SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)*
Financial Institutions Insurance Group, Ltd.
(Name of Issuer)
Common Stock, par value $1.00 per share
(Title of Class of Securities)
317588-10-1
(CUSIP Number)
Scott E. Pickens, Esq., Schiff Hardin & Waite,
7200 Sears Tower, Chicago, Illinois, 60606,
Telephone (312) 876-1000
and
Marc Weingarten, Esq., Schulte Roth & Zabel,
900 Third Ave, New York, New York, 10022
Telephone (212) 758-0404
(Name, address and telephone number of person
authorized to receive notices and communications)
April 12, 1996
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement
on Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box [X].
Check the following box if a fee is being paid with the
statement [ ]. (A fee is not required only if the reporting
person: (1) has a previous statement on file reporting
beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent
or less of such class.) (See Rule 13d-7.)
NOTE: Six copies of this statement, including all
exhibits, should be filed with the Commission. See Rule 13d-1(a)
for other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect
to the subject class of securities, and for any subsequent
amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required in the remainder of this cover page sha
ll not be deemed to be "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934 ("Act") or otherwise subject to
the liabilities of that section of the Act but shall be subject
to all other provisions of the Act (however, see the Notes).
PAGE 1 OF 73 PAGES
<PAGE>
CUSIP No. 317588-10-1
_________________________________________________________________
(1) NAME OF REPORTING PERSON: John A. Dore
S.S. OR I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON: ###-##-####
_________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [ ]
(b) [X]
_________________________________________________________________
(3) SEC USE ONLY
_________________________________________________________________
(4) SOURCE OF FUNDS**: PF, OO, SC, BK
_________________________________________________________________
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e): N/A
[ ]
_________________________________________________________________
(6) CITIZENSHIP OR PLACE OF ORGANIZATION: United States
_________________________________________________________________
NUMBER OF (7) SOLE VOTING POWER: 172,490
SHARES
_______________________________________________________
BENEFICIALLY (8) SHARED VOTING POWER: 67,658
OWNED BY
_______________________________________________________
EACH (9) SOLE DISPOSITIVE POWER: 172,490
REPORTING
_______________________________________________________
PERSON WITH (10) SHARED DISPOSITIVE POWER: 67,658
_________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON: 240,148
_________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES **
[ ]
_________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11): 7.4%
_________________________________________________________________
(14) TYPE OF REPORTING PERSON **: IN
_________________________________________________________________
** SEE INSTRUCTIONS BEFORE FILLING OUT!
PAGE 2 OF 73 PAGES
<PAGE>
CUSIP No. 317588-10-1
_________________________________________________________________
(1) NAME OF REPORTING PERSON: Castle Harlan Partners II, L.P.
S.S. OR I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON:
_________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [ ]
(b) [X]
_________________________________________________________________
(3) SEC USE ONLY
_________________________________________________________________
(4) SOURCE OF FUNDS**: N/A
_________________________________________________________________
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e): N/A
[ ]
_________________________________________________________________
(6) CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware
_________________________________________________________________
NUMBER OF (7) SOLE VOTING POWER: 0
SHARES
_____________________________________________________
BENEFICIALLY (8) SHARED VOTING POWER: 0
OWNED BY
_____________________________________________________
EACH (9) SOLE DISPOSITIVE POWER: 0
REPORTING
____________________________________________________
PERSON WITH (10) SHARED DISPOSITIVE POWER: 0
_________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON: 0
_________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES **
[ ]
_________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11): 0%
_________________________________________________________________
(14) TYPE OF REPORTING PERSON **: PN
_________________________________________________________________
** SEE INSTRUCTIONS BEFORE FILLING OUT!
PAGE 3 OF 73 PAGES
<PAGE>
CUSIP No. 317588-10-1
_________________________________________________________________
(1) NAME OF REPORTING PERSON: Castle Harlan, Inc.
S.S. OR I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON:
_________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [ ]
(b) [X]
_________________________________________________________________
(3) SEC USE ONLY
_________________________________________________________________
(4) SOURCE OF FUNDS**: N/A
_________________________________________________________________
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e): N/A
[ ]
_________________________________________________________________
(6) CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware
_________________________________________________________________
NUMBER OF (7) SOLE VOTING POWER: 0
SHARES
__________________________________________________
BENEFICIALLY (8) SHARED VOTING POWER: 0
OWNED BY
__________________________________________________
EACH (9) SOLE DISPOSITIVE POWER: 0
REPORTING
__________________________________________________
PERSON WITH (10) SHARED DISPOSITIVE POWER: 0
_________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON: 0
________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES **
[ ]
_________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11):0%
_________________________________________________________________
(14) TYPE OF REPORTING PERSON **: CO
_________________________________________________________________
** SEE INSTRUCTIONS BEFORE FILLING OUT!
PAGE 4 OF 73 PAGES
<PAGE>
CUSIP No. 317588-10-1
_________________________________________________________________
(1) NAME OF REPORTING PERSON: John K. Castle
S.S. OR I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON:
_________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [ ]
(b) [X]
_________________________________________________________________
(3) SEC USE ONLY
_________________________________________________________________
(4) SOURCE OF FUNDS**: N/A
_________________________________________________________________
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e): N/A
[ ]
_________________________________________________________________
(6) CITIZENSHIP OR PLACE OF ORGANIZATION: United States
_________________________________________________________________
NUMBER OF (7) SOLE VOTING POWER: 0
SHARES
__________________________________________________
BENEFICIALLY (8) SHARED VOTING POWER: 0
OWNED BY
___________________________________________________
EACH (9) SOLE DISPOSITIVE POWER: 0
REPORTING
___________________________________________________
PERSON WITH (10) SHARED DISPOSITIVE POWER: 0
_________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON: 0
_________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES **
[ ]
_________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11): 0%
_________________________________________________________________
(14) TYPE OF REPORTING PERSON **: IN
_________________________________________________________________
** SEE INSTRUCTIONS BEFORE FILLING OUT!
PAGE 5 OF 73 PAGES
<PAGE>
This Amendment No. 2 amends and supplements the
statement on Schedule 13D dated January 12, 1996 filed, and
previously amended, by John A. Dore ("Dore"), Castle Harlan
Partners II, L.P. ("CHP II"), a Delaware limited partnership,
Castle Harlan, Inc., a Delaware corporation and John K. Castle
relating to the shares of Common Stock, $1.00 par value, issued
by Financial Institutions Insurance Group, Ltd. ("FIIG"), a
Delaware corporation. Capitalized terms used herein without
definition, if any, have the same meanings as those ascribed to
them in the initial filing.
Item 3 Source and Amount of Funds.
Subsequent to the filing of the Schedule 13D on January
16, 1996, Dore acquired beneficial ownership of 57,484 shares of
the Common Stock (see Item 4 - Interest in Securities of the
Issuer). The amount of funds used in the acquisition of such
shares was zero, as beneficial ownership of all such shares was
acquired either through a stock dividend distributed by FIIG to
its stockholders on February 25, 1996 or as a result of certain
stock options previously issued to Dore under FIIG's incentive
stock option plan becoming exercisable.
Item 4 Purpose of Transaction.
On April 12, 1996, a Merger Agreement was entered into
by and among FIIG, FIIG Holding Corp., a Delaware corporation
wholly owned by CHP II ("Holding"), and FIIG Merger Corp., a
Delaware corporation and wholly owned subsidiary of Holding
("FMC"), pursuant to which (i) FMC will be merged with and into
FIIG with FIIG as the surviving corporation (the "Surviving
Corporation"), (ii) each share of the Common Stock of FIIG (other
than shares held by FMC and Holding) shall be converted into the
right to receive $16.00 cash, (iii) each share of the Common
Stock of FIIG held by FMC or Holding shall be canceled, and (iv)
each share of common stock, par value $0.01 per share, of FMC
shall be converted into and become one share of common stock, par
value $1.00 per share, of the Surviving Corporation (the "Merger
Agreement"). The Merger Agreement is subject to approval by the
holders of a majority of the outstanding Common Stock, compliance
with the applicable filing requirements under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 and the filing and
approval requirements of various state regulatory agencies.
Item 5 Interest in Securities of the Issuer.
Since the filing of the Schedule 13D during January
1996, Dore's beneficial ownership of the Common Stock has
increased as follows:
(i) 17,912 shares were acquired through
the distribution of a 20% stock
dividend by FIIG on February 25,
1996 (the "Stock Dividend");
PAGE 6 OF 73 PAGES
<PAGE>
(ii) 1,056 shares were acquired as a
result of the Stock Dividend with
respect to shares beneficially
owned by Dore as custodian or
trustee for his minor children;
(iii) 11,276 shares were acquired as
a result of the Stock Dividend with
respect to shares owned by Mrs.
Dore as to which Dore may be deemed
to be a beneficial owner, sharing
voting and dispositive powers with
respect to such shares; and
(iv) 27,240 shares not presently owned,
but which Dore has the right to
acquire pursuant to presently
exercisable stock options granted
to him under the FIIG incentive
stock option plan, of which 15,720
were not previously reported and of
which 11,520 became exercisable
during the month of March 1996.
Dore has the sole power to vote (or to direct the vote)
and to dispose (or to direct the disposition) of all of such
shares (subject, in the case of those shares subject to options
not as yet exercised, to his exercising such options and
acquiring such shares), except such voting and dispositive powers
as to the 17,852 shares acquired by Mrs. Dore, which is shared
with Mrs. Dore. By reasons of the provisions of Rule 13d-3
promulgated under the 1934 Act, Dore and Mrs. Dore may be deemed
part of a "group," however Dore disclaims participation in a
"group" as so defined. Dore's current beneficial ownership of
the Common Stock is 240,148 shares (or 7.4% of the total
outstanding shares of Common Stock, based on figures reported
outstanding by FIIG as of March 1, 1996 and adjusted in
accordance with Rule 13d-3(d)(1) promulgated under the 1934 Act).
On April 12, 1996, FMC and Holding entered into voting
agreements with certain directors and executive officers of FIIG
representing in the aggregate more than 20% of the Common Stock
(the "Stockholders"), based on figures reported outstanding by
FIIG as of March 1, 1996, pursuant to which each such stockholder
agreed to vote his shares in favor of the merger contemplated by
the Merger Agreement (the "Voting Agreements"). These directors
and officers are: R. Keith Long, Dore, John B. Zellars, Lonnie
L. Steffen, Wilbur Dean Cannon, Herschel Rosenthal, William B.
O'Connell, Joseph C. Morris, Dale C. Bottom and John P. Diesel.
The form of Voting Agreement is filed as Exhibit 2 to this
Amendment and is hereby incorporated by reference in its entirety
in response to the requirements of Item 6. By reason of the
provisions of Rule 13d-3 and Rule 13d-5 promulgated under the
1934 Act, the Stockholders may be deemed part of a "group",
however each of them disclaims participation in a "group" as so
defined.
PAGE 7 OF 73 PAGES
<PAGE>
Item 6 Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Issuer.
FIIG, FMC and Holding have entered into the Merger
Agreement, which is described in Item 4 and is attached as
Exhibit 1 to this Amendment. The Merger Agreement is hereby
incorporated by reference in its entirety in response to the
requirements of Item 6.
FMC, Holding and the Stockholders entered into the
Voting Agreements described in Item 5 and attached as Exhibit 2
to this Amendment. The Voting Agreements are hereby incorporated
by reference in their entirety in response to the requirements of
Item 6.
Item 7 Material to be Filed as Exhibits.
The following document are exhibits filed herewith:
1. Merger Agreement dated as of April 12, 1996, by and
among FIIG Holding Corp., FIIG Merger Corp. and Financial
Institutions Insurance Group, Ltd.
2. Form of Voting Agreement, each of which is dated as of
April 12, 1996, among FMC, Holding and each of the Stockholders,
pursuant to which each such Stockholder agrees to vote his shares
in favor of the merger contemplated by the Merger Agreement.
PAGE 8 OF 73 PAGES
<PAGE>
Signatures
After reasonable inquiry and to the best of the
undersigned's knowledge and belief, the undersigned certify that
the information set forth in this statement is true, complete and
correct.
Dated: April 18, 1996
/s/ John A. Dore
John A. Dore
Castle Harlan Partners II, L.P.
By: Castle Harlan Inc., its
Investment Manager
/s/ Jeffry M. Siegal
By: Jeffrey M. Siegal
Title: Managing Director
Castle Harlan, Inc.
/s/ Jeffrey M. Siegal
By: Jeffrey M. Siegal
Title: Managing Director
/s/ John K. Castle
John K. Castle
PAGE 9 OF 73 PAGES
<PAGE>
EXHIBIT INDEX
Exhibit Number Description of Document
Location of
Exhibit
1 Merger Agreement, dated as of 11
April 12, 1996, by and among
FIIG Holding Corp., FIIG Merger
Corp and Financial Institutions
Insurance Group, Ltd.
2 Form of Voting Agreement each of 67
which is dated as of April 12, 1996
among FIIG Merger Corp., FIIG Holding
Corp. and each of the following
persons: R. Keith Long, John A. Dore,
John B. Zellars, Lonnie L. Steffen,
Wilbur Dean Cannon, Herschel Rosenthal,
William B. O'Connell, Joseph C. Morris,
Dale C. Bottom and John P. Diesel.
PAGE 10 OF 73 PAGES
<PAGE>
=================================================================
MERGER AGREEMENT
by and among
FIIG HOLDING CORP.,
FIIG MERGER CORP.
and
FINANCIAL INSTITUTIONS INSURANCE GROUP, LTD.
Dated as of: April 12, 1996
=================================================================
PAGE 11 OF 73 PAGES
<PAGE>
TABLE OF CONTENTS
Page
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...............................3
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........................................7
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
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
PAGE 12 OF 73 PAGES
<PAGE>
Page
SECTION 6.8.Capitalization.................................12
SECTION 6.9. Compliance; Insurance Regulatory Licenses.....13
SECTION 6.10.SEC Reports...................................14
SECTION 6.11.Financial Statements..........................15
SECTION 6.12.Reinsurance...................................16
SECTION 6.13.Written Insurance Policies; Regulatory Filings17
SECTION 6.14.Producers: Fronting...........................17
SECTION 6.15.Premium Balances Receivable...................18
SECTION 6.16.Certain Business Practices....................18
SECTION 6.17.Tax Matters...................................18
SECTION 6.18.Employee Benefit Plans; Employment and Labor
Agreements....................................20
SECTION 6.19.Investments...................................22
SECTION 6.20.Intangible Property...........................22
SECTION 6.21.Tangible Property.............................23
SECTION 6.22.Real Property; Leases.........................23
SECTION 6.23.Assets........................................23
SECTION 6.24.Agreements for Borrowed Money, Etc............24
SECTION 6.25.Contracts and Commitments.....................24
SECTION 6.26.Litigation....................................25
SECTION 6.27.Environmental Matters.........................26
SECTION 6.28.Brokers and Finders...........................27
SECTION 6.29.Banks.........................................27
SECTION 6.30.Maintenance of Insurance......................27
SECTION 6.31.Legislation...................................28
SECTION 6.32.Operations of the Company and its Subsidiaries28
SECTION 6.33.Potential Conflicts of Interest...............30
SECTION 6.34.Guaranty Funds, Pools and Associations........31
SECTION 6.35.Full Disclosure...............................31
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF BUYER AND
BUYER SUB..................................................31
SECTION 7.1. Organization and Standing.....................31
SECTION 7.2. Certificate of Incorporation and By-Laws......32
SECTION 7.3. Authority.....................................32
SECTION 7.4. Absence of Conflicts..........................32
SECTION 7.5. Consents and Approvals........................32
SECTION 7.6. Brokers and Finders...........................33
SECTION 7.7. SEC Filings...................................33
ARTICLE VIII COVENANTS AND AGREEMENTS OF THE COMPANY.........33
SECTION 8.1. Conduct of Business...........................33
SECTION 8.2. Access to Properties, Books and Records;
Confidentiality...............................34
SECTION 8.3. Insurance.....................................35
SECTION 8.4. Litigation....................................35
SECTION 8.5. Advice of Changes.............................35
PAGE 13 OF 73 PAGES
<PAGE>
Page
SECTION 8.6. Subsequent Financial Statements;
SEC Documents; and Insurance Filings..........36
SECTION 8.7. No Solicitation...............................36
SECTION 8.8. Proxy Statement; Approval by the Company's
Stockholders..................................38
SECTION 8.9. Options.......................................39
ARTICLE IX ADDITIONAL COVENANTS..............................39
SECTION 9.1. HSR Act.......................................39
SECTION 9.2. Insurance Regulatory Approvals................39
SECTION 9.3. Filings and Approvals.........................39
SECTION 9.4. Continued Effectiveness of Representations and
Warranties....................................40
SECTION 9.5. Advice of Changes.............................40
SECTION 9.6. Proxy Statement...............................40
SECTION 9.7. Further Assurances............................40
SECTION 9.8. Directors' and Officers' Insurance............40
ARTICLE X CONDITIONS TO OBLIGATIONS OF BUYER AND BUYER
SUB.......................................................41
SECTION 10.1.Compliance with Agreements....................41
SECTION 10.2.Representations and Warranties................41
SECTION 10.3.Opinion of Counsel for the Company............41
SECTION 10.4.Approvals.....................................41
SECTION 10.5.Legislation...................................42
SECTION 10.6.Absence of Preventative Litigation............42
SECTION 10.7.Secretary's Certificate; Certified Copies.....42
SECTION 10.8.Resignations..................................43
SECTION 10.9.Dissenting Stock..............................43
SECTION 10.10.No Material Adverse Effect...................43
SECTION 10.11.Stock Option Plan and Directors' Incentive
Plan; Options................................43
ARTICLE XI CONDITIONS TO OBLIGATIONS OF THE COMPANY..........43
SECTION 11.1.Compliance with Agreement.....................43
SECTION 11.2.Representations and Warranties................43
SECTION 11.3.Opinion of Counsel for Buyer..................44
SECTION 11.4.Approvals.....................................44
SECTION 11.5.Secretary's Certificate.......................44
SECTION 11.6.Absence of Preventative Litigation............44
SECTION 11.7 Good Standing.................................44
ARTICLE XII TERMINATION, AMENDMENT, WAIVERS..................44
SECTION 12.1.Termination...................................44
SECTION 12.2.Effect of Termination.........................45
PAGE 14 OF 73 PAGES
<PAGE>
Page
SECTION 12.3.Amendments, Modifications, Etc................46
SECTION 12.4.Waivers.......................................46
ARTICLE XIII MISCELLANEOUS PROVISIONS........................46
SECTION 13.l.Publicity.....................................46
SECTION 13.2.Certain Expenses..............................46
SECTION 13.3.Notices.......................................47
SECTION 13.4.Entire Agreement..............................48
SECTION 13.5.No Third Party Beneficiaries..................48
SECTION 13.6.No Assignment.................................48
SECTION 13.7.Governing Law.................................48
SECTION 13.8.Counterparts..................................48
SECTION 13.9.Headings......................................48
SECTION 13.10.Severability.................................48
SECTION 13.11.Survival of Representation and Warranties....49
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 6.25 - 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
PAGE 15 OF 73 PAGES
<PAGE>
EXHIBITS
Exhibit A - Voting Agreement
Exhibit B - Opinion of Company's Counsel
Exhibit C - Opinion of Buyer's Counsel
PAGE 16 OF 73 PAGES
<PAGE>
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:
PAGE 17 OF 73 PAGES
<PAGE>
Term Section Term Section
Acquisition Proposal. Section 8.7. IRIS................. Section 6.11.
Acquiror Approvals..... Section 7.5. Letter of
Affiliated Group....... Section 6.17. Transmittal........ Section 3.3.
Agreement.............. Recitals. Lien................. Section 6.4.
Annual Convention Loss Reserves........ Section 6.11.
Statements........... Section 6.11. Material Adverse
Annual Financial Effect............. Section 6.1.
Statements........... Section 6.11. Merger............... Recitals.
Applicable Insurance Law. Section 6.11. NAIC................. Section 6.11.
Benefit Plan........... Section 6.18. Options.............. Section 3.7.
Buyer.................. Recitals. Paying Agent......... Section 3.2.
Buyer Related Agreements. Section 7.3 Payment Fund......... Section 3.2.
Buyer Sub.............. Recitals. Payment Fund
Buyer Sub Common Stock. Section 3.1. Investment......... Section 3.6.
Cash Consideration Per Permits............... Section 6.5.
Option............... Section 3.7 Preventative
Cash Consideration Per Litigation......... Section 10.6.
Share................ Section 3.1. Producer............. Section 6.14.
CHPII.................. Section 8.2. Proxy Statement... Section 8.8.
Closing................ Section 5.1. Quarterly Convention
Closing Date........... Section 5.1. Statements......... Section 6.11.
Code................... Section 6.17. Reinsurance
Common Stock........... Section 3.1. Agreement.......... Section 6.12.
Company................ Recitals. Related Agreements... Section 6.3.
Confidentiality Agreement. Section 8.2. Rights............... Section 6.8.
Connecticut Approval... Section 9.3. SEC.................. Section 6.5.
Connecticut Waiver..... Section 9.3. SEC Documents........ Section 6.10.
Constituent Corporations. Section 2.1. SEC Filing........... Section 8.6.
DGCL................... Recitals. Securities Act....... Section 6.10.
Dissenting Stockholder. Section 4.1. Sellers Approvals.... Section 6.5.
Effective Date......... Section 2.2. Subsidiary........... Section 6.2.
Effective Time......... Section 2.2. Surviving
Environmental Actions.. Section 6.27. Corporation........ Section 2.1.
Environmental Laws..... Section 6.27. Surviving Corporation
ERISA.................. Section 6.18. By-laws............ Section 2.4.
ERISA Affiliate........ Section 6.18. Surviving Corporation
Exchange Act........... Section 6.10. Certificate........ Section 2.3.
FRH.................... Section 6.5. Surviving Corporation
Governmental Entity.... Section 6.9. Common Stock....... Section 3.1.
Hazardous Substances... Section 6.27. Tangible Property.... Section 6.21.
HSR Act................ Section 6.5. Tax.................. Section 6.17.
Insurance Regulatory Third Party
Approvals............ Section 6.5. Consents........... Section 6.5.
Investments............ Section 6.19. Unsolicited Sale..... Section 8.7.
IRS.................... Section 6.18. Voting Agreement..... Recitals.
(b) All references herein to dollars or "$" shall be
to United States dollars.
PAGE 18 OF 73 PAGES
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(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.
(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
PAGE 19 OF 73 PAGES
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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 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.
PAGE 20 OF 73 PAGES
<PAGE>
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
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.
PAGE 21 OF 73 PAGES
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(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 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
PAGE 22 OF 73 PAGES
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 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.
PAGE 23 OF 73 PAGES
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(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 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
PAGE 24 OF 73 PAGES
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upon or finally determined pursuant to such provisions). If a
Dissenting Stockholder fails to perfect, or effectively withdraws
or loses the right to receive 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.
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
PAGE 25 OF 73 PAGES
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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 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
PAGE 26 OF 73 PAGES
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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 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
PAGE 27 OF 73 PAGES
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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 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
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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 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
PAGE 29 OF 73 PAGES
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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 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 38a
- - 136(f) and all dividends paid by FRH within the past twelve
months did not contravene, or constitute a
PAGE 30 OF 73 PAGES
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default under any provision of applicable law or regulation,
including without limitation, Connecticut General Statute 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 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
PAGE 31 OF 73 PAGES
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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 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
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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.
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
PAGE 33 OF 73 PAGES
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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 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
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hereto lists (i) all pending claims arising from insurance or
reinsurance policies issued by FRH for which amounts 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.
(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.
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(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 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
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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.
(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.
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(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 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. 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
PAGE 38 OF 73 PAGES
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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 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
PAGE 39 OF 73 PAGES
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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 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
PAGE 40 OF 73 PAGES
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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;
(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
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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 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
PAGE 42 OF 73 PAGES
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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 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
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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.
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,
PAGE 44 OF 73 PAGES
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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.
(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,
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deferred compensation, profit sharing, stock option, stock
purchase, employee benefit, welfare benefit or other
agreement, plan or arrangement 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 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
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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;
ix) 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;
(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
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(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
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.
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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, 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)
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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.
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
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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
(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
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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 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
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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 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
PAGE 53 OF 73 PAGES
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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 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.
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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 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 38a-132 in connection with the Merger (the "Connecticut
Approval") and make a request for waiver of Connecticut General
Statute 38a-136(i)(2)(A) with the Connecticut Commissioner of
Insurance (the
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"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 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 execution and delivery of any
documents, certificates, instruments or other papers that are
reasonably required for the consummation of the Merger.
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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
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
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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 38a-
136(i), other than Connecticut General Statute 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.
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
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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.
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.
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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.
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.
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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 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.
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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 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
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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.
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
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Schulte Roth & Zabel
900 Third Avenue
New York, New York 10022
Attention: Marc Weingarten, Esq.
Facsimile: (212) 593-5955
Telephone: (212) 758-0404
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, however,
that no assignment of any rights or
PAGE 64 OF 73 PAGES
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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:/s/ Howard Weiss
Name: Howard Weiss
Title: President
FIIG MERGER CORP.
By:/s/ Howard Weiss
Name: Howard Weiss
Title: President
FINANCIAL INSTITUTIONS INSURANCE
GROUP, LTD.
By:/s/ R. Keith Long
Name: R.Keith Long
Title: Chairman of the Board of
Directors
PAGE 66 OF 73 PAGES
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EXHIBIT 2
VOTING AGREEMENT
VOTING AGREEMENT, dated as of April 12, 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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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 Common Stock
owned by the Stockholder
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which the Stockholder may have heretofore appointed or granted
(other than a proxy to vote in accordance with Section 1.01
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 Stock set forth opposite the Stockholder's name
on the signature page
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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
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subsidiaries, affiliates, 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 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
PAGE 71 OF 73 PAGES
<PAGE>
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.
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:
PAGE 72 OF 73 PAGES
<PAGE>
SCHEDULE A - VOTING AGREEMENT
Shareholder # of shares %*
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%
*Based on % outstanding of 3,207,711 at January 31, 1996
PAGE 73 OF 73 PAGES
