SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 23, 1997
INTEGON CORPORATION
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(Exact name of registrant as specified in charter)
State of Delaware 001-10997 13-3559471
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
500 West Fifth Street, Winston-Salem, NC 27152
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (910) 770-2000
Not Applicable
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(Former name or former address, if changed since last report)
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2
Item 5. Other Events.
------------
On June 23, 1997, Integon Corporation, a Delaware corporation (the
"Company"), entered into an Agreement and Plan of Merger (the
"Merger Agreement") with General Motors Acceptance Corporation, a
New York corporation ("GMAC"), pursuant to which a wholly-owned
direct or indirect subsidiary of GMAC to be incorporated in Delaware
on or before July 3, 1997 (the "Merger Sub") will merge (the
"Merger") with and into the Company with the Company as the
surviving corporation (the "Surviving Corporation"). As a result of
the Merger, (i) all outstanding shares of the Company's common
stock, par value $.01 per share (the "Company Common Stock"), will
be converted into the right to receive an amount of cash equal to
$26.00 per share, (ii) each outstanding share of $3.875 Convertible
Preferred Stock, par value $.01 per share (the "Company Convertible
Preferred Stock"), will entitle its holder to convert such share
into an amount of cash equal to (x) $26.00 per share multiplied by
(y) the number of shares of Company Common Stock into which the
shares of Company Convertible Preferred Stock held by such holder
would have been convertible immediately prior to the Effective Time
(as defined in the Merger Agreement), at the conversion price set
forth in the Certificate of Designation for the Company Convertible
Preferred Stock, (iii) each option outstanding under the Integon
Corporation 1992 Stock Option Plan will become fully vested at the
Effective Time by action of the Compensation and Personnel Committee
of the Company and will entitle its holder to receive in settlement
and cancellation of such option, an amount of cash equal to (x) the
excess of $26.00 over the exercise price of such option, multiplied
by (y) the number of shares of Company Common Stock covered by such
option, and (iv) each option outstanding under the Integon
Corporation Amended and Restated Omnibus Long-Term Performance
Incentive Compensation Plan (the "Omnibus Plan") will become
automatically exercisable at the Effective Time and will entitle its
holder to receive in settlement and cancellation of such option, an
amount of cash equal to (x) the excess of the greater of $26.00 or
the Change In Control Price (as defined in the Omnibus Plan) over
the exercise price of such option, multiplied by (y) the number of
shares of Company Common Stock covered by such option.
On and after the Effective Time, GMAC will and will cause the
Surviving Corporation to honor, in accordance with their terms, the
Indentures relating to the outstanding 8% Senior Notes due 1999 and
the 9 1/2% Senior Notes due 2001 of the Company and the 10 3/4%
Capital Securities issued by Integon Capital I, a business trust.
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3
The Surviving Corporation will redeem all outstanding shares of
Company Convertible Preferred Stock that have not been converted and
remain outstanding after the Effective Time.
Prior to its execution, the Merger Agreement was approved by the
respective boards of the Company, GMAC and General Motors
Corporation, the parent of GMAC.
The Merger is conditioned upon, among other things, approval by
holders of a majority of the Company Common Stock, receipt of
certain regulatory and governmental approvals, and the
representations and warranties made by the Company being true and
correct as of the closing except where the failure of such
representations and warranties to be true and correct as of the
closing did not, individually or in the aggregate, result in a
material adverse effect on the business, operations, assets,
properties, liabilities, financial condition or results of
operations of the Company and its subsidiaries taken as a whole.
The Company has agreed not to solicit any other acquisition
proposals. However, it may respond to unsolicited requests for
information, and negotiate with other persons, with respect to an
acquisition proposal, but only if such other person has submitted a
written proposal and the Board of Directors of the Company has
determined in its good faith judgment, based as to legal matters on
the written advice of counsel, that failing to take such action
would constitute a breach of fiduciary duty. The Company may
terminate the Merger Agreement to accept such other acquisition
proposal after notifying GMAC of its intention to do so. GMAC has a
right of first refusal, exercisable within two business days, to
acquire the Company on substantially the same economic terms as such
other acquisition proposal. If the right is not exercised and the
Merger Agreement is terminated, the Company must pay GMAC a break-up
fee of $15,000,000.
The Merger Agreement is attached as Exhibit 2 hereto and is
incorporated herein by reference.
In connection with the Merger Agreement, the Company amended its
Rights Agreement (the "Rights Agreement"), dated as of January 22,
1997, with First Chicago Trust Company of New York (the "Rights
Agent") by entering into an Amendment to Rights Agreement (the
"Amendment"), dated as of June 23, 1997, with the Rights Agent. The
Amendment provides that none of (a) the execution or delivery of the
Merger Agreement by the Company and GMAC, (b) GMAC or Merger Sub,
or any Affiliate or Associate of GMAC or Merger Sub, becoming a
Beneficial Owner (as defined in the Rights Agreement) of Company
Common Stock pursuant to the Merger Agreement or (c)
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4
the consummation of the Merger or other transactions contemplated in
the Merger Agreement shall (i) cause GMAC or the Merger Sub, or any
Affiliate or Associate of GMAC or Merger Sub, to become an Acquiring
Person (as defined in the Rights Agreement), (ii) cause a
Distribution Date (as defined in the Rights Agreement) to occur in
accordance with the terms of the Rights Agreement or (iii) be deemed
a Section 13 Event (as defined in the Rights Agreement). The
Amendment also provides that the Expiration Date (as defined in the
Rights Agreement) shall occur at or prior to the earliest to occur
of (i) the Close of Business on January 22, 2007, (ii) the time at
which the Rights (as defined in the Rights Agreement) are redeemed
as provided in Section 24 thereof, (iii) the time at which such
Rights are exchanged as provided in Section 24 thereof or (iv) the
Effective Time (which is the closing of the Merger Agreement). A
copy of the Amendment is attached hereto as Exhibit 99.1 and is
incorporated herein by reference.
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5
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
------------------------------------------------------------------
(c) Exhibits:
Exhibit Number
(Referenced to Item 601
of Regulation S-K) Description of Exhibit
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2 Agreement and Plan of Merger dated as of June 23,
1997 between Integon Corporation and General
Motors Acceptance Corporation.
99.1 Amendment to Rights Agreement, dated as of June
23, 1997, between Integon Corporation and First
Chicago Trust Company of New York.
<PAGE>
6
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Date: June 24, 1997
INTEGON CORPORATION
By: /s/ John B. Yorke
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Name: John B. Yorke
Title: Vice President and Corporate General Counsel
<PAGE>
7
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit number
(Referenced to Page Number in Rule 0-3(b)
Item 601 of sequential numbering system
Regulation S-K) Description of Exhibit where Exhibit can be found
- --------------- ---------------------- --------------------------
<S> <C> <C>
2 Agreement and Plan of Merger, dated as 8
of June 23, 1996, between Integon
Corporation and General Motors
Acceptance Corporation.
99.1 Amendment to Rights Agreement, dated
as of June 23, 1997, between Integon
Corporation and First Chicago Trust
Company of New York.
</TABLE>
Execution Copy
================================================================================
AGREEMENT AND PLAN OF MERGER
by and between
GENERAL MOTORS ACCEPTANCE CORPORATION
and
INTEGON CORPORATION
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June 23, 1997
------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 THE MERGER......................................................2
1.1 The Merger......................................................2
1.2 Closing; Effective Time.........................................2
1.3 Certificate of Incorporation....................................3
1.4 By-laws.........................................................3
1.5 Directors and Officers..........................................3
ARTICLE 2 CONVERSION OF SECURITIES........................................3
2.1 Common Stock....................................................3
2.2 Convertible Preferred Stock.....................................4
2.3 Treasury Stock and Parent-Owned Stock...........................5
2.4 Dissenting Shares...............................................5
2.5 Merger Sub Common Stock.........................................6
2.6 Exchange of Certificates........................................6
2.7 Options.........................................................9
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
OF THE COMPANY.................................................10
3.1 Organization...................................................10
3.2 Capitalization.................................................11
3.3 Subsidiaries...................................................12
3.4 Authorization; Binding Agreement...............................13
3.5 Noncontravention...............................................13
3.6 Approvals......................................................14
3.7.A SEC Filings; Financial Statements..............................15
3.7.B Insurance Subsidiary Statements................................16
3.7.C No Undisclosed Liabilities.....................................17
3.8 Absence of Certain Changes or Events...........................17
3.9 Litigation, Judgments, No Default, Etc.........................22
3.10 Compliance.....................................................23
3.11.A Definition of Tax and Taxes, Tax Returns and Taxing Authority..24
3.11.B Taxes......................................................25
3.11.C Tax Representations........................................26
3.12 Employee Benefit Plans.....................................29
3.13 Information Supplied.......................................32
3.14 Finders and Investment Bankers.............................33
3.15 Rights Agreement...........................................33
3.16 Opinion of Financial Advisor........................ ...34
3.17 Contracts..................................................34
3.18 Reserves...................................................37
i
<PAGE>
Page
3.19 Reinsurance Recoverables.......................................37
3.20 Collective Bargaining Agreements...............................37
3.21 No Default.....................................................37
3.22 Premiums Receivable............................................38
3.23 Bank Accounts..................................................39
3.24 Guarantees.....................................................39
3.25 Insurance......................................................39
3.26 Related Parties................................................40
3.27 Proprietary Rights.............................................40
3.28 Compliance with Law............................................41
3.29 Real Property..................................................42
3.30 Investments of Insurance Subsidiaries..........................43
3.31 Insurance Practices............................................43
3.32 Licenses and Permits...........................................43
3.33 Overdue Assessments: Risk Sharing Plans.......................44
3.34 Underlying Documents...........................................45
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE MERGER SUB...............................45
4.1 Organization...................................................45
4.2 Authorization; Binding Agreement...............................46
4.3 Noncontravention...............................................47
4.4 Governmental Approvals.........................................47
4.5 Finders and Investment Bankers.................................48
ARTICLE 5 COVENANTS......................................................48
5.1 Conduct of Business of the Company.............................48
5.2 Stockholder Approval; Proxy Statement..........................50
5.3 Access and Information.........................................51
5.4 No Solicitation................................................52
5.5 Reasonable Efforts; Additional Actions.........................53
5.6 Notification of Certain Matters................................54
5.7 Public Announcements...........................................55
5.8 Merger Sub.....................................................55
5.9 Severance......................................................56
5.10 Indebtedness of the Company....................................56
5.11 Termination of Investment Advisory Agreement...................57
5.12 Termination of Amended Salary Deferral Plan and Deferral
of Bonus Payment...............................................57
5.13 Employee Plans.................................................57
5.14 Investment Portfolio...........................................58
5.15 Indemnification of Directors and Officers......................58
5.16 Updating of Schedules..........................................59
5.17 Redemption of Company Convertible Preferred Stock..............59
ii
<PAGE>
Page
ARTICLE 6 CONDITIONS.....................................................60
6.1 Conditions to Each Party's Obligations.........................60
6.2 Conditions to Obligation of the Parent and the Merger Sub......62
6.3 Conditions to Obligation of the Company........................63
ARTICLE 7 TERMINATION....................................................63
7.1 Termination....................................................64
7.2 Procedure for and Effect of Termination........................65
ARTICLE 8 MISCELLANEOUS..................................................66
8.1 Certain Definitions............................................66
8.2 Amendment and Modification.....................................67
8.3 Waiver of Compliance; Consents.................................68
8.4 Survival.......................................................68
8.5 Notices........................................................68
8.6 Assignment.....................................................70
8.7 Expenses.......................................................70
8.8 Governing Law..................................................70
8.9 Counterparts...................................................70
8.10 Interpretation.................................................70
8.11 Entire Agreement...............................................71
8.12 No Third Party Beneficiaries...................................71
iii
<PAGE>
SCHEDULES
Schedule 2.3 - Treasury Shares Held by Subsidiaries
Schedule 3.2 - Capitalization
Schedule 3.3 - Subsidiaries
Schedule 3.2.4 - Guarantees
Schedule 3.5 - Consents
Schedule 3.7.A - SEC Filings
Schedule 3.7.C - No Undisclosed Liabilities
Schedule 3.8 - Certain Changes or Events
Schedule 3.9 - Litigation
Schedule 3.10 - Compliance
Schedule 3.11.B - Taxes
Schedule 3.11.C - Tax Representations
Schedule 3.12(a) - Employee Benefit Plans
Schedule 3.12(b) - Employee Benefit Plans
Schedule 3.14 - Finders & Investment Bankers
Schedule 3.17 - Contracts
Schedule 3.23 - Bank Accounts
Schedule 3.25 - Insurance
Schedule 3.26 - Related Parties
Schedule 3.27 - Proprietary Rights
Schedule 3.29 - Real Property
Schedule 3.30 - Investment of Insurance Subsidiaries
Schedule 3.32 - Licenses and Permits
Schedule 3.33 - Overdue Assessments; Risk Sharing Plans
Schedule 5.1 - Conduct of Business Schedule 5.9 - Severance Schedule
Schedule 5.12 - Amended Salary Deferral Plan
EXHIBITS
Exhibit 6.2(e) - Opinion of Paul, Weiss, Rifkind, Wharton & Garrison
Exhibit 6.3(d) - Opinion of Parent's Legal Staff
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 23, 1997 (the
"AGREEMENT"), by and between GENERAL MOTORS ACCEPTANCE CORPORATION, a New York
corporation (the "PARENT"), and INTEGON CORPORATION, a Delaware corporation (the
"COMPANY").
WHEREAS, the respective boards of directors of the Parent and the
Company have approved this Agreement pursuant to which, among other things, a
wholly owned direct or indirect subsidiary of the Parent to be incorporated in
Delaware (the "MERGER SUB") will be merged with and into the Company (the
"MERGER") on the terms and conditions contained herein and in accordance with
the General Corporation Law of the State of Delaware (the "DGCL"); the Merger
Sub and the Company are sometimes collectively referred to herein as the
"CONSTITUENT CORPORATIONS"; and
WHEREAS, the Parent and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and to prescribe various conditions to the Merger.
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
<PAGE>
2
ARTICLE 1
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.2) and in accordance
with the DGCL, the Merger Sub shall be merged with and into the Company, which
shall be the surviving corporation in the Merger (the "SURVIVING CORPORATION").
At the Effective Time, the separate existence of the Merger Sub shall cease and
the other effects of the Merger shall be as set forth in Section 259 of the
DGCL.
1.2 CLOSING; EFFECTIVE TIME. Subject to the provisions of Article 6,
the closing of the Merger (the "CLOSING") shall take place in New York City at
the offices of Paul, Weiss, Rifkind, Wharton & Garrison, as soon as practicable
but in no event later than 10:00 a.m. New York City time on the first business
day after the date on which each of the conditions set forth in Article 6 have
been satisfied or waived by the party or parties entitled to the benefit of such
conditions, or at such other place, at such other time or on such other date as
the Parent, the Merger Sub and the Company may mutually agree. The date on which
the Closing actually occurs is hereinafter referred to as the "CLOSING DATE." At
the Closing, the Parent, the Merger Sub and the Company shall cause a
certificate of merger (the "CERTIFICATE OF MERGER") to be executed and filed
with the Secretary of State of the State of Delaware in accordance with the
DGCL. The Merger shall become effective as of the date and time of such filing
or as of such subsequent date or time as the Parent and the
<PAGE>
3
Company shall agree to and shall be set forth in the Certificate of Merger
("EFFECTIVE TIME").
1.3 CERTIFICATE OF INCORPORATION. The certificate of incorporation
of the Company, as in effect immediately prior to the Effective Time, shall be,
from and after the Effective Time, the certificate of incorporation of the
Surviving Corporation, until thereafter altered, amended or repealed as provided
therein and in accordance with applicable law.
1.4 BY-LAWS. The by-laws of the Merger Sub, as in effect immediately
prior to the Effective Time, shall become, from and after the Effective Time,
the by-laws of the Surviving Corporation, until thereafter altered, amended or
repealed as provided therein and in accordance with applicable law.
1.5 DIRECTORS AND OFFICERS. The directors and officers of the Merger
Sub immediately prior to the Effective Time shall become, from and after the
Effective Time, the directors and officers of the Surviving Corporation, until
their respective successors are duly elected or appointed and qualified or their
earlier resignation or removal.
ARTICLE 2
CONVERSION OF SECURITIES; OPTIONS
2.1 COMMON STOCK. Each share of Common Stock, par value $.01 per
share, of the Company (the "COMPANY COMMON STOCK") issued and outstanding
immediately prior to the Effective Time (other than Dissenting Shares (as
defined in Section 2.4) and Parent Shares (as defined in Section 2.3)) shall, by
virtue of the
<PAGE>
4
Merger and without any action on the part of the holder thereof, be converted
into the right to receive an amount in cash equal to $26.00 per share (the
"COMMON STOCK PRICE PER SHARE") payable to the holder thereof, without interest
thereon, upon surrender of the certificate formerly representing such share of
Company Common Stock in accordance with Section 2.6. Notwithstanding the
foregoing, if between the date of this Agreement and the Effective Time the
outstanding shares of the Company Common Stock shall have been changed into a
different number of shares or a different class, by reason of any dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares, the Common Stock Price Per Share shall be correspondingly adjusted on
a per-share basis to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
2.2 CONVERTIBLE PREFERRED STOCK. All shares of $3.875 Convertible
Preferred Stock, par value $.01 per share, of the Company (the "COMPANY
CONVERTIBLE PREFERRED STOCK") issued and outstanding immediately prior to the
Effective Time shall remain outstanding after the Effective Time, subject to
Section 5.17. Each share of Company Convertible Preferred Stock shall entitle
its holder, from and after the Effective Time during the period such shares are
convertible, to convert such shares into cash in an amount (the "CASH CONVERSION
CONSIDERATION") equal to (i) the Common Stock Price Per Share multiplied by (ii)
the number of shares of Company Common Stock into which the shares of Company
Convertible Preferred Stock held by such holder would have been convertible
immediately prior to
<PAGE>
5
the Effective Time at the Conversion Price (as defined in the Certificate of
Designation of the Company Convertible Preferred Stock (the "CERTIFICATE OF
DESIGNATION")) then in effect. The Parent acknowledges that each share of
Company Convertible Preferred Stock that has been converted into Company Common
Stock prior to the Effective Time shall have been duly converted for purposes of
this Agreement and that the Company Common Stock issued upon such conversion
shall entitle its holder to receive the Common Stock Price Per Share under
Section 2.1.
2.3 TREASURY STOCK AND PARENT-OWNED STOCK. Each share of Company
Common Stock held in the Company's treasury immediately prior to the Effective
Time, if any (excluding any shares of Company Common Stock held by the Company's
subsidiaries, all of which shares are described on SCHEDULE 2.3 and shall be
entitled to receive the Common Stock Price Per Share as set forth in Section 2.1
and shall not be canceled and retired), and each share of Company Common Stock
and Company Convertible Preferred Stock then owned by the Parent, the Merger Sub
or any other wholly-owned subsidiary of the Parent (collectively, "PARENT
SHARES"), if any, shall, by virtue of the Merger, automatically be canceled and
retired and cease to exist and no consideration shall be delivered in exchange
therefor.
2.4 DISSENTING SHARES. Notwithstanding anything in this Agreement to
the contrary, each share of Company Common Stock that is issued and outstanding
immediately prior to the Effective Time and that is held by a stockholder who
has properly exercised and perfected appraisal rights under Section 262 of the
DGCL (the "DISSENTING SHARES"), shall not be converted into or exchangeable for
the right to
<PAGE>
6
receive the Common Stock Price Per Share, but shall be entitled to receive such
consideration as shall be determined pursuant to Section 262 of the DGCL;
PROVIDED, HOWEVER, that if such holder shall have failed to perfect or shall
have effectively withdrawn or lost its right to appraisal and payment under the
DGCL, each share of Company Common Stock of such holder shall thereupon be
deemed to have been converted into and to have become exchangeable for, as of
the Effective Time, the right to receive the Common Stock Price Per Share,
without any interest thereon, in accordance with Section 2.6, and such shares
shall no longer be Dissenting Shares.
2.5 MERGER SUB COMMON STOCK. Each share of common stock of the
Merger Sub issued and outstanding immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into one share of common stock of the Surviving
Corporation.
2.6 EXCHANGE OF CERTIFICATES.
2.6.1 On or before the Effective Time, the Parent shall
deposit or cause to be deposited in trust with a bank or trust company mutually
acceptable to the Parent and the Company (the "EXCHANGE AGENT") cash in the
aggregate amount required to make the cash payments in respect of (i) the
Company Common Stock issued and outstanding at the Effective Time (other than
Dissenting Shares and Parent Shares), (ii) the Company Convertible Preferred
Stock that is convertible after the Effective Time into the Cash Conversion
Consideration, and (iii) the Company Options (as defined in Section 2.7)
(collectively, the "MERGER CONSIDERATION"), such sum being hereinafter referred
to as the "EXCHANGE FUND". The Exchange Agent
<PAGE>
7
shall, pursuant to irrevocable instructions, make the payments provided for in
this Article 2 out of the Exchange Fund. If any cash deposited with the Exchange
Agent pursuant to this Section 2.6 remains unclaimed by the former stockholders
or former option holders of the Company following the expiration of nine months
after the Effective Time, such cash (together with all interest earned thereon)
shall be delivered, upon demand, to the Parent by the Exchange Agent and,
thereafter, any former stockholders and any former option holders of the Company
who have not heretofore complied with this Article 2 shall be entitled to look
only to the Parent (subject to abandoned property, escheat or similar laws) as
general creditors thereof with respect to the payment of their claim for any
Merger Consideration.
2.6.2 As soon as reasonably practicable following the Closing
Date, the Parent shall instruct the Exchange Agent to mail to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock (collectively, the
"CERTIFICATES") and to each holder of an agreement evidencing a Company Option
(an "OPTION AGREEMENT"), (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates and
the Option Agreements shall pass, only upon delivery of the Certificates and the
Option Agreements to the Exchange Agent and shall be in such form and have such
other provisions as the Parent may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates and the Option Agreements for
payment therefor.
<PAGE>
8
2.6.3 After the Effective Time, each holder of shares of
Company Common Stock or Option Agreements shall surrender and deliver the
Certificates or Option Agreements, as the case may be, to the Exchange Agent
together with a duly completed and executed transmittal letter. Upon such
surrender and delivery, following the Effective Time, the holder shall be
entitled to receive in exchange therefor, a check in the amount of the cash
payment which such holder is entitled to receive pursuant to this Article 2, and
such Certificates and Option Agreements shall forthwith be canceled. No interest
will be paid or accrued on the cash payable upon the surrender of the
Certificates or Option Agreements. If the payment is to be made to a person
other than the person in whose name a Certificate surrendered is registered, it
shall be a condition of payment that (a) the Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer and (b) the person
requesting such payment shall pay any transfer or other taxes required by reason
of the payment to a person other than the registered holder of the Certificate
surrendered or establish to the satisfaction of the Parent that such tax has
been paid or is not applicable. Until so surrendered, each outstanding
Certificate or Option Agreement after the Effective Time shall be deemed for all
purposes to evidence the right to receive such payment of cash, without any
interest thereon.
2.6.4 At the Effective Time, the stock transfer books of the
Company shall be closed and no transfer of shares of Company Common Stock shall
be made thereafter. In the event that, after the Effective Time, Certificates or
Option
<PAGE>
9
Agreements are presented to the Surviving Corporation or the Parent, they shall
be canceled and exchanged for cash as provided in this Article 2.
2.7 OPTIONS.
2.7.1 All outstanding options obligating the Company to issue,
transfer or sell any shares of Company Common Stock and issued pursuant to the
Integon Corporation 1992 Stock Option Plan, as amended from time to time (the
"1992 PLAN") (such options, the "1992 PLAN COMPANY OPTIONS"), or pursuant to the
Integon Corporation Amended and Restated Omnibus Long-Term Performance Incentive
Compensation Plan, as amended from time to time (the "OMNIBUS PLAN", and
together with the 1992 Plan, the "COMPANY OPTION PLANS") (such options, the
"OMNIBUS PLAN COMPANY OPTIONS" and together with the 1992 Plan Company Options,
the "COMPANY OPTIONS"), which Company Options are outstanding immediately prior
to the Effective Time, are vested, or by action of the Compensation and
Personnel Committee of the Board of Directors of the Company prior to the date
hereof, will become fully vested at the Effective Time. Each holder of a 1992
Plan Company Option shall be entitled to receive as soon as practicable after
the Effective Time, in settlement and cancellation of such 1992 Plan Company
Option, an amount in cash in immediately available funds equal to the product of
(i) the excess of the Common Stock Price Per Share over the exercise price of
each such 1992 Plan Company Option, multiplied by (ii) the number of shares of
Company Common Stock covered by such 1992 Plan Company Option. Each holder of an
Omnibus Plan Company Option shall be entitled to receive as soon as practicable
after the Effective
<PAGE>
10
Time, in settlement and cancellation of such Omnibus Plan Company Option, an
amount in cash in immediately available funds equal to the product of (i) the
excess of the greater of (A) the Common Stock Price Per Share or (B) the Change
In Control Price (as defined in the Omnibus Plan in effect as of the date of
this Agreement) over the exercise price of each such Omnibus Plan Company
Option, multiplied by (ii) the number of shares of Company Common Stock covered
by such Omnibus Plan Company Option.
2.7.2 Prior to the Effective Time, the Company and the Parent
shall cooperate and take such other action as may be necessary to cancel all
outstanding Company Options in consideration for the payment provided herein and
to effectuate the arrangements described in this Section 2.7.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to the Parent and, upon the
Amendment (as defined in Section 5.8), to the Merger Sub as follows:
3.1 ORGANIZATION. Each of the Company and its subsidiaries
(collectively, the "SUBSIDIARIES") is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. The Company
and each of its Subsidiaries is duly qualified or licensed to do business and in
good standing in each jurisdiction in
<PAGE>
11
which the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect (as defined in Section 8.1) with respect to the
Company or any of its Subsidiaries. The Company has previously delivered or made
available to the Parent correct and complete copies of the certificates of
incorporation and by-laws (or equivalent governing instruments) as currently in
effect, of the Company and each of its Subsidiaries.
3.2 CAPITALIZATION. The authorized capital stock of the Company is
as disclosed in the Company SEC Filings (as defined in Section 3.7.A). Except as
disclosed in the Company SEC Filings or as set forth on SCHEDULE 3.2, no shares
of capital stock of the Company are authorized, reserved for issuance or issued
and outstanding and there are no outstanding Company Options. All issued and
outstanding shares of Company Common Stock have been duly authorized and are
validly issued, fully paid, nonassessable and free of preemptive rights. Except
for the Company Options disclosed in the Company SEC Filings or as set forth in
SCHEDULE 3.2, the Company does not have outstanding any subscription, option,
put, call, warrant or other right or commitment to issue or any obligation or
commitment to redeem or purchase, any of its authorized capital stock or any
securities convertible into or exchangeable for any of its authorized capital
stock. There are no shareholder agreements, voting agreements, voting trusts or
other similar arrangements which
<PAGE>
12
have the effect of restricting or limiting the transfer, voting or other rights
associated with the capital stock of the Company.
3.3 SUBSIDIARIES. Except as disclosed in the Company SEC Filings or
as set forth on SCHEDULE 3.3, the Company does not own, directly or indirectly,
(a) any shares of capital stock of any subsidiary of the Company or (b) any
other material equity interest in any person, domestic or foreign. All of the
outstanding shares of capital stock of each of the Subsidiaries that are owned
by the Company or any other Subsidiary (collectively, the "COMPANY SUBSIDIARY
SHARES") have been duly authorized and are validly issued, fully paid and
nonassessable and free of preemptive rights. There are no irrevocable proxies or
similar obligations with respect to any of the Company Subsidiary Shares and,
except as set forth on SCHEDULE 3.3, all of the Company Subsidiary Shares are
owned by the Company free and clear of all liens, claims, charges, encumbrances
or security interests (collectively, "LIENS") with respect thereto. SCHEDULE 3.3
sets forth, with respect to each Subsidiary, (i) the number of authorized shares
of each class of its capital stock and (ii) the number of issued and outstanding
shares of each class of capital stock, with a true, correct and complete list of
the record and beneficial holders of such shares. No Subsidiary has outstanding
any subscription, option, put, call, warrant or other right or commitment to
issue, nor any obligation or commitment to redeem or purchase, any of its
authorized capital stock, or any securities convertible into or exchangeable for
any of its authorized capital stock.
<PAGE>
13
3.4 AUTHORIZATION; BINDING AGREEMENT. The Company has the full legal
power and authority to execute and deliver this Agreement and, subject to the
due execution and delivery of the Amendment by the Parent, the Company and
Merger Sub, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and, subject to the due execution and delivery of
the Amendment by the Parent, the Company and Merger Sub, the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company, subject, in both cases,
to the adoption of this Agreement by the stockholders of the Company in
accordance with the DGCL and the certificate of incorporation and by-laws of the
Company. This Agreement has been duly and validly executed and delivered by the
Company and, subject to the due execution and delivery of the Amendment by the
Parent, the Company and Merger Sub and the adoption of this Agreement by the
stockholders of the Company in accordance with the DGCL and the certificate of
incorporation and by-laws of the Company, constitutes a legal, valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms.
3.5 NONCONTRAVENTION. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
conflict with or result in any breach of any provision of the certificate of
incorporation or by-laws (or equivalent governing instruments) of the Company or
any of its Subsidiaries, (b) except as set forth on SCHEDULE 3.5, require any
consent, approval or notice under or conflict with or result in a violation or
breach of, or
<PAGE>
14
constitute (with or without notice or lapse of time or both) a default (or give
rise to any right of termination, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, agreement or other instrument or obligation (collectively, "CONTRACTS
AND OTHER AGREEMENTS") to which the Company or any of its Subsidiaries is a
party or by which any of them or any portion of their properties or assets may
be bound or (c) violate any order, judgment, writ, injunction, determination,
award, decree, law, statute, rule or regulation (collectively, "LEGAL
REQUIREMENTS") applicable to the Company or any of its Subsidiaries or any
portion of their properties or assets; PROVIDED that no representation or
warranty is made in the foregoing clause (b) with respect to matters that,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect with respect to the Company or any Subsidiary.
3.6 APPROVALS. No consent, approval or authorization of or
declaration or filing with any foreign, federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
(each, a "GOVERNMENT ENTITY") on the part of the Company or any of its
Subsidiaries that has not been obtained or made is required in connection with
the execution or delivery by the Company of this Agreement or the consummation
by the Company of the transactions contemplated hereby, other than (a) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware, (b) filings and other applicable requirements under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and the Securities Exchange Act of 1934, as amended (the
<PAGE>
15
"EXCHANGE ACT"), (c) approvals, filings and/or notices required under any
applicable insurance laws, and (d) consents, approvals, authorizations,
declarations or filings that, if not obtained or made, could not reasonably be
expected to result in a Material Adverse Effect with respect to the Company or
any Subsidiary or prevent the Company from consummating the transactions
contemplated hereby.
3.7.A SEC FILINGS; FINANCIAL STATEMENTS. Except as set forth on
SCHEDULE 3.7.A, the Company has made all filings required to be made with the
Securities and Exchange Commission (the "SEC") since December 31, 1995 and has
delivered or made available to the Parent true, correct and complete copies of
the Company's (a) Annual Reports on Form 10-K for the years ended December 31,
1995 and December 31, 1996 (the "COMPANY 1995 FORM 10-K" and the "COMPANY 1996
FORM 10-K," respectively), as filed with the SEC, (b) proxy statements relating
to all of the Company's meetings of stockholders (whether annual or special)
since December 31, 1995 and (c) all other reports, statements and registration
statements (including Quarterly Reports on Form 10-Q and Current Reports on Form
8-K) filed by the Company with the SEC since December 31, 1995 (collectively,
and in each case including all exhibits and schedules thereto and documents
incorporated by reference therein, the "COMPANY SEC FILINGS"). As of their
respective dates, the SEC Filings did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Company
and its Subsidiaries included or incorporated by
<PAGE>
16
reference in the Company 1995 Form 10-K, the Company 1996 Form 10-K and the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
(the "COMPANY 1997 FIRST QUARTER FORM 10-Q") have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes to such
financial statements) and fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries at the
respective dates thereof and the consolidated results of operations and cash
flows for the respective periods then ended (subject, in the case of unaudited
interim financial statements, to normal year-end adjustments).
3.7.B INSURANCE SUBSIDIARY STATEMENTS. For each of the insurance
subsidiaries of the Company chartered as an insurance company under state law
(collectively, the "INSURANCE SUBSIDIARIES"), the Company has delivered or made
available to the Parent true, correct and complete copies of (a) the statutory
financial statements (including the annual reports filed in each state in which
one of such Insurance Subsidiaries is admitted or approved) for each such
Insurance Subsidiary for the years 1994 through 1996 and (b) the statutory
financial statements (including quarterly reports filed in each state in which
one of such Insurance Subsidiaries is admitted or approved) for each such
Insurance Subsidiary for the quarter ending March 31, 1997, and will deliver to
Parent true, correct and complete copies of such statements for all quarters
ending thereafter and prior to the Effective Time. All such statements shall be
referred to as the "INSURANCE SUBSIDIARY STATEMENTS". The Insurance Subsidiary
Statements do (and, with respect to any Insurance Subsidiary
<PAGE>
17
Statement for any quarter after March 31, 1997, and prior to the Effective Time,
will) present fairly, on a consistent basis and in accordance with practices
prescribed or permitted by the appropriate regulatory agencies of each state in
which the Insurance Subsidiary Statements have been filed or may be required to
be filed, the financial position at the date of each such statement and results
of each such Insurance Subsidiary's operations for each such referenced periods.
Further, the exhibits and schedules included in the Insurance Subsidiary
Statements are fairly stated in all material respects in relation to the subject
Insurance Subsidiary and the Insurance Subsidiary Statements comply in all
material respects with all applicable regulatory requirements.
3.7.C NO UNDISCLOSED LIABILITIES. Neither the Company nor any
Subsidiary has any liabilities or obligations (absolute, accrued, contingent or
otherwise) which are not reflected in its financial statements referenced in
Sections 3.7.A. or 3.7.B., except for (i) liabilities and obligations incurred
in the ordinary course of business since March 31, 1997, none of which,
individually or in the aggregate, has had a Material Adverse Effect on the
Company or any Subsidiary, or (ii) liabilities or obligations disclosed in
SCHEDULE 3.7.C.
3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1996,
except as disclosed on SCHEDULE 3.8 or in the Company SEC Filings or as
consented to in writing by the Parent, the Company and the Subsidiaries have
conducted business only in the ordinary and usual course and, without limiting
the generality of the foregoing:
<PAGE>
18
(a) Neither the Company, nor any Subsidiary has sustained any
damage, destruction or loss (including, without limitation, by reason of
revocation of license, certificate of authority, or right to do business, total
or partial termination, suspension, default or modification of contracts,
governmental restriction, regulation, investigation or inquiry), regardless of
whether covered by insurance, which, individually or in the aggregate, have had
or would reasonably be expected to have a Material Adverse Effect with respect
to the Company or any Subsidiary.
(b) There have been no changes, events or conditions (other
than changes, events or conditions affecting generally the United States economy
or the insurance industry or that are caused primarily or substantially by, or
as a result of, the announcement of this Agreement and the transactions
contemplated hereby, including payment of the expenses, fees and other charges
incurred by the Company's contemplation, negotiation, execution or consummation
of this Agreement) which, individually or in the aggregate, have had or would
reasonably be expected to have a Material Adverse Effect with respect to the
Company or any Subsidiary.
(c) No material contractual obligation of the Company or any
Subsidiary has been modified in any material respect or terminated, except in
accordance with its terms, and neither the Company nor any Subsidiary has
received notice from any person with respect to such a possible modification or
termination thereof.
<PAGE>
19
(d) Neither the Company nor any Subsidiary incurred additional
debt for borrowed money, or incurred any other obligation or liability (fixed,
contingent or otherwise), regardless of whether required to be reflected on a
balance sheet prepared in accordance with generally accepted accounting
principles, except in the ordinary and usual course of its business and
consistent with past practices and except pursuant to the Credit Agreement,
dated as of October 12, 1993, between the Company and the Chase Manhattan Bank.
(e) Neither the Company nor any Subsidiary has paid or prepaid
any obligation or liability (fixed, contingent or otherwise), or discharged or
satisfied any lien or encumbrance, or settled any liability, claim, dispute,
proceeding, suit or appeal other than Direct Action Claims (as defined in
Section 3.9), pending or threatened against it or any of its assets or
properties, except for liabilities included in the December 31, 1996 audited
consolidated balance sheet of the Company contained in the Company SEC Filings
(the "DECEMBER 31, 1996 BALANCE SHEET") and liabilities incurred since December
31, 1996 in the ordinary and usual course of business of the Company or such
Subsidiary.
(f) Neither the Company nor any Subsidiary has authorized,
declared, paid or effected any dividend, payment or other distribution on or
with respect to any share of its capital stock.
(g) Neither the Company nor any Subsidiary has purchased,
redeemed or otherwise acquired or committed itself to acquire, directly or
indirectly, any of the capital stock of the Company or any Subsidiary.
<PAGE>
20
(h) Neither the Company nor any Subsidiary has mortgaged,
pledged, otherwise encumbered or subjected to lien any of its assets or
properties, tangible or intangible, nor has the Company nor any Subsidiary
mortgaged, pledged, otherwise encumbered or subjected to any lien any of the
capital stock of the Company or any Subsidiary except for liens for current
taxes which are not yet due and payable.
(i) Neither the Company nor any Subsidiary has sold, leased or
otherwise disposed of any asset or property, tangible or intangible, except in
the ordinary and usual course of its business, and in each case for a
consideration at least equal to the fair value of such asset or property, nor
has the Company nor any Subsidiary leased or licensed to others (including
officers and directors) any asset or property, or discontinued any product or
service line or the sale or other disposition of any of its products or
services.
(j) Neither the Company nor any Subsidiary has purchased or
otherwise acquired any debt or equity securities of any corporation,
partnership, joint venture, firm or other entity other than in connection with
ordinary course investment activities.
(k) Neither the Company nor any Subsidiary has made any
expenditure for the purchase, acquisition, construction or improvement of a
capital asset except (a) in the ordinary course of business, (b) pursuant to
Company Agreements listed on SCHEDULE 3.17, (c) as listed on SCHEDULE 3.8, or
(d) for such expenditures in the aggregate not exceeding $500,000.
<PAGE>
21
(l) Neither the Company nor any Subsidiary has entered into
any transaction or contract, nor has the Company or any Subsidiary waived any
right of substantial value or canceled any debts or claims or voluntarily
suffered any extraordinary losses, except in either case in the ordinary and
usual course of its business or as disclosed in SCHEDULE 3.17.
(m) Neither the Company nor any Subsidiary has sold, assigned,
transferred or conveyed any Proprietary Right (as defined in Section 3.27).
(n) Neither the Company nor any Subsidiary has effected any
amendment or supplement to, or extension of, any employee profit-sharing, stock
option, stock purchase, pension, bonus, incentive, retirement, medical
reimbursement, life insurance, deferred compensation or any other employee
benefit plan or arrangement.
(o) Neither the Company nor any Subsidiary has paid to or for
the benefit of any of its directors, officers, employees or shareholders any
compensation of any kind other than wages, salaries, bonuses and benefits at
times and rates in effect prior to December 31, 1996, other than scheduled
increases and increases in the ordinary course of business consistent with past
practice.
(p) Neither the Company nor any Subsidiary has effected any
amendment or modification to its charter documents, by-laws or other governing
documents.
<PAGE>
22
(q) Neither the Company nor any Subsidiary has made any change
in accounting methods or principles used for financial or regulatory reporting
purposes, except for changes which are required of all property and casualty
insurers.
(r) Neither the Company nor any Subsidiary has entered into
any agreement or commitment, whether in writing or otherwise, to take any action
described in this Section 3.8.
(s) Neither the Company nor any Subsidiary has experienced
any strikes, shutdowns, slowdowns or work stoppages.
(t) The Insurance Subsidiaries taken together have not
experienced any change in reserves which has or would be reasonably expected to
have a Material Adverse Effect with respect to such Insurance Subsidiaries.
(u) There have been no claims (including Direct Action Claims)
incurred or reported to the Insurance Subsidiaries taken together which,
individually or in the aggregate, have or would be reasonably expected to have a
Material Adverse Effect with respect to such Insurance Subsidiaries.
3.9 LITIGATION, JUDGMENTS, NO DEFAULT, ETC. Except as described in
SCHEDULE 3.9, (a) there is no action or proceeding, other than Direct Action
Claims (as defined below), pending or, to the best knowledge of the Company,
threatened before any federal or state court or agency to which the Company or
any Subsidiary is a party, the outcome of which could involve payment by the
Company or any Subsidiary of damages, fines or penalties (net of actual
recoveries received by the Company and the Subsidiaries) in excess of $250,000
or which individually or in the
<PAGE>
23
aggregate would have a Material Adverse Effect with respect to the Company or
any Subsidiary, (b) there is no judgment, decree, injunction, rule or order
(collectively "ORDERS") of any court, arbitrator or Governmental Entity
outstanding against the Company or any Subsidiary, (c) there are no facts known
to the Company or any Subsidiary that would result in any such claim, dispute,
action, proceeding, suit, appeal, investigation or inquiry which would have such
a Material Adverse Effect with respect to the Company or any Subsidiary and (d)
to the best knowledge of the Company, there are no statutes, rules or
regulations, statutory or regulatory proceedings, or any other governmental or
regulatory rules, releases, interpretative opinions or pronouncements, whether
state, local or federal, which materially and adversely affect the ability of
the Company or any Subsidiary to carry on their business as currently conducted.
"DIRECT ACTION CLAIM" means a claim brought against an Insurance Subsidiary in
the ordinary course of the Insurance Subsidiary's business for damages allegedly
caused by or to an insured of the Insurance Subsidiary, pursuant to the laws of
a state which permits tort claims to be filed directly against an insurer
(provided that such a claim shall not be considered a Direct Action Claim to the
extent that it seeks recovery in excess of policy limits against the insurer or
extra-contractual damages against the insurer).
3.10 COMPLIANCE. Except as disclosed in the Company SEC Filings or
as set forth on SCHEDULE 3.10, neither the Company nor any of its Subsidiaries
is in default or violation of any term, condition or provision of (a) its
certificate of incorporation or by-laws (or equivalent governing instruments),
or (b) any Contracts
<PAGE>
24
and Other Agreements to which the Company or any of its Subsidiaries is a party
or by which any of them or any portion of their properties or assets may be
bound; PROVIDED that no representation or warranty is made in the foregoing
clause (b) with respect to matters that, individually or in the aggregate, have
not had or could not reasonably be expected to result in a Material Adverse
Effect with respect to the Company or any of its Subsidiaries.
3.11.A DEFINITION OF TAX AND TAXES, TAX RETURNS AND TAXING
AUTHORITY.
(a) "TAX" and "TAXES" mean (i) any tax imposed on or measured
by net income, gross income, gross receipts, franchise, capital stock, license,
sales, use, service, transfer, withholding, payroll, premium, real or personal
property or windfall profits tax, estimated, ad valorem, value added, or excise
tax, alternative or add-on minimum tax, or other tax, fee, levy, duty and
charges of whatever kind, including any employment, social security, workers'
compensation, unemployment compensation, utility, stamp, occupation or
assessment, together with any interest and any penalty, addition to tax or
additional amount imposed by any governmental authority (domestic or foreign)
responsible for the imposition of any such tax (a "TAXING AUTHORITY"), imposed
upon the Company or any Subsidiary and (ii) any liability for the payment of any
amount of the type described in clause (i) as a result of the Company or any
Subsidiary being a successor to or transferee of any other corporation at any
time on or prior to the Effective Time.
<PAGE>
25
(b) "TAX RETURNS" shall mean returns, reports and other
documentation (including any additional or supporting material and amendments
thereto) filed or maintained, or required to be filed or maintained, in
connection with the calculation, determination, assessment or collection of the
Company's or its Subsidiaries' Tax.
3.11.B TAXES. The Company and its Subsidiaries have timely filed all
Tax Returns required to be filed by them through the date hereof with the
appropriate Taxing Authorities, and shall prepare and timely file, in a manner
consistent with prior years and applicable law and regulations, all Tax Returns
required to be filed on or before the Effective Time. All Tax Returns are true,
correct and complete, and Taxes relating to the Company and its Subsidiaries
which are due to, or claimed to be due from them by, any Taxing Authority have
been paid other than as disclosed in SCHEDULE 3.11.B. Except as disclosed on
SCHEDULE 3.11.B and, to the best knowledge of the Company, there is currently no
audit or examination of, or action or proceeding relating to, any Tax Return of
the Company or any of its Subsidiaries or which includes the Company or any of
its Subsidiaries presently in progress or of which the Company or any of its
Subsidiaries has received notice. There are no outstanding agreements or waivers
extending the statutory period of limitations applicable to any Tax Returns
which include the Company or its Subsidiaries. Except as disclosed in the
Company SEC Filings or as set forth on SCHEDULE 3.11.B, no deficiencies for any
Taxes have been proposed, asserted or assessed against the Company or any of its
Subsidiaries.
<PAGE>
26
3.11.C TAX REPRESENTATIONS.
(a) Each Insurance Subsidiary is an "insurance company" within
the meaning of Treas. Reg. ss. 1.801-3(a) and subject to taxation under Part II
of Subchapter L of the Internal Revenue Code of 1986, as amended (the "CODE"),
for the taxable period ending on the Closing Date and for all prior taxable
periods for which the statute of limitations has not expired, except as set
forth on SCHEDULE 3.11.C.
(b) The unpaid loss reserves of each Insurance Subsidiary have
been computed in accordance with Section 846 of the Code for all taxable periods
for which Tax Returns have been filed and for which the statute of limitations
has not expired.
(c) There are no liens for Taxes upon the assets of the
Company or any Subsidiary except liens for current Taxes not yet due or payable
or liens imposed for nonpayment of Taxes which are currently being contested in
good faith by the Company or such Subsidiary, and for which adequate reserves
are reflected in the financial statements referred to in Sections 3.7.A or
3.7.B.
(d) Based on tax rates currently in effect, the current and
deferred Taxes of the Company and the Subsidiaries (i) as of March 31, 1997, did
not exceed by a material amount the reserve for such Taxes set forth in the
Company's consolidated financial statements contained in the Company 1997 First
Quarter Form 10-Q and (ii) will not exceed by a material amount such reserve as
adjusted for
<PAGE>
27
operations and transactions through the Effective Time in accordance with the
past customs and practice of the Company and the Subsidiaries.
(e) Except as set forth on SCHEDULE 3.11.C, there is no
contract, agreement, plan or arrangement covering any person that, individually
or collectively, could give rise to the payment by the Company or the
Subsidiaries of any amount that would not be deductible by the Company or the
Subsidiaries by reason of Section 162(m) of the Code.
(f) The Company is not a U.S. real property holding
corporation under Section 897 of the Code.
(g) Except as provided in SCHEDULE 3.11.C, the Company or its
Subsidiaries have not agreed (and no agreement has been made on their behalf) to
make any adjustment pursuant to Section 481(a) of the Code (or any predecessor
provision) by reason of any change in any accounting method or change in basis
of computing reserves or otherwise, and there is no application pending with any
Taxing Authority requesting permission for any changes in any accounting method
of the Company or the Subsidiaries.
(h) Any tax sharing agreement among the Company and the
Subsidiaries shall be and hereby is deemed to be amended so as to be
inapplicable to taxable periods commencing on or after the Closing Date and
shall have no further effect for any taxable year (whether the current year, a
future year or a past year).
(i) The Company or its Subsidiaries have set up an adequate
reserve for the payment of all Taxes required to be paid by the Company or its
<PAGE>
28
Subsidiaries, and the consolidated financial statements of the Company contained
in the Company 1997 First Quarter Form 10-Q reflect an adequate reserve for the
payment of all Taxes required to be paid by the Company and its Subsidiaries
through the date of such financial statements.
(j) The Federal income Tax Return of the Company and its
consolidated Subsidiaries have been examined and settled with the Internal
Revenue Service, or the statute of limitations with respect to such years has
expired, for all years through 1992, except for a pending refund claim by the
Company.
(k) The Company and each Subsidiary have timely withheld from
and paid to the appropriate Taxing Authority, and have properly reported, all
employee salaries, wages and other compensation with respect to matters that,
individually or in the aggregate, have had or would reasonably be expected to
result in a Material Adverse Effect with respect to the Company or any of its
Subsidiaries.
(l) The Company and each Subsidiary is a member of the
consolidated group (as defined in Section 1504 of the Code) of which the Company
is the common parent for all taxable years beginning January 1, 1995. Except as
set forth in SCHEDULE 3.11.C, neither the Company nor any Subsidiary (a) has,
for any periods ending on or after January 1, 1995, been a member of a
consolidated group filing a consolidated federal income Tax Return, other than
the group of which the Company is the common parent or (b) has any liability for
Taxes for any person (other than the Company and any Subsidiary) under Treas.
Reg. ss. 1.1502-6 or any
<PAGE>
29
similar provision of state, local or foreign law, or as a transferee, successor,
by contract or otherwise.
(m) No requests for ruling or determination letters with
respect to the income, operations or business of the Company or any Subsidiary
are pending with any Taxing Authority.
(n) Neither the Company nor any Subsidiary has received
written notice from any Taxing Authority in a jurisdiction in which such entity
does not file a Tax Return stating that such entity is subject to taxation in
that jurisdiction, which notice relates to an amount that, if due, could have a
Material Adverse Effect on the Company or any Subsidiary. Except as set forth on
SCHEDULE 3.11.C, neither the Company nor any Subsidiary is required to file any
Tax Return in any jurisdiction outside the United States.
3.12 EMPLOYEE BENEFIT PLANS.
(a) Except for the plans, programs or arrangements,
contractual or otherwise, listed in SCHEDULE 3.12(A), (i) neither the Company
nor any Subsidiary nor, with respect to employees, directors or officers of the
Company or any Subsidiary, any other person maintains, sponsors or contributes
to any plan, program or arrangement providing for (A) payment of deferred
compensation or retirement benefits, (B) the accrual or payment of bonuses or
special or incentive compensation of any kind, (C) any severance or termination
payments, (D) loans, loan guarantees or other extensions of credit to directors,
officers or employees, (E) life, health, disability or other welfare benefits,
or (F) moving or other relocation
<PAGE>
30
expense benefits or reimbursements; and (ii) neither the Company nor any
Subsidiary nor, with respect to employees, directors or officers of the Company
or any Subsidiary, any other person maintains, sponsors or contributes to any
other stock bonus, stock option, stock incentive, employee stock ownership,
stock purchase or similar plans or practices, whether formal or informal.
(b) With respect to any plan, program or arrangement of the
nature described in Section 3.12(a) above (hereinafter, the "PLANS"), except as
disclosed on such SCHEDULE 3.12(B):
i) the financial statements, if any, relating to the
Plans for the past five plan years have been furnished or were made
available to the Parent, have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved and are in accordance with the books and records of such Plans,
which books and records are correct and complete in all material respects;
ii) all such Plans comply in all material respects with
the applicable requirements of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), the Code and the applicable requirements
for tax-exempt status under the Code and each Plan has been operated
substantially in accordance with its terms and no penalties or excise
taxes have been incurred under ERISA or the Code;
iii) no material change in the assets or liabilities of
any such Plan has occurred after the date of the financial statement
relating thereto
<PAGE>
31
(other than any change resulting from the normal and anticipated accrual
of benefits, payment of benefits or receipt of contributions);
iv) all required contributions to the Plans have been
timely made, all contributions accrued by the Company or any Subsidiary
through March 31, 1997 are reflected in the Company's SEC Filings;
v) all applicable reporting and disclosure obligations
to any governmental agency or entity and to any Plan participant or
beneficiary have been materially satisfied;
vi) there have been no transactions between any such
Plan and any "party in interest" or "disqualified person", within the
meaning of ERISA or the Code, which might subject the Company or any
Subsidiary to a tax or penalty on prohibited transactions or to a civil
action under ERISA;
vii) all such Plans that are funded Plans have
sufficient assets to pay all benefits, expenses and liabilities, accrued
or otherwise;
viii) no investigation or review by the Internal Revenue
Service ("IRS") is pending or is contemplated in which the IRS has
asserted or may assert that any Plan is not qualified under the Code or
that any related trust, including any trust for a welfare Plan, is not
exempt from tax under Section 501 of the Code. No assessment of any
federal income taxes has been made or, to the best knowledge of the
Company, is contemplated against any of the Company or any Subsidiary or
any related trust of any such Plan on the basis of failure of such
qualification or exemption nor, to the knowledge of the
<PAGE>
32
Company, is there any basis for any such investigation, review, assertion
or assessment;
ix) no event has occurred or is threatened or about to
occur with respect to any Plan for which is required to be filed a notice
of a reportable event, within the meaning of Section 4043(b) of ERISA and
the Pension Benefit Guaranty Corporation (the "PBGC") regulations issued
thereunder. No notice of termination has been filed by the Plan
administrator pursuant to Section 4041 of ERISA or issued by the PBGC
pursuant to Section 4042 of ERISA with respect to any such Plan nor is
there any basis for the filing of any such notice of termination; and
x) after the Effective Time, neither the Company nor any
Subsidiary will have any liability with respect to any obligation to
contribute to, or any duty to provide any benefits under, any such Plan.
(c) Neither the Company nor any Subsidiary is or has ever been
a contributing employer to any multi-employer pension plan (within the meaning
of Section 3(37) of ERISA); neither the Company nor any Subsidiary is under any
obligation to make contributions to any multi-employer pension plan; and neither
the Company nor any Subsidiary has actual or potential liability under Section
4201 of ERISA for any complete or partial withdrawal from any multi-employer
pension plan.
3.13 INFORMATION SUPPLIED. None of the information supplied or to
be supplied by the Company for inclusion or incorporation by reference in the
proxy statement (the "PROXY STATEMENT") to be filed with the SEC by the Company
in
<PAGE>
33
connection with the meeting of the Company's stockholders (the "COMPANY
STOCKHOLDERS' MEETING") to be held in connection with the Merger will, at the
time the Proxy Statement is mailed to the Company's stockholders, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading.
3.14 FINDERS AND INVESTMENT BANKERS. Neither the Company nor any of
its officers or directors has employed any investment banker, financial advisor,
broker or finder in connection with the transactions contemplated by this
Agreement, except for Goldman, Sachs & Co. ("GOLDMAN SACHS"), or incurred any
liability for any investment banking, business consultancy, financial advisory,
brokerage or finders' fees or commissions in connection with the transactions
contemplated hereby, except for fees payable to Goldman Sachs (including any
fees for the written opinion provided pursuant to Section 3.16), all of which
fees have been or will be paid by the Company in accordance with the agreement
attached as SCHEDULE 3.14.
3.15 RIGHTS AGREEMENT. The Company has delivered or made available
to the Parent a correct and complete copy of the Rights Agreement dated as of
January 22, 1997 (the "COMPANY RIGHTS AGREEMENT") between the Company and First
Chicago Trust Company of New York, as Rights Agent, including all exhibits
thereto. The Company has amended the Company Rights Plan (the "RIGHTS PLAN
AMENDMENT") so that neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (a) cause the Rights
under the Company Rights Agreement (the "RIGHTS") to become exercisable, (b)
cause any
<PAGE>
34
person to become an Acquiring Person (as defined in the Company Rights
Agreement) or (c) give rise to a Distribution Date (as defined in the Company
Rights Agreement). The Company has delivered to the Parent a true, correct and
complete copy of the Rights Plan Amendment.
3.16 OPINION OF FINANCIAL ADVISOR. The Company has received a
written opinion of Goldman Sachs to the effect that, as of the date of this
Agreement, the Merger is fair to the stockholders of the Company from a
financial point of view.
3.17 CONTRACTS.
(a) Set forth in SCHEDULE 3.17 hereto is a list identifying
all outstanding contracts, leases and commitments, other than as an insurer
(except for insurance policies issued outside of the ordinary course of
business, which are listed on SCHEDULE 3.17), whether written or oral, either
(i) to which the Company or any Subsidiary is a party, or (ii) to which any of
its or their properties are subject and (a) are listed in the next sentence, or
(b) with respect to which the Company or any Subsidiary is, in the case of any
one contract, lease or commitment or series of related contracts, leases or
commitments, obligated to make aggregate payments in excess of $500,000, or (c)
which is performable by the Company or such Subsidiary beyond one year
subsequent to the Effective Time and has aggregate payments in excess of
$500,000, or (d) which are material to the business, prospects or financial
condition of the Company and the Subsidiaries, taken as a whole (collectively
the "COMPANY AGREEMENTS").
<PAGE>
35
The following types of agreements are Company
Agreements, irrespective of dollar amount or term:
i) management or employment contracts (other than oral
agreements for employment at will), consulting contracts, collective
bargaining contracts or other agreements with any labor union, or
termination and severance agreements;
ii) notes, mortgages, deeds of trust, loan agreements,
security agreements, guarantees, debentures, indentures, credit
agreements, warehousing agreements, repurchase agreements and other
evidence of indebtedness other than endorsements for collection or deposit
in the ordinary course of business;
iii) pension, retirement, profit-sharing, deferred
compensation, bonus, incentive, life insurance, hospitalization, or other
employee benefit plans or arrangements (including, without limitation, any
contracts or agreements with trustees, insurance companies or other
relating to any such employee benefit plan or arrangement);
iv) stock option, stock purchase, warrant, repurchase or
other contracts or agreements with any employee or officer of either the
Company or any Subsidiary relating to the shares of capital stock of any
Subsidiary or the Company;
v) contracts or agreements with reinsurers, managing
general agents, managing general underwriters, general agents,
underwriters,
<PAGE>
36
agents, investment bankers, investment advisers, custodians, brokers or
sales representatives;
vi) contracts or agreements with any director or officer
of the Company or any Subsidiary or with any person or entity affiliated
or associated with such director or officer;
vii) powers of attorney or similar authorizations
granted to any third party by the Company or any Subsidiary other than
those granted in the ordinary course of business;
viii) contracts or agreements containing covenants
limiting the freedom of the Company or any Subsidiary to compete in any
line of business or with respect to any particular product or service or
with any person; and
ix) requirements contracts or similar agreements in
which the Company or any Subsidiary is the purchaser or the seller.
The Company and the Subsidiaries have complied in all material respects
with
all the provisions of their respective Company Agreements and are not in default
in any material respect under any of the terms thereof. No party to any of the
Company Agreements will have the right to terminate any or all of the provisions
of any Company Agreement as a result of the transactions contemplated by this
Agreement.
(b) The Company has made available to representatives of the
Parent, for its review and examination, all of the Company Agreements.
<PAGE>
37
3.18 RESERVES. All loss, adjustment to expense and unearned premium
reserves required under applicable regulatory requirements to be established by
the Company or any Subsidiary have been and are in the required form. The amount
of such reserves carried on the books of the Company and the Subsidiaries
(including those established for reported and unreported insurance benefits,
losses or claims and expenses) satisfy all applicable regulatory requirements.
3.19 REINSURANCE RECOVERABLES. The reinsurance recoverables, net
of related reserves for uncollectible amounts, on the books of each of the
Insurance Subsidiaries as of December 31, 1996 and March 31, 1997, respectively,
are appropriate.
3.20 COLLECTIVE BARGAINING AGREEMENTS. Neither the Company nor any
Subsidiary is a party to or subject to any collective bargaining agreement with
any labor union. There are no labor controversies pending or, to the best
knowledge of the Company, threatened against the Company or any Subsidiary which
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect with respect to the Company or any Subsidiary.
3.21 NO DEFAULT. Each of the Company and the Subsidiaries has in all
respects performed, or is now performing, the obligations of, and is not in
default (and would not by the lapse of time and/or the giving of notice be in
default), nor has it received notice of default, in respect of, any contract,
agreement, lease or commitment binding upon it or its assets or properties
(including, without limitation, any contract, agreement, lease or commitment
described in any Schedule attached
<PAGE>
38
hereto), except where such nonperformance or default would not reasonably be
expected to result in a Material Adverse Effect with respect to the Company or
any Subsidiary. Except as previously disclosed in writing to the Parent, to the
best knowledge of the Company, no party with whom the Company or any Subsidiary
has an agreement, contract, lease or commitment which is material to the
condition (financial or otherwise), business, net worth, assets, properties,
operations or future prospects of the Company of such Subsidiary is in default
thereunder or has breached any terms or provisions thereof. To the best
knowledge of the Company, there are no facts or circumstances which make a
default under, or termination or suspension of, any of the contracts or
obligations referred to in this Section 3.21 likely to occur subsequent to the
date hereof nor has any third party raised any claim, dispute or controversy
with respect to such contracts or obligations.
3.22 PREMIUMS RECEIVABLE. All of the premiums receivable of the
Insurance Subsidiaries shown on the December 31, 1996 Balance Sheet or the March
31, 1997 consolidated balance sheet of the Company contained in the Company SEC
Filings (the "INTERIM BALANCE SHEET"), or thereafter acquired arose under
validly issued policies of insurance in the ordinary and usual course of the
business of the Company or the applicable Subsidiary. The values at which
premiums receivable are carried on the December 31, 1997 Balance Sheet and
Interim Balance Sheet are consistent with their respective past practices and in
accordance with generally accepted accounting principles applied on a consistent
basis.
<PAGE>
39
3.23 BANK ACCOUNTS. SCHEDULE 3.23 is a full and complete written
list of all of the bank accounts of the Company, together with the names of
persons authorized to draw thereon. Except as set forth therein, all cash in
such accounts is held in demand deposits and is not subject to any restriction
or limitation as to withdrawal.
3.24 GUARANTEES. Except as set forth on SCHEDULE 3.24, neither the
Company nor any Subsidiary has guaranteed, or is otherwise contingently
obligated for, any indebtedness of any third party, except guarantees by the
Company of the Subsidiaries' obligations and endorsements for collection or
deposit in the ordinary course of business.
3.25 INSURANCE. SCHEDULE 3.25 is (i) a full and complete list of all
policies of insurance to which the Company or any Subsidiary is a party or is a
beneficiary or named insured (except for insurance policies issued by the
Insurance Companies in the ordinary course of business and reinsurance
agreements to which the Company or any Subsidiary is a party), and the Company
and the Subsidiaries have in full force and effect, with all premiums due
thereon paid, the policies of insurance set forth therein and (ii) a true and
complete list of all insurance policies to which other parties are a party or a
beneficiary which relate to the properties, assets or operations of or any
Subsidiary, and the names of such other parties. No notice of cancellation or
termination has been received with respect to any insurance policy described in
this Section 3.25. Each of the Company and the Subsidiaries carries insurance,
with insurers that, to the knowledge of the Company, are solvent, in
<PAGE>
40
amount and types of coverage which are customary in the industry and against
risks and losses which are usually insured against by persons holding or
operating similar properties and similar businesses. No material claims have
been asserted under any of such insurance policies or relating to the
properties, assets or operations of the Company or any Subsidiary since December
31, 1996.
3.26 RELATED PARTIES. Except as set forth in SCHEDULE 3.26, (a) no
officer or director of the Company or any Subsidiary, or any affiliate of any
such person, has, either directly or indirectly, a beneficial interest, or
alleges a claim of beneficial interest, in any contract or agreement to which
the Company or any Subsidiary may be bound or (b) no officer or director of the
Company or any Subsidiary eligible to receive any severance obligations
referenced in the Severance Schedule (as defined in Section 5.9 has, either
directly or indirectly, an interest in any corporation, partnership, firm or
other person or entity which furnishes or sells services or products which are
similar to those furnished or sold by the Company or any Subsidiary other than
shares of publicly held companies not in excess of 1% of such companies'
outstanding shares.
3.27 PROPRIETARY RIGHTS. SCHEDULE 3.27 is a true, correct and
complete list of patents, patent applications, trademarks, trademark
registrations, applications for trademark registrations, trade secrets, service
marks, service mark registrations, applications for service mark registrations,
trade names, labels, slogans, claims of copyright, copyright registrations,
applications for copyright registrations, copyrights, drawings, designs,
proprietary know-how or information, or other rights
<PAGE>
41
with respect thereto (collectively referred to as "PROPRIETARY RIGHTS") owned or
used by the Company or the Subsidiaries in their respective businesses. The
Company and the Subsidiaries own or possess adequate licenses or other rights to
use the Proprietary Rights, and the same are sufficient to conduct the business
of the Company and the Subsidiaries as they have been and are now being
conducted. The operations of the Company and the Subsidiaries do not conflict
with or infringe, and, no one has asserted to the Company nor any Subsidiary
that such operations conflict with or infringe, any Proprietary Rights owned,
possessed or used by any third party. To the best knowledge of the Company,
there are no third parties whose operations conflict with or infringe nor has
anyone asserted that such operations conflict with or infringe, any Proprietary
Rights owned, possessed or used by the Company or any Subsidiary. There are no
facts or alleged facts which would reasonably serve as a basis of any claim that
the Company or any Subsidiary does not have the unrestricted right to use, free
of any rights or claims of others, all Proprietary Rights in the development,
provision, use, sale or other disposition of any or all products or services
presently being, or contemplated to be, used, furnished or sold in the business
of the Company or such Subsidiary.
3.28 COMPLIANCE WITH LAW. The businesses of the Company and each
Subsidiary have been conducted in all material respects in accordance with all
applicable laws, rules, regulations, orders and other requirements of
governmental authorities (excluding ERISA which is covered by Section 3.12),
including, without limitation, all insurance company holding laws, all laws,
regulations and orders
<PAGE>
42
relating to the ownership and operation of insurance companies, antitrust or
trade regulation, employment and discrimination practices and procedures, the
health and safety of employees, consumer credit and other consumer protection
laws, insurance, environmental protection, the pollution of the atmosphere,
surface water, ground water and noise, and the handling of toxic and hazardous
waste materials. Neither the Company nor any Subsidiary has received any notice
of alleged violations of the foregoing and there are no pending or, to the best
knowledge of the Company, threatened hearings or investigations with respect to
any of the foregoing.
3.29 REAL PROPERTY. The attached SCHEDULE 3.29 constitutes a true,
correct and complete list of all real property owned, leased, or under option to
be purchased, sold or leased, by the Company or any Subsidiary, and no other
real property is used in the conduct of the operations of the Company or any
Subsidiary. All property leased by the Company or any Subsidiary is held under
valid and existing leases. Except as set forth in SCHEDULE 3.29, neither the
operations of the Company or any Subsidiary on any such real property, nor the
condition of such real property, including improvements thereon, violates in any
material respect any applicable building code, health, fire or safety
engineering code, zoning requirement or classification, or other Legal
Requirement relating to the environment, pollution control, public health,
occupational safety or otherwise relating to such property or to such
operations. Neither the Company nor any Subsidiary has received notice of any
pending or threatened condemnation proceedings which may materially and
adversely affect the use or value of any property described in SCHEDULE 3.29.
<PAGE>
43
3.30 INVESTMENTS OF INSURANCE SUBSIDIARIES. The investments of the
Insurance Subsidiaries reflected on their respective Insurance Subsidiary
Statements comply in all material respects with all applicable regulatory
requirements and financial standards of the states in which each is admitted or
approved, respectively, to the extent applicable. A list of all portfolio
investments of the Insurance Subsidiaries as of May 31, 1997, is attached hereto
as SCHEDULE 3.30.
3.31 INSURANCE PRACTICES. The insurance practices and business
operations of the Insurance Subsidiaries (including, without limitation, their
reserving, marketing, investment, financial, claims, underwriting, premium
collection and refunding and other practices) conform in all material respects
to all applicable legal and regulatory requirements and accepted insurance
company practices.
3.32 LICENSES AND PERMITS.
(a) Each of the Company and the Subsidiaries has obtained, and
is in compliance in all material respects with, all necessary licenses, permits,
consents, approvals, orders, certificates, authorizations, declarations and
filings required by all federal, state, local and other governmental or
regulatory authorities (including, without limitation, any federal, state and
local laws and regulations and authorities or agencies regulating insurance
companies and their operations) and all courts and other tribunals for the
conduct of the businesses and operations of the Company and such Subsidiary as
now conducted (collectively, the "REQUIRED LICENSES"), and there are no
proceedings pending or, to the best knowledge of the Company, threatened which
may result in the revocation, cancellation or suspension,
<PAGE>
44
or any adverse modification, of any such Required License nor are there any
facts known to the Company which may give rise to such proceedings. The attached
SCHEDULE 3.32 contains a true, correct and complete list of all Required
Licenses and the jurisdictions for which they are issued and a true, correct and
complete list of all states in which the Company or any Subsidiary currently has
pending an application to transact any line of business. Except as described on
SCHEDULE 3.32, all of the Required Licenses shall remain in full force and
effect notwithstanding the consummation of the transactions contemplated
hereunder.
(b) All material reports and applications required to be filed
with any regulatory authority have been filed and are true, correct and complete
in all respects and accurately present the information contained therein.
Neither the consummation of the transactions contemplated by this Agreement nor
any change which occurs as a result thereof will, when reflected in appropriate
amendments to such applications or filings, have a material adverse effect upon
any matters (including rate approvals) which are the subject of such reports,
applications or filings.
3.33 OVERDUE ASSESSMENTS: RISK SHARING PLANS. There are no
overdue assessments in excess of $250,000 levied against the Company or any
Subsidiary by any insurance guaranty association or fund. Other than as set
forth in SCHEDULE 3.33, neither the Company nor any Subsidiary currently
participate in, nor are they required to participate in, any risk sharing plan,
pool, joint underwriting association, or similar arrangement pursuant to any
insurance laws. The liabilities
<PAGE>
45
and obligations (absolute, accrued, contingent and otherwise) of the Company and
its Subsidiaries in respect of such risk sharing plans set forth on SCHEDULE
3.33 do not exceed $1,000,000.
3.34 UNDERLYING DOCUMENTS. Any underlying documents listed or
described in the Schedules referred to in this Agreement have heretofore been
made available to the Parent or its representatives. All such documents
furnished to the Parent are true, correct and complete copies, and there are no
amendments or modifications thereto, except as expressly noted in the Schedules
in which such documents are incorporated. The minute books of the Company and
each Subsidiary contain true, correct and complete records of all meetings and
other corporate actions taken through April 28, 1997 by the directors and
stockholders of the Company and such Subsidiary.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE MERGER SUB
The Parent and, after the Amendment, the Merger Sub represent and
warrant to the Company as follows, provided that any representation and warranty
relating to the Merger Sub shall be as of the date the Merger Sub executes the
Amendment:
4.1 ORGANIZATION. Each of the Parent and the Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite power and
authority to own,
<PAGE>
46
lease and operate its properties and to carry on its business as now being
conducted. The Parent is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it make such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect with respect to
the Parent. The Parent has previously delivered or made available to the Company
correct and complete copies of the certificates of incorporation and by-laws, as
currently in effect, of the Parent and the Merger Sub. The Merger Sub is a newly
formed, wholly owned subsidiary of the Parent and, except for activities
incident to the acquisition of the Company, the Merger Sub has not engaged in
any business activities of any type or kind whatsoever.
4.2 AUTHORIZATION; BINDING AGREEMENT. Each of the Parent and the
Merger Sub has the full legal power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of each of the Parent and the Merger Sub. This
Agreement has been duly and validly executed and delivered by each of the Parent
and the Merger Sub and constitutes a legal, valid and binding agreement of each
of the Parent and the Merger Sub, enforceable against each of them in accordance
with its terms.
<PAGE>
47
4.3 NONCONTRAVENTION. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
conflict with or result in any breach of any provision of the certificate of
incorporation or by-laws of the Parent or the Merger Sub, (b) require any
consent, approval or notice under or conflict with or result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any Contracts and Other
Agreements to which the Parent or the Merger Sub is a party or by which either
of them or any material portion of their properties or assets may be bound or
(c) violate any Legal Requirements applicable to the Parent or the Merger Sub or
any material portion of their properties or assets; PROVIDED that no
representation or warranty is made in the foregoing clause (b) with respect to
matters that, individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect with respect to the Parent.
4.4 GOVERNMENTAL APPROVALS. No consent, approval or
authorization of, or declaration or filing with, any Governmental Entity on the
part of either the Parent or the Merger Sub that has not been obtained or made
is required in connection with the execution or delivery by the Parent or the
Merger Sub of this Agreement or the consummation by the Parent or the Merger Sub
of the transactions contemplated hereby, other than (a) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware, (b)
filings under the HSR Act and the
<PAGE>
48
Exchange Act, (c) approvals, filings and/or notices required under any
applicable insurance laws, and (d) consents, approvals, authorizations,
declarations or filings that, if not obtained or made, could not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect with respect to the Parent or prevent the Parent or the Merger Sub from
consummating the transactions contemplated hereby.
4.5 FINDERS AND INVESTMENT BANKERS. Neither the Parent or the Merger
Sub nor any of their respective officers or directors has employed any
investment banker, financial advisor, broker or finder in connection with the
transactions contemplated by this Agreement, except for Morgan Stanley & Co.
Incorporated ("MORGAN STANLEY"), or incurred any liability for any investment
banking, business consultancy, financial advisory, brokerage or finders' fees or
commissions in connection with the transactions contemplated hereby, except for
fees payable to Morgan Stanley, all of which fees have been or will be paid by
the Parent.
ARTICLE 5
COVENANTS
5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by
this Agreement, during the period commencing on the date hereof and ending at
the Effective Time, the Company shall, and shall cause each of its Subsidiaries
to, conduct its operations according to its ordinary course of business
consistent with past practice, and the Company shall, and shall cause each of
its Subsidiaries to, use all reasonable efforts to preserve intact its business
organization and to maintain
<PAGE>
49
satisfactory relationships with its customers, suppliers and employees and
others with which it has business relationships. Without limiting the generality
of the foregoing, and except as otherwise expressly provided in this Agreement,
prior to the Effective Time, neither the Company nor any or its Subsidiaries
will, without the prior written consent of the Parent:
(a) amend or propose to amend its certificate of
incorporation or by-laws (or equivalent governing instruments);
(b) except as set forth on SCHEDULE 5.1, authorize for
issuance, issue, sell, pledge, deliver or agree or commit to issue, sell, pledge
or deliver (whether through the issuance or granting of any options, warrants,
calls, subscriptions, stock appreciation rights or other rights or other
agreements) any capital stock of any class or any securities convertible into or
exchangeable for shares of capital stock of any class of the Company, other than
shares of Company Common Stock (and accompanying Rights) issuable upon exercise
of Company Options and upon conversion of Company Convertible Preferred Stock
outstanding on the date of this Agreement in accordance with the present terms
thereof;
(c) split, combine or reclassify any shares of Company Common
Stock or declare, pay or set aside for payment any dividend (other than
regularly scheduled dividends on the Company Common Stock and the Company
Convertible Preferred Stock at their current levels) or other distribution in
respect of any Company Common Stock, or redeem, purchase or otherwise acquire
any shares of Company Common Stock;
<PAGE>
50
(d) increase or establish any Plan or otherwise increase in
any manner the compensation payable or to become payable by the Company or any
of its Subsidiaries to any of their respective directors, officers or employees,
other than in the ordinary course of business consistent with past practice or
as required under any existing employment agreement or Plan, or enter into any
employment or severance agreement with or grant any severance or termination pay
to any director, officer or employee of the Company or any of its Subsidiaries,
other than in accordance with existing Plans;
(e) enter into any other agreements, commitments or contracts
that are material to the Company and its Subsidiaries taken as a whole, other
than in the ordinary course of business consistent with past practice;
(f) except as contemplated by this Agreement, without the
prior written consent of the Parent, otherwise take or cause to be taken any
action described in clauses (c) through (r) of Section 3.8 between the date of
this Agreement and the Effective Time; or
(g) agree, commit or arrange to do any of the foregoing.
5.2 STOCKHOLDER APPROVAL; PROXY STATEMENT. The Company shall
take all action necessary in connection with applicable law to convene the
Company Stockholders' Meeting as promptly as practicable after the date hereof
to consider and vote upon this Agreement and the transactions contemplated
hereby. The Company shall, through its Board of Directors (the "COMPANY BOARD"),
recommend that its stockholders vote in favor of the adoption of this Agreement
and the transactions
<PAGE>
51
contemplated hereby, subject to the Company Board's fiduciary duty under
applicable law, exercised after consultation with the Company's independent
legal counsel.
5.3 ACCESS AND INFORMATION. Between the date of this Agreement and
the Effective Time, the Company shall, and shall cause its Subsidiaries to,
afford the Parent and its authorized representatives (including its accountants,
financial advisors and legal counsel) reasonable access during normal business
hours to all of the properties, personnel, Contracts and Other Agreements, any
documents relating to Tax Returns of the Company and its Subsidiaries and other
books and records of the Company and its Subsidiaries and shall promptly deliver
or make available to the Parent (a) a copy of each report, schedule and other
document filed by the Company pursuant to the requirements of federal or state
securities laws and (b) all other information concerning the business,
properties, assets and personnel of the Company and its Subsidiaries as the
Parent may from time to time reasonably request, including, without limitation,
access to outside counsel of the Company or any Subsidiary in connection with
the review of any claim, dispute, action, proceeding, suit, appeal,
investigation or inquiry pending or threatened against the Company or any
Subsidiary. The Parent shall hold, and shall cause its Representatives (as
defined in the letter agreement dated May 6, 1997 (the "COMPANY CONFIDENTIALITY
AGREEMENT") between the Company and Motors Insurance Corporation) to hold, all
Evaluation Material (as defined in the Company Confidentiality Agreement) in
confidence in accordance with the terms of the Company Confidentiality Agreement
and, in the event of the termination of this Agreement for any reason, the
Parent
<PAGE>
52
promptly shall return or destroy all Evaluation Material in accordance with the
terms of the Company Confidentiality Agreement.
5.4 NO SOLICITATION. Except as otherwise contemplated by this
Agreement, neither the Company or any of its Subsidiaries, nor any of their
respective officers, directors, employees or representatives, shall, directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any person or group (other
than the Parent and the Merger Sub or any affiliate, associate or designee of
the Parent or the Merger Sub) concerning any proposal for an acquisition of all
or any substantial part of the business and properties or capital stock of the
Company and its Subsidiaries taken as a whole, whether by merger, tender offer,
purchase of assets or shares of capital stock or otherwise (an "ACQUISITION
PROPOSAL"). The Company shall promptly notify the Parent if any proposal, offer
or substantial contact with respect thereto is made by any person in writing.
Notwithstanding the foregoing, (a) the Company Board may take, and disclose to
the Company's stockholders, a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act with respect to any tender offer for shares
of capital stock of the Company and (b) the Company may, directly or indirectly,
furnish information and access, in each case only in response to unsolicited
requests therefor after the date hereof, and may participate in discussions and
negotiate with any person or group concerning any Acquisition Proposal, only if
such person or group has submitted a written Acquisition Proposal to the Company
Board and the Company Board determines in its good faith judgment, based as to
legal
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53
matters on the written advice of the Company's independent legal counsel, that
failing to take such action would constitute a breach of the Company's Board's
fiduciary duty under applicable law.
5.5 REASONABLE EFFORTS; ADDITIONAL ACTIONS.
5.5.1 Upon the terms and subject to the conditions of this
Agreement, each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all action, and to do or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including using all reasonable
efforts to (a) obtain all consents, amendments to or waivers under the terms of
any of the Company's and the Parent's borrowing or other contractual
arrangements required by the transaction contemplated by this Agreement, (b)
effect promptly all necessary or appropriate registrations and filings with
Governmental Entities, including, without limitation, filings and submissions
pursuant to the HSR Act, the Securities Act, the Exchange Act and the DGCL, (c)
effect promptly (but in no event later than twenty (20) days) and prosecute
diligently (including responding to all reasonable requests for supplemental
information) all approvals, filings and/or notices required under any applicable
insurance laws for the consummation of the transactions contemplated by this
Agreement, (d) defend any lawsuit or other legal proceedings, whether judicial
or administrative, challenging this Agreement or the consummation of the
transaction
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54
contemplated hereby and (e) fulfill or cause the fulfillment of the conditions
to Closing set forth in Article 6.
5.5.2 If, at any time after the Effective Time, the Surviving
Corporation shall determine or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation the right, title or interest in, to or under any of the rights,
properties or assets of either of the Constituent Corporations acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such other actions and things as may be necessary or desirable to vest, perfect
or confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
5.6 NOTIFICATION OF CERTAIN MATTERS. The Company shall give notice
to the Parent, and the Parent and the Merger Sub shall give notice to the
Company, promptly upon becoming aware of (a) any occurrence, or failure to
occur, of any event, which occurrence or failure to occur has caused or could
reasonably be expected to cause any representation or warranty in this Agreement
to be untrue or inaccurate in any material respect at any time after the date
hereof and prior to the
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55
Effective Time and (b) any material failure on its part to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; PROVIDED that the delivery of any notice pursuant to this Section
5.6 shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
5.7 PUBLIC ANNOUNCEMENTS. The initial press release or releases with
respect to the transactions contemplated by this Agreement shall be in the form
agreed to by the Parent and the Company. Thereafter, for as long as this
Agreement is in effect, the Parent and the Merger Sub, on the one hand, and the
Company, on the other hand, shall not, and shall cause their subsidiaries and
affiliates not to, issue or cause the publication of any press release or any
other announcement (including without limitation announcements to employees,
agents or policyholders) with respect to the Merger, this Agreement or the other
transactions contemplated hereby without the consent of the other, except where
such release or announcement is required by applicable law or pursuant to any
listing agreement with, or the rules or regulations of, any securities exchange
or any other regulatory requirements. The Parent will inform the Company in
writing as to the appropriate persons to give such consent.
5.8 MERGER SUB. On or before July 3, 1997, the Parent shall cause
the Merger Sub to be duly incorporated and organized and shall cause the Merger
Sub to authorize and execute an amendment to this Agreement by which the Merger
Sub agrees to become a Constituent Corporation hereunder and otherwise to be
bound by the terms hereof as applicable to the Merger Sub (the "AMENDMENT") and
the Parent and the Company agree to execute and deliver the Amendment. The
Parent will take
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56
all action necessary to cause the Merger Sub to perform its obligation under
this Agreement as so amended and to consummate the Merger on the terms and
conditions set forth in this Agreement as so amended. All references herein to
the Agreement shall, after the Amendment is executed and delivered by the
Parent, the Company and Merger Sub, mean this Agreement as so amended by the
Amendment.
5.9 SEVERANCE. For a period of at least two (2) years from and after
the Effective Time, the Parent will cause the Surviving Corporation to honor the
severance obligations listed on SCHEDULE 5.9 (the "SEVERANCE SCHEDULE") in
accordance with the terms of such plans as in effect immediately prior to the
Effective Time.
5.10 INDEBTEDNESS OF THE COMPANY. From and after the Effective Time,
the Parent will and will cause the Surviving Corporation to honor in accordance
with their terms, the Indenture dated as of August 26, 1992 between the Company
and First National Bank of Chicago, as trustee, as supplemented from time to
time, the Indenture dated as of October 15, 1994 between the Company and First
National Bank of Chicago, as trustee, as supplemented from time to time, and the
Indenture dated as of February 10, 1997 between the Company and First Union
National Bank of North Carolina, as trustee, as supplemented from time to time
(the "JUNIOR SUBORDINATED DEBENTURE INDENTURE"), including, without limitation,
any repurchase obligations with respect to the debentures issued pursuant to the
Junior Subordinated Debenture Indenture upon a Change of Control (as such term
is defined in the Junior Subordinated Debenture Indenture).
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57
5.11 TERMINATION OF INVESTMENT ADVISORY AGREEMENT. Effective at or
prior to the Effective Time, the Company shall have terminated the Investment
Advisory Agreement between the Company and Head Asset Management L.L.C. with
no further liability or obligation to the Company or its Subsidiaries.
5.12 TERMINATION OF AMENDED SALARY DEFERRAL PLAN AND DEFERRAL OF
BONUS PAYMENT. Effective at or prior to the Effective Time, the Company shall
have terminated the Integon Corporation Executive Salary Deferral Plan, which
became effective as of January 22, 1997, with no further liability or obligation
to the Company or its Subsidiaries other than to pay the participant therein the
amount due set forth on SCHEDULE 5.12. The Parent agrees to cause the Surviving
Corporation to defer until January 2, 1998, and to pay John C Head III, his
bonus in the amount of $500,000.
5.13 EMPLOYEE PLANS. From and after the Effective Time, the Parent
agrees to provide, or cause the Surviving Corporation to provide, to employees
of the Company retirement benefits, bonus and incentive compensation and life,
health, disability and other welfare benefits on a basis economically comparable
to similar plans currently in effect for the Company's employees, and, for
purposes of determining eligibility to participate, vesting and entitlement
benefits, service with the Company or any Subsidiary prior to the Effective Time
shall be treated as service with the Parent or its subsidiaries; PROVIDED,
HOWEVER, that such service shall not be recognized to the extent such
recognition would result in a duplication of benefits.
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58
5.14 INVESTMENT PORTFOLIO. The Company shall cause the investments
of the Insurance Subsidiaries to be maintained prior to the Effective Time in
accordance with past investment policies and practices of the Insurance
Subsidiaries, except that, pending the Closing, cash proceeds from any
investment (whether as a result of the sale or maturity of an investment or from
investment income) shall only be invested in United States Treasury Securities
having a maturity of five (5) years.
5.15 INDEMNIFICATION OF DIRECTORS AND OFFICERS. The certificate of
incorporation and by-laws (or equivalent governing instruments) of the Surviving
Corporation and each of its subsidiaries shall contain provisions no less
favorable with respect to indemnification than are set forth in the
Certification of Incorporation and by-laws of the Company and its Subsidiaries,
which provisions shall not be amended, repealed or otherwise modified for a
period of six years after the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who at or prior to the Effective
Time were directors, officers, agents or employees of the Company or any of its
subsidiaries or who were otherwise entitled to indemnification pursuant to the
certificate of incorporation and by-laws (or equivalent governing instruments)
of the Company or any of its subsidiaries. The Parent shall cause to be
maintained in effect for six years after the Effective Time the current policies
of the directors' and officers' liability insurance maintained by the Company
and its subsidiaries with respect to matters occurring prior to the Effective
Time; PROVIDED, HOWEVER, that the Parent may substitute therefor policies of at
least the same coverage
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59
containing terms and conditions that are not less advantageous than the existing
policies (including with respect to the period covered).
5.16 UPDATING OF SCHEDULES. From the date hereof until the Effective
Time, the Company shall keep up to date all of the Schedules, and shall notify
the Parent on a monthly basis of any changes or additions or events which may,
after the lapse of time, cause any change or addition in any of such Schedules,
whether or not such changes or additions relate to matters that are permitted
under Section 5.1. If the Company submits an amended Schedule to the Parent
pursuant to this Section and, if in the Parent's reasonable judgment, such
amendment or supplement, either individually or in the aggregate with other
amendments or supplements, results in a change that has had a Material Adverse
Effect on the Company and its Subsidiaries taken as a whole, then the Parent may
reject such amended Schedule and, if the Company fails or refuses to promptly
take such actions as are necessary to make the original version of the Schedule
satisfy in all material respects each applicable representation and warranty
under this Agreement (as of the Effective Time), such failure or refusal will be
deemed to be the failure of the condition set forth in Section 6.2(b) below, and
the Parent will be entitled to terminate this Agreement pursuant to Article 7
below.
5.17 REDEMPTION OF COMPANY CONVERTIBLE PREFERRED STOCK. The Parent
shall cause the Surviving Corporation to issue a notice of redemption within
five days after the later of (i) the Effective Time or (ii) September 16, 1997
to all holders of Company Convertible Preferred Stock outstanding on the
Effective Time.
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60
Such notice of redemption shall provide for the Redemption Record Date (as
defined in the Certificate of Designation) to be at least 20 days after the
notice of redemption has been given. On the Redemption Record Date, the
Surviving Corporation shall redeem all outstanding shares of Company Convertible
Preferred Stock in accordance with the terms of the Certificate of Designation.
If a notice of redemption has been given and any holder of shares of Company
Convertible Preferred Stock shall, prior to the close of business on the fifth
day preceding the Redemption Record Date, give written notice to the Surviving
Corporation, pursuant to paragraph 6 of the Certificate of Designation, of the
conversion of any or all of the shares to be redeemed held by the holder
(accompanied by a certificate or certificates for such shares, duly endorsed or
assigned to the Surviving Corporation and any necessary transfer tax payment, as
required by such paragraph 6), then such redemption shall not become effective
as to such shares to be converted and such conversion shall become effective at
the Conversion Price then in effect and shall entitle the holder to the Cash
Conversion Consideration.
ARTICLE 6
CONDITIONS
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the following
conditions:
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61
(a) This Agreement shall have been adopted by the affirmative
vote of the stockholders of the Company by the requisite vote in accordance with
applicable law;
(b) No Legal Requirements shall have been enacted, entered,
promulgated or enforced by any court or Governmental Entity that prohibit or
prevent the consummation of the Merger;
(c) (i) All consents, authorizations, orders and approvals of
(or filings or registrations with) any Governmental Entity required in
connection with the execution, delivery and performance of this Agreement shall
have been obtained or made (as the case may be), except for filings in
connection with the Merger and any other documents required to be filed after
the Effective Time and except where the failure to have obtained or made any
such consent, authorization, order, approval, filing or registration would not
have a Material Adverse Effect with respect to the Company or any Subsidiary or
the Parent or materially adversely affect the ability of the Company, the Parent
or the Merger Sub to perform their respective obligations hereunder and (ii)
such consents, authorizations, orders and approvals shall be subject to no
conditions other than (A) conditions customarily imposed by insurance regulatory
authorities or (B) other conditions that could not reasonably be expected to
have a Material Adverse Effect with respect to the Company or any of the
Subsidiaries, taken as a whole; and
(d) Any waiting period applicable to the Merger under the HSR
Act shall have expired or been terminated.
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62
6.2 CONDITIONS TO OBLIGATION OF THE PARENT AND THE MERGER SUB. The
obligation of the Parent and the Merger Sub to effect the Merger shall be
subject to the fulfillment or waiver at the Effective Time of the following
additional conditions:
(a) The Company shall have performed in all material respects
the covenants and obligations required to be performed by it under this
Agreement on or prior to the Effective Time;
(b) The representations and warranties of the Company
contained in this Agreement shall be true and correct on and as of the Effective
Time as if made on and as of such date (except to the extent that any such
representation or warranty had by its terms been made as of a specific date in
which case such representation or warranty shall have been true and correct as
of such specific date); provided, however, that if the failure of any such
representations and warranties to be true and correct on and as of the Effective
Date, individually or in the aggregate, has not resulted in a Material Adverse
Effect on the Company and its Subsidiaries taken as a whole, the foregoing
condition shall be deemed to have been fulfilled;
(c) The Parent shall have received a certificate signed by an
executive officer of the Company to the effect of Sections 6.2(a) and (b);
(d) All proceedings taken in connection with the filing of the
Certificate of Merger and other similar transactions contemplated hereby and all
documents incident to such transactions shall be reasonably satisfactory in form
and substance to the Parent and its counsel; and
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63
(e) The Parent shall have received a legal opinion of Paul,
Weiss, Rifkind, Wharton & Garrison, counsel for the Company, covering the
matters set forth on Exhibit 6.2(e), which firm may rely on appropriate opinion
of local counsel.
6.3 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the
Company to effect the Merger shall be subject to the fulfillment or waiver at
the Effective Time of the following additional conditions:
(a) The Parent and the Merger Sub shall have performed in all
material respects the covenants and obligations required to be performed by them
under this Agreement on or prior to the Effective Time;
(b) The representations and warranties of the Parent and the
Merger Sub contained in this Agreement shall be true and correct in all material
respects on and as of the Effective Time as if made on and as of such date;
(c) The Company shall have received a certificate signed by an
executive officer of each of the Parent and Merger Sub to the effect of Sections
6.3 (a) and (b); and
(d) The Company shall have received a legal opinion of the
Parent's legal staff covering the matters set forth on Exhibit 6.3(d), which
legal staff may rely on appropriate opinion of local counsel.
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64
ARTICLE 7
TERMINATION
7.1 TERMINATION. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time,
whether before or after adoption by the stockholders of the Company:
(a) By the mutual written consent of the Parent, the Merger
Sub and the Company;
(b) By the Parent, the Merger Sub or the Company:
(i)if a court of competent jurisdiction or
other Governmental Entity shall have issued an Order or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
Merger and such Order or other action shall have become final and
nonappealable; or
(ii) if the Effective Time shall not have occurred on or
before December 31, 1997, PROVIDED, HOWEVER, that the right to terminate
this Agreement under this Section 7.1(b)(ii) shall not be available to any
party whose failure to fulfill materially any covenant or obligation under
this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date; and
(c) By the Parent, the Merger Sub or the Company, if the
stockholder approval referred to in Section 6.1(a) shall not have been obtained
by reason of the failure to obtain the requisite vote at a duly held meeting of
stockholders or at any adjournment thereof;
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65
(d) By the Company if the Company receives an Acquisition
Proposal from any person or group and the Company Board determines in its good
faith judgment, based as to legal matters on the written advice of the Company's
independent legal counsel, that failing to terminate this Agreement would
constitute a breach of the Company Board's fiduciary duty under applicable law;
PROVIDED, HOWEVER, that if the Company exercises its right to terminate this
Agreement pursuant to this subsection (d), (i) the Company, upon giving written
notice of termination of this Agreement shall furnish a written copy of the
Acquisition Proposal giving rise to such termination, and the Parent shall have
a right of first refusal, exercisable within two (2) business days after
delivery of the Acquisition Proposal to the Parent, to acquire the Company and
its Subsidiaries on substantially the same economic terms set forth in such
Acquisition Proposal, provided that the Parent may substitute cash for any
non-cash consideration provided for under such Acquisition Proposal so long as a
substantially equivalent economic value, on an after-tax basis, is provided to
the Company's stockholders; and (ii) in the event the Parent elects not to
exercise such right of first refusal, the Company, upon demand by the Parent,
shall pay the Parent a break-up fee equal to $15,000,000. After exercise of any
right of first refusal by Parent in accordance with the immediately preceding
sentence, the Parent shall have 180 days to close such transaction.
7.2 PROCEDURE FOR AND EFFECT OF TERMINATION. In the event that
this Agreement is terminated and the Merger is abandoned by the Parent or the
Merger Sub, on the one hand, or by the Company, on the other hand, pursuant to
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66
Section 7.1, written notice of such termination and abandonment shall forthwith
be given to the other parties and this Agreement shall terminate and the Merger
shall be abandoned without any further action. If this Agreement is terminated
as provided herein, no party hereto shall have any liability or further
obligation to any other party under the terms of this Agreement except (i) with
respect to the willful breach by any party hereto, (ii) as provided under
Section 7.1(d) and (iii) the provisions of this Section 7.2, the second sentence
of Section 5.3.1, Section 7.1(d) and Article 8 shall survive the termination of
this Agreement.
ARTICLE 8
MISCELLANEOUS
8.1 CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the meanings ascribed to them in this Section 8.1:
(a) "AFFILIATE," with respect to any person, shall mean any
person controlling, controlled by or under common control with such person and
shall also include any person 10% or more of whose outstanding voting power is
owned by the specified person either directly or indirectly through
subsidiaries;
(b) "KNOWLEDGE," with respect to the Company, shall mean
the actual knowledge of any executive officer or director of the Company;
(c) "MATERIAL ADVERSE EFFECT," with respect to any person,
shall mean a material adverse effect on the business, operations, assets,
properties, liabilities, financial condition or results of operations of such
person;
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67
(d) "PERSON" shall mean and include an individual, a
partnership, a joint venture, a limited liability company, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof; and
(e) "SUBSIDIARY," with respect to any person, shall mean any
corporation 50% or more of the outstanding voting power of which, or any
partnership, joint venture, limited liability company or other entity 50% or
more of the total equity interest of which, is directly or indirectly owned by
such person. For purposes of this Agreement, all references to "subsidiaries" of
a person shall be deemed to mean "subsidiary" if such person has only one
subsidiary.
8.2 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified or supplemented, whether before or after
stockholder approval, only by a written agreement signed by each of the parties
hereto at any time prior to the Effective Time with respect to any of the terms
contained herein; PROVIDED, HOWEVER, that after this Agreement is adopted by the
Company's stockholders pursuant to Section 5.2, no such amendment or
modification shall (a) alter or change the amount or kind of the consideration
to be delivered to the stockholders of the Company, (b) alter or change any term
of the certificate of incorporation of the Surviving Corporation to be effected
by the Merger or (c) alter or change any of the terms or conditions of this
Agreement if such alteration or change would adversely affect the stockholders
of the Company.
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68
8.3 WAIVER OF COMPLIANCE; CONSENTS. Any failure of the Parent or the
Merger Sub, on the one hand, or the Company, on the other hand, to comply with
any obligation, covenant, agreement or condition herein may be waived by the
Parent, the Merger Sub or the Company, respectively, only by a written
instrument signed by the party granting such waiver, but such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing in a
manner consistent with the requirements for a waiver of compliance as set forth
in this Section 8.3.
8.4 SURVIVAL. The respective representations and warranties of the
Parent, the Merger Sub and the Company contained herein shall not survive the
Closing hereunder.
8.5 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given when delivered in person,
by telecopier (with a confirmed receipt thereof) or registered or certified mail
(postage prepaid, return receipt requested), and on the next business day when
sent by overnight courier service, to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
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69
(a) if to the Parent or the Merger Sub, to:
General Motors Acceptance Corporation
485 W. Milwaukee Avenue
Detroit, MI 48202
Attention: Bernard J. Buselmeier
Telecopier:(313) 974-5616
with a copy to:
Foley & Lardner
330 N. Wabash Avenue, Suite 3300
Chicago, IL 60611
Attention: Frederick L. Feldkamp, Esq.
Telecopier:(312) 755-1925
(b) if to the Company, to:
Integon Corporation
500 West Fifth Street
Winston Salem, North Carolina 27152
Attention: Secretary
Telecopier:(910) 770-2747
with copies to:
Head & Company L.L.C.
1330 Avenue of the Americas
New York, New York 10019-5402
Attention: John C Head III
Telecopier: (212) 315-0520
and
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Judith R. Thoyer, Esq.
Telecopier:(212) 757-3990
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70
8.6 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties;
PROVIDED, HOWEVER, that the rights of the Merger Sub may be transferred to any
wholly owned subsidiary of the Parent with an appropriate amendment to this
Agreement.
8.7 EXPENSES. Whether or not the Merger is consummated, all fees,
charges and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees,
charges or expenses.
8.8 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to agreements
made and to be performed entirely within such State, without regard to the
choice of law principles thereof.
8.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.10 INTERPRETATION. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
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71
8.11 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits, documents or instruments referred to herein) and the Parent
Confidentiality Agreement embody the entire agreement and understanding of the
parties hereto in respect of the subject matter hereof and thereof and supersede
all prior agreements and understandings, both written and oral, among the
parties, or between any of them, with respect to the subject matter hereof and
thereof.
8.12 NO THIRD PARTY BENEFICIARIES. This Agreement is not intended
to, and does not, create any rights or benefits of any party other than the
parties hereto.
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72
IN WITNESS WHEREOF, the Parent and the Company have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
GENERAL MOTORS ACCEPTANCE
CORPORATION
By /s/ Eric A. Feldstein
----------------------------------
Name: Eric A. Feldstein
Title: Executive Vice President and
Chief Executive Officer
INTEGON CORPORATION
By /s/ John B. McKinnon
----------------------------------
Name: John B. McKinnon
Title: President and Chief Executive Officer
EXECUTION COPY
AMENDMENT TO RIGHTS AGREEMENT
THIS AMENDMENT, dated as of June 23, 1997, is between INTEGON
CORPORATION, a Delaware corporation (the "Company"), and FIRST CHICAGO TRUST
COMPANY OF NEW YORK, (the "Rights Agent").
RECITALS
The Company and the Rights Agent are parties to a Rights Agreement
dated as of January 22, 1997 (the "Rights Agreement").
General Motors Acceptance Corporation, a New York corporation, and
the Company have entered into an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which a wholly owned direct or indirect subsidiary of
Parent ("Merger Sub") will merge with and into the Company and all the Company
Common Stock will be converted into the right to receive an amount of cash equal
to the Common Stock Price Per Share and all of the Company Convertible Preferred
Stock will remain outstanding (the "Merger"). The Board of Directors of the
Company has approved the Merger Agreement and the Merger. Capitalized terms used
herein but not defined shall have the meanings ascribed to them in the Merger
Agreement.
Pursuant to Section 27 of the Rights Agreement, the Board of
Directors of the Company has determined that an amendment to the Rights
Agreement as set forth herein is necessary and desirable to reflect the
foregoing and the Company and the Rights Agent desire to evidence such amendment
in writing.
Accordingly, the parties agree as follows:
1. AMENDMENT OF SECTION 1(A). Section 1(a) of the Rights
Agreement is amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary,
neither Parent nor Merger Sub, nor any Affiliate or Associate of Parent or
Merger Sub, shall be deemed to be an Acquiring Person solely by virtue of
(i) the execution and delivery of the Merger Agreement, (ii) becoming the
Beneficial Owner of Company Common Stock (as defined in the Merger
Agreement) pursuant to the Merger Agreement, or (iii) the consummation of
the Merger or the other transactions contemplated in the Merger
Agreement."
2. ADDITIONS TO SECTION 1. The following subsections are added to
Section 1 of the Rights Agreement at the end thereof:
"(z) 'Merger' shall mean the consummation of the transaction pursuant to
which the Merger Sub will merge with and into the Company and all the
Company Common Stock will be converted into the right to receive an amount
of cash.
(aa) 'Merger Agreement' shall mean the Agreement and Plan of Merger dated
as of June 23, 1997, between Parent and the Company, as amended from time
to time.
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2
(ab) 'Merger Sub' shall mean a Delaware corporation, wholly owned direct
or indirect subsidiary of Parent, or any other subsidiary of Parent that
is substituted for Merger Sub pursuant to the Merger Agreement.
(ac) 'Parent' shall mean General Motors Acceptance Corporation, a New York
corporation."
3. AMENDMENT OF SECTION 3(A). Section 3(a) of the Rights
Agreement is amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary, a
Distribution Date shall not be deemed to have occurred solely as the
result of (i) the execution and delivery of the Merger Agreement, (ii)
Parent or Merger Sub, or any Affiliate or Associate of Parent or Merger
Sub, becoming the Beneficial Owner of Company Common Stock (as defined in
the Merger Agreement) pursuant to the Merger Agreement or (iii) the
consummation of the Merger or the other transactions contemplated in the
Merger Agreement."
4. AMENDMENT OF SECTION 7(A). Section 7(a) of the Rights
Agreement is amended by:
(1) deleting the term "or" from clause (ii) replacing it
with ",",
(2) inserting the following after clause (iii):
"or (iv) the Effective Time, as that term is defined in the Merger
Agreement" and
(3) deleting the final parenthetical phrase and
inserting the following in its place:
"(the earliest of the times described in clauses (i), (ii), (iii)
and (iv) above being herein referred to as the "Expiration Date")
5. AMENDMENT OF SECTION 13. Section 13 of the Rights
Agreement is amended to add the following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary, (i)
the execution of the Merger Agreement, (ii) Parent or Merger Sub, or any
Affiliate or Associate of Parent or Merger Sub, becoming the Beneficial
Owner of Company Common Stock (as defined in the Merger Agreement)
pursuant to the Merger Agreement or (iii) the consummation of the Merger
or the other transactions contemplated in the Merger Agreement
<PAGE>
3
shall not be deemed to be a Section 13 Event and shall not cause the
Rights to be adjusted or exercisable in accordance with Section 13."
6. EFFECTIVENESS. This Amendment shall be deemed effective as of
June 23, 1997 as if executed on such date. Except as amended hereby, the Rights
Agreement shall remain in full force and effect and shall be otherwise
unaffected hereby.
7. MISCELLANEOUS. This Amendment shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such state applicable
to contracts to be made and performed entirely within such state. This Amendment
may be executed in any number of counterparts, each of such counterparts shall
for all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument. If any provision, covenant
or restriction of this Amendment is held by a court of competent jurisdiction or
other authority to be invalid, illegal or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Amendment shall remain in
full force and effect and shall in no way be effected, impaired or invalidated.
EXECUTED as of the date set forth above.
Attest: INTEGON CORPORATION
By: /s/ John B. Yorke By: /s/ John B. McKinnon
--------------------------------- ----------------------------------
Name: John B. Yorke Name: John B. McKinnon
Title: Secretary Title: President and Chief Executive
Officer
FIRST CHICAGO TRUST COMPANY OF
Attest: NEW YORK
By: /s/ By: /s/ Laurence A. Woods
--------------------------------- ----------------------------------
Name: Name: Laurence A. Woods
Title: Assist. Vice President Title: Vice President
