<PAGE>
As filed with the Securities and Exchange Commission on October 1, 1999
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
Form 8-A/A
(Amendment No. 1)
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
The Guarantee Life Companies Inc.
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(Exact name of registrant as specified in its charter)
Delaware 47-0785066
- --------------------------------------------------------------------------------
(State of incorporation or organization) (IRS Employer Identification No.)
8801 Indian Hills Drive
Omaha, Nebraska 68114
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
Title of each class to be so registered Name of each exchange on which each class
is to be registered
</TABLE>
None
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If this Form relates to the registration of a class of securities pursuant to
Section 12(b) of the Exchange Act and is effective pursuant to General
Instruction A.(c), check the following box. [ ]
If this Form relates to the registration of a class of securities pursuant to
Section 12(g) of the Exchange Act and is effective pursuant to General
Instruction A.(d), check the following box. [ ]
Securities Act registration statement file number to which this form relates
(if applicable):
---------
None
---------
Securities to be registered pursuant to Section 12(g) of the Act:
Rights to Purchase Series A Junior Participating Cumulative Preferred Stock,
$1.00 par value per share, of the Registrant
---------------
(Title of Class)
(The Exhibit Index is located on page 4 of this Form 8-A/A.)
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<PAGE>
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 1. Description of Registrant's Securities to be Registered.
This Form 8-A/A (Amendment No. 1) amends the Form 8-A dated November 25,
1996, as filed by The Guarantee Life Companies Inc. (the "Registrant")
with the United States Securities and Exchange Commission (the "SEC") on
November 25, 1996.
A description of the Rights to Purchase Series A Junior Participating
Cumulative Preferred Stock, is contained under the caption "Item 1.
Description of Registrant's Securities to be Registered" in the
Registrant's Registration Statement on Form 8-A (Commission File No. 0-
26788), as filed with the SEC, and is incorporated herein by reference.
On September 19, 1999, Jefferson-Pilot Corporation, a North Carolina
corporation ("Parent"), LG Merger Corp., a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub") and the Registrant,
entered into an Agreement and Plan of Merger, dated as of September 19,
1999 (the "Merger Agreement") relating to the merger of the Registrant
with Merger Sub.
In connection with the approval of the Merger Agreement, the Registrant's
Board of Directors amended the Rights Agreement between the Registrant
and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the
"Rights Agent"), dated November 14, 1996 (the "Rights Agreement").
Amendment No. 1 to the Rights Agreement between the Registrant and the
Rights Agent, dated as of September 19, 1999 ("Amendment No. 1"), is on
file with the SEC as an exhibit to the Registrant's Current Report on
Form 8-K, dated September 19, 1999, and is incorporated herein by
reference.
ITEM 2. Exhibits.
Exhibit numbers refer to the paragraph numbers under Item 601 of
Regulation S-K:
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Exhibit Number Description
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2(a) Plan of Conversion of Guarantee Mutual Life Company/1/
- ----------------------------------------------------------------------------------------------------
2(b) Amendment No. 1 to Plan of Conversion/1/
- ----------------------------------------------------------------------------------------------------
2(c) Agreement and Plan of Merger by and among Jefferson-Pilot
Corporation, LG Merger Corp. and The Guarantee Life Companies
Inc. dated as of September 19, 1999
- ----------------------------------------------------------------------------------------------------
3(a) Amended and Restated Certificate of Incorporation of The
Guarantee Life Companies Inc./2/
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3(b) Amended and Restated Bylaws of The Guarantee Life Companies Inc./3/
- ----------------------------------------------------------------------------------------------------
4(a) Form of Certificate of The Guarantee Life Companies Inc. Common
Stock, par value $0.01 per share/1/
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4(b) Rights Agreement between the Registrant and ChaseMellon
Shareholder Services, L.L.C., Rights Agent, dated as of November
18, 1996, which includes as Exhibit B the form of Right
Certificate/4/
- ----------------------------------------------------------------------------------------------------
4(c) Amendment No. 1, dated as of September 19, 1999, to the Rights
Agreement, dated November 18, 1996, between The Guarantee Life
Companies Inc. and ChaseMellon Shareholder Services, L.L.C./5/
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</TABLE>
<PAGE>
/1/ Incorporated by reference as an exhibit to Registrant's Registration
Statement on Form S-1, Registration No. 33-92992.
/2/ Incorporated by reference as an exhibit to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 (Commission File
No. 0-26788).
/3/ Incorporated by reference as an exhibit to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1997 (Commission File No.
0-26788).
/4/ Incorporated by reference as an exhibit to Registrant's Current Report on
Form 8-K filed November 25, 1996 (Commission File No. 0-26788).
/5/ Incorporated by reference as an exhibit to Registrant's Current Report on
Form 8-K dated September 19, 1999 (Commission File No. 0-26788).
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized.
THE GUARANTEE LIFE COMPANIES INC.
(Registrant)
By /s/ Richard A. Spellman
-----------------------
Richard A. Spellman, Senior Vice President,
General Counsel and Secretary
DATE: October 1, 1999
<PAGE>
EXHIBIT INDEX
- --------------------------------------------------------------------------------
Exhibit Number Description
- ------- -----------
- --------------------------------------------------------------------------------
2(a) Plan of Conversion of Guarantee Mutual Life Company/1/
- --------------------------------------------------------------------------------
2(b) Amendment No. 1 to Plan of Conversion/1/
- --------------------------------------------------------------------------------
2(c) Agreement and Plan of Merger by and among Jefferson-
Pilot Corporation, LG Merger Corp. and The Guarantee
Life Companies Inc. dated as of September 19, 1999
- --------------------------------------------------------------------------------
3(a) Amended and Restated Certificate of Incorporation of
The Guarantee Life Companies Inc./2/
- --------------------------------------------------------------------------------
3(b) Amended and Restated Bylaws of The Guarantee Life
Companies Inc./3/
- --------------------------------------------------------------------------------
4(a) Form of Certificate of The Guarantee Life Companies
Inc. Common Stock, par value $0.01 per share/1/
- --------------------------------------------------------------------------------
4(b) Rights Agreement between the Registrant and ChaseMellon
Shareholder Services, L.L.C., Rights Agent, dated as of
November 18, 1996, which includes as Exhibit B the form
of Right Certificate /4/
- --------------------------------------------------------------------------------
4(c) Amendment No. 1, dated as of September 19, 1999, to the
Rights Agreement, dated November 18, 1996, between The
Guarantee Life Companies Inc. and ChaseMellon
Shareholder Services, L.L.C./5/
- --------------------------------------------------------------------------------
/1/ Incorporated by reference as an exhibit to Registrant's Registration
Statement on Form S-1, Registration No. 33-92992.
/2/ Incorporated by reference as an exhibit to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 (Commission File No.
0-26788).
/3/ Incorporated by reference as an exhibit to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1997 (Commission File No.
0-26788).
/4/ Incorporated by reference as an exhibit to Registrant's Current Report on
Form 8-K filed November 25, 1996 (Commission File No. 0-26788).
/5/ Incorporated by reference as an exhibit to Registrant's Current Report on
Form 8-K dated September 19, 1999 (Commission File No. 0-26788).
<PAGE>
EXHIBIT 2(C)
AGREEMENT AND PLAN OF MERGER
among
JEFFERSON-PILOT CORPORATION
LG MERGER CORP.
and
THE GUARANTEE LIFE COMPANIES INC.
Dated as of September 19, 1999
<PAGE>
TABLE OF CONTENTS
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ARTICLE I
THE MERGER
Section 1.1. The Merger............................................................................... 1
Section 1.2. Closing.................................................................................. 1
Section 1.3. Effective Time........................................................................... 2
Section 1.4. Effects of the Merger.................................................................... 2
Section 1.5. Certificate of Incorporation and By-Laws of the Surviving Corporation.................... 2
Section 1.6. Directors................................................................................ 2
Section 1.7. Officers................................................................................. 2
ARTICLE II
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
Section 2.1. Effect on Stock.......................................................................... 2
Section 2.2. Election Procedure....................................................................... 4
Section 2.3. Issuance of Parent Common Stock and Payment of Cash Consideration; Proration............. 5
Section 2.4. Appraisal Rights......................................................................... 7
Section 2.5. Exchange of Certificates................................................................. 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1. Organization, Qualification, Etc......................................................... 10
Section 3.2. Capital Stock............................................................................ 11
Section 3.3. Corporate Authority Relative to this Agreement; No Violation............................. 13
Section 3.4. Reports and Financial Statements......................................................... 14
Section 3.5. No Undisclosed Liabilities............................................................... 15
Section 3.6. No Violation of Law...................................................................... 15
Section 3.7. Environmental Laws and Regulations....................................................... 15
Section 3.8. No Undisclosed Employee Benefit Plan Liabilities or Severance Arrangements............... 16
Section 3.9. Absence of Certain Changes or Events..................................................... 16
Section 3.10. Investigations; Litigation.............................................................. 17
Section 3.11. Proxy Statement; Registration Statement; Other Information.............................. 17
Section 3.12. Lack of Ownership of Parent Common Stock................................................ 17
Section 3.13. Tax Matters............................................................................. 18
Section 3.14. Opinion of Financial Advisor............................................................ 19
Section 3.15. Required Vote of the Company Stockholders............................................... 19
Section 3.16. Material Contracts...................................................................... 19
Section 3.17. Intellectual Property Rights............................................................ 20
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Section 3.18. Year 2000 Matters....................................................................... 20
Section 3.19. Takeover Statute........................................................................ 20
Section 3.20. Finders or Brokers...................................................................... 21
Section 3.21. Rights Agreement........................................................................ 21
Section 3.22. Insurance Laws.......................................................................... 21
Section 3.23. Insurance Business...................................................................... 21
Section 3.24. Agents.................................................................................. 22
Section 3.25. Separate Accounts....................................................................... 23
Section 3.26. Derivatives............................................................................. 23
Section 3.27. Investments............................................................................. 24
Section 3.28. Ohio Farmers Compliance................................................................. 24
Section 3.29. Real Estate............................................................................. 24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Section 4.1. Organization, Qualification, Etc........................................................ 24
Section 4.2. Capital Stock........................................................................... 25
Section 4.3. Corporate Authority Relative to this Agreement; No Violation............................ 25
Section 4.4. Reports and Financial Statements........................................................ 26
Section 4.5. No Undisclosed Liabilities.............................................................. 27
Section 4.6. No Violation of Law..................................................................... 28
Section 4.7. Absence of Certain Changes or Events.................................................... 28
Section 4.8. Investigations; Litigation.............................................................. 28
Section 4.9. Proxy Statement; Registration Statement; Other Information.............................. 28
Section 4.10. Lack of Ownership of the Company Common Stock........................................... 28
Section 4.11. Vote of Parent Stockholders............................................................. 29
Section 4.12. Finders or Brokers...................................................................... 29
Section 4.13. Financing............................................................................... 29
Section 4.14. Employment Agreement.................................................................... 29
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.1. Conduct of Business by the Company or Parent............................................ 29
Section 5.2. Investigation........................................................................... 33
Section 5.3. Proxy Material; Registration Statement.................................................. 33
Section 5.4. Affiliate Agreements.................................................................... 34
Section 5.5. Employee Incentive and Benefit Plans.................................................... 35
Section 5.6. Filings; Other Action................................................................... 35
Section 5.7. Further Assurances...................................................................... 36
Section 5.8. Takeover Statute........................................................................ 36
Section 5.9. No Solicitation......................................................................... 36
Section 5.10. Public Announcements.................................................................... 38
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ii
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Section 5.11. Indemnification and Insurance........................................................... 38
Section 5.12. Accountants' "Comfort" Letters.......................................................... 39
Section 5.13. Additional Reports and Information...................................................... 39
Section 5.14. Company Rights Plan..................................................................... 40
Section 5.15. Control of Other Party's Business....................................................... 40
Section 5.16. Omaha Operations........................................................................ 40
Section 5.17. Nebraska Domicile....................................................................... 40
Section 5.18. Tax Matters............................................................................. 40
Section 5.19. Financing............................................................................... 40
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.1. Conditions to Each Party's Obligation to Effect the Merger............................... 40
Section 6.2. Conditions to Obligation of the Company to Effect the Merger............................. 41
Section 6.3. Conditions to Obligation of Parent to Effect the Merger.................................. 42
ARTICLE VII
TERMINATION
Section 7.1. Termination or Abandonment............................................................... 43
Section 7.2. Termination Fee.......................................................................... 44
Section 7.3. Amendment or Supplement.................................................................. 44
Section 7.4. Extension of Time, Waiver, Etc........................................................... 45
ARTICLE VIII
MISCELLANEOUS
Section 8.1. No Survival of Representations and Warranties............................................ 45
Section 8.2. Expenses................................................................................. 45
Section 8.3. Counterparts; Effectiveness.............................................................. 45
Section 8.4. Governing Law............................................................................ 45
Section 8.5. Jurisdiction............................................................................. 45
Section 8.6. Notices.................................................................................. 46
Section 8.7. Assignment; Binding Effect............................................................... 47
Section 8.8. Severability............................................................................. 47
Section 8.9. Enforcement of Agreement................................................................. 47
Section 8.10. Entire Agreement; No Third-Party Beneficiaries.......................................... 47
Section 8.11. Headings................................................................................ 47
Section 8.12. Definitions............................................................................. 48
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iii
<PAGE>
Exhibit A Form of Affiliate Letter
Exhibit B Actions Regarding Employee Benefit Plans
Exhibit C Amendment to Rights Plan
Exhibit D Form of Noncompetition, Nonsolicitation and Cancellation
Agreement with Robert D. Bates
Exhibit E Form of Employment Agreement with Robert D. Bates
iv
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Agent................................................................................... 3.24(a)
Agreement............................................................................... Opening Clause
All Cash Transaction.................................................................... 2.3(c)
Applicable Insurance Laws............................................................... 3.22
Average Parent Price.................................................................... 2.1(b)
Cancellation Agreement.................................................................. 3.8(c)
Cash Consideration...................................................................... 2.1(b)
Cash Election........................................................................... 2.2(a)
Cash Election Number.................................................................... 2.3(a)
Cash Election Shares.................................................................... 2.3(b)
Cash Fraction........................................................................... 2.3(b)
Certificate of Merger................................................................... 1.3
Certificates............................................................................ 2.1(b)
Closing Date............................................................................ 1.2
Code.................................................................................... Preamble
Common Stock Consideration.............................................................. 2.1(b)
Company................................................................................. Opening Clause
Company Actuarial Analyses.............................................................. 3.23(b)
Company Affiliated Group................................................................ 3.13(a)
Company Common Stock.................................................................... 2.1(a)
Company Disclosure Schedule............................................................. Article III,1st Paragraph
Company Insurance Subsidiaries.......................................................... 3.1(b)
Company Material Contracts.............................................................. 3.16
Company Meeting......................................................................... 5.3(d)
Company Option Plans.................................................................... 3.2(a)
Company Preferred Stock................................................................. 3.2(a)
Company Representatives................................................................. 5.9(a)
Company Required Approvals.............................................................. 3.3(b)
Company Rights Plan..................................................................... 3.2(a)
Company SAP Statements.................................................................. 3.4(b)
Company SEC Reports..................................................................... 3.4(a)
Company Stockholder Approval............................................................ 3.15
Company Stockholder Rights.............................................................. 3.2(a)
Confidentiality Agreement............................................................... 5.2
Costs................................................................................... 5.11(a)
Current Company Group................................................................... 3.13(a)
Current Premium......................................................................... 5.11(c)
D&O Insurance........................................................................... 5.11(c)
DGCL.................................................................................... Preamble
Dissenting Share........................................................................ 2.4
Distribution Date....................................................................... 3.21
Effective Time.......................................................................... 1.3
Election................................................................................ 2.2(a)
Election Deadline....................................................................... 2.2(c)
Election Form........................................................................... 2.2(b)
</TABLE>
v
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<S> <C>
Employment Agreement.................................................................... 4.14
Environmental Claims.................................................................... 3.7
Environmental Laws...................................................................... 3.7
ERISA................................................................................... 3.8(a)
Exchange Act............................................................................ 3.3(b)
Exchange Agent.......................................................................... 2.5(a)
Exchange Fund........................................................................... 2.5(a)
Exchange Ratio.......................................................................... 2.1(b)
GAAP.................................................................................... 3.4(a)
HSR Act................................................................................. 3.3(b)
Indemnified Parties..................................................................... 5.11(a)
Intellectual Property................................................................... 3.17
Knowledge............................................................................... 8.12(b)
Lien.................................................................................... 3.1(a)
Mailing Date............................................................................ 2.2(b)
Material Adverse Effect................................................................. 3.1(a)
Material State.......................................................................... 3.13(e)
Merger.................................................................................. Preamble
Merger Consideration.................................................................... 2.1(b)
Merger Price............................................................................ 2.1(b)
Merger Sub.............................................................................. Opening Clause
Nebraska Insurers Demutualization Act................................................... 8.12(c)
Nebraska Shareholders Protection Act.................................................... 8.12(d)
Non-Electing Shares..................................................................... 2.3(b)
Non-Election............................................................................ 2.2(a)
NYSE.................................................................................... 2.1(b)
Option Amount........................................................................... 2.1(c)
Parent.................................................................................. Opening Clause
Parent Common Stock..................................................................... 2.1(b)
Parent Disclosure Schedule.............................................................. Article IV, 1st Paragraph
Parent Preferred Stock.................................................................. 4.2(a)
Parent Required Approvals............................................................... 4.3(b)
Parent Rights Agreement................................................................. 2.1(b)
Parent SAP Statements................................................................... 4.4(b)
Parent SEC Reports...................................................................... 4.4(a)
Parent Stockholder Rights............................................................... 2.1(b)
Past Company Group...................................................................... 3.13(a)
Proxy Statement......................................................................... 3.11
Registration Statement.................................................................. 5.3(a)
Regulatory Law.......................................................................... 5.6(c)
SEC..................................................................................... 3.4(a)
Securities Act.......................................................................... 3.3(b)
Separate Accounts....................................................................... 3.25(a)
Shares.................................................................................. 2.2
Stock Election.......................................................................... 2.2(a)
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vi
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Stock Election Number................................................................... 2.3(a)
Stock Election Shares................................................................... 2.3(b)
Stock Fraction.......................................................................... 2.3(c)
Subsidiaries............................................................................ 8.12(a)
Superior Proposal....................................................................... 5.9(a)
Surviving Corporation................................................................... 1.1
Takeover Proposal....................................................................... 5.9(a)
Tax Return.............................................................................. 3.13(e)
Taxes................................................................................... 3.13(e)
Termination Date........................................................................ 5.1
Termination Fee......................................................................... 7.2
Trading Average......................................................................... 2.1(b)
Trading Day............................................................................. 2.1(b)
Triggering Event........................................................................ 21
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vii
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of September 19, 1999 (the
"Agreement"), among JEFFERSON-PILOT CORPORATION, a North Carolina corporation
---------
("Parent"), LG MERGER CORP., a Delaware corporation and a wholly owned
------
subsidiary of Parent ("Merger Sub"), and THE GUARANTEE LIFE COMPANIES INC., a
----------
Delaware corporation (the "Company").
-------
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have approved the acquisition of the Company by Parent upon the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have approved and declared the advisability of this Agreement and the
merger of the Company with Merger Sub (the "Merger") in accordance with the
------
General Corporation Law of the State of Delaware ("DGCL") and upon the terms and
----
subject to the conditions set forth in this Agreement; and
WHEREAS, except in the event of an All Cash Transaction, for United States
federal income tax purposes, the Merger is intended to qualify as a
reorganization within the meaning of Section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code"), and this Agreement is
----
hereby adopted as a plan of reorganization for purposes of Section 368 of the
Code;
NOW THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained herein, and intending to be
legally bound hereby, Parent, Merger Sub and the Company agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to Section 2.3(f) and
----------
the conditions set forth in this Agreement and in accordance with the DGCL, the
Company shall be merged with and into Merger Sub at the Effective Time of the
Merger. Following the Merger, the separate corporate existence of the Company
shall cease, and Merger Sub shall continue as the surviving corporation (the
"Surviving Corporation").
---------------------
Section 1.2. Closing. The closing of the Merger shall, subject to Section
-------
2.3(e), take place at 10:00 a.m. on a date to be specified by the parties (the
"Closing Date") which (except as set forth herein) shall be no later than the
------------
second business day after the satisfaction or waiver of the conditions set forth
in Article VI at the offices of King & Spalding, 1185 Avenue of the Americas,
New York, unless another date or place is agreed to in writing by the parties
hereto, provided the Closing Date shall not take place prior to December 15,
1999, unless otherwise agreed to in writing by the parties hereto.
1
<PAGE>
Section 1.3. Effective Time. On the Closing Date, the parties shall
--------------
execute and file in the office of the Secretary of State of the State of
Delaware a certificate of merger (the "Certificate of Merger") executed in
---------------------
accordance with the DGCL and shall make all other filings or recordings, if any,
required under the DGCL. The Merger shall become effective at the time of filing
of the Certificate of Merger, or at such later time as is agreed upon by the
parties hereto and set forth therein (such time as the Merger becomes effective
is referred to herein as the "Effective Time").
--------------
Section 1.4. Effects of the Merger. The Merger shall have the effects set
---------------------
forth in applicable provisions of the DGCL.
Section 1.5. Certificate of Incorporation and By-Laws of the Surviving
---------------------------------------------------------
Corporation. (a) Subject to Section 2.3(f), the Certificate of Incorporation
- -----------
of Merger Sub as in effect immediately prior to the Effective Time shall become
the Certificate of Incorporation of the Surviving Corporation after the
Effective Time, until thereafter amended as provided by the DGCL and such
Certificate of Incorporation.
(b) Subject to Section 2.3(f), the By-laws of Merger Sub as in effect
immediately prior to the Effective Time shall become the By-laws of the
Surviving Corporation after the Effective Time, until thereafter amended as
provided by the DGCL, the Certificate of Incorporation of the Surviving
Corporation and such By-laws.
Section 1.6. Directors. The directors of Merger Sub immediately prior to
---------
the Effective Time shall become the directors of the Surviving Corporation,
until the earlier of their death, resignation or removal or until their
respective successors are duly elected and qualified.
Section 1.7. Officers. The officers of the Company immediately prior to
--------
the Effective Time shall become the officers of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified.
ARTICLE II
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES
Section 2.1. Effect on Stock. At the Effective Time, by virtue of the
---------------
Merger and without any action on the part of the Company, Merger Sub or the
holders of any securities of the Company or Merger Sub:
(a) Each share of common stock, par value $.01 per share, of the
Company (together with the associated Company Stockholder Rights, the
"Company Common Stock") issued and held, immediately prior to the Effective
--------------------
Time, in the Company's treasury or by any of the Company's direct or
indirect wholly owned subsidiaries, and each share of Company Common Stock
that is owned by Parent, Merger Sub or any other wholly owned subsidiary of
Parent (except for shares held in a separate account or any mutual fund of
any Subsidiary of Parent), shall automatically be cancelled and retired and
shall cease to exist, and no consideration shall be delivered in exchange
therefor.
2
<PAGE>
(b) Each issued and outstanding share of Company Common Stock (other
than shares to be cancelled in accordance with Section 2.1(a) and
Dissenting Shares) shall, at the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into
the right to receive a fraction of a duly authorized, validly issued, fully
paid and nonassessable share of common stock of Parent, par value $1.25
(together with the associated common share purchase rights (the "Parent
------
Stockholder Rights") issued pursuant to the Amended and Restated Rights
------------------
Agreement dated as of November 7, 1994 between Parent and First Union
National Bank as Rights Agent (as amended from time to time, the "Parent
------
Rights Agreement"), the "Parent Common Stock"), or cash, or a combination
---------------- -------------------
of Parent Common Stock and cash, in accordance with the following:
(i) a fraction of a duly authorized, validly issued, fully paid and
nonassessable share of Parent Common Stock (the "Common Stock
------------
Consideration"), calculated by dividing (x) $32.00 (the "Merger
------------- - ------
Price") by (y) the Average Parent Price, rounded to four decimal
----- -
places (such fraction being referred to herein as the "Exchange
--------
Ratio"). As used herein, the "Average Parent Price" shall mean
----- --------------------
the average of the high and low sales prices, regular way, per
share of Parent Common Stock as reported in The Wall Street
Journal on each of the 10 consecutive New York Stock Exchange
("NYSE") trading days (each, a "Trading Day") ending on (and
---- -----------
including) the fourth Trading Day prior to the Effective Time
(the "Trading Average"); or
---------------
(ii) $32.00 in cash, without any interest thereon (the "Cash
----
Consideration"; the Common Stock Consideration and the Cash
-------------
Consideration, collectively, the "Merger Consideration");
--------------------
in each case as the holder thereof shall have elected or be deemed to have
elected, in accordance with and subject to the limitations set forth in
Section 2.2 hereof determined as provided in Section 2.3 hereof.
As of the Effective Time, all such shares of Company Common Stock shall no
longer be outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Certificates") shall cease to have any rights with
------------
respect thereto, except as otherwise provided herein or by law.
(c) Each option granted under the Company's option plans held by
employees and directors outstanding at the Effective Time to acquire a
share of Company Common Stock shall be converted into the right to receive
an amount in cash (the "Option Amount") equal to the Cash Consideration
-------------
less the exercise price therefor. As promptly as practicable following the
Effective Time, the Surviving Corporation shall pay to each holder of one
or more options the applicable Option Amount (less any applicable
withholding taxes). On the Closing Date, the Company shall deposit in a
bank account not within the Company's control an amount of cash equal to
the aggregate payments to be made pursuant to the prior sentence together
with instructions that such cash be
3
<PAGE>
promptly distributed following the Effective Time to the holders of such
options in accordance with this Section.
(d) Each issued and outstanding share of common stock, par value $100
per share, of Merger Sub shall be converted into one validly issued, fully
paid and nonassessable share of common stock of the Surviving Corporation.
(e) The calculations of the computations required by this Article II
shall be prepared by Parent prior to the Closing Date and shall be set
forth in a statement furnished to the Company showing in reasonable detail
the manner of calculation.
(f) At the Effective Time, the stock transfer books of the Company
shall be closed as to holders of the Company Common Stock immediately prior
to the Effective Time and no transfer of the Company Common Stock by any
such holder shall thereafter be made or recognized. If, after the Effective
Time, Certificates are properly presented in accordance with this Article
II to the Exchange Agent, such Certificates shall be canceled and exchanged
for certificates representing the number of shares of Parent Common Stock,
and/or a check representing the amount of cash, if any, into which the
Company Common Stock represented thereby was converted in the Merger.
Section 2.2. Election Procedure. Each holder (or beneficial owner through
------------------
appropriate and customary documentation and instructions) of shares of Company
Common Stock ("Shares") (other than holders of Shares to be canceled as set
------
forth in Section 2.1(a)) shall have the right to submit a request specifying the
number of Shares that such holder desires to have converted into shares of
Parent Common Stock in the Merger and the number of Shares that such holder
desires to have converted into the right to receive Cash Consideration in the
Merger in accordance with the following procedure:
(a) Subject to Section 2.3, each holder of Shares may specify in a
request made in accordance with the provisions of this Section 2.2 (herein
called an "Election") (i) the number of Shares owned by such holder that
-------- -
such holder desires to have converted into Parent Common Stock in the
Merger (a "Stock Election") and (ii) the number of Shares owned by such
-------------- --
holder that such holder desires to have converted into the right to receive
the Cash Consideration in the Merger (a "Cash Election") and (iii) the
------------- ---
number of Shares owned by such holder as to which such holder has no
preference as to the receipt of Cash Consideration or Parent Common Stock
for such shares (a "Non-Election").
------------
(b) An election form and other appropriate and customary transmittal
materials (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of
such Certificates to the Exchange Agent) in such form as Parent and the
Company shall mutually agree (the "Election Form") shall be mailed thirty
-------------
days prior to the anticipated Effective Time or on such other date as
Parent and the Company shall mutually agree (the "Mailing Date") to each
------------
holder of record of Company Common Stock as of five business days prior to
the Mailing Date.
4
<PAGE>
(c) Any Election shall have been made properly only if the Exchange
Agent shall have received, by 5:00 p.m. local time in the city in which the
principal office of such Exchange Agent is located, on the fifth day prior
to the anticipated Effective Time (or such other time and date as Parent
and the Company shall mutually agree) (the "Election Deadline"), an
-----------------
Election Form properly completed and signed and accompanied by Certificates
for the Shares to which such Election Form relates (or customary affidavits
and indemnification regarding the loss or destruction of such Certificate
or Certificates or by an appropriate guarantee of delivery of such
Certificates, as set forth in such Election Form, from a member of any
registered national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company in the
United States provided such certificates are in fact delivered to the
Exchange Agent by the time required in such guarantee of delivery).
Failure to deliver Shares covered by such a guarantee of delivery within
the time set forth on such guarantee shall be deemed to invalidate any
otherwise properly made Election.
(d) Any Company stockholder may at any time prior to the Election
Deadline revoke or change his or her Election by written notice received by
the Exchange Agent prior to the Election Deadline accompanied by a properly
completed and signed, revised Election Form or by withdrawal of his or her
Certificates for Shares, or of the guarantee of delivery of such
Certificates, previously deposited with the Exchange Agent. In the event
an Election Form is revoked prior to the Election Deadline, the Shares
represented by such Election Form shall (except in the case of an All Cash
Transaction) be promptly returned without charge to the person submitting
the Election Form upon written request to that effect from the holder who
submitted the Election Form. The Exchange Agent shall have reasonable
discretion to determine whether any election, revocation or change has been
properly or timely made and to disregard immaterial defects in the Election
Forms, and any good faith decisions of the Exchange Agent regarding such
matters shall be binding and conclusive. The Exchange Agent shall be under
no obligation to notify any person of any defect in an Election Form. All
Elections shall be revoked automatically in the event of an All Cash
Transaction or if the Exchange Agent is notified in writing by Parent or
the Company that this Agreement has been terminated.
(e) Within fifteen calendar days after the Election Deadline, unless
the Effective Time has not yet occurred, in which case as soon thereafter
as practicable, Parent shall cause the Exchange Agent to effect the
allocation among the holders of Company Common Stock of rights to receive
Parent Common Stock or Cash Consideration in the Merger in accordance with
Section 2.3.
Section 2.3. Issuance of Parent Common Stock and Payment of Cash
---------------------------------------------------
Consideration; Proration. The manner in which each Share (other than Shares to
- ------------------------
be canceled as set forth in Section 2.1(a) and Dissenting Shares) shall be
converted into Parent Common Stock or the right to receive the Cash
Consideration at the Effective Time shall be as set forth in this Section 2.3.
All references to "outstanding" Shares in this Section 2.3 shall mean (i) all
-
Shares outstanding immediately prior to the Effective Time, less (ii) Shares to
--
be cancelled as set forth in Section 2.1(a).
5
<PAGE>
(a) As is more fully set forth below, the number of Shares to be
converted into the right to receive the Cash Consideration pursuant to the
Merger shall be equal to 50% of all outstanding Shares less the sum of (i)
-
the number of Dissenting Shares, if any, which are not to be treated as
Non-Electing Shares pursuant to Section 2.4 and (ii) the number of Shares
--
to be exchanged for cash in lieu of fractional shares pursuant to Section
2.5(e) (the "Cash Election Number"). The number of Shares to be converted
--------------------
into the right to receive Parent Common Stock in the Merger shall be equal
to 50% of all outstanding Shares (the "Stock Election Number").
---------------------
(b) If the aggregate number of Shares covered by Cash Elections (the
"Cash Election Shares") exceeds the Cash Election Number, all Shares
--------------------
covered by Stock Elections (the "Stock Election Shares") and all Shares
---------------------
covered by Non-Elections (the "Non-Electing Shares") shall be converted
-------------------
into the right to receive Parent Common Stock, and the Cash Election Shares
shall be converted into the right to receive Parent Common Stock and cash
in the following manner:
each Cash Election Share shall be converted into the right to receive
(i) an amount in cash, without interest, equal to the product of (x)
- -
the Cash Consideration and (y) a fraction (the "Cash Fraction"), the
- -------------
numerator of which shall be the Cash Election Number and the
denominator of which shall be the total number of Cash Election
Shares, and (ii) a number of shares of Parent Common Stock equal to
--
the product of (x) the Common Stock Consideration and (y) a fraction
- -
equal to one minus the Cash Fraction.
(c) If the aggregate number of Stock Election Shares exceeds the
Stock Election Number, all Cash Election Shares and all Non-Electing Shares
shall be converted into the right to receive cash, and all Stock Election
Shares shall be converted into the right to receive Parent Common Stock and
cash in the following manner:
each Stock Election Share shall be converted into the right to receive
(i) a number of shares of Parent Common Stock equal to the product of
-
(x) the Common Stock Consideration and (y) a fraction (the "Stock
- - -----
Fraction"), the numerator of which shall be the Stock Election Number
--------
and the denominator of which shall be the total number of Stock
Election Shares, and (ii) an amount in cash, without interest, equal
--
to the product of (x) the Cash Consideration and (y) a fraction equal
- -
to one minus the Stock Fraction.
(d) For the purposes of this Section 2.3, outstanding Shares as to
which an Election is not in effect at the Election Deadline shall be
considered Non-Electing Shares. If Parent and the Company shall determine
that any Election is not properly made with respect to any Shares, such
Election shall be deemed to be not in effect, and the Shares covered by
such Election shall, for purposes hereof, be deemed to be Non-Electing
Shares.
6
<PAGE>
(e) Notwithstanding any provision of this Agreement to the contrary,
all outstanding Shares shall be converted in the Merger into Cash
Consideration (i) in the event that the Average Parent Price is less than
-
$65.00 per Share, and Parent elects to pay the Cash Consideration for all
outstanding Shares by delivering written notice to the Company of such
election within two (2) business days following determination of the
Average Parent Price; (ii) in the event that the Average Parent Price
--
exceeds $75.00 per Share; and (iii) in the event that the closing price of
---
Parent Common Stock on the NYSE on the Trading Day immediately preceding
the Closing Date scheduled in accordance with Section 1.2 (without taking
account the last sentence of this subsection) is less than the Average
Parent Price, and as a result, the opinion required by either Section
6.2(b) or Section 6.3(b) is not delivered (in any of the events described
under this subsection (e), the Merger shall be an "All Cash Transaction").
--------------------
In the event that the Merger is an All Cash Transaction because of clause
(iii) above, the Closing Date shall be extended by two business days, but
the Average Parent Price shall not be recalculated as a result of such
extension.
(f) Notwithstanding any provision of this Agreement to the contrary,
in the event that the Merger is an All Cash Transaction, then the
transaction will be treated as an acquisition by Parent of all of the stock
of the Company, and the structure of the Merger will change, such that the
Merger Sub will merge with and into the Company, the separate existence of
Merger Sub will cease and the Company will continue as the Surviving
Corporation and the Certificate of Incorporation and By-laws of the Company
will become the Certificate of Incorporation and By-laws of the Surviving
Corporation.
Section 2.4. Appraisal Rights. Notwithstanding any provision of this
----------------
Agreement to the contrary, each outstanding share of Company Common Stock the
holder of which has not voted in favor of the Merger, has perfected such
holder's right to an appraisal of such holder's shares in accordance with the
applicable provisions of the DGCL and has not effectively withdrawn or lost such
right to appraisal (a "Dissenting Share") shall not be converted into or
----------------
represent a right to receive the Merger Consideration, but the holder thereof
shall be entitled only to such rights as are granted by the applicable
provisions of the DGCL; provided, however, that any Dissenting Share held by a
-------- -------
person at the Effective Time who shall, after the Effective Time, withdraw the
demand for appraisal within 60 days after the Effective Time or shall lose the
right of appraisal, in either case pursuant to the DGCL, shall be treated as a
Non-Electing Share for purposes of Section 2.3. The Company shall give Parent
(i) prompt notice of any written demands for appraisal, withdrawals of demands
-
for appraisal and any other instruments served pursuant to the applicable
provisions of the DGCL relating to the appraisal process received by the Company
and (ii) the opportunity to direct all negotiations and proceedings with respect
--
to demands for appraisal under the DGCL. The Company will not voluntarily make
any payment with respect to any demands for appraisal and will not, except with
the prior written consent of Parent, settle or offer to settle any such demands.
Notwithstanding anything to the contrary in this Section 2.4, if (A) the Merger
-
is rescinded or abandoned or (B) the stockholders of the Company revoke the
-
authority to effect the Merger, the right of any stockholder of the Company to
be paid the fair value of such stockholder's Dissenting Shares pursuant to the
DGCL shall cease.
Section 2.5. Exchange of Certificates. (a) Exchange Agent. As of the
------------------------ --------------
Effective Time, Parent shall enter into an agreement with First Union National
Bank or such other bank or trust
7
<PAGE>
company as may be designated by Parent and as shall be reasonably satisfactory
to the Company (the "Exchange Agent"), which shall provide that Parent shall
--------------
deposit with the Exchange Agent as promptly as practicable following the
Effective Time, for the benefit of the holders of shares of Company Common
Stock, for exchange in accordance with this Article II, through the Exchange
Agent, the aggregate Merger Consideration plus additional cash for dividends and
fractional shares. The aggregate Merger Consideration (together with any
dividends or distributions with respect thereto with a record date after the
Effective Time) and any cash payable in lieu of any fractional shares of Parent
Common Stock are hereinafter referred to as the "Exchange Fund."
-------------
(b) Exchange Procedures. Upon surrender of a Certificate for cancellation
-------------------
to the Exchange Agent, the holder of such Certificate shall be entitled to
receive in exchange therefor the applicable Merger Consideration, certain
dividends or other distributions in accordance with Section 2.5(c) and cash in
lieu of any fractional share in accordance with Section 2.5(e), and the
Certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, the applicable Merger Consideration may be
issued to a person other than the person in whose name the Certificate so
surrendered is registered if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such issuance
shall pay any transfer or other non-income taxes required by reason of the
issuance of shares of Parent Common Stock to a person other than the registered
holder of such Certificate or establish to the satisfaction of Parent that any
such tax has been paid or is not applicable. Parent or the Exchange Agent shall
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Company Common Stock such amounts as
Parent or the Exchange Agent are required to withhold or deduct under the Code
or any provision of state, local or foreign tax law with respect to the making
of such payment. To the extent that amounts are so withheld by Parent or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Company Common Stock in
respect of whom such deduction and withholding were made by Parent or the
Exchange Agent. Until surrendered as contemplated by this Section 2.5, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the applicable Merger
Consideration, certain dividends or other distributions in accordance with
Section 2.5(c) and cash in lieu of any fractional share in accordance with
Section 2.5(e). No interest will be paid or will accrue on any cash payable to
holders of Certificates pursuant to the provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
------------------------------------------------
other distributions with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Parent Common Stock represented thereby, and no
cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.5(e), and all such dividends, other distributions and cash
in lieu of fractional shares of Parent Common Stock shall be paid by Parent to
the Exchange Agent and shall be included in the Exchange Fund, in each case
until the surrender of such Certificate in accordance with this Article II.
Subject to the effect of applicable escheat or similar laws and laws with
respect to the withholding of Taxes, following surrender of any such Certificate
there shall be paid to the holder of shares of Parent Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
-
amount of dividends or
8
<PAGE>
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock and the amount of any
cash payable in lieu of a fractional share of Parent Common Stock to which such
holder is entitled pursuant to Section 2.2(e) and (ii) at the appropriate
--
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with a payment date
subsequent to such surrender payable with respect to such whole shares of Parent
Common Stock. Parent shall make available to the Exchange Agent cash for these
purposes.
(d) No Further Ownership Rights in Company Common Stock. The payment of
---------------------------------------------------
the applicable Merger Consideration upon the surrender for exchange of
Certificates in accordance with the terms of this Article II (including
distributions and dividends paid pursuant to Section 2.5(c) and any cash paid in
lieu of fractional shares pursuant to Section 2.5(e)) shall be deemed payment in
full satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such Certificates, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time which may have been authorized or
made by the Company on such shares of Company Common Stock which remain unpaid
at the Effective Time.
(e) No Fractional Shares. (i) No certificates or scrip representing
--------------------
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution of Parent shall relate to
such fractional share interests and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of Parent.
(ii) As promptly as practicable following the Effective Time, the
Surviving Company shall pay to each holder of Company Common Stock an amount in
cash, if any, equal to the product obtained by multiplying the fractional
interest in a share of Parent Common Stock to which such holder (after taking
into account all shares of Company Common Stock held at the Effective Time by
such holder) would otherwise be entitled by the Average Parent Price.
(iii) As soon as practicable after the determination of the amount of cash,
if any, to be paid to holders of Company Common Stock with respect to any
fractional share interests, the Exchange Agent will make available such amounts
to such holders of Company Common Stock subject to the terms of Section 2.5(c).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
----------------------------
remains undistributed to the holders of the Certificates for six months after
the Effective Time shall be delivered to Parent upon demand, and any holders of
the Certificates who have not theretofore complied with this Article II shall
thereafter look only to Parent for payment of their claim for Merger
Consideration, any cash in lieu of fractional shares of Parent Common Stock and
any dividends or distributions with respect to Parent Common Stock.
(g) No Liability. None of the Company, Parent, Merger Sub, the Surviving
------------
Corporation or the Exchange Agent shall be liable to any person in respect of
any shares of Parent Common Stock (or dividends or distributions with respect
thereto) or cash from the Exchange Fund in each case delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
9
<PAGE>
(h) Investment of Exchange Fund. The Exchange Agent shall invest all cash
---------------------------
included in the Exchange Fund, as directed by Parent. Any interest and other
income resulting from such investments shall be paid to Parent.
(i) Lost Certificates. If any Certificate shall have been lost, stolen or
-----------------
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration and, if applicable, any cash in lieu of fractional shares, and
unpaid dividends and distributions on shares of Parent Common Stock deliverable
in respect thereof, pursuant to this Agreement.
(j) Adjustments. If at any time during the period between the date of this
-----------
Agreement and the Effective Time any change in the outstanding shares of capital
stock of the Company or Parent shall occur as a result of any reclassification,
recapitalization, stock split (including a reverse stock split) or combination,
exchange or readjustment of shares or any stock dividend or stock distribution
with a record date during such period, the Merger Consideration shall be
equitably adjusted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as specifically set forth, by reference to a particular section of
this Agreement, on the Disclosure Schedule delivered by the Company to Parent
prior to the execution of this Agreement (the "Company Disclosure Schedule"),
---------------------------
the Company represents and warrants to Parent and Merger Sub as follows:
Section 3.1. Organization, Qualification, Etc. (a) The Company is a
---------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and authority to own its
properties and assets and to carry on its business as it is now being conducted
and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualification, except for jurisdictions in which the
failure to be so qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect (as hereinafter defined) on the
Company. As used in this Agreement, any reference to any state of facts, event,
change or effect having a "Material Adverse Effect" on or with respect to the
-----------------------
Company or Parent, as the case may be, means such state of facts, event, change
or effect that has had, or would reasonably be expected to have, a material
adverse effect on the business, results of operations, prospects or financial
condition of the Company and its Subsidiaries (as defined in Section 8.12),
taken as a whole, or Parent and its Subsidiaries, taken as a whole, as the case
may be, other than any change, circumstance or effect relating to (i) the
-
economy or securities markets in general, (ii) the industries in which the
--
entity and its Subsidiaries operate and not specifically relating to the entity,
(iii) the announcement, pendency or consummation of the Merger or any other
---
transaction contemplated by this Agreement, or (iv) any action required to be
--
taken by the entity or any of its Subsidiaries by the terms hereof; or, with
respect to any such
10
<PAGE>
entity, any change, circumstance or event that would prevent, materially hinder
or materially and unreasonably delay the consummation of the transactions
contemplated by this Agreement by such entity. The copies of the Company's and
each Company Insurance Subsidiary's certificate of incorporation and by-laws
which have been delivered to Parent are complete and correct and in full force
and effect. Each of the Company's Subsidiaries is a corporation or partnership
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has the corporate power and
authority to own its properties and to carry on its business as it is now being
conducted, and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its property or the conduct of its
business requires such qualification, except for jurisdictions in which the
failure to be so qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Except as set forth in
Section 3.1(a) of the Company Disclosure Schedule, all the outstanding shares of
capital stock of, or other ownership interests in, the Company's Subsidiaries
which are corporations are validly issued, fully paid and non-assessable and all
the outstanding shares of capital stock of, or other ownership interests in, the
Company's Subsidiaries are owned by the Company, directly or indirectly, free
and clear of all liens, claims, mortgages, encumbrances, pledges, security
interests, equities or charges of any kind (each, a "Lien"). Except as set forth
----
in Section 3.1(a) of the Company Disclosure Schedule, there are no existing
options, rights of first refusal, preemptive rights, calls, claims or
commitments of any character relating to the issued or unissued capital stock or
other securities of, or other ownership interests in, any Subsidiary of the
Company.
(b) The Company conducts its insurance operations through the Subsidiaries
set forth on Section 3.1(b) of the Company Disclosure Schedule (collectively,
the "Company Insurance Subsidiaries"). Each of the Company Insurance
------------------------------
Subsidiaries is (i) duly licensed or authorized as an insurance company and,
-
where applicable, a reinsurer in its jurisdiction of incorporation, (ii) duly
--
licensed or authorized as an insurance company and, where applicable, a
reinsurer in each other jurisdiction where it is required to be so licensed or
authorized, and (iii) duly authorized in its jurisdiction of incorporation and
---
each other applicable jurisdiction to write each line of business reported as
being written in the Company SAP Statements (as hereinafter defined), except, in
any such case, where the failure to be so licensed or authorized, individually
or in the aggregate, does not constitute and could not be reasonably expected to
have a Material Adverse Effect on the Company. The Company has made all
required filings under applicable insurance holding company statutes except
where the failure to file, individually or in the aggregate, is not having and
could not be reasonably expected to have a Material Adverse Effect on the
Company.
(c) Except as set forth in Section 3.1(c) of the Company Disclosure
Schedule, the minutes of the Board of Directors, any investment committees, any
compensation committees, and stockholders' meetings and the stock books of the
Company and the Company Insurance Subsidiaries, in each case since January 1,
1997, all of which have been previously made available to Parent, are true and
complete in all material respects.
Section 3.2. Capital Stock. (a) The authorized stock of the Company
-------------
consists of 30,000,000 shares of Company Common Stock and 30,000 shares of
preferred stock, par value $1.00 per share ("Company Preferred Stock"). As of
-----------------------
September 14, 1999, 10,315,785 shares of Company Common Stock were issued, of
which 1,063,041 shares were held in the treasury of the Company, and a total of
1,555,828 shares were reserved for issuance under the Company
11
<PAGE>
Long Term Incentive Plan, the Company's Directors Stock Incentive Plan and the
1997 Associates Stock Incentive Plan ("Company Option Plans"). Thirty thousand
--------------------
shares of Company Preferred Stock are designated Series A Junior Participating
Cumulative Preferred Stock ("Company Junior Participating Preferred Stock"),
--------------------------------------------
none of which are outstanding as of the date hereof, and are reserved for
issuance in accordance with the Rights Agreement dated as of November 18, 1996
by and between the Company and ChaseMellon Shareholder Services, L.L.C, as
Rights Agent (the "Company Rights Plan"), pursuant to which the Company has
-------------------
issued rights (the "Company Stockholder Rights") to purchase shares of Company
--------------------------
Junior Participating Preferred Stock. All of the issued and outstanding shares
of Company Common Stock are, and all shares reserved for issuance will be, upon
issuance in accordance with the terms specified in the instruments or agreements
pursuant to which they are issuable, validly issued and are fully paid and non-
assessable. Except as set forth in Section 3.2(a) of the Company Disclosure
Schedule, there are no outstanding contractual obligations of the Company or any
of its Subsidiaries to repurchase, redeem, or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries, and there are no
outstanding subscriptions, options, warrants, rights or other arrangements or
commitments obligating the Company to issue any shares of its stock, or to pay
to any Person any amount based upon or derived from a formula utilizing its
stock price or performance, other than:
(i) the Company Stockholder Rights;
(ii) options to acquire a total of 1,011,861 shares of Company Common
Stock as of September 14, 1999 pursuant to the Company's Option
Plans, which options are completely and accurately listed by
optionee, price per share, date of grant and number of shares covered
thereby on Section 3.2(a) of the Company Disclosure Schedule;
(iii) restricted stock awards (as to which the restrictions have not
lapsed) relating to a total of 44,895 shares of Company Common Stock
pursuant to the Company's Option Plan and the Company's Directors
Stock Incentive Plan, which awards are completely and accurately
listed by grantee, date of grant and number of shares covered thereby
in Section 3.2(a) of the Company Disclosure Schedule; and
(iv) "phantom stock" units equivalent to a total of 78,882.4 shares of
Company Common Stock awarded through August 31, 1999 (the most recent
withholding date) pursuant to the Guarantee Mutual Life Company
Amended and Restated Phantom Stock Plan, the Guarantee Life Insurance
Company Deferred Compensation Plan and the Guarantee Life Insurance
Company Board of Directors Deferred Compensation Plan, which units
are completely and accurately listed by grantee and number of shares
covered thereby on Section 3.2(a) of the Company Disclosure Schedule,
it being understood that the actual number of such units to be
awarded pursuant to such Plans will reflect deferrals, under such
Plans as in effect at August 31, 1999, and dividends paid on the
Company Common Stock, through the Effective Time.
12
<PAGE>
(b) As of the date of this Agreement, no bonds, debentures, notes or other
indebtedness of the Company having the right to vote on any matters on which
stockholders may vote are issued or outstanding.
Section 3.3. Corporate Authority Relative to this Agreement; No Violation.
------------------------------------------------------------
(a) The Company has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by the Board of
Directors of the Company, no other corporate proceedings on the part of the
Company, other than obtaining Stockholder approval pursuant to Section 3.15, are
necessary to authorize the consummation of the transactions contemplated hereby.
The Board of Directors of the Company has taken all necessary and appropriate
action so that Section 203 of the DGCL will be inapplicable to this Agreement
and the transactions contemplated hereby. The Board of Directors of the Company
has determined that the transactions contemplated by this Agreement are in the
best interest of the Company and its stockholders, has declared the advisability
of this Agreement and has determined to recommend to such stockholders that they
approve and adopt this Agreement. Subject to the foregoing, this Agreement has
been duly and validly executed and delivered by the Company and, assuming this
Agreement constitutes a valid and binding agreement of the other parties hereto,
this Agreement constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms.
(b) Except as set forth in Section 3.3(b) of the Company Disclosure
Schedule, the Company is not subject to or obligated under any charter, by-law
or contract provision or any license, franchise or permit, or subject to any
order or decree or to the Knowledge of the Company any law or regulation, which,
by its terms, would be breached or violated or would accelerate any payment or
obligation, trigger any right of first refusal or other purchase right, result
in the loss of any material benefit thereunder, or result in the creation of a
lien, pledge, security interest, charge or other encumbrance on any assets as a
result of the Company executing or, subject to the adoption of this Agreement by
its stockholders, carrying out the transactions contemplated by this Agreement,
except for any breaches or violations which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Other than in
connection with or in compliance with (i) the provisions of DGCL, (ii) the
- --
Securities Act of 1933, as amended (the "Securities Act"), (iii) the Securities
-------------- ---
Exchange Act of 1934, as amended (the "Exchange Act"), (iv) the Hart-Scott-
------------ --
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (v)
------- -
Section 4043 of ERISA (as defined in Section 3.8), (vi) the Nebraska Insurers
--
Demutualization Act, the Nebraska Insurance Holding Company System Act, the
Pennsylvania Insurance Holding Company Act and any other applicable laws, rules,
regulations, practices and orders of any state insurance regulatory authority,
(vii) any applicable United States competition, antitrust and investment laws,
---
(viii) the securities or blue sky laws of the various states and (ix) the
---- --
Nebraska Shareholder Protection Act (collectively, the "Company Required
----------------
Approvals"), no authorization, consent or approval of, or filing with, any
- ---------
governmental body or authority is necessary for the consummation by the Company
of the transactions contemplated by this Agreement, except for such
authorizations, consents, approvals or filings, the failure to obtain or make
which would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
13
<PAGE>
Section 3.4. Reports and Financial Statements. (a) The Company has
--------------------------------
previously furnished or made available to Parent true and complete copies of:
(i) the Company's Annual Reports on Form 10-K filed with the
Securities and Exchange Commission (the "SEC") for each of the years ended
---
December 31, 1996, 1997 and 1998;
(ii) each definitive proxy statement filed by the Company with the
SEC since December 31, 1996;
(iii) each final prospectus filed by the Company with the SEC since
December 31, 1996, except any final prospectus on Form S-8; and
(iv) all Current Reports on Form 8-K and Quarterly Reports on Form
10-Q filed by the Company with the SEC since December 31, 1998.
As of their respective dates, such reports, proxy statements and
prospectuses (collectively, the "Company SEC Reports") (i) complied as to form
------------------- -
in all material respects with the applicable requirements of the Securities Act,
the Exchange Act and the rules and regulations promulgated thereunder and (ii)
--
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 audited consolidated financial statements and unaudited
consolidated interim financial statements included in the Company SEC Reports
(including any related notes and schedules) fairly present the financial
position of the Company and its consolidated Subsidiaries as of the dates
thereof and the results of operations and cash flows for the periods or as of
the dates then ended (subject, in the case of the unaudited interim financial
statements, to normal recurring year-end adjustments), in each case in
accordance with generally accepted accounting principles in the United States
("GAAP") consistently applied during the periods involved (except as otherwise
----
disclosed in the notes thereto). The Company has also previously furnished to
Parent all audit reports and letters to management regarding accounting controls
received since January 1, 1997 from the auditors of the Company and its
Subsidiaries and all responses thereto from the Company and its Subsidiaries.
Since December 31, 1996, the Company has timely filed all reports, registration
statements and other filings required to be filed by it with the SEC under the
rules and regulations of the SEC. None of the Company's Subsidiaries is
required to file any forms, reports or other documents with the SEC.
(b) The Company has made available to Parent true and complete copies of
the annual and quarterly statements of each of the Company Insurance
Subsidiaries as filed with the applicable insurance regulatory authorities for
the years ended December 31, 1996, 1997 and 1998 and the quarterly periods ended
March 31, 1999 and June 30, 1999, including all exhibits, interrogatories,
notes, schedules and any actuarial opinions, affirmations or certifications or
other supporting documents filed in connection therewith (collectively, the
"Company SAP Statements"). The Company SAP Statements were prepared in
----------------------
conformity with statutory accounting practices prescribed or permitted by the
applicable insurance regulatory authority consistently applied for the periods
covered thereby and present fairly the statutory financial position of such
Company Insurance Subsidiaries as at the respective dates thereof and the
14
<PAGE>
results of operations of such Subsidiaries for the respective periods then
ended. Section 3.4(b) of the Company Disclosure Schedules sets forth the
permitted exceptions from statutory accounting practices received from any
regulatory authorities. The Company SAP Statements complied in all material
respects with all applicable laws, rules and regulations when filed, and, to the
Knowledge of the Company, no material deficiency has been asserted with respect
to any Company SAP Statements by the applicable insurance regulatory body or any
other governmental agency or body. The annual statutory balance sheets and
income statements included in the Company SAP Statements have been audited by
KPMG Peat Marwick LLP, and the Company has made available to Parent true and
complete copies of all audit opinions related thereto. The Company has made
available to Parent true and complete copies of all examination reports of
insurance departments and any insurance regulatory agencies since January 1,
1996 relating to the Company Insurance Subsidiaries. To the Knowledge of the
Company, the amounts shown in the Company SAP Statements as reserves and
liabilities for past and future insurance policy benefits, losses, claims and
expenses under insurance policies as of the end of each such reporting period
were fairly stated in accordance with generally accepted actuarial principles
consistently applied, were based on actuarial assumptions which were in
accordance with those called for in the policy provisions and met the
requirements of the insurance laws of the applicable insurance authority, with
such exceptions as would not, individually or in the aggregate, reasonably be
likely to have a Material Adverse Effect. Such amounts shown on the Company SAP
Statements filed after the date hereof and on or prior to the Closing Date will
be so computed and based and will meet all such requirements.
Section 3.5. No Undisclosed Liabilities. Except as set forth in Section
--------------------------
3.5 of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, and there is no existing condition, situation
or set of circumstances which would reasonably be expected to result in such a
liability or obligation, except (a) liabilities or obligations adequately
-
accrued or reserved for in the Company SEC Reports filed on or prior to the date
hereof, (b) liabilities and obligations that would not be required by GAAP to be
-
reflected in the financial statements of the Company and (c) liabilities or
-
obligations which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
Section 3.6. No Violation of Law. Except as set forth in Section 3.6 of
-------------------
the Company Disclosure Schedule, the businesses of the Company and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental body or authority (provided that no
representation or warranty is made in this Section 3.6 with respect to
Environmental Laws (as hereinafter defined)) except (a) as described in the
-
Company SEC Reports and (b) for violations or possible violations which would
-
not, individually or in the aggregate, have a Material Adverse Effect on the
Company.
Section 3.7. Environmental Laws and Regulations. (a) The Company and
----------------------------------
each of its Subsidiaries is in compliance with all applicable international,
federal, state, local and foreign laws and regulations relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata)
(collectively, "Environmental Laws"), which compliance includes, but is not
------------------
limited to, the possession by the Company and its Subsidiaries of all material
permits and other governmental authorizations required under applicable
Environmental Laws, and compliance
15
<PAGE>
with the terms and conditions thereof, except for non-compliance which would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company; (b) neither the Company nor any of its Subsidiaries has received
-
written notice of, or is the subject of, any actions, causes of action, claims,
investigations, demands or notices by any person asserting an obligation to
conduct investigations or clean-up activities under Environmental Law or
alleging liability under or non-compliance with any Environmental Law
(collectively, "Environmental Claims") which would, individually or in the
--------------------
aggregate, have a Material Adverse Effect on the Company; and (c) there are no
-
facts, circumstances or conditions in connection with the operation of its
business or any currently or formerly owned, leased or operated facilities that
are reasonably likely to lead to any Environmental Claims in the future which
would, individually or in the aggregate, have a Material Adverse Effect on the
Company.
Section 3.8. No Undisclosed Employee Benefit Plan Liabilities or Severance
-------------------------------------------------------------
Arrangements. (a) All "employee benefit plans," as defined in Section 3(3) of
- ------------
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
-----
maintained or contributed to by the Company or its Subsidiaries are in
compliance with all applicable provisions of each of the Code and ERISA and the
rules and regulations thereunder, except where failure to comply with the terms
of any such plans or any such provision of applicable law would not have a
Material Adverse Effect on the Company. Except as set forth in Section 3.8(a)
of the Company Disclosure Schedule, no employee of the Company will be entitled
to any additional benefits or any acceleration of the time of payment or vesting
of any benefits under any employee incentive or benefit plan, program or
arrangement as a result of the transactions contemplated by this Agreement.
(b) Any amount or other entitlement that could be received (whether in
cash or property or the vesting of property) as a result of any of the
transactions contemplated by this Agreement by any employee, officer or director
of the Company or any of its affiliates who is a "disqualified individual" (as
such term is defined in proposed Treasury Regulation Section 1.280G-1) under any
employee benefit plan or other compensation arrangement currently in effect
would not be characterized as an "excess parachute payment" or a "parachute
payment" (as such terms are defined in Section 280G(b)(1) of the Code).
(c) The Company, Parent and Robert D. Bates have entered into a
noncompetition, nonsolicitation and cancellation agreement, the form of which is
attached hereto as Exhibit D (the "Cancellation Agreement") and which shall
----------------------
become effective immediately prior to the Effective Time. Such agreement has
been duly authorized, executed and delivered by the Company and Robert D. Bates,
and upon satisfaction of the conditions set forth therein, shall be enforceable
against the Company and Robert D. Bates in accordance with its terms.
Section 3.9. Absence of Certain Changes or Events. Other than the
------------------------------------
transactions contemplated or permitted by this Agreement or as disclosed in the
Company SEC Reports, since June 30, 1999, the businesses of the Company and its
Subsidiaries have been conducted in the ordinary course consistent with past
practice, there has not been any event, occurrence, development or state of
circumstances or facts that has had, or would have, a Material Adverse Effect on
the Company, and neither the Company nor any of its Subsidiaries has taken any
action that, if taken after the date hereof, except as set forth in Section 3.9
of the Company Disclosure Schedule, would have violated any of Subsections
5.1(a)(i), (ii) or (iv) through (xix) hereof.
16
<PAGE>
Section 3.10. Investigations; Litigation. Except as set forth in Section
--------------------------
3.10 of the Company Disclosure Schedule:
(a) there is no investigation or review pending by any governmental
body or authority with respect to the Company or any of its Subsidiaries
which would, individually or in the aggregate, have a Material Adverse
Effect on the Company, nor has any governmental body or authority notified
the Company of an intention to conduct the same; and
(b) there is no action, suit or proceeding pending (or, to the
Company's Knowledge, threatened) against or affecting the Company or its
Subsidiaries, or any of their respective properties at law or in equity, or
before any federal, state, local or foreign governmental or regulatory body
or authority, which would reasonably be expected to result in costs or
losses in excess of $1,000,000 in any single instance against or on behalf
of the Company or any Subsidiary, or any officer, employee or director
thereof in such individual's capacity as officer, employee or director of
the Company or any Subsidiary or involving any of their properties or
businesses, whether at law or in equity. None of such matters (singly or
in the aggregate) could reasonably be expected to result in a Material
Adverse Effect on the Company. Further, except as previously disclosed in
writing to Parent, there are no outstanding judgments, orders, decrees,
stipulations or awards (whether rendered by court or administrative agency,
or by arbitration, pursuant to a grievance or other procedures) against or
relating to the Company or any of its Subsidiaries which contain any
remaining material restrictions or obligations to perform.
Section 3.11. Proxy Statement; Registration Statement; Other Information.
----------------------------------------------------------
The Proxy Statement (as defined below), or any amendment thereof or supplement
thereto, at the date mailed to the Company's stockholders and at the time of the
Company Meeting, will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading, except that no representation is made by the
Company with respect to statements made therein based on information supplied by
Parent or Merger Sub in writing for inclusion in the Proxy Statement. None of
the information supplied by the Company for inclusion or incorporation by
reference in the Registration Statement (as defined in Section 5.3(a)(i)), or
any amendment thereof or supplement thereto, will, at the date it becomes
effective and at the time of the Company Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
will comply in all material respects with the provisions of the Exchange Act and
the rules and regulations promulgated thereunder. The letter to stockholders,
notice of meeting, proxy statement and form of proxy to be distributed to
stockholders in connection with the Merger and any schedules required to be
filed with the SEC in connection therewith are collectively referred to herein
as the "Proxy Statement."
---------------
Section 3.12. Lack of Ownership of Parent Common Stock. Neither the
----------------------------------------
Company nor any of its Subsidiaries owns any shares of Parent Common Stock or
other securities convertible into shares of Parent Common Stock (exclusive of
any shares owned by the Company's employee benefit plans).
17
<PAGE>
Section 3.13. Tax Matters. (a) All federal, state, local and foreign Tax
-----------
Returns required to be filed by or on behalf of the Company, each of its
Subsidiaries, and each affiliated, combined, consolidated or unitary group of
which the Company or any of its Subsidiaries (i) is a member (a "Current Company
- ---------------
Group") or (ii) has been a member within six years prior to the date hereof but
- ----- --
is not currently a member, but only insofar as any such Tax Return relates to a
taxable period ending on a date within the last six years during which the
Company or any of its Subsidiaries was a member (a "Past Company Group,"
------------------
together with Current Company Groups, a "Company Affiliated Group") have been
------------------------
timely filed, and all such Tax Returns are complete and accurate except to the
extent any failure to file or any inaccuracies in filed returns would not,
individually or in the aggregate, have a Material Adverse Effect on the Company
(it being understood that the representations made in this Section, to the
extent that they relate to Past Company Groups, are made to the Knowledge of the
Company). All Taxes due and owing by the Company, any Subsidiary of the Company
or any Company Affiliated Group have been timely paid, or adequately reserved
for, except to the extent any failure to pay or reserve would not, individually
or in the aggregate, have a Material Adverse Effect on the Company. There is no
audit examination, deficiency, refund litigation, proposed adjustment or matter
in controversy with respect to any Taxes due and owing by the Company, any
Subsidiary of the Company or any Affiliated Group which would, individually or
in the aggregate, have a Material Adverse Effect on the Company. All
assessments for Taxes due and owing by the Company, any Subsidiary of the
Company or any Company Affiliated Group with respect to completed and settled
examinations or concluded litigation have been paid. Prior to the date of this
Agreement, the Company has provided Parent with written schedules of (i) the
-
taxable years of the Company for which the statutes of limitations with respect
to federal income Taxes have not expired, and (ii) with respect to federal
--
income Taxes, for all taxable years for which the statute of limitations has not
yet expired, those years for which examinations have been completed, those years
for which examinations are presently being conducted, and those years for which
examinations have not yet been initiated. Except as set forth in Section 3.13
of the Company Disclosure Schedule, the Company and each of its Subsidiaries
have complied in all material respects with all rules and regulations relating
to tax information reporting and the payment and withholding of Taxes, except to
the extent any such failure to comply would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
(b) Neither the Company nor any of its Subsidiaries knows of any fact or
has taken any action that could reasonably be expected to prevent the Merger
from qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
(c) Neither the Company nor any of its Subsidiaries is a party to or bound
by (or has any obligation under) any Tax sharing, allocation, indemnity, or
similar contract.
(d) Neither the Company nor any of its Subsidiaries has entered into any
agreement with or requested relief from the IRS concerning the qualification of
any life insurance or annuity policy under or compliance with Sections 72,
101(f), 401(a), 403(b), 408, 457, 817, 7702 or 7702A or the Code, and the IRS
has not asserted in writing that any such policy fails to so qualify. The
assets of any separate account are adequately diversified within the meaning of
Section 817(h) of the Code, and each Company Insurance Subsidiary is treated for
federal tax purposes as the owner of the assets underlying the respective life
insurance policies and annuity
18
<PAGE>
contracts issued, entered into or sold by it, with such exceptions as would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect on the Company.
(e) For purposes of this Agreement: (i) "Taxes" means any and all
- -----
federal, state, local, foreign, provincial, territorial or other taxes, imposts,
rates, levies, assessments and other charges of any kind whatsoever whether
imposed directly or through withholding (together with any and all interest,
penalties, additions to tax and additional amounts applicable with respect
thereto), including, without limitation, income, franchise, windfall or other
profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
net worth, excise, withholding, ad valorem and value added taxes; (ii) "Tax
-- ---
Return" means any declaration, return, report, schedule, certificate, statement
- ------
or other similar document (including relating or supporting information)
required to be filed or, where none is required to be filed with a taxing
authority, the statement or other document issued by a taxing authority in
connection with any Tax, including, without limitation, any information return,
claim for refund, amended return or declaration of estimated Tax; and (iii)
---
"Material State" means any state for which the average allocation percentage of
--------------
the Company and its Subsidiaries for the past three years exceeds ten percent
(10%).
Section 3.14. Opinion of Financial Advisor. The Board of Directors of the
----------------------------
Company has received the opinion of Goldman, Sachs & Co., dated the date of this
Agreement, substantially to the effect that, as of such date, the Merger
Consideration is fair to the holders of the Company Common Stock from a
financial point of view.
Section 3.15. Required Vote of the Company Stockholders. The affirmative
-----------------------------------------
vote of the holders of a majority of the outstanding shares of Company Common
Stock (the "Company Stockholder Approval") is required to approve and adopt this
----------------------------
Agreement. The Company Stockholder Approval is sufficient to approve the
"control-share acquisition" under the Nebraska Shareholders Protection Act,
provided that neither Parent nor Merger Sub owns any shares of Company Common
- --------
Stock. No other vote of the stockholders of the Company, or of the holders of
any other securities of the Company (equity or otherwise), is required by law,
the certificate of incorporation or by-laws of the Company or otherwise in order
for the Company to consummate the Merger and the transactions contemplated
hereby.
Section 3.16. Material Contracts. Except as set forth in Section 3.16 of
------------------
the Company Disclosure Schedule or in the Company SEC Reports, neither the
Company nor any of its Subsidiaries is a party to or bound by any "material
contract" (as such term is defined in item 601(b)(10) of Regulation S-K of the
SEC) (all contracts of the type described in this Section 3.16 being referred to
herein as "Company Material Contracts"). Each Company Material Contract is
--------------------------
valid and binding on the Company and is in full force and effect, and the
Company and each of its Subsidiaries have performed all obligations required to
be performed by them to date under each Company Material Contract, except where
such noncompliance, individually or in the aggregate, would not have a Material
Adverse Effect on the Company. Neither the Company nor any of its Subsidiaries
knows of, or has received notice of, any violation or default under any Company
Material Contract except for such violations or defaults as would not in the
aggregate have a Material Adverse Effect on the Company.
19
<PAGE>
Section 3.17. Intellectual Property Rights. The Company and its
----------------------------
Subsidiaries have all right, title and interest in, or a valid and binding
license to use, all Intellectual Property (as defined below) individually or in
the aggregate material to the conduct of the businesses of the Company and its
Subsidiaries taken as a whole. Neither the Company nor any Subsidiary of the
Company is in default (or with the giving of notice or lapse of time or both,
would be in default) under any license to use such Intellectual Property, such
Intellectual Property is not being infringed by any third party, and neither the
Company nor any Subsidiary of the Company is infringing any Intellectual
Property of any third party, except for such defaults and infringements which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a Material Adverse Effect on the Company. For purposes of this
Agreement, "Intellectual Property" means patents and patent rights, trademarks
---------------------
and trademark rights, trade names and trade name rights, service marks and
service mark rights, service names and service name rights, copyrights and
copyright rights and other proprietary intellectual property rights and all
pending applications for and registrations of any of the foregoing, and computer
and network software programs. There is no pending or, to the Knowledge of the
Company, threatened significant claim or dispute regarding the ownership of, or
use by, the Company or any Subsidiary of any Intellectual Property.
Consummation of the transactions contemplated hereby will not result in the loss
of use of any software material to the Company's business.
Section 3.18. Year 2000 Matters. Except as would not, individually or in
-----------------
the aggregate, reasonably be expected to have a Material Adverse Effect on the
Company, each hardware, software and firmware product (including embedded
microcontrollers in computer equipment which are owned or licensed and used by
the Company or any Subsidiary and which are involved in electronic data
interchange and integration with third parties) owned or licensed and used by
the Company or any of its Subsidiaries will, when required to do so, correctly
differentiate between the years in different centuries and will accurately
process date/time data (including, but not limited to, calculating, comparing
and sequencing) from, into, and between the twentieth and twenty-first
centuries, including leap year calculations; provided, however, that the Company
-------- -------
makes and has made no representation or warranty to Parent as to the state of
readiness, with respect to the year 2000 issue, of its vendors and its
independent agents and brokers, although to the Knowledge of the Company there
is no known lack of readiness of any such third party that would reasonably be
expected to have a Material Adverse Effect on the Company.
Section 3.19. Takeover Statute. The Board of Directors of the Company has
----------------
approved this Agreement and the transactions contemplated hereby and, assuming
the accuracy of the representation and warranty contained in Section 4.10, such
approval constitutes approval of the Merger and the other transactions
contemplated hereby by the Board of Directors of the Company under the
provisions of Section 203 of the DGCL such that Section 203 of the DGCL does not
apply to this Agreement and the transactions contemplated hereby. To the
Knowledge of the Company, no other state takeover statute is applicable to the
Merger or the other transactions contemplated hereby other than the Nebraska
Shareholders Protection Act. Provided that neither Parent nor Merger Sub owns
any shares of Company Common Stock, upon receipt of the Company Stockholder
Approval, no other actions are required to achieve compliance with the Nebraska
Shareholders Protection Act.
20
<PAGE>
Section 3.20. Finders or Brokers. Except for Goldman, Sachs & Co., a copy
------------------
of whose engagement agreement has been or will be provided to Parent, neither
the Company nor any of its Subsidiaries has employed any investment banker,
broker, finder or intermediary in connection with the transactions contemplated
hereby who might be entitled to any fee or any commission in connection with or
upon consummation of the Merger.
Section 3.21. Rights Agreement. The Company has taken all necessary
----------------
action to avoid the triggering of the provisions of the Company Rights Plan in
connection with the entry into, the announcement of and the performance of the
transactions contemplated by this Agreement (including the Merger), with respect
to the Company Stockholder Rights issued pursuant to the Company Rights Plan.
Section 3.22. Insurance Laws. The business and operations of the Company
--------------
Insurance Subsidiaries (including, without limitation, business, marketing,
operations, sales and issuances conducted by or through Agents (as defined in
Section 3.24)) have been conducted in compliance with applicable laws (including
the filing of any required reports) regulating the business and products of
insurance and all applicable orders and directives of insurance regulatory
authorities (including federal authorities with respect to variable or other
registered insurance and annuity products) and market conduct recommendations
resulting from market conduct examinations of insurance regulatory authorities
(including federal authorities with respect to variable or other registered
insurance and annuity products) (collectively, "Applicable Insurance Laws"),
-------------------------
except as set forth in Section 3.22 of the Company Disclosure Schedule and
except where the failure to so conduct such business and operations would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect on the Company. In addition, except as would otherwise not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect on the Company: (i) there is no pending or, to the Knowledge of
-
the Company, threatened, charge by any insurance regulatory authority that any
of the Company Insurance Subsidiaries has violated, nor any pending or, to the
Knowledge of the Company, threatened investigation by any insurance regulatory
authority with respect to possible violations of, any Applicable Insurance Laws;
(ii) each Company Insurance Subsidiary has been duly authorized by the relevant
--
state insurance regulatory authorities to issue the policies and/or contracts of
insurance that it is currently writing and in the states in which it conducts
its business; and (iii) the Company Insurance Subsidiaries have filed all
---
reports required to be filed with any insurance regulatory authority. None of
the Company Insurance Subsidiaries is subject to any order or decree of any
insurance regulatory authority relating to such Company Insurance Subsidiary
which either (A) would, individually or in the aggregate, be reasonably likely
-
to have a Material Adverse Effect on the Company, or (B) relates to marketing,
-
sales, trade or underwriting practices (other than routine correspondence) from
and after January 1, 1997, and neither the Company nor any Company Insurance
Subsidiary has engaged in any activity which would reasonably be expected to
cause revocation or suspension of any such license or other permit and no action
or proceeding looking to or contemplating the revocation or suspension of any
such license or permit is pending or, to the Knowledge of the Company,
threatened.
Section 3.23. Insurance Business. (a) Except as set forth in Section
------------------
3.23(a) of the Company Disclosure Schedule, and except as would otherwise not,
individually or in the aggregate, have a Material Adverse Effect on the Company,
to the Knowledge of the Company, since January 1, 1997, all insurance policy
forms and all applications, riders and other forms and
21
<PAGE>
rates required to be filed with insurance regulatory authorities have been duly
filed by the Company Insurance Subsidiaries and all required approvals have been
duly obtained, and all such forms and rates and all marketing materials comply
in all material respects with applicable insurance laws and regulations.
(b) The Company has delivered to Parent true and complete copies of the
following actuarial reports (collectively, the "Company Actuarial Analyses"):
--------------------------
(i) the February 18, 1999 Tillinghast-Towers Perrin report as corrected and
-
supplemented by the June 30, 1999 report, and (ii) the 1998 Asset Adequacy
--
Analyses by each of the Company Insurance Subsidiaries' appointed actuaries,
prepared in conjunction with the 1998 SAP Statement. The information and data
furnished to Tillinghast or the appointed actuaries in connection with the
preparation of the Company Actuarial Analyses were accurate in all material
respects, provided that no representation or warranty is made with respect to
projections of future events, including future expenses, new production levels
or future management actions. The assumptions utilized in making such
projections were arrived at in good faith and the Company believes they were
reasonable when made. Further, the 1998 Asset Adequacy Analyses referenced in
(ii) above were prepared in conformity with generally accepted actuarial
standards consistently applied.
(c) Except as would not be, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on the Company, (i) all insurance
-
contracts, arrangements, treaties and agreements to which any Company Insurance
Subsidiary is a party on the date hereof are valid and binding on such Company
Insurance Subsidiary, enforceable in accordance with their terms, and such
Company Insurance Subsidiary is not in material breach of its obligations
thereunder, (ii) except as provided for in the Company SAP Statements, all
--
reinsurance represented by any such reinsurance treaties represents an admitted
asset or reduction of loss reserves of the Company Insurance Subsidiary in the
respective Company SAP Statements and their carrying values have been described
in conformity with statutory accounting practices and in accordance with values
described by the National Association of Insurance Commissioners, when
appropriate, consistent with the prior reporting practices of the Company
Insurance Subsidiaries, and (iii) the termination of any reinsurance treaty
---
between or among any Company Insurance Subsidiary will not result in adverse tax
consequences to any Company Insurance Subsidiary.
(d) Each of the Company Insurance Subsidiaries has complied in all
material respects with its respective underwriting standards and, with respect
to Insurance Contracts reinsured in whole or in part, such Insurance Contracts
conform in all respects to the standards agreed to with the reinsurer in the
related reinsurance, coinsurance or other similar contracts.
(e) To the Knowledge of the Company, all insurance and annuity contracts
marketed or issued for use in connection with any employee benefit plan (as
defined in ERISA) or for any individual retirement plan (as defined in Sections
403(b), 408, or 457 of the Code) have been designed, qualified (if applicable),
and administered in compliance with all applicable rules and regulations, except
where such noncompliance would not have a Material Adverse Effect on the
Company.
Section 3.24. Agents. (a) To the Knowledge of the Company, each
------
insurance agent, third party administrator, manager, broker and distributor
(each an "Agent"), at the time such Agent wrote, sold, produced or managed
-----
business for the Company Insurance Subsidiaries was
22
<PAGE>
duly licensed for such business, and no such Agent violated (or with or without
notice or lapse of time or both, would have violated) any term or provision of
any law applicable to the writing, sale, production or management of business
for any Company Insurance Subsidiary, except for such failures to be licensed or
such violations which individually or in the aggregate, have not had or are not
reasonably likely to have a Material Adverse Effect on the Company.
(b) Except as set forth in Section 3.24(b) of the Company Disclosure
Schedule, no Agent has binding authority on behalf of any Company Insurance
Subsidiary.
(c) To the Knowledge of the Company, the announcement of and completion of
the transactions contemplated herein should not reasonably be expected to
materially adversely affect the production for the Company Insurance
Subsidiaries by their Agents.
Section 3.25. Separate Accounts. (a) Each separate account maintained by
-----------------
a Company Insurance Subsidiary (collectively, the "Separate Accounts") is duly
-----------------
and validly established and maintained under the laws of its state of formation
and is either excluded from the definition of an investment company pursuant to
Section 3(c)(11) of the 1940 Act or is duly registered as an investment company
under the 1940 Act. If registered, each such Separate Account is operated in
compliance with the 1940 Act, has filed all reports and amendments of its
registration statement required to be filed, and has been granted all exemptive
relief necessary for its operations as presently conducted, except as would
otherwise reasonably be expected to have a Material Adverse Effect on the
Company. The Insurance Contracts under which Separate Account assets are held
are duly and validly issued and are either exempt from registration under the
Securities Act pursuant to Section 3(a)(2) of the Securities Act or were sold
pursuant to an effective registration statement under the Securities Act, and
any such registration statement is currently in effect to the extent necessary
to allow the appropriate Company Insurance Subsidiary to receive contributions
under such policies.
(b) To the Knowledge of the Company, each registration statement,
prospectus, statement of additional information, or private placement
memorandum, as amended or supplemented, relating to any registered separate
account and all supplemental advertising material relating to any registered
separate account since January 1, 1997, (i) as of their respective mailing dates
-
or dates of use (or in the case of a registration statement, at the time that
such registration statement became effective), contained no untrue statement of
material fact and did not omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading at
the time that each become effective, and (ii) complied with applicable law
--
including, but not limited to, state insurance laws, state securities laws,
rules of the NASD, the Securities Act and the 1940 Act, except for such
instances of noncompliance which are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on the Company.
Section 3.26. Derivatives. Neither the Company nor its Subsidiaries is a
-----------
party on the date hereof to any contract or agreement constituting a "derivative
financial instrument," except as set forth in Section 3.26 of the Company
Disclosure Schedule. For purposes of this Section 3.26 and that Schedule, the
term "derivative financial instrument" shall have the same meaning given such
term under Item 305 of Regulation S-K under the U.S. federal securities laws and
23
<PAGE>
includes futures, forwards, swaps, options, and other financial instruments with
similar characteristics.
Section 3.27. Investments. The Company SAP Statements set forth a list,
-----------
which list is accurate and complete in all material respects, of all securities,
mortgages and other investments (collectively, the "Company Investments") owned
-------------------
by the Company Insurance Subsidiaries as of December 31, 1998, together with the
cost basis book or amortized value, as the case may be, as of December 31, 1998.
All transactions in Company Investments by each Company Insurance Subsidiary
have complied in all material respects with the investment policies of such
Company Insurance Subsidiaries and all applicable insurance laws and
regulations. A complete list of all investments owned, directly or indirectly,
by the Company and the Company Insurance Subsidiaries as of June 30, 1999 which
are in default, in bankruptcy, nonperforming, restructured, or foreclosed, or
which are included on any "watch list" is set forth in Section 3.27 of the
Company Disclosure Schedule, and there have been no changes since that date that
have or would reasonably be expected to have a Material Adverse Effect on the
Company.
Section 3.28. Ohio Farmers Compliance. To the Knowledge of the Company,
-----------------------
each of the Company and Ohio Farmers Insurance Company has complied in all
material respects with its obligations under the Administrative Services
Agreement dated June 2, 1998, and any related legal and regulatory obligations.
Section 3.29. Real Estate. The home office and investment real estate on
-----------
the same campus owned by a Company Subsidiary (i) to the Knowledge of the
-
Company contain no asbestos, (ii) are in all material respects properly zoned
--
for the uses to which they are being put and (iii) are presently zoned to permit
---
construction of a fourth building similar to the existing office buildings on
the Company's headquarters campus. The Company is not aware of any reason why
each existing building could not be operated on a "stand-alone" basis without
substantial expense.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Except as specifically set forth, by reference to a particular section of
this Agreement, on the Disclosure Schedule delivered by Parent to the Company
prior to the execution of this Agreement (the "Parent Disclosure Schedule"),
--------------------------
Parent and Merger Sub represent and warrant to the Company as follows:
Section 4.1. Organization, Qualification, Etc. Parent is a corporation
---------------------------------
duly organized, validly existing and in good standing under the laws of the
State of North Carolina and has the corporate power and authority to own its
properties and assets and to carry on its business as it is now being conducted
and is duly qualified to do business and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualification, except for jurisdictions in which the
failure to be so qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. The copies of the Parent's
certificate of incorporation and by-laws which have been delivered to the
24
<PAGE>
Company are complete and correct and in full force and effect. Each of the
Parent's Subsidiaries (including Merger Sub) is duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization, has the power and authority to own its properties and to carry on
its business as it is now being conducted, and is duly qualified to do business
and is in good standing in each jurisdiction in which the ownership of its
property or the conduct of its business requires such qualification, except for
jurisdictions in which the failure to be so qualified or in good standing would
not, individually or in the aggregate, have a Material Adverse Effect on the
Parent. Except as set forth in Section 4.1 of the Parent Disclosure Schedule,
all the outstanding shares of capital stock of, or other ownership interests in,
the Parent's Subsidiaries are validly issued, fully paid and non-assessable and
are owned by Parent, directly or indirectly, free and clear of all Liens. There
are no existing options, rights of first refusal, preemptive rights, calls,
claims or commitments of any character relating to the issued or unissued
capital stock or other securities of, or other ownership interests in, any
Subsidiary of Parent.
Section 4.2. Capital Stock. (a) The authorized capital stock of Parent
-------------
consists of 350,000,000 shares of Parent Common Stock and 20,000,000 shares of
preferred stock, par value $.01 per share ("Parent Preferred Stock"). As of
----------------------
September 17, 1999, 105,301,763 shares of Parent Common Stock were issued and
outstanding, and 10,524,102 shares were reserved for issuance under the Parent's
Option Plans. No shares of Preferred Stock are outstanding as of the date
hereof. All the outstanding shares of Parent Common Stock are, and all Shares
reserved for issuance will be, upon issuance in accordance with the terms
specified in the instruments and agreements pursuant to which they are issuable,
validly issued and are fully paid and non-assessable. As of September 17, 1999,
except as set forth in Section 4.2(a) of the Parent Disclosure Schedule, there
are no outstanding subscriptions, options, warrants, rights or other
arrangements or commitments obligating Parent to issue any shares of its capital
stock other than:
(i) Parent Rights Agreement;
(ii) options and other rights to receive or acquire 4,676,442 shares of
Parent Common Stock pursuant to the Parent's Option Plans;
(iii) As of the date of this Agreement, no bonds, debentures, notes or
other indebtedness of Parent having the right to vote on any matters
on which stockholders may vote are issued or outstanding.
Section 4.3. Corporate Authority Relative to this Agreement; No Violation.
------------------------------------------------------------
(a) Each of Parent and Merger Sub has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by Parent
and Merger Sub by all necessary corporate action, and no other corporate
proceedings on the part of Parent or Merger Sub are necessary to authorize the
consummation of the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Parent and Merger Sub and, assuming
this Agreement constitutes a valid and binding agreement of the other parties
hereto, this Agreement constitutes
25
<PAGE>
a valid and binding agreement of Parent and Merger Sub, enforceable against
Parent and Merger Sub in accordance with its terms.
(b) Neither Parent nor Merger Sub is subject to or obligated under any
charter, by-law or contract provision or any license, franchise or permit, or
subject to any order or decree, which, by its terms, would be breached or
violated or would accelerate any payment or obligation, trigger any right of
first refusal or other purchase right as a result of Parent or Merger Sub
executing or carrying out the transactions contemplated by this Agreement,
except for any breaches or violations which would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. Other than in connection
with or in compliance with (i) the provisions of the DGCL, (ii) the Securities
- --
Act, (iii) the Exchange Act, (iv) the HSR Act, (v) Section 4043 of ERISA, (vi)
--- -- - --
the Nebraska Insurers Demutualization Act, the Nebraska Insurance Holding
Company System Act, the Pennsylvania Insurance Holding Company Act and any other
applicable laws, rules, regulations, practices and orders of any state insurance
regulatory authority, (vii) any applicable United States competition, antitrust
---
and investments laws, (viii) the securities or blue sky laws of the various
----
states and (ix) the Nebraska Shareholder Protection Act (collectively, the
--
"Parent Required Approvals"), no authorization, consent or approval of, or
-------------------------
filing with, any governmental body or authority is necessary for the
consummation by Parent of the transactions contemplated by this Agreement,
except for such authorizations, consents, approvals or filings, the failure to
obtain or make which would not, individually or in the aggregate, have a
Material Adverse Effect on Parent or substantially impair or delay the
consummation of the transactions contemplated hereby and thereby.
Section 4.4. Reports and Financial Statements. (a) Parent has previously
--------------------------------
furnished or made available to the Company true and complete copies of:
(i) Parent's Annual Reports on Form 10-K filed with the SEC for each of
the years ended December 31, 1996 through 1998;
(ii) each definitive proxy statement filed by Parent with the SEC since
December 31, 1996;
(iii) each final prospectus filed by Parent with the SEC since December
31, 1996, except any final prospectus on Form S-8; and
(iv) all Current Reports on Form 8-K filed by Parent with the SEC since
December 31, 1998.
As of their respective dates, such reports, proxy statements and
prospectuses (collectively, the "Parent SEC Reports") (i) complied as to form in
------------------ -
all material respects with the applicable requirements of the Securities Act,
the Exchange Act and the rules and regulations promulgated thereunder and (ii)
--
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 audited consolidated financial statements and unaudited
consolidated interim financial statements included in the Parent SEC Reports
(including any related notes and schedules) fairly present the financial
position of the Parent and its consolidated Subsidiaries as of the dates thereof
and the
26
<PAGE>
results of operations and cash flows for the periods or as of the dates then
ended (subject, in the case of the unaudited interim financial statements, to
normal recurring year-end adjustments), in each case in accordance with GAAP
consistently applied during the periods involved (except as otherwise disclosed
in the notes thereto). Parent has also previously furnished to the Company all
audit reports and letters to management regarding accounting controls received
since January 1, 1997 from the auditors of Parent and its Subsidiaries and all
responses thereto from Parent and its Subsidiaries. Since December 31, 1996,
Parent has timely filed all reports, registration statements and other filings
required to be filed by it with the SEC under the rules and regulations of the
SEC.
(b) Parent has made available to the Company true and complete copies of
the annual and quarterly statements of each of Parent's Subsidiaries listed in
Section 4.4(b) of the Parent Disclosure Schedule ("Parent Insurance
----------------
Subsidiaries") as filed with the applicable insurance regulatory authorities for
- ------------
the years ended December 31, 1996, 1997 and 1998 and the quarterly periods ended
March 31, 1999 and June 30, 1999, including all exhibits, interrogatories,
notes, schedules and any actuarial opinions, affirmations or certifications or
other supporting documents filed in connection therewith (collectively, the
"Parent SAP Statements"). The Parent SAP Statements were prepared in conformity
---------------------
with statutory accounting practices prescribed or permitted by the applicable
insurance regulatory authority consistently applied for the periods covered
thereby and present fairly the statutory financial position of such Parent
Insurance Subsidiaries as at the respective dates thereof and the results of
operations of such Subsidiaries for the respective periods then ended. The
Parent SAP Statements complied in all material respects with all applicable
laws, rules and regulations when filed, and, to the Knowledge of Parent, no
material deficiency has been asserted with respect to any Parent SAP Statements
by the applicable insurance regulatory body or any other governmental agency or
body. The annual statutory balance sheets and income statements included in the
1996 Parent SAP Statements have been audited by McGladrey & Pullen L.L.P. and
the annual statutory balance sheets and income statements included in the 1997
and 1998 Parent SAP Statements have been audited by Ernst & Young L.L.P., and
Parent has made available to the Company true and complete copies of all audit
opinions related thereto. Parent has made available to the Company true and
complete copies of all examination reports of insurance departments and any
insurance regulatory agencies since January 1, 1996 relating to the Parent
Insurance Subsidiaries. To the Knowledge of Parent, the amounts shown in the
Parent SAP Statements as reserves and liabilities for past and future insurance
policy benefits, losses, claims and expenses under insurance policies as of the
end of each such reporting period were fairly stated in accordance with
generally accepted actuarial principles consistently applied, were based on
actuarial assumptions which were in accordance with those called for in the
policy provisions and met the requirements of the insurance laws of the
applicable insurance authority, with such exceptions as would not, individually
or in the aggregate, reasonably be likely to have a Material Adverse Effect.
Such amounts shown on the Parent SAP Statements filed after the date hereof and
on or prior to the Closing Date will be so computed and based and will meet all
such requirements.
Section 4.5. No Undisclosed Liabilities. Neither Parent nor any of its
--------------------------
Subsidiaries has any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, and there is no existing condition, situation
or set of circumstances which would reasonably be expected to result in such a
liability or obligation, except (a) liabilities or obligations adequately
-
accrued or reserved for in the Parent SEC Reports filed prior to the date
hereof, (b) liabilities and
-
27
<PAGE>
obligations that would not be required by GAAP to be reflected in the financial
statements of the Company and (c) liabilities or obligations which would not,
-
individually or in the aggregate, have a Material Adverse Effect on Parent.
Section 4.6. No Violation of Law. The businesses of Parent and its
-------------------
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental body or authority except (a) as described in the
-
Parent SEC Reports and (b) for violations or possible violations which would
-
not, individually or in the aggregate, have a Material Adverse Effect on Parent.
Section 4.7. Absence of Certain Changes or Events. Other than the
------------------------------------
transactions contemplated or permitted by this Agreement or as disclosed in the
Parent SEC Reports, since June 30, 1999, there has not been any event,
occurrence, development or state of circumstances or facts that has had, or
would have, a Material Adverse Effect on Parent and neither Parent nor any of
its Subsidiaries has taken action that, if taken after the date hereof, would
have violated Section 5.1(b).
Section 4.8. Investigations; Litigation. Except as described in the
--------------------------
Parent SEC Reports:
(a) there is no investigation or review pending by any governmental
body or authority with respect to Parent or any of its Subsidiaries which
would, individually or in the aggregate, have a Material Adverse Effect on
Parent, nor has any governmental body or authority notified Parent of an
intention to conduct the same; and
(b) there is no action, suit or proceeding pending (or, to Parent's
Knowledge, threatened) against or affecting Parent or its Subsidiaries, or
any of their respective properties at law or in equity, or before any
federal, state, local or foreign governmental or regulatory body or
authority which, individually or in the aggregate, are reasonably likely to
have a Material Adverse Effect on Parent.
Section 4.9. Proxy Statement; Registration Statement; Other Information.
----------------------------------------------------------
The Registration Statement, or any amendment thereof or supplement thereto, at
the date it becomes effective and at the time of the Company Meeting, will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by Parent or Merger Sub with
respect to statements made therein based on information supplied by the Company
in writing for inclusion in the Registration Statement. None of the information
supplied by Parent for inclusion or incorporation by reference in the Proxy
Statement will, at the date mailed to the Company's stockholders and at the time
of the Company Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. The Registration Statement will comply in all
material respects with the provisions of the Securities Act and the rules and
regulations promulgated thereunder.
Section 4.10. Lack of Ownership of the Company Common Stock. Neither
---------------------------------------------
Parent nor any of its Subsidiaries owns more than 2% of the outstanding shares
of the Company
28
<PAGE>
Common Stock (exclusive of any shares owned by Parent's employee benefit plans
or shares held in any separate account or mutual fund of any Subsidiary of
Parent), and does not own any other securities convertible into shares of the
Company Common Stock.
Section 4.11. Vote of Parent Stockholders. No vote of the stockholders of
---------------------------
Parent, or of the holders of any other securities of Parent (equity or
otherwise), is required by law, the certificate of incorporation or by-laws of
Parent or otherwise in order for Parent to consummate the Merger and the
transactions contemplated hereby.
Section 4.12. Finders or Brokers. Neither Parent nor any of its
------------------
Subsidiaries has employed any investment banker, broker, finder or intermediary
in connection with the transactions contemplated hereby who might be entitled to
any fee or any commission in connection with or upon consummation of the Merger.
Section 4.13. Financing. Parent has, and will have at the Effective Time,
---------
sufficient resources to satisfy the obligations of Parent and Merger Sub to pay
the aggregate Cash Consideration and any other cash payable in respect of Shares
pursuant to Article II, on the terms and subject to the conditions contemplated
by this Agreement.
Section 4.14. Employment Agreement. The Company, Parent and Robert D.
--------------------
Bates have entered into the Cancellation Agreement, and Parent and Robert D.
Bates have entered into an employment agreement, the form of which is attached
hereto as Exhibit E (the "Employment Agreement") and which shall become
--------------------
effective as of the Effective Time. The Cancellation Agreement and the
Employment Agreement have been duly authorized, executed and delivered by
Parent, and upon satisfaction of the conditions set forth therein, shall be
enforceable against Parent in accordance with their respective terms.
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.1. Conduct of Business by the Company or Parent. From and after
--------------------------------------------
the date hereof and prior to the Effective Time or the date, if any, on which
this Agreement is earlier terminated pursuant to Section 7.1 (the "Termination
-----------
Date"), and except (i) as may be required by law (provided that any party
- ---- -
availing itself of such exception must first consult with the other party), (ii)
--
as may be consented to in writing by Parent or the Company, as the case may be,
(iii) as may be expressly permitted pursuant to this Agreement, or (iv) as set
--- --
forth in Section 5.1 of the Company Disclosure Schedule or the Parent Disclosure
Schedule, as the case may be:
(a) the Company:
(i) shall, and shall cause each of its Subsidiaries to, conduct its
operations according to their ordinary and usual course of business in
substantially the same manner as heretofore conducted;
(ii) shall use its reasonable best efforts, and shall cause each of
its Subsidiaries to use its reasonable best efforts, to preserve intact its
business organization and goodwill (except that any of its Subsidiaries
other than any Company Insurance Subsidiary may be
29
<PAGE>
merged with or into, or be consolidated with any of its other Subsidiaries
or may be liquidated into the Company or any of its Subsidiaries), keep
available the services of its current officers and other key employees,
preserve its relationships with those persons having business dealings with
the Company and its Subsidiaries, including, without limitation, brokers,
agents, insureds and customers, and to comply in all material respects with
all laws and orders of all governmental and regulatory authorities
applicable to them;
(iii) shall confer at such times as Parent may reasonably request
with one or more representatives of Parent to report material operational
matters and the general status of ongoing operations and transition plans
(to the extent Parent reasonably requires such information);
(iv) shall not, and shall not (except in the ordinary course of
business consistent with past practice) permit any of its Subsidiaries that
is not wholly owned to, declare, set aside or pay any dividends on or make
any distribution with respect to its outstanding shares of stock, except
that Company may continue to pay dividends on Company Common Stock at times
consistent with past practice and in per share amounts not in excess of the
per share amount of the most recent dividend paid on the Company Common
Stock prior to the date of this Agreement;
(v) shall not, and shall not permit any of its Subsidiaries to,
split, combine or reclassify any of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of
or in substitution for, shares of its capital stock, except for any such
transaction by a wholly owned Subsidiary of the Company which remains a
wholly owned Subsidiary after consummation of such transaction;
(vi) shall not, and shall not permit any of its Subsidiaries to
enter into or amend any employment, severance or similar agreements or
arrangements with any of their respective directors or executive officers;
(vii) shall not, and shall not permit any of its Subsidiaries to,
authorize or effect any acquisition of assets or securities, any
disposition of assets or securities or any release or relinquishment of
material contract rights, in each case not in the ordinary course of
business consistent with past practice, except for transactions in Company
Investments by any Company Insurance Subsidiary effected in accordance with
the investment policy of such Company Insurance Subsidiary as in effect on
the date hereof and except that the Company may acquire or dispose of
assets or securities in transactions where the fair market value of the
consideration paid or received does not exceed $1,000,000 in any single
transaction or $5,000,000 in all such transactions, and except that the
sale of AGL Life Assurance Company, Philadelphia Financial Group, Inc., PFG
Distribution Company, Philadelphia Financial Insurance Agency of
Massachusetts, Inc. and Philadelphia Financial Group Agency of Ohio, Inc.,
substantially in accordance with the terms of such sale previously
disclosed to Parent, may be pursued to completion;
(viii) shall not propose or adopt any amendments to its or any
Company Insurance Subsidiary's corporate charter or by-laws;
30
<PAGE>
(ix) shall not, and shall not permit any of its Subsidiaries to,
issue or authorize the issuance of, or agree to issue or sell any shares of
their capital stock of any class (whether through the issuance or granting
of options, warrants, commitments, conversion rights, subscriptions, rights
to purchase or otherwise), other than pursuant to the Company Option Plans
and upon conversion of options under such Plan;
(x) shall not, and shall not permit any of its Subsidiaries to,
grant, confer or award any options, warrants, conversion rights or other
rights, not existing on the date hereof, to acquire any shares of its
capital stock;
(xi) shall not, and shall not permit any of its Subsidiaries to,
purchase or redeem any shares of its stock or any rights, warrants or
options to acquire any such shares;
(xii) shall not, and shall not permit any of its Subsidiaries to,
amend in any respect the terms of their respective employee benefit plans,
programs or arrangements or any severance or similar agreements or
arrangements or any bonus or other incentive programs in existence on the
date hereof, or adopt any new employee benefit plans, programs or
arrangements or any severance or similar agreements or arrangements, or
increase any salaries except in the ordinary course of business consistent
with past practice, or pay any bonus to the Company's Chief Executive
Officer except as contemplated under the Cancellation Agreement;
(xvii) shall not, and shall not permit any of its Subsidiaries to,
incur, assume or prepay any indebtedness or any other material liabilities,
other than in the ordinary course of business consistent with past
practice;
(xviii) shall not, and shall not permit any of its Subsidiaries to,
(i) make any loans, advances or capital contributions to, or investments
-
in, any other person, other than Company Investments by a Company Insurance
Subsidiary in accordance with the investment policy of such Company
Insurance Subsidiary as in effect on the date hereof or by the Company or a
Subsidiary of the Company to or in the Company or any wholly-owned
Subsidiary of the Company or (ii) pay, discharge or satisfy any claims,
--
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than indebtedness, issuances of debt
securities, guarantees, loans, advances, capital contributions,
investments, payments, discharges or satisfactions incurred or committed to
in the ordinary course of business consistent with past practice;
(xix) shall not sell, lease, license, mortgage or otherwise encumber
or subject to any Lien or otherwise dispose of any of its properties or
assets (including securitizations), other than Company Investments by a
Company Insurance Subsidiary in accordance with the investment policy of
such Company Insurance Subsidiary as in effect on the date hereof or in the
ordinary course of business consistent with past practice;
(xx) shall not, and shall not permit any of its Subsidiaries to,
(i) make any Tax election or settle or compromise any Tax liability or
-
(ii) change its fiscal year;
--
31
<PAGE>
(xxi) except as disclosed in the Company SEC Reports filed prior to
the date of this Agreement, or as required by a governmental body or
authority, shall not change its methods of accounting (including, without
limitation, make any material write-off or reduction in the carrying value
of any assets) in effect at December 31, 1998, except as required by GAAP;
(xxii) shall not, and shall not permit any of its Subsidiaries to,
enter into any new quota share or other reinsurance transaction (1) which
-
does not contain standard cancellation and termination provisions or (2)
-
which, except in the ordinary course of business, materially increases or
reduces the Company Insurance Subsidiaries' consolidated ratio of net
written premiums to gross written premiums;
(xxiii) shall not, and shall not permit any of its Subsidiaries to,
alter or amend their existing underwriting, claims management, reserving or
investment guidelines or policies; and
(xxiv) shall not take any action which would be required to be
disclosed under Section 3.9 if such action had been taken prior to the date
hereof;
(xxv) shall not permit any of the Company Insurance Subsidiaries to,
(i) directly or indirectly through an outside money manager, make or commit
-
to make any mortgage loan, private placement, real estate acquisition,
common or preferred stock acquisition, partnership interest acquisition,
derivative investment (except in connection with hedging for the equity
index annuity product) or below investment grade investment, except for
commitments existing on the date hereof, unless such investment is
consented to in advance by Parent, or (ii) enter into any new agreements to
--
outsource any investment or investment accounting functions;
(xxvi) shall not, and shall not permit any of its Subsidiaries to,
agree, in writing or otherwise, to take any of the foregoing actions or
take any action which would (x) make any representation or warranty in
-
Article III hereof untrue or incorrect or (y) result in any of the
-
conditions to the Merger set forth in Article VI not being satisfied; and
(xxvii) shall from time to time furnish to Parent, promptly following
the receipt by senior management of the Company or any of its Subsidiaries
(A) copies of any monthly management reports prepared for senior management
-
of the Company or any of its Subsidiaries, (B) copies of all monthly
-
financial statements and reports, (C) a copy of any report filed with any
-
insurance regulatory authority, (D) copies of any reports or statements
-
filed with the SEC, which in each such case, shall be prepared in a manner
consistent with past practice;
(b) the Parent:
(i) shall not, and shall not permit any of its Subsidiaries to
agree, in writing or otherwise, to take any action which would (x) make any
-
representation or warranty in Article IV hereof untrue or incorrect or (y)
-
result in any of the conditions to the Merger set forth in Article VI not
being satisfied; and
32
<PAGE>
(ii) except as disclosed in the Parent SEC Reports filed prior to the
date of this Agreement, or as required by a governmental body or authority,
shall not change its methods of accounting (including, without limitation,
make any material write-off or reduction in the carrying value of any
assets) in effect at June 30, 1999, except as required by GAAP.
Section 5.2. Investigation. Each of the Company and Parent shall afford
-------------
to one another and to one another's officers, employees, accountants, counsel
and other authorized representatives full and complete access during normal
business hours upon reasonable notice, throughout the period prior to the
earlier of the Effective Time or the Termination Date, to its and its
Subsidiaries' properties, contracts, commitments, books and records and any
report, schedule or other document filed or received by it pursuant to the
requirements of federal or state securities laws and shall use its reasonable
best efforts to cause its respective representatives to furnish promptly to
Parent such additional financial and operating data and other information as to
its and its Subsidiaries' businesses and properties as Parent or its duly
authorized representatives may from time to time reasonably request. The parties
hereby agree that each of them will treat any such information in accordance
with the Confidentiality Agreement, dated as of June 2, 1999, between the
Company and Parent (the "Confidentiality Agreement"). Notwithstanding any
-------------------------
provision of this Agreement to the contrary, no party shall be obligated to make
any disclosure in violation of applicable laws or regulations, including any
such laws or regulations pertaining to the treatment of classified information.
Section 5.3. Proxy Material; Registration Statement. (a) The Company and
--------------------------------------
Parent shall together, or pursuant to an allocation of responsibility to be
agreed upon between them:
(i) prepare and file with the SEC as soon as is reasonably
practicable the Proxy Statement and a registration statement on Form S-4
under the Securities Act with respect to the Parent Common Stock issuable
in the Merger (the "Registration Statement"), and shall use their
----------------------
reasonable best efforts to have the Proxy Statement cleared by the SEC
under the Exchange Act and the Registration Statement declared effective by
the SEC under the Securities Act as promptly as practicable. No filing of,
or amendment or supplement to, the Registration Statement or the Proxy
Statement will be made by Parent or the Company without providing the other
a reasonable opportunity to review and comment thereon. The Company will
advise Parent, and Parent will advise the Company, promptly after it
receives notice thereof, of any request by the SEC for amendment of the
Proxy Statement or the Registration Statement or comments thereof or
requests by the SEC for additional information. The Company and Parent
shall each provide the other with copies of any communication received from
or sent to the SEC in connection with the Proxy Statement or the
Registration Statement and with a reasonable opportunity to review all
responses to SEC comments or other requests prior to their being sent to
the SEC. If at any time prior to the Effective Time any information
relating to Parent or the Company, or any of their respective affiliates,
officers or directors, should be discovered by Parent or the Company which
should be set forth in an amendment or supplement to the Registration
Statement or the Proxy Statement, so that any such documents would not
include any misstatement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, the
33
<PAGE>
party which discovered such information shall promptly notify the other
party hereto and an appropriate amendment or supplement describing such
information shall be promptly filed with the SEC and, to the extent
required by law, disseminated to the stockholders of the Company;
(ii) as soon as is reasonably practicable take all such action as
may be required under state blue sky or securities laws in connection with
the transactions contemplated by this Agreement;
(iii) promptly prepare and file with the NYSE and such other stock
exchanges as shall be agreed upon listing applications covering the shares
of Parent Common Stock issuable in the Merger and use their reasonable best
efforts to obtain, prior to the Effective Time, approval for the listing of
such Parent Common Stock, subject only to official notice of issuance;
(iv) cooperate with one another in order to lift any injunctions or
remove any other impediment to the consummation of the transactions
contemplated herein; and
(v) cooperate with one another in obtaining opinions of Kutak Rock,
counsel to the Company, and King & Spalding, counsel to Parent, dated as of
the Effective Time, to the effect that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code. In
connection therewith, each of the Company, Parent and Merger Sub shall
deliver to Kutak Rock and King & Spalding, respectively, representation
letters in form and substance reasonably satisfactory to such tax counsel.
(b) Subject to the limitations contained in Section 5.2, the Company and
Parent shall each furnish to one another and to one another's counsel all such
information as may be required in order to effect the foregoing actions.
(c) The Company and Parent shall cause the Proxy Statement to be mailed to
the Company's stockholders as promptly as practicable after the Registration
Statement is declared effective under the Securities Act.
(d) The Company shall duly call, give notice of, convene and hold a
meeting of its stockholders (the "Company Meeting") for the purpose of obtaining
---------------
the Company Stockholder Approval and shall, through its Board of Directors,
subject to Section 5.9(b), recommend to its stockholders the adoption of this
Agreement, the Merger and the other transactions contemplated hereby. Without
limiting the generality of the foregoing but subject to its rights to terminate
this Agreement pursuant to Section 7.1, the Company agrees that its obligations
pursuant to the first sentence of this Section 5.3(d) shall not be affected by
the commencement, public proposal, public disclosure or communication to the
Company of any Takeover Proposal (as defined in Section 5.9).
Section 5.4. Affiliate Agreements. The Company shall, prior to the
--------------------
Effective Time, deliver to Parent a list (reasonably satisfactory to counsel for
Parent) setting forth the names and addresses of all persons who are, at the
time of the Company Meeting, in the Company's reasonable judgment, "affiliates"
of the Company for purposes of Rule 145 under the Securities Act. The Company
shall furnish such information and documents as Parent may reasonably
34
<PAGE>
request for the purpose of reviewing such list. The Company shall use its
reasonable best efforts to cause each person who is identified as an "affiliate"
in the list furnished pursuant to this Section 5.4 to execute a written
agreement on or prior to the mailing of the Proxy Statement, substantially in
the form of Exhibit A hereto.
Section 5.5. Employee Incentive and Benefit Plans. Simultaneously with
------------------------------------
the Merger, Parent agrees to take, and cause the Company to take, the actions
described in Exhibit B hereto with respect to employee benefit plans.
Section 5.6. Filings; Other Action. (a) Subject to the terms and
---------------------
conditions herein provided, the Company and Parent shall (i) promptly make their
-
respective filings and thereafter make any other required submissions under the
HSR Act, (ii) promptly make their respective filings and thereafter make any
--
other required submissions with applicable insurance regulatory authorities,
including insurance regulatory authorities in the State of Nebraska and the
Commonwealth of Pennsylvania, (iii) use their reasonable best efforts to
---
cooperate with one another in (x) determining whether any filings are required
-
to be made with, or consents, permits, authorizations or approvals are required
to be obtained from, any third party or other governmental or regulatory bodies
or authorities of federal, state, local and foreign jurisdictions in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and (y) timely making all such filings and
-
timely seeking all such consents, permits, authorizations or approvals, (iv) use
--
their reasonable best efforts to take, or cause to be taken, all other actions
and do, or cause to be done, all other things necessary, proper or advisable to
consummate and make effective the transactions contemplated hereby, including,
without limitation, taking all such further action as reasonably may be
necessary to resolve such objections, if any, as the Federal Trade Commission,
the Antitrust Division of the Department of Justice, state antitrust enforcement
authorities or competition authorities of any other nation or other jurisdiction
or any other person may assert under relevant antitrust or competition laws with
respect to the transactions contemplated hereby.
(b) In furtherance and not in limitation of the covenants of the parties
contained in this Section 5.6, if any administrative or judicial action or
proceeding, including any proceeding by a private party, is instituted (or
threatened to be instituted) challenging any transaction contemplated by this
Agreement as violative of any Regulatory Law (as defined below), each of the
Company and Parent shall cooperate in all respects with each other and use its
respective reasonable best efforts to contest and resist any such action or
proceeding and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts
consummation of the transactions contemplated by this Agreement. Notwithstanding
the foregoing or any other provision of this Agreement, nothing in this Section
5.6 shall limit a party's right to terminate this Agreement pursuant to Section
7.1(b) or 7.1(c) so long as such party has up to then complied in all respects
with its obligations under this Section 5.6.
(c) If any objections are asserted with respect to the transactions
contemplated hereby under any Regulatory Law or if any suit is instituted by any
governmental body or authority or any private party challenging any of the
transactions contemplated hereby as violative of any Regulatory Law, each of the
Company and Parent shall use its reasonable best efforts to resolve any such
objections or challenge as such governmental body or authority or private party
may
35
<PAGE>
have to such transactions under such Regulatory Law so as to permit consummation
of the transactions contemplated hereby. For purposes of this Agreement,
"Regulatory Law" means applicable state insurance laws and regulations, the
--------------
Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal
Trade Commission Act, as amended, and all other federal, state or foreign, if
any, statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines and other laws that are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade or lessening competition, whether in the insurance industry or otherwise,
through merger or acquisition.
Section 5.7. Further Assurances. In case at any time after the Effective
------------------
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers of the Company and Parent shall take all
such necessary action.
Section 5.8. Takeover Statute. If any "fair price," "moratorium,"
----------------
"control share acquisition" or other form of antitakeover statute or regulation
shall become applicable to the transactions contemplated hereby, each of the
Company and Parent and the members of their respective Boards of Directors shall
grant such approvals and take such actions as are reasonably necessary so that
the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate or
minimize the effects of such statute or regulation on the transactions
contemplated hereby.
Section 5.9. No Solicitation. (a) The Company represents and warrants
---------------
that it has terminated any discussions or negotiations with any party (other
than Parent) concerning any Takeover Proposal prior to the date hereof. From and
after the date hereof, the Company will not, and shall use its reasonable best
efforts not to permit, any of its officers, directors, employees, attorneys,
financial advisors, agents or other representatives or those of any of its
Subsidiaries (collectively, "Company Representatives") to, directly or
-----------------------
indirectly, solicit, initiate or knowingly encourage (including by way of
furnishing information) any Takeover Proposal from any persons or engage in or
continue discussions or negotiations relating thereto, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Takeover Proposal, except that, so
long as the Company is in compliance with its obligations under this Section
5.9, the Company may, in response to a Takeover Proposal that the Board of
Directors determines is reasonably likely to constitute a Superior Proposal that
was not solicited by the Company or any of its Company Representatives, and that
did not otherwise result from a breach or a deemed breach of this Section, and
subject to providing prior written notice of its decision to take such action to
Parent, (x) furnish information with respect to the Company to any person making
-
such a Takeover Proposal pursuant to a customary confidentiality agreement with
terms substantially similar to those of the agreement to which Parent is a party
with the Company, and (y) participate in discussions or negotiations regarding
-
such Takeover Proposal. Without limiting the foregoing, it is agreed that any
action that is in violation of the restrictions set forth in the preceding
sentence by any executive officer of the Company or any Subsidiary of the
Company, whether or not such person is purporting to act on behalf of the
Company or any of its Subsidiaries or otherwise, shall be deemed to be a breach
of this Section 5.9 by the Company. The Company will advise Parent orally
(within one business day) and in writing (as promptly as practicable) of the
receipt of any Takeover Proposal or inquiry or request for information with
respect to or which could reasonably be expected to lead to any Takeover
Proposal, including the material terms and conditions thereof (and any
36
<PAGE>
change in the material terms and conditions thereof) and the identity of the
person making such Takeover Proposal, and will promptly (but in no case later
than 36 hours) notify Parent of any determination by the Company's Board of
Directors that a Superior Proposal has been made. As used in this Agreement, (i)
-
"Takeover Proposal" shall mean any inquiry, proposal or offer from any person
-----------------
relating to any direct or indirect acquisition or purchase of business that
constitutes 15% or more of the net revenues, net income or the assets of the
Company and its Subsidiaries taken as a whole, or 15% or more of any class of
equity securities of the Company or any of its Subsidiaries (other than PFG,
Inc. and its Subsidiaries), any tender offer or exchange offer that if
consummated would result in any person beneficially owning 15% or more of any
class of equity securities of the Company or any of its Subsidiaries (other than
PFG, Inc. and its Subsidiaries), or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its Subsidiaries, other than the transactions
contemplated by this Agreement, and (ii) "Superior Proposal" shall mean any
-- -----------------
proposal made by a third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction,
for consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of the Company Common Stock then outstanding
or at least 50% of the assets of the Company and its Subsidiaries, taken
together, and (x) the proposal is otherwise on terms which the Board of
-
Directors determines in its good faith judgment (based on the advice of a
financial advisor of nationally recognized reputation and such other matters as
the Board of Directors deems relevant) to be more favorable to the Company's
stockholders than the Merger and for which financing, to the extent required, is
then committed or which in the good faith judgment of the Board of Directors is
reasonably capable of being obtained by a third party and (y) the Board of
-
Directors, after considering such matters as the Board of Directors deems
relevant (including the advice of outside counsel), determines in good faith
that failing to furnish information to the third party, participate in
discussions or negotiations with respect to the Superior Proposal or withdraw,
or modify its recommendation or recommend a Superior Proposal, as applicable, or
terminate this Agreement, is reasonably likely to result in a breach by the
Board of Directors of the Company of its fiduciary duties to the Company and its
stockholders under applicable law.
(b) The Board of Directors of the Company shall not (i) withdraw or
-
modify, or propose to withdraw or modify, in a manner adverse to Parent or
Merger Sub, the approval or recommendation by such Board of Directors of this
Agreement or the Merger or (ii) approve or recommend, or propose to approve or
--
recommend, any Takeover Proposal, unless, in each case, the Company receives an
unsolicited Takeover Proposal that is a Superior Proposal. The Board of
Directors may not enter into an agreement with respect to a Takeover Proposal
except in connection with a termination of this Agreement as set forth in
Section 7.1(e). Nothing contained in this Section 5.9 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders which, in the good faith reasonable judgment of the Board
of Directors of the Company after consultation with outside counsel, is required
under applicable law, provided that, except as otherwise permitted in this
Section 5.9, the Company does not withdraw or modify, or propose to withdraw or
modify, its position with respect to the Merger or approve or recommend, or
propose to approve or recommend, a Takeover Proposal. Notwithstanding anything
contained in this Agreement to the contrary, any
37
<PAGE>
action by the Board of Directors permitted by, and taken in accordance with,
this Section 5.9 shall not constitute a breach of this Agreement by the Company.
Section 5.10. Public Announcements. The Company and Parent will consult
--------------------
with and provide each other the opportunity to review and comment upon any press
release or other public statement or comment prior to the issuance of such press
release or other public statement or comment relating to this Agreement or the
transactions contemplated herein and shall not issue any such press release or
other public statement or comment without the prior approval of the other party
(which approval will not be unreasonably withheld), except as may be required by
law.
Section 5.11. Indemnification and Insurance. (a) From and after the
-----------------------------
Effective Time, Parent shall, and shall cause the Surviving Corporation to,
indemnify and hold harmless each present and former director and officer of the
Company determined as of the Effective Time (the "Indemnified Parties"), against
-------------------
any costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
-----
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time (including
without limitation in connection with the transactions contemplated by this
Agreement), whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent permitted under DGCL (and the Surviving Corporation
shall also advance expenses as incurred to the fullest extent permitted under
applicable law, provided the Person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
Person is not entitled to indemnification).
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 5.11, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify the Surviving Corporation
thereof, but the failure to so notify shall not relieve the Surviving
Corporation of any liability it may have to such Indemnified Party if such
failure does not materially prejudice the Surviving Corporation. In the event of
any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), the Surviving Corporation shall have the
right to assume the defense thereof and the Surviving Corporation shall not be
liable to such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that if the Surviving Corporation
elects not to assume such defense or counsel for the Indemnified Parties advises
that there are issues which raise conflicts of interest between the Surviving
Corporation and the Indemnified Parties, the Indemnified Parties may retain
counsel satisfactory to them, and the Surviving Corporation shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received.
(c) For a period of six years after the Effective Time, Parent shall cause
to be maintained in effect Side A of the current policies of directors' and
officers' liability insurance maintained by the Company ("D&O Insurance") with
-------------
respect to claims arising from facts or events which occurred before the
Effective Time, provided that Parent may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions that are no
less advantageous; provided, however, that nothing contained herein shall
require Parent or the
38
<PAGE>
Surviving Corporation to incur any annual premium in excess of 250% of the last
annual estimated aggregate premium paid prior to the date of this Agreement for
Side A of all current D&O Insurance policies maintained by the Company, which
the Company estimates to be $100,000 (the "Current Premium"). If such premiums
---------------
for such insurance would at any time exceed 250% of the Current Premium, then
Parent shall cause to be maintained policies of insurance which, in Parent's
good faith determination, provide the maximum coverage available at an annual
premium equal to 250% of the Current Premium.
(d) If Parent or any of its successors or assigns (i) shall consolidate
-
with or merge into any other corporation or entity and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) shall transfer all or substantially all of its properties and assets to any
--
individual, corporation or other entity, then and in each such case, proper
provisions shall be made so that the successors and assigns of Parent shall
assume all of the obligations set forth in this Section.
(e) The provisions of this Section are intended to be for the benefit of,
and shall be enforceable by, each of the Indemnified Parties, their heirs and
their representatives.
Section 5.12. Accountants' "Comfort" Letters. The Company and Parent will
------------------------------
each use reasonable best efforts to cause to be delivered to each other letters
from their respective independent accountants, dated as of a date within two
business days before the date of the Registration Statement, in form reasonably
satisfactory to the recipient and customary in scope for comfort letters
delivered by independent accountants in connection with registration statements
on Form S-4 under the Securities Act.
Section 5.13. Additional Reports and Information. (a) The Company and
----------------------------------
Parent shall each furnish to the other copies of any reports of the type
referred to in Sections 3.4 and 4.4 which it files with the SEC on or after the
date hereof, and each of the Company and Parent, as the case may be, represents
and warrants that as of the respective dates thereof, such reports will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statement therein, in
light of the circumstances under which they were made, not misleading. Any
unaudited consolidated interim financial statements included in such reports
(including any related notes and schedules) will fairly present the financial
position of the Company and its consolidated Subsidiaries or Parent and its
consolidated Subsidiaries, as the case may be, as of the dates thereof and the
results of operations and changes in financial position or other information
included therein for the periods or as of the date then ended (subject, where
appropriate, to normal year-end adjustments), in each case in accordance with
past practice and GAAP consistently applied during the periods involved (except
as otherwise disclosed in the notes thereto).
(b) The Company shall provide Parent with complete copies of all Tax
Returns filed by the Company or any Subsidiary after August 1, 1999 with the
Internal Revenue Service or with any Material State tax authority, as soon as
practicable after filing. The Company will promptly notify the Parent of the
commencement of any Tax audits or inquiries received from the Internal Revenue
Service after August 1, 1999, and will cooperate with Parent by providing any
information reasonably requested, including copies of any requests for documents
or information, proposed adjustments or assessments and penalty or deficiency
notices.
39
<PAGE>
Section 5.14. Company Rights Plan. Except as set forth in Exhibit C, the
-------------------
Company shall not amend, modify or supplement the Company Rights Plan without
the prior written consent of Parent.
Section 5.15. Control of Other Party's Business. Nothing contained in
---------------------------------
this Agreement shall give the Company, directly or indirectly, the right to
control or direct the Parent's operations prior to the Effective Time. Nothing
contained in this Agreement shall give the Parent, directly or indirectly, the
right to control or direct the Company's operations prior to the Effective Time.
Prior to the Effective Time, each of the Company and the Parent shall exercise,
consistent with the terms and conditions of this Agreement, complete control and
supervision over its respective operations.
Section 5.16. Omaha Operations. Parent intends to combine its
----------------
subsidiaries' group life and disability operations with the Company Insurance
Subsidiaries' group life and disability operations in Omaha and plans that the
combined operation will remain in Omaha for the indefinite future.
Section 5.17. Nebraska Domicile. Parent contemplates that Guarantee Life
-----------------
Insurance Company will maintain its Nebraska domicile and has no plan to change
that domicile.
Section 5.18. Tax Matters. Provided that the Merger is not an All Cash
-----------
Transaction, the parties intend for the Merger to qualify as a reorganization
under Section 368(a) of the Code; each party and its affiliates shall use all
reasonable efforts to cause the Merger to so qualify; neither party nor any
affiliate shall take any action that would reasonably be expected to cause the
Merger not to so qualify; and the parties will take the position for all
purposes that the Merger so qualifies.
Section 5.19. Financing. Parent will cause Merger Sub to have resources
---------
available to it at the Effective Time sufficient to pay the aggregate Cash
Consideration and any other cash payable in respect of Shares pursuant to
Article II, on the terms and subject to the conditions contemplated by this
Agreement.
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.1. Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) The Company Stockholder Approval shall have been obtained all in
accordance with the Company's Certificate of Incorporation, DGCL and
applicable law.
(b) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
court or other tribunal or governmental body or authority which prohibits
the consummation of the Merger substantially on the terms contemplated
hereby and shall continue to be in effect.
40
<PAGE>
(c) Unless the Merger is an All Cash Transaction, the
Registration Statement shall have become effective in accordance with the
provisions of the Securities Act, no stop order suspending such
effectiveness shall have been issued and remain in effect and no proceeding
for that purpose has been initiated or threatened by the SEC.
(d) Unless the Merger is an All Cash Transaction, the shares of
Parent Common Stock issuable in the Merger shall have been approved for
listing on the NYSE, subject only to official notice of issuance.
(e) Any applicable waiting period under the HSR Act shall have
expired or been terminated.
(f) Other than the filing provided for by Section 1.3, all
consents, approvals, permits, authorizations and actions of, filings with
and notices to any governmental or regulatory authority or any other public
or private third parties required of Parent, the Company or any of their
Subsidiaries to consummate the Merger and the other matters contemplated
hereby, the failure of which to be obtained or taken could be reasonably
expected to have a material adverse effect on Parent and its Subsidiaries
or the Surviving Corporation and its Subsidiaries, in each case taken as a
whole, or on the ability of Parent and the Company to consummate the
transactions contemplated hereby shall have been made or obtained,
including an order from each of the Insurance Departments of the State of
Nebraska and the Commonwealth of Pennsylvania approving the Merger, all in
form and substance reasonably satisfactory to Parent and the Company.
Section 6.2. Conditions to Obligation of the Company to Effect the Merger.
------------------------------------------------------------
The obligation of the Company to effect the Merger is further subject to the
fulfillment of the following conditions:
(a) (i) The representations and warranties of Parent contained herein
-
shall be true and correct in all respects (but without regard to any
materiality qualifications or references to Material Adverse Effect
contained in any specific representation or warranty) as of the Effective
Time with the same effect as though made as of the Effective Time except
(x) for changes specifically permitted by the terms of this Agreement, (y)
- -
that the accuracy of representations and warranties that by their terms
speak as of the date of this Agreement or some other date will be
determined as of such date and (z) where any such failure of the
-
representations and warranties in the aggregate to be true and correct in
all respects would not have a Material Adverse Effect on Parent, (ii)
--
Parent shall have performed in all material respects all obligations and
complied with all covenants required by this Agreement to be performed or
complied with by it prior to the Effective Time and (iii) Parent shall have
---
delivered to the Company a certificate, dated the Effective Time and signed
by its Chief Executive Officer or President certifying to both such
effects.
(b) Unless the Merger is an All Cash Transaction, the Company
shall have received an opinion of Kutak Rock, tax counsel to the Company,
dated as of the Effective Time, to the effect that the Merger will qualify
as a reorganization within the meaning of Section 368(a) of the Code. The
issuance of such opinion shall be conditioned upon the
41
<PAGE>
receipt by such tax counsel of representation letters from each of Parent,
Merger Sub and the Company, in each case, in form and substance reasonably
satisfactory to such tax counsel. The specific provisions of each such
representation letter shall be in form and substance reasonably
satisfactory to such tax counsel, and each such representation letter shall
be dated on or before the date of such opinion and shall not have been
withdrawn or modified in any material respect.
Section 6.3. Conditions to Obligation of Parent to Effect the Merger. The
-------------------------------------------------------
obligation of Parent to effect the Merger is further subject to the fulfillment
of the following conditions:
(a) (i) The representations and warranties of the Company contained
-
herein shall be true and correct in all respects (but without regard to any
materiality qualifications or references to Material Adverse Effect
contained in any specific representation or warranty) as of the Effective
Time with the same effect as though made as of the Effective Time except
(x) for changes specifically permitted by the terms of this Agreement, (y)
- -
that the accuracy of representations and warranties that by their terms
speak as of the date of this Agreement or some other date will be
determined as of such date and (z) where any such failure of the
-
representations and warranties in the aggregate to be true and correct in
all respects would not have a Material Adverse Effect on the Company, (ii)
--
the Company shall have performed in all material respects all obligations
and complied with all covenants required by this Agreement to be performed
or complied with by it prior to the Effective Time and (iii) the Company
---
shall have delivered to Parent a certificate, dated the Effective Time and
signed by its Chief Executive Officer or Executive Vice President
certifying to both such effects.
(b) Unless the Merger is an All Cash Transaction, Parent shall
have received an opinion of King & Spalding, tax counsel to Parent, dated
as of the Effective Time, to the effect that the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code. The
issuance of such opinion shall be conditioned upon the receipt by such tax
counsel of representation letters from each of Parent, Merger Sub and the
Company, in each case, in form and substance reasonably satisfactory to
such tax counsel. The specific provisions of each such representation
letter shall be in form and substance reasonably satisfactory to such tax
counsel, and each such representation letter shall be dated on or before
the date of such opinion and shall not have been withdrawn or modified in
any material respect.
(c) The Company shall have obtained the consent or approval of
each Person whose consent or approval shall be required in order to
consummate the transactions contemplated by this Agreement under any
agreement, lease, contract, note, mortgage, indenture or other obligation
to which the Company or any of its Subsidiaries is a party, except those
for which the failure to obtain such consent or approval, individually or
in the aggregate, is not reasonably likely to have, a Material Adverse
Effect on the Company.
42
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ARTICLE VII
TERMINATION
Section 7.1. Termination or Abandonment. Notwithstanding anything
--------------------------
contained in this Agreement to the contrary, this Agreement may be terminated
and abandoned at any time prior to the Effective Time, whether before or after
any approval of the matters presented in connection with the Merger by the
stockholders of the Company:
(a) by the mutual written consent of the Company and Parent;
(b) by either the Company or Parent if (i) the Effective Time shall
-
not have occurred on or before March 31, 2000 and (ii) the party seeking to
--
terminate this Agreement pursuant to this clause 7.1(b) shall not have
breached in any material respect its obligations under this Agreement in
any manner that shall have proximately contributed to the failure to
consummate the Merger on or before such date;
(c) by either the Company or Parent if (i) a statute, rule,
-
regulation or executive order shall have been enacted, entered or
promulgated prohibiting the consummation of the Merger substantially on the
terms contemplated hereby or (ii) an order, decree, ruling or injunction
--
shall have been entered permanently restraining, enjoining or otherwise
prohibiting the consummation of the Merger substantially on the terms
contemplated hereby and such order, decree, ruling or injunction shall have
become final and non-appealable and the party seeking to terminate this
Agreement pursuant to this clause 7.1(c)(ii) shall have used its reasonable
best efforts to remove such injunction, order or decree;
(d) by the Company if the approval of the stockholders of the Company
contemplated by this Agreement shall not have been obtained by reason of
the failure to obtain the required vote at a duly held meeting of
stockholders or at any adjournment thereof;
(e) by the Company if the Company has received a Superior Proposal,
except that the Company may not terminate this Agreement pursuant to this
clause 7.1(e) unless and until (i) four business days have elapsed
-
following delivery to Parent of a written notice of the determination by
the Board of Directors of the Company to terminate this Agreement, and
during such four business day period the Company (x) informs Parent of the
-
terms and conditions of the Superior Proposal and the identity of the
person making the Superior Proposal and (y) otherwise cooperates with
-
Parent with respect thereto with the intent of enabling Parent to agree to
a modification of the terms and conditions of this Agreement so that the
transactions contemplated hereby may be effected, (ii) at the end of such
--
four business day period the Takeover Proposal continues to be a Superior
Proposal, taking into account any amendment of the terms of this Agreement
or the Merger by Parent or any firm proposal (without conditions) by Parent
to amend the terms of this Agreement or the Merger, (iii) simultaneously
---
with such termination the Company enters into a definitive acquisition,
merger or similar agreement to effect the Superior
43
<PAGE>
Proposal and (iv) the Company pays to Parent the amount specified and
--
within the time period specified in Section 7.2;
(f) by Parent if the Board of Directors of the Company shall have (i)
-
withdrawn or modified in a manner adverse to Parent its approval or
recommendation of this Agreement and the transactions contemplated hereby
or (ii) approved or recommended, or proposed publicly to approve or
--
recommend, any Takeover Proposal;
(g) by Parent if a tender offer or exchange offer for 50% or more of
the outstanding shares of capital stock of the Company is commenced prior
to the Company Meeting, and the Board of Directors of the Company fails to
recommend against acceptance of such tender offer or exchange offer by its
stockholders (including by taking no position with respect to the
acceptance of such tender offer or exchange offer by its stockholders)
within the time period specified by Rule 14e-2; or
(h) by either the Company or Parent if there shall have been a
material breach by the other of any of its representations, warranties,
covenants or agreements contained in this Agreement, which if not cured
would cause the conditions set forth in Sections 6.2(a) or 6.3(a), as the
case may be, not to be satisfied, and such breach is incapable of being
cured or shall not have been cured within 30 days after notice thereof
shall have been received by the party alleged to be in breach.
In the event of termination of this Agreement pursuant to this Section 7.1,
this Agreement shall terminate (except for the Confidentiality Agreement
referred to in Section 5.2 and the provisions of Sections 7.2, 8.2, 8.4 and
8.5), and there shall be no other liability on the part of the Company or Parent
to the other except liability arising out of an intentional breach of this
Agreement or as provided for in the Confidentiality Agreement.
Section 7.2. Termination Fee. Notwithstanding any provision in this
---------------
Agreement to the contrary, if (i) this Agreement is terminated by the Company
-
pursuant to Section 7.1(e), or (ii) (x) prior to the termination of this
-- -
Agreement, a bona fide Takeover Proposal is commenced, publicly proposed or
publicly disclosed and not withdrawn, (y) this Agreement is terminated by the
-
Company pursuant to Section 7.1(b) or pursuant to Section 7.1(d) (but only due
to the failure of the Company stockholders to approve the Merger) or by Parent
pursuant to Section 7.1(f) or 7.1(g) and (z) concurrently with or within twelve
-
months after such termination a Takeover Proposal shall have been consummated or
an agreement with respect to a Takeover Proposal shall have been entered into,
then, in each case, the Company shall pay to Parent a fee (the "Termination
-----------
Fee") of $9,000,000 in cash, such payment to be made simultaneously with such
termination in the case of a termination by the Company pursuant to Section
7.1(e) and, in the case of clause (ii), upon the consummation of such Takeover
Proposal.
Section 7.3. Amendment or Supplement. At any time before or after
-----------------------
approval of the matters presented in connection with the Merger by the
stockholders of the Company and prior to the Effective Time, this Agreement may
be amended or supplemented in writing by the Company and Parent with respect to
any of the terms contained in this Agreement, except that following approval by
the stockholders of the Company there shall be no amendment or change to the
provisions hereof which by law or in accordance with the rules of any relevant
stock
44
<PAGE>
exchange requires further approval by such stockholders without such further
approval nor any amendment or change not permitted under applicable law.
Section 7.4. Extension of Time, Waiver, Etc. At any time prior to the
-------------------------------
Effective Time, the Company and Parent may:
(a) extend the time for the performance of any of the obligations or
acts of the other party;
(b) waive any inaccuracies in the representations and warranties of
the other party contained herein or in any document delivered pursuant
hereto; or
(c) waive compliance with any of the agreements or conditions of the
other party contained herein.
Notwithstanding the foregoing, no failure or delay by the Company or Parent
in exercising any right hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise of
any other right hereunder. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. No Survival of Representations and Warranties. None of the
---------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Merger.
Section 8.2. Expenses. Whether or not the Merger is consummated, all
--------
costs and expenses incurred in connection with the Merger, this Agreement and
the transactions contemplated hereby shall be paid by the party incurring or
required to incur such expenses, except expenses incurred in connection with the
printing and filing of the Registration Statement and the printing and mailing
of the Proxy Statement (including applicable SEC filing fees) shall be shared
equally by the Company and Parent.
Section 8.3. Counterparts; Effectiveness. This Agreement may be executed
---------------------------
in two or more consecutive counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered (by telecopy or otherwise) to the
other parties.
Section 8.4. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of laws thereof.
Section 8.5. Jurisdiction. Each of the parties hereto (i) consents to
------------ -
submit itself to the personal jurisdiction of any Federal court located in the
State of Delaware or any Delaware state
45
<PAGE>
court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (ii) agrees that it will not
--
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, and (iii) agrees that it will not bring any
---
action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a Federal court sitting in the State of
Delaware or a Delaware state court.
Section 8.6. Notices. All notices and other communications hereunder
-------
shall be in writing (including telecopy or similar writing) and shall be
effective (a) if given by telecopy, when such telecopy is transmitted to the
-
telecopy number specified in this Section 8.6 and the appropriate telecopy
confirmation is received or (b) if given by any other means, when delivered at
-
the address specified in this Section 8.6:
To Parent or Merger Sub:
Jefferson-Pilot Corporation
100 N. Greene Street
Greensboro, NC 27401
Attention: Dennis R. Glass, CFO
Fax: 336-691-3283
Attention: John D. Hopkins, General Counsel
at above address/(fax number 336-691-3639)
and
King & Spalding
1185 Avenue of the Americas
New York, NY 10036-4003
Attention: E. William Bates, II
Fax: 212-556-2222
To the Company:
The Guarantee Life Companies Inc.
8801 Indian Hills Drive
Omaha, NE 68114
Attention: Robert D. Bates, President
Fax: 402-361-7571
copy to:
The Guarantee Life Companies Inc.
8801 Indian Hills Drive
Omaha, NE 68114
Attention: Richard A. Spellman, Esq.
Fax: 402-361-7571
46
<PAGE>
and
Kutak Rock
1650 Farnam Street
Omaha, NE 68102
Attention: Joe E. Armstrong
Fax: (402) 346-1148
and
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Wolcott B. Dunham, Jr.
James C. Scoville
Fax: (212) 909-6836
Section 8.7. Assignment; Binding Effect. Neither this Agreement nor any
--------------------------
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
Section 8.8. Severability. Any term or provision of this Agreement which
------------
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, such provision shall be interpreted to be only so
broad as is enforceable.
Section 8.9. Enforcement of Agreement. The parties hereto agree that
------------------------
money damages or other remedy at law would not be a sufficient or adequate
remedy for any breach or violation of, or a default under, this Agreement by
them and that in addition to all other remedies available to them, each of them
shall be entitled to the fullest extent permitted by law to an injunction
restraining such breach, violation or default or threatened breach, violation or
default and to any other equitable relief, including, without limitation,
specific performance, without bond or other security being required.
Section 8.10. Entire Agreement; No Third-Party Beneficiaries. This
----------------------------------------------
Agreement and the Confidentiality Agreement constitute the entire agreement, and
supersede all other prior agreements and understandings, both written and oral,
between the parties, or any of them, with respect to the subject matter hereof
and thereof and except for the provisions of Section 5.11 hereof, is not
intended to and shall not confer upon any Person other than the parties hereto
any rights or remedies hereunder.
Section 8.11. Headings. Headings of the Articles and Sections of this
--------
Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
47
<PAGE>
Section 8.12. Definitions. (a) References in this Agreement to
-----------
"Subsidiaries" of any party shall mean any corporation, partnership,
------------
association, trust or other form of legal entity of which (i) more than 50% of
-
the outstanding voting securities are on the date hereof directly or indirectly
owned by such party, or (ii) such party or any Subsidiary of such party is a
--
general partner (excluding partnerships in which such party or any Subsidiary of
such party does not have a majority of the voting interests in such
partnership). References in this Agreement (except as specifically otherwise
defined) to "affiliates" shall mean, as to any person, any other person which,
----------
directly or indirectly, controls, or is controlled by, or is under common
control with, such person. As used in this definition, "control" (including,
-------
with its correlative meanings, "controlled by" and "under common control with")
------------- -------------------------
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of management or policies of a person, whether through the
ownership of securities or partnership of other ownership interests, by contract
or otherwise. References in the Agreement to "person" shall mean an individual,
------
a corporation, a partnership, a limited liability company, an association, a
trust or any other entity, group (as such term is used in Section 13 of the
Exchange Act) or organization, including, without limitation, a governmental
body or authority.
(b) The term "Knowledge" or any similar formulation thereof shall mean,
---------
with respect to the Company, the actual Knowledge of Robert D. Bates, Theodore
C. Cooley, William L. Bauhard, Richard A. Spellman, Gary Rittenhouse, Michael G.
Allen, C. E. Boyle, Mary G. Rahal, Alan D. Brinkman, Richard C. Easton and Wayne
Benseler without independent investigation, and, with respect to the Parent, the
actual Knowledge of David A. Stonecipher, Dennis R. Glass, Kenneth C. Mlekush,
John D. Hopkins, Mark E. Konen, Charles C. Cornelio, Leslie L. Durland, John C.
Ingram, Edward W. O'Neil and Hoyt J. Phillips without independent investigation.
(c) "Nebraska Insurers Demutualization Act" shall mean Sections 44-6101 to
-------------------------------------
44-6121 of the Nebraska Revised Statutes.
(d) "Nebraska Shareholders Protection Act" shall mean Sections 21-2431 to
------------------------------------
21-2453 of the Nebraska Revised Statutes.
48
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
THE GUARANTEE LIFE COMPANIES INC.
By /s/ Robert D. Bates
------------------------------------------
Name Robert D. Bates
----------------------------------------
Title President and Chief Executive Officer
---------------------------------------
JEFFERSON-PILOT CORPORATION
By /s/ Dennis R. Glass
------------------------------------------
Name Dennis R. Glass
----------------------------------------
Title Executive Vice President, Chief
---------------------------------------
Financial Officer & Treasurer
---------------------------------------------
LG MERGER CORP.
By /s/ Dennis R. Glass
------------------------------------------
Name Dennis R. Glass
----------------------------------------
Title Executive Vice President, Chief
---------------------------------------
Financial Officer
---------------------------------------------
49
