AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of September 8, 1995,
by and among Financial Benefit Group, Inc., a Delaware corporation (the
"Company"), AmVestors Financial Corporation, a Kansas corporation ("Parent"),
and AmVestors Acquisition Subsidiary, Inc., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Subsidiary").
WHEREAS, the Boards of Directors of Parent, Merger Subsidiary
and the Company deem it advisable and in the best interests of their
respective stockholders that Parent acquire the Company, and such Boards of
Directors have approved the merger of the Company with and into the Merger
Subsidiary upon the terms and subject to the conditions set forth herein;
WHEREAS, for federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, Parent wishes for no more than 150,000 shares of
Parent Stock (as hereinafter defined) to be issuable pursuant to the exercise
of FBG Options (as hereinafter defined) after the Closing Date (as
hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1.
THE MERGER. (a) Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.1(b)), the
Company shall be merged with and into the Merger Subsidiary (the "Merger") in
accordance with the Delaware General Corporation Law (the "DGCL"), whereupon
the separate existence of the Company shall cease, and the Merger Subsidiary
shall be the surviving corporation (the "Surviving Corporation").
(b)The consummation of the Merger (the "Closing") shall
take place (i) at the offices of Xxxxx Xxxx LLP,
St. Louis at 10:00 A.M., on such date (the "Closing Date") as Parent shall
notify the Company in writing not less than five days prior thereto, which
date shall not be more than 10 days after the last of the conditions set
forth in Article 8 hereof shall be satisfied or waived in accordance with
this Agreement, or (ii) such other place, time and date as the parties hereto
shall agree. Prior to the Closing, Merger Subsidiary and the Company shall
execute and deliver to the Secretary of State of the State of Delaware, a
Certificate of Merger in proper form for filing under the DGCL on the day of
the Closing, and the Merger shall become effective upon the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware or
at such later time as may be specified in the Certificate of Merger, such
time being herein called the "Effective Time."
(c)The Merger shall have the effects set forth in the
DGCL. Without limiting the generality of the
foregoing, at the Effective Time (i) the Surviving Corporation shall possess
all assets and property of every description, and every interest therein,
wherever located, and the rights, privileges, immunities, powers, franchises,
and authority, of a public as well as of a private nature, of each of the
Company and the Merger Subsidiary and all obligations belonging to or due
each of them shall be vested in the Surviving Corporation without further act
or deed; (ii) title to any real estate or any interest therein vested in
either of the Company or the Merger Subsidiary shall not revert or in any way
be impaired by reason of the Merger; (iii) all rights of creditors and all
liens on any property of the Company and the Merger Subsidiary shall be
preserved unimpaired; and (iv) the Surviving Corporation shall be liable for
all the obligations of the Company and the Merger Subsidiary, and any claim
existing, or action or proceeding pending, by or against either of them, may
be prosecuted to judgment with the right of appeal, as if the Merger had not
taken place.
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SECTION 1.2. CONVERSION OF SHARES.
(a) Prior to the Effective Time, each issued and outstanding share of the
Company's Class B common stock, par value $.01 per share ("Company B Stock")
shall be converted into 1.35 shares of the Company's Class A common stock
("Company A Stock") (the shares of Company B Stock and Company A Stock are
hereinafter referred to collectively as "Shares" and in the singular as a
"Share"), in accordance with the provisions of the Company's restated
Certificate of Incorporation.
(b)At the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof:
(i)each Share held by the Company as treasury stock or
owned by Parent or any subsidiary of Parent
immediately prior to the Effective Time shall be canceled, retired, and shall
cease to exist, and no payment shall be made with respect thereto;
(ii)each share of common stock of Merger Subsidiary
issued
and outstanding immediately prior to the
Effective Time shall be converted into and become one share of common stock
of the Surviving Corporation with the same rights, powers and privileges as
the shares so converted and such shares in the aggregate shall constitute the
only outstanding shares of capital stock of the Surviving Corporation; and
(iii) each Share outstanding immediately prior to the
Effective Time shall, except as otherwise provided in Section 1.2(b)(i), be
converted into the right to receive (X) the Cash Portion Per Share (as
defined in Section 1.2(d)), plus (Y) a Parent Warrant Fraction (as defined in
Section 1.2(e)) of a Parent Warrant (as defined in Section 1.2(e)) as
determined pursuant to Section 1.2(e)), plus (Z) that number of shares of
common stock, no par value, of Parent (the "Parent Stock") equal to $5.00
minus the Cash Portion Per Share ("Stock Portion Per Share"), divided by the
Parent Stock Price (as defined below), if the Parent Stock Price is greater
than or equal to $10.50 and less than or equal to $13.25; that number of
shares of Parent Stock equal to the Stock Portion Per Share divided by
$10.50, if the Parent Stock Price is less than $10.50; and that number of
shares equal to the Stock Portion Per Share divided by $13.25 if the Parent
Stock Price is greater than $13.25, in any such case carried to the fourth
decimal place (such amount of stock as so determined being herein referred to
as the "Stock Per Share Amount"). If the Parent Stock Price is greater than
$14.50 or less than $9.50 this Agreement may be terminated in accordance with
the provisions of Section 9.1(h) hereto.
(c)The average of the closing prices of the Parent
Stock
for the twenty trading day period ending the
third trading day prior to the Closing ("Pricing Date") shall be defined as
the "Parent Stock Price". The closing price for each day shall be the last
sale price, regular way, as reported in the principal consolidated
transaction reporting system for securities listed on New York Stock
Exchange.
(d)The "Cash Portion Per Share" shall be equal to the
amount obtained by dividing (i) $10 million (or
such greater amount not exceeding $15 million that Parent may determine in
its sole discretion) minus any amounts payable to holders of FBG Options (as
defined in Section 3.7(b)) pursuant to Sections 1.5(c), 1.5(d) and 1.5(e), by
(ii) the number of Shares outstanding immediately prior to the Effective
Time.
(e)A "Parent Warrant" shall be the right to purchase
one
share of Parent Stock. The "Parent Warrant
Fraction" shall be that fraction of a Parent Warrant equal in value to $.31
as determined by the Black-Scholes model in the Equity Option Calculator licen
sed by Bloomberg L.P. with the following assumptions used for such model: (i)
a Parent Warrant shall be exercisable for a period of six years following the
Pricing Date; (ii) the exercise price shall be equal to 135% of the Parent
Stock Price; (iii) the option type will be American; (iv) the options will be
"dilutive"; (v) the volatility rate shall be the rate prescribed by the
Bloomberg model as of the Pricing Date; (vi) the semi-annual risk-free
interest rate as prescribed by the Bloomberg model as of the Pricing Date
shall be used; (vii) a cash dividend of $.075 per share of Parent Stock on
April 13 of each year; and (viii) the number of shares of Parent Stock
outstanding following the Merger. Parent Warrants shall
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be represented by
warrant certificates with the terms attached as Schedule IV hereto and issued
pursuant to a warrant agreement, the language of which will be negotiated by
the parties prior to the mailing of the proxy statements as described herein
("Warrant Agreement").
(f)The Cash Portion Per Share, and the fraction of Parent
Warrant and the Parent Stock into which a Share is
converted pursuant to the Merger, are referred to herein as the "Merger
Consideration".
SECTION 1.3. SURRENDER AND
PAYMENT. (a) Prior to the Effective Time, Parent shall appoint an agent (the
"Exchange Agent") for the purpose of exchanging
certificates representing Shares for the Merger Consideration. At and after
the Effective Time as required, Parent will deposit with the Exchange Agent
the Merger Consideration to be paid in respect of the Shares. Promptly after
the Effective Time, Parent will send, or will cause the Exchange Agent to
send, to each holder of Shares at the Effective Time a letter of transmittal
for use in such exchange (which, among other things, shall specify that the
delivery shall be effected, and risk of loss and title shall pass, only upon
proper delivery of the certificates representing Shares to the Exchange
Agent).
(b)Each holder of Shares, upon surrender to the Exchange
Agent of a certificate or certificates representing
such Shares together with a properly completed letter of transmittal covering
such Shares, will receive the Merger Consideration payable in respect of such
Shares. Until so surrendered, each such certificate shall, after the
Effective Time, represent for all purposes only the right to receive such
Merger Consideration. The shares of Parent Stock constituting the Merger
Consideration shall be deemed to have been issued at the Effective Time.
(c)If any portion of the Merger Consideration is to be
paid
to a Person other than the registered holder of
the Shares represented by the certificate or certificates surrendered in
exchange therefor, it shall be a condition to such payment that the certificat
e or certificates so surrendered shall be properly endorsed or otherwise be
in proper form for transfer and the Person requesting such payment shall pay
to the Exchange Agent any transfer or other taxes required as a result of
such payment to a Person other than the registered holder of such Shares or
establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not applicable. For purposes of this Agreement, "Person" means an
individual, a corporation, a limited liability company, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or any agency or instrumentality thereof.
(d) After the Effective Time, there shall be no further
registration of transfers of Shares by the Company. If,
after the Effective Time, certificates representing Shares are presented to
the Surviving Corporation, they shall be canceled and exchanged for the
Merger Consideration provided for, and in accordance with the procedures set
forth, in this Article 1.
(e) Any portion of the Merger Consideration made available to
the
Exchange Agent pursuant to Section 1.3(a) and not
exchanged for Shares shall be returned by the Exchange Agent to Parent at
such time and from time to time as Parent may request, provided that such
return shall not relieve Parent of its obligation to make cash and Parent
Stock available to the Exchange Agent as required by Section 1.3(a). At such
time as Parent may determine, provided that such time shall not be earlier
than six (6) months following the Effective Time, Parent may discharge the
Exchange Agent, in which event Parent shall thereafter act as Exchange Agent.
(f) No holder of any unsurrendered certificates representing
Shares shall have the right to vote the Parent Stock
receivable in exchange for such certificates until such certificates are
surrendered as provided in this Section 1.3. Following such surrender, such
holder shall have the right to vote the Parent Stock for any meeting the
record date of which is after the date of such surrender. No dividends or
other distributions with respect to the Parent Stock constituting part of the
Merger Consideration shall be paid to the holder of any unsurrendered
certificates representing Shares until such certificates are surrendered as
provided in this Section 1.3. Upon such surrender, there shall be paid,
without interest, to the person in whose name the certificates representing
the
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Parent Stock into which such Shares were converted are registered, all
dividends and other distributions payable in respect of such Parent Stock on
a date subsequent to, and in respect of a record date after, the Effective Xxx
e and prior to such surrender. Such holder shall be also entitled to
receive, on the payment date therefor, any dividend or distribution the
record date for which occurred prior to such surrender and the payment date
for which occurred following such surrender. In no event shall any holder be
entitled to receive interest on the Cash Portion Per Share to be received in
the Merger. Notwithstanding anything in this Agreement to the contrary, none
of Parent, Merger Subsidiary or the Exchange Agent nor any other party hereto
shall be liable to a holder of Shares, for Parent Stock, dividends or
distributions thereon, the Cash Portion Per Share, or cash in lieu of
fractional shares, delivered to a public official pursuant to applicable
escheat laws.
SECTION 1.4. [INTENTIONALLY LEFT BLANK]
SECTION 1.5. STOCK OPTIONS. (a) Upon the conversion
of the Company B Stock into Company A Stock as provided in Section 1.2(a) and
Section 3.7(a), each FBG Option to purchase one share of Company B Stock
shall be converted into an option to purchase 1.35 shares of Company A Stock.
(b) At the Effective Time, the holder of an FBG Option that has
been properly exercised prior to the Effective Time
in accordance with its terms shall be entitled to receive the Merger
Consideration in accordance with Section 1.2(b)(iii), for each share of
Company A Stock acquired or to be acquired by virtue of the exercise of such
FBG Option.
(c) At the Effective Time, each FBG Option outstanding pursuant
to
Financial Benefit Group, Inc.'s Non-Qualified
Option Plan, whether or not exercisable, and whether or not vested, shall
terminate and the Surviving Corporation shall pay to each holder of such an
FBG Option cash in an amount equal to the product of: (x) the excess of the
Merger Consideration (with the Parent Stock portion of the Merger
Consideration valued at the Parent Stock Price and the Parent Warrant portion
of the Merger Consideration valued at $.31) over the exercise price per Share
of such Option, and (y) the number of Shares subject to such option.
(d) At the Effective Time, if the holder of an FBG Option
outstanding pursuant to Financial Benefit Group, Inc.'s
Equity Incentive Non-Qualified Warrant/Option Program, whether or not
exercisable, and whether or not vested, has elected (on or prior to ten days
preceding the Effective Time) to receive cash for such Option, such Option
shall terminate and the Surviving Corporation shall pay to each holder of
such an FBG Option cash in an amount equal to the product of (x) the excess
of the Merger Consideration (with the Parent Stock portion of the Merger
Consideration valued at the Parent Stock Price and the Parent Warrant portion
of the Merger Consideration valued at $.31) over the exercise price per Share
of such Option, and (y) the number of Shares subject to such option.
(e) The holder of an FBG Option outstanding pursuant to
Financial
Benefit Group, Inc.'s Employee Incentive Stock
Option Plan, whether or not exercisable, and whether or not vested, will be
given the opportunity to request the Company (on or prior to ten days
preceding the Effective Time) to allow such holder to receive cash from the
Surviving Corporation for such Option in an amount equal to the product of
(x) the excess of the Merger Consideration (with the Parent Stock portion of
the Merger Consideration valued at the Parent Stock Price and the Parent
Warrant portion of the Merger Consideration valued at $.31) over the exercise
price per Share of such Option, and (y) the number of Shares subject to such
option. If the Company consents to any such request, such Option shall
terminate at the Effective Time and such holder shall receive such amount.
(f) At the Effective Time, if the holder of an FBG Option
outstanding pursuant to Financial Benefit Group, Inc.'s Employee Incentive
Stock Option Plan, whether or not exercisable, and whether or not vested, has
not elected (on or prior to ten days preceding the Effective Time) to receive
cash for such FBG Option, such FBG Option shall in accordance with the
provisions of such plan become an option to acquire shares of Parent Stock
(an "ISO Continuing Option"). The number of shares of
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Parent Stock subject
to ISO Continuing Options shall be computed in compliance with the
requirements of Section 424(a) of the Code. Subject to the foregoing, (x)
the number of shares of Parent Stock subject to any such ISO Continuing
Option will be determined by multiplying the number of Shares subject to such
FBG Option immediately prior to the Effective Time by the "Exchange Ratio"
(with the "Exchange Ratio" defined as the sum of (i) the number of shares of
Parent Stock receivable for each Share pursuant to Section 1.2(b)(iii), plus
(ii) a number of shares equal to the Cash Portion Per Share divided by the
Parent Stock Price, plus (iii) a number of shares equal to $.31 divided by
the Parent Stock Price), and (y) the exercise price under any such ISO
Continuing Option will be determined by dividing the exercise price per Share
in effect immediately prior to the Effective Time of the Merger by the
Exchange Ratio, and rounding the exercise price thus determined to the
nearest whole cent (a half cent shall be rounded to the next higher whole
cent). Such ISO Continuing Options shall be subject to substantially all of
the other terms and conditions of the original options to which they relate.
Each holder of ISO Continuing Options shall surrender their current option
agreements and execute new option agreements with Parent with respect to such
Continuing Options and shall be required to execute an appropriate release.
(g) At the Effective Time, if the holder of an FBG Option
outstanding pursuant to Financial Benefit Group, Inc.'s
Equity Incentive Non-Qualified Warrant/Option Program, whether or not
exercisable, and whether or not vested, has not elected (on or prior to ten
days preceding the Effective Time) to receive cash for such Option, such
Option shall, in accordance with the provisions of such plan, become an
option to acquire shares of Parent Stock (an "NQO Continuing Option"). The
number of shares of Parent Stock subject to any such NQO Continuing Option
will be determined by multiplying the number of Shares subject to such FBG
Option immediately prior to the Effective Time of the Merger by the Exchange
Ratio. The exercise prices under any such NQO Continuing Option will be
determined by dividing the exercise price per Share in effect immediately
prior to the Effective Time of the Merger by the Exchange Ratio, and rounding
the exercise price thus determined to the nearest whole cent (a half cent
shall be rounded to the next higher whole cent). Such NQO Continuing Options
shall be subject to substantially all of the other terms and conditions of
the original options to which they relate. Each holder of NQO Continuing
Options shall surrender their current option agreements and execute new
option agreements with Parent with respect to such Continuing Options and
shall be required to execute an appropriate release.
(h) To make the elections for cash described in Section 1.5(d),
any such holder must deposit with the Exchange Agent a properly completed
letter of election (including an appropriate release) and the Option
Agreements relating to any such FBG Options for which such election is made.
Such election shall be irrevocable. Following the Effective Time, each
holder shall be sent the amount receivable upon such election. No interest
shall be paid on such amount. If the Merger is not consummated, the Option
Agreements shall be returned to each such holder. To make the request for
cash described in Section 1.5(e), any such holder must deposit with the
Company a properly completed letter of request (including an appropriate
release) and the Option Agreements relating to any such FBG Options for which
such offer is accepted. Such request shall be irrevocable. If the Company
consents, following the Effective Time, each holder shall be sent the amount
receivable. No interest shall be paid on such amount. If the Merger is not
consummated, the Option Agreements shall be returned to each such holder.
SECTION 1.6. 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
Parent shall occur by reason of any reclassification, recapitalization, stock
split or combination, exchange or readjustment of shares, or any stock
dividend thereon, the number of shares of Parent Stock constituting all or
part of the Merger Consideration shall be appropriately adjusted.
SECTION 1.7. FRACTIONAL SHARES AND WARRANTS.
No fractional shares of Parent Stock
shall be issued in the Merger. All fractional shares of Parent Stock that a
holder of Shares would otherwise be entitled to receive as a result of the
Merger shall be aggregated and if a fractional share results from such
aggregation, such holder shall be entitled to receive from Parent, in lieu
thereof, upon surrender of stock certificates for exchange pursuant to this
Article 1, an amount in cash
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determined by multiplying the Parent Stock Price
by the fraction of a share of Parent Stock to which such holder would
otherwise have been entitled. No interest shall be paid with respect to such
cash payment. No fractions of a Parent Warrant shall be issued in the
Merger. All fractions of a Parent Warrant that a holder of Shares would
otherwise be entitled to receive as a result of the Merger shall be
aggregated and if a fractional Parent Warrant results from such aggregation,
such holder shall be entitled to receive from Parent, in lieu thereof, upon
surrender of stock certificates for exchange pursuant to this Article 1, an
amount in cash determined by multiplying such fraction by an amount equal to
$.31 divided by the Parent Warrant Fraction. No interest shall be paid with
respect to such cash payment.
ARTICLE 2
THE SURVIVING CORPORATION
SECTION 2.1. CERTIFICATE OF INCORPORATION. The
certificate of incorporation of
Merger Subsidiary in effect at the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until amended in accordance with
applicable law.
SECTION 2.2. BYLAWS. The bylaws of
Merger Subsidiary in effect at the Effective Time shall be the bylaws of the
Surviving Corporation until amended in accordance with the applicable law.
SECTION 2.3. DIRECTORS AND OFFICERS. From and after the
Effective Time, until successors are duly elected or appointed and qualified
in
accordance with applicable law, (a) the directors of Merger Subsidiary at the
Effective Time shall be the directors of the Surviving Corporation, and (b)
the officers of the Merger Subsidiary at the Effective Time shall be the
officers of the Surviving Corporation.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Parent that, except as
otherwise disclosed on a disclosure schedule delivered on or prior to the
date hereof to Parent by the Company (the "Company Disclosure Schedule"):
SECTION 3.1. CORPORATE EXISTENCE AND POWER. The Company is
a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate powers and all governmental
licenses, authorizations, consents and approvals required to carry on its busi
ness as now conducted other than any such licenses, authorizations, permits,
registrations, consents and approvals the failure of which to have would not,
individually or in the aggregate, have a Company Material Adverse Effect (as
defined below). The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character
of the property owned or leased by it or the nature of its activities makes
such qualification necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have
a Company Material Adverse Effect. The Company has heretofore delivered to
Parent true and complete copies of the Company's certificate of incorporation
and bylaws as currently in effect. For purposes of this Agreement, a
"Company Material Adverse Effect" means, a material adverse effect on the
assets, liabilities, business, operations, condition (financial or
otherwise), or results of operations of the Company and any of its
subsidiaries identified pursuant to Section 3.2 (the "Company Subsidiaries")
taken as a whole, or on the ability of the Company to perform its obligations
hereunder. For purposes of this Agreement, any reference to any event, change
or effect being "material" with respect to any Person means an event, change
or effect, whether existing or prospective, which is material in relation to
the assets, liabilities, business, operations, condition (financial or
otherwise), or results of operations of such Person and its Subsidiaries
taken as a whole or on the ability of such Person to perform its obligations
hereunder.
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SECTION 3.2. SUBSIDIARIES.
The Company Disclosure Schedule contains a true and complete list of all of
the Company Subsidiaries. Said list sets forth the authorized capital stock,
the number of shares duly issued and outstanding, the number so owned by the
Company and the jurisdiction of incorporation of each corporation. The
shares of capital stock of the Company Subsidiaries owned directly or
indirectly by Company are validly issued, fully paid and non-assessable
(subject to statutory obligations of holders, if any), and are owned free and
clear of any liens, claims, charges or encumbrances except as set forth on
such list. The Company (i) does not have any direct or indirect subsidiaries
other than the Company Subsidiaries, and (ii) other than in the ordinary
course of business of the Company, has not made any advances to or
investments in, and does not own any securities of or other interests in, any
Person. Each of the Company Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation, has the corporate power to own or lease its properties and
carry on its business as now being conducted, and is duly qualified as a
foreign corporation to do business, and is in good standing, in each jurisdict
ion where the character of its properties owned or held under lease or the
nature of its activities makes such qualification necessary, except where the
failure so to qualify would not have a Company Material Adverse Effect.
SECTION 3.3. CORPORATE RECORDS. The corporate record books,
transfer books and stock
ledgers of the Company and the Company Subsidiaries are complete and accurate
in all material respects.
SECTION 3.4. CORPORATE AUTHORIZATION. The execution,
delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby are within the Company's
corporate powers subject to the conditions set forth in this Agreement and,
except for the approval by the Company's stockholders of this Agreement, the
Merger, and the transactions contemplated hereby, have been duly authorized
by all necessary corporate action. Subject to the approval of the Company's
stockholders of this Agreement, this Agreement constitutes a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting generally
the enforcement of creditors rights and by the availability of equitable
remedies. The Board of Directors has unanimously voted to recommend the
approval of this Agreement, the Merger and the transactions contemplated
hereby, by the Company's shareholders.
SECTION 3.5. GOVERNMENTAL AUTHORIZATION. The execution,
delivery and
performance by the Company of this Agreement and the consummation of the
Merger by the Company require no action by or in respect of, or filing with,
any governmental body, agency, official or authority other than (a) the filing
of a certificate of merger in accordance with the DGCL; (b) compliance with
any applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act"); (c) compliance with any applicable
requirements of the Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder (the "Exchange Act"), including, without
limitation, the filing by the Company with the Securities and Exchange
Commission (the "SEC") of the Company Proxy Statement (as hereinafter
defined); (d) compliance with any applicable requirements under the insurance
laws of Florida, Kansas and any other applicable state; (e) compliance with
the applicable requirements of the 1933 Act; (f) compliance with any
applicable foreign or state securities or Blue Sky laws; (g) compliance with
state takeover, antitrust and competition law filings and approvals; and (h)
such actions by or filings with governmental bodies, agencies, officials or
authorities, the failure of which to obtain or make would not reasonably be
expected to: (1) have, individually or in the aggregate, a Company Material
Adverse Effect; (2) impair the ability of the Company to perform its
obligations under this Agreement; or (3) prevent the consummation of the trans
actions contemplated by this Agreement.
SECTION 3.6. NON-CONTRAVENTION. The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby do not and will not (a)
contravene or conflict with the certificate of incorporation or bylaws of the
Company or any of the Company Subsidiaries, or (b) except for any such
matters that, individually or in the aggregate, have not had, and would not
reasonably be expected to have, a Company Material Adverse Effect, (i)
assuming compliance with the matters referred to in Section 3.5, contravene
or conflict
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with or constitute a violation of any provision of any law,
regulation, judgment, injunction, order or decree binding upon or applicable
to the Company, any Company Subsidiary or any of their respective properties
or assets, (ii) result in a violation or breach of, or constitute a default
under, or give rise to a right of termination, cancellation or acceleration
of any right or obligation of the Company or any Company Subsidiary or to a
loss of any benefit to which the Company or any Company Subsidiary is
entitled under any provision of any agreement, contract or other instrument
binding upon the Company or to which the Company or such Company Subsidiary
is a party or by which it is affected or any license, franchise, permit or
other similar authorization held by the Company or such Company Subsidiary or
to which the Company or such Company Subsidiary is a party or by which it is
affected or (iii) result in the creation or imposition of any Lien on any
asset of the Company or any Company Subsidiary. For purposes of this
Agreement, "Lien" means, with respect to an asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset.
SECTION 3.7. CAPITALIZATION. (a) The authorized
capital stock of the Company consists of 25,000,000 shares of Company A Stock
and 1,750,000 shares of Company B Stock and 5,000,000 shares of preferred
stock. As of the date hereof, there are outstanding 6,428,428 shares of
Company A Stock and 323,667 shares of Company B Stock and no shares of
preferred stock. All shares of Company B Stock outstanding prior to Closing
will be converted into Company A Stock prior to Closing. As of the Closing,
there will be no shares of Company A Stock or Company B Stock outstanding
other than those outstanding as of the date hereof, those issued pursuant to
the exercise of FBG Options (as defined herein) or Warrants (as defined
herein) outstanding as of the date hereof, or those issued pursuant to the
conversion into Company A Stock of the Company B Stock outstanding as of the
date hereof or Company B Stock issued upon exercise of options for Company B
Stock outstanding on the date hereof.
(b) As of the date hereof, there are outstanding options and
warrants (other than Warrants as defined in Section
3.7(h)) (collectively, "FBG Options") to purchase an aggregate of 1,453,975
Shares of Company A Stock and to purchase an aggregate of 445,130 shares of
Company B Stock. All of such FBG Options were issued pursuant to either
Financial Benefit Group, Inc.'s Non-Qualified Option Plan, Financial Benefit
Group, Inc.'s Equity Incentive Non-Qualified Warrant/Option Program, or
Financial Benefit Group, Inc.'s Employee Incentive Stock Option Plan.
Included in the Company Disclosure Schedule are true correct and complete
copies of such plans and standard agreements thereunder. Upon the conversion
of the Company B Stock into Company A Stock as provided in Section 1.2(a) and
Section 3.7(a), each option to purchase one share of Company B Stock pursuant
to its terms shall be automatically converted into an option to purchase 1.35
shares of Company A Stock. Prior to such conversion, as of Closing there
will be FBG Options to purchase a number of Shares of Company A Stock and
Company B Stock equal to the amounts indicated in the first sentence of this
Section 3.7(b), less Shares of Company A Stock and Company B Stock issued
pursuant to FBG Options exercised following the date hereof and prior
thereto. As of the date hereof, FBG Options to purchase 1,179,977 shares of
Company A Stock are exercisable with the remaining FBG Options to purchase
Company A Stock not exercisable, and FBG Options to purchase 329,796 shares
of Company B Stock are exercisable with the remaining FBG Options to purchase
Company B Stock not exercisable.
(c) The number of Shares (consisting entirely of Company A
Stock)
purchasable upon exercise of outstanding FBG
Options issued pursuant to Financial Benefit Group, Inc.'s Non-Qualified
Option Plan (whether currently exercisable) is equal to 12,500. All of such
FBG Options are non-qualified stock options. The terms of such Plan and the
FBG Options issued thereunder require that (i) such FBG Options must be
cashed out in connection with the Merger whether such FBG Options are
exercisable or not, and (ii) the Company must pay cash to holders of such FBG
Options as specified in Section 1.5(c). If the Merger is consummated, the
amount of cash required to be paid by the terms of such Plan and the FBG
Options issued thereunder is equal to the Merger Consideration (with the
Parent Stock portion of the Merger Consideration valued at the Parent Stock
Price and the Parent Warrant portion of the Merger Consideration valued at
$.31) less the exercise prices thereof, multiplied by the number of shares of
Company A Stock covered by any such Option. The payment of such amount
following the Effective Time does not violate the terms of such FBG Options.
No payment of such
41
amount is required if the Merger is not consummated.
There are no such Options for which the Merger Consideration (with the Parent
Stock portion of the Merger Consideration valued at the Parent Stock Price
and the Parent Warrant portion of the Merger Consideration valued at $.31) is
less than or equal to the exercise price. None of such FBG Options, whether
or not exercisable, would terminate pursuant to their terms, or may be
canceled, without requiring the payment of cash described in Section 1.5(c),
following or in connection with the Merger. All of such FBG Options were
issued in transactions exempt from registration under the Securities Act and
all applicable state securities laws. The Company Disclosure Schedule lists
all holders of Shares issued upon exercise of such FBG Options, which such
transactions were exempt from registration under the Securities Act and all
applicable state securities laws. The certificates for the Shares issued
upon such exercise contain appropriate legends.
(d) The number of Shares purchasable upon exercise of
outstanding
FBG Options issued pursuant to Financial Benefit
Group, Inc.'s Equity Incentive Non-Qualified Warrant/Option Program (whether
or not currently exercisable) is equal to 1,060,838 (consisting of FBG
Options for 858,338 shares of Company A Stock and for 150,000 shares of
Company B Stock). All of such FBG Options are non-qualified stock options or
warrants, as the case may be. The terms of such Program and the FBG Options
issued thereunder require the Company to pay cash upon the election described
in 1.5(d) hereof, but do not require the holders thereof to accept any such
cash payment. If the Merger is consummated, the amount of cash required to
be paid upon such election by the terms of such Program and the FBG Options
issued thereunder is equal to the Merger Consideration (with the Parent Stock
portion of the Merger Consideration valued at the Parent Stock Price and the
Parent Warrant portion of the Merger Consideration valued at $.31) less the
exercise prices thereof, multiplied by the number of shares of Company A
Stock covered by any such Option. The payment of such amount following the
Effective Time does not violate the terms of such FBG Options. No payment of
such amount is required if the Merger is not consummated. The terms of such
Plan and the FBG Options issued thereunder provide that following the
Effective Time, such FBG Options for which the holders do not elect to
receive cash, shall be exercisable for the number of shares of Parent Stock,
and the exercise prices, as determined pursuant to Section 1.5(g), whether
such FBG Options are exercisable or not, without any consent of any holder
thereof. Any such FBG Options which currently are not exercisable shall
become exercisable as provided in such Options; none of the signing of this
Agreement, the approval of this Agreement by the Board of Directors of the
Company, the Merger, the other transactions contemplated by this Agreement or
any action taken in connection with the foregoing, will accelerate or
lengthen the term of any of such FBG Options. None of such FBG Options,
whether or not exercisable, would terminate pursuant to their terms, or may
be canceled, without the payment of cash pursuant to Section 1.5(d) or the
continuation of such Option as specified in Section 1.5(g), following or in
connection with the Merger. All of such FBG Options were issued in
transactions exempt from registration under the Securities Act and all
applicable state securities laws. The Company Disclosure Schedule lists all
holders of Shares issued upon exercise of such FBG Options, which such
transactions were exempt from registration under the Securities Act and all
applicable state securities laws. The certificates for the Shares issued
upon such exercise contain appropriate legends.
(e) The number of Shares purchasable upon exercise of
outstanding
FBG Options issued pursuant to Financial Benefit
Group, Inc.'s Employee Incentive Stock Option Plan, (whether or not currently
exercisable) is equal to 981,563 (consisting of FBG Options for 583,137
shares of Company A Stock and for 295,130 shares of Company B Stock). All of
such FBG Options were incentive stock options within the meaning of Section
422 of the of the Internal Revenue Code when granted and nothing has occurred
since the date of granting such options to disqualify them as incentive stock
options. The terms of such Plan and the FBG options issued thereunder do not
require the Company to pay cash upon the election described in 1.5(e) hereof.
The payment of such amount following the Effective Time does not violate the
terms of such FBG Options. The terms of such Plan and the FBG Options issued
thereunder provide that following the Effective Time, such FBG Options for
which the holders do not elect to receive cash, shall be exercisable for the
number of shares of Parent Stock, and the exercise prices, as determined
pursuant to Section 1.5(f), whether such FBG Options are exercisable or not,
without any consent of any holder thereof. Any such FBG Options which
currently
42
are not exercisable shall become exercisable as provided in such
Options; none of the signing of this Agreement, the approval of this
Agreement by the Board of Directors of the Company, the Merger, the other
transactions contemplated by this Agreement or any action taken in connection
with the foregoing, will accelerate or lengthen the term of any of such FBG
Options. None of such FBG Options, whether or not exercisable, would
terminate pursuant to their terms, or may be canceled, without the payment of
cash pursuant to Section 1.5(e) or the continuation of such Option as
specified in Section 1.5(f), following or in connection with the Merger. The
terms of such FBG Options require that they remain incentive stock options;
none of such FBG Options, whether or not exercisable, could become
non-qualified stock options. The numbers of shares, and exercise prices set
forth expressly in Section 1.5(f), without reference to second sentence
thereof, shall not have to be adjusted as a result of Section 424(a) of the
Code.
(f) Set forth in Section 3.7(f) of the Company Disclosure
Schedule
is a true and complete list of all FBG Options,
the Company Stock for which they are exercisable, whether such FBG Options
are incentive stock options or non-qualified stock options or warrants, the
issue date thereof, the company plan under which such FBG Options were
issued, the exercise prices thereof (indicating whether such exercise prices
relate to Company A Stock or Company B Stock) and the dates on which such FBG
Options become exercisable. The aggregate difference between $5.31 and the
exercise prices of all FBG Options (assuming the conversion of Company B FBG
Options into Company A FBG Options) is equal to $8,929,359.
(g) Set forth in Section 3.7(g) of the Company Disclosure
Schedule
is a true and complete list of all FBG Options
held by the officers of the Company named therein, the Company Stock for
which they are exercisable, whether such FBG Options are incentive stock
options or non-qualified stock options, the issue date thereof, the company
plan under which such FBG Options were issued, the exercise prices thereof,
and the dates on which such FBG Options become exercisable. Such FBG Options
shall be exercised prior to Closing or cash shall be elected or requested
pursuant to Sections 1.5(d) or (e) with respect to such FBG Options.
(h) As of the date hereof, there are outstanding warrants to
purchase 643,781 Shares of Company A Stock and no
Shares of Company B Stock, other than warrants included in the definition of
FBG Options ("Warrants"). True and correct copies of such Warrants are
included in the Company Disclosure Schedule. All of such Warrants are
currently exercisable. Pursuant to their terms, upon exercise and payment of
the exercise price thereof following the Closing, the holder of the Warrants
will be entitled to receive the cash and Parent Stock they would have been
entitled to receive had they exercised such Warrants immediately prior to
Closing (and to the extent such Warrants are for Company B Stock, had they
exercised such Warrants, and converted the Company B Stock received into
Company A Stock, immediately prior to Closing). None of such Warrants,
whether or not exercisable, would terminate pursuant to their terms, or are
cancelable, following or in connection with the Merger. None of such
Warrants could be exchanged for cash or paid out in cash without the consent
of the holders thereof. The aggregate difference between $5.31 and the
exercise price of the Warrants is equal to $2,768,477.
(i) Following the cash payment for FBG Options as described in
Sections 1.5(c), and following the cash payments for
those holders who elect or request to receive cash as described in Sections
1.5(d) or 1.5(e), the number of shares of Parent Stock subject to options
issuable in exchange for FBG Options under Sections 1.5(f) or 1.5(g) will be
no more than 150,000.
(j) All outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are
fully paid and nonassessable and free of pre-emptive rights. Except as set
forth in this Section, there are outstanding (i) no other shares of capital
stock or other voting securities of the Company, (ii) no securities of the
Company convertible into or exchangeable for shares of capital stock or
voting securities of the Company, and (iii) no other options or other rights
to acquire from the Company, and no obligation of the Company to issue, any
capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company (the items
in clauses (i), (ii) and (iii) being referred to collectively as
43
the "Company
Securities"). There are no outstanding obligations of the Company to
repurchase, redeem or otherwise acquire any Company Securities.
SECTION 3.8. SEC FILINGS. (a) The Company has
filed all reports required to be filed with the SEC pursuant to the Exchange
Act since December 31, 1991 (the "Company SEC Reports"). The Company has
delivered or made available to Parent (i) the annual report on Form 10-K for
its fiscal year ended 1994, (ii) its quarterly reports on Form 10-Q for its
fiscal quarters ended March 31, 1995 and June 30, 1995 (iii) its proxy
statement dated June 7, 1995, and (iv) all of its other reports, statements,
schedules and registration statements filed with the SEC since June 30, 1995
(collectively, with the Company SEC Reports, the "Company Filings").
(b) As of its filing date, no Company Filing contained any
untrue
statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
(c) No such registration statement as amended or supplemented,
if
applicable, filed pursuant to the 1933 Act when
such statement or amendment became effective contained any untrue statement
of a material fact or omitted to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
SECTION 3.9. FINANCIAL STATEMENTS. The audited consolidated
financial statements and unaudited consolidated interim financial statements
of the Company included in the Company Filings fairly present, in conformity
with generally accepted accounting principles applied on a consistent basis
(except as may be indicated in the notes thereto), the financial position of
the Company and the Company Subsidiaries as of the dates thereof and their
results of operations and cash flow for the periods then ended (subject to
normal year-end adjustments in the case of any unaudited interim financial
statements). For purposes of this Agreement, "Company Balance Sheet" means
the Company's balance sheet dated as of June 30, 1995, as set forth in the
Company's Form 10-Q report for the second quarter of 1995 and "Company
Balance Sheet Date" means June 30, 1995.
(b) Except as and to the extent set forth on the Company Balance
Sheet, the Company and the Company Subsidiaries do
not have any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise), except for liabilities and obligations
incurred since the Company Balance Sheet Date which would not, individually
or in the aggregate, have a Company Material Adverse Effect.
SECTION 3.10. STATUTORY
FINANCIAL STATEMENTS AND FILINGS. (a) The statutory financial statements
("SAP Statements") of Financial Benefit Life Insurance
Company (the "Company Insurance Subsidiary") for each of the three years in
the three-year period ended December 31, 1994, and for the quarter ended June
30, 1995, have been prepared in accordance with statutory accounting
practices prescribed or permitted by the National Association of Insurance
Commissioners ("SAP") and such accounting practices have been applied on a
consistent basis throughout the period involved, except as disclosed therein.
The Company has heretofore delivered to Parent true and complete copies of
all such statements. Such SAP Statements (i) present fairly in all material
respects, to the extent required and in conformity with SAP, the financial
condition of the Company Insurance Subsidiary at their respective dates, and
its results of operations, changes in capital and surplus, and cash flows for
each of the periods then ended; (ii) were correct in all material respects
when filed; and (iii) were timely filed. The Company has not received
written notice from the Florida Commissioner of Insurance asserting any
deficiency with respect to such SAP Statements nor, to the best knowledge of
the Company, has the Florida Commissioner of Insurance threatened to assert
any such deficiency.
(b) Since June 30, 1995, the Company Insurance Subsidiary has
filed all reports and other filings, together with
any amendments required to be made with respect thereto, that it has been
required to file with state insurance regulatory authorities (the "Company
Insurance Filings"), and all of the Company Insurance Filings filed prior to
the date hereof complied, and all such filings
44
made hereafter prior to the
Effective Time will comply, in all material respects with applicable
insurance laws, rules and regulations, and, except as disclosed in the
Company Disclosure Schedule, there are no material open or unresolved issues
raised by any insurance or securities regulatory authority with respect to
any of such filings.
(c) The Company has no reason to believe that any material
amount
recoverable pursuant to any material reinsurance,
coinsurance, excess insurance, ceding of insurance, assumption of insurance
or indemnification with respect to insurance or similar material arrangements
applicable to the Company Insurance Subsidiary or its properties or assets
(collectively, "Reinsurance Agreements") is not fully collectible in due
course. The Company Insurance Subsidiary is entitled to take full credit in
its SAP Statements pursuant to applicable insurance laws, rules and
regulations for such reinsurance, coinsurance or excess insurance ceded
pursuant to any such Reinsurance Agreement. The Company Disclosure Schedule
sets forth all assumption reinsurance contracts or arrangements entered into
by the Company or any of the Company Subsidiaries in which the Company or
such subsidiary has ceded risk to any person.
(d) Each material reserve and other material liability of the
Company Insurance Subsidiary reflected in, or
included with, the SAP Statements was determined in accordance with generally
accepted actuarial standards consistently applied throughout the specified
period and the immediately preceding prior period, was based on actuarial
assumptions that were in accordance with or more conservative than those
called for in relevant policy and contract provisions, is fairly stated in
accordance with sound actuarial principles and is in compliance with the
requirements of applicable insurance laws, rules and regulations. Except as
may be affected by deviations from investment assumptions, such reserves and
liabilities were adequate in the aggregate to cover the total amount of all
reasonably anticipated liabilities of the Company Insurance Subsidiary under
all outstanding insurance policies, funding agreements, Reinsurance
Agreements and annuity, coinsurance and other similar arrangements as of the
respective dates of such SAP Statements. Such investment assumptions were
reasonable as of such respective dates. The admitted assets of the Company
Insurance Subsidiary as determined under applicable insurance laws, rules and
regulations is in an amount equal to the sum of all such reserves and
liabilities and the statutory capital and surplus yielding an authorized
control level risk based capital ratio of 484%, meeting such laws, rules and
regulations.
SECTION 3.11. ACTUARIAL REPORT.--The Company has delivered to
Parent a true and complete copy of any actuarial reports prepared by
independent actuaries with respect to the Company or the Company Subsidiaries
in the last 12 months, and all attachments, addenda, supplements and
modifications thereto (the "Company Actuarial Analyses"). To the knowledge
of the Company, the policy information and experience data furnished by the
Company to its independent actuaries in connection with the preparation of
the Company Actuarial Analyses were accurate in all material respects, except
insofar as any inaccuracy shall not have materially affected the accuracy of
the Company Actuarial Analyses.
SECTION 3.12. DISCLOSURE DOCUMENTS. (a) The proxy statement
required to be filed by the Company with the SEC in connection with the
transactions contemplated by this Agreement (the "Company Proxy Statement"),
and any
amendments or supplements thereto will, when filed, comply as to form in all
material respects with the applicable requirements of the Exchange Act.
(b) At the time the Company Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders
of the Company, at the time such stockholders vote on approval of this
Agreement and at the Effective Time, the Company Proxy Statement, as
supplemented or amended, if applicable, will not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements made therein, in the light of the circumstances under
which they were made, not misleading. The representations and warranties
contained in this Section 3.12(b) will not apply to statements in, or
omissions from, the Company Proxy Statement based upon information furnished
to the Company, or omitted therefrom, by Parent specifically for use therein.
(c) The information with respect to the Company that the Company
furnishes to Parent in writing specifically for
use in the Registration Statement (as defined in Section 4.16) will not
45
contain at the time the Registration Statement becomes effective or at the
Effective Time any untrue statement or a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, not misleading.
SECTION 3.13. ABSENCE OF
CERTAIN CHANGES. Since the Company Balance Sheet Date, the Company and the
Company Subsidiaries have conducted their business in the ordinary course
consistent with past practices and there has not been:
(a) any event, occurrence or occurrences which has had or
reasonably could be expected to have, individually or in
the aggregate, a Company Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of
capital stock of the Company, or any repurchase, redemption or other
acquisition by the Company of any outstanding shares of capital stock or
other ownership interests in, the Company;
(c) any incurrence, assumption or guarantee by the Company or
any
of the Company Subsidiaries of any outstanding
amount of indebtedness for borrowed money other than in the ordinary course
of business in accordance with their customary practices;
(d) any transaction or commitment made, or any contract or
agreement entered into, by the Company or any of the
Company Subsidiaries relating to their respective assets or businesses
(including the acquisition or disposition of any assets) or any loss or
relinquishment by the Company or any of the Company Subsidiaries of any
material contract or other material right, other than transactions and
commitments in the ordinary course of business in accordance with their
customary practices;
(e) any material change in any method of accounting or
accounting
practice or policy or application thereof by the
Company or any of the Company Subsidiaries;
(f) any increase in (or commitment, oral or written, to
increase)
the rate or terms (including, without limitation,
any acceleration of the right to receive payment) of compensation payable or
to become payable by the Company or any of the Company Subsidiaries to their
directors, officers, employees or consultants, except increases occurring in
the ordinary course of business in accordance with their customary practices;
or
(g) any increase in (or commitment, oral or written, to
increase)
the rate or terms (including, without limitation,
any acceleration of the right to receive payment) of any bonus, insurance,
pension or other employee benefit plan or contract, payment or arrangement
made to, for or with any director, officer, employee or consultant of the
Company or any of the Company Subsidiaries, except increases occurring in the
ordinary course of business in accordance with their customary practices.
SECTION 3.14. LITIGATION. There is no (nor to
the knowledge of the Company any grounds for any) action, suit, investigation
or proceeding pending against, nor to the knowledge of the Company threatened
against or affecting, the Company or the Company Subsidiaries or any of their
respective properties before any court or arbitrator or any governmental
body, agency or official which, if determined or resolved adversely to the
Company in accordance with the plaintiff's demands, would reasonably be
expected to have a Company Material Adverse Effect or which in any manner
challenges or seeks to prevent, enjoin, alter or delay the Merger or any of
the other transactions contemplated hereby.
SECTION 3.15. EMPLOYEE
BENEFIT PLANS. (a) The Company Disclosure Schedule contains a list of each
employee benefit plan (as defined in section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
which are hereinafter referred to individually as a "Plan" and collectively
as the "Plans") pursuant to which the Company has any present or future
obligations or liabilities with respect to its employees or former employees
or their dependents or beneficiaries.
46
There are no negotiations, demands or
proposals (other than routine claims for benefits) which are pending or
threatened which concern matters now covered, or that would be covered, by
the foregoing types of Plans.
(b) The Company has delivered or made available to Parent, or
will deliver or make available prior to the
Closing, copies of the following documents, as they may have been amended to
the date hereof, embodying or relating to the Plans: (i) each of the Plans
listed in the Company Disclosure Schedule, including all amendments thereto,
and any related trust agreements, group annuity contracts insurance policies
or other funding agreements or (ii) the most recent determination letter, if
any, from the Internal Revenue Service with respect to the plans that are
pension plans as defined in Section 3(2)(A) of ERISA (hereinafter referred to
as "Pension Plans"); (iii) current summary plan descriptions and
prospectuses; (iv) the most recently filed annual return/report on Form 5500
for each of the Plans; (v) general notification to employees of their rights
under Code Section 4980B and form of letter(s) distributed upon the
occurrence of a qualifying event described in Code Section 4980B, in the case
of a plan that is a "group health plan" as defined in Code Section 1621(i);
and (vi) ruling letter and any outstanding request for a ruling letter with
respect to the tax-exempt status of any VEBA which is implementing such Plan.
(c) Except as set forth in the Company Disclosure Schedule:
(i)
the written terms of each of the Plans and any
related trust agreement, group annuity contract, insurance policy or other
funding arrangement are in full compliance with ERISA, the Code and all other
applicable legal requirements, and each of the Plans has been administered in
full compliance with, and has no direct or indirect liability in connection
with such regulatory requirements, (ii) each of the Plans has been
administered in compliance with its terms; (iii) each Plan which is a Pension
Plan meets the requirements of section 401(a), and, if applicable, Sections
409 and 4975(e), of the Code and has been so qualified since its inception
date to the date of this Agreement and each trust forming a part thereof is
exempt from income tax pursuant to section 501(a) of the Code; (iv) the
Company has not engaged in any "prohibited transaction" (as defined in
section 4975 of the Code or section 406 or 407 of ERISA) which could subject
the Company to any tax or penalty under section 4975 of the Code or Title I
of ERISA; (v) as of the date of this Agreement, there are no actions, suits,
arbitrations or claims pending (other than routine claims for benefits),
legal, administrative or other proceedings or governmental investigations
pending or, to the Company's knowledge, threatened, against (X) the Plans,
the Plan fiduciaries or the Plan assets, or (Y) the Company or the Company
Subsidiaries with respect to claims related to such Plans, and to the
Company's knowledge, there is no basis for any such action, claim proceeding
or investigation; (vi) all contributions due and payable from the Company
with respect to each of the Plans and all expenses and liabilities relating
to each of the Plans for all calendar (plan) years through December 31, 1994
are reflected on the financial statements of the Company and each of the
Company Subsidiaries; (vii) no Pension Plan which is a "single-employer
plan," within the meaning of section 4001(a)(15) of ERISA, nor any
single-employer plan of any entity which is considered a predecessor of the
Company or one employer with the Company under section 4001 of ERISA or
section 414 of the Code (an "ERISA Affiliate") is subject to section 412 of
the Code or Title IV of ERISA; (viii) no Plan currently maintained by the
Company or an ERISA affiliate, and no other "employee benefit plan" under
which the Company or an ERISA affiliate has any liability or other
obligation, is or was a "multiple employer plan" (within the meaning of
section 413(c) of the Code) or a "multiemployer plan" (as defined in section
3(37) of ERISA); (ix) neither the Company nor any of its ERISA Affiliates has
incurred any withdrawal liability under Subtitle E of Title IV of ERISA with
respect to a multiemployer plan; (x) neither the Company nor any of the
Company Subsidiaries has any obligations for retiree health, life or other
welfare benefits under any Plan (xi) a request for a favorable determination
letter relating to the tax qualified status of each of the Plans under the
Code has been filed, is pending, and no indication of an adverse response has
been received; and (xii) the Company and the Company's ERISA Affiliates have
complied with all applicable notice requirements and has provided group
health care continuation and conversion coverage under section 4980B of the
Code and/or any other applicable law.
(d) The Company Disclosure Schedule lists each employment,
severance or other similar contract, arrangement or
policy and each plan or arrangement (written or oral) providing for insurance
coverage
47
(including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit-sharing, bonuses,
stock options, stock appreciation or other forms of incentive compensation or
post retirement insurance, compensation or benefits which (i) is not one of
the Company's Plans, (ii) is entered into, maintained or contributed to, as
the case may be, by the Company or any of its ERISA Affiliates. Such
contracts, plans and arrangements as are described above, copies of
descriptions of all of which have been furnished previously to Parent, are
referred to collectively herein as the "Benefit Arrangements." Each Benefit
Arrangement has been maintained in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and
regulations that are applicable to such Benefit Arrangement. Neither the
Company nor any of the Company Subsidiaries has any obligations for post
retirement benefits under any Benefit Arrangement. There are no
negotiations, demands or proposals (other than routine claims for benefits)
which are pending or threatened which concern matters now covered, or that
would be covered, by the foregoing types of Benefit Arrangements.
(e) Except as disclosed on the Company Disclosure Schedule,
the
Company is not a party to or subject to any
collective bargaining agreement with any union or any employment contract or
arrangement providing for annual future compensation of any officer,
consultant, director or employee.
(f) No Plan or Benefit Arrangement (including any Plan or
Benefit Arrangement covering former employees of the
Company) restricts the ability of either the Company or the Parent to amend
or terminate the Plan on or any time after the Closing.
(g) The Company represents that there will be no acceleration of
vesting, benefit accrual or benefit entitlement under either the Plans or the
Benefit Arrangements, and, except as disclosed on the Company Disclosure
Schedule, there will be no incidence of severance payments or any other
termination benefits for which Parent or Surviving Corporation will be
responsible as a result of the transaction contemplated hereby or otherwise.
(h) The Company is not, as of the date hereof, nor will be at the
Closing Date, liable for any future payment to any current or former employee
resulting from the long- or short-term disability of such person, whether
such payments are to be made pursuant to the Company's disability plan, if
any, or otherwise.
SECTION 3.16. TAXES. (a) All tax
returns, including estimated tax and informational returns ("Tax Returns"),
of or relating to any Taxes heretofore required to be filed by the Company or
any of the Company Subsidiaries have been duly filed on a timely basis, other
than any such Tax Returns, the failure of which to file would not,
individually or in the aggregate, have a Company Material Adverse Effect.
All such Tax Returns were complete and accurate in all material respects and
the Company and each of the Company Subsidiaries have timely paid or made
adequate provision for the payment of all Taxes shown as due and payable on
such Tax Returns. There are no grounds for the assertion or assessment of
any additional Taxes against the Company, any of the Company Subsidiaries or
their assets with respect to such periods. All unpaid Taxes are properly
accrued on the Company or the Company Subsidiaries' books. Set forth on the
Company Disclosure Schedule are all Tax Returns for periods up to and
including the Closing Date (whether the period ends on such date) which have
not been filed as of the Closing Date.
(b)There are no audits or administrative proceedings, court
proceedings or claims pending against the Company or
any of the Company Subsidiaries with respect to any Taxes and no assessment,
deficiency or adjustment has been asserted or, to the knowledge of the
Company, proposed with respect to any Tax Return of or with respect to the
Company or any of the Company Subsidiaries and there are no liens for Taxes
upon the assets or properties of the Company or any of the Company
Subsidiaries, except for liens for Taxes not yet due and owing.
(c)Since their formation, the Company and all of the Company
Subsidiaries have been members
48
of an affiliated
group of corporations within the meaning of section 1504 of the Code, with
respect to which the Company is and at all times has been the common parent.
The Company and each of the Company Subsidiaries have not been members of any
other affiliated group of corporations within the meaning of section 1504 of
the Code.
(d)Neither the Company nor any of the Company Subsidiaries are
a
party to or bound by any affiliated group
consolidated return tax allocation agreement, tax sharing agreement or tax
indemnification agreement.
(e)Neither the Company nor any of the Company Subsidiaries are
required to include in income any adjustment under
section 481(a) of the Code by reason of a change in accounting method
initiated by the Company or any of the Company Subsidiaries and the Internal
Revenue Service has not proposed any such adjustment or change in accounting
method.
(f)The Company is not a U.S. Real Property Holding Company
within the meaning of section 897(c) of the Code.
(g)Neither the Company nor any of the Company Subsidiaries is
a
partner in any joint venture, partnership or
other arrangement or contract that could be treated as a partnership for
federal income tax purposes.
(h)There are no material intercompany transactions within the
meaning of Treasury Regulation section 1.1502-13 in
which gain has been deferred.
(i)The Company and each of the Company Subsidiaries have
complied with all laws relating to the withholding of
Taxes and the payment thereof (including, without limitation, withholding of
Taxes under sections 1441 and 1442 of the Code, or similar provision under
foreign laws), and has timely and properly withheld from employee wages and
paid over to the proper tax authorities all amounts required to be withheld
and be paid over under applicable law.
(j)Neither the Company nor any of the Company Subsidiaries are
a
party to any safe harbor lease within the
meaning of section 168(f)(8) of the Code, as in effect prior to amendment by
the Tax Equity and Fiscal Responsibility Act of 1982. None of the assets of
the Company or any of the Company Subsidiaries have been financed with or
directly or indirectly secures any industrial revenue bonds or debt the
interest on which is tax-exempt under section 103(a) of the Code. Neither
the Company nor any of the Company Subsidiaries are the borrower or guarantor
of any outstanding industrial revenue bonds, and are not a tenant, principal
user or related person to any principal user (within the meaning of section
144(a) of the Code) of any property which has been financed or improved with
the proceeds of any industrial revenue bonds.
(k)As used in this Agreement, "Taxes" means all taxes,
charges,
fees, levies, or other like assessments,
including without limitation income, gross receipts, ad valorem, value added,
premium, excise, real property, personal property, windfall profit, sales,
use, transfer, license, withholding, employment, payroll, and franchise taxes
imposed by: the United States or any other nation, state, or bilateral or
multilateral governmental authority, any local governmental unit or
subdivision thereof, or any branch, agency, or judicial body thereof
("Government"); and shall include any interest, fines, penalties,
assessments, or additions to tax resulting from, attributable to, or incurred
in connection with any such Taxes or any contest or dispute thereof.
SECTION 3.17. COMPLIANCE WITH LAWS. Except as disclosed in the
Company SEC Reports, and except for any matter that would not reasonably be
expected to have a Company Material Adverse Effect, neither Company nor any
Company Subsidiary is in violation of, or has violated, any applicable provisi
ons of any laws, statutes, ordinances or regulations.
SECTION 3.18. FINDERS' FEES. Xxxxxxxxx, Xxxxxx &
Xxxxxxxx Securities Corporation ("DLJ"), a copy of whose engagement agreement
has been provided to Parent, is entitled to fees from the Company
49
in accordance with the provisions of said engagement letter by virtute of the
transactions contemplated hereby. Based on the capitalization of the Company
set forth in this Agreement, such fees would be in the aggregate amount of
$1,266,406 plus reimbursement of out-of-pocket expenses (assuming the Parent
Stock Price is greater than or equal to $10.50 and less than or equal to
$13.25, and further assuming the assumption by the Surviving Corporation of
$15,500,000 of Company debt, which was the amount of debt of the Company at
June 30, 1995 which would have been used to calculate such fees had the
Merger been consummated on that date). Except for DLJ, there is no
investment banker, broker, finder or other intermediary (other than Firemark
Capital, Inc., whose compensation is payable by DLJ) which has been retained
by or is authorized to act on behalf of the Company who might be entitled to
any fee or commission upon consummation of the transactions contemplated by
this Agreement. The compensation payable to DLJ shall be computed without
regard to the value of the Parent Warrants.
SECTION 3.19. FAIRNESS OPINION.
The Company's Board of Directors has received from DLJ, a written opinion
("DLJ Fairness Opinion"), dated the date of
this Agreement, to the effect that the consideration to be paid by Parent in
the Merger is fair to the stockholders of the Company from a financial point
of view.
SECTION 3.20. ENVIRONMENTAL MATTERS. Except as would not,
individually
or in the aggregate, have a Company Material Adverse Effect, the Company has
not (i) received any notice of noncompliance with, violation of, or liability
or potential liability under, any laws relating to pollution, the discharge
or release of hazardous materials or the disposal of infectious, medical or
hazardous waste into the environment ("Environmental Laws"); (ii) entered
into or agreed to any consent decree or order, and is not subject to any
judgment, decree or judicial order, under any Environmental Laws or relating
to the cleanup of any hazardous materials or wastes (including infectious and
medical wastes); or (iii) agreed to undertake, and has not undertaken, any
other cleanup of hazardous materials or wastes (including infectious and
medical wastes) relating to properties owned or leased by the Company or any
of the Company Subsidiaries or to any off-site location to which waste
material has been sent by the Company or any of the Company Subsidiaries. The
Company and each of the Company Subsidiaries is in compliance with all
Environmental Laws in all material respects.
SECTION 3.21. INSURANCE
LICENSES. The Company Disclosure Schedule sets forth a true, correct and
complete list of: (a) each of the jurisdictions in
which the Company Insurance Subsidiary is duly licensed and in good standing
to write insurance; (b) the lines of insurance that the Company Insurance
Subsidiary is authorized to write in such jurisdictions (including a notation
as to whether the Company Insurance Subsidiary is authorized to transact a
variable annuity and/or life or health insurance business therein and any
restriction that may exist with respect to any such licenses); and (c) the
dates of expiration of each of such licenses. All such licenses and
regulatory authorizations are valid and in full force and effect. The
Company and the Company Insurance Subsidiary and their employees have not
breached any material provision of, and are not in default under the material
terms of, and have not engaged in any activity which would cause revocation
or suspension of, any such licenses or regulatory authorizations and no
action or proceeding looking to or contemplating the revocation or suspension
of any thereof is pending or, to the best of the Company's knowledge,
threatened. No such license or permit issued by any governmental authority
to the Company and the Company Insurance Subsidiary, or to any of their
present employees who presently holds such a license and uses it in the
Company's and the Company Insurance Subsidiary's business, has ever been
revoked, suspended or rescinded.
SECTION 3.22. ASSETS. The Company and the
Company Subsidiaries have good and clear record and marketable title to and
possession of all of their respective real and personal properties and
assets, in each case free and clear of any liens, restrictions, encumbrances,
rights, title and interests of others, except the lien of current taxes and
covenants and restrictions of record, which liens, covenants and restrictions
do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and the
Company Subsidiaries. There exists no restriction on the transfer of any
such properties or assets which would materially affect the value of such
properties or assets. The Company Disclosure Schedule
50
contains a complete
and accurate list, with legal description, of each parcel of real estate
owned or leased by the Company and the Company Subsidiaries. Neither the
Company nor any of the Company Subsidiaries has any obligation to acquire any
interest in any real property other than those described on the Company
Disclosure Schedule. The real and personal properties and assets held under
lease by the Company and the Company Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as do not
interfere with the use made and proposed to be made of such properties and
assets by the Company and the Company Subsidiaries. No consent is necessary
under the terms of any such lease in connection with the consummation of the
transactions contemplated hereby.
SECTION 3.23. DISPOSAL OF ASSETS. No assets of the Company
have
been disposed of outside the ordinary course of the Company's business during
the two year period preceding the Effective Time. The liabilities of the
Company and the Company Subsidiaries were incurred by the Company and the
Company Subsidiaries in the ordinary course of its business consistent with
past practice.
SECTION 3.24. INSURANCE POLICIES. All material insurable
properties owned or held by the Company and the Company Subsidiaries are
adequately insured by financially sound and reputable insurers in such
amounts against fire and other risks insured against by extended coverage and
public liability insurance, as is customary with companies of the same size
and in the same business. The Company and the Company Subsidiaries have in
effect the insurance coverage listed on the Company Disclosure Schedule which
coverage is believed by the Company to be adequate for the business conducted
by the Company and the Company Subsidiaries.
SECTION 3.25. CONTRACTS. Except as set forth on
the Company Disclosure Schedule, neither the Company nor any of the Company
Subsidiaries is party to or bound by any (a) material lease or license with
respect to any property, real or personal, whether as landlord, tenant, licens
or or licensee; (b) agreement, contract, or indenture relating to the
borrowing of money by the Company or any of the Company Subsidiaries,
excluding endorsements made for collection and guarantees made in the
ordinary course of business; (c) management agreement, consulting or other
similar contract or arrangement; (d) agreement with any present or former
officer, director or shareholder of the Company or any of the Company
Subsidiaries; or (e) other contract, agreement or other commitment which is
material to the business, operations, property, prospects or assets or to the
condition, financial or otherwise, of the Company or any of the Company
Subsidiaries or which involve a payment by the Company or any of the Company
Subsidiaries of more than $25,000 in one year.
SECTION 3.26. DEFAULTS.
Neither the Company nor any of the Company Subsidiaries is in material breach
or material default under any agreement or commitment to which the Company or
any of the Company Subsidiaries is a party, or under any loan agreement,
note, security agreement, guarantee or other document pursuant to or in
connection with the Company's or, any such subsidiary's extension of credit;
and there has not occurred any event which, after the giving of notice, the
lapse of time or otherwise, would constitute any such default under, or
result in any such breach of, any such agreement, commitment or extension of
credit.
SECTION 3.27. DIRECTOR SEVERANCE. Set forth on the Company
Disclosure Schedule is a complete and accurate list of all persons who will
be entitled to severance payments or other compensation under the FBG
Directors Severance Plan on or after the Closing Date, the gross amounts due
to such person, and the terms under which such amounts are to be paid.
SECTION 3.28. EMPLOYEE HANDBOOK. The Company has provided to
Parent a true and complete copy of the Company's current employee handbook.
51
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT
Parent represents and warrants to the Company that, except as
otherwise disclosed on a disclosure schedule delivered on or prior to the
date hereof to the Company by Parent (the "Parent Disclosure Schedule"):
SECTION 4.1. CORPORATE
EXISTENCE AND POWER. Parent is a corporation duly incorporated, validly
existing and in good standing under the laws of the
State of Kansas, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as
now conducted other than any such licenses, authorizations, permits,
registrations, consents and approvals the failure of which to have would not,
individually or in the aggregate, have a Parent Material Adverse Effect (as
defined below). Parent is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character
of the property owned or leased by it or the nature of its activities makes
such qualification necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have
a Parent Material Adverse Effect. Parent has heretofore delivered to the
Company true and complete copies of the Parent's certificate of incorporation
and bylaws as currently in effect. For purposes of this Agreement, a "Parent
Material Adverse Effect" means a material adverse effect, on the assets,
liabilities, business, operations, condition (financial or otherwise), or
results of operations of the Parent and/or any of its subsidiaries identified
pursuant to Section 4.2 (the "Parent Subsidiaries") taken as a whole, or on
the ability of the Parent to perform its obligations hereunder.
SECTION 4.2. SUBSIDIARIES. The Parent Disclosure
Schedule contains a true and complete list of all of the Parent Subsidiaries.
Said list sets forth the authorized capital stock, the number of shares duly
issued and outstanding, the number so owned by Parent and the jurisdiction of
incorporation of each corporation. The shares of capital stock of the Parent
Subsidiaries owned directly or indirectly by Parent are validly issued, fully
paid and nonassessable (subject to statutory obligations of holders, if any),
and are owned free and clear of any liens, claims, charges or encumbrances
except as set forth on such list. Except as disclosed on the Parent
Disclosure Schedule, Parent (i) does not have any direct or indirect
subsidiaries other than the Parent Subsidiaries, and (ii) other than in the
ordinary course of business of the Parent, has not made any advances to or
investments in, and does not own any securities of or other interests in, any
Person. Each of the Parent Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation, has the corporate power to own or lease its properties and
carry on its business as now being conducted, and is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease
or the nature of its activities makes such qualification necessary, except
where the failure so to qualify would not have a Parent Material Adverse
Effect Merger Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Merger
Subsidiary has not engaged in any business since its date of inception.
SECTION 4.3. CORPORATE AUTHORIZATION. The execution,
delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby are within the Parent's and Merger Subsidiary's corporate powers subjec
t to the conditions set forth in this Agreement, and have been duly
authorized by the Boards of Directors of Parent and Merger Subsidiary, and by
Parent as the sole stockholder of Merger Subsidiary, and, except for the
approval of Parent's stockholders, no other corporate proceedings on the part
of Parent or Merger Subsidiary are necessary to authorize this Agreement, the
Merger, and the transactions contemplated hereby. This Agreement constitutes
a valid and binding agreement of the Parent and Merger Subsidiary,
enforceable against the Parent and Merger Subsidiary in accordance with its
terms, except as limited by bankruptcy, insolvency, reorganization,
moratorium or similar
52
laws relating to or affecting generally the enforcement
of creditors rights and by the availability of equitable remedies.
SECTION 4.4. GOVERNMENTAL AUTHORIZATION. The execution,
delivery and
performance by the Parent and Merger Subsidiary of this Agreement and the
consummation of the transactions contemplated hereby and the Merger by the
Parent and Merger Subsidiary require no action by or in respect of, or filing
with, any governmental body, agency, official or authority other than (a) the
filing of a certificate of merger in accordance with the DGCL; (b) compliance
with any applicable requirements of the HSR Act; (c) compliance with any
applicable requirements of the Exchange Act and the 1933 Act, including,
without limitation, the filing by Parent with the SEC of the Parent Proxy
Statement (as hereinafter defined); (d) compliance with any applicable
requirements under the insurance laws of Florida, Kansas and any other
applicable state; (e) compliance with any applicable foreign or state
securities or Blue Sky laws; (f) compliance with state takeover, antitrust
and competition law filings and approvals; and (g) such actions by or filings
with governmental bodies, agencies, officials or authorities, the failure of
which to obtain or make would not reasonably be expected to: (1) have,
individually or in the aggregate, a Parent Material Adverse Effect; (2)
impair the ability of the Parent and Merger Subsidiary to perform their
obligations under this Agreement; or (3) prevent the consummation of the
transactions contemplated by this Agreement.
SECTION 4.5. NON-CONTRAVENTION. The execution, delivery and
performance by the Parent and/or Merger Subsidiary of this Agreement and the
consummation by the Parent and the Merger Subsidiary of the transactions
contemplated hereby do not and will not (except in the case of clauses (b),
(c) and (d) of this Section 4.5, for any such matters that, individually or
in the aggregate, have not had, and would not reasonably be expected to have,
a Parent Material Adverse Effect): (a) contravene or conflict with the
certificate of incorporation or bylaws of the Parent or of Merger Subsidiary,
(b) assuming compliance with the matters referred to in Section 4.4,
contravene or conflict with or constitute a violation of any provision of any
law, regulation, judgment, injunction, order or instrument binding upon or
applicable to the Parent and/or Merger Subsidiary or any of their properties
or assets, (c) result in a violation or breach of, or constitute a default
under, or give rise to a right of termination, cancellation or acceleration
of any right or obligation of the Parent and/or Merger Subsidiary or to a
loss of any benefit to which the Parent and/or Merger Subsidiary is entitled
under any provision of any agreement, contract or other decree binding upon
the Parent and/or Merger Subsidiary or to which the Parent and/or Merger
Subsidiary is a party or by which it is affected or any license, franchise,
permit or other similar authorization held by the Parent and/or Merger
Subsidiary or to which the Parent and/or Merger Subsidiary is a party or by
which it is affected or (d) result in the creation or imposition of any Lien
on any asset of the Parent and/or Merger Subsidiary.
SECTION 4.6. CAPITALIZATION. The authorized capital
stock of the Parent consists of 25,000,000 shares of common stock and
2,000,000 shares of preferred stock. As of June 30, 1995, there were
outstanding 10,072,926 shares of common stock; no shares of preferred stock;
stock options to purchase an aggregate of 907,653 shares of common stock of
which options to purchase an aggregate of 726,653 shares were exercisable;
and warrants to purchase 170,002 shares of common stock. All outstanding
shares of capital stock of the Parent have been duly authorized and validly
issued and are fully paid and nonassessable. Except as set forth in this
Section, there are outstanding (a) no other shares of capital stock or other
voting securities of the Parent, (b) no securities of the Parent convertible
into or exchangeable for shares of capital stock or voting securities of the
Parent, and (c) no other options or other rights to acquire from the Parent,
and no obligation of the Parent to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock
or voting securities of the Parent (the items in clauses (a), (b) and (c)
being referred to collectively as the "Parent Securities"). There are no
outstanding obligations of the Parent to repurchase, redeem or otherwise
acquire any Parent Securities. All of the Parent Stock and Parent Warrants
issuable in exchange for Shares at the Effective Time will be, when so
issued, duly authorized, validly issued, fully paid and non-assessable. The
authorized capital stock of Merger Subsidiary consists of 1,000 shares of
common stock, all of which are validly issued and outstanding, fully paid and
nonassessable and owned by Parent.
53
SECTION 4.7. SEC FILINGS.
Parent has filed all reports required to be filed with the SEC pursuant to
the Exchange Act (the "Parent SEC Reports"). Parent has delivered to the
Company (i) its annual reports on Form 10-K for its fiscal years ended 1992,
1993 and 1994, (ii) its quarterly reports on Form 10-Q for its fiscal
quarters March 31, 1995 and June 30, 1995, (iii) its proxy or information
statements relating to meetings of, or actions taken without a meeting by,
Parent's stockholders, and (iv) all of its other reports, statements,
schedules and registration statements filed with the SEC since June 30, 1995
(collectively, with the Parent SEC Reports, the "Parent Filings").
(b) As of its filing date, no Parent Filing contained any
untrue statement of material fact or omitted to
state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not mis
leading.
(c) No such registration statement as amended or
supplemented, if applicable, filed pursuant to the 1933 Act
when such statement or amendment became effective contained any untrue
statement of a material fact or omitted to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
SECTION 4.8. FINANCIAL STATEMENTS. The audited consolidated
financial statements and unaudited consolidated interim financial statements
of the Parent included in the Parent Filings fairly present, in conformity
with generally accepted accounting principles applied on a consistent basis
(except as may be indicated in the notes thereto), the consolidated financial
position of Parent and the Parent Subsidiaries as of the dates thereof and
their consolidated results of operations and cash flow for the periods then
ended (subject to normal year-end adjustments in the case of any unaudited
interim financial statements.) For purposes of this Agreement, "Parent
Balance Sheet" means the Parent's balance sheet as of June 30, 1995, as set
forth in the Parent's Form 10-Q report for the second quarter of 1995 and
"Parent Balance Sheet Date" means June 30, 1995.
(b) Except as and to the extent set forth on the Parent
Balance Sheet, Parent and the Parent Subsidiaries do
not have any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise), except for liabilities and obligations
incurred since the Parent Balance Sheet Date which would not, individually or
in the aggregate, have a Parent Material Adverse Effect.
SECTION 4.9. STATUTORY
FINANCIAL STATEMENTS AND FILINGS. (a) The SAP Statements of the Parent's
insurance subsidiary (the "Parent Insurance Subsidiary")
for each of the three years in the three-year period ended December 31, 1994,
and for the quarter ended June 30, 1995, have been prepared in accordance
with statutory accounting practices prescribed or permitted by the National
Association of Insurance Commissioners and such accounting practices have
been applied on a consistent basis throughout the period involved, except as
disclosed therein. The Parent has heretofore delivered to the Company true
and complete copies of all such SAP Statements. Such financial statements
(i) present fairly in all material respects, to the extent required and in
conformity with SAP, the financial condition of the Parent Insurance
Subsidiary at their respective dates, and its results of operations, changes
in capital and surplus, and cash flows for each of the periods then ended;
and (ii) were correct in all material respects when filed. The Parent has
not received written notice from the Kansas Commissioner of Insurance
asserting any deficiency with respect to such statements nor, to the best
knowledge of Parent, has the Kansas Commissioner of Insurance threatened to
assert any such deficiency.
(b) Since June 30, 1995, the Parent Subsidiaries have
filed
all reports and other filings, together with any
amendments required to be made with respect thereto, that they have been
required to file with state insurance regulatory authorities (the "Parent
Insurance Filings"), and all of the Parent Insurance Filings filed prior to
the date hereof complied, and all such filings made hereafter prior to the
Effective Time will comply, in all material respects with applicable
insurance laws, rules and regulations, and, except as disclosed by the Parent
in the Parent Disclosure Schedule, there are no material open or unresolved
issues raised by any insurance or
54
securities regulatory authority with respect to any of such filings.
(c) Each material reserve and other material liability of
the Parent Insurance Subsidiary reflected in, or
included with, the SAP Statements was determined in accordance with generally
accepted actuarial standards consistently applied throughout the specified
period and the immediately preceding prior period, was based on actuarial
assumptions that were in accordance with or more conservative than those
called for in relevant policy and contract provisions, is fairly stated in
accordance with sound actuarial principles and is in compliance with the
requirements of applicable insurance laws, rules and regulations. Except as
may be affected by deviations from investment assumptions, such reserves and
liabilities were adequate in the aggregate to cover the total amount of all
reasonably anticipated liabilities of the Parent Insurance Subsidiary under
all outstanding insurance policies, funding agreements, Reinsurance
Agreements and annuity, coinsurance and other similar arrangements as of the
respective dates of such SAP Statements. Such investment assumptions were
reasonable as of such respective dates. The admitted assets of the Parent
Insurance Subsidiary as determined under applicable insurance laws, rules and
regulations is in an amount equal to the sum of all such reserves and
liabilities and the statutory capital and surplus yielding an authorized
control level risk based capital ratio of 434%, meeting such laws, rules and
regulations.
SECTION 4.10. DISCLOSURE DOCUMENTS. The information with
respect to Parent and the Parent Subsidiaries that Parent furnishes to the
Company
specifically for use in any Company Proxy Statement will not contain, any
untrue statement of a material fact or omit to state any material fact necessa
ry in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading at the time the
Company Proxy Statement or any amendment or supplement thereto is first
mailed to stockholders of the Company, at the time the stockholders vote on
adoption of this Agreement and at the Effective Time.
SECTION 4.11. ABSENCE OF CERTAIN CHANGES. Since the
Parent Balance Sheet Date,
Parent and the Parent Subsidiaries have conducted their business in the
ordinary course consistent with past practice and there has not been any
event, occurrence or development of a state of circumstances or facts which
could be expected to have, a Parent Material Adverse Effect.
SECTION 4.12. LITIGATION. There is no action,
suit, investigation or proceeding (or any basis therefor) pending against, or
to the knowledge of Parent threatened against or affecting, Parent or any
Parent Subsidiary or any of their respective properties before any court or
arbitrator or any governmental body, agency or official which, if determined
or resolved adversely to Parent or any Parent Subsidiary in accordance with
the plaintiff's demands, would reasonably be expected to have a Parent
Material Adverse Effect or which in any manner challenges or seeks to
prevent, enjoin, alter or delay the Merger or any of the other transactions
contemplated hereby.
SECTION 4.13. EMPLOYEE BENEFIT PLANS. (a) The Parent
Disclosure Schedule
contains a list of each Plan pursuant to which the Parent has any material
present or future obligations or liabilities with respect to its employees or
former employees or their dependents or beneficiaries.
(b) Parent has delivered or made available to Company, or
will deliver or make available prior to the
Closing, copies of the following documents, as they may have been amended to
the date hereof, embodying or relating to the Plans: (i) each of the Plans
listed in the Parent Disclosure Schedule, including all amendments thereto,
and any related trust agreements, group annuity contracts insurance policies
or other funding agreements or arrangements; (ii) the most recent
determination letter, if any, from the Internal Revenue Service with respect
to the plans that are Pension Plans as defined in Section 3(2)(A) of ERISA;
(iii) current summary plan descriptions and prospectuses; (iv) the most
recently filed annual return/report on Form 5500 for each of the Plans; and
(v) the latest actuarial reports for the Pension Plans.
(c) Except as set forth in the Parent Disclosure
Schedule:
(i) the written terms of each of the Plans and
any related trust agreement, group annuity contract, insurance policy or
other funding arrangement are in full compliance with ERISA and the Code, and
each of the Plans has been
55
administered in full compliance with its terms and
all regulatory requirements; (ii) each Plan which is a Pension Plan meets the
requirements of section 401(a) of the Code and, if applicable, Sections 409
and 4975(e), and has been so qualified since its inception date to the date
of this Agreement and each trust forming a part thereof is exempt from income
tax pursuant to section 501(a) of the Code. (iii) the Parent has not engaged
in any "prohibited transaction" (as defined in section 4975 of the Code or
section 406 or 407 of ERISA) which could subject the Parent to any tax or
penalty under section 4975 of the Code or Title I of ERISA; (iv) as of the
date of this Agreement, there are no actions, suits, arbitrations or claims
pending (other than routine claims for benefits), legal, administrative or
other proceedings or governmental investigations pending or, to the Parent's
knowledge, threatened, against the Plans or their assets; (v) no "reportable
event" (within the meaning of section 4043(c)(l)-(13) of ERISA) as to which a
thirty day notice would be required to be filed with the PBGC has occurred
with respect to the Pension Plan (other than those that may result from the
transactions contemplated by this Agreement); (vi) no Plan currently
maintained by the Parent, and no other "employee benefit plan" under which
the Parent has any liability or other obligation, is or was a "multiple
employer plan" (within the meaning of section 413(c) of the Code) or a
"multiemployer plan" (as defined in section 3(37) of ERISA); (vii) all
contributions due and payable from the Parent with respect to each of the
Plans and for all calendar (plan) years through December 31, 1994 are
reflected on the financial statements of the Parent and each of the Parent
Subsidiaries; (viii) neither any Pension Plan which is a "single-employer
plan," within the meaning of section 4001(a)(15) of ERISA, nor any
single-employer plan of any entity which is considered a predecessor of the
Parent or one employer with the Parent under section 4001 of ERISA or section
414 of the Code (an "ERISA Affiliate") has an "accumulated funding
deficiency" (whether or not waived) within the meaning of section 412 of the
Code or section 302 of ERISA, and neither the Parent nor an ERISA Affiliate
has an outstanding funding waiver; (ix) neither the Parent nor any of the
Parent Subsidiaries has provided, or is required to provide, security to any
Plan or to any single-employer plan of an ERISA Affiliate pursuant to section
401(a)(29) of the Code; (x)(A) no Pension Plan subject to Title IV of ERISA
maintained by the Parent or any of the Parent Subsidiaries has been
terminated; and (B) no proceeding has been initiated to terminate any such
Pension Plan; (xi) no liability under Subtitle C or D of Title IV Of ERISA
has been or is expected to be incurred by the Parent or any of the Parent
Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan," within the meaning of section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them or by an ERISA Affiliate;
(xii) neither the Parent nor any of the Parent Subsidiaries has incurred any
withdrawal liability under Subtitle E of Title IV of ERISA with respect to a
multiemployer plan; (xiii) the Parent has paid all premiums (and interest
charges and penalties for late payment), if any, due the PBGC as of the
Closing with respect to the Pension Plans; (xiv) neither the Parent nor any
of the Parent Subsidiaries has any obligations for retiree health and life
benefits under any Plan (xv) a request for a favorable determination letter
relating to the tax qualified status of each of the Pension Plans under the
Code has been filed, is pending, and no indication of an adverse response has
been received; and (xvi) the Company and the Company's Erisa Affiliates have
complied with all applicable notice requirements and has provided group
health care continuation and conversion coverage under 4980B of the Code
and/or any other applicable law.
(d) The Parent Disclosure Schedule lists each employment
severance or other similar contract, arrangement or
policy and each plan or arrangement (written or oral) providing for insurance
coverage (including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or deferred compensation, profit-sharing bonuses, stock
options, stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not one of
the Parent's Plans, (ii) is entered into, maintained or contributed to, as
the case may be, by the Parent or any of its ERISA Affiliates and (iii)
covers any employee or former employee of the Parent or any of its ERISA
Affiliates. Such contracts, plans and arrangements as are described above,
copies or descriptions of all of which have been furnished previously to the
Company, are referred to collectively herein as the "Benefit Arrangements."
Each Benefit Arrangement has been maintained in full compliance with its
terms and with the requirements prescribe by any and all statutes, orders,
rules and regulations that are applicable to such Benefit Arrangement, except
where the failure to maintain such Benefit Arrangement in such compliance
would not have a Parent Material Adverse Effect.
56
(e) Except as disclosed on the Parent Disclosure
Schedule,
the Parent is not a party to or subject to any
collective bargaining agreement with any union or any employment contract or
arrangement providing for annual future compensation of any officer, consultan
t, director or employee.
SECTION 4.14. TAXES. (a) All Tax
Returns, including estimated tax and informational returns, of or relating to
any Taxes heretofore required to be filed by the Parent or any of the Parent
Subsidiaries have been duly filed on a timely basis, other than any such Tax
Returns, the failure of which to file would not, individually or in the
aggregate, have a Parent Material Adverse Effect. All such Tax Returns were
complete and accurate in all material respects and the Parent and each of the
Parent Subsidiaries have timely paid or made adequate provision for the
payment of all Taxes shown as due and payable on such Tax Returns. There are
no grounds for the assertion or assessment of any additional Taxes against
the Parent, any of the Parent Subsidiaries or their assets with respect to
such periods. All unpaid Taxes are properly accrued on the Parent or the
Parent Subsidiaries' books. Set forth on the Parent Disclosure Schedule are
(i) all Tax Returns for periods up to and including the Closing Date (whether
the period ends on such date) which have not been filed as of the Closing
Date and (ii) any exceptions to this Section 4.14.
(b) As of the date hereof, there are no audits or administrative
proceedings, court proceedings or claims pending against the Parent or any of
the Parent Subsidiaries with respect to any Taxes and no assessment,
deficiency or adjustment has been asserted or, to the knowledge of the
Parent, proposed with respect to any Tax Return of or with respect to the
Parent or any of the Parent Subsidiaries and there are no liens for Taxes
upon the assets or properties of the Parent or any of the Parent Subsidiaries,
except for liens for Taxes not yet due and owing.
SECTION 4.15. FINDERS' FEES. There is no investment
banker, broker, finder or other intermediary who might be entitled to any fee
or commission from the Parent or any of the Parent Subsidiaries upon
consummation of the transactions contemplated by this Agreement.
SECTION 4.16. REGISTRATION STATEMENT. The Registration
Statement to be
filed by Parent with the SEC with respect to the offering of Parent Stock and
Parent Warrants in connection with the Merger (the "Registration Statement")
and any amendments or supplements thereto will, when filed comply as to form
in all material respects with the requirements of the 1933 Act and will not
contain, at the time the Registration Statement becomes effective or at the
Effective Time, any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements contained therein, not misleading; provided that the foregoing
representation shall not apply to statements or omissions in the Registration
Statement based upon information furnished to Parent or Merger Subsidiary by
the Company specifically for use therein.
SECTION 4.17. ENVIRONMENTAL MATTERS. Except as would not,
individually
or in the aggregate, have a Parent Material Adverse Effect or as disclosed on
the Parent Disclosure Schedule, the Parent has not (i) received any notice of
noncompliance with, violation of, or liability or potential liability under,
any laws relating to pollution, the discharge or release of hazardous
materials or the disposal of infectious, medical or hazardous waste into the
environment ("Environmental Laws"); (ii) entered into or agreed to any
consent decree or order, and is not subject to any judgment, decree or
judicial order, under any Environmental Laws or relating to the cleanup of
any hazardous materials or wastes (including infectious and medical wastes);
or (iii) agreed to undertaken, and has not undertaken, any other cleanup of
hazardous materials or wastes (including infectious and medical wastes)
relating to properties owned or leased by the Parent or any of the Parent
Subsidiaries or to any off-site location to which waste material has been
sent by the Parent or any of the Parent Subsidiaries.
SECTION 4.18. INSURANCE LICENSES. The Parent Disclosure
Schedule
sets forth a true, correct and complete list of: (a) each of the
jurisdictions in which the Parent and the Parent Subsidiaries are duly
licensed and in good standing to write insurance; (b) the lines of insurance
that the Parent
57
and the Parent Subsidiaries is authorized to write in such
jurisdictions (including a notation as to whether the Parent and the Parent
Subsidiaries are authorized to transact a variable annuity and/or life or
health insurance business therein and any restriction that may exist with
respect to any such licenses); and (c) the dates of expiration of each of
such licenses. All such licenses and regulatory authorizations are valid and
in full force and effect. The Parent and the Parent Subsidiaries and their
employees have not breached any material provision of, and are not in default
under the material terms of, and have not engaged in any activity which would
cause revocation or suspension of, any such licenses or regulatory
authorizations and no action or proceeding looking to or contemplating the
revocation or suspension of any thereof is pending or, to the best of the
Parent's knowledge, threatened. No such license or permit issued by any
governmental authority to the Parent and the Parent Subsidiaries or to any of
their present employees who presently holds such a license and uses it in the
Parent's and the Parent Subsidiaries business has ever been revoked,
suspended or rescinded.
SECTION 4.19. ACTUARIAL REPORT. Parent has delivered to the
Company a true and complete copy of any actuarial reports prepared by
independent actuaries with respect to Parent or the Parent Subsidiaries in
the last 12 months, and all attachments, addenda, supplements and
modifications thereto (the "Parent Actuarial Analyses"). To the knowledge of
Parent, the policy information and experience data furnished by Parent to its
independent actuaries in connection with the preparation of the Parent
Actuarial Analyses were accurate in all material respects, except insofar as
any inaccuracy shall not have materially affected the accuracy of the Parent
Actuarial Analyses.
ARTICLE 5
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 5.1. CONFIDENTIALITY.
Prior to the Effective Time and after any termination of this Agreement,
the Company will hold, and will use its reasonable
best efforts to cause its officers, directors, employees, accountants,
counsel, consultants, advisors and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law, all non-public documents and information concerning
Parent furnished to the Company in connection with the transactions
contemplated by this Agreement, except to the extent that such information
can be shown to have been (a) previously known on a nonconfidential basis by
the Company, (b) in the public domain through no fault of the Company or (c)
later lawfully acquired by the Company from sources other than Parent (not
owing a duty of confidentiality to Parent); provided that the Company may
disclose such information to its officers, directors, employees, accountants,
counsel, consultants, advisors and agents in connection with the transactions
contemplated by this Agreement so long as such Persons are informed by the
Company of the confidential nature of such information and are directed by
the Company to treat such information confidentially. The Company's
obligation to hold any such information in confidence shall be satisfied if
it exercises the same care with respect to such information as it would take
to preserve the confidentiality of its own similar information. If this
Agreement is terminated, the Company will, and will use its best efforts to
cause its officers, directors, employees, accountants, counsel, consultants,
advisors and agents to, destroy or deliver to Parent, upon request, all
documents and other materials, and all copies thereof, obtained by the
Company or on its behalf from Parent in connection with this Agreement that
are subject to such confidence.
SECTION 5.2. CONDUCT OF THE COMPANY. From the date hereof
until the
Effective Time, unless the prior written consent of Parent is obtained, the
Company and the Company Subsidiaries (a) will carry on their business
diligently and substantially in the same manner as heretofore and will not mak
e or institute any unusual method of management, accounting or operation
except in the manner consistent with prior practice or enter into any
transaction other than in the ordinary course of business; (b) will not make
loans or discounts or any commitments to loan or discount in an aggregate
amount greater than $25,000; (c) will not enter into any management,
maintenance, servicing or similar contracts having a term of more than one
year or providing for fees in excess of a rate of
58
$25,000 per year, provided,
that the foregoing shall not prohibit Seller from renewing data processing
and computer servicing contracts currently in effect which have an expiration
date prior to Closing, on substantially similar terms for no more than one
year; (d) will maintain in force all insurance policies in effect on the date
of this Agreement; (e) will make investments in the usual course of business
consistent with past practice and investment policy (and will promptly inform
Parent in writing of the relevant details of all such investments); (f) will
not grant any increase in the rates of pay of their employees or any increase
in the compensation payable or to become payable, if any, to any director,
officer, employee or agent thereof, or increase in any amount the benefits or
compensation, if any, of any such directors, officers, employees or agents of
the Company or Company Subsidiaries under any pension plan or other contract
or commitment; and will not pay nor agree to pay any bonus or commission to
any director, officer, employee or agent thereof and will not otherwise enter
into or amend any employment or severance agreement with any such directors,
officers, employees or agents, provided that the foregoing shall not prevent
(X) increases in rates of pay to employees who are not officers or directors
in amounts and at times consistent with past practice, (Y) annual bonus
payments to up to 10 employees of the Company who are not officers or
directors and who customarily receive an annual bonus, at such times and in
such individual amounts as are consistent with past practice, provided, that,
in no event may such bonus payments exceed $25,000 in the aggregate, and (Z)
bonuses to officers which the Company is obligated to pay pursuant to the
terms of a currently existing bonus plan; (g) will not enter into any
material contract or commitment, or engage in any transaction not in the
usual and ordinary course of business and consistent with past practices; (h)
will not sell or dispose of any of its material assets out of the ordinary
course of business and will maintain its assets in their present condition,
reasonable wear and tear excepted; (i) will not make any expenditure for
fixed assets and will not purchase any data processing equipment for any singl
e item in excess of $25,000 or enter into any leases of fixed assets
providing for an annual rental of $25,000; (j) will not declare or pay any
dividend or make any other distribution, directly or indirectly, in respect
of any capital stock of the Company or Company Subsidiaries (other than
distributions from the Company Subsidiaries to the Company in an amount
necessary to support the Company's debt service or operations) nor directly
or indirectly redeem, purchase or otherwise acquire or issue any such capital
stock, or grant or issue any capital stock of the Company or Company
Subsidiaries or stock options, warrants or other rights therefor (other than
issuances of Company A Stock and Company B Stock pursuant to the exercise of
currently outstanding FBG Options or pursuant to the conversion of Company B
Stock to Company A Stock); (k) will not amend the Certificate of
Incorporation or Bylaws of the Company or any of Company Subsidiaries, or
make any change in the authorized or issued capital stock of the Company or
such subsidiaries; (l) will not do any act or omit to do any act which will
cause or permit a material breach by the Company or Company Subsidiaries of
any contract, commitment or obligations, including without limitation this
Agreement; (m) will not charge off any loans prior to Closing except in
accordance with past policies and procedures consistently applied; (n) will
not acquire, purchase any assets of, or make any investment in any entity,
(other than, in the case of normal investing activity, as allowed in (e)
above); (o) will not agree or commit to do any of the foregoing; (p) will not
take or agree or commit to take any action that would make any representation
and warranty of the Company hereunder inaccurate in any respect at, or as of
any time prior to, the Effective Time, or (r) will not omit or agree or
commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any respect at any such
time.
SECTION 5.3. STOCKHOLDER MEETING: PROXY MATERIAL. The Company
shall cause a meeting of its
stockholders (the "Company Stockholder Meeting") to be duly called and held
as soon as reasonably practicable for the purpose of voting on the approval
of this Agreement, the Merger, and the transactions contemplated hereby. The
Directors of the Company shall recommend approval (and if the vote of the
Directors of the Company in favor of this Agreement is unanimous, unanimously
recommend approval) of this Agreement, the Merger, and the transactions
contemplated hereby by the Company's stockholders, unless the Board of
Directors of the Company determines, in good faith, at a meeting of the full
Board of Directors, that the exercise of its fiduciary duties to the
Company's shareholders under applicable law, as advised in writing by outside
counsel reasonably acceptable to the Parent, requires them to decline to
make, withdraw or modify such a recommendation. Any such declining,
withdrawal or modification, however, will not change the approval of the
Merger for purposes of
59
Section 251(b) of the DGCL. In connection with such
meeting, the Company (a) as soon as reasonably practicable, will take steps
to prepare, file and clear with the SEC, and thereafter mail to its
stockholders, the Company Proxy Statement and all other proxy materials for
such meeting, and (b) will use its reasonable best efforts to obtain the
necessary approval by its stockholders of this Agreement, the Merger, and the
transactions contemplated hereby, unless the Board of Directors of the
Company determines, in good faith, at a meeting of the full Board of
Directors, that the exercise of its fiduciary duties to the Company's
shareholders under applicable law, as advised in writing by outside counsel
reasonably acceptable to the Parent, requires them not to. Nothing in this
Section 5.3 or 5.5 will be interpreted to eliminate the Company's obligation
to prepare, file and clear with the SEC, and thereafter mail to its
shareholders, the Company Proxy Statement, solicit proxies in favor of the
Merger, or hold a meeting of its stockholders to vote on the Merger as
provided herein, provided that, following the declining to make, withdrawal
of or modification of the recommendation by the Board in accordance with this
Section 5.3, the Parent shall have to waive in writing its right to the fee
described in Section 9.2(b) in order for the Company to be so obligated.
SECTION 5.4. ACCESS TO INFORMATION. From the date hereof
until the
Effective Time, the Company will provide Parent, its counsel, financial
advisors, auditors and other authorized representatives full access to the
offices, properties, books and records of the Company and each of the Company
Subsidiaries and will furnish to Parent, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating
data and other information as such Persons may reasonably request and will
instruct the Company's and each of the Company Subsidiaries' employees,
counsel and financial advisors to cooperate with Parent in its investigation
of the business of the Company and each of the Company Subsidiaries.
SECTION 5.5. NO SOLICITATION OF ACQUISITIONS PROPOSAL.
Neither the Company nor its affiliates (including
directors, officers, employees, agents, representatives and shareholders or
any affiliates or associates thereof) ("Affiliates") shall, directly or
indirectly, make, encourage, facilitate, solicit, assist or initiate any
inquiry or proposal, or, subject to the provisos to this sentence, provide
any information to or participate in any negotiations with, any corporation,
partnership, agent, attorney, financial advisor, person, or other entity or
group (other than the Parent and its Affiliates) ("Third Parties") relating
to any (i) liquidation, dissolution, recapitalization, merger or
consolidation of the Company or its subsidiaries (ii) outside the ordinary
course of business, sale of a significant amount of assets of the Company or
its subsidiaries (iii) purchase or sale of shares of capital stock of the
Company or its subsidiaries (iv) any similar actions or transactions
involving the Company or its subsidiaries other than the transactions
contemplated by this Agreement ("Extraordinary Transactions"), or, subject to
the provisos to this sentence, agree to or consummate any Extraordinary
Transactions; provided, however, that the Company may provide information at
the request of, or enter into negotiations with a, third party or agree to or
consummate any Extraordinary Transaction if the Board of Directors of the
Company determines, in good faith, at a meeting of the full Board of
Directors, that the exercise of its fiduciary duties to the Company's
shareholders under applicable law, as advised in writing by Lord, Bissell &
Brook (or other firm with a national reputation in transactions of this
nature) requires it to take any such action, and, provided further, that the
Company may not, in any event, provide to such third party any information
which it has not provided to the Parent. In addition, following receipt of a
proposal for an Extraordinary Transaction ("Acquisition Proposal"), the
Company may take and disclose to its stockholders a position contemplated by
Rule 14e-2 or Rule 14d-9 under the Exchange Act or otherwise make a
disclosure to its stockholders. The Company shall immediately inform the
Parent of any inquiry, proposal or request for information (including the
terms thereof and the person making such inquiry) which it may receive in
respect of such a transaction and provide the Parent with a copy of any such
written inquiries, proposals and offers, including without limitation any
Acquisition Proposal.
SECTION 5.6. NOTICES OF CERTAIN EVENTS. The Company shall
promptly notify Parent of:
(a) any notice or other communication from any Person
alleging that the consent of such Person is or may be
required in connection with the transactions contemplated by this Agreement;
60
(b) any notice or other communication from any
governmental
or regulatory agency or authority in connection
with the transactions contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge
threatened against, relating to or involving or otherwise affecting the
Company which, if pending on the date of this Agreement, would have been requi
red to have been disclosed pursuant to Section 3.14 or which relate to the
consummation of the transaction contemplated by this Agreement.
SECTION 5.7. TITLE TO REAL
ESTATE. As soon as practical after the date hereof, but in any event no
later than 60 days after the date hereof, the Company,
at its own expense, shall obtain and deliver to Parent, with respect to all
real estate owned by the Company and the Company Subsidiaries and listed on
the Company Disclosure Schedule, an owner's preliminary report of title
covering a date subsequent to the date hereof, issued by a title insurance
company reasonably acceptable to Parent, which preliminary report shall
contain a commitment of such title insurance company to issue an owner's
title insurance policy on ALTA 1970 Owner's Form B insuring the fee simple
title of the Company or such subsidiary in such real estate in an amount to
be determined, subject only to (a) the standard exceptions to title
customarily contained in such title policies and (b) liens of current state
and local property taxes which are not delinquent or subject to penalty.
SECTION 5.8. MONTHLY FINANCIAL REPORTS. From and after the
date of this
Agreement the Company shall deliver to Parent within twenty (20) days of the
last day of each calendar month, unaudited balance sheets and statements of
income of the Company and of each of the Company Subsidiaries for such month
(certified by the Chief Financial Officer of the Company (the "Monthly
Reports") The Monthly Reports: (a) will be true, correct and complete in all
material respects; (b) shall present fairly (subject to adjustments that
would be revealed by an audit, none of which is believed to be material in
the aggregate) the financial position of the Company or the Company
Subsidiaries (as the case may be) and the results of operations as of such
date; and (c) shall properly reflect all assets of the Company or such
subsidiaries (as the case may be) of a kind normally reflected in a balance
sheet of such entity.
SECTION 5.9. FAIRNESS
OPINION. The Company shall use its reasonable best efforts to obtain an
update and re-issue of the DLJ Fairness Opinion at the time of mailing of the
Company Proxy Statement.
SECTION 5.10. OPINION. The Company shall
use its reasonable best efforts to obtain a written opinion from Jordan,
Burt, special counsel to the Company, or such other special counsel
reasonably acceptable to Parent, dated as of the Effective Time and
substantially in the form contained in Schedule III attached hereto or
otherwise in form and substance reasonably satisfactory to Parent; the
Company shall not be required to spend more than $25,000 in this regard.
ARTICLE 6
COVENANTS OF PARENT
Parent agrees that:
SECTION 6.1. CONFIDENTIALITY. Prior to the Effective Time
and after any termination of this Agreement, Parent will hold, and will use
its reasonable best efforts to cause its officers, directors, employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by
other requirements of law, all non-public documents and information
concerning the Company and the Company Subsidiaries furnished to Parent in
connection with the transactions contemplated by this Agreement, except to
the extent that such information can be shown to have been (a) previously
known on a nonconfidential basis by Parent, (b) in the public domain through
no fault of Parent or (c) later lawfully acquired by Parent from sources
other than the Company; provided that Parent may disclose such information to
61
its officers, directors, employees, accountants, counsel, consultants,
advisors and agents in connection with the transactions contemplated by this
Agreement so long as such Persons are informed by Parent of the confidential
nature of such information to its officers, directors, employees,
accountants, counsel, consultants, advisors and agents in connection with the
transactions contemplated by this Agreement so long as such Persons are
informed by Parent of the confidential nature of such information and are
directed by Parent to treat such information confidentially. Parent's
obligation to hold any such information in confidence shall be satisfied if
it exercises the same care with respect to such information as it would take
to preserve the confidentiality of its own similar information. If this
Agreement is terminated, Parent will, and will use its best efforts to cause
its officers, directors, employees, accountants, counsel, consultants,
advisors and agents to, destroy or deliver to the Company, upon request, all
documents and other materials, and all copies thereof, obtained by Parent or
on its behalf from the Company in connection with this Agreement that are
subject to such confidence.
SECTION 6.2. CONDUCT OF PARENT. From the date hereof until
the Effective Time, Parent shall use its reasonable best efforts to preserve
intact its business organizations and relationships with third parties and to
keep available the services of its present officers and employees. Parent
shall not issue any Parent Stock for consideration less than the market price
for such Parent Stock, or any options for Parent Stock with an exercise price
below such market price, provided that the foregoing shall not prevent the
issuance of Parent Stock in exercise of employee stock options, or the
issuance of stock options pursuant to the terms of such plans. In the event
of any issuance of Parent Stock in any acquisition of assets, or in exchange
for any stock of another entity in any merger or similar transaction, the
determination by the Board of Parent as to the value of the consideration
received in such acquisition or exchange shall be conclusive and binding.
SECTION 6.3. ACCESS TO INFORMATION. From the date hereof
until the
Effective Time, Parent will provide the Company, its counsel, financial
advisors, auditors and other authorized representatives full access to the
offices, properties, books and records of Parent and each of the Parent Subsid
iaries and will furnish to the Company, its counsel, financial advisors,
auditors and other authorized representatives such financial and operating
data and other information as such Persons may reasonably request and will
instruct Parent's and each of the Parent Subsidiaries employees, counsel and
financial advisors to cooperate with the Company in its investigation of the
business of Parent and each of the Parent Subsidiaries.
SECTION 6.4. OBLIGATIONS OF MERGER SUBSIDIARY. Parent will
take all action necessary to
cause Merger Subsidiary to perform its obligations under this Agreement and
to consummate the Merger on the terms and conditions set forth in this
Agreement.
SECTION 6.5. VOTING OF
SHARES. Parent agrees to vote all Shares beneficially owned by it, if any,
to approve this Agreement, the Merger and the transactions contemplated
hereby, at the Company Stockholder Meeting.
SECTION 6.6. CONTINUING DIRECTORS. The Board of Directors
of Parent
(the "Board") will appoint to the Board three individuals from a group of
qualified nominees recommended by the Company and acceptable to Parent, with
one individual to be appointed to each of the Board's three classes of
directors. If any nominee so appointed is unable to serve the entirety of the
remaining term of the class to which such nominee is appointed, the Board
will appoint another person from such group to the Board as successor
thereto.
SECTION 6.7. REGISTRATION STATEMENT. Parent shall as soon as
reasonably
practicable prepare and file with the SEC under the 1933 Act the Registration
Statement and shall use its reasonable best efforts to cause the Registration
Statement to be declared effective by the SEC. Parent shall as soon as
reasonably practicable take any action required to be taken under foreign or
state securities or Blue Sky laws in connection with the issuance of Parent
Stock in the Merger, provided Parent shall not be required to qualify as a
foreign corporation or to file a general consent to service of process in any
jurisdiction where it is not now so qualified or required to file such a
consent or to
62
subject itself to taxation as doing business in any jurisdiction where it is not
now so taxed.
SECTION 6.8. STOCK EXCHANGE
LISTING. Parent shall use its best efforts to cause the shares of Parent
Stock to be issued in connection with the Merger to be
listed on the NYSE, subject to official notice of issuance and evidence of
satisfactory distribution, and shall reserve such shares of Parent Stock for
issuance. Parent shall use its reasonable best efforts to cause the Parent
Warrants issued in connection with the Merger to be listed on an exchange or
NASDAQ National Market, subject to official notice of issuance and evidence
of satisfactory distribution, and shall reserve the shares of Parent Stock
issuable thereunder. Reasonable best efforts shall not include the payment of
more than $10,000 as an initial listing fee for such Warrants, the payment of
more than $5,500 per year for such listing, the issuance of any additional
Parent Warrants, or the imposition of unreasonable restrictions or
requirements.
SECTION 6.9. STOCKHOLDER MEETING: PROXY MATERIAL. The Parent
shall cause a meeting of its
stockholders to be duly called and held as soon as reasonably practicable for
the purpose of voting on the approval of this Agreement, the Merger, and the
transactions contemplated hereby. The Directors of the Parent shall, except
as otherwise provided in Section 5.5 hereof and subject to their fiduciary
duties as determined in good faith by the Board of Directors based on advice
of outside legal counsel, recommend approval of this Agreement, the Merger,
and the transactions contemplated hereby, by the Parent's stockholders. In
connection with such meeting, the Parent (a) will as soon as reasonably
practicable take steps to prepare, file and clear with the SEC, and
thereafter mail to its stockholders, its proxy statement (the "Parent Proxy
Statement") and all other proxy materials for such meeting, and (b) will use
its reasonable best efforts to obtain the necessary approval by its
stockholders of this Agreement, the Merger, and the transactions contemplated
hereby.
SECTION 6.10. NOTICES OF CERTAIN EVENTS. Parent shall promptly
notify the Company of:
(a)any notice or other communication from any Person alleging
that
the consent of such Person is or may be required
in connection with the transactions contemplated by this Agreement;
(b)any notice or other communication from any governmental or
regulatory agency or authority in connection with the
transactions contemplated by this Agreement; and
(c)any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened
against, relating to or involving or otherwise affecting Parent which, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Section 4.10 or which relate to the consummation of the
transaction contemplated by this Agreement.
SECTION 6.11. EMPLOYEE BENEFITS. Parent shall cause
Surviving
Corporation to provide the eligible employees of Surviving Corporation and
its subsidiaries with benefits that are in the aggregate generally as
favorable as the benefits provided to the eligible employees of Parent and
the Parent Subsidiaries, provided, that, Parent, in its sole discretion, may
elect to continue the health care coverage currently maintained by the
Company for such eligible employees. The foregoing shall not limit the
Parent's or Surviving Corporation's ability to make any staffing decisions
they deem appropriate.
SECTION 6.12 INDEMNIFICATION. The Surviving Corporation
shall honor any obligation of the Company immediately prior to the Effective
Time to indemnify and hold harmless the present and former officers and
directors of the Company and of the Company Subsidiaries (the "Indemnitees") i
n respect of acts or omissions occurring prior to the Effective Time to the
extent required by the Company's certificate of incorporation and bylaws, or
any indemnification agreement to which the Company and any Indemnitee are
parties (copies of which have been provided by the Company to the Surviving
Corporation), in effect on the date hereof, subject to any limitation imposed
from time to time under applicable law. For three years after the Effective
Time, Parent will cause the Surviving Corporation to provide officers' and
directors' liability insurance in respect of acts or omissions
63
occurring
prior to the Effective Time covering each such Indemnitee on terms with
respect to coverage and amounts roughly comparable to the coverage and
amounts currently provided by the Company's policy, which provides for
coverage in the amount of $2,000,000, so long as such coverage may be
obtained by Parent at a reasonable cost, the current cost of the Company's
insurance being deemed reasonable for this purpose.
SECTION 6.13. FINANCING. Parent shall use its
reasonable best efforts to obtain, prior to the time of printing of the Joint
Proxy Statement, either (i) a commitment from The First National Bank of
Chicago ("First Chicago") for all cash financing necessary for Parent and the
Merger Subsidiary to consummate the Merger, and conduct its activities
following the Effective Time or (ii) the consent of First Chicago and
Boatmen's National Bank to the Merger under the Company's current agreements
therewith, the consent of Shawmut Bank Connecticut, N.A. ("Shawmut") or its
successor to the assumption by Parent or the Merger Subsidiary of the
Company's obligations under that certain Credit Agreement dated June 27, 1994
by and between the Company and Shawmut (the "Credit Agreement)", the
extension of such Credit Agreement beyond its current term, and the
continuation of the Credit Agreement upon economic terms no less favorable
that those currently existing and reflecting an acknowledgement of the
enhanced credit standing of the combined entities after the Merger.
SECTION 6.14. POOLING LETTER.
Parent will use its reasonable best efforts to obtain from Deloitte & Touche,
LLP, a letter dated prior to the time of printing of the Joint Proxy
Statement, addressed to Parent and in form and substance reasonably
satisfactory to Parent, to the effect that the business combination to be
effected by the Merger is not required to be accounted for as a pooling of
interests by Parent for purposes of its consolidated financial statements
under generally accepted accounting principles and applicable SEC rules and
regulations (the "Pooling Letter"), provided, that, Parent may abandon its
efforts to obtain the Pooling Letter if it determines, in its sole
discretion, that the Pooling Letter is unnecessary (in which event the
condition in Section 8.2(i) shall lapse).
SECTION 6.15. FAIRNESS OPINION. Parent will use its
reasonable best efforts to obtain from Xxxxxx Xxxx a written opinion ("Xxxxxx
Xxxx Fairness Opinion"), dated the time of mailing of the Joint Proxy
Statement, or if dated previously, updated to such time, in either case to
the effect that the Merger is fair to the stockholders of the Parent from a
financial point of view.
SECTION 6.16. RESERVE OPINION. Parent will use its
reasonable best efforts to obtain the opinion described in Section 8.2(g).
ARTICLE 7
COVENANTS OF PARENT AND THE COMPANY
The parties hereto agree that:
SECTION 7.1. REASONABLE BEST EFFORTS. Subject to the terms
and conditions
of this Agreement, each party will use its reasonable best efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement. Parent's reasonable best efforts shall not be deemed to
include agreeing to change the Pricing Date.
SECTION 7.2. CERTAIN FILINGS. The Company and Parent
shall cooperate with each other (a) in connection with the preparation of the
Company Proxy Statement and the Parent Proxy Statement (or the Joint Proxy
Statement as provided in Section 7.5) and the Registration Statement, (b) in
determining whether any action by or in respect of, or filing with, any,
governmental body, agency or official, or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (c) in seeking any such
actions, consents, approvals or waivers or making any such filings,
furnishing information required in connection therewith or with the Company
64
Proxy Statement and the Registration Statement and seeking timely to obtain
any such actions, consents, approvals or waivers.
SECTION 7.3. PUBLIC ANNOUNCEMENTS. Neither Parent nor the
Company
will issue any press release or make any public statement with respect to
this Agreement and the transactions contemplated hereby without the prior
approval of the other party, except as may be required by applicable law or
any listing agreement with any national securities exchange. Parent and the
Company shall consult with each other concerning, and endeavor in good faith
to agree on, the content of any such required announcement or disclosure.
SECTION 7.4. FURTHER ASSURANCES. At and after the Effective
Time, the officers and directors of the Surviving Corporation will be
authorized to execute and deliver, in the name and on behalf of the Company
or Merger Subsidiary, any deeds, bills of sale, assignments or assurances and
to take and do, in the name and on behalf of the Company or Merger
Subsidiary, any other actions and things to vest, perfect or confirm of
record or otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets of the
Company acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger.
SECTION 7.5. JOINT PROXY STATEMENT/PROSPECTUS. It is
understood and agreed that the Company
and Parent may prepare a Joint Proxy Statement and prospectus in satisfaction
of their respective obligations to prepare a Proxy Statement and the
Registration Statement.
ARTICLE 8
CONDITIONS TO THE MERGER
SECTION 8.1. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The
obligations of the Company, Parent and Merger
Subsidiary to consummate the Merger are subject to the satisfaction or waiver
at or prior to the Closing of the following conditions:
(a)The shareholders of the Company and the Parent shall have
duly
approved and adopted this Agreement, the Merger,
and the other transactions contemplated hereby to the extent required by
applicable requirements of law and the Certificate or Articles of
Incorporation and By-laws of each of the Company and the Parent.
(b)any applicable waiting period under the HSR Act relating to
the
Merger shall have expired or terminated;
(c)the transactions contemplated by this Agreement shall have
been
approved by any federal, state, foreign or local
governmental or regulatory authority or self-regulatory body the approval of
which is required to permit the consummation thereof, including without
limitation the Florida and Kansas Commissioners of Insurance if required,
without the imposition of any condition, requirement or commitment which
would reasonably be expected to have a Company Material Adverse Effect, a
Parent Material Adverse Effect, or a material adverse effect on the business,
operations, assets, conditions (financial or otherwise) or results of
operations of the Surviving Corporation;
(d)no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the
consummation of the Merger;
(e)the Company's Board of Directors shall have received from DLJ
the DLJ Fairness Opinion updated and re-issued at
the time of mailing of the Company Proxy Statement, which opinion shall not
have been withdrawn;
(f)the Company shall have received from Xxxxx Xxxx LLP special
counsel for Parent and Merger Subsidiary, and from
other counsel for Parent reasonably satisfactory to the Company, written
65
opinions dated as of the Effective Time and substantially in the respective
forms contained in Schedule I attached hereto or otherwise in form and
substance reasonably satisfactory to the Company;
(g)Parent shall have received from Lord, Bissell & Brook,
special
counsel to the Company, Harnett Xxxxxxx Xxxxx &
Xxxx, P.A., outside general counsel to the Company, written opinions, dated
as of the Effective Time and substantially in the respective forms contained
in Schedule II attached hereto or otherwise in form and substance reasonably
satisfactory to Parent.
(h)no court, arbitrator or governmental body, agency or official
shall have issued any order, and there shall not
be any statute, rule or regulation, restraining or prohibiting the
consummation of the Merger or the effective operation of the business of the
Company, the Company Subsidiaries, the Parent and Parent Subsidiaries after
the Effective Time;
(i)all actions by or in respect of or filings with any
governmental body, agency, official, or authority required
to permit the consummation of the Merger, including but not limited to the
Florida and Kansas Insurance Departments and any other insurance regulatory
agency in any state in which the Company, the Company Subsidiaries, Parent
and the Parent Subsidiaries do business, shall have been obtained;
(j)the Registration Statement shall have been declared effective
and no stop order suspending the effectiveness of
the Registration Statement shall be in effect and no proceedings for such
purpose shall be pending before or threatened by the SEC;
(k)the shares of Parent Stock to be issued in connection with
the
Merger shall have been approved for listing on
the NYSE, subject to official notice of issuance of satisfactory
distribution;
(l)each of Parent and the Surviving Corporation shall execute
and
deliver Employment Agreements with each of Xxxxx
X. Xxxxx and Xxxxx X. Xxxxxxxxx, substantially in the forms of Exhibits A-1
and A-2 hereto as applicable, on or before the Closing;
(m) there shall not have been a downgrading or threatened
downgrading of the Parent Insurance Subsidiary by A.M. Best; provided, that,
in the event of a threatened downgrading, the parties agree that (i) Parent
shall promptly notify the Company of such threatened downgrading, and (ii)
neither Parent nor the Company may terminate this Agreement pursuant to
Section 9.1(f) or (g), as the case may be, because of such threatened
downgrading unless such threat has not been withdrawn by A.M. Best within ten
(10) calendar days from the date it was received by Parent, and (X) Parent
shall have used its reasonable best efforts to have such threat withdrawn
prior to such time, and (Y) if permitted by A.M. Best, the Company and Parent
shall have made a joint presentation to A.M. Best with a request that it
withdraw such threatened downgrading. If this Agreement is terminated
pursuant to Section 9.1(f) or (g), the parties shall make a joint
announcement of such termination and the reason therefor; and
(n) the parties shall have executed the form of the Warrant
Agreement prior to the mailing of the proxy statements by each party.
SECTION 8.2. CONDITIONS TO OBLIGATIONS OF PARENT. The
obligation of Parent to consummate the
transactions contemplated by this Agreement shall be subject to the
satisfaction or waiver at or prior to the Closing of the following additional
conditions:
(a)REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth in Article 3 that
are qualified as to materiality shall be true and correct, and the
representations and warranties of the Company set forth in Article 3 that are
not so qualified shall be true and correct in all material respects, in each
case as of the date of this Agreement and as of the Closing as though made on
and as of the date of the Closing, except to the extent such representations
and warranties speak as of an earlier date or except for transactions
explicitly
66
permitted by this Agreement. The representations and warranties
of the Company set forth in Article 3 shall also be true and correct in the
aggregate as of the date of this Agreement and as of the Closing with the
same effect as though made on and as of the date of the Closing, except to
the extent the breaches of all the representations and warranties, if any
(excluding, for this purpose, any qualifications as to materiality therein)
in the aggregate do not have a Company Material Adverse Effect.
(b) PERFORMANCE OF OBLIGATIONS OF COMPANY. The Company shall
have
performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Effective Time.
(c) CERTIFICATE. Parent shall have
received a certificate dated as of the date of the Closing and signed on
behalf of Company by the Chief
Executive Officer and Chief Financial Officer the Company, to the effect that
the conditions to Parent's obligations set forth in Sections 8.2(a) and (b)
have been satisfied.
(d) NO MATERIAL ADVERSE CHANGE. There shall not have occurred
any
one or more events with respect to the Company
or the Company Subsidiaries between the Company Balance Sheet Date and the
date of the Closing which, individually or in the aggregate, had, or may be
reasonably expected to have, a Company Material Adverse Effect, a Parent
Material Adverse Effect or a Surviving Corporation Adverse Effect including,
without limitation, a downgrading or threatened downgrading of the Company
Insurance Subsidiary by A.M. Best (which is hereby deemed to be such a
Material Adverse Effect) or a development or developments in any litigation
listed in the Company Disclosure Schedule with respect to Section 3.14 which,
individually or in the aggregate, had, or may be reasonably expected to have,
a Company Material Adverse Effect.
(e) COMFORT LETTER. Parent shall have received a "comfort
letter"
from Deloitte & Touche, LLP, the Company's
independent certified public accountants, dated the date of the Company Proxy
Statement and updated as of the date of the Closing, with respect to the
financial information regarding the Company and the Company Subsidiaries in
form and substance reasonably satisfactory to Parent, and shall have received
their consent to the inclusion of their report on the Company's financial
statements included in the Registration Statement.
(f) TAX OPINION. Parent shall have received from its counsel an
opinion to the effect that the Merger when
consummated in accordance with the terms hereof and any plan of merger
entered into by the parties will constitute a tax-free reorganization within
the meaning of Section 368(a) of the Code, that no gain or loss will be
recognized by Parent or the Company on consummation of the Merger, and that
the exchange of Parent Stock for Shares will not give rise to recognition of
gain or loss for federal income tax purposes to the stockholders of the
Company, except with respect to the receipt of the Cash Portion Per Share,
the Parent Warrants and cash in lieu of a fractional share of Parent Stock
and Parent Warrant, and the Merger will not give rise to recognition of gain
or loss for federal income tax purposes to Parent.
(g) RESERVES. Parent shall have received an unqualified opinion
of an independent actuarial firm, satisfactory to
Parent, that the reserves and assets held by the Company and the Company
Insurance Subsidiary are adequate and sufficient to fund the legal and
contractual obligations of the Company and the Company Insurance Subsidiary
to the Company Insurance Subsidiary's policy holders as of June 30, 1995.
Such opinion must be accompanied by an Actuarial Memorandum of the same
independent actuarial firm, describing the Company's Asset Adequacy Analysis.
(h) BLUE SKY COMPLIANCE. Parent shall have
received all state securities or "blue sky" authorizations necessary to issue
Parent Stock and Parent Warrants pursuant to the Merger.
(i) POOLING LETTER. Unless waived,
Parent shall have received the Pooling Letter dated no later than the time of
printing of the Joint Proxy Statement.
67
(j) FAIRNESS OPINION. Parent shall have
received the Xxxxxx Xxxx Fairness Opinion, dated the time of mailing of the
Joint Proxy Statement, or if dated previously, updated to such time.
(k) RESIGNATIONS. Parent shall have received written
resignations
from such office from all directors and officers
of the Company and the Company Subsidiaries.
(l) AFFILIATES. Parent shall have received a signed "affiliates
letter" from all affiliates of the Company (i)
restricting the shares of Parent Stock received from them unless sold
pursuant to the requirements of Rule 145 or other exemption from the Federal
securities laws, and an opinion to that effect reasonably satisfactory to
Parent (both as to counsel and form of opinion) and (ii) providing for a
legend referencing such restriction.
(m) FINANCING. Parent shall
have received, no later than the date of printing of the Joint Proxy
Statement, either (a) a commitment from First Chicago for all cash financing
necessary for Parent and the Merger Subsidiary to consummate the Merger, and
conduct its activities following the Effective Time or (b) consents or
waivers to the execution of this Agreement and to the consummation of each of
the transactions contemplated hereby from (i) Shawmut or its successor (to
the assumption by Parent or the Merger Subsidiary of the Company's
obligations under the Credit Agreement, the extension of such Credit
Agreement beyond its current term, and the continuation of the Credit
Agreement upon economic terms no less favorable that those currently existing
and reflecting an acknowledgement of the enhanced credit standing of the
combined entities after the Merger, and (ii) Parent's senior lenders, First
Chicago and Boatmen's National Bank.
(n) OPTION PLAN AMENDMENT. The stockholders of
Parent shall have approved an amendment to the 1989 AmVestors Financial
Corporation Non-Qualified Stock Option Plan to increase the number of shares
issuable under such plan by at least 150,000 shares.
(o) RELEASES
. Parent shall have received appropriate releases from holders of options
issued pursuant to Financial Benefit Group, Inc.'s
Employee Incentive Stock Option Plan as described in Section 1.5(f).
SECTION 8.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligation of the Company to consummate the
transactions contemplated by this Agreement shall be subject to the
satisfaction or waiver at or prior to the Closing of the following additional
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Subsidiary set forth in Article 4 that are
qualified as to materiality shall be true and correct, and the
representations and warranties of Parent and Merger Subsidiary set forth in
Article 4 that are not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the Closing
as though made on and as of the date of the Closing, except to the extent
such representations and warranties speak as of an earlier date or except for
transactions permitted by this Agreement. The representations and warranties
of Parent set forth in Article 4 shall also be true and correct in the
aggregate as of the date of this Agreement and as of the Closing with the
same effect as though made on and as of the date of the Closing, except to
the extent the breaches of all the representations and warranties, if any
(excluding, for this purpose, any qualifications as to materiality therein)
in the aggregate do not have a Parent Material Adverse Effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND MERGER SUBSIDIARY.
Parent and Merger Subsidiary shall have performed
in all material respects all obligations required to be performed by them
under this Agreement at or prior to the Effective Time.
(c) CERTIFICATE. The Company
shall have received a certificate dated as of the date of the Closing and
signed on behalf of Parent and Merger Subsidiary by the respective Chief
Executive Officers and Chief Financial Officers of each such entity, to the
effect that the conditions to the Company's obligations set forth in Sections
8.3(a) and (b) have been satisfied.
68
(d) NO MATERIAL ADVERSE CHANGE. There shall not have occurred
any
one or more events with respect to Parent, the
Parent Subsidiaries or the Merger Subsidiary between the Parent Balance Sheet
Date and the date of the Closing which, individually or in the aggregate,
had, or may be reasonably expected to have, a Parent Material Adverse Effect,
including without limitation a development or developments in any litigation
listed in the Parent Disclosure Schedule with respect to Section 4.12 which,
individually or in the aggregate, had, or may be reasonably expected to have,
a Parent Material Adverse Effect.
(e) TAX OPINION. The Company shall
have received from its counsel an opinion to the effect that the Merger when
consummated in
accordance with the terms hereof and any plan of merger entered into by the
parties will constitute a tax-free reorganization within the meaning of
Section 368(a) of the Code, that no gain or loss will be recognized by Parent
or the Company on consummation of the Merger, and that the exchange of Parent
Stock for Shares will not give rise to recognition of gain or loss for
federal income tax purposes to the stockholders of the Company, except with
respect to the receipt of the Cash Portion Per Share, the Parent Warrants and
cash in lieu of a fractional share of Parent Stock and Parent Warrant, and
the Merger will not give rise to recognition of gain or loss for federal
income tax purposes to the Company.
(f) RESERVES. The Company
shall have received an unqualified opinion of an independent actuarial firm,
satisfactory to the Company, that the reserves and assets held by Parent and
the Parent Insurance Subsidiary are adequate and sufficient to fund the legal
and contractual obligations of Parent and the Parent Insurance Subsidiary to
Parent Insurance Subsidiary's policy holders as of June 30, 1995. Such
opinion must be accompanied by an Actuarial Memorandum of the same
independent actuarial firm, describing Parent's Asset Adequacy Analysis.
ARTICLE 9
TERMINATION
SECTION 9.1. TERMINATION.
This Agreement may be terminated and the Merger may be abandoned at any time
prior to the Effective Time (notwithstanding any approval of this Agreement,
the Merger, and the transactions contemplated hereby, by the stockholders of
the Company):
(a)by mutual written consent of the Company and Parent;
(b)by either the Company or Parent, if there shall be any law or
regulation that makes consummation of the Merger
illegal or otherwise prohibited or if any judgment, injunction, order or
decree enjoining Parent or the Company from consummating the Merger is
entered and such judgment, injunction, order or decree shall become final and
nonappealable;
(c)by either Parent or the Company, if the Effective Time shall
not have occurred on or before January 31, 1996;
(d)by either Parent or the Company, if the stockholders of the
Company or Parent fail to approve and adopt this
Agreement, the Merger and other transactions contemplated hereby at a meeting
duly convened therefor;
(e)by Parent, if the Company shall have received any Acquisition
Proposal that the Board of Directors of the
Company has determined is more favorable to the Company's stockholders than
the transactions contemplated by this Agreement, or has otherwise declined to
make, withdrawn or modified its recommendation for the Company's shareholders
to approve this Agreement, the Merger and the transactions contemplated
hereby;
(f)by Parent, if any of the conditions specified in Sections 8.1
and 8.2 hereof has not been met or waived by
Parent on or prior to the Effective Time or at such time as such condition
can no longer be satisfied;
69
(g)by the Company, if any of the conditions specified in
Sections
8.1 and 8.3 hereof has not been met or waived by
the Company on or prior to the Effective Time or at such time as such
condition can no longer be satisfied; or
(h)by either Parent or the Company if the Parent Stock Price is
less than $9.50 or greater than $14.50.
The party desiring to terminate this Agreement pursuant to
clauses
(b), (c), (d), (e), (f), (g) or (h) shall give
written notice of such termination to the other party in accordance with
Section 10.1.
SECTION 9.2. PAYMENTS
AND EXPENSES. In recognition of the considerable time and expense that the
Parent has expended and will expend in entering into
this Agreement, and pursuing the Merger and the other transactions
contemplated hereby, and in order to induce Parent and Merger Subsidiary to
enter into this Agreement, the Company shall pay to the Parent the amounts
described in (a) and (b) below.
(a)In the event that this Agreement is terminated and the Merger
has not been consummated (other than as a result
of the material breach by the Parent or Merger Subsidiary of their
representations, warranties or covenants contained in this Agreement or the
exercise by either party of the right to terminate under Section 9.1(h)), and
if no Triggering Event (as hereinafter defined) has occurred, the Company
shall reimburse the Parent for its time and expenses in pursuing and
structuring the Merger in an amount equal to $250,000. In the event that
this Agreement is terminated and the Merger has not been consummated as a
result of the material breach by the Parent or Merger Subsidiary of their
representations, warranties or covenants contained in this Agreement (and
there shall have been no material breach by the Company of its
representations, warranties or covenants contained in this Agreement), and if
no Triggering Event has occurred, the Parent shall reimburse the Company for
its time and expenses in pursuing and structuring the Merger in an amount
equal to $250,000.
(b)The Company shall pay to Parent $1,000,000 if the Merger is
not
consummated and any of the following have
previously occurred ("Triggering Events"):
(i)any other party shall have in any manner proposed (whether to
management, the directors or the shareholders of
the Company or otherwise) or communicated or announced its interest in
pursuing an Extraordinary Transaction (after execution of this Agreement),
such proposal or interest is publicly communicated or announced by any party,
and the shareholders of the Company disapprove the Merger, this Agreement or
the transactions contemplated hereby.
(ii) more than 25% of the Shares held by the directors of the
Company are voted against, or abstain from voting on, the Merger, this
Agreement and the transactions contemplated hereby.
(iii) the Company enters into an agreement (or reaches an
agreement in principle) providing for an Extraordinary Transaction or the
directors or shareholders of the Company shall have authorized or approved
the entering into any such agreement or agreement in principle by the Company
or any application, notification or filing seeking regulatory approval or
clearance of any such agreement, agreement in principle or Extraordinary
Transaction shall have been filed;
(iv) an Extraordinary Transaction shall be consummated by the
Company;
(v) any other party shall have commenced, or publicly
communicated
an intention to commence, a solicitation of
proxies in opposition to approval by the Company's shareholders of this
Agreement and the shareholders of the Company disapprove the Merger, this
Agreement and the transactions contemplated hereby; or
(vi) the Board of Directors declines to make, withdraws or
amends
its recommendation to the
70
Company's shareholders
to approve this Agreement, the Merger and the transactions contemplated
hereby.
The fee described in this Section 9.2(b) shall not be payable in
the event that the Company has terminated this Agreement, pursuant to its
rights under Section 9.1, prior to the occurrence of a Triggering Event. The
fee described in this Section 9.2(b) shall also not be payable in the event
that the Parent terminates this Agreement (X) pursuant to its rights under
Section 9.1(h), (Y) because the Parent does not receive the pooling letter
described in Section 8.2(i) or (Z) because of a downgrading or threatened
downgrading of the Parent Insurance Subsidiary or Company Insurance
Subsidiary by A.M. Best, which downgrading or threatened downgrading is not
primarily the result of a Triggering Event or actions taken in connection
therewith.
SECTION 9.3. OTHER RIGHTS
AND REMEDIES. The payments described in Sections 9.2 hereof shall be in
addition to, and not in limitation of, any right or remedy that the Parent or
Merger Subsidiary may otherwise have for a breach by the Company of the
provisions of this Agreement.
SECTION 9.4. PROCEDURE UPON
TERMINATION. In the event of termination and abandonment pursuant to this
Article 9, this Agreement shall terminate and the
Merger shall be abandoned without further action by the Company or the
Parent, provided that the agreements contained in Sections 5.1 and 6.1 hereof
shall remain in full force and effect. If this Agreement is terminated as
provided herein, each party shall use its reasonable best efforts to
redeliver all documents, work papers and other material (including any copies
thereof) of any other party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same. Nothing contained in this Agreement shall relieve any
party from any liability for any breach of this Agreement prior to
termination.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. NOTICES. All
notices, requests and other communications to any party hereunder shall be in
writing (including telecopy or similar writing) and shall be given,
if to Parent or Merger Subsidiary, to:
AmVestors Financial Corporation
000 X.X. Xxxxxx Xxxxxx
Xxxxxx, Xxxxxx 00000
Attention: Xxxx X. Xxxxx
President and General Counsel
telecopy: (000) 000-0000
With a copy to:
Xxxxx Xxxx LLP
000 Xxxxx Xxxxxxxx, Xxxxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. XxXxxxx
telecopy: (000) 000-0000
if to the Company, to:
Financial Benefit Group, Inc.
Attention Xxxxx X. Xxxxx
0000 Xxxx Xxxxxxxx Xxxx Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
telecopy: (000) 000-0000
With a copy to:
Harnett Xxxxxxx Xxxxx & Xxxx, P.A.
71
Attention: Xxxxxxx Xxxxxxx
0000 Xxxx Xxxxxxxx Xxxx Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
telecopy: (000) 000-0000
and to:
Lord, Bissell & Brook
Attention Xxxxx X. Xxxxxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
telecopy (000) 000-0000
or such other address or telecopy number as such party may hereafter specify
by notice to the other parties hereto. Each such notice, request or other
communication shall be effective (a) if given by telecopy, when such telecopy
is transmitted to the telecopy number specified in this Section and the
appropriate telecopy confirmation is received or (b) if given by any other
means, when delivered at the address specified in this Section.
SECTION 10.2. SURVIVAL OF
REPRESENTATIONS AND WARRANTIES. The representations and warranties and
agreements contained herein and in any certificate or
other writing delivered pursuant hereto shall not survive the Effective Time
and the termination of this Agreement except for the representations,
warranties and agreements set forth in Sections 1.3, 1.5, 1.7, 2.3, 3.7,
3.16, 3.18, 4.15, 5.1, 6.1, 6.6, 6.7, 10.2 and 10.4.
SECTION 10.3. AMENDMENTS; NO WAIVERS. (a) Any
provision of this Agreement may be
amended or waived prior to the Effective Time if, and only if, such amendment
or waiver is in writing and signed, in the case of an amendment, by the
Company, Parent and Merger Subsidiary or in the case of a waiver, by the
party against whom the waiver is to be effective; provided that after the
adoption of this Agreement by the stockholders of the Company, no such
amendment or waiver shall, without the further approval of such stockholders,
alter or change (i) the amount or kind of consideration to be received in
exchange for any Shares of capital stock of the Company; (ii) any term of the
certificate of incorporation of the Surviving Corporation or (iii) any of the
terms or conditions of this Agreement if such alteration or change would
adversely affect the holders of any Shares of capital stock of the Company.
(b)No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as
a waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 10.4. EXPENSES. Except as otherwise
provided
in this Agreement, each party hereto shall pay its own legal and accounting
fees, costs and expenses in connection with the negotiation and execution of
this Agreement and the transactions contemplated hereby.
SECTION 10.5 AFFILIATE RESTRICTIONS/LEGENDS. The
shares of Parent Stock received by any affiliate, as that term is defined
under the Securities Act,
shall be subject to the restrictions contained in Rule 145 under the
Securities Act and may not be resold by any such affiliate except in
compliance with such rule or another applicable exemption from registration
under such Act and any applicable state securities laws. The shares of
Parent Stock received by any such affiliate shall contain an appropriate
legend.
SECTION 10.6. ENTIRE AGREEMENT/NO
THIRD PARTY BENEFICIARIES. All prior negotiations and agreements between the
parties hereto relating to the subject matter
hereof are superseded by this Agreement and as of the date hereof there are
no representations, warranties, understandings or agreements, whether written
or oral, expressed or implied, other than those specifically set forth
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herein. There are no third party beneficiaries to this Agreement.
SECTION 10.7. WAIVERS. Any failure by any of the
parties hereto to comply with any of the obligations, agreements or
conditions set forth herein may be waived by the other party or parties
provided, however, that any such waiver shall not be deemed a waiver of any
other obligation, agreement or condition.
SECTION 10.8.AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS.
Each of the parties agrees to cooperate fully in the effectuation of the
transactions contemplated hereby and to execute any and all additional
documents or take such additional actions as shall be reasonably necessary or
appropriate for such purpose.
SECTION 10.9. SUCCESSORS AND ASSIGNS.
The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
provided that no party may assign, delegate or otherwise transfer any of its
rights or obligations under this Agreement without the prior written consent
of the other parties hereto.
SECTION 10.10. GOVERNING LAW. This
Agreement shall be governed by and construed in accordance with the internal
laws and not the conflicts of laws provisions of the State of Kansas.
SECTION 10.11.EXCLUSIVE JURISDICTION AND CONSENT TO
SERVICE OF PROCESS. The Parties agree that any legal
action, suit or proceeding arising out of or relating to this Agreement or
the agreements and transactions contemplated hereby shall be instituted in a
Federal court located in such District, or a state court in such District or
County, in which the Parent resides, which shall be the exclusive
jurisdiction and venue of said legal proceedings, and each party hereto
waives any objection which such party may now or hereafter have to the laying
of venue of any such action, suit or proceeding. Any and all service of
process and any other notice in any such action, suit or proceeding shall be
effective against such party upon notice to such party thereof as provided in
Section 10.1. Nothing contained herein shall be deemed to affect the right of
any party hereto to serve process in any manner permitted by law.
SECTION 10.12. DISCLOSURE SCHEDULES.
Notwithstanding anything herein to the contrary, any matter disclosed in any
part of either the Company Disclosure Schedule or the Parent Disclosure
Schedule shall be deemed to be disclosed in all parts of such Schedules where
the other party could reasonably be expected to ascertain the scope of the
modification of any such other representation, regardless of whether such
matter is specifically cross-referenced. The disclosure of any matter in a
Schedule is not to be deemed determinative of or an indication that such
matter is material to the operations of the Company or Parent, as the case
may be.
SECTION 10.13. COUNTERPARTS: EFFECTIVENESS. This
Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of
the day and year first above written.
FINANCIAL BENEFIT GROUP, INC.
By: /c/ Xxxxx X. Xxxxx
Title: CHAIRMAN AND CEO
AMVESTORS FINANCIAL CORPORATION
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By:/c/ Xxxxx X. Xxxxxx, Xx.
Title: CHAIRMAN AND CEO
AMVESTORS ACQUISITION SUBSIDIARY, INC.
By:/c/ Xxxx X. Xxxxx
Title: PRESIDENT
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