SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 9, 1998
JOHN ALDEN FINANCIAL CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Delaware 1-11396 59-2840712
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
7300 CORPORATE CENTER DRIVE, MIAMI, FLORIDA 33126-1208
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(Address of Principal Executive Offices) (Zip Code)
(305) 715-3767
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
On March 9, 1998, John Alden Financial Corporation, a corporation
organized and existing under the laws of the State of Delaware ("John Alden"),
Fortis, Inc., a corporation organized and existing under the laws of the State
of Nevada ("Fortis"), and JAFCO Acquisition Corp., a corporation organized and
existing under the laws of the State of Delaware and a wholly owned subsidiary
of Fortis ("Merger Sub"), entered into an Agreement and Plan of Merger (the
"Merger Agreement"), pursuant to which Merger Sub will be merged with and into
John Alden (the "Merger"). The Board of Directors of John Alden approved the
Merger at its meeting held on March 8, 1998.
Upon consummation of the Merger and in accordance with the terms of the
Merger Agreement, each share of John Alden common stock, par value $.01 per
share ("John Alden Common Stock"), issued and outstanding immediately prior to
the effective time of the Merger (the "Effective Time"), excluding shares with
respect to which statutory appraisal rights have been perfected, will be
converted into the right to receive $22.50 in cash from Fortis, and each share
of 9% Cumulative Preferred Stock, par value $.01 per share, of John Alden issued
and outstanding immediately prior to the Effective Time will be redeemed for
cash at the Effective Time in accordance with the terms thereof.
In addition, at the Effective Time, (i) each option or other right to
acquire shares of John Alden Common Stock pursuant to stock options, stock
appreciation rights, restricted stock awards or performance share awards granted
by John Alden and outstanding at the Effective Time, whether or not then
exercisable or vested (collectively, the "John Alden Options"), will become
fully exercisable and vested, (ii) each such John Alden Option will be canceled
and (iii) in consideration of such cancellation, Fortis will pay to each such
holder of John Alden Options an amount in cash equal to the product of (1) the
difference (if positive) between $22.50 and the exercise price per share under
the respective John Alden Option and (2) the number of shares of John Alden
Common Stock subject thereto.
Consummation of the Merger is subject to various conditions, including:
(i) approval of the Merger Agreement and the Merger by the shareholders of John
Alden; (ii) receipt of requisite regulatory approvals and expiration or
termination of all waiting periods required by law; (iii) no law or order having
been enacted or issued or any other action taken by a governmental authority
which prohibits, restricts or makes illegal consummation of the transactions
contemplated by the Merger Agreement; (iv) no distribution date having occurred
under John Alden's shareholder rights plan, and the rights thereunder not having
become non-redeemable or exercisable upon consummation of the Merger; (v) the
exchange agent for the Merger having delivered to John Alden a certificate,
dated as of the Effective Time, to the effect that Fortis has deposited
sufficient funds to
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pay the aggregate cash payments required to be paid to holders of John Alden
Common Stock in the Merger; and (vi) satisfaction of certain other conditions.
Further, the Merger Agreement may be terminated prior to consummation of
the Merger, whether before or after approval thereof by John Alden shareholders
(except in the case of clause (iv) below), under certain circumstances,
including, among others and subject to certain limitations: (i) by mutual
consent of John Alden and Fortis; (ii) by either John Alden or Fortis if the
Merger is not consummated by September 30, 1998 (subject to being extended for
up to an additional three months by either party if all conditions to
consummation of the Merger other than the receipt of requisite regulatory
approvals have been satisfied or waived prior to such date); (iii) by either
John Alden or Fortis if any order permanently enjoining or prohibiting
consummation of the Merger has become final and non-appealable; (iv) by John
Alden to enter into an agreement with respect to an unsolicited competing
acquisition proposal that is more favorable than that contemplated by the Merger
Agreement (a "Superior Proposal") (John Alden being permitted under the Merger
Agreement to provide information on a confidential basis and negotiate with
respect to and to recommend to John Alden shareholders such a Superior Proposal
if the John Alden Board of Directors determines in good faith that such actions
are required to comply with the directors' fiduciary duties), provided that the
John Alden shareholders have not theretofore approved the Merger Agreement and
the Merger; (v) by John Alden or Fortis if the John Alden shareholders do not
approve the Merger Agreement and the Merger at the meeting convened therefor;
and (vi) by Fortis if John Alden enters into a binding agreement with respect to
a Superior Proposal.
The Merger Agreement and the Merger will be submitted for approval at a
meeting of the shareholders of John Alden. Prior to such meeting, John Alden
will mail to its shareholders a proxy statement with respect to such shareholder
meeting.
In connection with the Merger Agreement, John Alden and Fortis entered
into a Stock Option Agreement, dated as of March 9, 1998 (the "Stock Option
Agreement"), pursuant to which John Alden granted to Fortis an irrevocable
option to purchase, under certain circumstances, up to 4,880,108 shares of John
Alden Common Stock at a price, subject to certain adjustments, of $22.50 per
share (the "Fortis Option"). The Fortis Option, if exercised, would equal,
before giving effect to the exercise of the Fortis Option, 19.9% of the total
number of shares of John Alden Common Stock currently outstanding. The Fortis
Option was granted by John Alden as a condition and inducement to Fortis'
willingness to enter into the Merger Agreement. Under certain circumstances and
subject to certain limitations, John Alden may be required to repurchase the
Fortis Option and all of the shares acquired pursuant to the exercise of the
Fortis Option.
The preceding descriptions of the Merger Agreement and Stock
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Option Agreement are qualified in their entirety by reference to the copies of
the Merger Agreement and Stock Option Agreement included as Exhibits 2.1 and 2.2
hereto, respectively, and which are hereby incorporated herein by reference. The
press release, dated March 9, 1998, issued by John Alden and included as Exhibit
99.1 hereto is hereby incorporated herein by reference.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit Description
2.1 Agreement and Plan of Merger, dated as of March 9, 1998, by and
among John Alden Financial Corporation, Fortis, Inc. and JAFCO
Acquisition Corp.
2.2 Stock Option Agreement, dated as of March 9, 1998, by and between
John Alden Financial Corporation, as issuer, and Fortis, Inc., as
grantee.
99.1 Text of press release, dated March 9, 1998, issued by John Alden
Financial Corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: March 19, 1998
JOHN ALDEN FINANCIAL CORPORATION
By: /s/ Scott L. Stanton
Name: Scott L. Stanton
Title: Senior Vice President
and Chief Financial
Officer
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EXHIBIT INDEX
Exhibit Description of Exhibit
2.1 Agreement and Plan of Merger, dated as of March 9, 1998, by and
among John Alden Financial Corporation, Fortis, Inc. and JAFCO
Acquisition Corp.
2.2 Stock Option Agreement, dated as of March 9, 1998, by and between
John Alden Financial Corporation, as issuer, and Fortis, Inc., as
grantee.
99.1 Text of press release, dated March 9, 1998, issued by John Alden
Financial Corporation.
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Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
JOHN ALDEN FINANCIAL CORPORATION,
FORTIS, INC.
AND
JAFCO ACQUISITION CORP.
DATED AS OF MARCH 9, 1998
<PAGE>
TABLE OF CONTENTS
Page
PARTIES .......................................................................1
RECITALS ......................................................................1
ARTICLE 1 - TRANSACTIONS AND TERMS OF MERGER...................................1
1.1 Merger...........................................................1
1.2 Time and Place of Closing........................................1
1.3 Effective Time...................................................2
1.4 Execution of Stock Option Agreement..............................2
ARTICLE 2 - TERMS OF MERGER....................................................2
2.1 Charter..........................................................2
2.2 Bylaws...........................................................2
2.3 Directors and Officers...........................................2
ARTICLE 3 - MANNER OF CONVERTING SHARES........................................2
3.1 Conversion of Shares.............................................2
3.2 Shares Held by the Company or Parent.............................3
3.3 Dissenting Stockholders..........................................3
3.4 Conversion of Stock Options; Restricted Stock....................3
ARTICLE 4 - EXCHANGE OF SHARES.................................................4
4.1 Exchange Procedures..............................................4
4.2 Rights of Former Company Stockholders............................5
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES
OF THE COMPANY...............................................5
5.1 Organization, Good Standing and Qualification....................5
5.2 Capital Structure................................................6
5.3 Corporate Authority; Approval and Fairness.......................7
5.4 Governmental Filings; No Violations..............................7
5.5 Company Reports; Financial Statements............................8
5.6 Absence of Certain Changes......................................10
5.7 Litigation......................................................10
5.8 Employee Benefits...............................................10
5.9 Compliance With Laws, Orders and Permits........................12
5.10 Taxes...........................................................14
5.11 Labor Matters...................................................15
5.12 Intellectual Property...........................................15
5.13 Material Contracts..............................................16
5.14 Real Property...................................................16
5.15 Other Assets....................................................18
5.16 Insurance Matters...............................................19
5.17 Liabilities and Reserves........................................20
5.18 Investment Company..............................................21
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5.19 Rights Plan.....................................................21
5.20 State Takeover Statutes.........................................21
5.21 Charter Provisions..............................................21
5.22 [Intentionally Omitted].........................................22
5.23 Brokers and Finders.............................................22
5.24 Statements True and Correct.....................................22
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF PARENT..........................22
6.1 Organization, Good Standing and Qualification...................22
6.2 Corporate Authority; Approval...................................23
6.3 Governmental Filings; No Violations.............................23
6.4 Compliance With Laws, Orders and Permits........................24
6.5 Litigation......................................................24
6.6 Statements True and Correct.....................................24
6.7 Authority of Merger Sub.........................................25
6.8 Financing.......................................................25
ARTICLE 7 - COVENANTS ........................................................25
7.1 Interim Operations..............................................25
7.2 Acquisition Proposals...........................................28
7.3 Stockholders' Meeting...........................................29
7.4 Filings; Other Actions; Notification............................29
7.5 Access; Technology Conversions..................................31
7.6 Miami Property..................................................32
7.7 Publicity.......................................................33
7.8 Employee Benefits...............................................33
7.9 Expenses........................................................33
7.10 Indemnification; Directors' and Officer's Insurance.............34
7.11 Other Actions by the Company and Parent.........................35
ARTICLE 8 - CONDITIONS PRECEDENT TO OBLIGATIONS TO
CONSUMMATE..................................................36
8.1 Conditions to Obligations of Each Party.........................36
8.2 Conditions to Obligations of Parent.............................36
8.3 Conditions to Obligations of the Company........................37
ARTICLE 9 - TERMINATION ...................................................38
9.1 Termination by Mutual Consent...................................38
9.2 Termination by Either Parent or the Company.....................38
9.3 Termination by the Company......................................38
9.4 Termination by Parent...........................................39
9.5 Effect of Termination and Abandonment...........................39
ARTICLE 10 - MISCELLANEOUS ...................................................40
10.1 Definitions.....................................................40
10.2 Non-Survival of Representations and Covenants...................48
10.3 Entire Agreement................................................48
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10.4 Amendments......................................................49
10.5 Waivers.........................................................49
10.6 Assignment......................................................49
10.7 Notices.........................................................50
10.8 Governing Law...................................................51
10.9 Counterparts....................................................51
10.10 Captions; Articles and Sections.................................51
10.11 Interpretations.................................................51
10.12 Enforcement of Agreement........................................51
10.13 Severability....................................................51
Signatures ................................................................53
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LIST OF EXHIBITS
EXHIBIT NUMBER DESCRIPTION
1 Form of Stock Option Agreement
iv
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of March 9, 1998, by and among JOHN ALDEN FINANCIAL CORPORATION,
a Delaware corporation (the "Company"), FORTIS, INC., a Nevada corporation
("Parent"), and JAFCO ACQUISITION CORP., a Delaware corporation ("Merger Sub")
(the Company and Merger Sub are sometimes referred to herein collectively as the
"Constituent Corporations"). Certain terms used in this Agreement are defined in
Section 10.1 of this Agreement.
RECITALS
WHEREAS, the respective boards of directors of each of Parent, Merger
Sub and the Company have determined that the merger of Merger Sub with and into
the Company upon the terms and subject to the conditions set forth in this
Agreement is advisable and have approved the Merger;
WHEREAS, as a condition to, and simultaneous with, execution of this
Agreement, the Company and Parent are entering into a stock option agreement
(the "Stock Option Agreement") in the form attached hereto as Exhibit 1; and
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time, Merger Sub shall be merged with and into the Company in
accordance with the provisions of, and having the effects specified in, the DGCL
(the "Merger"). The Company shall be the Surviving Corporation resulting from
the Merger and shall become a wholly owned Subsidiary of Parent and shall
continue to be governed by the Laws of the State of Delaware. The separate
corporate existence of Merger Sub shall cease upon the effectiveness of the
Merger.
1.2 TIME AND PLACE OF CLOSING. The consummation of the transactions
contemplated hereby (the "Closing") will take place at 9:00 a.m. local time at
the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York,
New York, or at such other place and time as the Parties shall mutually agree,
on the last business day of the month in which all of the conditions set forth
in Article 8 are satisfied or waived (the "Closing Date").
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1.3 EFFECTIVE TIME. On the Closing Date and as soon as practicable
following the Closing, the Company and Parent will cause a Certificate of Merger
(the "Certificate of Merger") to be executed, acknowledged and filed with the
Secretary of State of the State of Delaware (the "Secretary") as provided in the
DGCL. The Merger shall become effective at the time the Secretary accepts for
record the Certificate of Merger or at such later time agreed by the Parties and
established under the Certificate of Merger (the "Effective Time").
1.4 EXECUTION OF STOCK OPTION AGREEMENT. Simultaneously with the
execution of this Agreement by the Parties and as a condition thereto, the
Company is executing and delivering to Parent the Stock Option Agreement,
pursuant to which the Company is granting to Parent an option to purchase shares
of the Company Common Stock.
ARTICLE 2
TERMS OF MERGER
2.1 CHARTER. 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 until duly amended or repealed.
2.2 BYLAWS. The Bylaws of Merger Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until duly
amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of Merger Sub in office
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the directors of the Surviving
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation. The officers of the Company in office immediately
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the officers of the Surviving Corporation
from and after the Effective Time in accordance with the Bylaws of the Surviving
Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article 3,
at the Effective Time, by virtue of the Merger and without any action on the
part of Parent, the Company, Merger Sub or the stockholders of any of the
foregoing, the shares of the Constituent Corporations shall be converted as
follows:
(a) Each share of Merger Sub Common Stock issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into one share of Company Common
Stock.
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(b) Each share of Company Common Stock (including any
associated Rights, but excluding shares held by any Company Entity or
any Parent Entity, and excluding shares held by stockholders who
perfect their statutory appraisal rights as provided in Section 3.3)
issued and outstanding immediately prior to the Effective Time shall
cease to be outstanding and shall be converted into and exchanged for
the right to receive from Parent a cash payment in the amount of
twenty-two dollars and fifty cents ($22.50) (the "Per Share Purchase
Price").
(c) Each share of Company 9% Preferred Stock issued and
outstanding immediately prior to the Effective Time shall be redeemed
for cash at the Effective Time in accordance with the terms of such
Company 9% Preferred Stock as set forth in the Company's Certificate of
Incorporation.
(d) Each share of capital stock of Parent issued and
outstanding immediately prior to the Effective Time shall remain issued
and outstanding from and after the Effective Time.
3.2 SHARES HELD BY THE COMPANY OR PARENT. Each of the shares of Company
Common Stock held by any Company Entity or by any Parent Entity shall be
canceled and retired at the Effective Time and no consideration shall be issued
in exchange therefor.
3.3 DISSENTING STOCKHOLDERS. Any holder of shares of Company Common
Stock who perfects his appraisal rights in accordance with and as contemplated
by Section 262 of the DGCL shall be entitled to receive the value of such shares
in cash as determined pursuant to such provision of Law; provided, that no such
payment shall be made to any dissenting stockholder unless and until such
dissenting stockholder has complied with the applicable provisions of the DGCL
and surrendered to the Company the certificate or certificates representing the
shares for which payment is being made. In the event that after the Effective
Time a dissenting stockholder of the Company fails to perfect, or effectively
withdraws or loses, his right to appraisal and of payment for his shares, Parent
shall issue and deliver the consideration to which such holder of shares of
Company Common Stock is entitled under this Article 3 (without interest) upon
surrender by such holder of the certificate or certificates representing shares
of Company Common Stock held by him. If and to the extent required by applicable
Law, the Company will establish (or cause to be established) an escrow account
with an amount sufficient to satisfy the maximum aggregate payment that may be
required to be paid to dissenting stockholders. Upon satisfaction of all claims
of dissenting stockholders, the remaining escrowed amount, reduced by payment of
the fees and expenses of the escrow agent, will be returned to the Surviving
Corporation.
3.4 CONVERSION OF STOCK OPTIONS; RESTRICTED STOCK. At the Effective
Time, (i) each option or other Equity Right to purchase or receive shares of
Company Common Stock pursuant to stock options, stock appreciation rights,
restricted stock awards or performance share awards granted by the Company under
the Company Stock Plans and outstanding at the Effective Time, whether or not
then exercisable or vested (collectively, the "Company Options"), shall become
fully exercisable and vested, (ii) each such Company Option shall be canceled
and (iii) in
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consideration of such cancellation, Parent shall pay to each such holder of
Company Options an amount in cash equal to the product of (1) the difference (if
positive) between the Per Share Purchase Price and the price, if any, per share
of Company Common Stock pursuant to which the holder of such Company Option may
purchase the shares of Company Common Stock to which such Company Option relates
(and less any withholding of Taxes as may be required by applicable Law) and (2)
the number of shares of Company Common Stock subject thereto. At the Effective
Time, each such Company Option shall no longer represent the right to purchase
or receive shares of Company Common Stock, but in lieu thereof shall represent
the right to receive the cash payment referred to above. At or prior to the
Effective Time, the Company shall take all actions necessary to provide notice
of the provisions of this Section 3.4 to all holders of Company Options and to
cause the cancellation of the Company Options in accordance herewith at the
Effective Time.
ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, Parent and
the Company shall cause the exchange agent selected by Parent (the "Exchange
Agent") to mail to each holder of record of a certificate which represented
shares of Company Common Stock immediately prior to the Effective Time (the
"Certificates") appropriate transmittal materials and instructions (which shall
specify that delivery shall be effected, and risk of loss and title to such
Certificates shall pass, only upon proper delivery of such Certificates to the
Exchange Agent). The Certificates of Company Common Stock so delivered shall be
duly endorsed as the Exchange Agent may require. In the event of a transfer of
ownership of shares of Company Common Stock represented by Certificates that are
not registered in the transfer records of the Company, the consideration
provided in Section 3.1 may be issued to a transferee if the Certificates
representing such shares are delivered to the Exchange Agent, accompanied by all
documents required to evidence such transfer and by evidence satisfactory to the
Exchange Agent that any applicable stock transfer taxes have been paid. If any
Certificate shall have been lost, stolen, mislaid or destroyed, upon receipt of
(a) an affidavit of that fact from the holder claiming such Certificate to be
lost, mislaid, stolen or destroyed, (b) such bond, security or indemnity as
Parent and the Exchange Agent may reasonably require and (c) any other documents
reasonably necessary to evidence and effect the bona fide exchange thereof, the
Exchange Agent shall issue to such holder the consideration into which the
shares represented by such lost, stolen, mislaid or destroyed Certificate shall
have been converted. The Exchange Agent may establish such other reasonable and
customary rules and procedures in connection with its duties as it may deem
appropriate. After the Effective Time, each holder of shares of Company Common
Stock (other than shares to be canceled pursuant to Section 3.2 or as to which
statutory appraisal rights have been perfected, and not withdrawn or lost, as
provided in Section 3.3) issued and outstanding at the Effective Time shall
surrender the Certificates representing such shares to the Exchange Agent and
shall promptly upon surrender thereof receive in exchange therefor the
consideration provided in Section 3.1, together with all undelivered dividends
or distributions in respect of such shares (without interest thereon) pursuant
to Section 4.2, less any withholding of Taxes as may be required by applicable
Law.
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Parent shall not be obligated to deliver the consideration to which any former
holder of Company Common Stock is entitled as a result of the Merger until such
holder surrenders such holder's Certificates for exchange as provided in this
Section 4.1. Any other provision of this Agreement notwithstanding, neither
Parent, the Surviving Corporation nor the Exchange Agent shall be liable to a
holder of Company Common Stock for any amounts paid or property delivered in
good faith to a public official pursuant to any applicable abandoned property,
escheat or similar Law. Adoption of this Agreement by the stockholders of the
Company shall constitute ratification of the appointment of the Exchange Agent.
4.2 RIGHTS OF FORMER COMPANY STOCKHOLDERS. At the Effective Time, the
stock transfer books of the Company shall be closed as to holders of Company
Common Stock immediately prior to the Effective Time and no transfer of Company
Common Stock by any such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of Section 4.1, each
Certificate theretofore representing shares of Company Common Stock (other than
shares to be canceled pursuant to Sections 3.2 and 3.3) shall from and after the
Effective Time represent for all purposes only the right to receive the
consideration provided in Section 3.1 in exchange therefor, subject, however, to
the Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which have been
declared or made by the Company in respect of such shares of Company Common
Stock in accordance with the terms of this Agreement and which remain unpaid at
the Effective Time. However, upon surrender of such Certificate, any undelivered
dividends and cash payments payable hereunder (without interest) shall be
delivered and paid with respect to each share represented by such Certificate.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the corresponding sections or subsections of the
Company Disclosure Letter or in any Company Report filed prior to January 1,
1998, the Company hereby represents and warrants to Parent and Merger Sub as
follows:
5.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware.
Section 5.1(a) of the Company Disclosure Letter contains a list of all
of the Company Subsidiaries. Each Company Subsidiary is a corporation
duly organized, validly existing and in good standing under the Laws of
its respective jurisdiction of organization. Each Company Entity has
all requisite corporate or similar power and authority to own and
operate its Assets and to carry on its business as presently conducted
and is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership or operation of
its Assets or conduct of its business requires such qualification,
except where the failure to be so qualified or in good standing, when
taken together with all other such failures, is not reasonably likely
to have a Company Material Adverse Effect. The Company has
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made available to Parent a complete and correct copy of each Company
Entity's charter and bylaws, each as amended to date. Each Company
Entity's charter and bylaws so delivered are in full force and effect.
(b) The Company conducts its insurance operations through the
Subsidiaries set forth in Section 5.1(b) of the Company Disclosure
Letter (collectively, the "Company Insurance Subsidiaries"). Each of
the Company Insurance Subsidiaries is (i) duly licensed or authorized
as an insurance company and, where applicable, a reinsurer in its
jurisdiction of incorporation, (ii) duly licensed or authorized as an
insurance company and, where applicable, a reinsurer in each other
jurisdiction where it is required to be so licensed or authorized, and
(iii) duly authorized in its jurisdiction of incorporation and each
other applicable jurisdiction to write each line of business reported
as being written in the Company SAP Statements, except, in any such
case, where the failure to be so licensed or authorized is not
reasonably likely to have a Company Material Adverse Effect. The
Company has made all required filings under applicable insurance
holding company statutes except where the failure to file is not
reasonably likely to have a Company Material Adverse Effect.
5.2 CAPITAL STRUCTURE.
(a) The authorized stock of the Company consists of 75,000,000
shares of Company Common Stock, of which 24,523,156 shares were
outstanding as of the close of business on March 9, 1998; and 432,000
shares of preferred stock, $.01 par value ("Preferred Stock"), of which
(i) 270,000 shares have been authorized as 9% Cumulative Preferred
Stock ("Company 9% Preferred Stock"), of which 150,000 shares were
outstanding as of March 9, 1998, and (ii) 162,000 shares have been
authorized as Series B Participating Preferred Stock, of which no
shares were outstanding as of March 9, 1998. All of the outstanding
shares of Company Common Stock and Company 9% Preferred Stock have been
duly authorized and are validly issued, fully paid and nonassessable.
The Company has no commitments to issue or deliver Company Common
Stock, except that, as of March 9, 1998, there were 2,506,366 shares of
Company Common Stock subject to issuance pursuant to the Company Stock
Plans. The Company has no commitments to issue or deliver any shares of
preferred stock, except that as of March 9, 1998, there were 245,231.56
shares of Series A Junior Participating Preferred Stock subject to
issuance pursuant to the Rights Agreement, the terms of which shares of
Series A Junior Participating Preferred Stock are set forth in a
designation that has been approved by the board of directors of the
Company as part of the Rights Agreement but not filed with the
Secretary. Section 5.2(a) of the Company Disclosure Letter contains a
correct and complete list of each outstanding Company Option, including
the applicable Company Stock Plan, the holder of such Company Option,
date of grant, exercise price and number of shares subject thereto.
(b) Each of the outstanding shares of capital stock or other
securities of each of the Company's Subsidiaries is duly authorized,
validly issued, fully paid and
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nonassessable and owned by the Company or a direct or indirect wholly
owned Subsidiary of the Company, free and clear of any and all Liens.
(c) Except as set forth in this Section 5.2 above, and except
with respect to the Stock Option Agreement and the Rights Agreement,
there are no preemptive or other outstanding Equity Rights with respect
to any shares of capital stock or other securities of the Company or
any of its Subsidiaries, and no securities or obligations evidencing
such rights are authorized, issued or outstanding. The Company does not
have outstanding any bonds, debentures, notes or other obligations the
holders of which have the right to vote (or convertible into or
exercisable for securities having the right to vote) with the
stockholders of the Company on any matter.
5.3 CORPORATE AUTHORITY; APPROVAL AND FAIRNESS.
(a) The Company has all requisite corporate power and
authority, and has taken all corporate action necessary in order, to
execute, deliver and perform its obligations under this Agreement and
the Stock Option Agreement and to consummate the transactions
contemplated hereby and thereby, subject only to approval of the Merger
by the holders of at least a majority of the outstanding Company Common
Stock (the "Company Requisite Vote") and to the receipt of the
approvals referred to in Section 5.4. This Agreement and the Stock
Option Agreement are the valid and binding agreements of the Company
enforceable against the Company in accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles (the
"Bankruptcy and Equity Exception").
(b) The board of directors of the Company at a meeting duly
called and held, has by unanimous vote of those directors present (who
constituted all of the directors then in office), (i) determined that
the Agreement and the Stock Option Agreement, and the Merger and the
other transactions contemplated hereby and thereby, are fair to and in
the best interests of the Company and its stockholders, (ii)
authorized, approved and adopted in all respects the Agreement and the
Stock Option Agreement, and the Merger and the other transactions
contemplated hereby and thereby, and (iii) subject to Section 7.2,
resolved to recommend that the holders of the Company Common Stock
adopt this Agreement. The board of directors of the Company has
received the opinion of Credit Suisse First Boston Corporation, dated
the date of this Agreement, to the effect that the consideration to be
received in the Merger by the holders of the Company Common Stock is
fair, from a financial point of view, to such holders, a signed copy of
which has been delivered to Parent.
5.4 GOVERNMENTAL FILINGS; NO VIOLATIONS.
(a) Other than the filings, notices and Consents (i) pursuant
to Section 1.3, (ii) under the HSR Act and the Exchange Act, (iii)
required to be made with the NYSE, and (iv) the filing of appropriate
documents with, and approval of, the respective
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Commissioners of Insurance or similar Regulatory Authorities of
Bermuda, Florida, Minnesota, Nevada, Ohio and Texas, and such filings,
notices or Consents as may be required under the antitrust notification
insurance Laws of any state in which the Company, Parent or any of
their respective Subsidiaries is domiciled or does business, no
notices, reports or other filings are required to be made by any
Company Entity with, nor are any Consents, registrations or Permits
required to be obtained by any Company Entity from, any Regulatory
Authority, in connection with the execution and delivery of this
Agreement and the Stock Option Agreement by the Company and the
consummation by the Company of the Merger and the other transactions
contemplated hereby and thereby, except those that the failure to make
or obtain are not, individually or in the aggregate, reasonably likely
to have a Company Material Adverse Effect or prevent, materially delay
or materially impair the ability of the Company to consummate the
transactions contemplated by this Agreement and the Stock Option
Agreement.
(b) The execution, delivery and performance of this Agreement
and the Stock Option Agreement by the Company do not, and the
consummation by the Company of the Merger and the other transactions
contemplated hereby and thereby will not, constitute or result in (i) a
Default under the Certificate of Incorporation or bylaws of the Company
or the comparable governing instruments of any of its Subsidiaries,
(ii) a Default under, or the creation of a Lien on the Assets of the
Company or any of its Subsidiaries (with or without notice, lapse of
time or both) pursuant to, any Contract binding upon the Company or any
of its Subsidiaries or (provided, as to consummation, the filings and
notices are made, and approvals are obtained, as referred to in Section
5.4(a)), any Law, Order or Permit to which the Company or any of its
Subsidiaries is subject, or (iii) any change in the rights or
obligations of any party under any of the foregoing Contracts, except,
in the case of clause (ii) or (iii) immediately above, for any Default,
creation of Lien or change that, individually or in the aggregate, is
not reasonably likely to have a Company Material Adverse Effect or
prevent, materially delay or materially impair the ability of the
Company to consummate the transactions contemplated by this Agreement
or the Stock Option Agreement. Section 5.4 of the Company Disclosure
Letter sets forth, to the Knowledge of the Company, a correct and
complete list of Contracts of the Company and its Subsidiaries pursuant
to which Consents are or may be required prior to consummation of the
transactions contemplated by this Agreement and the Stock Option
Agreement (whether or not subject to the exception set forth with
respect to clauses (ii) and (iii) immediately above), except those the
failure to obtain, individually or in the aggregate, are not reasonably
likely to have a Company Material Adverse Effect.
5.5 COMPANY REPORTS; FINANCIAL STATEMENTS.
(a) The Company has made available to Parent each registration
statement, report, proxy statement or information statement prepared by
it since December 31, 1994, including (i) the Company's Annual Report
on Form 10-K for the year ended December 31, 1996, and (ii) the
Company's Quarterly Reports on Form 10-Q for the periods ended March
31, 1997, June 30, 1997 and September 30, 1997, each in the form
(including
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exhibits, annexes and any amendments thereto), and filed with the SEC
(collectively, including any such reports filed subsequent to the date
hereof, the "Company Reports"). As of their respective dates, the
Company Reports did not, and any Company Reports filed with the SEC
after January 1, 1998 will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of
the circumstances in which they were made, not misleading. Each of the
consolidated balance sheets included in or incorporated by reference
into the Company Reports (including the related notes and schedules)
fairly presents, or will fairly present, the consolidated financial
position of the Company and its Subsidiaries as of its date and each of
the consolidated statements of income, cash flows and changes in
stockholders equity included in or incorporated by reference into the
Company Reports (including any related notes and schedules) fairly
presents, or will fairly present, the results of operations, cash flows
and changes in stockholders equity, as the case may be, of the Company
and its Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to notes and normal year-end audit
adjustments that will not be material in amount or effect), in each
case in accordance with GAAP, except as may be noted therein.
(b) The Company has made available to Parent true and complete
copies of the annual and quarterly statements of each of the Company
Insurance Subsidiaries as filed with the applicable insurance
Regulatory Authorities for the years ended December 31, 1995, 1996 and
1997, including all exhibits, interrogatories, notes, schedules and any
actuarial opinions, affirmations or certifications or other supporting
documents filed in connection therewith (collectively, the "Company SAP
Statements"). The Company SAP Statements were prepared in conformity
with statutory accounting practices prescribed or permitted by the
applicable insurance Regulatory Authority consistently applied for the
periods covered thereby and present fairly the statutory financial
position of such Company Insurance Subsidiaries as at the respective
dates thereof and the results of operations of such Subsidiaries for
the respective periods then ended. The Company SAP Statements complied
in all material respects with all applicable Laws when filed and, to
the Knowledge of the Company, no material deficiency has been asserted
with respect to any Company SAP Statements by the applicable insurance
Regulatory Authority or any other governmental agency or body. The
statutory balance sheets and income statements included in the Company
SAP Statements as of and for the years ended December 31, 1995 and 1996
have been audited by Price Waterhouse LLP, and the Company has made
available to Parent true and complete copies of all audit opinions
related thereto. The Company has made available to Parent true and
complete copies of all examination reports of insurance departments and
any insurance Regulatory Authorities since January 1, 1994 relating to
the Company Insurance Subsidiaries.
(c) Since January 1, 1993, or the date of organization if
later, each Company Entity has timely filed all reports and statements,
together with any amendments required to be made with respect thereto,
that it was required to file with Regulatory Authorities (except
failures to file which are not reasonably likely to have, individually
or in the aggregate, a Company Material Adverse Effect).
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5.6 ABSENCE OF CERTAIN CHANGES. Since September 30, 1997, the Company
and its Subsidiaries have conducted the businesses of the Company and its
Subsidiaries, taken as a whole, only in, and have not engaged in any material
transaction other than according to, the ordinary and usual course of such
businesses and there has not been (i) any change in the financial condition,
management, Assets, Liabilities, business or results of operations of the
Company and its Subsidiaries which or, to the Knowledge of the Company, any
development or combination of developments which, individually or in the
aggregate, has had or is reasonably likely to have a Company Material Adverse
Effect; (ii) any material damage, destruction or other casualty loss with
respect to any material Asset owned, leased or otherwise used by the Company or
any of its Subsidiaries, whether or not covered by insurance; (iii) any
declaration, setting aside or payment of any dividend or other distribution in
respect of the stock of the Company, except for (A) regular quarterly cash
dividends on the Company Common Stock not in excess of $.12 per share per
quarter, and (B) regular semi-annual cash dividends on the Company 9% Preferred
Stock paid in accordance with the Company's Certificate of Incorporation; (iv)
any material change by the Company in accounting principles, practices or
methods other than those required by GAAP or applicable statutory accounting
principles; (v) any material change in the Company's consolidated reserves for
future policy benefits or other policy claims and benefits; or (vi) any material
change in the accounting, actuarial, investment, reserving, underwriting or
claims administration policies, practices, procedures, methods, assumptions or
principles of any Company Insurance Subsidiary. Since September 30, 1997, there
has not been any increase in the compensation payable or that could become
payable by the Company or any of its Subsidiaries to officers or key employees
or any amendment of any of the Compensation and Benefit Plans other than
increases or amendments in the ordinary course.
5.7 LITIGATION. There is no Litigation instituted or pending or, to the
Knowledge of the Company, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any Company Entity, or against any director,
officer or Compensation and Benefit Plan, or against any Asset, interest or
right of any of them, nor are there any Orders of any Regulatory Authorities,
other governmental authorities or arbitrators outstanding against any Company
Entity, in each case, except for those that are not, individually or in the
aggregate, reasonably likely to have a Company Material Adverse Effect or
prevent or materially delay or materially impair the ability of the Company to
consummate the transactions contemplated by this Agreement or the Stock Option
Agreement. Section 5.7 of the Company Disclosure Letter contains a summary of
all Litigation pending as of the date of this Agreement to which any Company
Entity is a party and which names a Company Entity as a defendant, co-defendant
or third-party defendant or for which any Company Entity has any potential
Liability.
5.8 EMPLOYEE BENEFITS.
(a) A copy of each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, restricted stock, stock option,
employment, termination, severance, change of control, compensation,
medical, health or other plan, agreement, policy or arrangement that
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covers employees, directors, agents, former employees, former directors
or former consultants of any Company Entity (the "Compensation and
Benefit Plans") and any trust agreement or insurance contract forming a
part of such Compensation and Benefit Plans has been made available to
Parent prior to the date hereof. The Compensation and Benefit Plans are
listed in Section 5.8(a) of the Company Disclosure Letter and any
"change of control" or similar provisions therein are specifically
identified in Section 5.8(a) of the Company Disclosure Letter.
(b) All Compensation and Benefit Plans are in substantial
compliance with all applicable Law, including the Code and ERISA. Each
Compensation and Benefit Plan that is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA (a "Pension Plan")
and that is intended to be qualified under Section 401(a) of the Code
has received a favorable determination letter from the IRS with respect
to "TRA" (as defined in Section 1 of Rev. Proc. 93-39), and the Company
has no Knowledge of any circumstances reasonably likely to result in
revocation of any such favorable determination letter. There is no
pending or, to the Knowledge of the Company, threatened litigation
relating to the Compensation and Benefit Plans. To the Knowledge of the
Company, no Company Entity has engaged in a transaction with respect to
any Compensation and Benefit Plan that, assuming the taxable period of
such transaction expired as of the date hereof, would subject any
Company Entity to a material tax or penalty imposed by either Section
4975 of the Code or Section 502 of ERISA.
(c) No liability under Subtitle C or D of Title IV of ERISA
has been or is reasonably expected to be incurred by any Company Entity
with respect to any ongoing, frozen or terminated "single-employer
plan," within the meaning of Section 4001(a)(15) of ERISA, currently or
formerly maintained by any Company Entity, or the single-employer plan
of any entity which is considered one employer with the Company under
Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"). No Company Entity has contributed, or has been obligated
to contribute, to a multiemployer plan as defined in Section 3(37) of
ERISA at any time during the last six years. No notice of a "reportable
event," within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been required to
be filed for any Pension Plan or by any ERISA Affiliate within the
12-month period ending on the date hereof.
(d) All contributions required to be made under the terms of
any Compensation and Benefit Plan as of the date hereof have been
timely made or have been reflected on the most recent consolidated
balance sheet filed or incorporated by reference in the Company Reports
prior to the date hereof. Neither any Pension Plan nor any
single-employer plan of an ERISA Affiliate has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412
of the Code or Section 302 of ERISA. Neither the Company nor its
Subsidiaries has provided, or is required to provide, security to any
Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code.
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(e) Under each Pension Plan which is a single-employer plan,
as of the date of the most recent actuarial valuation, the actuarially
determined present value of all "benefit liabilities," within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of
the actuarial assumptions contained in the Pension Plan's most recent
actuarial valuation), did not exceed the then current value of the
assets of such Pension Plan, and there has been no material change in
the financial condition of such Pension Plan since the date of the most
recent actuarial valuation.
(f) No Company entity has any obligations for retiree health
and life benefits under any Compensation and Benefit Plan, except as
specifically described in Section 5.8(f) of the Company Disclosure
Letter. Subject to the restrictions set forth in Section 7.1 hereof,
the Company or its Subsidiaries may amend or terminate any such plan
under the terms of such plan at any time without incurring any material
Liability thereunder.
(g) The consummation of the Merger and the other transactions
contemplated by this Agreement, either alone or in connection with a
subsequent termination of employment, will not (i) entitle any
employees of any Company Entity to severance pay, (ii) accelerate the
time of payment or vesting or trigger any payment of compensation or
benefits under, increase the amount payable or trigger any other
material obligation pursuant to, any of the Compensation and Benefit
Plans, or (iii) result in any Default under any of the Compensation and
Benefit Plans.
(h) All Compensation and Benefit Plans covering current or
former non-U.S. employees or former employees of the Company and its
Subsidiaries comply in all material respects with applicable Law. No
Company Entity has any material unfunded Liabilities with respect to
any Pension Plan that covers such non-U.S. employees.
(i) No amount that will be received (whether in cash or
property or the vesting of property) as a direct result of the
transactions contemplated by this Agreement by any employee, officer,
director, agent or independent contractor of the Company who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment arrangement is
reasonably likely to be treated as an "excess parachute payment" (as
such term is defined in Section 280G(b)(1) of the Code).
5.9 COMPLIANCE WITH LAWS, ORDERS AND PERMITS.
(a) The business and operations of the Company and the Company
Insurance Subsidiaries have been conducted in compliance in all
material respects with all applicable Laws regulating the business of
insurance, including all applicable orders and directives of insurance
Regulatory Authorities and market conduct recommendations resulting
from market conduct examinations of insurance Regulatory Authorities
(collectively, "Insurance Laws"). Notwithstanding the generality of the
foregoing, except where the failure to do so would not, individually or
in the aggregate, be reasonably likely to have a Company Material
Adverse Effect, each Company Insurance Subsidiary
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and, to the Knowledge of the Company, its agents have marketed, sold
and issued insurance products in compliance, in all material respects,
with Insurance Laws applicable to the business of such Company
Insurance Subsidiary and in the respective jurisdictions in which such
products have been sold, including in compliance with (i) all
applicable prohibitions against "redlining" or withdrawal of business
lines, (ii) all applicable requirements relating to the disclosure of
the nature of insurance products as policies of insurance, and (iii)
all applicable requirements relating to insurance product projections
and illustrations.
(b) There is no pending or, to the Knowledge of the Company,
threatened charge by any insurance Regulatory Authority that any of the
Company Insurance Subsidiaries has violated, nor any pending or, to the
Knowledge of the Company, threatened investigation by any insurance
Regulatory Authority with respect to possible violations of, any
applicable Insurance Laws where such violations are, individually or in
the aggregate, reasonably likely to have a Company Material Adverse
Effect. None of the Company Insurance Subsidiaries is subject to any
Order of any insurance Regulatory Authority relating specifically to
such Company Insurance Subsidiary (as opposed to insurance companies
generally). The Company Insurance Subsidiaries have filed all reports
required to be filed with any insurance Regulatory Authority on or
before the date hereof as to which the failure to file such reports is,
individually or in the aggregate, reasonably likely to have a Company
Material Adverse Effect.
(c) In addition to Insurance Laws, the business of each
Company Entity has been, and is being, conducted in compliance in all
material respects with all applicable Laws, Orders and Permits, and
with such Company Entity's charter and bylaws or other similar
governing documents. No investigation or review by any Regulatory
Authority with respect to any Company Entity is pending or, to the
Knowledge of the Company, threatened, nor, to the Knowledge of the
Company, has any Regulatory Authority indicated an intention to conduct
the same, except for those the outcome of which are not, individually
or in the aggregate, reasonably likely to have a Company Material
Adverse Effect or prevent or materially burden, delay or impair the
ability of the Company to consummate the transactions contemplated by
this Agreement. To the Knowledge of the Company, no material change is
required in any Company Entity's processes, properties or procedures in
connection with any applicable Laws, Orders or Permits, and the Company
has not received any written notice or communication of any material
noncompliance with any such Laws, Orders or Permits that has not been
cured as of the date hereof. Each Company Entity has all Permits,
Orders, Consents, trademarks, patents, trade names, copyrights, service
marks and franchises necessary to conduct its business as presently
conducted except those the absence of which are not, individually or in
the aggregate, reasonably likely to have a Company Material Adverse
Effect or prevent or materially burden, delay or impair the ability of
the Company to consummate the Merger and the other transactions
contemplated by this Agreement or the Stock Option Agreement.
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(d) Copies of all material written reports, correspondence,
notices and other documents relating to any inspection, audit,
monitoring or other form of review or enforcement action by a
Regulatory Authority have been made available to Parent.
5.10 TAXES.
(a) Each Company Entity has filed, completely and correctly in
all material respects, all Tax Returns that are required by all
applicable Laws to be filed by such Company Entity, and (i) has paid,
or made adequate provision for the payment of, all Taxes which have or
may become due and payable pursuant to those Tax Returns, has paid all
estimated Taxes due and (ii) has paid all other charges, claims and
assessments for Taxes received to date other than those charges, claims
and assessments for Taxes being contested in good faith for which
provision has been made in accordance with GAAP on the books of such
Company Entity.
(b) All Taxes which the Company Entities are required by Law
to withhold and collect have been duly withheld and collected, and have
been paid over, in a timely manner, to the proper Taxing Authorities to
the extent due and payable.
(c) No Company Entity has executed any currently effective
waiver to extend the applicable statute of limitations in respect of
any Tax Liabilities of any Company Entity for the fiscal years prior to
and including the most recent fiscal year.
(d) No Company Entity has been a member of any consolidated
group for federal income tax purposes other than the consolidated group
of which the Company is the common parent; and no Company Entity is a
party to any tax sharing agreement or arrangement, other than with each
other.
(e) No Liens for Taxes exist with respect to any of the Assets
of any Company Entity, except for statutory Liens for Taxes not yet due
or payable or that are being contested in good faith.
(f) All of the income Tax Returns filed by or on behalf of
each Company Entity have been examined by and settled with the IRS or
appropriate Taxing Authority, or the statute of limitations with
respect to the relevant Tax liability expired, for all taxable periods
through and including the period ending on December 31, 1993.
(g) All Taxes due with respect to any completed and settled
audit, examination or deficiency litigation with any Taxing Authority
have been, or prior to the Effective Time will be, paid in full.
(h) There is no audit, examination, deficiency, or refund
litigation pending with respect to any Taxes and during the past three
years no Taxing Authority has given written notice of the commencement
of any audit, examination, deficiency or refund litigation, with
respect to any Taxes.
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(i) No Company Entity is bound by any currently effective
private ruling, closing agreement or similar agreement with any Taxing
Authority relating to a material amount of Taxes.
(j) The Company is not a "consenting corporation" within the
meaning of Section 341(f) of the Code.
5.11 LABOR MATTERS. No Company Entity is a party to or otherwise bound
by any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization. No Company Entity is the
subject of any Litigation asserting that any such Company Entity has committed
an unfair labor practice (within the meaning of the National Labor Relations Act
or comparable state law) or seeking to compel any such Company Entity to bargain
with any labor organization as to wages or conditions of employment, nor is any
Company Entity party to any collective bargaining agreement, nor is there any
strike or other labor dispute involving any Company Entity, pending or, to the
Knowledge of the Company, threatened, or, to the Knowledge of the Company, is
there any activity involving any Company Entity's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
5.12 INTELLECTUAL PROPERTY.
(a) The Company Entities own, or are licensed or otherwise
possess legally enforceable rights to use, all Intellectual Property
that is used in their businesses as currently conducted, except for any
such failures to own, be licensed or possess that are not, individually
or in the aggregate, reasonably likely to have a Company Material
Adverse Effect, and to the Knowledge of the Company all patents,
trademarks, tradenames, service marks and copyrights held by any
Company Entity are valid and subsisting.
(b) Except as are not, individually or in the aggregate,
reasonably likely to have a Company Material Adverse Effect:
(i) The Company is not, nor will it be as a result of
the execution and delivery of this Agreement or the
performance of its obligations hereunder, in violation of any
licenses, sublicenses and other Contracts as to which the
Company is a party and pursuant to which the Company is
authorized to use any third-party patents, trademarks,
tradenames, service marks, and copyrights ("Third-Party
Intellectual Property Rights").
(ii) No claims with respect to (A) the patents,
registered and material unregistered trademarks and service
marks, registered copyrights, tradenames, and any applications
therefor owned by any Company Entity (the "Company
Intellectual Property Rights"); (B) any trade secret material
to the Company; or
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(C) Third-Party Intellectual Property Rights are currently
pending or, to the Knowledge of the Company, are threatened
by any Person.
(iii) The Company has no Knowledge of any valid
grounds for any bona fide claims (A) to the effect that the
sale, licensing or use of any product as now used, sold or
licensed or proposed for use, sale or license by any Company
Entity infringes on any copyright, patent, trademark, service
mark or trade secret; (B) against the use by any Company
Entity of any trademarks, trade names, trade secrets,
copyrights, patents, technology, know-how or computer software
programs and applications used in the business of any Company
Entity as currently conducted or as proposed to be conducted;
(C) challenging the ownership, validity or effectiveness of
any of the Company Intellectual Property Rights or other trade
secret material to the Company; or (D) challenging the license
or legally enforceable right to use of the Third-Party
Intellectual Rights by any Company Entity.
(iv) To the Knowledge of the Company, there is no
unauthorized use, infringement or misappropriation of any of
the Company Intellectual Property Rights by any third party,
including any employee or former employee of any Company
Entity.
5.13 MATERIAL CONTRACTS. All of the material Contracts of the Company
Entities that are required to be described in the Company Reports or to be filed
as exhibits thereto (the "Material Contracts") are described in the Company
Reports or filed as exhibits thereto and are in full force and effect. True and
complete copies of all such Material Contracts have been delivered or have been
made available by the Company to Parent. Neither any Company Entity nor any
other party is in Default under any such Material Contract except for such
Defaults as are not, individually or in the aggregate, reasonably likely to have
a Company Material Adverse Effect. No Company Entity is party to any Contract
containing any provision or covenant limiting in any manner the ability of any
Company Entity to (a) sell any products or services of or to any other person,
(b) engage in any line of business, or (c) compete with or to obtain products or
services from any Person or limiting the ability of any Person to provide
products or services to any Company Entity.
5.14 REAL PROPERTY.
(a) Section 5.14(a) of the Company Disclosure Letter contains
a list of all parcels of real property owned by the Company Entities,
including the Miami Property (collectively, the "Owned Real Property").
The Company has good, marketable and insurable fee simple title to all
of the Owned Real Property, including the Improvements thereon, free
and clear of all Liens and other imperfections of title, except
Permitted Title Exceptions. The Company is the lessor or landlord or
the successor lessor or landlord under the Space Leases free and clear
of all Liens except for the Commission Agreements and the Permitted
Title Exceptions and is entitled to receive the rents, issues and
profits from the Space Leases. Without limiting the foregoing, the
Space Leases are free and
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clear of any and all Liens, and the Company has made no assignment of
any of the rights of the Company under any of the Space Leases or with
respect to any of said rents, issues or profits, except as set forth in
the Commission Agreements and the Permitted Title Exceptions, and
except as to any holders of any Liens to be released and canceled at as
of the Effective Time. The Company has delivered to Parent a true and
complete copy of the Rent Roll for the Miami Property, and the Company
has no Knowledge that any tenant listed thereon who currently leases a
material portion of the Miami Property has (i) plans to terminate such
tenant's Space Lease, (ii) has commenced a voluntary case, or had
entered against it a petition, for relief under any Law relating to
bankruptcy or insolvency, or (iii) has asserted a right to off-set rent
by reason of the Company's failure to perform its obligations under a
Space Lease. The Miami Property contains not less than 1 million
rentable square feet within the current Improvements thereon.
(b) The Owned Real Property and all Improvements thereon, in
all material respects, conform to and comply with all applicable Laws,
including those relating to zoning, fire, health, building, handicapped
persons, sanitation, use and occupancy. The Company has obtained all
material Permits required for the Owned Real Property, all of which are
currently in full force and effect. The Improvements on the Owned Real
Property (i) are properly located within the boundaries of the Owned
Real Property and in accordance with all applicable set-back
restrictions, (ii) are free from all material engineering and
structural defects, (iii) are free from all termites or other
wood-destroying insects, and (iv) do not contain any asbestos or
asbestos-containing materials. No portion of the Improvements located
on the Owned Real Property has been damaged or destroyed by fire or
other casualty.
(c) To the Company's Knowledge, no portion of the Owned Real
Property is currently subject to any Condemnation Proceeding and no
Condemnation Proceeding has been commenced or instituted against any
portion of the Owned Real Property.
(d) The Acreage (i) contains approximately four acres of
vacant land, and (ii) has all necessary and appropriate zoning
designations, ingress and egress, and utility access, and is otherwise
suitable in all material respects, for commercial development in a
manner consistent with the development that exists on the remainder of
the Miami Property.
(e) Section 5.14(e) of the Company Disclosure Letter contains
a list of all parcels of real property leased by any of the Company
Entities as lessee (collectively, the "Leased Real Property"). Each of
such leases is in full force and effect, no Company Entity is in
material Default under any material provisions of such lease, and no
lessor has asserted that any Company Entity is in material Default of
any material provision under any such lease.
(f) Each Company Entity has complied in all material respects
with all applicable Environmental Laws; (ii) the properties currently
owned or operated by the Company (including soils, groundwater, surface
water, buildings or other structures) are
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not contaminated with any Hazardous Substances; (iii) the properties
formerly owned or operated by any Company Entity were not contaminated
with Hazardous Substances during the period of ownership or operation
by such Company Entity; (iv) no Company Entity is subject to Liability
for any Hazardous Substance disposal or contamination on any third
party property; (v) no Company Entity has been associated with any
release or threat of release of any Hazardous Substance; (vi) no
Company Entity has received any notice, demand, letter, claim or
request for information alleging that any Company Entity may be in
violation of or liable under any Environmental Law; (vii) no Company
Entity is subject to any Orders or other arrangements with any
Regulatory Authority or is subject to any indemnity or other agreement
with any third party relating to Liability under any Environmental Law
or relating to Hazardous Substances; and (viii) there are no
circumstances or conditions involving any Company Entity that could
reasonably be expected to result in any Liability, investigations or
restrictions on the ownership, use or transfer of any property of the
Company pursuant to any Environmental Law, except in each of clauses
(i) through (viii) as are not, individually or in the aggregate,
reasonably likely to have a material adverse effect on the fair market
value of the Owned Real Property.
5.15 OTHER ASSETS.
(a) With respect to all Assets other than the Real Property,
the Company Entities have good and marketable title, free and clear of
all Liens, except as would not be reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect. To
the Company's Knowledge, all tangible properties used in the businesses
of the Company Entities are in good condition, reasonable wear and tear
excepted, and are usable in the ordinary course of business consistent
with the Company's past practices.
(b) All Assets (other than the Real Property) that are
material to the Company's business on a consolidated basis, and that
are held under leases or subleases by any of the Company Entities, are
held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by the
Bankruptcy and Equity Exception), and each such Contract is in full
force and effect.
(c) The Company Entities currently maintain insurance similar
in amounts, scope, and coverage to that maintained by other peer
organizations. None of the Company Entities has received written notice
from any insurance carrier that (i) any policy of insurance will be
canceled or that coverage thereunder will be reduced or eliminated, or
(ii) premium costs with respect to such policies of insurance will be
substantially increased. There are presently no claims for amounts
exceeding in any individual case $1 million pending under such policies
of insurance and no notices of claims in excess of such amounts have
been given by any Company Entity under such policies.
(d) The Assets (including the Real Property) of the Company
Entities include all Assets required to operate the business of the
Company Entities as presently
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conducted, except as would not be reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect.
5.16 INSURANCE MATTERS.
(a) All policies, binders, slips, certificates, annuity
contracts and participation agreements and other agreements of
insurance, whether individual or group, in effect as of the date hereof
(including all applications, supplements, endorsements, riders and
ancillary agreements in connection therewith) that are issued by the
Company Insurance Subsidiaries (the "Company Insurance Contracts"), and
any and all marketing materials, are, to the extent required under
applicable Law, on forms approved by applicable insurance Regulatory
Authorities or which have been filed and not objected to by such
authorities within the period provided for objection, and such forms
comply in all material respects with the Insurance Laws applicable
thereto and, as to premium rates established by any Company Insurance
Subsidiary that are required to be filed with or approved by insurance
Regulatory Authorities, the rates have been so filed or approved, the
premiums charged conform thereto in all material respects, and such
premiums comply in all material respects with the Insurance Laws
applicable thereto.
(b) Section 5.16(b) lists all of the reinsurance and
coinsurance treaties or agreements, including retrocessional
agreements, to which the Company or any Company Insurance Subsidiary is
a party or under which the Company or any Company Insurance Subsidiary
has any existing rights, obligations or Liabilities (collectively, the
"Reinsurance Contracts"). All of the Reinsurance Contracts are in full
force and effect, and neither the Company nor any Company Insurance
Subsidiary, nor, to the Knowledge of the Company, any other party to a
Reinsurance Contract, is in Default in any material respect as to any
provision thereof. No Reinsurance Contract contains any provision
providing that the other party thereto may terminate such Reinsurance
Contract by reason of the transactions contemplated by this Agreement.
Neither the Company nor any Company Insurance Subsidiary has received
any notice to the effect that the financial condition of any other
party to any such Reinsurance Contract is impaired with the result that
a Default thereunder may reasonably be anticipated, whether or not such
Default may be cured by the operation of any offset clause in such
Reinsurance Contract.
(c) Prior to the date hereof, the Company has delivered or
made available to Parent a true and complete copy of any material
actuarial reports prepared by actuaries, independent or otherwise, with
respect to any Company Insurance Subsidiary since December 31, 1994,
and all attachments, addenda, supplements and modifications thereto
(the "Company Actuarial Analyses"). The information and data furnished
by the Company or any Company Insurance Subsidiary to its independent
actuaries in connection with the preparation of the Company Actuarial
Analyses were accurate in all material respects. Furthermore, to the
Knowledge of the Company, each Company Actuarial Analysis was based
upon an accurate inventory of policies in force for the Company
Insurance Subsidiaries at the relevant time of preparation, was
prepared using appropriate modeling procedures accurately applied and
in conformity with generally
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accepted actuarial standards consistently applied, and the projections
contained therein were properly prepared in accordance with the
assumptions stated therein.
(d) None of Standard & Poor's Corporation, Moody's Investors
Service, Inc. or A.M. Best Company has announced that it has under
surveillance or review its rating of the financial strength or
claims-paying ability of any Company Insurance Subsidiary, and the
Company has no reason to believe that any rating presently held by the
Company Insurance Subsidiaries is likely to be modified, qualified,
lowered or placed under such surveillance for any reason, including as
a result of the transactions contemplated hereby.
(e) All annuity contracts and life insurance policies issued
by each Company Insurance Subsidiary to an annuity holder domiciled in
the United States satisfy in all material respects all definitional or
other requirements for qualification under the Code section applicable
(or intended to be applicable) to such annuity contracts or life
insurance policies, and none of the Company Insurance Subsidiaries have
entered into any Contract or are involved in any discussions or
negotiations and there are no audits, examinations, investigations or
other proceedings with the IRS with respect to the failure of any life
insurance policy under section 7702 or 817(h) of the Code or the
failure of any annuity contract to meet the requirements of section
72(s) of the Code. There are no "hold harmless" indemnification
agreements respecting the tax qualification or treatment of any product
or plan sold, issued, entered into or administered by the Company
Insurance Subsidiaries, and there have been no claims asserted by any
Person under such "hold harmless" indemnification agreements so set
forth.
5.17 LIABILITIES AND RESERVES.
(a) The reserves carried on the Company SAP Statements of each
Company Insurance Subsidiary for future insurance policy benefits,
losses, claims and similar purposes were, as of the respective dates of
such Company SAP Statements, in compliance in all material respects
with the requirements for reserves established by the insurance
Regulatory Authority of the state of domicile of such Company Insurance
Subsidiary, were determined in all material respects in accordance with
generally accepted actuarial standards and principles consistently
applied, and were fairly stated in all material respects in accordance
with sound actuarial and statutory accounting principles. Such reserves
were adequate in the aggregate to cover the total amount of all
reasonably anticipated Liabilities of the Company and each Company
Insurance Subsidiary under all outstanding insurance, reinsurance and
other applicable agreements as of the respective dates of such Company
SAP Statements. The admitted assets of each Company Insurance
Subsidiary as determined under applicable Laws are in an amount at
least equal to the minimum amounts required by applicable Laws. In
addition, the Company has delivered or made available to Parent copies
of all material work papers used as the basis for establishing the
reserves for the Company and the Company Insurance Subsidiaries at
December 31, 1995, December 31, 1996 and September 30, 1997,
respectively.
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(b) Except for regular periodic assessments in the ordinary
course of business or assessments based on developments which are
publicly known within the insurance industry, to the Knowledge of the
Company, no claim or assessment is pending or threatened against any
Company Insurance Subsidiary which is peculiar or unique to such
Company Insurance Subsidiary by any state insurance guaranty
associations in connection with such association's fund relating to
insolvent insurers (or similar state assessment authority) which, if
determined adversely, would, individually or in the aggregate, be
reasonably likely to have a Company Material Adverse Effect.
5.18 INVESTMENT COMPANY. None of the Company Insurance Subsidiaries
maintains any separate accounts. No Company Entity conducts activities of or is
otherwise deemed under applicable Law to control an "investment advisor" as such
term is defined in Section 2(a)(20) of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), whether or not registered under the
Investment Advisers Act of 1940, as amended. No Company Entity is an "investment
company" as defined under the Investment Company Act, and no Company Entity
sponsors any Person that is such an investment company.
5.19 RIGHTS PLAN.
(a) Prior to Parent entering into this Agreement and the Stock
Option Agreement, the Company has taken all actions necessary such
that, for all purposes under the Rights Agreement, Parent shall not be
deemed an Acquiring Person (as defined in the Rights Agreement), the
Distribution Date (as defined in the Rights Agreement) shall not be
deemed to occur and the rights issuable pursuant to the Rights
Agreement will not separate from the Company Common Stock, as a result
of Parent's entering into this Agreement or the Stock Option Agreement,
or consummating the Merger or the other transactions contemplated
hereby or thereby.
(b) The Company has taken all necessary action with respect to
all of the outstanding Rights so that, as of immediately prior to the
Effective Time, (i) neither the Company nor Parent will have any
obligations under the Rights or the Rights Agreement and (ii) the
holders of the Rights will have no rights under the Rights or the
Rights Agreement.
5.20 STATE TAKEOVER STATUTES. Each Company Entity has taken all
necessary action to exempt the transactions contemplated by this Agreement and
the Stock Option Agreement from, or if necessary to challenge the validity or
applicability of, any applicable "moratorium," "fair price," "business
combination," "control share," or other anti-takeover Laws (collectively,
"Takeover Laws").
5.21 CHARTER PROVISIONS. Each Company Entity has taken all action so
that the entering into of this Agreement and the Stock Option Agreement, and the
consummation of the Merger and the other transactions contemplated by this
Agreement and the Stock Option Agreement, do not and will not result in the
grant of any rights to any Person under the Certificate of Incorporation, Bylaws
or other governing instruments of any Company Entity or
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restrict or impair the ability of Parent or any of its Subsidiaries to vote, or
otherwise to exercise the rights of a stockholder with respect to, shares of any
Company Entity that may be directly or indirectly acquired or controlled by
them.
5.22 [INTENTIONALLY OMITTED]
5.23 BROKERS AND FINDERS. No Company Entity nor any of their officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders, fees in connection
with the Merger or the other transactions contemplated in this Agreement, except
that the Company has employed Credit Suisse First Boston Corporation as its
financial advisor, the arrangements with which have been disclosed to Parent
prior to the date hereof.
5.24 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument, or other writing furnished or to be furnished by any Company Entity
or any Affiliate thereof to Parent pursuant to this Agreement or any other
document, agreement, or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to be
supplied by any Company Entity or any Affiliate thereof for inclusion in the
Proxy Statement to be mailed to the Company's stockholders in connection with
the Stockholders' Meeting, and any other documents to be filed by a Company
Entity or any Affiliate thereof with the SEC or any other Regulatory Authority
in connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Proxy Statement, when
first mailed to the stockholders of the Company, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or, in the case of the Proxy Statement or any amendment
thereof or supplement thereto, at the time of the Stockholders' Meeting, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for the Stockholders' Meeting. All
documents that any Company Entity or any Affiliate thereof is responsible for
filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to the Company as follows:
6.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. Parent has all requisite corporate or similar power and
authority to own and operate its Assets and to carry on its business as
presently conducted and is qualified to do business and is in good
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standing as a foreign corporation in each jurisdiction where the ownership or
operation of its Assets or conduct of its business requires such qualification,
except where the failure to be so qualified or in good standing, when taken
together with all other such failures, is not reasonably likely to have a Parent
Material Adverse Effect. Parent has made available to the Company a complete and
correct copy of Parent's Articles of Incorporation and Bylaws, each as amended
to date. Parent's Articles of Incorporation and Bylaws so delivered are in full
force and effect.
6.2 CORPORATE AUTHORITY; APPROVAL.
(a) Parent has all requisite corporate power and authority,
and has taken all corporate action necessary in order, to execute,
deliver and perform its obligations under this Agreement and the Stock
Option Agreement and to consummate the transactions contemplated hereby
and thereby, subject only to receipt of the approvals referred to in
Section 6.3. This Agreement and the Stock Option Agreement are the
valid and binding agreements of Parent enforceable against Parent in
accordance with their terms, subject to the Bankruptcy and Equity
Exception.
(b) The board of directors of Parent (i) has declared that the
Agreement and the Stock Option Agreement, and the Merger and the other
transactions contemplated hereby and thereby, are advisable and in the
best interests of Parent, and (ii) has authorized, approved and adopted
in all respects the Agreement and the Stock Option Agreement, and the
Merger and the other transactions contemplated hereby and thereby.
6.3 GOVERNMENTAL FILINGS; NO VIOLATIONS.
(a) Other than the filings, notices and Consents (i) pursuant
to Section 1.3, (ii) under the HSR Act, and (iii) the filing of
appropriate documents with, and approval of, the respective
Commissioners of Insurance or similar Regulatory Authorities of
Bermuda, Florida, Minnesota, Nevada, Ohio and Texas, and such filings,
notices or Consents as may be required under the antitrust notification
insurance laws of any state in which the Company, Parent or any of
their respective Subsidiaries is domiciled or does business, no
notices, reports or other filings are required to be made by any Parent
Entity with, nor are any Consents, registrations or Permits required to
be obtained by any Parent Entity from, any Regulatory Authority, in
connection with the execution and delivery of this Agreement and the
Stock Option Agreement by Parent and the consummation by Parent of the
Merger and the other transactions contemplated hereby and thereby,
except those that the failure to make or obtain are not, individually
or in the aggregate, reasonably likely to have a Parent Material
Adverse Effect or prevent, materially delay or materially impair the
ability of Parent to consummate the transactions contemplated by this
Agreement and the Stock Option Agreement.
(b) The execution, delivery and performance of this Agreement
and the Stock Option Agreement by Parent do not, and the consummation
by Parent of the Merger and the other transactions contemplated hereby
and thereby will not, constitute or result in (i) a Default under the
Articles of Incorporation or Bylaws of Parent, (ii) a Default under, or
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the creation of a Lien on the Assets of Parent (with or without notice,
lapse of time or both) pursuant to, any Contract binding upon Parent or
(provided, as to consummation, the filings and notices are made, and
approvals are obtained, as referred to in Section 6.3(a)), any Law,
Order or Permit to which Parent is subject, or (iii) any change in the
rights or obligations of any party under any of the foregoing
Contracts, except, in the case of clause (ii) or (iii) immediately
above, for any Default, creation of Lien or change that, individually
or in the aggregate, is not reasonably likely to have a Parent Material
Adverse Effect or prevent, materially delay or materially impair the
ability of Parent to consummate the transactions contemplated by this
Agreement or the Stock Option Agreement. To the Knowledge of Parent,
there are no Contracts of Parent pursuant to which Consents are or may
be required prior to consummation of the transactions contemplated by
this Agreement and the Stock Option Agreement (whether or not subject
to the exception set forth with respect to clauses (ii) and (iii)
immediately above), except those the failure to obtain, individually or
in the aggregate, are not reasonably likely to have a Parent Material
Adverse Effect.
6.4 COMPLIANCE WITH LAWS, ORDERS AND PERMITS. The business and
operations of Parent have not been, and are not being, conducted in violation of
any applicable Law, Order or Permit, except for violations or possible
violations that are not, individually or in the aggregate, reasonably likely to
have a Parent Material Adverse Effect or prevent or materially burden or
materially impair the ability of Parent to consummate the transactions
contemplated by this Agreement. No investigation or review by any Regulatory
Authority with respect to Parent is pending or, to the Knowledge of Parent,
threatened, nor, to the Knowledge of Parent, has any Regulatory Authority
indicated an intention to conduct the same, except for those the outcome of
which are not, individually or in the aggregate, reasonably likely to have a
Parent Material Adverse Effect or prevent or materially burden or materially
impair the ability of Parent to consummate the transactions contemplated by this
Agreement.
6.5 LITIGATION. There is no Litigation instituted or pending or, to the
Knowledge of Parent, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any Parent Entity, or against any director or
officer of any Parent Entity, or against any Asset, interest or right of any of
them, nor are there any Orders of any Regulatory Authorities, other governmental
authorities or arbitrators outstanding against any Parent Entity, in each case,
except for those that are not, individually or in the aggregate, reasonably
likely to have a Parent Material Adverse Effect or prevent or materially delay
or materially impair the ability of Parent to consummate the transactions
contemplated by this Agreement or by the Stock Option Agreement.
6.6 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument
or other writing furnished or to be furnished by any Parent Entity or any
Affiliate thereof to the Company pursuant to this Agreement or any other
document, agreement or instrument referred to herein contains or will contain
any untrue statement of material fact or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to be
supplied by any Parent Entity or any Affiliate thereof for inclusion in the
Proxy Statement to be mailed to the Company's
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stockholders in connection with the Stockholders' Meeting, and any other
documents to be filed by any Parent Entity or any Affiliate thereof with any
Regulatory Authority in connection with the transactions contemplated hereby,
will, at the respective time such documents are filed, and with respect to the
Proxy Statement, when first mailed to the stockholders of the Company, be false
or misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
Stockholders' Meeting, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the
Stockholders' Meeting. All documents that any Parent Entity or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
6.7 AUTHORITY OF MERGER SUB. Merger Sub is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware as a wholly owned Subsidiary of Parent. The authorized capital stock of
Merger Sub consists of 1,000 shares of Merger Sub Common Stock, all of which is
validly issued and outstanding, fully paid and nonassessable and is owned by
Parent free and clear of any Lien. Merger Sub has the corporate power and
authority necessary to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of Merger Sub. This Agreement represents a legal, valid, and binding
obligation of Merger Sub, enforceable against Merger Sub in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought).
Parent, as the sole stockholder of Merger Sub, will vote prior to the Effective
Time the shares of Merger Sub Common Stock in favor of adoption of this
Agreement, as and to the extent required by applicable Law.
6.8 FINANCING. Parent has, or will have prior to the Closing Date,
sufficient cash, available lines of credit or other sources of immediately
available funds to enable it to make the aggregate cash payments required to be
paid pursuant to Section 3.1(b) and any other amounts to be paid by it
hereunder.
ARTICLE 7
COVENANTS
7.1 INTERIM OPERATIONS. The Company covenants and agrees as to itself
and its Subsidiaries that, after the date hereof and prior to the Effective Time
(unless Parent shall
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otherwise approve in writing, and except as otherwise expressly contemplated by
this Agreement or the Stock Option Agreement or set forth in Section 7.1 of the
Company Disclosure Letter):
(a) The business of all Company Entities shall be conducted in
the ordinary and usual course (it being understood and agreed that
nothing contained herein shall permit the Company to enter into or
engage in (through acquisition, product extension or otherwise) the
business of selling any products or services materially different from
existing products or services of the Company Entities or to enter into
or engage in new lines of business without Parent's prior written
approval), and it shall be conducted in compliance in all material
respects with all applicable Laws.
(b) To the extent consistent with (a) above, each Company
Entity shall use all commercially reasonable efforts to preserve its
business organization intact and maintain its existing relations and
goodwill with customers, suppliers, reinsurers, distributors,
creditors, lessors, employees and business associates, and maintain all
Permits necessary for the Company Entities to conduct business in the
jurisdictions in which they currently conduct business.
(c) No Company Entity shall permit a material change in any of
its underwriting, investment, actuarial, financial reporting or
accounting practices or policies or in any material assumption
underlying an actuarial practice or policy, except as may be required
by any change in GAAP, statutory accounting principles or applicable
Law.
(d) The Company shall not (i) issue, sell, pledge, dispose of
or encumber any capital stock owned by it in any of its Subsidiaries;
(ii) amend its Certificate of Incorporation or Bylaws or amend, modify
or terminate the Rights Agreement; (iii) split, combine or reclassify
its outstanding shares of capital stock; (iv) authorize, declare, set
aside or pay any dividend payable in cash, stock or property in respect
of any capital stock other than (A) dividends from its direct or
indirect wholly owned Subsidiaries, (B) regular quarterly cash
dividends on the Company Common Stock not to exceed $.12 per share per
quarter, and (C) regular semi-annual cash dividends required to be paid
by the Company on the Company 9% Preferred Stock in accordance with the
Company's Certificate of Incorporation; or (v) repurchase, redeem or
otherwise acquire or permit any of its Subsidiaries to purchase or
otherwise acquire, any shares of its stock or any securities
convertible into or exchangeable or exercisable for any shares of its
stock, other than as may be required pursuant to the terms of the
Company Stock Plans.
(e) No Company Entity shall (i) issue, sell, pledge, dispose
of or encumber any shares of, or securities convertible into or
exchangeable or exercisable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of its capital
stock of any class or any other property or assets (other than shares
of Company Common Stock issuable pursuant to Company Options
outstanding on the date hereof under any of the Company Stock Plans);
(ii) other than in the ordinary and usual course of business, transfer,
lease, license, guarantee, sell, mortgage, pledge, dispose of or
encumber any other Assets (including capital stock of any of Company
Subsidiary) or incur or modify
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any material indebtedness or other material Liability; (iii) make or
authorize or commit for any capital expenditures other than in amounts
not exceeding $1 million in the aggregate; (iv) by any means, make any
acquisition of, or investment in, assets or stock of any other Person
or entity, including by way of assumption reinsurance, in excess of
$100,000 individually or $1 million in the aggregate (other than in
connection with ordinary course investment activities); or (v) make any
capital investment in or loan to NHP Holding Company, Inc. or any
entity controlled by it.
(f) No Company Entity shall terminate, establish, adopt, enter
into, make any new grants or awards under, amend or otherwise modify,
any Compensation and Benefit Plans, or increase the salary, wage, bonus
or other compensation of any employees, except annual base salary (and
corresponding benefit) increases occurring in the ordinary and usual
course of business (which shall not exceed on an annual basis the
lesser of 10% or $5,000 for any individual employee) or as required by
applicable Law or under existing Contracts.
(g) Each Company Entity shall use all commercially reasonable
efforts to ensure that no payments are paid or become due under the
change of control employment agreements listed in Section 5.6 of the
Company Disclosure Letter.
(h) No Company Entity shall pay, discharge, settle or satisfy
any claims, Liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge
or satisfaction of (A) claims arising under the terms of products,
contracts or policies issued by the Company Insurance Subsidiaries in
the ordinary and usual course of business, and (B) such other claims,
Liabilities or obligations (including Litigation) as shall not exceed
$250,000 per claim.
(i) No Company Entity shall make or change any material Tax
election, settle any material audit, file any material amended Tax
Returns or permit any insurance policy naming it as a beneficiary or
loss-payable payee to be canceled or terminated except in the ordinary
and usual course of business.
(j) No Company Entity shall enter into any Contract containing
any provision or covenant limiting in any material respect the ability
of any Company Entity to (A) sell any products or services of or to any
other Person, (B) engage in any line of business, or (C) compete with
or to obtain products or services from any Person or limiting the
ability of any Person to provide products or services to any Company
Entity.
(k) No Company Entity shall enter into any new quota share or
other reinsurance transaction (A) that does not contain standard
cancellation and termination provisions, (B) that, except in the
ordinary course of business, materially increases or reduces the
Company Insurance Subsidiaries' consolidated ratio of net written
premiums to gross written premiums, or (C) pursuant to which $5 million
or more in gross written premiums are ceded by the Company Insurance
Subsidiaries to any Person other than a Company Entity.
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(l) No Company Entity shall enter into, amend or terminate any
Material Contract (including for this purpose the Amended Shareholders
Agreement, dated May 23, 1994, by and among JA Services, Inc.,
Dimension Holding Company, Inc. and NHP Holding Company, Inc.).
(m) The Company Entities shall make new investments only in
Qualified Investments.
(n) The Company shall use all commercially reasonable efforts
to ensure that there will be no downgrade in any Company Insurance
Subsidiary's rating relating to its financial strength or claims-paying
ability as published by A.M. Best Company.
(o) No Company Entity shall take any action or omit to take
any action that would cause any of the conditions set forth in Sections
8.2(a) or (b) not being satisfied (other than by waiver).
(p) No Company Entity shall authorize or enter into a Contract
to do any of the foregoing.
7.2 ACQUISITION PROPOSALS. The Company will not, and will not permit or
cause any of its Subsidiaries or any of the officers and directors of it or its
Subsidiaries to, and shall direct its and its Subsidiaries' employees and
Representatives not to, directly or indirectly, initiate, solicit, encourage or
otherwise facilitate any inquiries or the making of any proposal or offer with
respect to a merger, reorganization, share exchange, consolidation or similar
transaction involving, or any purchase of 15% or more of the Assets or any
equity securities of, the Company or any of its Subsidiaries (any such proposal
or offer being hereinafter referred to as an "Acquisition Proposal"). The
Company will not, and will not permit or cause any of its Subsidiaries or any of
the officers and directors of it or its Subsidiaries to and shall direct its and
its Subsidiaries' employees and Representatives not to, directly or indirectly,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any Person relating to an Acquisition
Proposal, whether made before or after the date of this Agreement, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal
(including, without limitation, by means of an amendment to the Rights
Agreement); provided, however, that nothing contained in this Agreement shall
prevent the Company or its Board of Directors from (i) complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal, or
(ii) at any time after the date hereof, if the Merger shall not have been
approved by the Company Requisite Vote as of such time, (A) providing
information in response to a request therefor by a Person who has made an
unsolicited bona fide written Acquisition Proposal if the Board of Directors
receives from the Person so requesting such information an executed
confidentiality agreement on terms substantially equivalent to those contained
in the Parent Confidentiality Agreement; (B) engaging in any negotiations or
discussions with any Person who has made an unsolicited bona fide written
Acquisition Proposal; or (C) recommending such an Acquisition Proposal to the
stockholders of the Company, if and only to the extent that, (i) in each such
case referred to in clause (A), (B) or
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(C) above, the Board of Directors of the Company determines in good faith after
consultation with outside legal counsel that such action is necessary in order
for its directors to comply with their respective fiduciary duties under
applicable Law and (ii) in each case referred to in clause (B) or (C) above, the
Board of Directors of the Company determines in good faith (after consultation
with its financial advisor) that such Acquisition Proposal, if accepted, is
reasonably likely to be consummated, taking into account all legal, financial
and regulatory aspects of the proposal and the Person making the proposal and
would, if consummated, result in a more favorable transaction than the
transaction contemplated by this Agreement, taking into account, to the extent
relevant, the long-term prospects and interests of the Company and its
stockholders (any such more favorable Acquisition Proposal being referred to in
this Agreement as a "Superior Proposal"). The Company will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing. The
Company agrees that it will take the necessary steps to inform promptly the
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 7.2 and in the Confidentiality Agreement.
The Company will notify Parent immediately if any such inquiries, proposals or
offers are received by, any such information is requested from, or any such
discussions or negotiations are sought to be initiated or continued with, any of
its or its Subsidiaries' directors, employees or Representatives indicating, in
connection with such notice, the name of such Person and the material terms and
conditions of any proposals or offers and thereafter shall keep Parent informed,
on a current basis, on the status and terms of any such proposals or offers and
the status of any such negotiations or discussions. The Company also will
promptly request each Person that has heretofore executed a confidentiality
agreement in connection with its consideration of an Acquisition Proposal to
return or destroy all confidential information heretofore furnished to such
Person by or on behalf of it or any of its Subsidiaries.
7.3 STOCKHOLDERS' MEETING. The Company will take, in accordance with
its Certificate of Incorporation and Bylaws and the DGCL, all action necessary
to convene a meeting of holders of the Company Common Stock (the "Stockholders'
Meeting") as promptly as practicable, but in no event more than 45 days, after
the definitive Proxy Statement has been filed with the SEC, to consider and vote
upon the adoption of this Agreement. Subject to fiduciary obligations under
applicable Law, the Company's board of directors shall recommend such adoption,
shall not withdraw or modify such recommendation and shall take all lawful
action to solicit such adoption. Without limiting the generality of the
foregoing, in the event that the Company's board of directors withdraws or
modifies its recommendation, the Company nonetheless shall cause the
Stockholders Meeting to be convened and a vote taken with respect to the
adoption of this Agreement.
7.4 FILINGS; OTHER ACTIONS; NOTIFICATION.
(a) In connection with the Stockholders' Meeting, the Company
shall prepare and deliver to Parent within 30 days after the date
hereof a draft of the Proxy Statement. Thereafter, the Company and
Parent shall cooperate fully to make such changes to the Proxy
Statement as may be appropriate, file the Proxy Statement with the SEC
as soon as practicable, and respond promptly to any SEC comments. Upon
filing the final,
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definitive Proxy Statement with the SEC, the Company shall mail such
Proxy Statement to its stockholders.
(b) The Company and Parent shall cooperate with each other and
use (and shall cause their respective Subsidiaries to use) all
commercially reasonable efforts (i) to do or cause to be done all
things necessary, proper or advisable on its part under this Agreement
and applicable Laws to consummate and make effective the Merger and the
other transactions contemplated by this Agreement as soon as
practicable, including preparing and filing as promptly as practicable
all documentation to effect all necessary notices, reports and other
filings; and (ii) to obtain as promptly as practicable all Consents and
Permits necessary or advisable to be obtained from any third party or
any Regulatory Authority in connection with, as a result of, or in
order to consummate, the Merger or any of the other transactions
contemplated by this Agreement; provided, however, that nothing in this
Section 7.4 shall require, or be construed to require, Parent, in
connection with the receipt of any regulatory approval or Consent, to
proffer to, or agree to (i) sell or hold separate and agree to sell or
to discontinue or to limit, before or after the Effective Time, any
Assets, businesses or interest in any Assets or businesses of Parent,
the Company or any of their respective Affiliates (or to consent to any
sale, or agreement to sell, or discontinuance or limitation by Parent
or the Company of any of its Assets or businesses), or (ii) agree to
any conditions relating to, or changes or restriction in, the
operations of any such Asset or businesses which, in either case,
could, in the reasonable judgment of the board of directors of Parent,
materially and adversely impact the economic or business benefits to
Parent of the transactions contemplated by this Agreement. Subject to
applicable Laws relating to the exchange of information, Parent and the
Company shall have the right to review in advance, and to the extent
practicable each will consult the other on, all the information
relating to Parent or the Company, as the case may be, and any of their
respective Subsidiaries, that appear in any filing made with, or
written materials submitted to, any third party or Regulatory Authority
in connection with the Merger and the other transactions contemplated
by this Agreement. In exercising the foregoing right, each of the
Company and Parent shall act reasonably and as promptly as practicable.
(c) The Company and Parent each shall, upon request by the
other, furnish the other with all information concerning itself, its
Subsidiaries, directors, officers and stockholders and such other
matters as may be reasonably necessary or advisable in connection with
the Proxy Statement or any other statement, filing, notice or
application made by or on behalf of Parent, the Company or any of their
respective Subsidiaries to any third party or Regulatory Authority in
connection with the Merger and the transactions contemplated by this
Agreement.
(d) The Company and Parent each shall keep the other apprised
of the status of matters relating to completion of the transactions
contemplated hereby, including promptly furnishing the other with
copies of notices or other communications received by Parent or the
Company, as the case may be, or any of its Subsidiaries, from any third
party or Regulatory Authority with respect to the Merger and the other
transactions
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contemplated by this Agreement. The Company and Parent each shall give
prompt notice to the other of any change that is reasonably likely to
result in a Company Material Adverse Effect or Parent Material Adverse
Effect, respectively.
7.5 ACCESS; TECHNOLOGY CONVERSIONS.
(a) Upon reasonable notice, and except as may otherwise be
required by applicable Law, all of the Company Entities shall afford
Parent's officers, employees and Representatives access, during normal
business hours throughout the period from the date hereof to the
earlier of the termination of this Agreement or the Effective Time, to
the personnel, properties, Contracts, books and records of the Company
Entities and, during such period the Company Entities shall furnish
promptly to Parent all information concerning the Company Entities'
business and financial condition as may reasonably be requested,
provided that no investigation pursuant to this Section shall affect or
be deemed to modify any representation or warranty made by the Company
and, provided, further, that the foregoing shall not require the
Company to permit any inspection, or to disclose any information, that
in the reasonable judgment of the Company would result in the
disclosure of any trade secrets of third parties or violate any of its
obligations with respect to confidentiality if the Company shall have
used all reasonable efforts to obtain the Consent of such third party
to such inspection or disclosure. All such information shall be
governed by the terms of the Confidentiality Agreement.
(b) From the date hereof through the earlier of termination of
this Agreement or the Effective Time, the Company shall permit Parent
to use an office within the Company's offices at the Miami Property to
afford Parent's internal auditors reasonable access to monitor the
operations and financial activities of the Company Entities. In
addition, the Company Entities shall cooperate with Parent, upon
Parent's reasonable request, to develop plans for the integration of
the business of the Company Entities with that of the Parent Entities.
(c) From the date hereof through the earlier of termination of
this Agreement or the Effective Time, the Company Entities shall
promptly take all commercially reasonable actions as may be necessary
to assure that the Company Entities' computer software systems are able
to become Year 2000 compliant on a timely basis acting in the ordinary
course of business. In addition, from the date hereof through the
earlier of termination of this Agreement or the Effective Time, the
Company Entities shall permit Parent's officers, employees and
Representatives to be involved to the extent reasonably requested by
Parent, in the conversion of the Company Entities' computer software
systems to systems that are Year 2000 compliant, and the Company shall
use all commercially reasonable efforts to comply with all reasonable
requests of Parent in respect of the design and implementation of such
conversion in anticipation of consummation of the Merger.
Notwithstanding the foregoing, all final decisions with respect to such
conversion design and implementation shall be made by the appropriate
Company Entity. In the event that this Agreement is terminated and the
Merger is not consummated for any reason, neither Party shall have any
Liability to the other with
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respect to the involvement of Parent's officers, employees and
Representatives in such conversion project.
7.6 MIAMI PROPERTY. Without limiting the generality of Section
7.1 or 7.5:
(a) Access Rights for Inspections. From the date hereof until
the earlier of the Effective Time or the termination of this Agreement,
the Company shall provide Parent and its employees and Representatives
with access to the Miami Property at all reasonable times during normal
business hours (and during evenings, weekends and holidays, provided
that Parent has a reasonable need for such off-hours access and has
given the Company not less than 24 hours prior notice of such need for
access) to inspect the Miami Property and make such studies, audits,
tests, appraisals, surveys and verifications as Parent reasonably
considers necessary with respect to the Miami Property, including,
investigations of the legal and physical status of the Miami Property,
tests and assessments with respect to environmental matters, soil
tests, asbestos analysis, structural review, examination of title,
preparation of a survey and interviews of tenants.
(b) Title and Survey Update. At Parent's reasonable request,
the Company shall cooperate to assist Parent in obtaining, at or prior
to the Effective Time, a title insurance policy with respect to the
Miami Property, or an update or endorsement to an existing such title
insurance policy
(c) Permits and Zoning. The Company shall use commercially
reasonable efforts to preserve in force all existing Permits with
respect to the Miami Property and to renew all such Permits expiring
prior to the Effective Time on terms reasonably acceptable to Parent.
If any such Permit shall be suspended or revoked, the Company shall
promptly notify Parent and shall diligently take all measures
reasonably necessary to cause the reinstatement of such Permit without
any additional limitation or condition. The Company shall not seek or
voluntarily allow any amendment to any Permit with respect to the Miami
Property that would alter the existing permissible uses of the Miami
Property or any part thereof. Without the prior written consent of
Parent, the Company shall not apply for, consent to or promote any
modification of any zoning restrictions or other restrictions or
regulations of Regulatory Authorities with respect to the Miami
Property.
(d) Estoppels. At Parent's request, the Company shall use
commercially reasonable efforts to obtain and deliver to Parent, at or
prior to the Effective time, with respect to the Miami Property (i)
estoppel certificates executed by each party (other than the Company)
to a Service Contract that is not cancelable upon thirty days after
written notice from the owner of the Miami Property, which estoppel
certificates shall in form and substance reasonably approved by Parent,
(ii) estoppel certificates executed by each warrantor or guarantor
under a Warranty, which estoppel certificates shall be in form and
substance reasonably approved by Parent, and (iii) such other estoppel
certificates reasonably requested by Parent, in form and substance
reasonably approved by Parent, in
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connection with covenants, conditions and restrictions, reciprocal
easement agreements encumbering the Miami Property.
7.7 PUBLICITY. The initial press release with respect to the Merger and
the transactions contemplated hereby shall be a joint press release, and
thereafter the Company and Parent each shall consult with each other prior to
issuing any press releases or otherwise making public announcements with respect
to the Merger and the other transactions contemplated by this Agreement, except
as may be required by Law or the rules of the NYSE.
7.8 EMPLOYEE BENEFITS. From and after the Effective Time, all employees
of the Company Entities (the "Employees") shall be eligible to participate in
Parent's employee benefit plans, programs, policies and arrangements on the same
basis as similarly situated employees of Parent; provided, however, that, in
lieu of Parent's severance pay plan, Parent shall cause the Company's severance
pay plan as described in Section 5.8(a) of the Company Disclosure Letter to
remain in effect with respect to the Employees for the 12 months immediately
following the Effective Time. Parent shall, and shall cause the Company and its
Subsidiaries to, honor, pursuant to their terms, all employee benefit
obligations to current and former directors, officers, consultants and employees
under the Compensation and Benefits Plans, including, without limitation, all
employment, severance and compensation agreements of the Company and its
Subsidiaries. For purposes of all employee benefit plans, programs or
arrangements maintained or contributed to by Parent or any of its Subsidiaries,
in which the Employees shall be eligible to participate, Parent shall cause each
such plan, program or arrangement to treat the prior service with the Company or
its Subsidiaries of each Employee as service rendered to Parent and its
Subsidiaries for purposes of all eligibility periods, vesting and benefit
accruals thereunder (but not for purposes of benefit accruals under any defined
benefit pension plan maintained by Parent or its Subsidiaries (other than the
Company Entities)). No Employee (or eligible spouse or dependent) who elects to
be covered under a Parent medical insurance plan shall be excluded from coverage
under such plan on the basis of a pre-existing condition that was not also
excluded under the Company's or any of its Subsidiaries' medical insurance
plans. To the extent any such Employee has satisfied in whole or in part any
annual deductible or paid any out-of-pocket or co-payment expenses under a
medical insurance plan of the Company or any of its Subsidiaries for a plan
year, such individual shall be credited therefor under the corresponding
provisions of the corresponding plan of Parent and its Subsidiaries in which
such individual participates after the conversion date. Parent agrees that the
consummation of the Merger shall constitute a "Change in Control" of the Company
Entities for all purposes within the meaning of all Compensation and Benefit
Plans.
7.9 EXPENSES. Except as otherwise provided in Section 9.5, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the Merger and the other transactions contemplated by
this Agreement shall be paid by the party incurring such expense; provided,
however, that if the Merger is consummated, the Surviving Corporation shall pay
all charges and expenses, including those of the Exchange Agent, in connection
with the transactions contemplated in Article 4.
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7.10 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) From and after the Effective Time, Parent agrees that it
will indemnify and hold harmless each present and former director and
officer of the Company (when acting in such capacity), determined as of
the Effective Time (each, an "Indemnified Party" and, collectively, the
"Indemnified Parties"), against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages
or liabilities (collectively, "Costs") incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the
fullest extent that the Company would have been permitted under
Delaware Law and its Certificate of Incorporation or Bylaws in effect
on the date hereof to indemnify such Person (and Parent shall also
advance expenses as incurred to the fullest extent permitted under
applicable Law provided the Person to whom expenses are advanced
provides a written affirmation of his or her good faith belief that the
standard of conduct necessary for indemnification has been met, and an
undertaking to repay such advances if it is ultimately determined that
such Person is not entitled to indemnification).
(b) Any Indemnified Party wishing to claim indemnification
under paragraph (a) of this Section 7.10, upon learning of any such
claim, action, suit, proceeding or investigation, shall promptly notify
Parent thereof, but the failure to so notify shall not relieve Parent
of any Liability it may have to such Indemnified Party if such failure
does not materially prejudice Parent as the indemnifying party. In the
event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) Parent or the
Surviving Corporation shall have the right to assume the defense
thereof and Parent shall not be liable to such Indemnified Parties for
any legal expenses of other counsel or any other expenses subsequently
incurred by such Indemnified Parties in connection with the defense
thereof, except that if Parent or the Surviving Corporation elects not
to assume such defense, or if counsel for the Indemnified Parties
advises that there are issues that raise conflicts of interest between
Parent or the Surviving Corporation and the Indemnified Parties, the
Indemnified Parties may retain counsel satisfactory to them, and Parent
or the Surviving Corporation shall pay all reasonable fees and expenses
of such counsel for the Indemnified Parties promptly as detailed
statements therefor are received; provided, however, that Parent shall
be obligated pursuant to this paragraph (b) to pay for only one firm of
counsel for all Indemnified Parties in any jurisdiction unless the use
of one counsel for such Indemnified Parties would present such counsel
with a conflict of interest, (ii) the Indemnified Parties will
cooperate in the defense of any such matter, and (iii) Parent shall not
be liable for any settlement effected without its prior written
consent, which consent shall not be unreasonably withheld; and
provided, further, that Parent shall not have any obligation hereunder
to any Indemnified Party if and when a court of competent jurisdiction
shall ultimately determine, and such determination shall have become
final and non-appealable, that the indemnification of such Indemnified
Party in the manner contemplated hereby is prohibited by applicable
Law.
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(c) Parent shall, or shall cause the Surviving Corporation to,
maintain in effect for a period of six years after the Effective Time
the Company's existing directors' and officers' liability insurance
policy (provided that Parent may substitute therefor (i) policies of at
least the same coverage and amounts, containing terms and conditions
that are no less advantageous, which policies are issued by an issuer
with a claims-paying rating at least equal to that of the issuer of the
existing policies of the Company, or (ii) with the consent of the
Company given prior to the Effective Time, any other policy with
respect to claims arising from facts or events that occurred at or
prior to the Effective Time and covering persons who are currently
covered by such insurance (and the Company shall cooperate prior to the
Effective Time in these efforts); provided, that neither Parent nor the
Surviving Corporation shall be obligated to make premium payments in
each year of such six-year period in respect of such policy (or
coverage replacing such policy) exceeding, for the portion related to
the Company's directors and officers, 200% of the annual premium
payments on the Company's current policy in effect as of the date of
this Agreement (the "Maximum D&O Premium"). If the amount of the
premiums necessary to maintain or procure such insurance coverage
exceeds the Maximum D&O Premium, Parent shall use all commercially
reasonable efforts to maintain the most advantageous policies of
directors' and officers' liability insurance obtainable for a premium
equal to the Maximum D&O Premium.
(d) The provisions of this Section are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified
Parties, their heirs and their legal representatives.
7.11 OTHER ACTIONS BY THE COMPANY AND PARENT.
(a) If any Takeover Statute is or may become applicable to the
Merger or the other transactions contemplated by this Agreement or the
Stock Option Agreement, each of Parent and the Company and its board of
directors shall grant such approvals and take such actions as are
necessary so that such transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement or the Stock
Option Agreement, as the case may be, or by the Merger and otherwise
act to eliminate or minimize the effects of such statute or regulation
on such transactions.
(b) Subject to Section 7.2, the Company shall use its
reasonable efforts to exercise its rights under all confidentiality,
lock-up, standstill and similar agreements entered into with Persons
that were considering an Acquisition Proposal with respect to the
Company, to preserve the confidentiality of the information relating to
the Company Entities provided to such Persons and their Affiliates and
Representatives and to ensure compliance with the terms of this
Agreement.
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ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
8.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations
of each Party to consummate the Merger are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 10.5:
(a) Stockholder Approval. The stockholders of the Company
shall have adopted this Agreement, and the consummation of the
transactions contemplated hereby, including the Merger, as and to the
extent required by Law, by the provisions of any governing instruments,
or by the rules of the NYSE.
(b) Regulatory Approvals. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities
required for consummation of the Merger shall have been obtained or
made and shall be in full force and effect and all waiting periods
required by Law shall have expired.
(c) Legal Proceedings. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) or taken any other action which prohibits,
restricts or makes illegal consummation of the transactions
contemplated by this Agreement.
8.2 CONDITIONS TO OBLIGATIONS OF PARENT. The obligations of Parent to
consummate the Merger are subject to the satisfaction of the following
conditions, unless waived by Parent pursuant to Section 10.5(a):
(a) Representations and Warranties. For purposes of this
Section 8.2(a), the accuracy of the representations and warranties of
the Company set forth in this Agreement shall be assessed as of the
date of this Agreement and as of the Effective Time with the same
effect as though all such representations and warranties had been made
on and as of the Effective Time (provided that representations and
warranties that are confined to a specified date shall speak only as of
such date). The representations and warranties set forth in Section 5.2
shall be true and correct (except for inaccuracies which are de minimis
in amount). The representations and warranties set forth in Sections
5.3, 5.4, 5.14, 5.19, 5.20 and 5.21 shall be true and correct in all
material respects. There shall not exist inaccuracies in the
representations and warranties of the Company set forth in this
Agreement (including the representations and warranties set forth in
Sections 5.2, 5.3, 5.4, 5.14, 5.19, 5.20 and 5.21) such that the
aggregate effect of such inaccuracies has, or is reasonably likely to
have, a Company Material Adverse Effect; provided that, for purposes of
this sentence only, those representations and warranties which are
qualified by references to "material" or "Material Adverse Effect" of
any Person shall be deemed not to include such qualifications.
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(b) Performance of Agreements and Covenants. The Company shall
have performed in all material respects all of its agreements and
covenants hereunder required to be performed by it on or prior to the
Effective Time.
(c) Certificates. The Company shall have delivered to Parent
(i) a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer and its chief financial officer,
to the effect that the conditions set forth in Section 8.1 as relates
to the Company and in Section 8.2(a) and 8.2(b) have been satisfied,
and (ii) certified copies of resolutions duly adopted by the Company's
board of directors and stockholders evidencing the taking of all
corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as Parent and its
counsel shall request.
(d) Rights Agreement. No Distribution Date (as defined in the
Rights Agreement) shall have occurred, and the Rights shall not have
become non-redeemable or exercisable upon consummation of the Merger.
8.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to consummate the Merger are subject to the satisfaction of the
following conditions, unless waived by the Company pursuant to Section 10.5(b):
(a) Representations and Warranties. For purposes of this
Section 8.3(a), the accuracy of the representations and warranties of
Parent set forth in this Agreement shall be assessed as of the date of
this Agreement and as of the Effective Time with the same effect as
though all such representations and warranties had been made on and as
of the Effective Time (provided that representations and warranties
which are confined to a specified date shall speak only as of such
date). The representations and warranties set forth in Sections 6.2 and
6.7 shall be true and correct in all material respects. There shall not
exist inaccuracies in the representations and warranties of the Company
set forth in this Agreement (including the representations and
warranties set forth in Sections 6.2 and 6.7) such that the aggregate
effect of such inaccuracies has, or is reasonably likely to have, a
Parent Material Adverse Effect; provided that, for purposes of this
sentence only, those representations and warranties which are qualified
by references to "material" or "Material Adverse Effect" of any Person
shall be deemed not to include such qualifications.
(b) Performance of Agreements and Covenants. Parent shall have
performed in all material respects all of its agreements and covenants
hereunder required to be performed by it on or prior to the Effective
Time.
(c) Certificates. Parent shall have delivered to the Company
(i) a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer and its chief financial officer,
to the effect that the conditions set forth in Section 8.1 as relates
to Parent and in Section 8.3(a) and 8.3(b) have been satisfied, and
(ii) certified copies of resolutions duly adopted by Parent's board of
directors and Merger Sub's board of
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directors and sole stockholder evidencing the taking of all corporate
action necessary to authorize the execution, delivery and performance
of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as the Company and
its counsel shall request.
(d) Exchange Agent Certification. The Exchange Agent shall
have delivered to the Company a certificate, dated as of the Effective
Time, to the effect that Parent has deposited with the Exchange Agent
sufficient funds to pay the aggregate cash payments required to be paid
pursuant to Section 3.1(b).
ARTICLE 9
TERMINATION
9.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the adoption hereof by stockholders of the Company referred to
in Section 8.1(a), by mutual written consent of the Company and Parent by action
of their respective boards of directors.
9.2 TERMINATION BY EITHER PARENT OR THE COMPANY. This Agreement may be
terminated and the Merger may be abandoned (a) by action of the board of
directors of either Parent or the Company if the Merger shall not have been
consummated by September 30, 1998, whether such date is before or after the date
of adoption hereof by the stockholders of the Company (provided, however, that
if all conditions to Closing have been satisfied or waived on or before
September 30, 1998, other than obtaining the required Consents from Regulatory
Authorities, such date shall be extended past September 30, 1998 for up to three
additional one-month periods at the request of either Parent or the Company)
(the "Termination Date"), or (b) by action of the board of directors of either
Parent or the Company if any Order permanently restraining, enjoining or
otherwise prohibiting consummation of the Merger shall become final and
non-appealable (whether before or after the adoption hereof by the stockholders
of the Company); provided, that the right to terminate this Agreement or request
an extension pursuant to clause (a) above shall not be available to any Party
that has breached in any material respect its obligations under this Agreement
in any manner that shall have proximately contributed to the occurrence of the
failure of the Merger to be consummated on or before the Termination Date.
9.3 TERMINATION BY THE COMPANY. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, by action
of the board of directors of the Company:
(a) If (i) the Company is not in material breach of any of its
agreements or covenants under this Agreement, (ii) the Merger shall not
have been approved by the Company Requisite Vote, (iii) the board of
directors of the Company authorizes the Company, subject to complying
with the terms of this Agreement, to enter into a binding written
agreement concerning a transaction that constitutes a Superior Proposal
and the Company notifies Parent in writing that it intends to enter
into such an agreement, attaching the most current version of such
agreement to such notice, (iv) Parent does not
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make, within five business days after receipt of the Company's written
notification of its intention to enter into a binding agreement for a
Superior Proposal, a bona fide offer that the board of directors of the
Company determines, in good faith after consultation with its financial
advisors, is at least as favorable as the Superior Proposal, taking
into account, to the extent relevant, the long term prospects and
interests of the Company and its stockholders, and (v) the Company has
paid Parent any amounts then due to Parent pursuant to the Stock Option
Agreement; or
(b) If there has been a material breach by Parent of any
representation, warranty, covenant or agreement contained in this
Agreement that, together with all such breaches, would prevent any of
the conditions set forth in Article 8 from being satisfied (other than
by waiver) prior to the Termination Date and that is not curable or, if
curable, is not cured within 20 days after written notice of such
breach is given by the Company to Parent; or
(c) If the Company Requisite Vote shall not have been obtained
at a meeting duly convened therefor or at any adjournment or
postponement thereof and the Company has paid Parent any amounts then
due to Parent pursuant to the Stock Option Agreement.
9.4 TERMINATION BY PARENT. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after the adoption hereof by the stockholders of the Company referred to in
Section 8.1(a), by action of the board of directors of Parent (a) if the Company
Requisite Vote shall not have been obtained at a meeting duly convened therefor
or at any adjournment or postponement thereof, (b) if the Company enters into a
binding agreement for a Superior Proposal, (c) if there has been a material
breach by the Company of any representation, warranty, covenant or agreement
contained in this Agreement that, together with all such breaches, would prevent
any of the conditions set forth in Article 8 from being satisfied (other than by
waiver) prior to the Termination Date and that is not curable or, if curable, is
not cured within 20 days after written notice of such breach is given by Parent
to the Company, or (d) if the Company shall not have delivered to Parent, on or
before March 31, 1998, a copy of an unqualified opinion of Price Waterhouse LLP
with respect to the Company's consolidated GAAP financial statements for the
year ended December 31, 1997, provided that in such event Parent must terminate
this Agreement pursuant to this Section 9.4(d) prior to the close of business on
the later of April 3, 1998 or 3 business days following the date of delivery to
Parent of such consolidated financial statements with an opinion of such
accountant thereon.
9.5. EFFECT OF TERMINATION AND ABANDONMENT. In the event of termination
of this Agreement and the abandonment of the Merger pursuant to this Article 9,
this Agreement (other than as set forth in Section 7.9) shall become void and of
no effect with no Liability on the part of any Party hereto (or of any of its
directors, officers, employees, agents, legal and financial advisors or other
representatives); provided, however, except as otherwise provided herein, no
such termination shall relieve any Party hereto of any Liability resulting from
any willful breach of this Agreement.
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ARTICLE 10
MISCELLANEOUS
10.1 DEFINITIONS.
(a) Except as otherwise provided herein, the capitalized terms
set forth below shall have the following meanings:
"AFFILIATE" of a Person means any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled
by or under common control with such Person.
"AGREEMENT" means this Agreement and Plan of Merger, including
the Exhibits (other than the Stock Option Agreement) delivered pursuant
hereto and incorporated herein by reference.
"ASSETS" of a Person means all of the assets, properties,
businesses and rights of such Person of every kind, nature, character
and description, whether real, personal or mixed, tangible or
intangible, accrued or contingent, or otherwise relating to or utilized
in such Person's business, directly or indirectly, in whole or in part,
whether or not carried on the books and records of such Person, and
whether or not owned in the name of such Person or any Affiliate of
such Person and wherever located.
"CODE" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"COMMISSIONS" means all leasing commissions, referral fees,
payments and obligations to make payments to agents, leasing agents,
leasing brokers or other parties with respect to the Space Leases,
whether such agreements are contained in a Space Lease or in any
separate commission agreement.
"COMMISSION AGREEMENTS" means all obligations to pay
Commissions, whether such agreements are contained in a Space Lease or
in any separate commission agreement, together with all amendments
thereto or modifications thereof, and all correspondence, notices,
files and other records pertaining to Commissions.
"COMPANY" means John Alden Financial Corporation, a Delaware
corporation.
"COMPANY COMMON STOCK" means the $.01 par value common stock
of the Company.
"COMPANY DISCLOSURE LETTER" means the written information
entitled "John Alden Financial Corporation Disclosure Letter" delivered
prior to the date of this Agreement to Parent describing in reasonable
detail the matters contained therein and,
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with respect to each disclosure made therein, specifically referencing
each Section of this Agreement under which such disclosure is being
made.
"COMPANY ENTITIES" means, collectively, the Company and all
Company Subsidiaries.
"COMPANY MATERIAL ADVERSE EFFECT" means an event, change or
occurrence which, individually or together with any other event, change
or occurrence, has a material adverse impact on (i) the financial
condition, business or results of operations of the Company and its
Subsidiaries, taken as a whole, or (ii) the ability of the Company to
perform its obligations under this Agreement or to consummate the
Merger or the other transactions contemplated by this Agreement.
"COMPANY STOCK PLANS" means the existing stock option and
other stock-based compensation plans of the Company designated as
follows: 1992 JAFCO Long-Term Incentive Plan; 1997 JAFCO Long-Term
Incentive Plan; North Star Marketing Long-Term Incentive Plan;
Non-employee Directors Stock Option Plan; Amended and Restated
Management Stockholders Agreement, dated February 17, 1993, as amended
July 24, 1994; and Employee Stock Purchase Plan.
"COMPANY SUBSIDIARIES" means the Subsidiaries of the Company,
which shall include all such Subsidiaries as of the date hereof and any
corporation or other organization acquired as a Subsidiary of the
Company in the future and held as a Subsidiary by the Company at the
Effective Time.
"CONDEMNATION PROCEEDING" means any proceeding in
condemnation, eminent domain or any written request for a conveyance in
lieu thereof, or any notice that such proceedings have been or will be
commenced against any portion of the Owned Real Property.
"CONFIDENTIALITY AGREEMENT" means that certain Confidentiality
Agreement, dated September 15, 1997, between the Company and Parent.
"CONSENT" means any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person
pursuant to any Contract, Law, Order, or Permit.
"CONSTITUENT CORPORATIONS" means, collectively, the Company
and Merger Sub.
"CONTRACT" means any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking
of any kind or character, or other document, in each case, that is
binding on any Person or its capital stock, Assets or business.
"DEFAULT" means (i) any breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order or Permit,
(ii) any occurrence of any event that
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with the passage of time or the giving of notice or both would
constitute a breach or violation of, default under, contravention of or
conflict with, any Contract, Law, Order or Permit, or (iii) any
occurrence of any event that with or without the passage of time or the
giving of notice would give rise to a right of any Person to exercise
any remedy or obtain any relief under, terminate or revoke, suspend,
cancel or modify or change the current terms of, or renegotiate, or to
accelerate the maturity or performance of, or to increase or impose any
Liability under, any Contract, Law, Order or Permit.
"DGCL" means the Delaware General Corporation Law.
"ENVIRONMENTAL LAWS" means all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface, or subsurface strata) and
which are administered, interpreted, or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive
Environmental Response Compensation and Liability Act, as amended, 42
U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and other Laws
relating to emissions, discharges, releases, or threatened releases of
any Hazardous Material, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
or handling of any Hazardous Material.
"EQUITY RIGHTS" means all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings,
warrants, or other binding obligations of any character whatsoever
relating to the issuance of, or securities or rights convertible into
or exchangeable for, shares of the capital stock of a Person or by
which a Person is or may be bound to issue additional shares of its
capital stock or other Equity Rights.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXHIBITS" 1 and 2, inclusive, means the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are
hereby incorporated by reference herein and made a part hereof, and may
be referred to in this Agreement and any other related instrument or
document without being attached hereto.
"GAAP" means United States generally accepted accounting
principles, consistently applied during the periods involved.
"HAZARDOUS MATERIAL" means (i) any hazardous substance,
hazardous material, hazardous waste, regulated substance, or toxic
substance (as those terms are defined by any applicable Environmental
Laws) and (ii) any chemicals, pollutants, contaminants, petroleum,
petroleum products, or oil (and specifically shall include asbestos
requiring
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abatement, removal, or encapsulation pursuant to the requirements of
governmental authorities and any polychlorinated biphenyls), in each
case other than common cleaning and office products in reasonable
amounts.
"HSR ACT" means Section 7A of the Clayton Act, as added by
Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"IMPROVEMENTS" means the buildings, structures (surface and
subsurface) and other improvements and fixtures now or hereafter
situated on or attached to any parcel of the Owned Real Property.
"IRS" means the Internal Revenue Service.
"KNOWLEDGE" with respect to the Company means those facts that
are known or should reasonably have been known after due inquiry by the
chairman, president, chief financial officer, chief accounting officer,
chief actuary, chief operating officer, general counsel, any assistant
or deputy general counsel, or any senior, executive or other vice
president of any Company Entity; and with respect to Parent means those
facts that are known or should reasonably have been known after due
inquiry by the chairman, president, chief financial officer, general
counsel, corporate counsel or any executive vice president of Parent.
"LAW" means any code, law (including common law), ordinance,
regulation, reporting or licensing requirement, rule, or statute of any
Regulatory Authority applicable to a Person or its Assets, Liabilities
or business.
"LIABILITY" means any direct or indirect, primary or
secondary, liability, indebtedness, obligation, penalty, cost or
expense (including costs of investigation, collection and defense),
claim, deficiency, guaranty or endorsement of or by any Person (other
than endorsements of notes, bills, checks, and drafts presented for
collection or deposit in the ordinary course of business) of any type,
whether accrued, absolute or contingent, liquidated or unliquidated,
matured or unmatured, or otherwise.
"LIEN" means any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or
interest, charge, or claim of any nature whatsoever of, on, or with
respect to any property or property interest, other than (i) Liens for
current property Taxes not yet due and payable and (ii) Liens which do
not materially impair the use of or title to the Assets subject to such
Lien.
"LITIGATION" means any action, arbitration, cause of action,
claim, complaint, criminal prosecution, governmental or other
examination or investigation, hearing, administrative or other
proceeding of a Regulatory Authority relating to or affecting a
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Party, its business, its Assets (including Contracts related to it), or
the transactions contemplated by this Agreement and the Stock Option
Agreement .
"MERGER SUB" means JAFCO Acquisition Corp., a Delaware
corporation.
"MERGER SUB COMMON STOCK" means the $.01 par value common
stock of Merger Sub.
"MIAMI PROPERTY" means that parcel of real property known as
Airport Corporate Center in Miami, Florida, containing 11 buildings,
including one building presently used by the Company as its corporate
headquarters and ten buildings that are leased by the Company to third
parties, and including approximately four acres (the "Acreage") of
contiguous undeveloped land located in Lot B-1 of the West Replat.
"NYSE" means the New York Stock Exchange, Inc.
"ORDER" means any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling,
or writ of any Regulatory Authority.
"PARENT" means Fortis, Inc., a Nevada corporation.
"PARENT ENTITIES" means, collectively, Parent and all Parent
Subsidiaries.
"PARENT MATERIAL ADVERSE EFFECT" means an event, change or
occurrence which, individually or together with any other event, change
or occurrence, has a material adverse impact on the ability of Parent
to perform its obligations under this Agreement or to consummate the
Merger or the other transactions contemplated by this Agreement.
"PARENT SUBSIDIARIES" means the Subsidiaries of Parent, which
shall include all such Subsidiaries as of the date hereof and any
corporation or other organization acquired as a Subsidiary of Parent in
the future and held as a Subsidiary by Parent at the Effective Time.
"PARTY" means either the Company or Parent, and "Parties"
shall mean both the Company and Parent.
"PERMIT" means any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a
party or that is or may be binding upon or inure to the benefit of any
Person or its securities, Assets or business.
"PERMITTED TITLE EXCEPTIONS" means:
(i) the Space Leases and any new leases entered into
between the date hereof and the Effective Time in accordance with the
terms of this Agreement;
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(ii) all real estate Taxes not yet due and payable as
of the Effective Time;
(iii) local, state and federal (if applicable) zoning
and building Laws, provided that neither the Improvements nor the
existing use of the Owned Real Property violates any of such Laws or
results in any unpermitted "non-conforming" use thereunder; and
(iv) any existing utility easements serving only the
Owned Real Property and no other land.
"PERSON" means a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation,
general partnership, joint venture, limited partnership, limited
liability company, trust, business association, group acting in
concert, or any person acting in a representative capacity.
"PROXY STATEMENT" means the proxy statement used by the
Company to solicit the approval of its stockholders of the transactions
contemplated by this Agreement.
"QUALIFIED INVESTMENTS" means (i) publicly traded corporate
bonds with a rating of A or better from a rating agency generally
accepted by the insurance industry, (ii) U.S. government securities,
(iii) cash equivalents, and (iv) other investments approved
specifically or as a category by Parent in writing from time to time.
"REAL PROPERTY" means, collectively, the Owned Real Property
and the Leased Real Property.
"REGULATORY AUTHORITIES" means, collectively, the SEC, the
NYSE, the Federal Trade Commission, the United States Department of
Justice, the Minnesota Department of Commerce, the Texas Department of
Insurance, the Florida Department of Insurance, the Nevada Department
of Insurance, the Ohio Department of Insurance, and all other federal,
state, county, local or other judicial, legislative, governmental or
regulatory agencies, authorities (including self-regulatory
authorities), instrumentalities, courts, commissions, boards or bodies
having jurisdiction over the Parties and their respective Subsidiaries.
"RENT ROLL" means the rent roll for the Miami Property as of a
date not more than 30 days prior to the date hereof, which shall show
(a) the names of all Space Tenants and a description of their
respective Space Leases, (b) the portion of the Improvements and total
number of square feet covered by each Space Lease (including any
options to expand), (c) the date of the Space Lease and the
commencement date and expiration date (including option periods) of
each Space Lease, (d) the current monthly rental payable under each
Space Lease and other charges payable by such Space Tenant (including
base rent and any percentage rent and operating expense reimbursement),
(e) the base year (and, if applicable, the amount of expenses incurred
during such base year) used for calculating each Space Tenant's
operating expense reimbursement under such Space
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Tenant's Space Lease, (f) the amount of all tenant deposits with
respect to each Space Lease, less amounts previously applied or
returned to such tenant, if any, (g) whether such tenant is entitled to
any assigned storage or parking space, (h) whether any rents or other
charges are in arrears and the period to which such arrearages relate
(including the Company's current "delinquency report"), (i) any
incentives, concessions, abatements, due and unpaid allowances or
inducements granted to such tenant, (j) the amounts of any due and
unpaid Commission with respect to such Space Lease, if any, and (k)
whether the Space Lease is subject to cancellation or termination by
the tenant thereunder and the circumstances which would give rise to
such termination or cancellation (or a reference to the Space Lease
provision giving rise to such right).
"REPRESENTATIVE" means any investment banker, financial
advisor, attorney, accountant, consultant, or other representative
engaged by a Person.
"RIGHTS" means the preferred stock purchase rights issued
pursuant to the Rights Agreement.
"RIGHTS AGREEMENT" means that certain Rights Agreement, dated
December 16, 1996, as amended March 9, 1998, between the Company and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent.
"SEC" means the Securities and Exchange Commission.
"SERVICE CONTRACTS" means all service, maintenance, and other
Contracts respecting leasing, management, maintenance or operation of
the Miami Property or the Improvements thereon, including all leases by
which equipment is leased to the Company and is used or usable in
connection with any present or future occupation or operation of the
Miami Property.
"SPACE LEASES" means all leases, subleases, rental agreements
and other occupancy agreements, whether oral or written and whether or
not of record, for the use or occupancy of any portion of the Miami
Property, together with all amendments to, modifications of, renewals
and extensions of said leases, subleases, rental agreements and other
occupancy agreements, all guaranties with respect thereto, all work
letter agreements, improvement agreements and other agreements with
tenants of the Miami Property, all Default letters or notices, estoppel
letters, rental adjustment notices, escalation notices and other
correspondence in regard thereto, and all credit reports and accounting
records in regard thereto.
"SUBSIDIARIES" means all those corporations, associations, or
other business entities of which the entity in question either (i) owns
or controls 50% or more of the outstanding equity securities either
directly or through an unbroken chain of entities as to each of which
50% or more of the outstanding equity securities is owned directly or
indirectly by its parent (provided, there shall not be included any
such entity the equity securities of which are owned or controlled in a
fiduciary capacity), (ii) in the case of partnerships, serves as a
general partner, (iii) in the case of a limited liability company,
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serves as a managing member, or (iv) otherwise has the ability to elect
a majority of the directors, trustees or managing members thereof.
"SURVIVING CORPORATION" means the Company as the surviving
corporation resulting from the Merger.
"TAX RETURN" means any report, return, information return, or
other information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or
combined or unitary group that includes any Company Entity.
"TAX" or "TAXES" means any federal, state, county, local, or
foreign taxes, charges, fees, levies, imposts, duties, or other
assessments, including income (net, gross or other, including recapture
of any tax items such as investment tax credits), gross receipts,
excise, employment, sales, use, transfer, premium, gains, license,
payroll, franchise, severance, stamp, occupation, environmental,
federal highway use, commercial rent, customs duties, capital stock,
paid-up capital, profits, withholding, Social Security, single business
and unemployment, disability, real property, personal property,
registration, ad valorem, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, imposes or required to
be withheld by the United States or any state, county, local or foreign
government or subdivision or agency thereof, including any interest,
penalties, and additions imposed thereon or with respect thereto.
"TAXING AUTHORITY" means any authority responsible for
the imposition, collection or administration of any Tax.
"WARRANTIES" means each and every now existing and outstanding
bond and warranty concerning the Miami Property or the Improvements
located thereon, including any and all bonds and warranties in
conjunction with any construction, maintenance or operation Contracts.
(b) The terms set forth below shall have the meanings ascribed
thereto in the referenced sections:
Term Section
Acquisition Proposal 7.2
Alternative Transaction Notice 9.3(a)
Bankruptcy and Equity Exception 5.3(a)
Certificate of Merger 1.3
Certificates 4.1
Closing 1.2
Closing Date 1.2
Company Actuarial Analyses 5.16(c)
Compensation and Benefit Plans 5.8(a)
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Company Insurance Contracts 5.16(a)
Company Insurance Subsidiaries 5.1(b)
Company Intellectual Property Rights 5.12(b)(ii)
Company 9% Preferred Stock 5.2(a)
Company Options 3.4
Company SAP Statements 5.5(b)
Company Reports 5.5(a)
Company Requisite Vote 5.3(a)
Compensation and Benefit Plans 5.8(a)
Costs 7.9(a)
Effective Time 1.3
ERISA Affiliate 5.8(c)
Exchange Agent 4.1
Expenses 9.5(c)
Indemnified Parties 7.9(a)
Insurance Laws 5.9(a)
Investment Company Act 5.18
Leased Real Property 5.14(e)
Material Contracts 5.13
Maximum D&O Premium 7.9(c)
Merger 1.1
Option Settlement Payment 3.4
Owned Real Property 5.14(a)
Pension Plan 5.8(b)
Per Share Purchase Price 3.1(b)
Preferred Stock 5.2(a)
Reinsurance Contracts 5.16(b)
Secretary 1.3
Stock Option Agreement 1.4
Stockholders' Meeting 7.3
Superior Proposal 7.2
Takeover Laws 5.20
Termination Date 9.2
Third Party Intellectual Property Rights 5.12(b)(i)
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
10.2 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective
representations, warranties, obligations, covenants and agreements of the
Parties shall not survive the Effective Time except Articles 1, 2, 3, 4 and 10
and Sections 7.7, 7.8, 7.9 and 7.10.
10.3 ENTIRE AGREEMENT. Except as otherwise expressly provided herein,
this Agreement (including the documents and instruments referred to herein)
constitutes the entire
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agreement between the Parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings with respect
thereto, written or oral (except, as to Section 7.5, for the Confidentiality
Agreement). Other than Section 7.10 which shall be enforceable by the parties
intended to receive the benefits thereof, nothing in this Agreement expressed or
implied, is intended to confer upon any Person, other than the Parties or their
respective successors, any rights, remedies, obligations, or liabilities under
or by reason of this Agreement.
10.4 AMENDMENTS. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of each of the Parties, whether before or after the Company's stockholders have
adopted this Agreement; provided, that after any such adoption hereof by the
holders of Company Common Stock, there shall be made no amendment that, pursuant
to Section 251 of the DGCL, requires further approval by such stockholders
without the further approval of such stockholders.
10.5 WAIVERS.
(a) Prior to or at the Effective Time, Parent, acting through
its board of directors, chief executive officer or other authorized
officer, shall have the right to waive any Default in the performance
of any term of this Agreement by the Company, to waive or extend the
time for the compliance or fulfillment by the Company of any and all of
its obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of Parent under this Agreement,
except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in
writing signed by a duly authorized officer of Parent.
(b) Prior to or at the Effective Time, the Company, acting
through its board of directors, chief executive officer or other
authorized officer, shall have the right to waive any Default in the
performance of any term of this Agreement by Parent, to waive or extend
the time for the compliance or fulfillment by Parent of any and all of
its obligations under this Agreement, and to waive any or all of the
conditions precedent to the obligations of the Company under this
Agreement, except any condition which, if not satisfied, would result
in the violation of any Law. No such waiver shall be effective unless
in writing signed by a duly authorized officer of the Company.
(c) 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 or any other
provision of this Agreement. No waiver of any condition or of the
breach of any term contained in this Agreement in one or more instances
shall be deemed to be or construed as a further or continuing waiver of
such condition or breach or a waiver of any other condition or of the
breach of any other term of this Agreement.
10.6 ASSIGNMENT. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party;
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provided, however, that Parent may transfer the Merger Sub Common Stock to any
wholly owned Parent Subsidiary prior to the Effective Time, so that upon the
Merger the Company will become a wholly owned Subsidiary of such Parent
Subsidiary, without the need to obtain any consent of the Company. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the Parties and their respective successors and
assigns.
10.7 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by certified mail, postage pre-paid, or by courier or
overnight carrier, to each person at the address set forth below (or at such
other address as may be provided hereunder), and shall be deemed to have been
delivered as of the date so delivered:
If to the Company:
John Alden Financial Corporation
7300 Corporate Center Drive
Miami, Florida 33126-1223
Telephone Number: (305) 715-2000
Telecopy Number: (305) 715-1342
Attention: General Counsel
Copy (which shall not constitute notice) to Counsel:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6150
Telephone Number: (212) 403-1000
Telecopy Number: (212) 403-2000
Attention: Howard A. Mergelkamp III
If to Parent:
Fortis, Inc.
One Chase Manhattan Plaza
New York, New York 10005
Telephone Number: (212) 859-7000
Telecopy Number: (212-859-7034)
Attention: Jerome Atkinson, General Counsel
Copy (which shall not constitute notice) to Counsel:
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Alston & Bird LLP
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telephone Number: (404) 881-7446
Telecopy Number: (404) 881-7777
Attention: B. Harvey Hill, Jr.
10.8 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the Laws of the State of Delaware, without regard to any
applicable conflicts of Laws.
10.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10.10 CAPTIONS; Articles and Sections. The captions contained in this
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this Agreement.
10.11 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any Party, whether under
any rule of construction or otherwise. No Party to this Agreement shall be
considered the draftsman. The Parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all Parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all Parties
hereto. Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
10.12 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at Law or in equity.
10.13 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf by its duly authorized officers as of the day and year
first above written.
JOHN ALDEN FINANCIAL CORPORATION
By: /s/ Glendon E. Johnson
Name: Glendon E. Johnson
Title: Chairman and Chief Executive
Officer
FORTIS, INC.
By: /s/ J. Kerry Clayton
Name: J. Kerry Clayton
Title: Executive Vice President
JAFCO ACQUISITION CORP.
By: /s/ J. Kerry Clayton
Name: J. Kerry Clayton
Title: President
EXHIBIT 2.2
EXECUTION COPY
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made and entered into as
of March 9, 1998, by and between John Alden Financial Corporation, a Delaware
corporation ("Issuer"), and Fortis, Inc., a Nevada corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into that certain Agreement and
Plan of Merger, dated as of March 9, 1998 (the "Merger Agreement"), providing
for, among other things, the merger of JAFCO Acquisition Corp., a Delaware
corporation ("Merger Sub") with and into Issuer, with Issuer being the surviving
entity and becoming a wholly owned subsidiary of Grantee; and
WHEREAS, as a condition and inducement to Grantee's execution of the Merger
Agreement, Grantee has required that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to four million eight hundred eighty thousand one hundred and eight
(4,880,108) shares (as adjusted as set forth herein, the "Option Shares," which
shall include the Option Shares before and after any transfer of such Option
Shares) of common stock, $.01 par value per share ("Issuer Common Stock"), of
Issuer at a purchase price per Option Share (subject to adjustment as set forth
herein, the "Purchase Price") equal to twenty two dollars and fifty cents
($22.50); provided, however, that in no event shall the number of shares of
Issuer Common Stock for which this Option is exercisable exceed the lesser of
(i) 19.9% of the Issuer's issued and outstanding shares of Issuer Common Stock
without giving effect to any shares subject to or issued pursuant to the Option
and (ii) that minimum number of shares of Issuer Common Stock which when
aggregated with any other shares of Issuer Common Stock beneficially owned by
Grantee or any Affiliate thereof would cause the provisions of any Takeover Laws
of the DGCL to be applicable to the Merger. Each Option Share to be issued upon
exercise of the Option shall be accompanied by and be deemed to represent a
Right under the Rights Agreement.
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3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of its agreements or covenants
contained in this Agreement or the Merger Agreement, and (ii) no preliminary or
permanent injunction or other order against the delivery of shares covered by
the Option issued by any court of competent jurisdiction in the United States
shall be in effect, Holder may exercise the Option, in whole or in part, at any
time and from time to time following the occurrence of a Purchase Event and
prior to the termination of the Option. The Option shall terminate and be of no
further force and effect upon the earliest to occur of (A) the Effective Time,
(B) termination of the Merger Agreement in accordance with the terms thereof
prior to the occurrence of a Purchase Event or a Preliminary Purchase Event
(other than a termination of the Merger Agreement by Grantee pursuant to Section
9.4(c) thereof, but with respect to a termination for material breach of a
representation or warranty by Issuer, only if such termination was a result of a
willful breach by Issuer (a "Default Termination")), (C) 18 months after a
Default Termination, and (D) 18 months after any termination of the Merger
Agreement following the occurrence of a Purchase Event or a Preliminary Purchase
Event. Any purchase of shares upon exercise of the Option shall be subject to
compliance with applicable law, including, without limitation, all applicable
Insurance Laws. The term "Holder" shall mean the holder or holders of the Option
from time to time, and which initially is the Grantee. The rights set forth in
Section 8 shall terminate when the right to exercise the Option terminates
(other than as a result of a complete exercise of the Option) as set forth
herein.
(b) As used herein, a "Purchase Event" means any of the following
events subsequent to the date of this Agreement:
(i) without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement
with any person (other than Grantee or any Subsidiary of Grantee) to effect
an Acquisition Transaction (as defined below). As used herein, the term
Acquisition Transaction shall mean (A) a merger, consolidation or similar
transaction involving Issuer or any of its Subsidiaries (other than
transactions solely between Issuer's Subsidiaries), (B) the disposition, by
sale, lease, exchange or otherwise, of Assets of Issuer or any of its
Subsidiaries representing in either case 15% or more of the consolidated
assets of Issuer and its Subsidiaries, (C) the issuance, sale or other
disposition of (including by way of merger, consolidation, share exchange
or any similar transaction) securities representing 15% or more of the
voting power of Issuer or any of its Subsidiaries, or (D) a Tender Offer or
an Exchange Offer (as such terms are defined below) (any of the foregoing,
an "Acquisition Transaction");
(ii) any person (other than Grantee or any Subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), of or the right to acquire beneficial ownership of,
or any "group" (as such term is defined under the Exchange Act), other than
a group of which Grantee or any of its Subsidiaries is a member,
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shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of, 15% or more of the then-outstanding shares of
Issuer Common Stock; or
(iii) the holders of Issuer Common Stock shall not have approved the
Merger Agreement at the meeting called for such purpose, or such meeting
shall not have been held or shall have been canceled prior to termination
of the Merger Agreement following a Preliminary Purchase Event.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any Subsidiary of Grantee)
shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act), or shall have filed a registration statement under the
Securities Act of 1933, as amended (the "Securities Act") with respect to,
a tender offer or exchange offer to purchase any shares of Issuer Common
Stock such that, upon consummation of such offer, such person would own or
control 15% or more of the then-outstanding shares of Issuer Common Stock
(such an offer being referred to herein as a "Tender Offer" or an "Exchange
Offer," respectively); or
(ii) it shall have been publicly announced that any person (other
than Grantee or any Subsidiary of Grantee) shall have (A) made a bona fide
proposal to engage in an Acquisition Transaction, (B) commenced a Tender
Offer or filed a registration statement under the Securities Act with
respect to an Exchange Offer, or (C) filed an application (or given a
notice), whether in draft or final form, under any federal or state statute
or regulation seeking the Consent to an Acquisition Transaction from any
federal or state governmental or regulatory authority or agency.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(d) In the event Holder wishes to exercise the Option, it shall send to
Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 30 business days from the Notice Date for the
closing (the "Closing") of such purchase (the "Closing Date"). If prior Consent
of any governmental or regulatory agency or authority is required in connection
with such purchase, Issuer shall cooperate with Holder in the filing of the
required notice or application for such Consent and the obtaining of such
Consent and the Closing shall occur immediately following receipt of such
Consents (and expiration of any mandatory waiting periods).
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date, and
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(ii) present and surrender this Agreement to the Issuer at the address of the
Issuer specified in Section 12(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever and subject to no preemptive rights, and (B) if the Option is
exercised in part only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF MARCH 9,
1998. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that: (i) the references in the above legend to
resale restrictions of the Securities Act shall be removed by delivery of
substitute certificate(s) without such reference if Holder shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act; (ii)
the references in the above legend to the provisions of this Agreement shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents and
warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Issuer.
This Agreement has been duly executed and delivered by Issuer.
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(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and, at all times from the date hereof until
the obligation to deliver Issuer Common Stock upon the exercise of the Option
terminates, will have reserved for issuance, upon exercise of the Option, the
number of shares of Issuer Common Stock necessary for Holder to exercise the
Option, and Issuer will take all necessary corporate action to authorize and
reserve for issuance all additional shares of Issuer Common Stock or other
securities which may be issued pursuant to Section 7 upon exercise of the
Option. The shares of Issuer Common Stock to be issued upon due exercise of the
Option, including all additional shares of Issuer Common Stock or other
securities which may be issuable pursuant to Section 7, upon issuance pursuant
hereto, shall be duly and validly issued, fully paid, and nonassessable, and
shall be delivered free and clear of all liens, claims, charges, and
encumbrances of any kind or nature whatsoever, including any preemptive rights
of any stockholder of Issuer.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents and
warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) This Option is not being, and any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be, acquired with a
view to the public distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from registration under
all applicable federal, state and local securities laws (the "Securities Laws").
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction, if any, so that Holder shall receive, upon exercise of the
Option, the number and class of shares or other securities or property that
Holder would have received in respect of Issuer Common Stock if the Option had
been exercised immediately prior to such event, or the record date therefor, as
applicable. If any additional shares of Issuer Common Stock are issued after the
date of this Agreement (other than pursuant to an event described in the first
sentence of this Section 7(a) or pursuant to this Option), the number of shares
of Issuer Common Stock subject to the Option shall be adjusted so that, after
such issuance, it, together with any shares of Issuer Common Stock previously
issued pursuant hereto, shall not exceed the lesser of (i) 19.9% of the number
of shares of Issuer Common Stock then
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issued and outstanding, without giving effect to any shares subject to or issued
pursuant to the Option and (ii) that minimum number of shares of Issuer Common
Stock which when aggregated with any other shares of Issuer Common Stock
beneficially owned by Grantee or any Affiliate thereof would cause the
provisions of any Takeover Laws of the DGCL to be applicable to the Merger.
(b) In the event that Issuer shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than Grantee or one of
its Subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other property or
the outstanding shares of Issuer Common Stock immediately prior to such merger
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company; or (iii) to sell or otherwise transfer
all or substantially all of its Assets to any person, other than Grantee or one
of its Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of Grantee, of either (x) the Acquiring Corporation
(as defined below) or (y) any person that controls the Acquiring Corporation (in
each case, such person being referred to as the "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Grantee. The Substitute Option Issuer shall also
enter into an agreement with the then-holder or holders of the Substitute Option
in substantially the same form as this Agreement, which shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of the Substitute Common Stock (as hereinafter defined) as is equal to
the Assigned Value (as hereinafter defined) multiplied by the number of shares
of the Issuer Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The exercise price of the
Substitute Option per share of the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the Purchase Price multiplied by a
fraction in which the numerator is the number of shares of the Issuer Common
Stock for which the Option was theretofore exercisable and the denominator is
the number of shares for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (y) Issuer in a
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merger in which Issuer is the continuing or surviving person, and (z) the
transferee of all or any substantial part of the Issuer's assets (or the
assets of its Subsidiaries).
(ii) "Substitute Common Stock" shall mean the common stock issued by
the Substitute Option Issuer upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the highest of (x) the price per
share of the Issuer Common Stock at which a Tender Offer or Exchange Offer
therefor has been made by any person (other than Grantee), (y) the price
per share of the Issuer Common Stock to be paid by any person (other than
the Grantee) pursuant to an agreement with Issuer, and (z) the highest last
sale price per share of Issuer Common Stock quoted on the NYSE (or if
Issuer Common Stock is not quoted on the NYSE, the highest bid price per
share on any day as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a recognized source
chosen by Grantee) within the six-month period immediately preceding the
agreement; provided, that in the event of a sale of less than all of
Issuer's assets, the Assigned Value shall be the sum of the price paid in
such sale for such assets and the current market value of the remaining
assets of Issuer as determined by a nationally recognized investment
banking firm selected by Grantee (or by a majority in interest of the
Grantees if there shall be more than one Grantee (a "Grantee Majority"))
and reasonably acceptable to Issuer, divided by the number of shares of the
Issuer Common Stock outstanding at the time of such sale. In the event that
an exchange offer is made for the Issuer Common Stock or an agreement is
entered into for a merger or consolidation involving consideration other
than cash, the value of the securities or other property issuable or
deliverable in exchange for the Issuer Common Stock shall be determined by
a nationally recognized investment banking firm selected by Grantee and
reasonably acceptable to Issuer (or if applicable, Acquiring Corporation).
If there shall be more than one Grantee, any such selection shall be made
by a Grantee Majority.
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
last sale price of the shares of the Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by Issuer, the person
merging into Issuer or by any company which controls or is controlled by
such merger person, as Grantee may elect.
(f) In no event pursuant to any of the foregoing paragraphs shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for this clause (f), the Substitute Option Issuer shall make a cash payment
to Grantee equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (f) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (f). This
difference in value shall be determined by a
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nationally recognized investment banking firm selected by Grantee (or a Grantee
Majority) and reasonably acceptable to the Acquiring Corporation.
(g) Issuer shall not enter into any transaction described in subsection
(b) of this Section 7 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the shares of Substitute
Common Stock are in no way distinguishable from or have lesser economic value
than other shares of common stock issued by the Substitute Option Issuer).
(h) The provisions of Sections 8, 9, 10, and 11 shall apply, with
appropriate adjustments, to any securities for which the Option becomes
exercisable pursuant to this Section 7 and, as applicable, references in such
sections to "Issuer," "Option," "Purchase Price" and "Issuer Common Stock" shall
be deemed to be references to "Substitute Option Issuer," "Substitute Option,"
"Substitute Purchase Price" and "Substitute Common Stock," respectively.
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a), at the request of
Holder at any time commencing upon the first occurrence of a Purchase Event (as
defined in Section 3(b)) and ending 18 months immediately thereafter, all
current and former Holders shall sell to Issuer and Issuer shall repurchase from
such Holders the Option and all, but not less than all, shares of Issuer Common
Stock purchased by such Holders pursuant hereto whether or not such Holders then
have beneficial ownership of such shares. The date on which Holder exercises its
rights under this Section 8 is referred to as the "Request Date." Such
repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by such Holders for any shares
of Issuer Common Stock acquired by such Holders pursuant to the Option;
(ii) $20 million; and
(iii) Up to, but not in excess of $2.5 million of Holder's
reasonable out-of-pocket expenses incurred in connection with the
transactions contemplated by the Merger Agreement (including, without
limitation, legal, accounting and investment banking fees and expenses).
(b) If Holder exercises its rights under this Section 8, Issuer shall,
on the business day following the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds by wire transfer to an
account designated by Holder, and contemporaneously with such payment Holder
shall surrender to Issuer the Option and the certificates evidencing the shares
of Issuer Common Stock purchased thereunder with respect to which Holder then
has beneficial ownership, and Holder shall warrant that it has sole record and
beneficial ownership of such shares and that the same are then free and clear of
all liens, claims,
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charges and encumbrances of any kind whatsoever. Notwithstanding the foregoing,
to the extent that prior notification to or Consent of any governmental or
regulatory agency or authority is required in connection with the payment of all
or any portion of the Section 8 Repurchase Consideration, Holder shall have the
ongoing option to revoke its request for repurchase pursuant to Section 8, in
whole or in part, or to require that Issuer deliver from time to time that
portion of the Section 8 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or application for
Consent and expeditiously process the same (and each party shall cooperate with
the other in the filing of any such notice or application and the obtaining of
any such Consent). If any governmental or regulatory agency or authority
disapproves of any part of Issuer's proposed repurchase pursuant to this Section
8, Issuer shall promptly give notice of such fact to Holder. If any governmental
or regulatory agency or authority prohibits the repurchase in part but not in
whole, then Holder shall have the right (i) to revoke the repurchase request or
(ii) to the extent permitted by such agency or authority, determine on a
reasonable and proportionate basis whether the repurchase should apply to the
Option and/or Option Shares and to what extent to each. Holder shall notify
Issuer of its determination under the preceding sentence within five business
days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Holder's
rights under this Section 8 shall terminate on the date of termination of this
Option pursuant to Section 3(a).
9. REGISTRATION RIGHTS.
(a) Issuer shall, subject to the conditions of subparagraph (c) below,
if requested by any Holder, including Grantee and any permitted transferee
("Selling Holder"), as expeditiously as possible prepare and file a registration
statement under the Securities Laws if necessary in order to permit the sale or
other disposition of any or all shares of Issuer Common Stock or other
securities that have been acquired by or are issuable to Selling Holder upon
exercise of the Option in accordance with the intended method of sale or other
disposition stated by Holder in such request (it being understood and agreed
that any such sale or other disposition shall be effected on a widely
distributed basis so that, upon consummation thereof, no purchaser or transferee
shall beneficially own more than 5% of the shares of Issuer Common Stock then
outstanding), including, without limitation, a "shelf" registration statement
under Rule 415 under the Securities Act or any successor provision, and Issuer
shall use its best efforts to qualify such shares or other securities for sale
under any applicable state securities laws. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder.
(b) If Issuer at any time after the exercise of the Option, but prior
to the termination of the Option, proposes to register any shares of Issuer
Common Stock under the Securities Laws in connection with an underwritten public
offering of such Issuer Common Stock, Issuer will promptly give written notice
to Holder of its intention to do so and, upon the written request of Holder
given within 30 days after receipt of any such notice (which request shall
specify the number of shares of Issuer Common Stock intended to be included in
such underwritten public offering by Selling Holder), Issuer will use all
reasonable efforts to cause all such shares, the
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holders of which shall have requested participation in such registration, to be
so registered and included in such underwritten public offering; provided, that
Issuer may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith determine that the inclusion of such shares would
interfere with the successful marketing of the shares of Issuer Common Stock for
the account of Issuer, or (ii) in the case of a registration solely to implement
a dividend reinvestment or similar plan, an employee benefit plan or a
registration filed on Form S-4 or any successor form, or a registration filed on
a form which does not permit registrations of resales; provided, further, that
such election pursuant to clause (i) may only be made once. If some but not all
the shares of Issuer Common Stock, with respect to which Issuer shall have
received requests for registration pursuant to this subparagraph (b), shall be
excluded from such registration, Issuer shall make appropriate allocation of
shares to be registered among Selling Holders and any other person (other than
Issuer or any person exercising demand registration rights in connection with
such registration) who or which is permitted to register their shares of Issuer
Common Stock in connection with such registration pro rata in the proportion
that the number of shares requested to be registered by each Selling Holder
bears to the total number of shares requested to be registered by all persons
then desiring to have Issuer Common Stock registered for sale (other than Issuer
or any person exercising demand registration rights in connection with such
registration).
(c) Issuer shall use all reasonable efforts to cause the registration
statement referred to in subparagraph (a) above to become effective and to
obtain all consents or waivers of other parties which are required therefor and
to keep such registration statement effective, provided, that Issuer may delay
any registration of Option Shares required pursuant to subparagraph (a) above
for a period not exceeding 90 days, provided Issuer shall in good faith
determine that any such registration would adversely affect an offering or
contemplated offering of other securities by Issuer or would require disclosure
by Issuer of any information (including, without limitation, financial
information) which is not reasonably available to Issuer. Notwithstanding
anything to the contrary contained herein, Issuer shall not be required to
register Option Shares under the Securities Laws pursuant to subparagraph (a)
above:
(i) prior to the occurrence of a Purchase Event;
(ii) more than twice;
(iii) within 90 days after the effective date of a registration
referred to in subparagraph (b) above pursuant to which the Selling Holders
concerned were afforded the opportunity to register such shares under the
Securities Laws and such shares were registered as requested; and
(iv) unless a request therefor is made to Issuer by Selling Holders
holding at least 15% or more of the aggregate number of Option Shares then
outstanding or the right to acquire at least 15% of the Option Shares.
In addition to the foregoing, Issuer shall not be required to
maintain the effectiveness of any registration statement after the expiration of
120 days from the effective date
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of such registration statement. Issuer shall use all reasonable efforts to make
any filings, and take all steps, under all applicable state securities laws to
the extent necessary to permit the sale or other disposition of the Option
Shares so registered in accordance with the intended method of distribution for
such shares, provided, that Issuer shall not be required to consent to general
jurisdiction or qualify to do business in any state where it is not otherwise
required to so consent to such jurisdiction or to so qualify to do business.
(d) Except where applicable state law prohibits such payments, Issuer
will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and expenses
of Issuer's counsel), accounting expenses, printing expenses, expenses of
underwriters, excluding discounts and commissions but including liability
insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to subparagraph (a) or (b) above (including the
related offerings and sales by Selling Holders) and all other qualifications,
notifications or exemptions pursuant to subparagraph (a) or (b) above.
Underwriting discounts and commissions relating to Option Shares and any other
expenses incurred by such Selling Holders in connection with any such
registration (including expenses of Selling Holders' counsel) shall be borne by
such Selling Holders.
(e) In connection with any registration under subparagraph (a) or (b)
above Issuer hereby agrees to indemnify the Selling Holders, and each
underwriter thereof, including each person, if any, who controls such holder or
underwriter within the meaning of Section 15 of the Securities Act, against all
expenses, losses, claims, damages and liabilities caused by any untrue statement
of a material fact contained in any registration statement or prospectus
(including any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission to state therein 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, except insofar as such
expenses, losses, claims, damages or liabilities of such indemnified party are
caused by any untrue statement or alleged untrue statement or any omission or
alleged omission made in reliance upon and in conformity with, information
furnished in writing to Issuer by such indemnified party expressly for use
therein, and Issuer and each officer, director and controlling person of Issuer
shall be indemnified by such Selling Holder, or by such underwriter, as the case
may be, for all such expenses, losses, claims, damages and liabilities caused by
any untrue, or alleged untrue, statement or omission made in reliance upon, and
in conformity with, information furnished in writing to Issuer by such holder or
such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this
subparagraph (e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this subparagraph (e), such indemnified
party shall notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not relieve it
of any liability which it may otherwise have to any indemnified party under this
subparagraph (e), except to the extent such failure to notify materially
prejudices the indemnifying party. In case notice of commencement of any such
action shall be given to the
11
<PAGE>
indemnifying party as above provided, the indemnifying party shall be entitled
to participate in and, to the extent it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense of such action at
its own expense, with counsel chosen by it and reasonably satisfactory to such
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel (other than reasonable costs of investigation)
shall be paid by the indemnified party unless (i) the indemnifying party either
agrees to pay the same, (ii) the indemnifying party fails to assume the defense
of such action with counsel satisfactory to the indemnified party, or (iii) the
indemnified party has been advised by counsel that one or more legal defenses
may be available to the indemnifying party that may be contrary to the interest
of the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel; provided, however, that the indemnifying party
shall not be liable for the expenses of more than one firm of counsel for all
indemnified parties in any jurisdiction. No indemnifying party shall be liable
for any settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this subparagraph (e) is
unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative benefits received
by Issuer, all Selling Holders and the underwriters from the offering of the
securities and also the relative fault of Issuer, all Selling Holders and the
underwriters in connection with the statements or omissions which resulted in
such expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as a
result of the expenses, losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim; provided, that in no case shall any Selling Holder be responsible, in
the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any holder to
indemnify shall be several and not joint with other holders.
In connection with any registration pursuant to subparagraph (a)
or (b) above, Issuer and each Selling Holder (other than Grantee) shall enter
into an agreement containing the indemnification provisions of this subparagraph
(e).
(f) Issuer shall use its best efforts to comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by Holder in accordance with
and to the extent permitted by any rule or regulation promulgated by the SEC
from time to time, including, without limitation, Rules 144 and 144A.
12
<PAGE>
(g) Issuer will pay all stamp taxes in connection with the issuance and
the sale of the Option Shares and in connection with the exercise of the Option,
and will save Holder harmless, without limitation as to time, against any and
all liabilities, with respect to all such taxes.
10. QUOTATION; LISTING. If Issuer Common Stock or any other securities to
be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on the NYSE or any other securities exchange or any automated
quotations system maintained by a self-regulatory organization, Issuer, upon the
request of Holder, will promptly file an application, if required, to authorize
for quotation or trading or listing the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on the NYSE or any other
securities exchange or any automated quotations system maintained by a
self-regulatory organization and will use its best efforts to obtain approval,
if required, of such quotation or listing as soon as practicable.
11. DIVISION OF OPTION. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. MISCELLANEOUS.
(A) EXPENSES. Except as otherwise provided in Section 9, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
(B) WAIVER AND AMENDMENT. Any provision of this Agreement may be waived
at any time by the party that is entitled to the benefits of such provision.
This Agreement may not be modified, amended, altered or supplemented except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(C) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY; SEVERABILITY. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all
13
<PAGE>
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof and (b) is not intended to confer upon
any person other than the parties hereto (other than any transferees of the
Option Shares or any permitted transferee of this Agreement pursuant to Section
12(h) and other than as provided in the Merger Agreement) any rights or remedies
hereunder. If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or a federal or state governmental or
regulatory agency or authority to be invalid, void or unenforceable, 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. If for any reason such court or regulatory agency determines
that the Option does not permit Holder to acquire, or does not require Issuer to
repurchase, the full number of shares of Issuer Common Stock as provided in
Sections 3 and 8 (as adjusted pursuant to Section 7), it is the express
intention of Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
(D) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law rules.
(E) DESCRIPTIVE HEADINGS. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(F) NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Merger Agreement (or
at such other address for a party as shall be specified by like notice).
(G) COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(H) ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Grantee may assign this
Agreement to a wholly owned Subsidiary of Grantee and Grantee may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(I) FURTHER ASSURANCES. In the event of any exercise of the Option by
Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
14
<PAGE>
(J) SPECIFIC PERFORMANCE. The parties hereto agree that this Agreement
may be enforced by either party through specific performance, injunctive relief
and other equitable relief. Both parties further agree to waive any requirement
for the securing or posting of any bond in connection with the obtaining of any
such equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
(K) CONFIDENTIALITY AGREEMENTS. The parties hereto agree that this
Agreement supersedes any provision of the Confidentiality Agreement that could
be interpreted to preclude the exercise of any rights or the fulfillment of any
obligations under this Agreement, and that none of the provisions included in
the Confidentiality Agreement will act to preclude Holder from exercising the
Option or exercising any other rights under this Agreement or act to preclude
Issuer from fulfilling any of its obligations under this Agreement.
[SIGNATURES ON NEXT PAGE]
15
<PAGE>
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
JOHN ALDEN FINANCIAL CORPORATION
By: /s/ Glendon E. Johnson
Name: Glendon E. Johnson
Title: Chairman and Chief Executive Officer
FORTIS, INC.
By: /s/ J. Kerry Clayton
J. Kerry Clayton
Executive Vice President
16
Exhibit 99.1
NEWS RELEASE [JOHN ALDEN Logo]
================================================================================
For Immediate Release Contact: Mark Schoder
(305)715-3767
JOHN ALDEN REPORTS FOURTH QUARTER OPERATING LOSS PER SHARE OF $0.98 FOR 1997
COMPARED TO $0.57 FOR 1996
FULL-YEAR 1997 OPERATING INCOME PER SHARE OF $0.51 COMPARED TO LOSS FOR 1996
OF $0.03
ANNOUNCES AGREEMENT TO BE ACQUIRED BY FORTIS
MIAMI, FL, MARCH 9, 1998 -- John Alden Financial Corporation (NYSE: JA) today
reported an operating loss from continuing operations for the 1997 fourth
quarter of $0.98 per share, compared with an operating loss of $0.57 per share
for the fourth quarter of 1996. The 1997 fourth quarter per share results
exclude $0.40 per share for severance and other charges related to restructuring
actions. The 1996 fourth quarter per share results exclude $0.44 per share of
income from discontinued operations.
Operating income from continuing operations for all of 1997 was $0.51 per share
compared to an operating loss from continuing operations for all of 1996 of
$0.03 per share. The 1997 and 1996 results exclude $0.99 per share and $0.17 per
share, respectively, for restructuring and related charges. All further
discussion of results excludes these charges. Operating income from discontinued
operations for 1997 and 1996 was $0.31 per share and $1.50 per share,
respectively.
During the 1997 fourth quarter, the Company recognized an additional $0.95 per
share of income related to the partial recognition of the deferred gain on the
sale of the Discontinued Operations. As of December 31, 1997, approximately
$21.0 million, or $0.85 per share, of deferred gain is yet to be recognized in
income.
The group health medical loss ratio was 91.2% for the 1997 fourth quarter,
compared with 83.3% for the fourth quarter of 1996. For the fourth quarter of
1997, Group Health premiums decreased by 34.4% as compared with the fourth
quarter of 1996. Approximately one third of this decrease is due to the decline
in premium from the states the Company exited in 1997. The group health expense
ratio was 27.7% for the 1997 fourth quarter versus 25.1% for the 1996 fourth
quarter.
RESULT FROM THE REVIEW OF STRATEGIC ALTERNATIVES
As previously announced, John Alden retained Credit Suisse First Boston in
August 1997 to evaluate strategic alternatives for the future of the Company. As
a result of this process, the Board of Directors has approved a sale of the
Company and Fortis through its U.S. subsidiary Fortis, Inc., has signed a
definitive agreement to acquire all of the outstanding common stock of John
Alden Financial Corporation for $22.50 per share in cash.
"Our analysis of strategic alternatives showed that in order to maximize the
value of our key assets, we needed to join with a partner to develop the size
and resulting economies of scale to compete in our dynamic marketplace," said
Glendon E. Johnson, Chairman of the Board, Chief Executive Officer and
President.
The Board of Directors has also approved a payment of a regular quarterly
dividend of 12 cents per share on the common stock of the Company. The dividend
will be paid on April 20,1998, to holders of record at the close of business on
March 31, 1998.
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<PAGE>
John Alden Financial Corporation
March 9, 1998
Page 2
================================================================================
*****
John Alden Financial Corporation is an insurance holding company that, through
its subsidiaries, is principally engaged in providing group health insurance,
managed care and other health-related risk management products and services.
FOR MORE INFORMATION:
Fax-on-Demand - Call (800) 656-2580 for a complete menu of John Alden news
releases.
Internet Address - Visit John Alden's site on the Internet at
http://www.jalden.com.
E-Mail - Contact us at [email protected] to ask questions or request
materials.
- TABLES FOLLOW -
<PAGE>
John Alden Financial Corporation
March 9, 1998
Page 3
================================================================================
<TABLE>
<CAPTION>
JOHN ALDEN FINANCIAL CORPORATION
QUARTERLY EARNINGS RELEASE
DECEMBER 31, 1997
(DOLLARS IN MILLIONS, EXCEPT PER SHARE)
------------------- ---------------------
FOR THE THREE FOR THE TWELVE
MONTHS ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------- ---------------------
1997 1996 1997 1996
--------- -------- -------- ----------
<S> <C> <C> <C> <C>
Earned premium by state type:
Exit states $ - $ 45.7 $ 80.2 $ 209.0
Other states 230.9 306.4 1,025.4 1,314.4
--------- -------- -------- ----------
Total Group earned premiums 230.9 352.1 1,105.6 1,523.4
Group gross medical loss ratio 91.2% 83.3% 75.4% 76.3%
Group gross expense ratio 27.7% 25.1% 26.0% 24.5%
--------- -------- --------- ----------
Group underwriting profit $ (43.8) $ (29.4) $ (14.9) $ (10.6)
Investment income 11.6 8.8 45.1 35.8
Corporate related expenses (8.3) (5.0) (18.4) (26.1)
Interest expense (1.1) (1.7) (5.3) (6.7)
Amortization of purchased intangibles (0.7) 0.3 (3.3) (3.6)
Other operations income 4.4 3.2 21.7 13.3
--------- -------- --------- ----------
Continuing pre-tax operating (loss)
income before significant charges (37.9) (23.8) 24.9 2.1
Significant charges (15.5) - (38.5) (6.7)
Realized investment (losses) gains (0.3) 1.9 4.8 3.0
--------- -------- --------- ----------
Continuing pre-tax loss before
minority interest in joint venture (53.7) (21.9) (8.8) (1.6)
Benefit for income taxes 18.7 10.4 1.9 2.1
Minority interest in joint venture 0.1 (1.3) (1.0) (2.1)
loss (income)
--------- -------- --------- ----------
Net loss from continuing operations (34.9) (12.8) (7.9) (1.6)
Net income from discontinued operations 24.0 10.9 29.7 32.6
--------- -------- --------- ----------
Total net (loss) income (10.9) (1.9) 21.8 31.0
Preferred stock dividends (0.3) (0.4) (1.3) (1.4)
--------- -------- --------- ----------
Net (loss) income applicable to $ (11.2) $ (2.3) $ 20.5 $ 29.6
common stock
--------- -------- --------- ----------
Average shares outstanding (000's) 25,516 25,332 25,400 25,295
Per share data:
Operating income (loss):
Continuing operations $ (0.98) $ (0.57) $ 0.51 $ (0.03)
Significant charges (0.40) - (0.99) (0.17)
--------- -------- --------- ---------
Total continuing operations (1.38) (0.57) (0.48) (0.20)
Discontinued operations - 0.44 0.31 1.50
--------- -------- --------- ---------
Total operating (loss) income (1.38) (0.13) (0.17) 1.30
Realized investment (losses) gains (0.01) 0.03 0.03 (0.13)
Recognition of deferred gain on sale 0.95 - 0.95 -
--------- -------- --------- ---------
Net (loss) income applicable to common $ (0.44) $ (0.10) $ 0.81 $ 1.17
stock
========= ======== ========= =========
</TABLE>
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<PAGE>
John Alden Financial Corporation
March 9, 1998
Page 4
================================================================================
<TABLE>
<CAPTION>
JOHN ALDEN FINANCIAL CORPORATION
QUARTERLY EARNINGS RELEASE
DECEMBER 31, 1997
(DOLLARS IN MILLIONS, EXCEPT PER SHARE)
DECEMBER 31, DECEMBER 31,
BALANCE SHEET 1997 1996
- ----------------------------------------------- ------------ ------------
<S> <C> <C>
Held-to-maturity securities $ 45 $ 45
Available-for-sale securities 551 4,249
Trading account securities 4 5
Mortgage loans 146 1,449
Real estate acquired through foreclosure 3 11
Equity securities - 82
Cash and short term investments 228 174
Reinsurance receivables and investment deposits 187 971
recoverable
Other assets 316 685
============ ============
Total assets $ 1,480 $ 7,671
------------ ------------
Group claim reserves $ 195 $ 254
Other reserves and liabilities 721 6,831
Deferred gain on sale of Annuity Operations 21 -
Total debt 77 102
Redeemable securities 15 19
Stockholders' equity 451 465
Book value per share, including effects
of SFAS No. 115 18.29 18.39
Proforma for recognition of deferred gain
on sale of Annuity Operations 19.14 20.18
Book value per share, excluding effects of
SFAS No. 115 17.57 17.64
Proforma for recognition of deferred gain on 18.42 19.43
sale of Annuity Operations
DECEMBER 31, DECEMBER 31,
OTHER RELEVANT DATA 1997 1996
- ----------------------------------------------- ------------ ------------
Group employer groups 110,000 183,000
Group employees 284,000 474,000
Covered lives data:
Minigroup 526,000 859,000
Intermediate and other 18,000 42,000
============ ============
Group 544,000 901,000
HMO 111,000 81,000
Administrative services only 93,000 78,000
Self-funded, ARMS 868,000 947,000
</TABLE>
###
