gerald N. Gaston
Title: President and Chief Executive
Officer
CENDANT CORPORATION
By: /s/ Henry R. Silverman
-------------------------------------
Name: Henry R. Silverman
Title: President and Chief Executive
Officer
SEASON ACQUISITION CORP.
By: /s/ Henry R. Silverman
-------------------------------------
Name: Henry R. Silverman
Title:
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ANNEX I
CERTAIN CONDITIONS OF THE TENDER OFFER. The capitalized terms used in this
Annex I have the meanings set forth in the attached Agreement. Notwithstanding
any other provision of the Tender Offer, Merger Subsidiary shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Merger Subsidiary's obligation to pay for or return tendered
Common Shares promptly after termination or withdrawal of the Tender Offer),
pay for, or may delay the acceptance for payment of or payment for, any
tendered Common Shares, or may, in its reasonable discretion, terminate or
amend the Tender Offer as to any Common Shares not then paid for if (a) prior
to the Expiration Date (i) there shall not have been tendered and not withdrawn
at least that number of Common Shares which, together with Shares owned by
Parent or Merger Subsidiary, constitute at least 51% of the Common Shares
outstanding on a fully diluted basis (the "Minimum Tender Condition"), (ii) any
waiting period applicable to the consummation of the Tender Offer and the
Merger under the HSR Act shall not have expired or been terminated, (iii) other
than the filing provided for in Section 1.3 of the Agreement, any notices,
reports and other filings required to be made prior to the Effective Time by
the Company or Parent or any of their respective Subsidiaries with, and all
consents, registrations, approvals, permits and authorizations required to be
obtained prior to the Effective Time by the Company or Parent or any of their
respective Subsidiaries from, any Governmental Entity (collectively,
"Governmental Consents"), in connection with the execution and delivery of the
Agreement and the consummation of the Tender Offer and the Merger and the other
transactions contemplated by the Agreement shall not have been made or obtained
(as the case may be), or (iv) the Company shall not have obtained the consent
or approval of each Person whose consent or approval shall be required under
any Contract to which the Company or any of its Subsidiaries is a party, except
those for which the failure to obtain such consents or approvals is not,
individually or in the aggregate, reasonably likely to have a Company Material
Adverse Effect or is not, individually or in the aggregate, reasonably likely
to prevent or to materially burden or materially impair the ability of the
Company to consummate the transactions contemplated by the Agreement; or any
such consent or approval, or any Governmental Consent, imposes any condition or
conditions relating to, or requires changes or restrictions in, the operations
of any asset or businesses of the Company, Parent or their respective
Subsidiaries which could, in the judgment of the board of directors of Parent,
individually or in the aggregate, materially and adversely impact the economic
or business benefits to Parent and its Subsidiaries of the transactions
contemplated by the Agreement; or (b) at or before the expiration of the Tender
Offer (whether or not any Common Shares have theretofore been accepted for
payment), any of the following events shall occur:
(i) any court or Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated,
enforced or entered any law, statute, ordinance, rule,
regulation, judgment, decree, injunction or other order
(whether temporary, preliminary or permanent) that is in
effect and restrains, enjoins or otherwise prohibits
consummation of the Tender Offer or the Merger, or which
makes the acceptance for payment of, or payment for, any
Common Shares in the Tender Offer illegal;
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(ii) the representations and warranties of the Company set
forth in the Agreement shall not be true and correct in all
material respects as of the date made; or such
representations and warranties shall not be true and correct
as of the Expiration Date as though made on and as of the
Expiration Date (except to the extent any such representation
or warranty expressly speaks as of an earlier
date(disregarding the parenthetical clause at the end of the
lead-in to Section 5.1 for these purposes)) except where the
failure of such representations and warranties to be so true
and correct (without giving effect to any qualifications as
to "Company Material Adverse Effect", "material" or similar
qualifications set forth in the Agreement) are not,
individually or in the aggregate, reasonably likely to have a
Company Material Adverse Effect, or Parent shall not have
received a certificate on the Expiration Date signed on
behalf of the Company by an executive officer of the Company
to such effect;
(iii) the Company shall not have performed in all material
respects all obligations required to be performed by it under
the Agreement at or prior to the Expiration Date; or
(iv) the Agreement shall have been terminated in accordance
with its terms prior to the Expiration Date; or Parent,
Merger Subsidiary and the Company shall have otherwise agreed
that Merger Subsidiary may amend, terminate or withdraw the
Tender Offer;
which, in the reasonable judgment of Parent and Merger Subsidiary, in any such
case, and regardless of the circumstances (including any action or inaction by
Parent or Merger Subsidiary) giving rise to any such conditions, makes it
inadvisable to proceed with the Tender Offer and/or with such acceptance for
payment of or payment for Common Shares.
The foregoing conditions are for the sole benefit of Parent
and Merger Subsidiary and may be asserted by Parent or Merger Subsidiary
regardless of the circumstances (including any action or inaction by Parent or
Merger Subsidiary) giving rise to such condition or may be waived by Parent or
Merger Subsidiary, by express and specific action to that effect, in whole or
in part at any time and from time to time in their sole discretion. Any
determination by Parent and Merger Subsidiary concerning any event described in
this Annex I shall be final and binding upon all holders of Common Shares. The
failure by Merger Subsidiary at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right, the waiver of any such
right with respect to particular facts and other circumstances shall not be
deemed a waiver with respect to any other facts and circumstances, and each
such right shall be deemed an ongoing right that may be asserted at any time
and from time to time.
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