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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 12, 1996
Financial Institutions Insurance Group, Ltd.
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(Exact name of registrant as specified in its charter)
Delaware 0-15404 36-3468795
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
300 Delaware Avenue, Wilmington, Delaware 19801
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (302) 427-5800
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Item 5. Other Events.
On April 12, 1996, Financial Institutions Insurance Group, Ltd. (the "Company")
executed a Merger Agreement with FIIG Holding Corp., a wholly-owned subsidiary
of Castle Harlan Partners II, L.P. ("Buyer"), and FIIG Merger Corp., a
wholly-owned subsidiary of Buyer ("Buyer Sub"), pursuant to which Buyer Sub
will merge with and into the Company and each outstanding share of common stock
of the Company will be converted into the right to receive $16.00 in cash (the
"Merger"). Pursuant to a letter agreement dated January 4, 1996 between John
A. Dore, President and Chief Executive Officer of the Company, and Castle
Harlan, Inc., John Dore also will be a stockholder and Chief Executive Officer
of the Buyer.
The Merger is subject to certain conditions, including the approval and
adoption of the Merger Agreement by the holders of a majority of the
outstanding shares of the Company, the obtaining of all necessary regulatory
approvals, and other customary closing conditions. The Merger is not
conditioned upon receipt of financing.
The Merger Agreement further provides under certain circumstances for the
payment of a cash fee in the amount of $3,500,000 to Castle Harlan Partners II,
L.P. in the event the Company executes an agreement with a third party
involving a merger or other business combination or sale of a substantial
portion of the assets or stock of the Company prior to February 17, 1997.
Certain directors and executive officers with ownership of an aggregate of
approximately 20% of the outstanding common stock of the Company also will
enter into Voting Agreements pursuant to which each such stockholder will agree
to vote his shares in favor of the Merger.
The discussion herein of the terms of the Merger Agreement and Voting Agreement
is qualified in its entirety by reference to such agreements, copies of which
are attached hereto as Exhibits.
Item 7. Exhibits.
The following exhibits are filed as part of this report:
2.1 Merger Agreement dated April 12, 1996 by and among Financial
Institutions Insurance Group, Ltd., FIIG Holding Corp. and FIIG
Merger Corp.
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2.2 Form of Voting Agreement to be executed by certain directors
and executive officers of the Company.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FINANCIAL INSTITUTIONS INSURANCE GROUP, LTD.
(Registrant)
Date: April 16, 1996 /s/ Robert E. Wendt
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Robert E. Wendt, Senior Vice President
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EXHIBIT (2.1)
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MERGER AGREEMENT
by and among
FIIG HOLDING CORP.,
FIIG MERGER CORP.
and
FINANCIAL INSTITUTIONS INSURANCE GROUP, LTD.
Dated as of: April 12, 1996
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MERGER AGREEMENT
MERGER AGREEMENT, dated as of April 12, 1996 (this "Agreement"), by and
among FIIG Holding Corp. ("Buyer"), a Delaware corporation, FIIG Merger Corp.,
a wholly-owned subsidiary of Buyer and a Delaware corporation ("Buyer Sub"),
and Financial Institutions Insurance Group, Ltd., a Delaware corporation (the
"Company").
RECITALS:
WHEREAS, subject to the terms and conditions of this Agreement, each of
the boards of directors of Buyer, Buyer Sub and the Company have approved the
merger (the "Merger") of Buyer Sub into the Company, in accordance with the
Delaware General Corporation Law (the "DGCL") and subject to the terms and
conditions set forth in this Agreement;
WHEREAS, holders in excess of, in the aggregate, 20% of the issued and
outstanding Common Stock (as hereinafter defined) have contemporaneously
herewith entered into voting agreements in the form of Exhibit A hereto (the
"Voting Agreement"), pursuant to which such stockholders agree to vote all of
their shares of Common Stock to approve the Merger and the transactions
contemplated hereby; and
WHEREAS, in furtherance of the consummation of the Merger and transactions
contemplated herein, the parties hereto desire to enter into this Agreement;
NOW, THEREFORE, in consideration of and premised upon the various
representations, warranties, covenants and other agreements and undertakings of
Buyer, Buyer Sub and the Company contained in this Agreement, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Buyer, Buyer Sub and the Company agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. (a) The following terms shall have the meaning
specified in the indicated section of this Agreement:
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<TABLE>
<CAPTION>
Term Section Term Section
---- ------- ---- -------
<S> <C> <C> <C>
Acquisition Proposal ............... Section 8.7.
Acquiror Approvals ................. Section 7.5.
Affiliated Group ................... Section 6.17.
Agreement .......................... Recitals.
Annual Convention Statements ....... Section 6.11.
Annual Financial Statements ........ Section 6.11.
Applicable Insurance Law ........... Section 6.11.
Benefit Plan ....................... Section 6.18.
Buyer .............................. Recitals.
Buyer Related Agreements ........... Section 7.3
Buyer Sub .......................... Recitals.
Buyer Sub Common Stock ............. Section 3.1.
Cash Consideration Per Option ...... Section 3.7
Cash Consideration Per Share ....... Section 3.1.
CHPII .............................. Section 8.2.
Closing ............................ Section 5.1.
Closing Date ....................... Section 5.1.
Code ............................... Section 6.17.
Common Stock ....................... Section 3.1.
Company ............................ Recitals.
Confidentiality Agreement .......... Section 8.2.
Connecticut Approval ............... Section 9.3.
Connecticut Waiver ................. Section 9.3.
Constituent Corporations ........... Section 2.1.
DGCL ............................... Recitals.
Dissenting Stockholder ............. Section 4.1.
Effective Date ..................... Section 2.2.
Effective Time ..................... Section 2.2.
Environmental Actions .............. Section 6.27.
Environmental Laws ................. Section 6.27.
ERISA .............................. Section 6.18.
ERISA Affiliate .................... Section 6.18.
Exchange Act ....................... Section 6.10.
FRH ................................ Section 6.5.
Governmental Entity ................ Section 6.9.
Hazardous Substances ............... Section 6.27.
HSR Act ............................ Section 6.5.
Merger ............................. Recitals.
Insurance Regulatory Approvals ..... Section 6.5. NAIC ............................... Section 6.11.
Investments ........................ Section 6.19. Options ............................ Section 3.7.
IRS ................................ Section 6.18. Paying Agent ....................... Section 3.2.
IRIS ............................... Section 6.11. Payment Fund ....................... Section 3.2.
Letter of Transmittal .............. Section 3.3. Payment Fund Investment ............ Section 3.6.
Lien ............................... Section 6.4. Permits ............................ Section 6.5.
Loss Reserves ...................... Section 6.11. Preventative Litigation ............ Section 10.6.
Material Adverse Effect ............ Section 6.1. Producer ........................... Section 6.14
</TABLE>
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<TABLE>
<S> <C>
Proxy Statement .................... Section 8.8.
Quarterly Convention Statements .... Section 6.11.
Reinsurance Agreements ............. Section 6.12.
Related Agreements ................. Section 6.3.
Rights ............................. Section 6.8.
SEC ................................ Section 6.5.
SEC Documents ...................... Section 6.10.
SEC Filing ......................... Section 8.6.
Securities Act ..................... Section 6.10.
Sellers Approvals .................. Section 6.5.
Subsidiary ......................... Section 6.2
Surviving Corporation .............. Section 2.1.
Surviving Corporation By-laws ...... Section 2.4.
Surviving Corporation Certificate .. Section 2.3.
Surviving Corporation Common Stock Section 3.1.
Tangible Property .................. Section 6.21.
Tax ................................ Section 6.17.
Third Party Consents ............... Section 6.5.
Unsolicited Sale ................... Section 8.7.
Voting Agreement ................... Recitals.
</TABLE>
(b) All references herein to dollars or "$" shall be to United States
dollars.
(c) As used herein, the phrase "to the Company's knowledge", or "to the
best knowledge of the Company" or other similar phrase refers to the knowledge
of the officers of the Company and its Subsidiaries.
ARTICLE II
THE MERGER
SECTION 2.1. Merger. Upon the terms and subject to the conditions set
forth in this Agreement and in accordance with the DGCL, at the Effective Time,
Buyer Sub shall be merged with and into the Company, whereupon the Company
shall continue as the surviving corporation (sometimes referred to herein as
the "Surviving Corporation") and the separate corporate existence of Buyer Sub
shall cease. The Company and Buyer Sub are sometimes referred to herein,
collectively, as the "Constituent Corporations".
SECTION 2.2. Effective Time. (a) The Merger shall be effective when a
properly executed certificate of merger setting forth the information required
by Section 251 of the DGCL, (together with any other documents, certificates
and instruments required by law to effectuate and consummate the Merger) shall
be filed with the Secretary of State of the State of Delaware (or at such other
time as shall be specified in such certificate of merger), which filing shall
be made as soon as practicable after satisfaction (or waiver) of the conditions
set forth in Articles X and XI.
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(b) When used herein, the term "Effective Time" shall mean the date and
time at which the Merger becomes effective and the term "Effective Date" shall
mean the date upon which the Effective Time occurs.
SECTION 2.3. Certificate of Incorporation. The Certificate of
Incorporation of the Company in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation (the
"Surviving Corporation Certificate"), unless and until amended as provided by
the Surviving Corporation Certificate or by law.
SECTION 2.4. By-Laws. The by-laws of the Company in effect immediately
prior to the Effective Time shall be the by-laws of the Surviving Corporation
(the "Surviving Corporation By-laws") unless and until altered, amended or
repealed as provided by law, the Surviving Corporation Certificate or the
Surviving Corporation By-laws.
SECTION 2.5. Officers and Directors. The officers of the Company
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation until their successors shall have been duly elected and qualified,
or as otherwise provided in the Surviving Corporation By-laws. The directors
of the Surviving Corporation shall be the directors of Buyer Sub until their
successors shall have been duly elected and qualified, or as otherwise provided
in the Surviving Corporation Certificate, the Surviving Corporation By-laws or
as otherwise provided by applicable law.
SECTION 2.6. Effect of Merger. (a) At the Effective Time, the Merger
shall have the effects set forth in Section 259 of the DGCL. Without limiting
the generality of the foregoing, and subject thereto: (i) the Surviving
Corporation shall possess all the rights, privileges, powers and franchises, of
a public and private nature, and shall be subject to all the restrictions,
disabilities and duties of each of the Constituent Corporations; (ii) all
property, real, personal and mixed, and all debts due to either Constituent
Corporation on whatever account, including all choses in action and other
things belonging to the Constituent Corporations, shall be vested in the
Surviving Corporation; (iii) all property, rights, privileges, powers and
franchises, and every other interest of each of the Constituent Corporations
shall be, from and after the Effective Date, the property of the Surviving
Corporation and the title to any real estate vested by deed or otherwise in the
Constituent Corporations shall not revert or be impaired in any way by this
Agreement or the Merger provided for herein, but all rights of creditors and
all liens upon any property of either Constituent Corporation shall be
preserved unimpaired, and all debts, liabilities and duties of the Constituent
Corporations shall, from and after the Effective Time, attach to and become the
debts, liabilities and duties of the Surviving Corporation, and may be enforced
against the Surviving Corporation to the same extent as if said debts,
liabilities and duties had been incurred or contracted by the Surviving
Corporation; and (iv) all transfers vesting in the Surviving
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Corporation referred to herein shall be deemed to occur by operation of
law and no consent or approval of any other person shall be required in
connection with any such transfer or vesting unless such consent or approval is
specifically required in the event of merger or consolidation by law or express
provision of any contract, agreement, decree, order or other instrument to
which either or both of the Constituent Corporations is a party or is bound.
(b) The Surviving Corporation shall assume and be liable for all the
liabilities, obligations and penalties of each of the Constituent Corporations.
No liability or obligation due or to become due, claim or demand for any cause
existing against either Constituent Corporation, or any stockholder, officer or
director thereof, shall be released or impaired by the Merger. No action or
proceeding, whether civil or criminal, then pending by or against either
Constituent Corporation, or any stockholder, officer or director thereof, shall
abate or be discontinued by the Merger, but may be enforced, prosecuted,
settled or compromised as if the Merger had not occurred, or the Surviving
Corporation may be substituted in such action or special proceeding in place of
either Constituent Corporation.
(c) All corporate acts, plans, policies, approvals and authorizations of
the Constituent Corporations and their respective Boards of Directors,
committees appointed by such Boards of Directors and their officers and agents,
which were valid and effective immediately prior to the Effective Time, shall
be taken for all purposes as the acts, plans, policies, approvals and
authorizations of the Surviving Corporation and shall be as effective and
binding thereon as the same were with respect to the Company and Buyer Sub.
ARTICLE III
CONVERSION
SECTION 3.1. Conversion. The manner and basis of converting the shares
of common stock of each of the Constituent Corporations, and the consideration
that the holders of such shares shall receive, are as follows:
(a) At the Effective Time, by virtue of the Merger and without any action
on the part of the holder thereof, each share of the common stock, par value
$1.00 per share, of the Company ("Common Stock") issued and outstanding
immediately prior to the Effective Time (other than shares held by Buyer or
Buyer Sub or shares as to which appraisal rights have not been forfeited under
the DGCL, if an effective notice of exercise of appraisal rights with respect
to such shares under Section 262 of the DGCL was required and given
prior to the Effective Time) shall be converted into the right to receive $16
cash (the "Cash Consideration Per Share") without interest thereon, after the
date when such holder satisfies the procedures contemplated by
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Section 3.4, in accordance with the provisions of this Agreement.
Following the Effective Time, all certificates or other instruments
representing shares of Common Stock outstanding immediately prior to the Merger
(other than shares held by Buyer or Buyer Sub or shares as to which appraisal
rights have not been forfeited under the DGCL, if an effective notice of
exercise of appraisal rights with respect to such shares under Section 262 of
the DGCL was required and given prior to the Effective Time) shall thereafter
only represent the right to receive, upon surrender thereof and conversion of
such shares in accordance with this Agreement, the Cash Consideration Per
Share. At and after the Effective Time, a holder of Common Stock, other than
Buyer or Buyer Sub, shall cease to have any rights as a stockholder of the
Company, except for the right to surrender the certificate or certificates
representing such holder's Common Stock in exchange for the payments required
to be made under this Agreement or to perfect such holder's right, if any, to
receive payment with respect to the Common Stock for which such holder has
validly demanded appraisal rights in accordance with the DGCL (which demand has
not been withdrawn). As of the Effective Time, the stock transfer books of the
Company shall be closed and there shall be no further registration of transfers
on the records of the Company of shares of Common Stock and, if a certificate
formerly representing such shares is presented to the Company or the Surviving
Corporation, it shall be canceled and exchanged for cash, as herein provided.
At the Effective Time, each share of Common Stock issued and outstanding prior
to the Effective Time (which shares will be converted into the right to receive
the Cash Consideration Per Share (other than shares held by Buyer or Buyer Sub
or shares as to which appraisal rights have not been forfeited under the DGCL,
if an effective notice of exercise of appraisal rights with respect to such
shares under Section 262 of the DGCL was required and given prior to the
Effective Time)) shall be canceled and retired and shall cease to exist.
(b) Each share of Common Stock which shall be held by Buyer or Buyer Sub
or in the treasury of the Company, at the Effective Time, shall, by virtue of
the Merger and without further action, be canceled and retired and shall cease
to exist.
(c) At the Effective Time, each share of common stock, par value $.01 per
share, of Buyer Sub (the "Buyer Sub Common Stock"), issued and outstanding
immediately prior to the Effective Time, shall be converted into and become one
(1) share of the common stock, par value $1.00 per share, of the Surviving
Corporation (the "Surviving Corporation Common Stock"), by virtue of the Merger
and without any action on the part of the holder thereof. Immediately upon
such conversion into shares of Surviving Corporation Common Stock, each share
of Buyer Sub Common Stock shall be canceled and retired and shall cease to
exist.
SECTION 3.2. Exchange of Certificates; Paying Agent. As of the Effective
Time, Buyer shall deposit, or shall cause to be deposited, with or for the
account of a bank or trust company designated by the Company and reasonably
acceptable to Buyer (the "Paying Agent"), for the benefit of the holders of
shares of Common Stock, funds in an aggregate amount equal to
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the Cash Consideration Per Share multiplied by the number of shares of
Common Stock issued and outstanding (other than those shares held by Buyer or
Buyer Sub) and for which appraisal rights were not effectively exercised (the
"Payment Fund").
SECTION 3.3. Letter of Transmittal. As soon as practicable after the
Effective Time but in no event more than 20 days after the Effective Date, the
Company shall mail to each record holder of certificates that, immediately
prior to the Effective Time, shall represent shares of Common Stock which shall
be converted pursuant to Section 3.1 hereof, a notice and letter of transmittal
(the "Letter of Transmittal") advising such stockholder of the Merger and the
procedure for surrendering such certificates and receiving the consideration to
which such holder shall be entitled therefor pursuant to the terms thereof or
Section 3.1 hereof.
SECTION 3.4. Exchange Procedures. As soon as practicable after the
Effective Time, each holder of an outstanding certificate or certificates
which, prior thereto, represented shares of Common Stock shall, upon surrender
no later than 180 days after the Effective Date to the Paying Agent of such
certificate or certificates, together with a duly executed and completed
transmittal form, and acceptance thereof by the Paying Agent, be entitled to
the Cash Consideration Per Share for each share of Common Stock represented by
such certificate or certificates so surrendered. The Paying Agent shall accept
such certificates (or an indemnity in form reasonably satisfactory to Buyer and
the Paying Agent, if such certificate is lost, stolen or destroyed) upon
compliance with such terms and conditions as is reasonably necessary for the
Paying Agent to effect an orderly exchange thereof in accordance with normal
exchange practices. If the Cash Consideration Per Share is to be paid to any
person other than the person in whose name the certificate representing shares
of Common Stock surrendered in exchange therefor is registered, it shall be a
condition to such exchange that the certificate so surrendered shall be
properly endorsed or be accompanied by appropriate stock powers or otherwise be
in proper form for transfer and that the person requesting such payment shall
pay to the Paying Agent any transfer or other taxes required by reason of the
payment of such consideration to a person other than the registered holder of
the certificate surrendered, or shall establish to the reasonable satisfaction
of the Paying Agent that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 3.4, each certificate representing
shares of Common Stock (other than certificates representing shares held by
Buyer or Buyer Sub, shares to be canceled in accordance with Section 3.1 hereof
or shares of Common Stock of Dissenting Stockholders), shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the Cash Consideration Per Share, as contemplated by Section 3.1(a)
hereof. No interest will be paid or will accrue on any cash payable as Cash
Consideration Per Share.
SECTION 3.5. No Further Ownership Rights in Common Stock. The Cash
Consideration Per Share paid upon the surrender for exchange of certificates
representing shares
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of Common Stock in accordance with the terms of this Article III shall
be deemed to be full satisfaction of all rights pertaining to the shares of
Common Stock theretofore represented by such certificates.
SECTION 3.6. Payment Fund. (a) Any portion of the Payment Fund which
remains undistributed to the holders of Common Stock for 180 days after the
Effective Time shall be delivered to the Surviving Corporation upon demand, and
any such holders that have not theretofore complied with the provisions of this
Article III, shall thereafter look only to the Surviving Corporation and only
as general creditors thereof for payment of their claim for any Cash
Consideration, without any interest thereon.
(b) None of Buyer, Buyer Sub, the Surviving Corporation nor the Paying
Agent shall be liable to any person in respect of any cash, shares, dividends
or distributions payable from the Payment Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If any
certificates representing shares of Common Stock shall not have been
surrendered prior to five (5) years after the Effective Date (or immediately
prior to such earlier date on which any Cash Consideration Per Share in respect
of any such certificate would otherwise escheat to or become the property of
any Governmental Entity), any such cash, shares, dividends or distributions
payable in respect of such certificates shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and
clear of all claims or interest of any person previously entitled thereto.
(c) The Paying Agent shall invest the Payment Fund, as directed by Buyer,
in: (i) direct obligations of the United States of America; (ii) obligations
for which the full faith and credit of the United States of America is pledged
to provide for the payment of principal and interest; or (iii) commercial paper
rated the highest quality by both Moody's Investors Services, Inc. and Standard
& Poor's Corporation (each a "Payment Fund Investment"); provided, however,
that any such investment or any such payment of earnings shall not delay the
receipt by holders of shares of Common Stock of the Cash Consideration or
otherwise impair such holders' respective rights hereunder. In the event the
Payment Fund shall realize a loss on any such Payment Fund Investment, Buyer
shall promptly thereafter deposit in the Payment Fund on behalf of the
Surviving Corporation cash or a Payment Fund Investment in an amount sufficient
to enable the Payment Fund to satisfy all remaining obligations originally
contemplated to be paid out of the Payment Fund.
(d) Any portion of the Payment Fund for which appraisal rights have been
perfected shall be returned to the Surviving Corporation, upon demand.
SECTION 3.7. Options. On the Effective Date, Buyer shall pay or cause to
be paid to each of the persons listed on Schedule 3.7 hereto with respect to
the outstanding options
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for Common Stock (the "Options") set forth opposite such person's name
on Schedule 3.7 hereto an amount per share of Common Stock subject to an Option
equal to the excess of the Cash Consideration Per Share over the exercise price
per share of such Option, as set forth on Schedule 3.7 hereto (the "Cash
Consideration Per Option"). Concurrently with the payment of the Cash
Consideration Per Option, each holder of an Option shall deliver to Buyer
evidence satisfactory to Buyer of the cancellation of such Option. At the
Effective Time, each Option shall be canceled and retired and shall cease to
exist and shall be deemed to represent only the right to receive the Cash
Consideration Per Option. Payment of the Cash Consideration Per Option in
accordance with this Section 3.7 shall be deemed to be full satisfaction of all
rights pertaining to the Options. All amounts payable under this Section 3.7
shall be subject to any required withholding of taxes and shall be paid without
interest.
ARTICLE IV
DISSENTING STOCKHOLDERS
SECTION 4.1. Election. Any shares of Common Stock as to which the holder
thereof shall have properly demanded appraisal in accordance with the
requirements of Section 262 of the DGCL (any holder duly making such demand is
referred to herein as a "Dissenting Stockholder") shall not be converted into
the right to receive the Cash Consideration Per Share, unless and until such
holder shall have failed to perfect, or shall have effectively withdrawn or
lost, the right to appraisal of and payment for such shares of Common Stock
under the DGCL. The Company shall give Buyer prompt notice of any demands for
appraisal with respect to shares of Common Stock which shall have been made in
accordance with the DGCL, and Buyer shall have the right to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Buyer, make any payment with
respect to, or settle or offer to settle or otherwise negotiate, any such
demands. In the event that a notice of exercise of appraisal rights under
Section 262 of the DGCL was not required prior to the Effective Time, at such
time as a holder of shares of Common Stock subsequently properly demands
appraisal rights, certificates for shares of Common Stock as to which such
appraisal rights are properly demanded shall thereupon cease to represent the
right to receive the Cash Consideration Per Share, and shall represent only the
right to receive payment for such shares under Section 262 of the DGCL.
SECTION 4.2. Payment. Each Dissenting Stockholder who becomes entitled,
pursuant to the provisions of Section 262 of the DGCL, to payment of the value
of its shares of Common Stock shall receive payment therefor from the Surviving
Corporation (but only after the value thereof shall have been agreed upon or
finally determined pursuant to such provisions). If a Dissenting Stockholder
fails to perfect, or effectively withdraws or loses the right to receive
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payment for such shares of Common Stock, pursuant to Section 262 of the DGCL,
such Dissenting Stockholder shall be entitled to convert such shares of Common
Stock as provided in Section 3.1 hereof.
ARTICLE V
THE CLOSING
SECTION 5.1. Closing. The closing of the transactions provided for
herein (the "Closing") shall take place at the offices of Schulte Roth & Zabel,
900 Third Avenue, New York, New York 10022 at 10 a.m., New York City time, as
promptly as practicable, and in any event within 5 days of the date on which
the conditions to Closing set forth in Articles X and XI hereof have been
waived or satisfied, or at such other time and place as the Buyer and the
Company mutually agree in writing. The date upon which the Closing occurs is
hereinafter referred to as the "Closing Date".
SECTION 5.2. Certificate of Merger. If this Agreement and the Merger has
been duly approved and adopted by the affirmative vote or consent of the
holders of at least a majority of all outstanding shares of Common Stock
entitled to vote thereon as provided in Section 8.8 hereof, and upon the
satisfaction (or waiver in writing) of the conditions precedent to the
consummation of the Merger as provided for herein, including those set forth in
Articles X and XI hereof (and if this Agreement has not been terminated and the
Merger has not been abandoned as permitted by the provisions of this
Agreement), at the Closing the Certificate of Merger shall be executed and
delivered on behalf of Buyer Sub and the Company and submitted to the Secretary
of State of the State of Delaware for filing in accordance with Sections 103
and 251 of the DGCL.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to and agrees with Buyer and Buyer Sub
that:
SECTION 6.1. Incorporation; Qualification and Standing. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation and has all requisite corporate power and
authority to own, operate and lease its assets and properties and to carry on
its business as now being conducted and to enter into and, subject to receipt
of all Seller Approvals, to perform its obligations under this Agreement and
under the other agreements and instruments provided for herein to which it is a
party. The Company is duly qualified and licensed to do business as a foreign
corporation and is in good standing in each jurisdiction where the properties
owned, leased or operated or the business conducted by it requires such
qualification or licensing, each of which jurisdictions is listed on Schedule
6.1 hereto, except where the failure to be so qualified, licensed or in good
standing, individually or in the aggregate, is not reasonably likely to have a
material adverse effect on the business, operations, assets, condition
(financial or otherwise) or prospects of the Company and its Subsidiaries taken
as a whole or the ability to consummate the transactions contemplated by this
Agreement (a "Material Adverse Effect").
SECTION 6.2. Subsidiaries. Schedule 6.2 contains a list of all of the
Company's Subsidiaries, their jurisdictions of incorporation and the
jurisdictions in which they are qualified to do business as a foreign
corporation. Each of the Company's Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation as set forth on Schedule 6.2 hereto,
and has the requisite corporate power and lawful authority to own, lease and
operate its respective assets, properties and business and to carry on its
respective business as it is now being conducted and, subject to receipt of all
Seller Approvals, to perform its obligations under this Agreement and to enter
into and perform its obligations under the other agreements and instruments
provided for herein to which it is a party. Each of the Company's Subsidiaries
is duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction where the properties owned, leased or
operated or the business conducted by it requires such qualification or
licensing, each of which jurisdiction is listed on Schedule 6.2 hereto, except
where the failure to be so qualified, licensed or in good standing,
individually or in the aggregate, is not reasonably likely to have a Material
Adverse Effect. Except for shares of capital stock of the Company's
Subsidiaries and as set forth on Schedule 6.19 hereto, the Company does not,
directly or indirectly, own or control or have any capital or other equity
interest or participation, or any interest convertible, exchangeable or
exercisable for, any capital or other equity interest or participation in, nor
is the Company, directly
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<PAGE> 14
or indirectly, subject to any obligation or requirement to provide
funds to or invest in, any person. The term "Subsidiary" shall mean any person
as to which the Company directly or indirectly owns or has the power to vote,
or to exercise a controlling influence with respect to, fifty percent (50%) or
more of the securities of any class of such person, the holders of which class
are entitled to vote for the election of directors (or persons performing
similar functions) of such person.
SECTION 6.3. Authority. The Company has the full legal right and power
and all authority required to enter into, execute and deliver this Agreement
and each other agreement entered into or to be entered into in connection
herewith (the "Related Agreements") to which the Company is or is to be a party
and, subject to receipt of all Seller Approvals, to perform fully its
obligations hereunder and thereunder. The execution, delivery and performance
of this Agreement and the Related Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize the execution, delivery and performance of this Agreement, the
Related Agreements, the Merger and the transactions contemplated hereby and
thereby, except for the approval of the stockholders of the Company as provided
in Sections 5.2 and 8.8 hereof. This Agreement has been, and each Related
Agreement will be, duly executed and delivered by the Company and this
Agreement and the Related Agreements each constitutes or will constitute the
legal, valid and binding obligation of the Company enforceable against it in
accordance with its terms except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally and by the availability of equitable remedies (regardless of
whether a proceeding is considered at law or in equity).
SECTION 6.4. Absence of Conflicts. Neither the execution nor the
delivery of this Agreement nor any of the Related Agreements, nor the
consummation of the transactions and performance of the obligations
contemplated hereby or thereby will: (i) conflict with or result in a breach
or violation of any of the terms, conditions or provisions of the certificate
of incorporation or by-laws of the Company or any of its Subsidiaries; (ii)
except as set forth in Schedule 6.4 hereto, conflict with or result in a breach
or violation of, or default (or event which, with the giving of notice or the
passage of time or both, would constitute a breach, violation or default) or
loss of a benefit under, result in the termination or modification of or
creation of any lien, security interest, pledge, charge, option, right of first
refusal, claim, mortgage, lease, easement or any other encumbrance whatsoever
("Lien") under, or permit the acceleration or modification of any obligation
under any provision of any agreement, indenture, mortgage, lien, lease or other
instrument or restriction of any kind to which the Company or any of its
Subsidiaries is a party or by which any of their assets, properties or
securities are otherwise bound; or (iii) except as set forth on Schedule 6.4
hereto, conflict with or violate any permit, license, judgment, order, writ,
injunction, award, decree, statute, law, ordinance, code, rule or regulation
applicable to the
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<PAGE> 15
Company or any of its Subsidiaries or any of their assets or
properties; except in the case of clauses (ii) and (iii) above, those which,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect.
SECTION 6.5. Consents and Approvals. The execution and delivery by the
Company of this Agreement and the Related Agreements, the performance by the
Company of its obligations hereunder and thereunder and the consummation by the
Company and its Subsidiaries of the transactions contemplated hereby and
thereby do not require the Company or any of its Subsidiaries to obtain any
permit, license, variance, waiver, exemption, franchise, order, consent,
approval, authorization or action of (including, without limitation, any
consent or approval of any insurance regulatory authority, debtholder, landlord
or mortgagee), or make any report to or filing with or give any notice to or
register with, any Governmental Entity (collectively, "Permits") or any third
party ("Third Party Consents") except (i) for the approval of the stockholders
of the Company as provided in Sections 5.2 and 8.8 hereof, (ii) filings made
with the Securities and Exchange Commission (the "SEC"), as listed in Schedule
6.5 hereto, and the receipt of clearance from the SEC with respect thereto,
(iii) the filings and termination of the applicable waiting period required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder (the "HSR Act"), as provided
in Section 9.1 hereof, (iv) the consents and approvals of the insurance
regulatory authorities in the State of Connecticut and other jurisdictions
where The First Reinsurance Company of Hartford ("FRH") conducts business and
as listed in Schedule 6.5 hereto ("Insurance Regulatory Approvals"), (v) the
filing of the Certificate of Merger under the DGCL, (vi) the other consents,
approvals, authorizations or notices set forth in Schedule 6.5 hereto, and
(vii) those which if not obtained, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect. The consents, approvals,
authorizations, actions, filings and notices set forth in clauses (i) through
(vi), inclusive, of this Section 6.5 or in Schedule 6.5 hereto are referred to
herein as the "Sellers Approvals".
SECTION 6.6. Directors and Officers. Schedule 6.6 includes a list of the
officers and directors of the Company and its Subsidiaries. None of such
officers and none of the other key employees of the Company or its Subsidiaries
has indicated in writing to the Company or its Subsidiaries that he or she
intends to resign or retire as a result of the transactions contemplated hereby
or otherwise.
SECTION 6.7. Charter and By-Laws. Copies of the charter and by-laws of
the Company and its Subsidiaries have heretofore been delivered to Buyer or
Buyer's counsel and are true, accurate and complete and reflect all amendments
or changes in effect. Copies of the stock books and minute books of
the Company and its Subsidiaries have heretofore been delivered to Buyer or
Buyer's counsel and are true, accurate and complete, and such minute books
contain true, accurate and complete records of all meetings and consents in
lieu of meetings of their
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<PAGE> 16
respective Board of Directors (and any committees thereof) and
stockholders, in the case of FRH and JBR Holdings, Inc., since August 23, 1991
and, in the case of the Company and its other Subsidiaries, since the time of
their respective organization, except for minutes of meetings of the Board of
Directors of the Company and the Special Committee thereof relating to the
proposed transaction between Buyer and the Company as contemplated hereby,
copies of which will be delivered to Buyer prior to the Closing.
SECTION 6.8. Capitalization. (a) The Company. As of the date hereof,
the authorized capital stock of the Company consists of 6,000,000 shares of
Common Stock, 3,210,591 shares of which are issued and outstanding, and 75,000
shares of preferred stock, par value $1,000 per share, of which no shares are
issued and outstanding. All of the issued and outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully paid and
nonassessable. Except for the Options and except as set forth on Schedule 6.8
hereto, there are no other shares of capital stock of the Company authorized or
outstanding and no outstanding options, warrants, convertible or exchangeable
securities, subscriptions, rights (including any preemptive rights), stock
appreciation rights, calls or commitments of any character whatsoever
("Rights") requiring the issuance or sale by the Company of shares of any
capital stock of the Company, and there are no contracts or other agreements to
issue additional shares of capital stock of the Company or any Rights relating
to such shares. Except as set forth on Schedule 6.8 hereto, no shares of
capital stock of the Company are held in treasury.
(b) The Subsidiaries. Schedule 6.8 hereto sets forth a list of the
authorized and outstanding shares of capital stock of each Subsidiary of the
Company, together with the number of shares of each class of capital stock
owned by the Company or by its Subsidiaries. All of the issued and outstanding
shares of capital stock of the Company's Subsidiaries are duly authorized,
validly issued, fully paid and nonassessable; are owned, directly or indirectly
through another Subsidiary of the Company or by the Company, of record and
beneficially; and are free and clear of all Liens. There are no other shares
of capital stock of any of such Subsidiaries authorized or outstanding and no
outstanding Rights requiring the issuance or sale of shares by such Subsidiary
of any capital stock of any such Subsidiary, and there are no contracts or
other agreements to issue additional shares of capital stock of any such
Subsidiary or any Rights relating to such shares. No shares of capital stock
of any of the Company's Subsidiaries are held in treasury.
(c) Other Agreements. Except as set forth in the Schedule 6.8 hereto,
neither the Company nor any of its Subsidiaries is a party to any agreement or
understanding, including, without limitation, any stockholder or
shareholders, registration rights, voting trust, proxy or other agreement, with
respect to the capital stock or other securities of the Company or its
Subsidiaries, nor is there any proposed amendment to the charters of the
Company or its Subsidiaries for increasing the amount of authorized capital
stock of such corporation. To the best knowledge of the Company, except for
the Voting Agreement and as set forth on Schedule
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<PAGE> 17
6.8 hereto, there are no shareholder or stockholder agreements, voting trusts
or voting agreements, proxies or other similar agreements or understandings
between or among stockholders of the Company or its Subsidiaries.
(d) Options. Schedule 3.7 hereto sets forth the number of outstanding
Options as of the date hereof, the name of the holder of each Option and the
exercise price for each Option. All such Options are currently exercisable by
the holder thereof or by the terms thereof will be exercisable by the holder
thereof on the Effective Date as a result of the Merger.
SECTION 6.9. Compliance; Insurance Regulatory Licenses. (a) No
Violations. Except as set forth on Schedule 6.9 hereto, the Company and its
Subsidiaries are in compliance in all material respects with all foreign,
federal, state, county and local laws, statutes, rules, regulations, ordinances
and governmental and administrative requirements applicable to the operation of
its business, including all Applicable Insurance Laws (other than Environmental
Laws and laws with respect to ERISA which are covered by Sections 6.27 and 6.18
hereto). Other than as included in any final examination report listed on
Schedule 6.9 hereto, there is no judgment, ruling, order, writ, injunction,
award or decree of any Governmental Entity applicable to the Company or any of
its Subsidiaries or to their respective assets, properties, businesses or
operations. Except as set forth in Schedule 6.9 hereto, no investigation or
review by any Governmental Entity with respect to the Company or its
Subsidiaries is pending, or, to the best knowledge of the Company, threatened
nor has any Governmental Entity indicated an intention to conduct the same.
The term "Governmental Entity" shall mean any nation or government, any state
or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administration functions of or pertaining
to government, including the SEC or any other government authority, agency,
department, board, commission or instrumentality of the United States, any
foreign government, any State of the United States or any political subdivision
thereof, and any court, tribunal or arbitrator(s) of competent jurisdiction,
and any governmental or non-governmental self-regulatory organization, agency
or authority.
(b) Permits. The Company and each of its Subsidiaries have obtained all
Permits required in connection with the conduct of the businesses of the
Company and its Subsidiaries as presently conducted, except as set forth on
Schedule 6.9 hereto. Such Permits are listed on Schedule 6.9 hereto. Schedule
6.9 hereto includes a true and complete list of the jurisdictions in which FRH
is licensed and authorized to engage in insurance and reinsurance
business either as a licensed, admitted carrier or as an approved unlicensed
reinsurer and the lines of insurance or types of business which it is licensed
to write or engage in each such jurisdiction and a true and complete list of
the jurisdictions in which credit is allowed for reinsurance without posting
security for such reinsurance. Neither the Company nor any of its Subsidiaries
other than FRH engages in any activity that requires it to be licensed as an
insurer or reinsurer. The Company has heretofore made available to Buyer true
and complete copies of all such Permits as
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<PAGE> 18
are currently in effect or evidence that the Company otherwise has such
Permits. Neither the Company nor any of its Subsidiaries has received written
notice pursuant to which any other jurisdiction has claimed that the Company or
any of its Subsidiaries is required to qualify or otherwise be licensed to
transact any insurance or reinsurance business therein. All Permits are valid
and in full force and effect and neither the Company nor any of its
Subsidiaries are in violation of any Permit, except where such violation,
individually or in the aggregate, is not reasonably likely to have a Material
Adverse Effect and except as set forth on Schedule 6.9 hereto. No such Permit
is the subject of a proceeding for suspension or revocation or similar
proceedings. No violations are or have been recorded in respect of any Permit
and no proceeding is pending, or to the knowledge of the Company threatened, to
revoke or limit any Permit. Except as set forth on Schedule 6.9 hereto, none
of the Permits contain any terms, limitations or conditions which would,
following the consummation of the transactions contemplated hereby, prevent the
Company and its Subsidiaries from conducting their respective businesses as
currently conducted. No jurisdiction has demanded or requested that the
Company or any of its Subsidiaries qualify or become licensed as a foreign
corporation, except with respect to FRH's insurance or reinsurance business.
(c) Examination Report. Schedule 6.9 hereto includes a true and complete
list of all draft and final examination reports received by the Company and its
Subsidiaries since August 23, 1991. The Company has delivered true and
complete copies of each such report to Buyer. Except for generally applicable
legal requirements, there are no agreements or understandings between the
Company or its Subsidiaries, and any regulatory authority with respect to the
payment of dividends or the maintenance of any reserves.
(d) Dividends. FRH has not during the twelve months preceding the date
hereof declared or paid an "extraordinary dividend" within the meaning of
Connecticut General Statute Section 38a - 136(f) and all dividends paid by FRH
within the past twelve months did not contravene, or constitute a default under
any provision of applicable law or regulation, including without limitation,
Connecticut General Statute Section 38a - 136(f) and (h), or the certificate
of incorporation or by-laws of the Company or any of its Subsidiaries, or of
any agreement, judgment, injunction, order, decree or other instrument binding
upon the Company or any of its Subsidiaries or result in the creation or
imposition of any Lien on any asset of the Company or any of its Subsidiaries.
SECTION 6.10. SEC Reports. The Company has heretofore furnished the
Buyer with true and complete copies of (i) the Company's Annual Reports on Form
10-K for the years ended December 31, 1991 through December 31, 1995, as filed
with the SEC, (ii) the Company's Quarterly Reports on Form 10-Q for each
quarterly period from December 31, 1991 through the nine months ended September
30, 1995, and (iii) all other reports, including Current Reports on Form 8-K,
filed with, and other filings made with, the SEC since December 31, 1991 by any
of
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<PAGE> 19
the Company or the Subsidiaries pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), which are all the documents (other than
preliminary material) that the Company was required to file with the SEC since
such date. As of their respective dates, all such reports, statements and
filings (the "SEC Documents") complied in all material respects with the
Securities Act of 1933, as amended (the "Securities Act") and the Exchange Act,
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and did 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 therein, in light of the
circumstances under which they were made, not misleading.
SECTION 6.11. Financial Statements.
(a) GAAP Financial Statements. The audited consolidated balance sheets of
the Company and its Subsidiaries as of December 31, 1991, 1992, 1993, 1994 and
1995 and the related audited consolidated statements of income, stockholders'
equity and cash flows, together with all related notes and schedules thereto,
for the years then ended included in the SEC Documents (such 1995 financial
statements are hereinafter referred to as the "Annual Financial Statements"),
copies of all of which have been heretofore delivered to Buyer or Buyer's
counsel, comply as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto and present
fairly the consolidated financial position and results of the operations of the
Company and its Subsidiaries as of the dates and for the periods indicated
therein in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated, except as may otherwise be
specifically indicated in such financial statements. All material agreements,
contracts and other documents required to be filed as exhibits to any of the
SEC Documents have been so filed.
(b) Statutory Financial Statements. All annual convention statements
("Annual Convention Statements") required to be filed since January 1, 1992 and
the quarterly convention statements ("Quarterly Convention Statements")
required to be filed since January 1, 1992 with any insurance regulatory
agencies by FRH have been duly filed and, except where the failure to file in a
timely fashion, individually or in the aggregate, is not reasonably likely to
have a Material Adverse Effect, all such filings have been timely. Such Annual
Convention Statements for the fiscal years ended December 31, 1992,
1993, 1994 and 1995 (including the financial statements on a statutory basis
and the accompanying exhibits and schedules), copies of all of which have
heretofore been delivered to Buyer or Buyer's counsel, were prepared in
accordance with statutory accounting practices prescribed or permitted for
insurance companies by the Connecticut Insurance Department, applied on a
consistent basis throughout such periods except as otherwise stated therein or
required by the rules and regulations of the Connecticut Insurance Department,
and in accordance with the books and records of FRH, and present fairly, in
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accordance with such practices, the statutory financial position as at
the date of, and the statutory results of its operations for the periods
covered by, such Annual Convention Statements.
(c) Loss Reserves; Statutory Capital. The reserves of FRH including, but
not limited to, the reserves for incurred losses, incurred loss adjustment
expenses, incurred but not reported losses and loss adjustment expenses for
incurred but not reported losses (the "Loss Reserves") as set forth in each of
the Company's audited consolidated financial statements, the Company's
unaudited interim financial statements, and the Annual Convention Statements
and the Quarterly Convention Statements (i) are computed and are fairly stated
in accordance with generally accepted loss reserving standards and principles,
(ii) are based upon actuarial assumptions which are relevant to policy
provisions, (iii) are established using reserving techniques applied on a
consistent basis throughout the periods covered by such statements except as
otherwise stated therein or as required by the rules and regulations of the
Connecticut Insurance Department, (iv) are in compliance with the requirements
of the insurance laws, rules and regulations of the State of Connecticut
(collectively "Applicable Insurance Law") and (v) as of the date of such
statements made a reasonable provision for all unpaid loss and loss adjustment
expense obligations, including incurred but not reported losses and loss
adjustment expenses for incurred but not reported losses, under the terms of
the policies and agreements which FRH has incurred or to which it is subject.
Since December 31, 1995, there has been no material adverse change in the Loss
Reserves.
(d) Risk Based Capital. For the year ended December 31, 1995, FRH had a
ratio of total adjusted capital to authorized control level of 2.0 or more
pursuant to the risk based capital system of the National Association of
Insurance Commissioners ("NAIC").
(e) NAIC IRIS Ratios. Except as set forth on Schedule 6.11(e) hereto, for
the year ended December 31, 1995, all of the relevant financial relationships
specified under the Insurance Regulatory Information System ("IRIS") of the
NAIC of FRH were all within the "usual ranges" specified in the NAIC guidelines
for using IRIS.
(f) Liabilities. Except as set forth on Schedule 6.11 hereto (i) as at
December 31, 1995, the Company and its Subsidiaries did not have any
liabilities or obligations (whether or not of a kind required by generally
accepted accounting principles to be set forth on a financial statement) that
were not fully and adequately reflected or reserved against on the Annual
Financial Statements and (ii) the Company and its Subsidiaries do not have any
liabilities or obligations other than those reflected on the Annual Financial
Statements (less liabilities or obligations that have been discharged in the
ordinary course of business since December 31, 1995) and those incurred since
December 31, 1995 in the ordinary course of business. The Company has no
knowledge of any circumstances, conditions, events or arrangements which may
hereafter give rise to any material liabilities, except in the ordinary course
of business.
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<PAGE> 21
SECTION 6.12. Reinsurance. Schedule 6.12 sets forth a true and complete
list of all reinsurance treaties and contracts currently in effect under which
FRH cedes or retrocedes any business (individually a "Reinsurance Agreement"
and collectively the "Reinsurance Agreements"). None of the Reinsurance
Agreements will terminate because of a change in control of the Company or its
Subsidiaries. No other party to any Reinsurance Agreement has given written
notice that it intends to terminate or cancel any such Reinsurance Agreement as
a result of the Merger or the contemplated operations of the Company and its
Subsidiaries after the Merger is consummated.
SECTION 6.13. Written Insurance Policies; Regulatory Filings. (a) Except
as set forth on Schedule 6.9 hereto, all of FRH's policies and contracts of
insurance and reinsurance now in force are in compliance in all material
respects, and at their respective dates of issuance were in compliance in all
material respects, with all applicable laws and, to the extent required under
applicable law, are on forms approved by the appropriate Governmental Entities
in the jurisdictions where issued or have been filed with and not objected to
by such Governmental Entities within the period provided for objection. Any
premium rates with respect to FRH's insurance or reinsurance policies or
contracts now in force which are required to be filed with or approved by any
Governmental Entity have been so filed or approved in accordance with
applicable law, and such premiums charged thereon conform thereto.
(b) Schedule 6.13 hereto sets forth a true and complete list of all
underwriting management agreements to which the Company or its Subsidiaries are
a party.
(c) Each Reinsurance Agreement to which the Company or its Subsidiaries
are party is valid, binding and in full force and effect in accordance with its
terms. FRH is not in default in any respect with respect to any such
Reinsurance Agreement (other than defaults which, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect or
result in termination of such Reinsurance Agreement) and no such Reinsurance
Agreement contains any provision providing that the other party thereto may
terminate the same by reason of the transactions contemplated by this Agreement
or any other provision which would be altered or otherwise become applicable by
reason of such transactions.
SECTION 6.14. Producers; Fronting. (a) Schedule 6.14 hereto sets forth a
true and complete list of all persons through whom FRH placed or sold insurance
under policies currently in force (each, a "Producer"). To the knowledge of
the Company, each Producer is duly licensed (to the extent that such licenses
are required) in the jurisdictions where the Producer places or sells such
insurance. Each Producer is duly authorized and appointed by FRH pursuant to
applicable insurance statutes if any and all contracts or agreements between
any Producer, on the one hand, and FRH, on the other hand, are in compliance
with such statutes, except where the
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<PAGE> 22
failure to be so authorized and appointed or for such noncompliance which,
individually or in the aggregate, is not reasonably likely to have a Material
Adverse Effect. To the knowledge of the Company, no Producer is the subject of,
or party to, any disciplinary action or proceeding under applicable insurance
statutes.
(b) Except as set forth in the Schedule 6.14 hereto, no Producer
represented more than 5% of the gross premiums written by FRH, taken as a whole
during the year ended December 31, 1995.
(c) No Producers have advised the Company in writing that they intend to
terminate or materially change their relationships with the Company or any of
its Subsidiaries as a result of the Merger or the contemplated operations of
the Company and its Subsidiaries after the Merger is consummated.
(d) Except as set forth in the Schedule 6.14 hereto, FRH is not (i) a
party to any reinsurance agreement under which it assumes business written by a
licensed insurer in jurisdictions where FRH is not licensed, or (ii) acting as
a broker or reinsurance intermediary.
SECTION 6.15. Premium Balances Receivable. (a) The premium balances
receivable, as reflected in the Annual Financial Statements for the fiscal year
ended December 31, 1995, to the extent uncollected on the date hereof, and the
premium balances receivable reflected on the Company's and its Subsidiaries'
books as of the date hereof, are valid and existing and represent monies due,
and (x) as of the date of the Annual Financial Statements such Annual Financial
Statements made reasonable provision, (y) as of the date hereof the Company and
its Subsidiaries made reasonable provision on their books and (z) as of the
Closing Date the Company and its Subsidiaries will have made reasonable
provision on their books, for receivables not collectible in the ordinary course
of business and (subject to reserves for uncollectible receivables) the premium
balances receivable are (i) not disputed by the account debtor, (ii) not subject
to any prior sale, pledge or assignment and are free and clear of any Liens, and
(iii) are not subject to any adjustments, offset, counterclaim, defense or
credit in favor of the account debtor, except to the extent that any items set
forth in clauses (i), (ii) or (iii) above, individually or in the aggregate, are
not reasonably likely to have a Material Adverse Effect.
(b) FRH owns assets that qualify as admitted assets under Applicable
Insurance Law in an amount at least equal to the sum of its Loss Reserves,
other liabilities and its statutory capital and surplus as set forth on FRH's
Annual Convention Statement for the fiscal year ended December 31, 1995.
SECTION 6.16. Certain Business Practices. (a) Schedule 6.16 hereto
lists (i) all pending claims arising from insurance or reinsurance policies
issued by FRH for which amounts
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reserved exceed $25,000, and (ii) all pending litigation by or against FRH's
policyholder involving FRH in which damages are sought by or from FRH in excess
of $25,000.
(b) All insurance or reinsurance claims that have become payable by FRH,
and are not currently in the course of being settled in good faith by the
relevant party, have been paid, or provided for, in accordance with the terms
of the insurance or reinsurance policy or contract under which they arose.
SECTION 6.17. Tax Matters. Except as set forth in the Schedule 6.17
hereto:
(a) The Company, each of its Subsidiaries and each consolidated,
affiliated, combined or unitary group of which the Company or any of its
Subsidiaries is or has been a member (each such group, an "Affiliated Group")
have timely filed or caused to be filed all federal, state, local and foreign
Tax returns required to be filed prior to the date hereof and have paid or
caused to be paid, or have made adequate provision or set up an adequate
reserve on the books of the Company or applicable Subsidiary of the Company for
the payment of, all Taxes required to be paid in respect of the periods covered
by said returns, and has established an adequate reserve on the books of the
applicable Company or Subsidiary of the Company for the payment of all Taxes
payable by the Company, any such Subsidiary or any Affiliated Group in respect
of any period, including portions thereof, subsequent to the last of such
periods and will establish such reserves up to and including the close of the
Closing Date. For these purposes, the Tax attributable to the period up to and
including the close of the Closing Date shall be determined as if the taxable
year of the Company, its Subsidiaries and any Affiliated Group ended as of the
close of the Closing Date.
(b) No deficiency or dispute in respect of any Tax has been claimed,
proposed or assessed against the Company, any Subsidiary of the Company or any
Affiliated Group.
(c) No waiver or extension of time to assess any Taxes has been granted
by the Company, any Subsidiary of the Company or any Affiliated Group.
(d) Neither the Company, any Subsidiary of the Company nor any
Affiliated Group has made any consent under Section 341 of the Internal Revenue
Code of 1986, as amended (the "Code").
(e) The Company, each Subsidiary of the Company and each Affiliated
Group has in all material respects satisfied all Federal, state, local and
foreign withholding tax requirements including but not limited to income, social
security and employment tax withholding.
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<PAGE> 24
(f) There is no contract, agreement or other understanding pursuant to
which the Company or any Subsidiary of the Company has or may at any time after
the Closing have any obligation in respect of Taxes of any person or entity
other than the Company or any Subsidiary of the Company.
(g) There have been no accounting method changes of any Company, its
Subsidiaries or any Affiliated Group that could give rise to an adjustment
under Section 481 of the Code for periods after the Closing Date.
(h) Neither the Company nor any of its of its Subsidiaries has made any
payments or is or may be obligated to make any payments that are or will be not
deductible for tax purposes as a result of the application of Section 162(m) or
280G of the Code.
(i) Neither the Company nor any of its Subsidiaries has any liability
for Taxes of any person other than the Company or any of its Subsidiaries (A)
under Section 1.1502-6 of the Treasury Regulations, (B) as transferee or
successor, or (C) otherwise.
For the purposes of this Agreement, the term "Tax" shall include all
taxes, charges, withholdings, fees, levies, penalties, additions, interest or
other assessments imposed by any federal, state, local, foreign or other taxing
authority including, but not limited to, those related to gross or net income
or receipts, sales, use, occupation, services, leasing, valuation, transfer,
license, customs duties or franchise.
SECTION 6.18. Employee Benefit Plans; Employment and Labor Agreements.
(a) (i) Schedule 6.18 hereto contains a true and complete list of all
employee benefit plans, agreements, arrangements, funds, and programs
(including, without limitation, all "employee benefit plans" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) (A) which are sponsored, maintained or
contributed to by the Company, its Subsidiaries or any trade or business
under common control with the Company or its Subsidiaries within the meaning
of Section 414 of the Code (an "ERISA Affiliate") for the benefit of current
or former employees, officers or directors of any of the Company, its
Subsidiaries or any ERISA Affiliate, or (B) with respect to which the
Company, its Subsidiaries or any ERISA Affiliate has any liability, whether
direct or indirect, actual or contingent (individually, a "Benefit Plan" and
collectively, the "Benefit Plans").
(ii) With respect to each Benefit Plan, the Company has provided to
Buyer: (A) descriptions of all Benefit Plans; (B) the two most recent annual
reports (Form 5500 series, including all schedules and attachments); (C) the
three most recent annual and
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periodic accountings of plan assets, if applicable; (D) the three most recent
actuarial valuations, if applicable; and (E) the most recent determination
letter received from the Internal Revenue Service ("IRS").
(iii) Except as set forth on Schedule 6.18 hereto, with respect to
each Benefit Plan: (A) such Benefit Plan has been administered in compliance
in all material respects with its terms and all applicable laws; (B) no actions,
suits or claims are pending or threatened in respect to any Benefit Plan or any
assets thereof other than routine claims for benefits and domestic relations
orders; and (C) if such Benefit Plan is intended to qualify under Section 401(a)
of the Code such Benefit Plan (and the trust created thereunder) so qualifies
and a determination letter has been received from the IRS indicating that such
Benefit Plan is qualified under the Code.
(iv) With respect to each Benefit Plan which is an "employee
welfare benefit plan" (as defined in Section 3(1) of ERISA): (A) the trust
relating thereto, if any, satisfies the requirements of Section 501(c)(9) of
the Code; (B) such Benefit Plan has been administered in compliance in all
material respects with all requirements imposed under Section 4980B of the Code
and Sections 601-608 of ERISA; and (C) no such Benefit Plan provides health or
death benefits to any individual beyond his retirement or other termination of
employment (other than statutorily mandated continuation coverage or conversion
rights to individual coverage).
(v) No Benefit Plan which is currently maintained or has been
maintained at any time within the six years preceding the date hereof is a
"multiemployer plan" defined in Section 3(37) or 4001 of ERISA and neither the
Company, its Subsidiaries nor any ERISA Affiliate has any liability or
obligation, whether actual or contingent, with respect to such a multiemployer
plan.
(vi) No Benefit Plan which is currently maintained or has been
maintained at any time during the six (6) years preceding the date hereof is
subject to Title IV of ERISA.
(vii) There has been no transaction involving any Benefit Plan which
is a "prohibited transaction" under ERISA or the Code in connection with which
the Company, its Subsidiaries or any ERISA Affiliate would be subject to
liability under ERISA or the Code, or which would subject such Benefit Plan, the
Company, its Subsidiaries or any ERISA Affiliates to a penalty under ERISA or
the Code.
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(viii) None of the Benefit Plans listed in Schedule 6.18 hereto
provides for additional or accelerated payments or other consideration to be
made on account of the transactions contemplated hereby.
(ix) All contributions or payments required to be made to such
Benefit Plans by their terms or by law, before or after the Closing Date, with
respect to all periods or events occurring prior to the Closing Date (including
all insurance premiums) will be properly paid or accrued on the books of account
of the Company, its Subsidiaries and the ERISA Affiliates prior to the Closing
Date (including, without limitation, a pro rata share with respect to any period
including the Closing Date based on the ratio of the number of days in such
period to the total number of days in the plan year).
(x) There were no Benefit Plans in effect at any time during the
three years preceding the Closing Date with respect to which the Company, its
Subsidiaries or any ERISA Affiliate has taken action during such period which
has or will result in termination of such Benefit Plans.
(b) To the best knowledge of the Company, no union has attempted to
organize or represent the labor force of the Company or any of its Subsidiaries
in the 24 months immediately prior to the date hereof. Neither the Company nor
any of its Subsidiaries has any knowledge of any present or threatened walkout,
strike or any other similar occurrence. The Company has provided Buyer with a
list of all of the unions that have entered into collective bargaining
agreements with respect to employees of the Company or its Subsidiaries that are
now certified or claiming to be certified as collective bargaining agents to
represent any such employees. Neither the Company nor any of its Subsidiaries
has (i) taken any action that would constitute a plant closing or mass layoff
(within the meaning of the Workers Adjustment and Retraining Notification Act)
or (ii) incurred any material liability or obligation under the Workers
Adjustment and Retraining Notification Act or similar state laws which remains
unpaid or unsatisfied.
(c) To the knowledge of the Company, the employer-employee relations of
the Company and its Subsidiaries are generally satisfactory. The employment
practices of the Company and each of its Subsidiaries comply with all applicable
anti-discrimination laws, including, without limitation, the Age Discrimination
in Employment Act and the Americans with Disabilities Act, except where the
failure to so comply, individually or in the aggregate, is not reasonably likely
to have a Material Adverse Effect.
(d) No person (including, but not limited to, any Governmental Entity) has
any claim or basis for any suit, action, claim, proceeding or investigation
against the Company or any of its Subsidiaries arising out of any statute, law,
ordinance, code, rule or regulation relating to
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discrimination in employment or employment practices or occupational safety
and health standards (including, without limitation, The Fair Labor
Standards Act, as amended, Title VII of the Civil Rights Act of 1964, as
amended, 42 U.S.C. Section 1981, the Rehabilitation Act of 1973, as amended,
the Age Discrimination in Employment Act of 1967, as amended, the Family and
Medical Leave Act of 1993 or the Americans with Disabilities Act) which, if
upheld, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect.
SECTION 6.19. Investments. Schedule 6.19 hereto contains a list of all
bonds, stocks, other securities and other investments (including, without
limitation, real estate and other partnership interests) of any type owned by
the Company or any of its Subsidiaries, including a list of investments held on
deposit pursuant to applicable law or subject to trust arrangements
("Investments"), other than shares of capital stock of the Company or any of
its Subsidiaries held by the Company or any of its Subsidiaries, as of the date
hereof, all of which Investments, comply with Applicable Insurance Law, except
to the extent that noncompliance, individually or in the aggregate, is not
reasonably likely to have a Material Adverse Effect. Schedule 6.19 hereto sets
forth for each such Investment the category to which it has been assigned by
the Company pursuant to Statement of Financial Accounting Standard No. 115.
Except to the extent that, taken in the aggregate, the failure of the
Investments of FRH to be admitted to the full extent of their carrying value is
not reasonably likely to have a Material Adverse Effect, all Investments of FRH
are admitted assets to the full extent of their carrying value under Applicable
Insurance Law and statutory accounting practices. Except as disclosed on
Schedule 6.19 hereto, the Company and its Subsidiaries have good and marketable
title to all of the Investments listed on Schedule 6.19 or acquired in the
ordinary course of business since the date hereof other than with respect to
those Investments which have been disposed of in the ordinary course of
business since such date, free and clear of all Liens except for Liens for
taxes not yet due and payable. Neither the Company nor any of its Subsidiaries
has received notice that any of the Investments listed on Schedule 6.19 hereto
or acquired in the ordinary course of business since the date hereof is
currently in default in the payment of principal or interest.
SECTION 6.20. Intangible Property. The Company and its Subsidiaries own,
have registered or have valid rights to use the patents, trademarks, service
marks, trade names, copyrights and other intellectual property listed on
Schedule 6.20 hereto, which are the only such rights, patents, trademarks,
service marks, copyrights or other intellectual property that are material to
the business of the Company or any of its Subsidiaries. Neither the Company
nor any of its Subsidiaries has received written notice that any of them is
infringing any patents, trademarks, service marks, trade names, copyrights or
any application pending therefor. Neither the Company nor any of its
Subsidiaries is a party to a proceeding asserting, and none is aware, that any
third party is infringing on its or their rights thereunder. Neither the
Company nor any of its Subsidiaries have any notice of any adversely held
patent, trademark, service mark, trade name, copyright or franchise of any
other person or notice of any claim of any other person relating to
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any of the property set forth on Schedule 6.20 hereto or any process or
confidential information of the Company or any of its Subsidiaries, and neither
the Company nor any of its Subsidiaries has any knowledge of any basis for any
such charge or claim.
SECTION 6.21. Tangible Property. Except for items with a book value of
less than $5,000, Schedule 6.21 hereto sets forth all interests owned or
claimed by the Company or any of its Subsidiaries (including, without
limitation, options) in or to the plant, machinery, equipment, furniture,
leasehold improvements, fixtures, vehicles, structures, any related capitalized
items and other tangible property and which is treated by the Company or any of
its Subsidiaries as depreciable or amortizable property (collectively, the
"Tangible Property"). The Tangible Property of the Company and its
Subsidiaries is in good operating condition and repair, ordinary wear and tear
excepted, and the Company has not received any written notice that any of the
Tangible Property is in violation of any existing statute, law, or any health,
safety or other ordinance, code, rule or regulation. The Tangible Property is
owned by the Company and its Subsidiaries free and clear of all Liens except
those that, individually or in the aggregate, are not reasonably likely to have
a Material Adverse Effect.
SECTION 6.22. Real Property; Leases. Neither the Company nor any of its
Subsidiaries owns any land, buildings or other interests of any kind in any
real property (regardless of where located). Schedule 6.22 hereto includes a
list of all leases and subleases of real property to which either the Company
or any of its Subsidiaries is a party and all leases of equipment to which
either any of the Company or any of its Subsidiaries is a party that obligate
the Company or any such Subsidiary to expend more than $25,000 during any
fiscal year. To the best knowledge of the Company, all of such leases to which
either the Company or any of its Subsidiaries is a party are legal, valid and
binding; and neither the Company nor any of its Subsidiaries nor, to the best
knowledge of the Company, any other party is in default thereunder, nor has the
Company or any of its Subsidiaries received any written notice of default or
written notice of any material claim of any sort that has been asserted by
anyone adverse to the rights of the Company or any of its Subsidiaries under
any such lease or sublease, or affecting or questioning the rights of such
corporation to the continued possession of such leased or subleased premises
under any such lease or sublease, except for claims that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
SECTION 6.23. Assets. Each of the Company and its Subsidiaries has good
and marketable title to all of its assets reflected in the Annual Financial
Statements or described in Sections 6.15, 6.19, 6.20, 6.21 and 6.22 hereof, in
each case, free and clear of any Liens, except for: (i) Liens specifically
described in the notes to the Annual Financial Statements; (ii) assets disposed
of in the ordinary course of business since the date of the Annual Financial
Statements; (iii) Liens securing taxes, assessments, governmental charges or
levies, or the claims of materialmen, carriers, landlords and like persons, all
of which are not yet due and payable or are
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being contested in good faith, so long as such contest does not materially
detract from the value of, or prohibit the use of, such assets as currently
used; (iv) minor imperfections of title and encumbrances, if any, which (a) do
not materially detract from the value of the properties subject thereto, (b) do
not interfere with either the present and continued use of such property or
the conduct of normal operations or (c) have arisen only in the ordinary course
of business; or (v) assets held or used pursuant to any lease listed on
Schedule 6.22 hereto. Each of the Company and its Subsidiaries own (or lease,
in the case of leased assets) all of the assets necessary for the operation of
its business as now operated.
SECTION 6.24. Agreements for Borrowed Money, Etc. Neither the Company
nor any of its Subsidiaries is a party to or bound by any agreement, instrument
or indenture with respect to indebtedness for borrowed money or obligations in
the nature of guarantees of the indebtedness of another person.
SECTION 6.25. Contracts and Commitments. There is no material contract
or document of a character required to be described in the SEC Documents or to
be filed as an exhibit to any SEC Document that is not described and filed as
required by the Securities Act or the Exchange Act. As of the Effective Date,
all contracts or documents described in or filed within an SEC Document shall
have been provided or made available to the Buyer by the Company. Other than
policies of insurance written in the ordinary course of business, Schedule
6.25 hereto sets forth a list of all agreements, contracts and instruments to
which the Company or any of the Subsidiaries is a party or by which it or its
assets or properties is bound which involve an amount in excess of $25,000 or
are otherwise material to the business of the Company or any of its
Subsidiaries. Except as set forth in Schedule 6.25 hereto, neither the Company
nor any of its Subsidiaries is a party to any written or oral:
(i) contracts or agreements containing covenants limiting the freedom
of the Company or any of its Subsidiaries in any material respect to engage
in any line of business in any geographic area or to compete with any
person;
(ii) employment agreements or contracts, including, without limitation,
contracts to employ executive officers and other contracts or arrangements
with officers or directors of the Company or any of its Subsidiaries;
(iii) management, management services, investment management or
consulting agreements (other than those which will be terminated prior to
the Closing) calling for annual payments in excess of $25,000;
(iv) contracts for the purchase or sale of personal property for a
purchase price in excess of $25,000;
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(v) leases of personal property requiring annual payments in excess of
$25,000 per year;
(vi) patent, trademark, service mark, trade name, and copyright and
franchise licenses, royalty agreements or similar contracts and other
agreements;
(vii) joint venture contracts and other agreements;
(viii) contracts and other agreements under which the Company or any of
its Subsidiaries has guaranteed the obligations of any person;
(ix) contracts and other agreements under which the Company or any of
its Subsidiaries agrees to indemnify any person or to share tax liability
with any person;
(x) representative, management, marketing, sales agency, printing or
advertising contracts material to the business;
(xi) contracts for the grant to any person of any preferential rights
to purchase any of the assets or properties material to the business;
(xii) contracts relating to the acquisition by the Company or any of
its Subsidiaries of any operating business or the capital stock of any
person;
(xiii) Benefit Plans; or
(xiv) any other contract, whether or not made in the ordinary course of
business, that is material to the business.
Neither the Company nor any of its Subsidiaries is (and to the best knowledge
of the Company, no other party is) in breach or violation of, or default under,
any of the contracts, commitments or agreements listed on Schedule 6.25 hereto,
and no event has occurred which, with the giving of notice or the passage of
time or both, would constitute a breach, violation or default by the Company or
its Subsidiaries (or, to the best knowledge of the Company, of any other party
thereto) of any of such contracts, commitments or agreements, nor has any
notice of default been received, except for such breaches, violations and
defaults which, individually or in the aggregate, are not reasonably like to
have a Material Adverse Effect. To the best knowledge of the Company, all of
the contracts, commitments or agreements listed on Schedule 6.25 hereto to
which the Company or its Subsidiaries is a party are legal, valid and binding.
There are no oral modifications to any of such contracts or other
agreements. None of the contracts or other
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agreements listed in Schedule 6.25 hereto provides for additional or
accelerated payments or other consideration to be made on account of the
transactions contemplated hereby. No Permit is needed in order that such
contracts, commitments or agreements continue in full force and effect (without
breach by the Company or any of its Subsidiaries, as the case may be, of, or
giving any contractual party a right to terminate or modify, any such contract,
commitment or agreement) following the consummation of the transactions
contemplated hereby. The Company and its Subsidiaries has paid in full or
accrued all amounts due under the contracts set forth on Schedule 6.25 hereto
and has satisfied in full or provided adequate reserves for all of their
liabilities thereunder.
SECTION 6.26. Litigation. Except as set forth on Schedule 6.26 hereto,
there are no actions, suits, proceedings, claims, investigations or
examinations (other than claims under insurance policies issued by the Company
or any of its Subsidiaries) pending or, to the best knowledge of the Company,
threatened against the Company or any of its Subsidiaries or any of their
respective businesses, properties, assets, or securities, at law or in equity,
before or by any Governmental Entity or before any private arbitration panel.
None of the actions, suits, proceedings, claims, investigations or examinations
set forth on Schedule 6.26 hereto, individually or in the aggregate,
will result in any judgment, ruling, order, writ, injunction, award or decree
of any court or any Governmental Entity or arbitral tribunal that is not
adequately reserved against in the Annual Financial Statements or covered by
insurance from unrelated third party insurers. There are no outstanding
judgments, rulings, orders, writs, injunctions, awards or decrees of any court
or Governmental Entity or arbitral tribunal against or involving the Company or
any of its Subsidiaries.
SECTION 6.27. Environmental Matters.
(a) The operations of the Company and its Subsidiaries are in compliance
with all applicable federal, state and local laws, rules, regulations and
ordinances imposing liability or establishing standards for the protection of
human health and the environment including, but not limited to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, the Resource Conservation and Recovery Act, as amended, the Clean
Air Act, as amended, the Clean Water Act, as amended, the Toxic Substances
Control Act, as amended, the Occupational Safety and Health Act, as amended and
any other federal, state, local or municipal laws, statutes, regulations, rules
or ordinances imposing liability or establishing standards of conduct for
protection of the environment (collectively, "Environmental Laws"), except
where failure to comply, individually or in the aggregate, is not reasonably
likely to have a Material Adverse Effect.
(b) The Company and its Subsidiaries have all permits, authorizations, and
approvals required under any applicable Environmental Laws and are each in
compliance with
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their respective requirements, except where failure to comply,
individually or in the aggregate, is not reasonably likely to have a Material
Adverse Effect.
(c) There are no petroleum products, asbestos-containing materials,
polychlorinated biphenyls, or other materials that are defined as hazardous
substances, hazardous wastes, extremely hazardous, special wastes, pollutants,
toxic substances or pollutants, or contaminants under Environmental Laws
("Hazardous Substances") stored, contained or disposed on any property owned or
operated by the Company or any of its Subsidiaries except in compliance with
Environmental Laws, except where failure to comply, individually or in the
aggregate, is not reasonably likely to have a Material Adverse Effect.
(d) To the knowledge of the Company, there has not been any release or
discharge of any Hazardous Substances at any facility owned or operated by the
Company or any of its Subsidiaries or by an insured or at any facility that
received Hazardous Substances generated by the Company or any of its
Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries have received written
notice of or are a party to any proceeding, citation, summons, notice of
violation, administrative order or a notice of potential liability filed by a
Governmental Entity or third party involving the release of Hazardous
Substances or violation of Environmental Laws ("Environmental Actions").
(f) Neither the Company nor any of its Subsidiaries are subject to an
Environmental Action relating to a direct action statute authorizing recovery
against an insurance carrier for releases of Hazardous Substances by an insured
at a facility owned or operated by the insured or a facility which received
Hazardous Substances generated by the insured.
(g) The Company has received no written notice that any of the properties
owned or operated by an insured have been placed or proposed to be placed on
the National Priorities List or comparable state hazardous waste site registry.
(h) The Company has received no written notice that any insured is subject
to an Environmental Action that will likely result in a Material Adverse
Effect.
SECTION 6.28. Brokers and Finders. The Company and its Subsidiaries have
utilized the services of William Blair & Company, L.L.C. and the Company and
its Subsidiaries will be solely responsible for the expenses of such firm. No
other agent, broker, investment banker, person or firm acting on behalf of the
Company or its Subsidiaries, or under authority of any of them is or will be
entitled to any broker's, finder's or investment banker's fee or any other
commission or similar fee directly or indirectly from any of the other parties
hereto in connection with the negotiation of any of the transactions
contemplated hereby.
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SECTION 6.29. Banks. Schedule 6.29 hereto includes a true and complete
list of all banks or other financial institutions in which the Company or any
of its Subsidiaries has an account, letter of credit or a line of credit,
showing a description of each account, letter of credit or line of credit, or
in which the Company or any of its Subsidiaries has a safe deposit box or a
lock-box arrangement.
SECTION 6.30. Maintenance of Insurance. Schedule 6.30 hereto includes a
true and complete list of all policies or binders of insurance maintained by
the Company and its Subsidiaries with respect to their respective properties
and the conduct of their respective businesses, showing the insurer, the
subject matter, the policy number or covering note number with respect to
binders, the beneficiary and the amount of coverage for each policy, and
describing each pending claim thereunder of more than $5,000, and setting forth
the aggregate amounts paid out under each such policy through the date hereof
(which information may be updated as of the Closing Date provided that coverage
and premiums continue to be substantially similar to those reflected in
Schedule 6.30 hereto as of the date hereof). Such policies are valid and
binding in accordance with their terms and are in full force and effect and
insure against risks and liabilities customary for the businesses in which the
Company and its Subsidiaries are engaged. Neither the Company nor any of its
Subsidiaries have received a notice of cancellation or nonrenewal of any such
policy or binder or have any knowledge of any state of facts which might form
the basis for termination of any such insurance. Each of the Company and its
Subsidiaries has, or has made or will make provision for, insurance coverage
consistent with current practices through the Closing Date. None of the
insurance policies for the benefit of the Company and its Subsidiaries is in
default, and neither the Company nor its Subsidiaries has failed to give any
notice or present any claim thereunder in due or timely fashion or as required
by any of such insurance policies so as to jeopardize full recovery under such
policies. The Company and its Subsidiaries paid or will pay all premiums
payable for periods prior to the Closing Date with respect to such insurance
policies.
SECTION 6.31. Legislation. To the knowledge of the Company, since
December 31, 1995, there has not been any legislation, statute, law, ordinance,
code, rule or regulation, either proposed or adopted, by any foreign, federal,
state, county or local government or any other governmental, regulatory or
administrative agency or authority prohibiting or in any way limiting the
business, operations or prospects of the Company or any of its Subsidiaries
except for such prohibitions or limitations which, individually or in the
aggregate, would not have a Material Adverse Effect.
SECTION 6.32. Operations of the Company and its Subsidiaries.
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(a) Since December 31, 1995, the Company and its Subsidiaries have
conducted their respective businesses only in the ordinary course of business
in a manner consistent with past practice.
(b) Since December 31, 1995, there has not occurred any change or event
which, individually or in the aggregate, has or could reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has any knowledge of any change or event which is threatened
which, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect.
(c) Except as set forth on Schedule 6.32 hereto, since December 31, 1995
neither the Company nor any of its Subsidiaries has:
(i) declared or paid or set aside dividends or other distributions
(whether in cash, stock or property) on its capital stock or made any
direct or indirect redemption, retirement, purchase or other acquisition
of any shares of capital stock;
(ii) issued, redeemed, sold or disposed of, or created any
obligation to issue, redeem, sell or dispose of, any shares of the
capital stock of the Company or any of its Subsidiaries or any Rights
relating to capital stock (whether authorized but unissued or held in
treasury) or issued any option, warrant or other right to acquire any
shares of its capital stock;
(iii) effected any stock split, reclassification or combination;
(iv) adopted a plan of, or resolutions providing for, complete or
partial liquidation, dissolution, restructuring, recapitalization or
other reorganization;
(v) amended or modified its certificate of incorporation or by-laws
(or equivalent charter documents);
(vi) merged or consolidated with any corporation or other entity
otherwise than as contemplated by this Agreement or subdivided or in any
way reclassified any shares of its capital stock or changed or agreed to
change in any manner the rights of its outstanding capital stock or the
character of its business;
(vii) entered into, adopted, modified or amended in any material
respect any written employment, severance, consulting, "change of
control", "parachute payment", bonus, incentive compensation, deferred
compensation, profit sharing, stock option, stock purchase, employee
benefit, welfare benefit or other agreement, plan or arrangement
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providing for compensation or benefits to employees or directors or
stockholders which would have effect for any employee of the Company or
its Subsidiaries after the Closing Date;
(viii) incurred or contracted for any capital expenditures in excess
of $25,000 in the aggregate;
(ix) amended, terminated or waived any right of value material to
the business of the Company or any of its Subsidiaries;
(x) made any change in its accounting methods, principles or
practices or made any change in depreciation or amortization policies or
rates adopted by it, except insofar as may have been required by a
change in generally accepted accounting principles, or made any change in
its accounting policies with respect to Loss Reserves;
(xi) revalued any portion of its assets, properties or businesses
other than in the ordinary course of business in a manner consistent with
past practice;
(xii) materially changed any of its business policies, including,
without limitation, advertising, marketing, pricing, purchasing,
personnel, sales or budget policies;
(xiii) made any wage or salary increase or bonus, or increase in any
other direct or indirect compensation, for or to any of its officers,
directors, employees, consultants or agents or any accrual for or
contract or other agreement to make or pay the same, other than to
persons other than its officers, directors or shareholders made in the
ordinary course of business in a manner consistent with past practice;
(xiv) made any loan or advance to any of its officers, directors,
employees, consultants, agents or other representatives (other than
travel advances made in the ordinary course of business in a manner
consistent with past practice) or made any other loan or advance;
(xv) made any payment or commitment to pay severance or termination
pay to any of its officers, directors, employees, consultants, agents or
other representatives;
(xvi) entered into any lease (as lessor or lessee); sold, abandoned
or made any other disposition of any of its Investments or other assets,
properties or businesses other than in the ordinary course of business
consistent with past practice; granted or suffered any Lien on any of its
assets, properties or businesses or on any of the
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capital stock of the Company (other than for Taxes not yet due and
payable); entered into or amended any contract or other agreement to
which it is a party or by or to which it or its assets, properties or
businesses are bound or subject, except in the ordinary course of
business in a manner consistent with past practice; or entered into or
amended any contract or other agreement pursuant to which it agrees to
indemnify any person or to refrain from competing with any person (other
than insurance policies and reinsurance treaties and contracts entered
into in the ordinary course of business);
(xvii) incurred or assumed any debt, obligation or liability, or
issued any debt securities or assumed, guaranteed, endorsed or otherwise
as an accommodation became responsible for, liabilities of any other
person or made any loans or advances, individually or in the aggregate,
material to the business of the Company and its Subsidiaries (other than
insurance policies and reinsurance treaties and contracts entered into in
the ordinary course of business);
(xviii) except for Tangible Property acquired in the ordinary course
of business in a manner consistent with past practice, made any
acquisition of all or any part of the assets, properties, capital stock
or business of any other person;
(xix) except in the ordinary course of business in a manner
consistent with past practice, amended, terminated or entered into any
contract or other agreement or amended, terminated or entered into any
other material transaction; or
(xx) agreed to do any of the foregoing.
SECTION 6.33. Potential Conflicts of Interest. Except as set forth on
the Schedule 6.33, no officer or director of the Company or any of its
Subsidiaries, or any entity controlled by an officer or director of the
Company, or any member of the immediate family of an officer or director, nor
to the best knowledge of the Company, no stockholder of the Company and no
entity controlled by a stockholder of the Company, or any immediate family
member of any stockholder of the Company:
(i) owns, directly or indirectly, any interest in (excepting not
more than five percent stock holdings held solely for investment purposes
in securities of any person which are listed on any national securities
exchange or regularly traded in the over-the-counter market) or is an
owner, sole proprietor, shareholder, partner, director, officer,
employee, consultant or Producer of any person which is a competitor,
lessor, lessee, reinsurer, customer or supplier of the Company or any of
its Subsidiaries or any person which is party to any contract set forth
in Schedule 6.25 hereto;
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(ii) owns, directly or indirectly, in whole or in part, any Tangible
Property, patent, trademark, service mark, trade name, copyright,
franchise, invention, permit, license or secret or confidential
information which the Company or any of its Subsidiaries is using or the
use of which is necessary for the business of the Company or any of its
Subsidiaries; or
(iii) has any pending cause of action or other suit, action or claim
whatsoever against, or owes any amount to, the Company or any of its
Subsidiaries, except for claims in the ordinary course of business,
such as for accrued vacation pay, accrued benefits under Benefit Plans
and similar matters.
As used in this Section 6.33, a person's immediate family shall mean such
person's spouse, parents, children, siblings, mothers- and fathers-in-law,
sons- and daughters-in-law, and brothers- and sisters-in-law.
SECTION 6.34. Guaranty Funds, Pools and Associations. Except as required
by the laws of the jurisdiction in which it transacts business, neither the
Company nor any of its Subsidiaries is a member of any guaranty fund, pool,
joint underwriting association, assigned risk plan or similar entity or subject
to any present or known future assessment by any such entities.
SECTION 6.35. Full Disclosure. All documents delivered by or on behalf
of the Company in connection with this Agreement and the transactions
contemplated hereby are true, complete, accurate and authentic. The
information furnished by or on behalf of the Company to Buyer in connection
with this Agreement and the transactions contemplated hereby does not contain
any untrue statement of a material fact and does not omit to state a material
fact required to be stated therein or necessary to make the statements made, in
the context in which made, not false or misleading. There is no fact relating
to the operations of the Company and its Subsidiaries which the Company has not
disclosed to Buyer in writing which, individually or in the aggregate, has a
Material Adverse Effect, or so far as the Company can now foresee, individually
or in the aggregate, is reasonably likely to have a Material Adverse Effect.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF BUYER AND BUYER SUB
The Buyer and Buyer Sub represent and warrant to the Company as follows:
SECTION 7.1. Organization and Standing. Each of Buyer and Buyer Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its
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incorporation and has all requisite corporate power and authority to
enter into this Agreement and the other agreements provided for herein to which
it is a party and to perform its obligations hereunder and thereunder.
SECTION 7.2. Certificate of Incorporation and By-Laws. The copies of the
Certificate of Incorporation and by-laws of Buyer and Buyer Sub which have
heretofore been delivered to the Company are true, accurate and
complete and reflect all amendments or changes in effect.
SECTION 7.3. Authority. Buyer and Buyer Sub have the full legal right
and power and all authority required to enter into, execute and deliver this
Agreement and each other agreement entered into or to be entered into in
connection herewith to which Buyer or Buyer Sub is or is to be a party (the
"Buyer Related Agreements"), and subject to receipt of all Acquiror Approvals,
to perform fully their respective obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and the Buyer Related
Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
on the part of Buyer and Buyer Sub and no other corporate proceedings on the
part of Buyer or Buyer Sub are necessary to authorize the execution, delivery
and performance of this Agreement, the Buyer Related Agreements, the Merger and
the transactions contemplated hereby and thereby. This Agreement has been, and
each Buyer Related Agreement will be, duly executed and delivered by Buyer and
Buyer Sub and this Agreement and the Buyer Related Agreements each constitutes
or will constitute the legal, valid and binding obligation of Buyer and Buyer
Sub enforceable against each of Buyer and Buyer Sub in accordance with its
terms except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally and by the availability of equitable remedies (regardless of whether
a proceeding is considered at law or in equity).
SECTION 7.4. Absence of Conflicts. Neither the execution nor the
delivery of this Agreement nor any of the Buyer Related Agreements, nor the
consummation of the transactions and performance of the obligations
contemplated hereby or thereby will: (i) conflict with or result in a breach
or violation of any of the terms, conditions or provisions of the certificate
of incorporation or by-laws of Buyer or Buyer Sub; (ii) except as set forth in
Schedule 7.4 hereto, conflict with or result in a breach or violation of, or
default (or event which, with the giving of notice or the passage of time or
both, would constitute a breach, violation or default) or loss of a benefit
under, result in the termination or modification of or creation of any Lien
under, or permit the acceleration or modification of any obligation under any
provision of any agreement, indenture, mortgage, lien, lease or other
instrument or restriction of any kind to which Buyer or Buyer Sub is a party or
by which any of their assets, properties or securities are otherwise bound; or
(iii) except as set forth on Schedule 7.4 hereto, conflict with or violate any
permit, license,
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judgment, order, writ, injunction, award, decree, statute, law, ordinance,
code, rule or regulation applicable to Buyer or Buyer Sub or any of their
assets or properties; except in the case of clauses (ii) and (iii) above,
those which, individually or in the aggregate, are not reasonably likely to
have a material adverse effect on the ability of Buyer and Buyer Sub to
consummate the transactions contemplated by this Agreement.
SECTION 7.5. Consents and Approvals. The execution and delivery by Buyer
and Buyer Sub of this Agreement and the Buyer Related Agreements, the
performance by Buyer and Buyer Sub of their obligations hereunder and
thereunder and the consummation by Buyer and Buyer Sub of the transactions
contemplated hereby and thereby do not require Buyer or Buyer Sub to obtain any
Permit or Third Party Consent, except for (i) the approval of the stockholders
of the Company as provided in Sections 5.2 and 8.8 hereof, (ii) the filings and
termination of the applicable waiting period required under the HSR Act, as
provided in Section 9.1 hereof, (iii) the Insurance Regulatory Approvals, (iv)
the filing of the Certificate of Merger under the DGCL, (v) the other consents,
approvals, authorizations or notices set forth in Schedule 7.5 hereto, and (vi)
those which if not obtained, individually or in the aggregate, are not
reasonably likely to have a material adverse effect on the ability of Buyer and
Buyer Sub to consummate the transactions contemplated by this Agreement. The
consents, approvals, authorizations, actions, filings and notices set forth in
clauses (i) through (v), inclusive, of this Section 7.5 or in Schedule 7.5
hereto are referred to herein as the "Acquiror Approvals".
SECTION 7.6. Brokers and Finders. CHPII has utilized the services of
Gill and Roeser, Inc. and CHPII will be solely responsible for the expenses of
such firm. No other agent, broker, investment banker, person or firm acting on
behalf of Buyer or Buyer Sub or under authority of Buyer or Buyer Sub is or
will be entitled to any broker's, finder's or investment banker's fee or any
other commission or similar fee directly or indirectly from the Company in
connection with the negotiation of any of the transactions contemplated hereby.
SECTION 7.7 SEC Filings. None of the written information supplied or to
be supplied by Buyer or Buyer Sub expressly provided by it for inclusion in the
Proxy Statement will, at the time of the first mailing thereof to the Company's
stockholders and on the date of the meeting of FIIG's stockholders referred to
in Section 8.8 hereof, 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.
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ARTICLE VIII
COVENANTS AND AGREEMENTS OF THE COMPANY
SECTION 8.1. Conduct of Business. From the date of this Agreement until
the earlier of the Effective Time of the Merger or the termination of this
Agreement in accordance with Article XII hereof (except with the prior written
consent of Buyer or except as expressly provided in other sections of this
Agreement or the Schedules hereto), the Company agrees that:
(i) the Company and each of its Subsidiaries will conduct their
respective business in the ordinary course and consistent with past practice
and will use their reasonable best efforts to preserve intact their business
organization and goodwill, preserve the goodwill and business relationships
with suppliers, customers, licensees, licensors, agents, reinsurers and all
others having business relationships with each of them, keep available the
services of their respective present officers, employees, consultants and
agents, defend and protect their respective assets from infringement or
usurpation, perform all of their obligations under all contracts, leases and
any and all other agreements relating to or affecting its assets or its
business, conduct their respective businesses in such a manner so that the
representations and warranties contained in Article VI hereof shall continue
to be true, complete and accurate on and as of the Closing Date with the
same force and effect as if made on and as of the Closing Date in a manner
so as to satisfy the condition set forth in Section 10.2 hereof and shall
maintain their books, accounts and records in the usual manner consistent
with past practice and comply in all material respects with all laws,
ordinances and regulations of Governmental Entities applicable to the
Company and any of its Subsidiaries, including, without limitation, all
Applicable Insurance Law;
(ii) each of the Company and its Subsidiaries will use accounting
policies in keeping its books and records and preparing its financial
statements in accordance with U.S. generally accepted accounting principles,
applied consistently with the application of such principles in preparing
the Annual Financial Statements and in accordance with statutory accounting
principles, applied consistently with the application of such principles in
preparing the Annual Convention Statements;
(iii) the Company will not, and will not permit any of its Subsidiaries
to, pay any bonus to any employees of the Company or any of its Subsidiaries
without the prior written consent of Buyer (which consent shall not be
unreasonably withheld or delayed); and
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(iv) except as set forth in Schedule 8.1 hereto, the Company will not,
and will not permit any of its Subsidiaries to, undertake any of the actions
specified in Section 6.32 hereof.
SECTION 8.2. Access to Properties, Books and Records; Confidentiality.
From the date hereof through the Closing Date, the Company shall, and shall
cause each of its Subsidiaries to, use all reasonable efforts to cause to be
afforded upon reasonable notice to the officers, directors, employees,
attorneys, accountants, consultants and other authorized representatives of
Buyer including, without limitation, any banks, other financial institutions
and investment bankers arranging or providing for, or advising with respect to,
any financing, free and full access during normal business hours to the Company
and its Subsidiaries and to the employees, properties, books and records, and
contracts and other agreements, documents and other papers, and copies,
extracts and summaries thereof (certified, if requested) of each of the
foregoing in order to afford Buyer the opportunity to make such investigations
of the affairs of the Company and its Subsidiaries as it deems desirable. The
Company and each of its Subsidiaries shall furnish to Buyer such information
relating to their respective businesses and affairs (and which is reasonably
available to the Company and its Subsidiaries) as Buyer shall from time to time
reasonably request and will cause their officers, employees, agents and
consultants to keep the officers of the Buyer informed as to the affairs of the
Company and its Subsidiaries. The Company and its Subsidiaries shall cause
their officers, employees, agents and consultants to meet with officers,
employees, agents and consultants and other authorized representatives of
Buyer, including, without limitation, any banks, other financial institutions
and investment bankers arranging or providing for, or advising with respect to,
any financing, from time to time upon Buyer's reasonable request. No
investigation pursuant to this Section 8.2 shall affect any representations or
warranties of the Company or the conditions to the obligations of the Company
hereunder. Notwithstanding any right of Buyer to fully investigate the affairs
of the Company and its Subsidiaries and notwithstanding any knowledge of facts
determined or determinable by Buyer pursuant to such investigation or right of
investigation, Buyer has the right to rely fully upon the representations,
warranties, covenants and agreements of the Company contained in this
Agreement. Buyer and Buyer Sub agree to be bound by and comply with the
provisions set forth in the Confidentiality Agreement, dated February 22, 1996
(the "Confidentiality Agreement"), between William Blair & Company, L.L.C. as
agent for the Company and Castle Harlan Partners II, L.P., a Delaware limited
partnership ("CHPII"), as if such provisions were set forth herein, and such
provisions are hereby incorporated herein by reference.
SECTION 8.3. Insurance. From the date hereof through the Closing Date,
the Company and its Subsidiaries shall maintain in force (including necessary
renewals thereof) the insurance policies listed in Schedule 6.30 hereto, except
to the extent that they may be replaced with equivalent policies
appropriate to insure the assets, properties and businesses of the
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Company and its Subsidiaries to the same extent as currently
insured at the same or lower rates or at rates approved by Buyer.
SECTION 8.4. Litigation. The Company shall promptly notify Buyer of any
suits, actions, claims, proceedings or investigations which after the date of
this Agreement are commenced or, to the Company's knowledge, threatened,
against the Company or any of its Subsidiaries or against any officer,
director, employee, consultant, agent or shareholder with respect to the
affairs of the Company or any of its Subsidiaries.
SECTION 8.5. Advice of Changes. The Company shall give prompt written
notice to Buyer of: (i) the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause any representation or
warranty of the Company contained in this Agreement, if made on or as of the
date of such event or as of the Closing Date, to be untrue or inaccurate; (ii)
any failure of the Company or any of its Subsidiaries or of any officer,
director, employee, consultant or agent of the Company or any of its
Subsidiaries, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it or them under this Agreement; (iii) any
event of which they have knowledge which will result, or in the opinion of such
party, has a reasonable prospect of resulting, in the failure to satisfy the
conditions specified in Article X hereof; (iv) any notice of, or other
communication relating to, a default (or event which, with notice or lapse of
time or both, would constitute a default), received by the Company or any of
its Subsidiaries subsequent to the date hereof and prior to the Closing Date,
under any contract or other agreement material to the business of the Company
or any of its Subsidiaries; (v) the termination or cancellation of any
Reinsurance Agreement; (vi) any notice or other communication from any person
alleging that the consent of such person is or may be required in connection
with the transactions contemplated hereby; (vii) any notice or other
communication from any foreign, federal, state, county or local government or
any other governmental, regulatory or administrative agency or authority in
connection with the transactions contemplated hereby or any other material
notice or other material communication from any foreign, federal, state, county
or local government or any other governmental, regulatory or administrative
agency or authority; (viii) any change which has a Material Adverse Effect, or
the occurrence of any event which, so far as can be foreseen at the time of its
occurrence, would have a Material Adverse Effect; or (ix) any matter hereafter
arising which, if existing, occurring or known at the date hereof, would have
been required to be disclosed to Buyer; provided, however, that no such
notification shall affect the representations or warranties of the Company or
the conditions to the obligations of the Company hereunder.
SECTION 8.6. Subsequent Financial Statements; SEC Documents; and
Insurance Filings. (a) From the date hereof to and including the Closing Date,
the Company and its Subsidiaries shall: (i) provide to Buyer a monthly
management report in scope and detail reasonably satisfactory to Buyer; (ii)
timely prepare, and promptly deliver to Buyer, monthly
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financial statements in scope and detail reasonably
satisfactory to Buyer; (iii) provide to Buyer a monthly statement of
Investments in detail reasonably satisfactory to Buyer; and (iv) provide to
Buyer a monthly list of all claims paid under any insurance or reinsurance
policy issued by the Company or any of its Subsidiaries in excess of $50,000.
Each such report or statement shall present fairly the information set forth
therein in accordance with accounting policies and procedures consistent with
those historically used by the Company.
(b) The Company will file with the SEC all reports, schedules, forms,
statements and other documents required to be filed under the Exchange Act from
the date hereof through the Effective Date (the "SEC Filings") and promptly
provide Buyer with a copy of such SEC Filing. Each SEC Filing, as of its
respective date: (i) will comply in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to each such SEC Filing; (ii) will not
contain any untrue statement of a material fact or omit to state a 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; and (iii) in the case of the Annual Report on Form 10-K for the
year ended December 31, 1995, will be accompanied by a report of the Company's
independent accountants which report shall be unqualified except for references
therein to the adoption of new accounting policies.
(c) The Company will file all reports, schedules, forms, statements and
other documents required to be filed under any Applicable Insurance Law from
the date hereof through the Effective Date and promptly provide Buyer with a
copy of any such filing.
SECTION 8.7. No Solicitation. (a) During the term of this Agreement,
the Company and its Subsidiaries shall not, directly or indirectly, solicit any
Acquisition Proposal, or cooperate with, furnish or cause to be furnished any
information concerning the business, financial condition, properties or assets
of the Company or any of its Subsidiaries to, or continue or enter into any
discussion, negotiation, agreement or understanding concerning any Acquisition
Proposal with, any person making any Acquisition Proposal (other than any of
the parties hereto and their agents and representatives or any governmental or
regulatory authority whose consent is required in connection with the
transactions contemplated by this Agreement), except that the Company shall be
permitted to consider and negotiate any unsolicited Acquisition Proposal and
furnish information to and enter into an acquisition agreement with a third
party making an unsolicited Acquisition Proposal if the Board of Directors of
the Company determines in good faith, based upon a written opinion of outside
counsel, that its fiduciary duties require it to do so (an "Unsolicited Sale").
The Company shall promptly notify Buyer of any inquiry or proposal
received by the Company or any of its Subsidiaries with respect to any such
Acquisition Proposal. As used herein, the term "Acquisition Proposal" shall
mean any proposal, offer or indication of
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interest for a merger or other business combination or joint venture
involving the Company or for the acquisition of a substantial portion of the
assets or the stock of the Company.
(b) In the event that the Company enters into an agreement involving an
Unsolicited Sale prior to February 17, 1997, then the Company shall be
obligated concurrently with the execution of such agreement: (i) to reimburse
to Buyer, Buyer Sub and CHPII all of their out-of-pocket fees and expenses in
connection with the transactions contemplated by this Agreement in an amount
not to exceed $100,000 (a written itemization of which shall be delivered to
the Company); (ii) to pay to CHPII (or its designee) a cash fee of $3,500,000;
and (iii) to terminate this Agreement.
(c) In the event that the Company enters into an agreement involving a
merger or other business combination or joint venture involving the Company or
for the acquisition of a substantial portion of the assets or the stock of the
Company other than with Buyer at any time after the termination of this
Agreement pursuant to Article XII hereof and prior to February 17, 1997, then
the Company shall be obligated concurrently with the execution of such
agreement: (i) to reimburse to Buyer, Buyer Sub and CHPII all of their
out-of-pocket fees and expenses in connection with the transactions
contemplated by this Agreement in an amount not to exceed $100,000 (a written
itemization of which shall be delivered to the Company); and (ii) to pay to
CHPII (or its designee) a cash fee of $3,500,000.
(d) Upon payment of the amounts specified in clauses (i) and (ii) of
Section 8.7(b) or 8.7(c) of this Agreement, the Company shall have no further
liability or obligation whatsoever to Buyer, Buyer Sub or CHPII. The
provisions of Sections 8.7(b) and 8.7(c) hereof shall be of no force and effect
and no payment shall be made to CHPII if: (i) at any time Buyer lowers the
Cash Consideration Per Share below $16.00; (ii) the Merger is not consummated
due to the failure by Buyer to satisfy the terms and conditions of this
Agreement; (iii) Buyer for any reason (other than due to the failure by the
Company to satisfy the terms and conditions of this Agreement) determines not
to pursue the transaction with the Company; (iv) any regulatory approval
required for the Merger is not obtained; or (v) this Agreement is terminated
pursuant to clause (i) or (iv) of Section 12.1 hereof as a result of the
Connecticut Waiver being denied.
SECTION 8.8. Proxy Statement; Approval by the Company's Stockholders. The
Company shall cause a special meeting of its stockholders to be called and held
promptly following the date hereof for the purposes of acting on this Agreement
and the Merger and the transactions contemplated hereby. The Company shall,
through its Board of Directors, and subject to its fiduciary duties, recommend
to its stockholders approval of the Merger and the transactions contemplated
hereby. As soon as practicable after the date hereof, the Company shall prepare
(with the cooperation of, and reasonable approval by, Buyer and Buyer Sub) and
file with the SEC under the Exchange Act, and use all reasonable efforts to have
cleared by the SEC and
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promptly thereafter mail to the Company's stockholders, a proxy
statement and form of proxy with respect to the meeting of the Company's
stockholders (the "Proxy Statement"). Simultaneously herewith, stockholders of
the Company holding in excess of 20% of the outstanding Common Stock have
executed and delivered to Buyer the Voting Agreement.
SECTION 8.9. Options. The Company shall cause each of the persons listed
on Schedule 3.7 hereto to deliver to Buyer on or before the Effective Date
evidence satisfactory to Buyer of the cancellation of the Options set forth
next to the name of such person on Schedule 3.7 hereto.
ARTICLE IX
ADDITIONAL COVENANTS
SECTION 9.1. HSR Act. The Company and Buyer shall promptly and timely
after the date hereof file, or cause to be filed, with the Federal Trade
Commission and the Department of Justice, all notifications, including
responses to requests for information, required by the HSR Act applicable to
the Company and Buyer as the case may be, and each party shall request early
termination of the applicable waiting period thereunder. The Company and Buyer
will cooperate with one another to the extent necessary to prepare their
separate filings and to supply any additional information that may be submitted
to the Federal Trade Commission or the Department of Justice relating to the
status of the transaction contemplated hereby under the antitrust laws, whether
or not such additional information is requested or required under the HSR Act.
SECTION 9.2. Insurance Regulatory Approvals. Each of the parties hereto
will use its best efforts to take all steps necessary or appropriate to obtain
the Connecticut Waiver, the Connecticut Approval and the other Insurance
Regulatory Approvals required for the consummation of the Merger.
SECTION 9.3. Filings and Approvals. The Company, its Subsidiaries, Buyer
and Buyer Sub shall, as applicable: (i) file a Form A with the Connecticut
Commissioner of Insurance with respect to the grant of prior approval or
exemption by the Connecticut Commissioner of Insurance under Connecticut
General Statute Section 38a-132 in connection with the Merger (the
"Connecticut Approval") and make a request for waiver of Connecticut General
Statute Section 38a-136(i)(2)(A) with the Connecticut Commissioner of
Insurance (the "Connecticut Waiver") all of which filings shall be made on or
before May 8, 1996; (ii) duly make all other regulatory filings required to be
made by each in respect of this Agreement or the transactions contemplated
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hereby; (iii) comply as promptly as practicable with all governmental
requirements applicable to the transactions contemplated hereby; and (iv)
obtain promptly all necessary permits, orders and other consents of
Governmental Entities and consents of third parties necessary for the
consummation of the Merger. Buyer shall use its reasonable best efforts to
obtain, and each of the Company and its Subsidiaries shall use its reasonable
best efforts to assist Buyer in obtaining, the Connecticut Waiver, the
Connecticut Approval and all other Acquiror Approvals. The Company and its
Subsidiaries shall each use its reasonable best efforts to obtain, and Buyer
shall use its reasonable best efforts to assist the Company and the
Subsidiaries in obtaining, the Connecticut Waiver, the Connecticut Approval and
all other Sellers Approvals. Buyer will promptly notify the Company of all
material communications with the Connecticut Department of Insurance with
respect to the Connecticut Approval and the Connecticut Waiver. Buyer will
furnish the Company with a copy of the aforementioned Form A and request for
waiver promptly after the same are filed with the Connecticut Department of
Insurance.
SECTION 9.4. Continued Effectiveness of Representations and Warranties.
Buyer and Buyer Sub shall use their reasonable best efforts to cause the
representations and warranties contained in Article VII hereof to continue to
be true, complete and accurate on and as of the Closing Date with the same
force and effect as if made on and as of the Closing Date in a manner so as to
satisfy the condition set forth in Section 11.2 hereof.
SECTION 9.5. Advice of Changes. Buyer shall give prompt written notice
to the Company of the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
of Buyer or Buyer Sub contained in this Agreement, if made on or as of the date
of such event or as of the Closing Date, to be untrue or inaccurate; provided,
however, that no such notification shall affect the representations and
warranties of Buyer or Buyer Sub or the conditions to the obligations of Buyer
or Buyer Sub hereunder.
SECTION 9.6. Proxy Statement. Buyer and Buyer Sub shall use all
reasonable efforts to obtain and furnish to the Company the information
relating to it required to be included in the Proxy Statement.
SECTION 9.7. Further Assurances. In addition to the actions, contracts
and other agreements and documents and other papers specifically required to be
taken or delivered pursuant to this Agreement, each of the parties hereto shall
execute such contracts and other agreements and documents and other
papers and take such further actions as may be reasonably required or desirable
to carry out the provisions hereof and the transactions contemplated hereby.
Each such party shall, on or prior to the Effective Time, use its best efforts
to fulfill or obtain the fulfillment of the conditions precedent to the
consummation of the Merger, including the
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execution and delivery of any documents, certificates, instruments or other
papers that are reasonably required for the consummation of the Merger.
SECTION 9.8 Directors' and Officers' Insurance. After the Effective
Time, Buyer will cause the Surviving Corporation, or another affiliate of
Buyer, to (i) maintain the current directors' and officers' liability and
corporate indemnification insurance policy of the Company and its Subsidiaries,
or a substantially similar policy, subject to terms and conditions no less
advantageous than under such current policy, for all officers and directors of
the Company and its Subsidiaries on the date of this Agreement, for 36 months
after the Effective Time to cover acts and omissions of directors and officers
of the Company and its Subsidiaries occurring prior to the Effective Time,
provided, however, that in no event shall the Surviving Corporation be required
to pay an annual premium for any such policy in excess of 125% of the current
annual premium in effect as of the date hereof, but shall instead in such case
obtain the greatest amount of coverage available at a premium equal to 125% of
the current premium, and (ii) maintain in effect provisions of the certificate
of incorporation and by-laws of the Surviving Corporation and its subsidiaries,
as the case may be, and cause the Surviving Corporation to comply with all
agreements between the Company and its directors and officers providing for
indemnification, all relating to the rights of officers and directors with
respect to indemnification for acts and omissions occurring prior to the
Effective Time on terms no less advantageous to such officers and directors as
in effect prior to the Effective Time.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF BUYER AND BUYER SUB
The obligations of Buyer and Buyer Sub under this Agreement are subject to
the satisfaction (or waiver in writing, in whole or in part), at or before the
Effective Time, of each of the following conditions:
SECTION 10.1. Compliance with Agreements. The Company and each of its
Subsidiaries shall have performed and complied in all material respects with
all of the obligations required of any of them by this Agreement and the other
agreements provided herein to be performed or complied with by each of them on
or before the Closing Date, and Buyer shall have received from the Company and
each of its Subsidiaries at the Closing a certificate, dated the Closing Date,
to such effect and stating that all conditions to the Buyer's obligations
hereunder have been satisfied.
SECTION 10.2. Representations and Warranties. The representations and
warranties made by the Company in this Agreement shall be true, complete and
accurate (i) in all
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respects (in the case of any representation or warranty
containing any materiality qualification) or (ii) in all material respects (in
the case of any representation or warranty without any materiality
qualification), in each case as of the Closing Date as though such
representations and warranties were made at and as of such time (except for any
representation and warranty made or given as of a specified date, which shall
have been true and correct as of such specified date, and except for any
changes expressly permitted by the terms hereof or consented to in writing by
Buyer). Buyer shall have received from the Company at the Closing a
certificate, dated the Closing Date, to that effect.
SECTION 10.3. Opinion of Counsel for the Company. Buyer shall have
received an opinion from Lord, Bissell & Brook, special counsel for the Company
and its Subsidiaries, dated the Closing Date, substantially to the effect set
forth in Exhibit B hereto.
SECTION 10.4. Approvals. The Connecticut Waiver, the Connecticut
Approval, all other Acquiror Approvals and all other Sellers Approvals shall
have been obtained and shall be in full force and effect on the Closing Date,
and the continued conduct by the Company or any of its Subsidiaries of their
respective businesses in substantially the same manner as currently conducted
and the consummation of the transactions contemplated hereby shall not violate
or conflict with any judgment, code, ruling, order, writ, injunction, decree,
award, statute, law, ordinance, rule or regulation or other restriction binding
upon or applicable to the Company or any of its Subsidiaries. None of the
Connecticut Waiver, the Connecticut Approval or any such other approvals shall
contain any terms, limitations or conditions which Buyer determines in good
faith to be materially burdensome (restrictions under Connecticut General
Statute Section 38a-136(i), other than Connecticut General Statute Section
38a-136(i)(2)(A), shall be deemed not to be materially burdensome) to Buyer or
its affiliates or to the Company or its Subsidiaries taken as a whole, or which
restrict Buyer's rights as the controlling shareholder of the Company
(including, without limitation, its right to participate actively in the
management of the Company and its Subsidiaries), or which would prevent Buyer,
its affiliates or the Company and its Subsidiaries from conducting their
respective businesses in substantially the same manner as conducted on the date
hereof.
SECTION 10.5. Legislation. No legislation shall have been proposed in
bill form or enacted since the date hereof, and no statute, law, ordinance,
code, rule or regulation shall have been adopted, revised or interpreted, by
any Governmental Entity, which would require, upon or as a condition to the
Merger, the divestiture or cessation of the conduct of any business presently
conducted by the Company or any of its Subsidiaries, on the one hand, or, by
Buyer or any of its affiliates, on the other hand, or, in the event that the
transactions contemplated hereby are consummated, which may, individually or in
the aggregate, have an adverse effect on Buyer or on any of its affiliates or
which, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on the Company or any or its Subsidiaries.
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SECTION 10.6. Absence of Preventative Litigation. On the Closing Date:
(i) there shall be no injunction, restraining order or order of any nature
issued by any court of competent jurisdiction which direct that this Agreement
or any transaction contemplated hereby shall not be consummated as herein
provided or compels or would compel CHPII to dispose of or discontinue any
portion of the business conducted by CHPII and its subsidiaries or of the
business conducted by the Company or any of its Subsidiaries as a result of the
consummation of the transactions contemplated hereby, and (ii) there shall be
no suit, action, claim, proceeding or investigation instituted or threatened by
or before any court or any foreign, federal, state, county or local government
or any other governmental, regulatory or administrative agency or authority
seeking to restrain, prohibit or invalidate the consummation of the
transactions contemplated hereby or to seek damages in connection with such
transactions or which might affect the right of Buyer to own, operate or
control, after the Closing, the assets, properties and businesses of the
Company and its Subsidiaries or which has or may have, in the opinion of the
Buyer, a Material Adverse Effect (the matters referred to in this Section
being collectively referred to as "Preventative Litigation").
SECTION 10.7. Secretary's Certificate; Certified Copies. The Buyer shall
have received: (i) a secretary's certificate for the Company attached to which
shall be a certified copy of the resolutions of the Board of Directors of the
Company and a copy certified by the secretary of the corporation of the vote or
written consent of the Company's stockholders, in each case authorizing this
Agreement, the Merger and the transactions contemplated hereby, and an
incumbency certificate for each officer executing any agreement, certificate or
other instrument provided for herein to be executed and delivered by the
Company; and (ii) copies of the certificate of incorporation of the Company and
each of its Subsidiaries certified by the Secretary of State of the
jurisdiction of its incorporation and copies of by-laws certified by the
secretary of the applicable corporation. The Company shall deliver to Buyer
copies of certificates of good standing (together with tax clearance) for the
Company and each of its Subsidiaries from the Secretary of State or other
appropriate official of the respective jurisdictions of incorporation and
jurisdictions in which the Company or any of its Subsidiaries is qualified to
do business.
SECTION 10.8. Resignations. Buyer shall have received resignations
from those directors and officers of the Company and its Subsidiaries as shall
be designated by Buyer not less than five days prior to the Closing Date, such
resignations to be effective at the Effective Time of the Merger.
SECTION 10.9. Dissenting Stock. The aggregate number of shares of
Dissenting Stock shall be less than 5% of the number of shares of Common Stock
outstanding at the time of the stockholders' meeting referred to in Section 8.8
hereof.
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SECTION 10.10. No Material Adverse Effect No Material Adverse Effect
shall have occurred and be existing as of the Closing Date.
SECTION 10.11. Stock Option Plan and Directors' Incentive Plan;
Options. Buyer shall have received evidence satisfactory to it that: (i) the
Company Stock Option Plan, effective February 28, 1991 and the Directors'
Incentive Plan, as amended March 8, 1995, shall have been terminated; and (ii)
all Options and any other options for Common Stock have been canceled.
ARTICLE XI
CONDITIONS TO OBLIGATIONS OF
THE COMPANY
The obligations of the Company under this Agreement are subject to the
satisfaction (or waiver in writing in whole or in part), at or before the
Effective Time, of each of the following conditions:
SECTION 11.1. Compliance with Agreement. Buyer and Buyer Sub shall have
performed and complied in all material respects with all the obligations
required by this Agreement to be performed or complied with by it on or before
the Closing Date, and the Company shall have received from Buyer and Buyer Sub
at the Closing a certificate, dated the Closing Date, to such effect and
stating that all conditions to the Buyer's obligations hereunder have been
satisfied.
SECTION 11.2. Representations and Warranties. The representations and
warranties made by Buyer and Buyer Sub in this Agreement shall be true,
complete and accurate (i) in all respects (in the case of any representation or
warranty containing any materiality qualification) or (ii) in all material
respects (in the case of any representation or warranty without any materiality
qualification), in each case as of the Closing Date as though such
representations and warranties were made at and as of such time (except for any
representation and warranty made or given as of a specified date, which shall
have been true and correct as of such specified date, and except for any
changes expressly permitted by the terms hereof or consented to in writing by
the Company). The Company shall have received from Buyer and Buyer Sub at the
Closing a certificate, dated the Closing Date, to that effect.
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SECTION 11.3. Opinion of Counsel for Buyer. The Company shall have
received an opinion from Schulte Roth & Zabel, special counsel for Buyer and
Buyer Sub, dated the Closing Date, substantially to the effect set forth in
Exhibit C hereto.
SECTION 11.4. Approvals. All Sellers Approvals specified in clauses (i)
through (iv), inclusive, of Section 6.5 hereof shall have been obtained and be
in full force and effect on the Closing Date.
SECTION 11.5. Secretary's Certificate. The Company shall have received a
secretary's certificate of Buyer and Buyer Sub, attached to which certificate
shall be a certified copy of the resolutions of the Board of Directors of Buyer
and Buyer Sub, in each case authorizing this Agreement, the Merger and the
transactions contemplated hereby, and a certificate of incumbency as to each
officer executing and delivering to the Company any agreement or certificate
pursuant hereto.
SECTION 11.6. Absence of Preventative Litigation. There shall be no
Preventative Litigation.
SECTION 11.7. Good Standing. The Company shall have received
certificates of good standing for the Buyer and Buyer Sub from the Delaware
Secretary of State.
ARTICLE XII
TERMINATION, AMENDMENT, WAIVERS
SECTION 12.1. Termination. At any time prior to the Effective Time of
the Merger, this Agreement may be terminated and the Merger provided for herein
abandoned, whether before or after and notwithstanding adoption and approval
thereof by the stockholders of the Company:
(i) by mutual written consent of Buyer and the Company;
(ii) at the election of the Company, if Buyer or Buyer Sub has breached
or failed to perform or comply with in any material respect any
representation, warranty, covenant or agreement contained in this Agreement;
provided, however, that if such breach or failure is curable, notice of such
breach or failure shall have been given to Buyer and Buyer
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Sub and Buyer or Buyer Sub, as the case may be, shall not have cured such
failure within 15 days;
(iii) at the election of Buyer, if the Company or any of its
Subsidiaries has breached or failed to perform or comply with in any
material respect any representation, warranty, covenant or agreement
contained in this Agreement; provided, however, that if such breach or
failure is curable, notice of such breach or failure shall have been given
to the Company and such breaching party shall not have cured such failure
within 15 days;
(iv) by Buyer or the Company if the Effective Date shall not be on or
before September 30, 1996 or such later date as the parties hereto may agree
upon, unless the failure to consummate the Merger is the result of a willful
and material breach of this Agreement by the party seeking to terminate this
Agreement;
(v) at the election of the Company, in the event of an Unsolicited
Sale and the payments required by Section 8.7(b) of this Agreement have been
made; or
(vi) by Buyer 45 days following the date on which the Company first
actively participates in any discussions or negotiations regarding, or
furnishes to any person any confidential information with respect to, any
unsolicited Acquisition Proposal in accordance with Section 8.7(a) hereof,
unless prior to the expiration of such 45 day period the Company notifies
Buyer that such Acquisition Proposal has been rejected and any such
negotiations have been terminated.
The termination of this Agreement shall be effectuated by the delivery by
the party terminating this Agreement to each other party of a written notice of
such termination. If this Agreement so terminates, it shall become null and
void and have no further force or effect, except as provided in Section 12.2.
SECTION 12.2. Effect of Termination. In the event of any termination
pursuant to this Article XII, the parties hereto shall be released from all
liabilities and obligations arising under this Agreement with respect to
matters contemplated by this Agreement, other than (i) for damages to the
extent arising from the failure to perform any obligation or breach of any
representation or covenant made in this Agreement arising prior to the time of
such termination, provided, however, that in no event shall Buyer and Buyer Sub
or the Company, as the case may be, be liable for aggregate damages resulting
from such failure to perform or breach in excess of $3,500,000, (ii) for the
expenses set forth in Section 13.2 hereof, (iii) for the amounts required to be
paid to CHPII pursuant to Sections 8.7(b) and 8.7(c) hereof and (iv) for the
obligations arising under the Confidentiality Agreement. Notwithstanding
anything in this Agreement to the contrary, in the event of any breach by the
Company of Section 8.7(a) hereof as a result of
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entering into an agreement involving an Acquisition Proposal other than an
agreement involving an Unsolicited Sale entered into in accordance with the
terms and provisions of Section 8 hereof, then the Company shall be obligated
concurrently upon the execution of such agreement, to pay to Buyer, Buyer Sub
and CHPII damages for such breach in an aggregate amount equal to the amounts
specified in clauses (i) and (ii) of Section 8.7(c) hereof, and upon making
such payment shall have no further liability or obligation whatsoever to Buyer,
Buyer Sub or CHPII.
SECTION 12.3. Amendments, Modifications, Etc. At any time prior to the
Effective Time of the Merger, this Agreement may be amended, modified,
superseded or supplemented to the extent permitted by applicable law only by an
instrument in writing executed and delivered on behalf of each of the parties
hereto, which instrument when so executed and delivered shall thereupon become
a part of this Agreement and the provisions thereof shall be given effect as if
contained in this Agreement as of the date hereof; provided that if the Merger
and this Agreement shall have been prior thereto approved by vote or consent of
the stockholders of the Company, no amendment shall be made in a manner which
is materially adverse, as reasonably determined by the Company, to the right of
stockholders of the Company without the vote or written consent of the
stockholders of the Company thereto.
SECTION 12.4. Waivers. The representations, warranties, covenants or
conditions of this Agreement may be waived only by a written instrument
executed by the party so waiving. The failure of any party at any time or times
to require performance of any provision hereof shall in no manner affect the
right of such party at a later time to enforce the same. No waiver by any
party of any condition, or breach of any term, covenant, agreement,
representation or warranty contained in this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of any other
condition or of the breach of any other term, covenant, agreement,
representation or warranty contained in this Agreement.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1. Publicity. Buyer and Company will consult with one another
before issuing, and provide one another the opportunity to review, comment upon
and consent to (which consent shall not be unreasonably withheld) any press
release or other public statements with respect to the transactions
contemplated by this Agreement, including the Merger, and shall not issue any
such press release or make any such public statement prior to such consultation
except as may be required by applicable law, court process or by any stock
exchange rule, regulation, or consent, or as may be advised by counsel.
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SECTION 13.2. Certain Expenses. Other than as provided in Sections
8.7(b) and 8.7(c) hereof, if the Merger is not consummated, Buyer and Buyer
Sub, on the one hand, and the Company, on the other hand, each shall pay their
respective direct and indirect expenses incurred in connection with this
Agreement or in consummating the transactions contemplated hereby (including,
without limitation, the fees and disbursements and expenses of its attorneys,
accountants and advisors), provided, however, that in the event that this
Agreement is terminated pursuant to clause (i) or (iv) of Section 12.1 hereof
as a result of the Connecticut Waiver being denied, Buyer shall be obligated to
reimburse to the Company its out-of-pocket fees and expenses in connection with
the transactions contemplated by this Agreement in an amount not to exceed
$50,000 (a written itemization of which shall be delivered to Buyer).
SECTION 13.3. Notices. All notices or other communications required or
permitted under this Agreement shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery personally,
by facsimile transmission, or by registered, certified or express mail, postage
prepaid, addressed as follows:
If to Buyer or Buyer Sub, to
c/o Castle Harlan, Inc.
150 East 58th Street
37th Floor
New York, New York 10155
Attention: Mr. Jeffrey M. Siegal
Facsimile: (212) 207-8042
Telephone: (212) 644-8600
with a copy to
Schulte Roth & Zabel
900 Third Avenue
New York, New York 10022
Attention: Marc Weingarten, Esq.
Facsimile: (212) 593-5955
Telephone: (212) 758-0404
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If to the Company, to
Financial Institutions Insurance Group, Ltd.
400 Royal Palm Way
Suite 204
Palm Beach, Florida 33480
Attention: R. Keith Long
Facsimile: (407) 655-6902
Telephone: (407) 832-4110
with a copy to
Lord, Bissell & Brook
115 South LaSalle Street
Chicago, Illinois 60603
Attention: Colleen M. Hennessy, Esq.
Facsimile: (312) 443-0336
Telephone: (312) 443-0700
Any party may change the person and addresses to which notices or other
communications are to be sent to it by giving written notice of any such change
in the manner provided herein for giving notice.
SECTION 13.4. Entire Agreement. Except as otherwise provided herein,
this Agreement, together with the exhibits and schedules hereto and the
Confidentiality Agreement set forth the entire agreement and understanding of
the parties hereto in respect of the transactions contemplated hereby, and
supersedes all prior agreements, arrangements and understandings relating to
the subject matter hereof.
SECTION 13.5. No Third Party Beneficiaries. Except as set forth in
Section 9.8 hereof, nothing in this Agreement is intended or shall be construed
to give any person, other than the parties hereto, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
contained herein.
SECTION 13.6. No Assignment. This Agreement shall inure to the benefit
of, and be binding upon, the respective successors and assigns of the parties
hereto; provided,
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however, that no assignment of any rights or delegation of
any obligations provided for herein shall be made by any party hereto without
the express prior written consent of the other party, except that Buyer shall
be permitted, without such consent, to assign any of its rights hereunder (but
not to delegate any of its obligations hereunder) to any wholly-owned domestic
subsidiary of CHPII or to a lender providing financing for the transactions
contemplated hereby.
SECTION 13.7. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
agreements made and to be performed entirely within such State, except (i)
matters related to the validity of corporate action, which shall be governed by
the laws of the state or other jurisdiction of organization of the relevant
corporation and (ii) matters related to compliance of the transactions
contemplated hereby with applicable insurance regulatory statutes, which shall
be governed by the laws of the state or other jurisdiction the insurance
regulatory statutes of which apply.
SECTION 13.8. Counterparts. This Agreement may be executed in any number
of separate counterparts, each of which shall be deemed to be an original, but
which together shall constitute one and the same instrument.
SECTION 13.9. Headings. The section headings contained in this Agreement
are inserted for convenience of reference only and shall not affect the meaning
or interpretation of this Agreement.
SECTION 13.10. Severability. If any term, provision, covenant or
restriction of this Agreement, or any part thereof, is held by a court of
competent jurisdiction or any foreign, federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority to be invalid, void, unenforceable or against public policy for any
reason, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
SECTION 13.11. Survival of Representations and Warranties. No
representations, warranties or agreements contained herein shall survive beyond
the Effective Time; provided however, that this Section shall not limit any
covenant or agreement of the parties hereto which by its terms specifically
contemplates performance after the Effective Time.
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IN WITNESS WHEREOF, each party hereto has caused this Agreement to be duly
executed on the date first above written.
FIIG HOLDING CORP.
By: ______________________________
Name:
Title:
FIIG MERGER CORP.
By: ______________________________
Name:
Title:
FINANCIAL INSTITUTIONS INSURANCE GROUP,
LTD.
By: ______________________________
Name:
Title:
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TABLE OF CONTENTS
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RECITALS ................................................................... 1
ARTICLE I DEFINITIONS ..................................................... 1
SECTION 1.1. Definitions 1
ARTICLE II THE MERGER ..................................................... 3
SECTION 2.1. Merger 3
SECTION 2.2. Effective Time 3
SECTION 2.3. Certificate of Incorporation 3
SECTION 2.4. By-Laws 3
SECTION 2.5. Officers and Directors 3
SECTION 2.6. Effect of Merger 4
ARTICLE III CONVERSION .................................................... 5
SECTION 3.1. Conversion 5
SECTION 3.2. Exchange of Certificates; Paying Agent 6
SECTION 3.3. Letter of Transmittal 6
SECTION 3.4. Exchange Procedures 6
SECTION 3.5. No Further Ownership Rights in Common Stock 7
SECTION 3.6. Payment Fund 7
SECTION 3.7. Options 8
ARTICLE IV DISSENTING STOCKHOLDERS ........................................ 8
SECTION 4.1. Election 8
SECTION 4.2. Payment 8
ARTICLE V THE CLOSING ..................................................... 9
SECTION 5.1. Closing 9
SECTION 5.2. Certificate of Merger 9
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE COMPANY .................. 9
SECTION 6.1. Incorporation; Qualification and Standing 9
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SECTION 6.2. Subsidiaries 10
SECTION 6.3. Authority 10
SECTION 6.4. Absence of Conflicts 11
SECTION 6.5. Consents and Approvals 11
SECTION 6.6. Directors and Officers 12
SECTION 6.7. Charter and By-Laws 12
SECTION 6.8. Capitalization 12
SECTION 6.9. Compliance; Insurance Regulatory Licenses 13
SECTION 6.10. SEC Reports 15
SECTION 6.11. Financial Statements 15
SECTION 6.12. Reinsurance 17
SECTION 6.13. Written Insurance Policies; Regulatory Filings 17
SECTION 6.14. Producers: Fronting 18
SECTION 6.15. Premium Balances Receivable 18
SECTION 6.16. Certain Business Practices 19
SECTION 6.17. Tax Matters 19
SECTION 6.18. Employee Benefit Plans; Employment and Labor Agreements 20
SECTION 6.19. Investments 23
SECTION 6.20. Intangible Property 23
SECTION 6.21. Tangible Property 23
SECTION 6.22. Real Property; Leases 24
SECTION 6.23. Assets 24
SECTION 6.24. Agreements for Borrowed Money, Etc. 24
SECTION 6.25. Contracts and Commitments 25
SECTION 6.26. Litigation 26
SECTION 6.27. Environmental Matters 27
SECTION 6.28. Brokers and Finders 28
SECTION 6.29. Banks 28
SECTION 6.30. Maintenance of Insurance 28
SECTION 6.31. Legislation 29
SECTION 6.32. Operations of the Company and its Subsidiaries 29
SECTION 6.33. Potential Conflicts of Interest 31
SECTION 6.34. Guaranty Funds, Pools and Associations 32
SECTION 6.35. Full Disclosure 32
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ARTICLE VII REPRESENTATIONS AND WARRANTIES OF BUYER
AND BUYER SUB ......................................................................... 33
SECTION 7.1. Organization and Standing 33
SECTION 7.2. Certificate of Incorporation and By-Laws 33
SECTION 7.3. Authority 33
SECTION 7.4. Absence of Conflicts 33
SECTION 7.5. Consents and Approvals 34
SECTION 7.6. Brokers and Finders 34
SECTION 7.7 SEC Filings 34
ARTICLE VIII COVENANTS AND AGREEMENTS OF THE COMPANY ................................... 35
SECTION 8.1. Conduct of Business 35
SECTION 8.2. Access to Properties, Books and Records; Confidentiality 36
SECTION 8.3. Insurance 36
SECTION 8.4. Litigation 37
SECTION 8.5. Advice of Changes 37
SECTION 8.6. Subsequent Financial Statements; SEC Documents; and Insurance 37
Filings
SECTION 8.7. No Solicitation 38
SECTION 8.8. Proxy Statement; Approval by the Company's Stockholders 39
SECTION 8.9. Options 39
ARTICLE IX ADDITIONAL COVENANTS ........................................................ 40
SECTION 9.1. HSR Act 40
SECTION 9.2. Insurance Regulatory Approvals 40
SECTION 9.3. Filings and Approvals 40
SECTION 9.4. Continued Effectiveness of Representations and Warranties 41
SECTION 9.5. Advice of Changes 41
SECTION 9.6. Proxy Statement 41
SECTION 9.7. Further Assurances 41
SECTION 9.8. Directors' and Officers' Insurance 41
ARTICLE X CONDITIONS TO OBLIGATIONS OF BUYER AND BUYER SUB ............................. 42
SECTION 10.1. Compliance with Agreements 42
SECTION 10.2. Representations and Warranties 42
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SECTION 10.3. Opinion of Counsel for the Company 42
SECTION 10.4. Approvals 43
SECTION 10.5. Legislation 43
SECTION 10.6. Absence of Preventative Litigation 43
SECTION 10.7. Secretary's Certificate; Certified Copies 44
SECTION 10.8. Resignations 44
SECTION 10.9. Dissenting Stock 44
SECTION 10.10. No Material Adverse Effect 44
SECTION 10.11. Stock Option Plan and Directors' Incentive Plan; Options 44
ARTICLE XI CONDITIONS TO OBLIGATIONS OF THE COMPANY .................................... 45
SECTION 11.1. Compliance with Agreement 45
SECTION 11.2. Representations and Warranties 45
SECTION 11.3. Opinion of Counsel for Buyer 45
SECTION 11.4. Approvals 45
SECTION 11.5. Secretary's Certificate 45
SECTION 11.6. Absence of Preventative Litigation 46
SECTION 11.7. Good Standing 46
ARTICLE XII TERMINATION, AMENDMENT, WAIVERS ............................................ 46
SECTION 12.1. Termination 46
SECTION 12.2. Effect of Termination 47
SECTION 12.3. Amendments, Modifications, Etc. 47
SECTION 12.4. Waivers 48
ARTICLE XIII MISCELLANEOUS PROVISIONS .................................................. 48
SECTION 13.1. Publicity 48
SECTION 13.2. Certain Expenses 48
SECTION 13.3. Notices 48
SECTION 13.4. Entire Agreement 50
SECTION 13.5. No Third Party Beneficiaries 50
SECTION 13.6. No Assignment 50
SECTION 13.7. Governing Law 50
SECTION 13.8. Counterparts 50
SECTION 13.9. Headings 50
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SECTION 13.10. Severability 51
SECTION 13.11. Survival of Representation and Warranties 51
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SCHEDULES
Schedule 3.7 - Options
Schedule 6.1 - Jurisdictions where Company Qualified to do Business
Schedule 6.2 - Subsidiaries' Jurisdictions of Incorporation and where
Qualified to do Business
Schedule 6.4 - Conflicts
Schedule 6.5 - Consents and Approvals
Schedule 6.6 - Officers and Directors
Schedule 6.8 - Capitalization
Schedule 6.9 - Permits
Schedule 6.11 - NAIC IRIS Ratios; Liabilities not Reserved Against
Schedule 6.12 - Reinsurance Agreements
Schedule 6.13 - Underwriting Management Agreements
Schedule 6.14 - Producers; Fronting Agreements
Schedule 6.16 - Pending Claims
Schedule 6.17 - Tax
Schedule 6.18 - Employee Benefit Plans
Schedule 6.19 - Investments
Schedule 6.20 - Intangible Property
Schedule 6.21 - Tangible Property
Schedule 6.22 - Real Property
Schedule 6.24 - Agreements for Borrowed Money
Schedule 6.25 - Contracts
Schedule 6.26 - Litigation
Schedule 6.29 - Banks
Schedule 6.30 - Insurance
Schedule 6.32 - Operations
Schedule 6.33 - Potential Conflicts
Schedule 7.4 - Conflicts
Schedule 7.5 - Consents
Schedule 8.1 - Conduct of Business
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EXHIBITS
Exhibit A - Voting Agreement
Exhibit B - Opinion of Company's Counsel
Exhibit C - Opinion of Buyer's Counsel
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EXHIBIT 2.2
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VOTING AGREEMENT
VOTING AGREEMENT, dated as of April __, 1996, among FIIG Holding Corp., a
Delaware corporation ("Buyer"), FIIG Merger Corp., a Delaware corporation and a
wholly-owned subsidiary of Buyer ("Buyer Sub") and the stockholder of the
Company named on the signature page hereto (the "Stockholder").
WHEREAS, as of the date hereof, the Stockholder owns the number of shares
of common stock, par value $1.00 per share ("Common Stock"), of Financial
Institutions Insurance Group, Ltd. (the "Company") set forth opposite such
Stockholder's name on the signature page hereto;
WHEREAS, concurrently herewith, the Company, Buyer and Buyer Sub have
entered into a Merger Agreement, dated the date hereof (the "Merger
Agreement"), pursuant to which and subject to the terms and conditions thereof
(i) Buyer Sub shall be merged (the "Merger") with and into the Company with the
Company as the surviving corporation (the "Surviving Corporation"), (ii) each
share of Common Stock (other than shares of Common Stock held by Buyer or Buyer
Sub) shall be converted into the right to receive $16 cash, (iii) each share of
Common Stock held by Buyer or Buyer Sub shall be canceled, and (iv) each share
of common stock, par value $.01 per share, of Buyer Sub shall be converted into
and become one share of common stock, par value $1.00 per share, of the
Surviving Corporation;
WHEREAS, the consummation of the Merger is subject to the approval by
holders of a majority of all outstanding shares of Common Stock entitled to
vote thereon;
WHEREAS, the Board of Directors of the Company has deemed the consummation
of the Merger to be in the best interests of the Company and its stockholders;
WHEREAS, each of the stockholders of the Company listed on Schedule A
hereto owns the number of shares of Common Stock set forth opposite such
stockholder's name on Schedule A hereto, and concurrently herewith is entering
into a Voting Agreement with Buyer and Buyer Sub identical to this Agreement;
WHEREAS, Buyer and Buyer Sub are not willing to enter into the Merger
Agreement without the prior agreement by the Stockholder and the other
stockholders listed on Schedule A hereto to vote in favor of the Merger and the
Merger Agreement as provided herein;
NOW THEREFORE, in consideration of and premised upon the various
representations, warranties, covenants and other agreements and undertakings of
Buyer, Buyer Sub and the Stockholder contained in this Agreement, and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
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<PAGE> 3
ARTICLE I
PROXY OF THE STOCKHOLDERS
SECTION 1.01. Voting Agreement.
(a) The Stockholder hereby agrees, that during the time this Agreement is
in effect, at any meeting of the stockholders of the Company, and in any action
by consent of the stockholders of the Company, the Stockholder shall vote all
shares of Common Stock which the Stockholder owns or is otherwise entitled to
vote in favor of any proposal for the adoption or approval of the Merger and
the Merger Agreement.
(b) The Stockholder hereby agrees, that during the time this Agreement is
in effect, at any meeting of the stockholders of the Company, and in any action
by consent of the stockholders of the Company, the Stockholder shall vote all
of the shares of Common Stock which the Stockholder owns or is otherwise
entitled to vote: (i) against any proposal relating to (A) the sale of stock or
assets of the Company or any of its Subsidiaries or any interest therein other
than as contemplated by the Merger Agreement, (B) the merger, consolidation or
other combination of the Company or any of its Subsidiaries with any person,
other than as contemplated by the Merger Agreement, (C) the liquidation,
dissolution or reorganization of the Company or any of its Subsidiaries, or (D)
any other action or agreement that would result in a breach of any covenant,
representation, warranty or any other obligation or agreement of the Company or
any of its Subsidiaries under the Merger Agreement or which could result in any
of the conditions to Buyer and Buyer Sub's obligations under the Merger
Agreement not being fulfilled; and (ii) as otherwise necessary or appropriate
to enable the Company and Buyer to consummate the transactions contemplated by
the Merger Agreement.
SECTION 1.02. Irrevocable Proxy. In the event the Stockholder shall
fail or threaten to fail to comply with the provisions of Section 1.01 hereof
as determined by Buyer in its sole discretion, the Stockholder hereby agrees
that such failure or threatened failure shall result, without any further
action by the Stockholder, in the irrevocable appointment of John K. Castle,
until termination of the Merger Agreement, as the Stockholder's attorney and
proxy pursuant to the provisions of Section 212(c) of the General Corporation
Law of the State of Delaware, with full power of substitution, to vote, and
otherwise act (by written consent or otherwise) with respect to the shares of
Common Stock which the Stockholder is entitled to vote at any meeting of the
stockholders of the Company (whether annual or special and whether or not an
adjourned or postponed meeting) or consent in lieu of any such meeting or
otherwise, on the matters specified in Section 1.01 hereof in such manner as
Buyer or its substitute shall, in its sole discretion, deem proper. THIS PROXY
AND POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN INTEREST. The
Stockholder hereby revokes all other proxies and powers of attorney with
respect to the shares of
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<PAGE> 4
Common Stock owned by the Stockholder which the Stockholder may have
heretofore appointed or granted (other than a proxy to vote in accordance with
Section 1.0 1 hereof), and no subsequent proxy or power of attorney shall be
given or written consent executed (and if given or executed, shall not be
effective) by the Stockholder with respect thereto (other than in accordance
with Section 1.01 hereof). All authority herein conferred or agreed to be
conferred shall survive the death, incapacity, bankruptcy or liquidation of the
Stockholder and any obligation of the Stockholder under this Agreement shall be
binding upon its heirs, representatives, assigns and successors.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Buyer as follows:
SECTION 2.01. Authority Relative to This Agreement. The Stockholder has
all requisite power and authority to enter into this Agreement and to perform
its obligations hereunder. This Agreement has been duly authorized, executed
and delivered by the Stockholder and, assuming this Agreement constitutes a
valid and binding obligation of the other parties hereto, constitutes a legal,
valid and binding obligation of the Stockholder, enforceable against the
Stockholder in accordance with its terms, except to the extent that the
enforceability thereof may be limited by: (i) applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar laws
from time to time in effect affecting generally the enforcement of creditors'
rights and remedies; and (ii) general principles of equity, including, without
limitation, principles of reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in equity or at law).
SECTION 2.02. No Conflict. The execution and delivery of this Agreement
by the Stockholder and performance of such Stockholder's obligations hereunder
do not (i) conflict with or violate any laws applicable to the Stockholder or
by which the shares of Common Stock of the Stockholder are bound or affected or
(ii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of a lien or encumbrance on any of the shares of
Common Stock of the Stockholder pursuant to, any note, bond, mortgage,
indenture, contract, lease, license, permit, franchise or other instrument or
obligation to which the Stockholder is a party or by which the Stockholder or
the shares of Common Stock of the Stockholder are bound or affected.
SECTION 2.03. Title to the Shares. As of the date hereof, the
Stockholder is the beneficial owner of the number of shares of Common Stock
set forth opposite the Stockholder's name on the signature page hereto. Such
shares of Common Stock are all of such shares as are owned, either of record or
beneficially, by the Stockholder. The Stockholder owns all the shares of
Common
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<PAGE> 5
Stock set forth opposite the Stockholder's name on the signature page
hereto free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, contracts, limitations on the Stockholder's
voting rights, charges and other encumbrances of any nature whatsoever. Except
as provided in this Agreement, the Stockholder has not appointed or granted
(and will not, after the date hereof, appoint or grant) any proxy, which
appointment or grant is still effective, with respect to the shares set forth
opposite the Stockholder's name on the signature page hereto, other than in
accordance with Section 1.01 hereof.
ARTICLE III
COVENANTS OF THE STOCKHOLDERS
SECTION 3.01. No Disposition or Encumbrance of Shares. The Stockholder
hereby covenants and agrees that, except as contemplated by this Agreement, the
Stockholder shall not, and shall not offer or agree to, sell, transfer, tender,
assign, hypothecate or otherwise dispose of, grant a proxy (other than the
irrevocable proxy granted herein) or power of attorney with respect to, create
or permit to exist any security interest, lien, claim, pledge, option, right of
first refusal, contract, limitation on the Stockholder's voting rights, charge
or other encumbrance of any nature whatsoever with respect to, the
Stockholder's shares of Common Stock, or directly or indirectly, initiate,
solicit or encourage any person to take actions which could reasonably be
expected to lead to the occurrence of any of the foregoing; provided however
that if the Stockholder is currently serving as a director or officer of the
Company, the Stockholder, acting in such capacities, shall not be precluded
from taking any such action or any action precluded by Section 3.02, based upon
the advice of counsel, that his or her fiduciary duties to the Company obligate
the Stockholder to do so; provided, further, however that the Stockholder may
transfer all or part of such Stockholder's shares of Common Stock to a
charitable remainder trust or other similar trust established for estate
planning purposes or to an entity which has claimed an exemption under Section
501(c)(3) of the Internal Revenue Code of 1986.
SECTION 3.02. No Negotiations. The Stockholder shall not, and shall not
permit any of its subsidiaries, affiliates, representatives, agents or any
other person acting for or on behalf of such Stockholder to, solicit, entertain
offers from, negotiate with, or in any manner discuss, encourage, recommend or
agree to any proposal relating to (a) the sale of the stock or assets of the
Company or any of its Subsidiaries or any interest therein, (b) the merger,
consolidation or other combination of the Company or any of its Subsidiaries
with any person, or (c) the liquidation, dissolution or reorganization of the
Company or any of its Subsidiaries, except as specifically contemplated by the
Merger Agreement. Without limiting the generality of the foregoing, the
Stockholder shall not, and shall not permit any of its subsidiaries,
affiliates, representatives, agents or any other person acting for or on behalf
of the Stockholder to, furnish or cause to be furnished any information with
respect to the Company or any of its Subsidiaries to any person (other than the
Buyer and its employees and agents and other than as required by law). If the
Stockholder or any of its subsidiaries, affiliates,
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<PAGE> 6
representatives, agents or any other person acting for or on behalf of the
Stockholder receives from any person any offer, proposal or informational
request that may be subject to this Section, the Stockholder shall promptly
advise such person, by written notice, of the terms of this Section and shall
promptly deliver a copy of such notice to the Buyer. Nothing herein shall, to
the extent not prohibited by the Merger Agreement, prohibit any Stockholder who
is an officer of the Company from acting in his capacity as such, or who is a
director of the Company from participating in meetings of the Board or
Committees thereof.
ARTICLE IV
MISCELLANEOUS
SECTION 4.01. Termination. This Agreement shall remain in effect until
the first to occur of (i) the Closing Date or (ii) the termination of the
Merger Agreement; provided, however, that the provisions set forth in Section
4.03 shall survive the Closing.
SECTION 4.02. Definitions. Any terms used but not defined herein shall
have the meanings ascribed to them in the Merger Agreement.
SECTION 4.03. Further Assurances. The Stockholders will execute and
deliver all such further documents and instruments and take all such further
action as may reasonably be necessary in order to consummate the transactions
contemplated hereby, including, without limitation, the transactions
contemplated by the Merger Agreement.
SECTION 4.04. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 4.05. Entire Agreement. This Agreement constitutes the entire
agreement between the Stockholder and the Buyer with respect to the subject
matter hereof and supersedes all prior agreements and understandings, both
written and oral, between the Buyer and the Stockholder with respect to the
subject matter hereof.
SECTION 4.06. Amendment. This Agreement may not be amended, altered or
modified except by a written instrument executed by the parties hereto.
SECTION 4.07. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the
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<PAGE> 7
economic or legal substance of this Agreement is not affected in any manner
materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the terms of this Agreement remain as
originally contemplated to the fullest extent possible.
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<PAGE> 8
SECTION 4.08. Governing Law. This Agreement shall be construed and
interpreted according to the laws of the State of New York applicable to
contracts made and to be performed wholly within such state.
SECTION 4.09. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and each of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Stockholder has duly executed this Agreement.
_____________________________________
Number of Shares of Name:
Common Stock owned:
AGREED TO AND ACCEPTED:
FIIG HOLDING CORP.
By:
__________________________
Name:
Title:
FIIG MERGER CORP.
By:
__________________________
Name:
Title:
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<PAGE> 9
SCHEDULE A - VOTING AGREEMENT
<TABLE>
<CAPTION>
Shareholder # of shares %*
- ------------------------------------------------------------------
<S> <C> <C>
R. Keith Long 398,188 12.41%
John A. Dore 113,450 3.54%
John B. Zellars 54,022 1.68%
Lonnie L. Steffen 33,792 1.05%
Wilbur Dean Cannon 24,984 .78%
Herschel Rosenthal 19,248 .60%
William B. O'Connell 14,313 .45%
Joseph C. Morris 13,276 .41%
Dale C. Bottom 8,823 .28%
John P. Diesel 7,200 .22%
- -------------- ------- ------
Total 687,296 21.42%
</TABLE>
*Based on % outstanding of 3,207,711 at January 31, 1996
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