AGREEMENT AND PLAN OF MERGER Dated as of July 15, 2010 among PROSIGHT SPECIALTY INSURANCE HOLDINGS, INC. PSI MERGER SUB INC. and NYMAGIC, INC.
Exhibit 2.1
EXECUTION COPY
Dated as of July 15, 2010
among
PROSIGHT SPECIALTY INSURANCE HOLDINGS, INC.
PSI MERGER SUB INC.
and
NYMAGIC, INC.
This AGREEMENT AND PLAN OF MERGER, dated as of July 15, 2010 (this “Agreement”), is
among ProSight Specialty Insurance Holdings, Inc., a Delaware corporation (“Parent”), PSI
Merger Sub Inc., a New York corporation and a direct, wholly owned Subsidiary of Parent
(“Merger Sub”), and NYMAGIC, INC. a New York corporation (the “Company”). Certain
terms used in this Agreement have the meanings set forth in Section 8.11.
RECITALS
WHEREAS, the respective Boards of Directors of the Company and Merger Sub have adopted and
declared advisable, and the Board of Directors of Parent has approved, this Agreement and the
merger of Merger Sub with and into the Company (the “Merger”), on the terms and subject to
the conditions provided for in this Agreement;
WHEREAS, Parent, in its capacity as the sole shareholder of Merger Sub, has agreed to adopt
this Agreement and approve the Merger by unanimous written consent, with such approval and adoption
effective upon execution of this Agreement;
WHEREAS, simultaneously with the execution and delivery of this Agreement and as a condition
and inducement to the willingness of Parent and Merger Sub to enter into this Agreement, Parent and
certain shareholders of the Company are entering into a Shareholders Agreement (the
“Shareholders Agreement”) pursuant to which, among other things, such shareholders have
agreed to vote to adopt this Agreement and to take certain other actions in furtherance of the
Merger, in each case on the terms set forth therein; and
WHEREAS,
concurrently with the execution of this Agreement, each of (a) GS Capital Partners VI
Fund, L.P., GS Capital Partners VI Offshore Fund, L.P., GS Capital
Partners VI GmbH & Co. KG and GS
Capital Partners VI Parallel, L.P. and (b) TPG Partners VI, L.P. (each, a “Guarantor”), has
provided a guarantee substantially in the form attached hereto as Exhibit A (the
“Guarantee”), dated as of the date hereof, in favor of the Company, with respect to the
obligations of Parent and Merger Sub arising under, or in connection with, this Agreement.
NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements
contained in this Agreement, and intending to be legally bound hereby, Parent, Merger Sub and the
Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the relevant provisions of the New York Business Corporation
Law (the “NYBCL”), at the Effective Time, Merger
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Sub shall be merged with and into the Company, and the separate corporate existence of Merger
Sub shall thereupon cease, and the Company shall be the surviving corporation in the Merger (the
“Surviving Corporation”).
SECTION 1.2. Closing. The closing of the Merger (the “Closing”) shall take
place at the offices of Weil, Gotshal & Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at
10:00 a.m. (New York City time) on a date to be specified by the Company and Parent, which date
shall be no later than the second (2nd) Business Day after satisfaction or (to the extent permitted
by Law) waiver of the conditions set forth in Article VI (other than those conditions that
by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of
those conditions at such time), or at such other place, date and/or time as may be agreed to in
writing by the Company and Parent. The date on which the Closing actually occurs is referred to in
this Agreement as the “Closing Date.”
SECTION 1.3. Effective Time. Subject to the provisions of this Agreement, as soon as
practicable on the Closing Date, the parties shall file with the Department of State of the State
of New York a certificate of merger, executed in accordance with, and in such form as complies
with, the relevant provisions of the NYBCL (the “Certificate of Merger”). The Merger shall
become effective upon the filing of the Certificate of Merger or at such later time as is agreed to
by the parties and specified in the Certificate of Merger (the time at which the Merger becomes
effective is referred to in this Agreement as the “Effective Time”).
SECTION 1.4. Effects of the Merger. From and after the Effective Time, the Merger
shall have the effects set forth in the applicable provisions of the NYBCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all of the properties,
rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
SECTION 1.5. Certificate of Incorporation and By-laws of the Surviving Corporation.
The certificate of incorporation and by-laws of the Company, as in effect immediately prior to the
Effective Time, shall be the certificate of incorporation and by-laws of the Surviving Corporation
until thereafter amended as provided therein or by Law.
SECTION 1.6. Directors and Officers of the Surviving Corporation.
(a) Each of the parties hereto shall take all necessary action to cause the directors of
Merger Sub immediately prior to the Effective Time to be the directors of the Surviving Corporation
immediately following the Effective Time, to hold office until their respective successors are duly
elected or appointed and qualified or their earlier death, resignation or removal in accordance
with the certificate of incorporation and by-laws of the Surviving Corporation. Prior to the
Closing Date, the Company shall take all
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reasonable action necessary to cause the directors of the Company to resign as directors of
the Company effective no later than the Effective Time.
(b) The officers of the Company immediately prior to the Effective Time shall be the officers
of the Surviving Corporation until their respective successors are duly appointed and qualified or
their earlier death, resignation or removal in accordance with the certificate of incorporation and
by-laws of the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON CAPITAL STOCK
SECTION 2.1. Effect on Capital Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any shares of common stock, par value $1.00 per
share, of the Company (“Company Shares”) or any shares of capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each share of capital stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and become one validly
issued, fully paid and non-assessable share of common stock, par value $0.01 per share, of the
Surviving Corporation and shall constitute the only shares of capital stock of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Any Company Shares that
are owned by the Company as treasury stock, and any Company Shares owned by Parent or Merger Sub,
shall be automatically canceled and shall cease to exist and no consideration shall be delivered in
exchange therefor. Each Company Share which is owned by any Subsidiary of the Company shall remain
outstanding, with appropriate adjustment to the number thereof to preserve such Subsidiary’s
relative ownership percentage in the Company.
(c) Conversion of Company Shares. Each Company Share issued and outstanding
immediately prior to the Effective Time (other than shares to be canceled or to remain outstanding
in accordance with Section 2.1(b)) shall be converted into the right to receive $25.75 in
cash, without interest (the “Merger Consideration”). As of the Effective Time, all such
Company Shares shall no longer be outstanding and shall automatically be canceled and shall cease
to exist, and each holder of a certificate (a “Certificate”), or un-certificated book-entry
shares (“Book-Entry Shares”), which immediately prior to the Effective Time represented any
such Company Shares shall thereafter cease to have any rights with respect thereto, except the
right to receive the Merger Consideration to be paid in consideration therefor upon surrender of
such Certificate or Book-Entry Shares in accordance with Section 2.3(b), without interest.
SECTION 2.2. No Appraisal Rights. In accordance with Section 910 of the NYBCL, no
appraisal rights shall be available to holders of Company Shares in connection with the Merger.
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SECTION 2.3. Exchange of Certificates.
(a) Paying Agent. At or prior to the Effective Time, Parent shall deposit with a bank
or trust company as may be designated by Parent and reasonably acceptable to the Company (the
“Paying Agent”), for the benefit of the holders of Company Shares converted at the
Effective Time into the right to receive the Merger Consideration pursuant to Section
2.1(c), the aggregate Merger Consideration to which such holders shall become entitled pursuant
to Section 2.1(c) (the “Exchange Fund”). The Exchange Fund shall, pending its
disbursement to such holders, be invested by the Paying Agent as directed by Parent in short-term
direct obligations of the United States or for which the full faith and credit of the United States
is pledged to provide for the payment of principal and interest. Any net profit resulting from, or
interest or income produced by, such amounts on deposit with the Paying Agent will be payable to
Parent or as Parent otherwise directs.
(b) Procedures. Promptly, and in any event no later than three (3) Business Days,
after the Effective Time, Parent and the Surviving Corporation shall cause the Paying Agent to mail
to each holder of record of Company Shares converted pursuant to Section 2.1(c) into the
right to receive the Merger Consideration a letter of transmittal and related instructions which
shall (i) specify that the delivery shall be effected, and risk of loss and title shall pass, only
upon proper delivery of the Certificates (or book-entry transfer of the Book-Entry Shares) to the
Paying Agent and (ii) otherwise be in customary form and include customary provisions (including
with respect to delivery of an “agent’s message” regarding the book-entry transfer of Book-Entry
Shares) for use in effecting the surrender of the Certificates and Book-Entry Shares in exchange
for the Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent, together with such letter of transmittal, duly completed and validly executed in accordance
with the instructions (or, in the case of Book-Entry Shares, receipt of an “agent’s message” by the
Paying Agent or such other evidence, if any, of transfer as the Paying Agent may reasonably
request), the holder of such Certificate (or Book-Entry Shares, as applicable) shall be entitled to
receive in exchange therefor the Merger Consideration, without interest, for each Company Share
formerly represented by such Certificate (or Book-Entry Shares, as applicable), and the Certificate
(or Book-Entry Shares, as applicable) so surrendered shall forthwith be canceled. If any portion
of such consideration is to be issued and paid to a Person other than the Person in whose name the
surrendered Certificate or Book-Entry Shares were registered, it shall be a condition to such
issuance and payment that (i) the Certificate so surrendered shall be properly endorsed or shall
otherwise be in proper form for transfer or such Book-Entry Share shall be properly transferred and
(ii) the Person requesting such issuance shall have paid any transfer and other Taxes required by
reason of the issuance and payment of such consideration to a Person other than the registered
holder of such Certificate or Book-Entry Shares surrendered or shall have established to the
reasonable satisfaction of the Paying Agent and the Surviving Corporation that such Tax either has
been paid or is not applicable. Until surrendered as contemplated by this Section 2.3,
each Certificate shall be deemed at any time after the Effective Time to represent only the right
to receive the Merger Consideration as contemplated by this Article II, without interest.
Notwithstanding anything to the contrary in this Agreement, a holder of Book-Entry
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Shares shall not be required to deliver a Certificate to the Paying Agent to receive the
consideration to which such holder is entitled pursuant to this Article II in respect of
such Book-Entry Shares.
(c) Transfer Books; No Further Ownership Rights in Company Shares. The Merger
Consideration issued and paid in respect of Company Shares represented by Book-Entry Shares, or
upon the surrender for exchange of Certificates, in accordance with the terms of this Article
II shall be deemed to have been issued and paid in full satisfaction of all rights pertaining
to the Company Shares previously represented by such Book-Entry Shares and Certificates (as
applicable), and at the close of business on the day on which the Effective Time occurs, the stock
transfer books of the Company shall be closed and, thereafter, there shall be no further
registration of transfers on the stock transfer books of the Surviving Corporation of the Company
Shares that were outstanding immediately prior to the Effective Time. From and after the Effective
Time, the holders of Book-Entry Shares or Certificates that evidenced ownership of Company Shares
outstanding immediately prior to the Effective Time shall cease to have any rights with respect to
such Company Shares, except as otherwise provided for in this Agreement or by Law. Subject to the
last sentence of Section 2.4, if, at any time after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article II.
(d) Lost, Stolen or Destroyed Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such Person
of a bond, in such reasonable amount as Parent may direct, as indemnity against any claim that may
be made against it with respect to such Certificate, the Paying Agent will issue and pay, in
exchange for such lost, stolen or destroyed Certificate, the applicable Merger Consideration to be
issued and paid in respect of the Company Shares formerly represented by such Certificate, as
contemplated by this Article II.
SECTION 2.4. Termination of Fund. At any time following the nine (9)-month
anniversary of the Closing Date, Parent or the Surviving Corporation shall be entitled to require
the Paying Agent to deliver to it any instruments and funds (including any interest received with
respect thereto) that had been made available to the Paying Agent and which have not been disbursed
to holders of Certificates or Book-Entry Shares, and thereafter such holders shall be entitled to
look only to the Surviving Corporation (subject to abandoned property, escheat or other similar
Laws) as general creditors thereof with respect to the payment of any Merger Consideration that may
be payable upon surrender of any Certificates or transfer of any Book-Entry Shares held by such
holders, as determined pursuant to this Agreement, without any interest thereon. The Surviving
Corporation shall pay all charges and expenses, including those of the Paying Agent, in connection
with the exchange of Company Shares for the Merger Consideration, except for charges and expenses
of holders of Company Shares. Any amounts remaining unclaimed by such holders at such time at
which such amounts would otherwise escheat to or become property of any Governmental Authority
shall become, to
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the extent permitted by Law, the property of Parent, free and clear of all claims or interest
of any Person previously entitled thereto.
SECTION 2.5. No Liability. Notwithstanding any provision of this Agreement to the
contrary, none of the parties hereto, the Surviving Corporation or the Paying Agent shall be liable
to any Person for Merger Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law.
SECTION 2.6. Withholding Taxes. Each of Parent, the Surviving Corporation and the
Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Article II such amounts as are required to be deducted and withheld with
respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the
“Code”), or under any provision of state, local or foreign Tax Law. To the extent amounts
are so withheld and paid over to the appropriate taxing authority, the withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the Person in respect of which
such deduction and withholding was made.
SECTION 2.7. Company Stock Plans.
(a) Company Options. Prior to the Effective Time, the Company shall take all actions
under the NYMAGIC, INC. 1991 Stock Option Plan, the NYMAGIC, INC. 2002 Nonqualified Stock Option
Plan as amended and restated and the NYMAGIC, INC. 2004 Amended and Restated Long-Term Incentive
Plan (together, the “Company Stock Plans”) and otherwise necessary to provide that the
unexercised portion of each option outstanding immediately prior to the Effective Time that
represents the right to acquire Company Shares (each, a “Company Option”) shall at the
Effective Time vest in full, to the extent unvested, and then be canceled, terminated and converted
at the Effective Time into the right to receive a cash amount equal to the Option Consideration for
each Company Share then subject to the Company Option; provided, however, that no action
taken by the Company or any holder of a Company Option shall be required to be irrevocable until
immediately prior to the Effective Time. Such actions shall include the Company’s use of its best
efforts to obtain the consent of the holders of any Underwater Option to cancel and terminate the
Underwater Option without receipt of any Option Consideration. For purposes of this Agreement,
“Option Consideration” means, with respect to any Company Share subject to a particular
Company Option, an amount equal to the excess, if any, of (i) the Merger Consideration over (ii)
the exercise price payable in respect of such Company Shares subject to such Company Option and any
required withholding Taxes. It is understood for the avoidance of doubt that a Company Option for
which such exercise price equals or exceeds such Merger Consideration (“Underwater Option”)
per share shall be canceled and terminated without the receipt of any Option Consideration. The
Option Consideration shall be paid as soon as practicable after the Closing Date, but in no event
later than three (3) Business Days after the Closing Date.
(b) Company RSUs, Company DSUs and Company PSUs. Prior to the Effective Time, the
Company shall take all actions under the Company Stock Plans and otherwise as necessary to provide
that each restricted stock unit, whether vested or
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unvested (“Company RSU”), each deferred stock unit (“Company DSU”), and each
performance stock unit for which the performance targets have been achieved (“Company
PSU”), issued by the Company under the Company Stock Plans pursuant to which Company Shares may
be issued, shall at the Effective Time be canceled and converted into the right to receive an
amount of cash, equal to (A) the number of Company Shares issuable upon conversion of such Company
RSU, Company DSU or Company PSU multiplied by the Merger Consideration, plus (B) in
accordance with the terms of the Company Stock Plans and applicable award agreements, any interest
and the value of any dividend rights credited with respect to any such Company RSU, Company DSU or
Company PSU minus (C) any required withholding Taxes. Such amounts shall be paid as soon
as practicable after the Closing Date in accordance with the terms and conditions of the applicable
plans and award agreements, but in no event later than three (3) Business Days after the Closing
Date.
(c) All amounts payable pursuant to this Section 2.7 shall be subject to any required
withholding Taxes or proof of eligibility for exemption therefrom, in accordance with Section
2.6.
SECTION 2.8. Adjustments. Notwithstanding any provision of this Article II to
the contrary (but without limiting the covenants in Section 5.3), if between the date
hereof and the Effective Time the outstanding Company Shares shall have been changed into a
different number of shares or a different class by reason of the occurrence or record date of any
stock dividend, stock split, reclassification, combination, exchange of shares or similar
transaction, the Merger Consideration shall be appropriately adjusted to reflect such stock
dividend, stock split, reclassification, combination, exchange of shares or similar transaction.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except (a) as disclosed in the Company SEC Documents filed prior to the date hereof (other than any
disclosures that contain general cautionary, predictive or forward-looking statements set forth in
any section of a Company SEC Document entitled “risk factors” or constituting “forward-looking
statements” or any other sections of such filings solely to the extent such sections contain
general cautionary, predictive or forward-looking statements), provided, that Section
3.2(a), Section 3.3 and Section 3.8 shall not be qualified by disclosure in
such Company SEC Documents, or (b) as disclosed in the corresponding sections or subsections of the
disclosure schedule, dated the date hereof, delivered to Parent by the Company prior to the
execution of this Agreement (the “Company Disclosure Schedule”) (it being agreed that
disclosure of any item in any section or subsection of the Company Disclosure Schedule shall be
deemed disclosed with respect to any section or subsection of this Agreement to which the relevance
of such item is reasonably apparent), as of the date of this Agreement (or such other time as may
be specified), the Company hereby represents and warrants to Parent and Merger Sub as follows:
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SECTION 3.1. Organization, Standing and Corporate Power.
(a) Each of the Company and its Subsidiaries is a corporation, limited liability company or
partnership, as the case may be, duly organized, validly existing and in good standing under the
Laws of the jurisdiction in which it is incorporated or organized and has all requisite corporate
or other power and authority necessary to own or lease all of its properties and assets and to
carry on its business as it is now being conducted. Each of the Company and its Subsidiaries is
duly licensed and qualified, as applicable, to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed, qualified or in good standing, individually or in the
aggregate, has not had and would not have a Material Adverse Effect on the Company (a “Company
Material Adverse Effect”).
(b) Section 3.1(b)(i) of the Company Disclosure Schedule sets forth the name of each
Subsidiary owned (whether directly or indirectly) by the Company and the state or jurisdiction of
its organization. Except as set forth in Section 3.1(b)(ii) of the Company Disclosure Schedule,
the Company does not own, directly or indirectly, any capital stock, voting securities or other
equity interests in any Person.
(c) The Company has delivered to Parent correct and complete copies of its articles of
incorporation and by-laws (the “Company Charter Documents”) and of the Subsidiary
Documents, in each case as amended and in effect as of the date hereof. Except as set forth on
Section 3.1(c) of the Company Disclosure Schedule, the Company has made available to Parent correct
and complete copies of the minutes (or, in the case of minutes that have not yet been finalized,
drafts thereof) of all meetings of the shareholders, Board of Directors and each committee of the
Board of Directors of each of the Company and its Subsidiaries held since January 1, 2008.
SECTION 3.2. Capitalization.
(a) The authorized capital stock of the Company consists of 30,000,000 Company Shares. At the
close of business on July 14, 2010, (i) 8,499,513 Company Shares were issued and outstanding, (ii)
4,118,019 Company Shares were held by the Company in its treasury and (iii) 681,623 Company Shares
were reserved for issuance under the Company Stock Plans (of which (A) 287,450 Company Shares were
subject to outstanding Company Options, (B) 94,973 Company Shares were subject to Company DSUs, (C)
287,200 Company Shares were subject to Company RSUs and (D) up to 12,000 Company Shares were
subject to Company PSUs). All outstanding shares of capital stock, voting securities or other
equity interests of the Company have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights. Section 3.2(a) of the Company Disclosure Schedule
sets forth a correct and complete list of all outstanding Company Options, Company DSUs, Company
PSUs, Company RSUs and Restricted Shares, which list sets forth, with respect to each such award,
the number of Company Shares subject thereto, the grant date, the holder and,
with respect to Company Options, the end date and xxxxx xxxxx. Except as set forth in
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Section 3.2(a) of the Company Disclosure Schedule, all Company Options have an exercise price equal to no
less than the fair market value of the underlying Company Shares on the date of grant.
(b) Except as set forth in this Section 3.2, and except for grants of Company Options,
Company DSUs, Company RSUs and Company PSUs made in the ordinary course of business consistent with
past practice, in each case pursuant to the terms of the Company Stock Plans in effect as of the
date of this Agreement, there are no (i) outstanding shares of capital stock of the Company, (ii)
outstanding securities of the Company or its Subsidiaries convertible into or exchangeable or
exercisable for shares of capital stock of the Company or (iii) outstanding options, warrants or
rights, or commitments or agreements, to acquire from the Company, or that obligate the Company to
issue, shares of capital stock of the Company or any securities of the Company or its Subsidiaries
convertible into or exchangeable or exercisable for shares of capital stock of the Company. Except
as set forth in Section 3.2(b) of the Company Disclosure Schedule, there are no outstanding
agreements of any kind which obligate the Company or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any shares of capital stock of the Company or any securities, options,
warrants or rights convertible into or exchangeable or exercisable for shares of capital stock of
the Company. All outstanding Company Shares have been duly authorized and validly issued and are
fully paid, non-assessable and free of preemptive rights.
(c) All of the outstanding shares of capital stock of, or other equity interests in, each
Subsidiary of the Company (i) have been duly authorized and validly issued, (ii) are fully paid and
nonassessable and (iii) are owned directly or indirectly by the Company free and clear of all
liens, pledges, charges, mortgages, encumbrances, adverse rights or claims and security interests
of any kind or nature whatsoever (including any restriction on the right to vote or transfer the
same, except for such transfer restrictions of general applicability as may be provided under the
Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the
“Securities Act”), and the “blue sky” laws of the various States of the United States)
(collectively, “Liens”), other than Permitted Liens.
(d) Except as set forth in Section 3.2(d) of the Company Disclosure Schedule, no Company
Shares or other securities of the Company are owned by any Subsidiary of the Company.
SECTION 3.3. Authority; Voting Requirements.
(a) The Company has all necessary corporate power and authority to execute and deliver this
Agreement and, subject to obtaining the Company Shareholder Approval, to perform its obligations
hereunder and to consummate the Transactions. The execution, delivery and performance by the
Company of this Agreement and the consummation by the Company of the Transactions have been duly
authorized and approved by the Board of Directors of the Company (“Company Board”).
Subject to obtaining the Company Shareholder Approval, no other corporate action on the part of
the Company is necessary to authorize the execution, delivery and performance by the
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Company of this Agreement and the consummation by the Company of the Transactions. This Agreement has been
duly executed and delivered by the Company and, assuming due authorization, execution and delivery
hereof by the other parties hereto, constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws of general application affecting or relating to the enforcement
of creditors’ rights generally and (ii) is subject to general principles of equity, whether
considered in a proceeding at law or in equity (clauses (i) and (ii) together, the “Bankruptcy
and Equity Exception”).
(b) The Negotiating Committee of the Board of Directors (the “Negotiating Committee”)
at a meeting duly called and held, (i) determined that it is in the best interests of the Company
and its shareholders, and declared it advisable, to enter into this Agreement and (ii) resolved to
recommend to the Company Board that it approve and declare advisable this Agreement and the
Transactions contemplated hereby, including the Merger. The Company Board, acting upon the
recommendation of the Negotiating Committee, at a meeting duly called and held, (i) determined that
it is in the best interests of the Company and its shareholders, and declared it advisable, to
enter into this Agreement, (ii) adopted and approved the execution, delivery and performance of
this Agreement and the consummation of the Transactions, including the Merger, (iii) directed that
the Company submit the adoption of this Agreement to a vote at a meeting of the shareholders of the
Company in accordance with the terms of this Agreement and (iv) resolved, subject to Section
5.2, to recommend that the shareholders of the Company adopt this Agreement at the Company
Shareholders Meeting.
(c) The affirmative vote (in person or by proxy) of the holders of no less than two-thirds of
the outstanding Company Shares at the Company Shareholders Meeting or any adjournment or
postponement thereof in favor of the adoption of this Agreement (the “Company Shareholder
Approval”) is the only vote or approval of the holders of any class or series of capital stock
of the Company or any of its Subsidiaries which is necessary to approve this Agreement and the
Transactions.
SECTION 3.4. Non-Contravention. Neither the execution and delivery of this Agreement
by the Company, nor the consummation by the Company of the Transactions nor compliance by the
Company with any of the terms or provisions hereof will (a) violate or conflict with any provision
of the Company Charter Documents or any of the Subsidiary Documents, (b) assuming that the
authorizations, consents and approvals referred to in Section 3.5 and the Company
Shareholder Approval are obtained and the filings referred to in Section 3.5 are made,
violate any Law, judgment, writ or injunction of any Governmental Authority applicable to the
Company or any of its Subsidiaries or any of their respective properties or assets or (c) violate,
breach, conflict with, result in the loss of any benefit under, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under, accelerate the performance required
by, or result in the creation of any Lien upon any of the respective properties or
assets of the Company or any of its Subsidiaries under, any of the terms, conditions or
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provisions of any Contract or Permit to which the Company or any of its Subsidiaries is a party, or
by which they or any of their respective properties or assets may be bound or affected except, in
the case of clauses (b) and (c) above, for such violations, breaches, conflicts, losses, defaults,
terminations, cancellations, accelerations or Liens as would not, individually or in the aggregate,
(i) have a Company Material Adverse Effect or (ii) to the Knowledge of the Company, reasonably be
expected to prevent consummation of the Transactions.
SECTION 3.5. Governmental Approvals. Except for (a) the filing with the SEC of a
proxy statement relating to the Transactions (as amended or supplemented from time to time, the
“Proxy Statement”) and other filings required under and compliance with the other
applicable requirements of the Exchange Act and the rules of the NYSE, (b) the filing of the
Certificate of Merger with the Department of State of the State of New York pursuant to the NYBCL,
(c) filings required under, and compliance with other applicable requirements of, the HSR Act and
(d) the consents, approvals, authorizations, Permits, filings or notifications listed in Section
3.5 of the Company Disclosure Schedule (including filings with and approval of the insurance
regulatory authorities in the jurisdictions listed thereon), no consents or approvals of, or
filings, Permits, notifications, declarations or registrations with, any Governmental Authority are
necessary for the execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the Transactions, other than such other consents, approvals,
filings, Permits, notifications, declarations or registrations that, if not obtained, made or
given, would not, individually or in the aggregate, (i) have a Company Material Adverse Effect or
(ii) reasonably be expected to prevent consummation of the Transactions.
SECTION 3.6. Company SEC Documents; Internal Controls.
(a) Except as set forth in Section 3.6(a) of the Company Disclosure Schedule, the Company has
filed or furnished, as applicable, on a timely basis all Company SEC Documents required to be filed
or furnished, as applicable, with the SEC since January 1, 2008 (the “Required Company SEC
Documents”). As of their respective effective dates (in the case of the Required Company SEC
Documents that are registration statements filed pursuant to the requirements of the Securities
Act) and as of their respective SEC filing dates or dates furnished to the SEC (in the case of all
other Required Company SEC Documents), the Required Company SEC Documents complied in all material
respects with the requirements of the Exchange Act, the Securities Act and the Xxxxxxxx-Xxxxx Act,
as the case may be, applicable to such Required Company SEC Documents, and none of the Required
Company SEC Documents as of such respective dates (or, if amended prior to the date hereof, the
date of filing of such amendment) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading. As of the date
hereof, there are no outstanding or unresolved comments received from the SEC staff with respect to
the Required Company SEC Documents. None of the Company’s
subsidiaries is subject to the reporting requirements of Section 13(a) or 15(d) of the
Exchange Act.
11
(b) The consolidated financial statements of the Company included in the Required Company SEC
Documents, as amended or supplemented prior to the date of this Agreement, were prepared, in all
material respects, in accordance with and complied, in all material respects, with GAAP applied on
a consistent basis throughout the periods indicated (except as may be indicated in the notes
thereto) and fairly presented, in all material respects, the consolidated financial position,
results of operations and cash flows of the Company and its consolidated Subsidiaries as of the
respective dates thereof and for the respective periods indicated therein (subject, in the case of
unaudited interim statements, to normal and recurring year-end adjustments).
(c) The Company has established and maintains disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as required under Rules 13a-15(a) and
15d-15(a) of the Exchange Act. Such disclosure controls and procedures are designed to ensure that
material information relating to the Company, including its consolidated Subsidiaries, is made
known to the chief executive officer and the chief financial officer of the Company by others
within the Company, and to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with
GAAP. The Company has disclosed, based on its most recent evaluation of the Company’s internal
control over financial reporting prior to the date of this Agreement, to the Company’s auditors and
the audit committee of the Company Board (i) any significant deficiencies and material weaknesses
in the design or operation of internal controls over financial reporting (as defined in Rule
13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect the Company’s
ability to record, process, summarize and report financial information and (ii) any fraud, whether
or not material, that involves management or other employees who have a significant role in the
Company’s internal controls over financial reporting.
(d) The principal executive officer and the principal financial officer of the Company have
made all certifications required by the Xxxxxxxx-Xxxxx Act, the Exchange Act and any related rules
and regulations promulgated by the SEC with respect to the Company SEC Documents, and the
statements contained in such certifications are complete and correct.
(e) Since, January 1, 2008, the Company has been in compliance in all material respects with
(i) the applicable provisions of the Xxxxxxxx-Xxxxx Act, (ii) the applicable listing and corporate
governance rules and regulations of the NYSE and (iii) the applicable provisions of the Foreign
Corrupt Practices Act of 1977, as amended, and any other Laws concerning corrupting payments.
(f) Since January 1, 2008, (i) neither the Company nor any of its Subsidiaries nor, to the
Knowledge of the Company, any director, officer or auditor of the Company or any of its
Subsidiaries, has received or been informed of any complaint, allegation, assertion or claim,
whether written or oral, regarding a deficiency with the
accounting or auditing practices, procedures, methodologies or methods of the Company or any
of its Subsidiaries or their respective internal accounting controls reasonably likely to lead to
material non-compliance by the Company with GAAP or the Exchange Act
12
(including any material complaint, allegation, assertion or claim that the Company or any of its Subsidiaries has engaged
in questionable accounting or auditing practices), which complaint, allegation, assertion or claim
was not publicly disclosed in the Required Company SEC Documents or appropriately addressed or
otherwise cured and (ii) no attorney representing the Company or any of its Subsidiaries, whether
or not employed by the Company or any of its Subsidiaries, has reported evidence of a material
violation of securities Laws, breach of fiduciary duty or similar violation by the Company or any
of its Subsidiaries or their respective officers, directors, employees or agents to the Company
Board or any committee thereof.
SECTION 3.7. Undisclosed Liabilities. Neither the Company nor any of its Subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute, contingent or
otherwise, whether known or unknown) required to be reflected or reserved against on a consolidated
balance sheet of the Company prepared in accordance with GAAP or the notes thereto, except
liabilities (i) as and to the extent reflected or reserved against on the balance sheet of the
Company and its Subsidiaries as of March 31, 2010 (the “Balance Sheet Date”) (including the
notes thereto) included in any Company SEC Document filed by the Company and publicly available
prior to the date hereof, (ii) incurred after the Balance Sheet Date in the ordinary course of
business consistent with past practice, (iii) disclosed in Section 3.7 of the Company Disclosure
Schedule, (iv) incurred in connection with the Merger or any other Transactions or (v) that,
individually or in the aggregate, are not material to the Company and its Subsidiaries.
SECTION 3.8. Absence of Certain Changes or Events. Except as set forth in Section 3.8
of the Company Disclosure Schedule, since December 31, 2009 through the date of this Agreement, (a)
the Company and its Subsidiaries have conducted their respective businesses in the ordinary course
of business consistent with past practice, (b) there has not been any change, development,
occurrence, event or state of facts that, individually or in the aggregate, has had or would have a
Company Material Adverse Effect and (c) neither the Company nor any of its Subsidiaries has taken
any action that, if taken after the date hereof without the consent of Parent, would constitute a
breach of any of the covenants set forth in clauses (e), (f), (g), (h), (i), (j), or (k) through
(q) of Section 5.3; provided that for the purposes of this Section 3.8, any
references to “$100,000” in Section 5.3(g) shall be deemed references to “$500,000.”
SECTION 3.9. Legal Proceedings. Except as set forth in Section 3.9 of the Company
Disclosure Schedule, there is no pending or, to the Knowledge of the Company, threatened, legal,
administrative, arbitral or other proceeding, claim, suit or action against, or governmental or
regulatory investigation of, the Company or any of its Subsidiaries, nor is there any injunction,
order, judgment, ruling or decree imposed (or, to the Knowledge of the Company, threatened to be
imposed) upon the Company, any of its Subsidiaries or the assets of the Company or any of its
Subsidiaries, by or before any
Governmental Authority, in each case, that would, individually or in the aggregate, reasonably
be expected to be material to the Company and its Subsidiaries.
13
SECTION 3.10. Compliance With Laws; Permits. Since January 1, 2008, the Company and
its Subsidiaries have been in compliance with all Laws applicable to the Company or any of its
Subsidiaries, any of their properties or other assets or any of their businesses or operations,
except as would not, individually or in the aggregate, reasonably be expected to be material to the
Company and its Subsidiaries. Each of the Company and its Subsidiaries is in possession of all
licenses, franchises, permits, certificates, approvals and authorizations of any Governmental
Authority necessary for it to own, lease and operate its properties or to carry on its business as
it is now being conducted (“Permits”), in each case, except as would not, individually or
in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries. Since
January 1, 2008, neither the Company nor any of its Subsidiaries has received notice to the effect
that a Governmental Authority (a) claimed or alleged that the Company or any of its Subsidiaries
was not in compliance with all Laws applicable to the Company or any of its Subsidiaries, any of
their properties or other assets or any of their businesses or operations or (b) was considering
the amendment, termination, revocation or cancellation of any Permit, except, in either case, for
any such conflicts, defaults, breaches or violations that would not, individually or in the
aggregate, reasonably be expected to be material to the Company and its Subsidiaries.
SECTION 3.11. Company SAP Statements. Each of the Company Insurance Subsidiaries has
filed or submitted all Company SAP Statements required to be filed with or submitted to the
insurance departments of their respective jurisdictions of domicile on forms prescribed or
permitted by such department, except for such failures to file or submit which would not,
individually or in the aggregate, have a Company Material Adverse Effect. The Company SAP
Statements were prepared in all material respects in conformity with SAP applied on a consistent
basis throughout the periods covered thereby (except as may be indicated in the notes thereto), and
the Company SAP Statements fairly present, in all material respects, the statutory financial
position of such Company Insurance Subsidiaries as at the respective dates thereof and the
statutory results of operations of such Company Insurance Subsidiaries for the respective periods
then ended. To the Knowledge of the Company, no material deficiency has been asserted in writing
with respect to any Company SAP Statement by the domiciliary state insurance department of such
filing Company Insurance Subsidiary that has not been remedied.
SECTION 3.12. Information Supplied. None of the information supplied or to be
supplied by or on behalf of the Company specifically for inclusion or incorporation by reference in
the Proxy Statement will, at the date it (and any amendment or supplement thereto) is first mailed
to the shareholders of the Company or, at the time of the Company Shareholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the circumstances under
which they are made, not misleading; provided that no representation or warranty is made by
the Company with
respect to information supplied by or on behalf of Parent or Merger Sub for inclusion or
incorporation by reference in any of the foregoing.
SECTION 3.13. Tax Matters.
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(a) The Company and each of its Subsidiaries has (i) duly and timely filed all material Tax
Returns required to be filed and all such Tax Returns are accurate and complete in all material
respects, and (ii) timely paid all material Taxes (whether or not shown due on any Tax Return),
other than Taxes that are being contested in good faith, and have been adequately reserved against
in accordance with GAAP on the Company’s most recent consolidated financial statements.
(b) The Company and each of its Subsidiaries has withheld and paid over all material Taxes
required to have been so withheld and paid in connection with any amounts paid or owing to any
employee, independent contractor, creditor, shareholder or other third party.
(c) Neither the Company nor any of its Subsidiaries has granted any extension or waiver of the
limitation period for the filing of any material Tax Return or the assessment or collection of any
material Tax that remains in effect. The material Tax Returns of the Company and each of its
Subsidiaries have been examined by the appropriate taxing authorities or the applicable statute of
limitations has expired for all years to and including the year ending December 31, 2005. All
material assessments for Taxes of the Company or any of its Subsidiaries have been fully paid.
There are no disputes, audits, examinations or proceedings pending (or to the Knowledge of the
Company, threatened in writing), or claims asserted, for material Taxes of the Company or any of
its Subsidiaries.
(d) There are no Liens for Taxes (other than Permitted Liens) upon any of the assets of the
Company or any of its Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries is a party to or is bound by any Tax
sharing, allocation or indemnification agreement or arrangement (other than any such agreement or
arrangement exclusively between or among the Company and its Subsidiaries).
(f) Neither the Company nor any of its Subsidiaries (i) is or has been a member of an
affiliated group filing a consolidated, combined or unitary income Tax Return (other than a group
the common parent of which is the Company) or (ii) has any liability for the Taxes of any Person
(other than the Company or any of its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or
any similar provision of state, local or foreign Law), or as a transferee or successor.
(g) Neither the Company nor any of its Subsidiaries has been, within the past two years or
otherwise as part of a “plan (or series of related transactions)” within the meaning of Section
355(e) of the Code of which the Merger is also a part, a “distributing corporation” or a
“controlled corporation” (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of stock intended to qualify for tax-free
treatment under Section 355 of the Code.
(h) Since January 1, 2005, neither the Company nor any of its Subsidiaries has requested or is
the subject of or bound by any private letter ruling,
15
technical advice memorandum, or similar
ruling or memorandum with any taxing authority with respect to any material Taxes, nor is any such
request outstanding. The Company and its Subsidiaries have complied with and prepared all Tax
Returns in accordance with any private letter ruling, technical advice memorandum, or similar
ruling or memorandum obtained from a taxing authority prior to January 1, 2005.
(i) Neither the Company nor any of its Subsidiaries has been a party to any “reportable
transaction” within the meaning of Treasury Regulation Section 1.6011-4(b).
(j) The Company is not, has not been, and will not be, a “United States real property holding
corporation” within the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
(k) Neither the Company nor any of its Subsidiaries has agreed or is required to include in
income any material adjustment under Section 481(a) of the Code (or an analogous provision of Law)
by reason of a change in accounting method or otherwise.
SECTION 3.14. Employee Benefits and Labor Matters.
(a) Section 3.14(a) of the Company Disclosure Schedule sets forth a correct and complete
list of all material: (i) “employee benefit plans” (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”)); (ii) employment, individual
consulting, indemnification, change in control, retention, severance, transaction bonus or other
compensation agreements; and (iii) bonus or other incentive compensation, stock purchase, equity or
equity-based compensation, retirement, deferred compensation, termination, paid time-off,
compensation-related tax gross up, employee loan, welfare benefit, life insurance, salary
continuation, cafeteria, tuition reimbursement and any other material employee benefit plans,
policies, agreements or arrangements with respect to which the Company or any of its Subsidiaries
has any obligation or liability, contingent or otherwise, for current or former employees,
individual consultants or directors of the Company or any of its ERISA Affiliates (as defined
below) (collectively, the “Company Plans”). “ERISA Affiliates” means any trade or
business, affiliate or subsidiary of the Company which is or has been under common control or which
is or has ever been treated as a single employer with any of them under Section 414(b), (c), (m) or
(o) of the Code. None of the Company Plans (i) is subject to Title IV of ERISA; (ii) is a
“multiemployer plan”, as defined in Section 3(37) of ERISA; (iii) is or has been subject to
Sections 4063 or 4064 of ERISA; and (iv) provides for post-retirement health, medical or life
insurance coverage for former or current employees of the Company or any of its Subsidiaries,
except as may be required under Part 6 of the Subtitle B of Title I of ERISA.
(b) Correct and complete copies of the following documents with respect to each of the Company
Plans have been made available to Parent by the Company to the extent applicable: (i) any plan and
related trust documents, insurance contracts or other funding arrangements, and all amendments
thereto (or written
16
summaries of any non-written Company Plans); (ii) the three most recent Forms
5500 and all schedules thereto; (iii) the three most recent actuarial or financial reports; (iv)
the most recent IRS determination letter; and (v) the most recent summary plan descriptions and any
summaries of material modification, any material employee communications relating to any bonus
arrangements and any amendment or modification thereto.
(c) The Company Plans have been maintained, in all material respects, in accordance with their
terms and all applicable provisions of ERISA, the Code and other applicable Laws. To the Knowledge
of the Company, neither the Company nor any fiduciary with respect to the Company Plans has engaged
in a non-exempt prohibited transaction within the meaning of Section 4975 of the Code or Section
406 of ERISA which could result in any material liability to the Company or the Company Plans.
There are no pending actions, claims, investigations, lawsuits or other proceedings brought or
filed with or by any Governmental Authority or arbitrator which have been asserted or instituted
against any of the Company Plans, the assets or any of the trusts under such plans or, with respect
thereto, the Company, any of its Subsidiaries, the plan sponsor or the plan administrator that,
individually or in the aggregate could result in a material liability to the Company or the
affected Company Plan, or, to the Knowledge of the Company, against any fiduciary of the Company
Plans arising from, relating to, or in connection with the Company Plans (other than routine
benefit claims).
(d) The Company Plans intended to qualify under Section 401 or other tax-favored treatment
under of Subchapter B of Chapter 1 of Subtitle A of the Code are so qualified, and any trusts
intended to be exempt from federal income taxation under the Code are so exempt. Nothing has
occurred with respect to the operation of the Company Plans that could reasonably be expected to
cause the loss of such qualification or exemption, or the imposition of any liability, penalty or
tax under ERISA, the Code, or other applicable Laws that, individually or in the aggregate, could
result in a material liability to the Company or the affected Company Plan.
(e) Except as set forth in Section 3.14(e)(i) of the Company Disclosure Schedule, neither the
execution and delivery of this Agreement nor the consummation of the Merger will (alone or together
with other events) with respect to the employment or service of any employee, director or
individual independent contractor of the Company or any of its Subsidiaries)(i) result in any
payment becoming due to any employee, director or individual independent contractor of the Company
or any of its Subsidiaries, (ii) increase any benefits otherwise payable under any Company Plan,
(iii) require any contributions or payments to fund any obligations under any Company Plan, or (iv)
result in the acceleration of the time of payment, funding or vesting of any such benefits under
any Company Plan. Section 3.14(e)(ii) of the Company Disclosure Schedule lists the payments and
benefits with respect to each “disqualified individual” (as defined in Section 280G(c) of the Code)
that could be deemed a “parachute payment” (as defined in Section 280G(b)(2) of the Code) as a
result of the consummation of the Merger.
(f) Other than as set forth on Section 3.14(f) of the Company Disclosure Schedule or as
required pursuant to this Agreement, the Company does not
17
have any written, or material oral,
legally binding contract, plan, or commitment to create any additional Company Plan or to modify
any existing Company Plan.
(g) No Company stock or other security issued by the Company forms or has formed a material
part of the assets of any Company Plan that is intended by the Company to provide retirement
benefits.
(h) Neither the Company nor any of its Subsidiaries has recognized any labor organization, nor
has any labor organization been elected as the collective bargaining agent of any employees, nor
has the Company or any of its Subsidiaries entered into any collective bargaining agreement or
union contract recognizing any labor organization as the bargaining agent of any employees. To the
Knowledge of the Company, there is no union organization activity involving any of the employees of
the Company or any of its Subsidiaries pending or threatened. With respect to the Company or any
of its Subsidiaries there is no picketing pending or, to the Knowledge of the Company, threatened,
and there are no strikes, slowdowns, work stoppages, other job actions, lockouts, arbitrations,
grievances or other material labor disputes involving any of the employees of the Company or any of
its Subsidiaries pending or, to the Knowledge of the Company, threatened. Except as set forth on
Section 3.14(h) of the Company Disclosure Schedule, there are no complaints, charges, claims,
investigations, lawsuits or other proceedings against the Company or any of its Subsidiaries
pending or, to the Knowledge of the Company, threatened that could be brought or filed with or by
any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise
relating to the employment or termination of employment or failure to employ by the Company or any
of its Subsidiaries, of any individual. The Company and its Subsidiaries are in compliance with
all Laws relating to the employment of labor, including, without limitation, all such Laws relating
to wages, hours, the Worker Adjustment and Retraining Notification Act and any similar state or
local “mass layoff” or “plant closing” law (“WARN”), collective bargaining, discrimination,
civil rights, safety and health, workers’ compensation and the collection and payment of
withholding and/or social security taxes and any similar tax, except for immaterial non-compliance.
There has been no “mass layoff” or “plant closing” (as defined by WARN) with respect to the
Company or any of its Subsidiaries within the six months prior to the Effective Time, determined in
each case without regard to any terminations of employees of the Company or any of its Subsidiaries
or plant closings that occur following the Closing Date.
SECTION 3.15. Environmental Matters.
(a) Except for those matters that, individually or in the aggregate would not have a Company
Material Adverse Effect, (i) each of the Company and its Subsidiaries is, and has been, in
compliance with all applicable Environmental Laws, (ii) there is no investigation, suit, claim,
action or proceeding relating to or arising under Environmental Laws that is pending or, to the
Knowledge of the Company, threatened against the Company or any of its Subsidiaries or any real
property currently or, to the
Knowledge of the Company, owned, operated or leased by the Company or any of its Subsidiaries,
(iii) other than as provided for in insurance and reinsurance contracts issued
18
in the ordinary
course of the Company’s business, neither the Company nor any of its Subsidiaries has received any
notice of or entered into any obligation, liability, order, settlement, judgment, injunction or
decree relating to or arising under Environmental Laws and (iv) to the Knowledge of the Company, no
facts, circumstances or conditions exist with respect to the Company or any of its Subsidiaries
including at any property currently or formerly owned, operated or leased by the Company or any of
its Subsidiaries that could reasonably be expected to result in the Company and its Subsidiaries
incurring liabilities under Environmental Laws.
(b) For purposes of this Agreement:
(i) “Environmental Laws” means all Laws relating to the environment,
preservation or reclamation of natural resources, the presence, management or release of,
or exposure to, Hazardous Materials, or to human health and safety.
(ii) “Hazardous Materials” means any material, substance of waste that is
regulated, classified, or otherwise characterized under or pursuant to any Environmental
Law as “hazardous,” “toxic,” a “pollutant,” a “contaminant,” “radioactive” or words of
similar meaning or effect, including petroleum and its by-products, asbestos,
polychlorinated biphenyls, radon, mold, urea formaldehyde insulation, chlorofluorocarbons
and all other ozone-depleting substances.
SECTION 3.16. Contracts.
(a) Set forth in Section 3.16(a) of the Company Disclosure Schedule is a list of each of the
following to which the Company or any of its Subsidiaries is a party:
(i) any “material contract” (as such term is defined in Item 601(b)(10) of Regulation
S-K of the Securities Act), whether or not filed by the Company with the SEC;
(ii) any Contract that purports to limit, curtail or restrict the ability of the
Company or any of its existing or future Subsidiaries or Affiliates to compete in any
geographic area or line of business or restrict the Persons to whom the Company or any of
its existing or future Subsidiaries or Affiliates may sell products or deliver services;
(iii) any joint venture, partnership or other similar agreement, including agreements
pursuant to which the Company or any of its Subsidiaries hold minority interests;
(iv) any Contract (or series of related Contracts) that involves the acquisition or
disposition, directly or indirectly (by merger, purchase or otherwise), of capital stock or
other equity interests or assets (including books of business), that (A) was entered into
since January 1, 2008 or (B) contains
obligations (including indemnification, “earn-out” or other contingent obligations)
19
that are still in effect and could result in material payments by the Company or any of its
Subsidiaries;
(v) any loan or credit agreement, mortgage, indenture, note or other Contract or
instrument evidencing indebtedness for borrowed money by the Company or any of its
Subsidiaries or any Contract or instrument pursuant to which indebtedness for borrowed
money may be incurred or is guaranteed by the Company or any of its Subsidiaries, in each
case in excess of $100,000;
(vi) any employment, severance, retention or indemnification contract applicable to
(A) any “named executive officer” (as such term is defined in Item 402 of Regulation S-K)
or director of the Company or (B) any employee of the Company or any its Subsidiaries
entitled to at least one (1)-month’s severance pay or to annual compensation in excess of
$200,000, in each case, that cannot be canceled by the Company (or the applicable
Subsidiary of the Company) upon sixty (60) days’ notice without liability, penalty or
premium;
(vii) any Contract containing outstanding obligations (whether or not measured in
cash) in excess of $1,000,000 in any twelve (12)-month period or that is otherwise material
to the business of the Company;
(viii) any Contract relating to the disposition or acquisition by the Company or any
of its Subsidiaries after the date hereof of assets (including books of business) other
than in the ordinary course of business consistent with past practice;
(ix) any Contract entered into since January 1, 2007 providing for outbound
reinsurance of any risks of any Company Insurance Subsidiary or any Insurance Pool in which
any Company Insurance Subsidiary participates;
(x) any
lease for real property; and
(xi) any commitment or agreement to enter into any of the foregoing (the Contracts and
other documents required to be listed in (A) on Section 3.16(a)(i) of the Company
Disclosure Schedule, together with any and all other Contracts of such type entered into in
accordance with Section 5.3, each a “Material Contract”) and (B) Section
3.16(a)(ii)-(x) of the Company Disclosure Schedule, together with any and all other
Contracts of such type entered into in accordance with Section 5.3, each a
“Company Contract”).
(b) The Company has made available to Parent correct and complete copies of each Material
Contract and Company Contract, together with any and all amendments and supplements thereto. Each
Material Contract and, to the Knowledge of the Company, each Company Contract, is valid and binding
on the Company and each of its Subsidiaries party thereto and is in full force and effect, except
for such failures to be valid and binding or to be in full force and effect that would not,
individually or in the
aggregate, have a Company Material Adverse Effect. Except as set forth in Section 3.16(b) of
the Company Disclosure Schedule, there is no breach or default under any
20
Material Contract or to
the Knowledge of the Company, under any Company Contract, by the Company or any of its
Subsidiaries, or to the Knowledge of the Company, any other party thereto and no condition exists
that with or without the lapse of time or the giving of notice or both would constitute a breach or
default thereunder by the Company or any of its Subsidiaries or, to the Knowledge of the Company,
any other party thereto, in each case, except as would not, individually or in the aggregate, have
a Company Material Adverse Effect. No party to any Material Contract or, to the Knowledge of the
Company, any Company Contract, has given the Company or any of its Subsidiaries notice of its
intention to cancel, terminate, change the scope of rights under, or not renew, any Material
Contract or Company Contract.
SECTION 3.17. Title to Property. The Company and its Subsidiaries (a) have good and
valid title to, or valid leasehold or sublease interests or other comparable contract rights in and
to, all properties and other assets which are, individually or in the aggregate, material to the
business or financial condition of the Company and its Subsidiaries taken as a whole, free and
clear of all Liens (except for Permitted Liens) and (b) have complied with the terms of each lease
of property that is material to the Company and its Subsidiaries, taken as a whole. Such leases
are in full force and effect (except for any scheduled expirations after the date hereof in
accordance with the terms of such leases) and enforceable in accordance with their respective terms
against the Company or its Subsidiary party thereto and, to the Knowledge of the Company, the other
parties thereto (subject in each case to the Bankruptcy and Equity Exception), and neither the
Company nor any of its Subsidiaries has received or provided any written notice of any event or
occurrence that has resulted or would reasonably be expected to result (with or without the giving
of notice, the lapse of time or both) in a material default with respect to any such lease. Each
of the Company and its Subsidiaries enjoys peaceful and undisturbed possession under all such
leases in all material respects, except where the failure to so comply would not, individually or
in the aggregate, have a Company Material Adverse Effect.
SECTION 3.18. Technology and Intellectual Property.
(a) Section 3.18(a)(i) of the Company Disclosure Schedule contains a complete and accurate
list of all Owned Intellectual Property. Section 3.18(a)(ii) of the Company Disclosure Schedule
contains a complete and accurate list of all Material Licenses. All Owned Intellectual Property
listed or required to be listed in Section 3.18(a)(i) of the Company Disclosure Schedule is solely
and exclusively owned by the Company and its Subsidiaries, free and clear of all Liens (other than
Permitted Liens). All necessary issuance, registration, maintenance, renewal and other relevant
filing fees in connection with any of the Owned Intellectual Property listed or required to be
listed on Section 3.18(a)(i) of the Company Disclosure Schedule have been timely paid, and all
necessary documents, certificates and other relevant filings in connection with any such Owned
Intellectual Property have been timely filed, with the relevant governmental entities and Internet
domain name registrars in the United States or foreign jurisdictions,
as the case may be, for the purpose of maintaining such Owned Intellectual Property and all
issuances, registrations and applications therefor in full force and effect.
21
(b) To the Knowledge of the Company, all of the Company Intellectual Property, and all of the
rights of the Company and its Subsidiaries in and to the Company Intellectual Property, are valid,
subsisting and enforceable. The Company or one of its Subsidiaries is the sole and exclusive owner
of (or has valid and continuing rights to use or otherwise commercially exploit) all Company
Intellectual Property, free and clear of all Liens (other than Permitted Liens).
(c) Prior to the date hereof, there have been no written claims made or, to the Knowledge of
the Company, threatened in writing against the Company or any of its Subsidiaries asserting (i) the
invalidity, misuse or unenforceability of any of the Company Intellectual Property, or (ii) that
the operation of the business of the Company or any of its Subsidiaries infringes, violates,
misappropriates or otherwise conflicts with any Intellectual Property or any other proprietary or
privacy right of any third party. The Company and its Subsidiaries have not received any written
(including by electronic mail) notice of any such threatened claim. To the Knowledge of the
Company, none of the Company Intellectual Property, the development, manufacturing, licensing,
marketing, importation, exportation, offer for sale, sale, use or other exploitation of any
products or services in connection with the respective businesses of the Company and its
Subsidiaries, or the respective business practices, methods or operations of the Company and its
Subsidiaries, infringes, violates, misappropriates or otherwise conflicts with (or has infringed,
violated, misappropriated or otherwise conflicted with) any Intellectual Property or other
proprietary or privacy right of any Person. To the Knowledge of the Company, no Person has
infringed upon, misappropriated, diluted, violated or otherwise conflicted with or is currently
infringing upon, misappropriating, diluting, violating or otherwise conflicting with any Company
Intellectual Property owned by or exclusively licensed to the Company or any of its Subsidiaries.
No written claims or, to the Knowledge of the Company, unwritten claims have been made against any
Person by the Company or any of its Subsidiaries alleging that any Person is infringing upon,
misappropriating, diluting, violating or otherwise conflicting, or has infringed upon,
misappropriated, diluted, violated or otherwise conflicted with, any Company Intellectual Property
owned by or exclusively licensed to the Company or any of its Subsidiaries.
(d) To the Knowledge of the Company, no material trade secret included in the Company
Intellectual Property has been authorized to be disclosed or has been actually disclosed by the
Company or any of its Subsidiaries to any employee or any third party other than pursuant to a
written non-disclosure agreement restricting the disclosure and use thereof. To the Knowledge of
the Company, no employee, consultant, independent contractor or any other third party has any
right, title or interest, directly or indirectly, in any Owned Intellectual Property.
(e) Other than as set forth in Section 3.18(e) of the Company Disclosure Schedule, none of the
Company or any of its Subsidiaries is currently a party to any source code escrow agreement or any
other agreement (or a party to any agreement obligating the Company or any of its Subsidiaries to
enter into a source code
escrow agreement or other agreement) requiring the deposit of source code or related materials
for any such Software.
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(f) Except with respect to “shrink wrapped” or “off the shelf” Software licensed to the
Company or any of its Subsidiaries on standard terms for less than $50,000 per annum or as
otherwise set forth in Section 3.18(f) of the Company Disclosure Schedule, none of the Company or
any of its Subsidiaries is required, obligated or under any liability whatsoever to make any
payments by way of royalties, fees or otherwise, or to provide any other consideration of any kind,
to any owner or licensor of, or other claimant to, any Intellectual Property, or any other Person,
with respect to the use of such Intellectual Property or in connection with the conduct of the
respective businesses of the Company and each of its Subsidiaries as currently conducted.
(g) For the past three (3) years, to the Knowledge of the Company, (i) no part of the
information technology systems is or has been infected by any virus or other extraneously induced
malfunction that has caused a material loss of performance of the information technology systems or
the loss of any material data stored on the information technology systems and (ii) there has been
no unauthorized access to or use of the information technology systems that has required
notification to any Person pursuant to any applicable breach notification laws. To the Knowledge
of the Company, the Company and its Subsidiaries are not in breach of any posted privacy policies
or any laws or regulations relating to personally identifiable information. The Company and has
implemented a plan in the event of a failure of the information technology systems (whether due to
natural disaster, power failure or otherwise) intended to reasonably minimize any disruption to the
operations of the Company or any of its Subsidiaries in the event of such a failure.
SECTION 3.19. Insurance. Copies of all material insurance policies maintained by the
Company and its Subsidiaries as the insured and all policies covering directors and officers of the
Company as of the date hereof have been provided to Parent or Merger Sub. Except as would not,
individually or in the aggregate, be material to the Company and its Subsidiaries, (a) all such
policies are in full force and effect and (b) neither the Company nor any of its Subsidiaries is in
breach or default, and, to the Knowledge of the Company, no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit termination or
modification under any policy. Except as set forth in Section 3.19 of the Company Disclosure
Schedule, the consummation of the Transactions will not cause the revocation, cancellation or
termination of any insurance policy of the Company or its Subsidiaries.
SECTION 3.20. Insurance Matters.
(a) The Company conducts its insurance operations through its Subsidiaries set forth in
Section 3.20(a)(i) of the Company Disclosure Schedule (collectively, the “Company Insurance
Subsidiaries”). Each of the Company Insurance Subsidiaries is (i) duly licensed or authorized
as an insurance company in its jurisdiction of incorporation, (ii) duly licensed, authorized or
otherwise eligible to transact the business of insurance in each other jurisdiction where it is
required to be so licensed,
authorized or eligible and (iii) duly authorized or eligible in its jurisdiction of
incorporation and each other applicable jurisdiction to write each line of business reported as
being written in the Company SAP Statements, except in the case of clauses
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(i), (ii) and (iii) as
would not, individually or in the aggregate, reasonably be expected to be material to the Company
and its Subsidiaries. Except as set forth in Section 3.20(a)(ii) of the Company Disclosure
Schedule, each of the Company’s Subsidiaries that acts as an insurance broker, agent, managing
general agent, producer or intermediary (“Company Insurance Intermediary”) is duly licensed
in each jurisdiction in which it is required to be so licensed, except where the failure to be so
licensed would not, individually or in the aggregate, reasonably be expected to be material to the
Company and its Subsidiaries. No Company Insurance Subsidiary is commercially domiciled in any
jurisdiction. The Company Insurance Intermediaries are set forth in Section 3.20(a)(ii) of the
Company Disclosure Schedule.
(b) To the Knowledge of the Company, as of the date hereof, all ceded reinsurance treaties or
agreements to which any Subsidiary of the Company (or, to the Knowledge of the Company, any Pool
Member, to the extent such treaty or agreement reinsures risks of an Insurance Pool) is a party or
under which any Subsidiary of the Company (or, to the Knowledge of the Company, any Pool Member, to
the extent such treaty or agreement reinsures risks of an Insurance Pool) has any existing material
rights, obligations or liabilities (the “Company Reinsurance Agreements”) are in full force
and effect in accordance with their terms. Neither the Company nor any Subsidiary thereof is in
default as to any material provision thereof, except as would not, individually or in the
aggregate, reasonably be expected to be material to the Company and its Subsidiaries. Since
January 1, 2008, neither the Company nor any Subsidiary thereof has received any written notice to
the effect that (i) the financial condition of any reinsurer party to any such agreement is
materially impaired with the result that a default thereunder may reasonably be anticipated, (ii)
there is a material dispute with respect to any material amounts recoverable by any Subsidiary of
the Company pursuant to any Company Reinsurance Agreement or (iii) a reinsurer intends to cancel
any Company Reinsurance Agreement, except as would not, individually or in the aggregate,
reasonably be expected to be material to the Company and its Subsidiaries. Section 3.20(b) of the
Company Disclosure Schedule sets forth a list of each dispute or series of related disputes
pending, or to the Knowledge of the Company, threatened between the Company, any of its
Subsidiaries (or, to the Knowledge of the Company, any Pool Member, to the extent such dispute
relates to risks of an Insurance Pool), on the one hand, and any reinsurer, on the other hand.
(c) With respect to any Company Reinsurance Agreement for which any Company Insurance
Subsidiary has taken credit for reinsurance ceded on its Company SAP Statement, (i) there have been
no separate written or oral agreements between any of the Company or its Subsidiaries (or, to the
Knowledge of the Company, any Pool Member) and the assuming reinsurer that would under any
circumstances reduce, limit, mitigate or otherwise affect any actual or potential loss to the
parties under any such Company Reinsurance Agreement other than inuring contracts that are
explicitly defined in any such Company Reinsurance Agreement, (ii) for each such Company
Reinsurance Agreement entered into, renewed or amended on or after
January 1, 2008, for which risk transfer is not reasonably considered to be self-evident,
documentation concerning the economic intent of the transaction and the risk transfer analysis
evidencing the proper accounting treatment, as required by SSAP No. 62, is
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available for review by
the domiciliary state insurance departments for each of the Company Insurance Subsidiaries and
(iii) from and after January 1, 2008, each of the Company Insurance Subsidiaries complies and has
complied in all material respects with all of the requirements set forth in SSAP No. 62.
(d) Prior to the date hereof, the Company has made available to Parent a true and complete
copy of all material actuarial reports prepared by actuaries, independent or otherwise, with
respect to any Company Insurance Subsidiary since January 1, 2008, and all material attachments,
addenda, supplements and modifications thereto. The information and data furnished by the Company
and its Subsidiaries to its independent actuaries in connection with the preparation of such
actuarial reports were accurate in all material respects for the periods covered in such reports.
(e) Except for regular periodic assessments in the ordinary course of business or assessments
based on developments that are publicly known within the insurance industry, as of the date hereof,
no claim or assessment is pending or, to the Knowledge of the Company, threatened in writing
against any Company Insurance Subsidiary by any state insurance guaranty association in connection
with such association’s fund relating to insolvent insurers, except for any such claims or
assessments that would not, individually or in the aggregate, reasonably be expected to be material
to the Company and its Subsidiaries.
(f) Since January 1, 2008, to the Knowledge of the Company, (i) salaried employees of the
Company and its Subsidiaries, who, in each of the foregoing cases, is performing the duties of
insurance producer, agency, agent or managing general agent for the Company and its Subsidiaries
and/or any Insurance Pool (collectively, “Company Producers”), at the time such Company
Producer wrote, sold, or produced business for or on behalf of the Company or any of its
Subsidiaries or such Insurance Pool that requires a License, was duly licensed and appointed as
required by applicable Law, in the particular jurisdiction in which such Company Producer wrote,
sold or produced business and (ii) each of the agency agreements and appointments between the
Company Producers, including as subagents under the Company’s affiliated insurance agency, and the
Company and any of its Subsidiaries, is valid and binding and in full force and effect in
accordance with its terms, except as would not, individually or in the aggregate, have a Company
Material Adverse Effect. To the Knowledge of the Company, as of the date hereof, no Company
Producer has been since January 1, 2008, or is currently, in violation (or with or without notice
or lapse of time or both, would be in violation) of any term or provision of any Law applicable to
the writing, sale, production or administration of insurance or other business for the Company, any
of its Subsidiaries or any Insurance Pool, except for such violations that would not, individually
or in the aggregate, reasonably be expected to be material to the Company and its Subsidiaries.
Except as set forth in Section 3.20(f) of the Company Disclosure Schedule, to the Knowledge of the
Company, as of the date hereof, no Company Producer individually accounting directly or indirectly
for 2% or more of the total gross premiums of all of the
Company’s Subsidiaries for the year ended December 31, 2009, has notified the Company or any
of its Subsidiaries that such Company Producer will be unable in any material respect or unwilling
to continue its relationship as a Company Producer with the
25
Company or any of its Subsidiaries or
any Insurance Pool within twelve months after the date hereof.
(g) To the Knowledge of the Company, Section 3.20(g) of the Company Disclosure Schedule sets
forth, with respect to each Insurance Pool, a list complete and accurate in all material respects,
of the participations of each Pool Member for each year of such Insurance Pool’s existence
(beginning with the year of such pool’s creation), which list reflects all adjustments to pool
participations, including as a result of intra-pool transfers, withdrawals and liquidations.
Neither the Company nor any Subsidiary of the Company is in material default as to any material
provision of any Pool Agreement. Since January 1, 2008, neither the Company nor any Subsidiary of
the Company has received any written notice to the effect that (i) the financial condition of any
Pool Member is materially impaired with the result that a default thereunder may reasonably be
anticipated or (ii) there is a material dispute with respect to any material amounts recoverable by
any Subsidiary of the Company pursuant to any Pool Agreement.
SECTION 3.21. Policy Reserves. The policy reserves of the Company Insurance
Subsidiaries recorded in their respective Company SAP Statements, as of December 31, 2009 and March
31, 2010, (a) have been computed in all material respects in accordance with generally accepted
actuarial standards in effect on such date and (b) were in compliance in all material respects with
the requirements for policy reserves established by the domiciliary insurance regulatory authority
of such Company Insurance Subsidiary. Notwithstanding the foregoing, the Company is not making any
representation or warranty in this Section 3.21 as to the adequacy or sufficiency of
reserves.
SECTION 3.22. Opinion of Financial Advisor. The Company Board has received the
opinion of Xxxxx, Xxxxxxxx & Xxxxx, Inc., dated the date hereof, to the effect that, as of such
date, and subject to the various assumptions and qualifications set forth therein, the Merger
Consideration is fair, from a financial point of view, to the holders of Company Shares.
SECTION 3.23. Brokers. Except for Xxxxx, Xxxxxxxx & Xxxxx, Inc., the fees and
expenses of which will be paid by the Company, no broker, investment banker, financial advisor or
other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or
commission, or the reimbursement of expenses, in connection with the Transactions, based upon
arrangements made by or on behalf of the Company or any of its Subsidiaries. A correct and
complete copy of the Company’s engagement letter with Xxxxx, Xxxxxxxx & Xxxxx, Inc. relating to the
Merger and other Transactions has been delivered to Parent (the “Engagement Letter”).
SECTION 3.24. Rating. As of the date of this Agreement, neither the Company nor any
Company Insurance Subsidiary has received any communication from
A.M. Best Company that it intends to lower or place under surveillance any rating assigned to
a Company Insurance Subsidiary as of the Balance Sheet Date.
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SECTION 3.25. State Takeover Statutes. Subject to the accuracy of the representations
and warranties of Parent and Merger Sub set forth in Section 4.9, the Company and the
Company Board have taken all action required to be taken by them to exempt the Transactions from
the requirements of any “moratorium,” “control share,” “fair price,” “affiliate transaction,”
“business combination” or other antitakeover laws and regulations of any state.
SECTION 3.26. No Other Representations or Warranties. Except for the representations
and warranties contained in this Agreement, including any modification or qualification thereto
included in the Company Disclosure Schedule, none of the Company, the Company’s Subsidiaries or any
other Person on behalf of the Company or its Subsidiaries makes any other express or implied
representation or warranty with respect to the Company, any of the Company’s Subsidiaries or any
information provided to Parent or Merger Sub with respect to the Company or any of the Company’s
Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the corresponding sections or subsections of the disclosure schedule,
dated the date hereof, delivered by Parent to the Company prior to the execution of this Agreement
(the “Parent Disclosure Schedule”) (it being agreed that disclosure of any item in any
section or subsection of the Parent Disclosure Schedule shall be deemed disclosure with respect to
any section or subsection of this Agreement to which the relevance of such item is reasonably
apparent), as of the date of this Agreement (or such other time as may be specified), Parent and
Merger Sub jointly and severally represent and warrant to the Company that:
SECTION 4.1. Organization. Each of Parent and Merger Sub is a corporation duly
organized, validly existing and in good standing under the Laws of the jurisdiction of its
organization and has all requisite corporate or other power and authority necessary to own or lease
all of its properties and assets and to carry on its business as it is now being conducted, except
where any such failure to be so organized, existing or in good standing or to have such power or
authority except as would not, individually or in the aggregate, prevent or materially delay the
consummation of the Transactions. Each of Parent and Merger Sub is duly licensed and qualified, as
applicable, to do business and is in good standing in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and assets owned or leased
by it makes such licensing or qualification necessary, except where the failure to be so licensed,
qualified or in good standing would not, individually or in the aggregate, reasonably be expected
to prevent or materially delay the consummation of the Transactions or the performance of their
respective obligations hereunder.
SECTION 4.2. Ownership and Operations of Merger Sub. Parent owns of record, and as of
the Effective Time will own, all of the outstanding capital stock of Merger Sub. Merger Sub was
formed solely for the purpose of engaging in the
27
Transactions, has engaged in no other business
activities and has conducted its operations only as contemplated hereby.
SECTION 4.3. Authority. Parent and Merger Sub have all necessary corporate power and
authority to execute and deliver this Agreement and to perform their respective obligations
hereunder and to consummate the Transactions. The execution, delivery and performance by Parent
and Merger Sub of this Agreement, and the consummation by Parent and Merger Sub of the
Transactions, have been duly authorized and approved by their respective Boards of Directors and by
Parent as the sole shareholder of Merger Sub, and no other corporate action on the part of Parent
or Merger Sub is necessary to authorize the execution, delivery and performance by Parent or Merger
Sub of this Agreement and the consummation by Parent and Merger Sub of the Transactions. This
Agreement has been duly executed and delivered by Parent and Merger Sub and, assuming due
authorization, execution and delivery hereof by the Company, constitutes a legal, valid and binding
obligation of Parent and Merger Sub, enforceable against Parent and Merger Sub in accordance with
its terms, subject to the Bankruptcy and Equity Exception.
SECTION 4.4. Non-Contravention. Neither the execution and delivery of this Agreement
by Parent and Merger Sub, nor the consummation by Parent or Merger Sub of the Transactions, nor
compliance by Parent or Merger Sub with any of the terms or provisions hereof, will (a) violate or
conflict with any provision of articles of incorporation or bylaws of Parent or Merger Sub or (b)
assuming that the authorizations, consents and approvals referred to in Section 4.5 are
obtained and the filings referred to in Section 4.5 are made, violate any Law, judgment,
writ or injunction of any Governmental Authority applicable to Parent or any of its Subsidiaries or
any of their respective properties or assets, or (c) violate, breach, conflict with, result in the
loss of any benefit under, constitute a default (or an event which, with notice or lapse of time,
or both, would constitute a default) under, result in the termination of or a right of termination
or cancellation under, accelerate the performance required by, or result in the creation of any
Lien upon any of the respective properties or assets of, Parent, Merger Sub or any of their
respective Subsidiaries under, any of the terms, conditions or provisions of any Contract or Permit
to which Parent, Merger Sub, or any of their respective Subsidiaries is a party, or by which they
or any of their respective properties or assets may be bound or affected except, in the case of
clauses (b) and (c), as, individually or in the aggregate, would not reasonably be expected to
prevent or materially delay the consummation of the Transactions.
SECTION 4.5. Governmental Approvals. Except for (a) filings required under, and
compliance with other applicable requirements of, the Exchange Act, and the rules of NYSE, (b) the
filing of the Certificate of Merger with the Department of State of the State of New York pursuant
to the NYBCL, (c) filings required under, and compliance with other applicable requirements of, the
HSR Act, and (d) the consents, approvals, authorizations, Permits, filings or notifications listed
in Section 4.5 of the
Parent Disclosure Schedule (including filings with, and approval of, the insurance regulatory
authorities in the jurisdictions listed thereon), no consents or approvals of, or filings, Permits,
notifications, declarations or registrations with, any Governmental
28
Authority are necessary for the
execution, delivery and performance of this Agreement by Parent or Merger Sub and the consummation
by Parent and Merger Sub of the Transactions, other than such other consents, approvals, filings,
notifications, declarations or registrations that, if not obtained, made or given, would not,
individually or in the aggregate, reasonably be expected to prevent or materially delay the
consummation of the Transactions.
SECTION 4.6. Legal Proceedings. Except insofar as do not, and as would not reasonably
be expected to, individually in the aggregate, prevent or materially delay the consummation of the
Transactions there is no pending or, to the knowledge of Parent, threatened, material legal,
administrative, arbitral or other proceeding, claim, suit or action against, or governmental or
regulatory investigation of, Parent or any of its Subsidiaries, nor is there any injunction, order,
judgment, ruling or decree imposed (or, to the knowledge of Parent, threatened to be imposed) upon
Parent or any of its Subsidiaries or the assets of Parent or any of its Subsidiaries, by or before
any Governmental Authority.
SECTION 4.7. Information Supplied. None of the information supplied or to be supplied
by or on behalf of Parent or Merger Sub specifically for inclusion or incorporation by reference in
the Proxy Statement or other filing required under the Exchange Act will, at the date it (and any
amendment or supplement thereto) is first mailed to the shareholders of the Company (or filed, with
respect to such other required filings) or, at the time of the Company Shareholders Meeting,
contain any untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading; provided that no representation or warranty is
made by Parent or Merger Sub with respect to information supplied by or on behalf of the Company
for inclusion or incorporation by reference in any of the foregoing.
SECTION 4.8. Financing. Parent and Merger Sub will have, at the Effective Time,
sufficient funds to pay the aggregate Merger Consideration.
SECTION 4.9. Ownership of Company Shares. Neither Parent nor any of its Subsidiaries,
including Merger Sub, is the beneficial owner of any shares of capital stock of the Company or is
an “interested person” as defined in Section 903 of the NYBCL, other than as contemplated by the
Transactions, including the Shareholders Agreement.
SECTION 4.10. Guarantee. Concurrently with the execution of this Agreement, the
Guarantors have delivered to the Company the duly executed Guarantees. Each Guarantee is valid and
in full force and effect, and is the valid, binding and enforceable obligation of the Guarantors
thereto, and no event has occurred which, with or without notice, lapse of time or both, would
constitute a default on the part of the Guarantors under each Guarantee.
SECTION 4.11. No Other Representations or Warranties. Except for the representations
and warranties contained in this Agreement or the Shareholders
29
Agreement, neither Parent nor Merger
Sub nor any other Person on its behalf makes any other express or implied representation or
warranty with respect to Parent or Merger Sub or any information provided to the Company or any of
its Subsidiaries with respect to Parent or Merger Sub.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 5.1. Proxy Statement; Company Shareholders Meeting.
(a) As promptly as reasonably practicable (but in no event more than twenty-five (25) Business
Days) following the date of this Agreement, the Company shall prepare and file with the SEC a
preliminary Proxy Statement, which shall comply as to form in all material respects with applicable
requirements of the Exchange Act. The Company shall as promptly as reasonably practicable respond
to any comments of the SEC or its staff and cause the Proxy Statement to be mailed to the
shareholders of the Company as promptly as reasonably practicable (but in no event more than ten
(10) days) after the Proxy Statement has been cleared by the SEC for mailing to the shareholders of
the Company. As promptly as reasonably practicable, each of Parent and the Company shall notify
the other of the receipt of any comments from the SEC or its staff and of any request by the SEC or
its staff for amendments or supplements to the Proxy Statement, or for additional information. The
Company or Parent, as applicable, will supply the other party with copies of all correspondence
between such party or any of its Representatives, on the one hand, and the SEC or its staff, on the
other hand, with respect to the Proxy Statement or the Transactions (and the Company and its
counsel shall keep Parent and its counsel reasonably informed of all communications with the SEC
and its staff (including all meetings and telephone conferences) with respect to the Proxy
Statement or the Transactions). If at any time prior to the Company Shareholders Meeting any event
shall occur, or fact or information shall be discovered, that should be set forth in an amendment
or supplement to the Proxy Statement so that such document would not include any misstatement of a
material fact or omit to state any material fact necessary to make the statements therein, in light
of the circumstances under which they are made, not misleading, the party that discovers such
information shall promptly notify the other parties hereto and the Company shall prepare and file
with the SEC such amendment or supplement as promptly as practicable and, to the extent required by
Law, cause such amendment or supplement to be disseminated to the shareholders of the Company.
Parent and Merger Sub shall, and shall cause their respective Representatives to, cooperate with
the Company in the preparation of the Proxy Statement or any amendment or supplement thereto and
shall furnish to the Company all information relating to it and its Affiliates as required by the
Exchange Act, or requested by the SEC or its staff, to be set forth in the Proxy Statement or in
any other filing required under the Exchange Act. Notwithstanding anything to the contrary stated
above, prior to filing or mailing the Proxy Statement (or any amendment or supplement thereto) or
responding to any comments of the SEC or its staff with respect thereto, the Company shall provide
Parent and its counsel with a reasonable opportunity to review and comment on such document or
response.
30
(b) The Company shall, as promptly as reasonably practicable after the Proxy Statement is
cleared by the SEC for mailing to the shareholders of the Company, duly call, give notice of,
convene and hold a special meeting of shareholders of the Company (including any adjournment or
postponement thereof, the “Company Shareholders Meeting”) for the purpose of obtaining the
Company Shareholder Approval.
(c) Unless this Agreement has been terminated in accordance with its terms, the Company shall
(subject to the right to make an Adverse Recommendation Change in accordance with Section
5.2) (i) through the Company Board, recommend to the shareholders of the Company that they
adopt this Agreement and give the Company Shareholder Approval (the “Company
Recommendation”), (ii) include the Company Recommendation in the Proxy Statement and (iii) use
reasonable best efforts to solicit the Company Shareholder Approval. The Company shall provide
Parent with such information with respect to the solicitation of the Company Shareholder Approval
as Parent may from time to time reasonably request. Notwithstanding anything to the contrary
contained in this Agreement, the Company may adjourn or postpone the Company Shareholders Meeting
(in any event, to a date no later than five (5) Business Days prior to the Outside Date) (i) to the
extent necessary to ensure that any necessary supplement or amendment to the Proxy Statement is
provided to the shareholders of the Company in advance of the vote to be held at the Company
Shareholders Meeting if, the Company reasonably determines that such supplement or amendment is
required by applicable Law or (ii) if as of the time for which the Company Shareholders Meeting is
originally scheduled (as set forth in the Proxy Statement), there are insufficient Company Shares
represented (either in person or by proxy) to constitute a quorum necessary to conduct the business
of the Company at the Company Shareholders Meeting.
SECTION 5.2. Takeover Proposals; Board Recommendation; Etc.
(a) Except as otherwise permitted by this Section 5.2, the Company shall not, and
shall cause its Subsidiaries and the Company’s and its Subsidiaries’ respective officers and
directors not to, and shall direct the Company’s and its Subsidiaries’ employees, advisors,
investment bankers, agents and representatives (collectively, “Representatives”) not to,
directly or indirectly, (i) solicit, knowingly facilitate or knowingly encourage (including by way
of furnishing non-public information) the making of, or any inquiries regarding, a Takeover
Proposal or (ii) engage in, continue or otherwise participate in any discussions or negotiations
with any third party regarding a Takeover Proposal or any inquiry or proposal that would reasonably
be expected to lead to a Takeover Proposal; provided that if the Company or any of its
Subsidiaries or their respective Representatives receives, after the date hereof and prior to
receipt of the Company Shareholder Approval, a written Takeover Proposal (which was unsolicited and
not involving a breach of this Section 5.2) that the Company Board determines in good faith
constitutes or could reasonably be expected to lead to a Superior Proposal, then the Company and
its Representatives may, prior to receipt of the Company Shareholder Approval and subject to
compliance with the Company’s
obligations under this Section 5.2, (A) furnish, pursuant to an Acceptable
Confidentiality Agreement, any information with respect to the Company and its Subsidiaries to the
Person (or group of Persons) making such Takeover Proposal (provided that the
31
Company shall
concurrently provide to Parent all non-public information concerning the Company or its
Subsidiaries that is provided to any Person given such access which was not previously provided to
Parent or its Representatives), and (B) engage and participate in discussions and negotiations with
such Person (or group of Persons) regarding such Takeover Proposal. The Company shall not enter
into any confidentiality agreement with any Person which prohibits the Company from complying with
its obligations to Parent under this Section 5.2.
(b) Neither the Company Board nor any committee thereof shall (i) (A) withdraw, qualify or
change, or propose to withdraw, qualify or change, in a manner adverse to Parent, the Company
Recommendation or (B) approve or recommend a Takeover Proposal or any proposal that would
reasonably be expected to lead to a Takeover Proposal (any action described in this clause (i), an
“Adverse Recommendation Change”), or (ii) authorize or permit the Company or any of its
Subsidiaries to enter into any merger, acquisition, share exchange or other agreement with respect
to any Takeover Proposal (other than a confidentiality agreement in accordance with this
Section 5.2) (each, a “Company Acquisition Agreement”).
(c) Notwithstanding Section 5.2(b), prior to receipt of the Company Shareholder
Approval, if the Company receives a Takeover Proposal which the Company Board determines in good
faith after consultation with outside legal counsel and an outside financial advisor, constitutes a
Superior Proposal (after giving effect to all of the adjustments to the terms of this Agreement
which may be offered by Parent including pursuant to this Section 5.2(c)), the Company
Board may, if it determines in good faith after consultation with such outside legal counsel that
failure to take such action would be inconsistent with its fiduciary duties to the Company’s
shareholders under applicable Law: (i) make an Adverse Recommendation Change in response to such
Superior Proposal, (ii) approve or recommend such Superior Proposal and/or (iii) terminate this
Agreement to enter into a Company Acquisition Agreement with respect to such Superior Proposal in
accordance with Section 7.1(d)(ii); provided that, in the case of clause (iii), the
Company shall pay to Parent the Company Termination Fee pursuant to Section 7.3(a)(iii)
(and any purported termination without such payment shall be void and of no force or effect);
provided further that the Company Board may not take any of the actions
contemplated by clauses (i)-(iii), in each case, (A) if the Superior Proposal resulted from a
breach by the Company of this Section 5.2 or (B) until after the third (3rd) Business Day
following Parent’s receipt of written notice from the Company advising Parent that the Company
Board intends to take any such action, which notice (x) specifies the material terms and conditions
of (and the identity of the Person or group of Persons making) the Superior Proposal and (y)
includes copies of all information described in Section 5.2(e)(ii) (it being understood and
agreed that any amendment to the financial terms or other material terms or conditions of such
Superior Proposal shall require a new notice to Parent and a new three (3) Business Day period).
During any such three (3) Business Day period, if requested by Parent, the Company shall engage in
good faith
negotiations with Parent to amend this Agreement in a manner such that the failure by the
Company Board to take any such action would not be inconsistent with its fiduciary duties to the
Company’s shareholders under applicable Law. In determining whether to take any such action (and
whether the relevant Takeover Proposal still constitutes a
32
Superior Proposal), the Company Board
shall take into account any changes to the terms of this Agreement proposed by Parent.
(d) Nothing contained in this Section 5.2 or elsewhere in this Agreement shall be
deemed to prohibit the Company or the Company Board from complying with its disclosure obligations
under applicable Law with regard to a Takeover Proposal, including taking and disclosing to the
Company’s shareholders a position contemplated by Rule 14e-2(a), Rule 14d-9 or Item 1012(a) of
Regulation M-A promulgated under the Exchange Act. Notwithstanding the foregoing, nothing in this
Section 5.2(d) shall in any way affect the determination of whether there has been an
Adverse Recommendation Change; provided that in no event shall any “stop, look and listen”
or similar communication of the type contemplated by Rule 14d-9(f) under the Exchange Act be deemed
to be an Adverse Recommendation Change.
(e) In addition to the other obligations set forth in this Section 5.2:
(i) the Company shall, and shall cause its Subsidiaries and Representatives to, cease
immediately and cause to be terminated any and all existing discussions or negotiations
with any third party or its representatives or financing sources conducted prior to the
date hereof with respect to any Takeover Proposal or any proposal that could reasonably be
expected to lead to a Takeover Proposal; and
(ii) in addition to the other obligations set forth in this Section 5.2, the
Company shall as promptly as reasonably practicable advise Parent in writing, and in no
event later than twenty four (24) hours after receipt, if any proposal, offer or inquiry is
received by, any information is requested from, or any discussions or negotiations are
sought to be initiated or continued with, the Company or its Subsidiaries or
Representatives in respect of a Takeover Proposal or potential Takeover Proposal, and
shall, in such notice to Parent, indicate the identity of the Person or group of Persons
making such proposal, offer, inquiry or request and the material terms and conditions of
such proposal or offer and the nature of such inquiry or request (and shall include with
such notice copies of any draft agreements and financing commitment letters) and thereafter
shall promptly keep Parent informed of all material developments affecting the status and
terms and conditions of such proposal, offer, inquiry or request (and the Company shall
provide Parent with copies of any additional draft agreements and financing commitment
letters) and of the status of discussions or negotiations.
(f) For purposes of this Agreement:
(i) “Superior Proposal” means any bona fide written Takeover Proposal (with
all of the percentages included in the definition of Takeover
Proposal increased to fifty percent (50%)) on terms which the Company Board determines
in good faith after consultation with outside legal counsel and an outside financial
advisor (i) to be more favorable from a financial point of view to the holders of Company
Shares (other than Parent and its Subsidiaries) than the
33
Merger, taking into account all
the terms and conditions of such proposal (including price, form of consideration, closing
conditions and the likelihood and timing of consummation thereof based upon, among other
things, the availability of financing and the expectation of obtaining required approvals)
and this Agreement (including any changes to the terms of this Agreement committed to by
Parent to the Company in writing) and (ii) is reasonably capable of being completed on the
terms proposed.
(ii) “Takeover Proposal” means any inquiry, proposal or offer from any third
party relating to, in a single transaction or series of related transactions, any (i)
acquisition of assets of the Company and its Subsidiaries (including securities of
Subsidiaries) equal to twenty percent (20%) or more of the Company’s consolidated assets or
to which twenty percent (20%) or more of the Company’s revenues or earnings on a
consolidated basis are attributable, (ii) acquisition of beneficial ownership (within the
meaning of Section 13 under the Exchange Act) of twenty percent (20%) or more of the
outstanding Company Shares or any other class of equity securities of the Company, (iii)
tender offer or exchange offer that if consummated would result in any Person (or “group,”
as defined under Section 13 of the Exchange Act) beneficially owning twenty percent (20%)
or more of the outstanding Company Shares or (iv) merger, consolidation, share exchange,
business combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its Subsidiaries; in each case, other than the
Transactions.
SECTION 5.3. Conduct of Business by the Company. Except as expressly permitted by
this Agreement or as required by applicable Law or as set forth in Section 5.3 of the Company
Disclosure Schedule, during the period from the date hereof until the Effective Time, unless Parent
otherwise consents in writing, which consent shall not be unreasonably withheld or delayed, the
Company shall, and shall cause each of its Subsidiaries to, (x) conduct its business in the
ordinary course consistent with past practice and (y) use commercially reasonable efforts to
maintain and preserve intact its business organization and its goodwill and relationships with
producers, brokers, customers, suppliers, licensors, licensees, employees, consultants and other
Persons with whom the Company or its Subsidiaries have material business relationships and retain
the services of its present officers and key employees. Without limiting the generality of the
foregoing, except as set forth in Section 5.3 of the Company Disclosure Schedule during the period
from the date hereof to the Effective Time, the Company shall not, and shall not permit any of its
Subsidiaries to, without the prior written consent of Parent:
(a) issue, sell or grant any shares of its capital stock or equity interests, or any
securities or rights convertible into, exchangeable or exercisable for, or evidencing the right to
subscribe for, any shares of its capital stock or equity interests, or any warrants, options or
right to purchase or acquire any shares of its capital stock or equity
interests or any securities or rights convertible into, exchangeable or exercisable for, or
evidencing the right to subscribe for, any shares of its capital stock or equity interests,
provided that the Company may issue Company Shares upon the exercise of options
34
granted under the
Company Stock Plans that are outstanding on the date hereof and in accordance with the terms
thereof;
(b) redeem, purchase or otherwise acquire any of its outstanding shares of capital stock or
equity interests, or any rights, warrants or options to acquire any shares of its capital stock or
equity interests;
(c) declare, set aside for payment or pay any dividend on, or make any other distribution in
respect of, any shares of its capital stock or otherwise make any payments to its shareholders in
their capacity as such, other than (i) dividends by a direct or indirect wholly owned Subsidiary of
the Company to its parent or (ii) quarterly dividends consistent with past practice in an amount
not to exceed $0.10 per share of Company Shares (adjusted to reflect any stock dividends, splits,
subdivisions or other similar events);
(d) split, combine, subdivide or reclassify any shares of its capital stock;
(e) (i) incur or assume any indebtedness for borrowed money, (ii) guarantee any indebtedness
(or enter into a “keep well” or similar agreement) or (iii) issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of the Company or any of
its Subsidiaries;
(f) make any investment (by contribution to capital, property transfers, purchase of
securities or otherwise) in, or loan or advance (other than travel and similar advances to its
employees in the ordinary course of business consistent with past practice) to, any Person other
than a direct or indirect wholly owned Subsidiary of the Company in the ordinary course of business
other than investments in the ordinary course of business consistent with past practice and
consistent with the Company’s investment guidelines;
(g) make any capital expenditure or expenditures which (i) involves the purchase of real
property or (ii) is in excess of $100,000 in the aggregate;
(h) sell, dispose of or otherwise transfer (by merger or otherwise), lease out or license out,
or pledge, mortgage or otherwise encumber, any of its properties or assets (including securities of
Subsidiaries, which shall not be subject to the exceptions set forth in clauses (i) and (ii)
below), other than (i) disposal of investments in accordance with the investment guidelines as the
same may be amended from time to time, (ii) dispositions of assets with a fair market value of less
than $100,000 in the aggregate, or (iii) pursuant to Contracts in effect on the date hereof and
listed on Section 5.3(h) of the Company Disclosure Schedule, correct and complete copies of which
have been made available to Parent;
(i) directly or indirectly acquire (by merger, consolidation, acquisition of equity interests
or assets or any other business combination) any corporation, partnership, limited liability
company, joint venture, other business organization (or division thereof) or any property;
35
(j) increase in any manner the compensation of any of its directors, officers or employees
(except (x) increases in the ordinary course of business consistent with past practice in salaries,
wages, bonuses, incentives or benefits of employees of the Company or any of the Company’s
Subsidiaries who are not directors or executive officers of the Company; provided that no
such increase with respect to any such employee shall be greater than an amount equal to 3% of the
employee’s annual base salary; or (y) with respect to individuals who are first employed by the
Company or any of the Company’s Subsidiaries after the date hereof in the ordinary course of
business consistent with past practice, provided that, without Parent’s written consent, no such
individual shall be employed whose annual base salary is greater than $100,000) or enter into,
establish, materially amend or terminate any employment, consulting, retention, change in control,
collective bargaining, bonus or other incentive compensation, profit sharing, health or other
welfare, stock option or other equity (or equity-based), pension, retirement, vacation, severance,
deferred compensation or other compensation or benefit plan, policy, agreement, trust, fund or
arrangement with, for or in respect of, any shareholder, director, officer, other employee,
consultant or Affiliate, other than, as the case may be, as required by applicable Laws or written
agreements in existence on the date hereof, each as set forth on Schedule 3.14(f) of the Company
Disclosure Schedule or set forth on Section 5.3(j) of the Company Disclosure Schedule;
(k) except as set forth in Section 5.3(k) of the Company Disclosure Schedule, (i) modify or
amend in any material respect, waive or release any material rights or claims under, or terminate,
any Material Contract or Company Contract or, other than in the ordinary course of business
consistent with past practice, any other Contract that is material to the Company and its
Subsidiaries taken as a whole, (ii) amend or modify the Engagement Letter, (iii) enter into any
successor agreement to an expiring Material Contract or Company Contract that changes the terms of
the expiring Material Contract or Company Contract in any material respect, or (iv) enter into any
new Contract that would have been considered a Material Contract or Company Contract if it were
entered into at or prior to the date hereof;
(l) make, change or revoke any material Tax election, file any material amended Tax Return,
enter into any closing agreement with respect to a material amount of Taxes, or settle any material
Tax claim or assessment, other than pursuant to extensions of time to file Tax returns in the
ordinary course of business;
(m) amend the Company Charter Documents or the Subsidiary Documents;
(n) adopt a plan or agreement of complete or partial liquidation, dissolution, restructuring,
recapitalization or other reorganization;
(o) (i) settle or compromise any claim, audit, arbitration, suit, investigation, complaint or
other proceeding in excess of the amount of the corresponding reserve established on the
consolidated balance sheet of the Company as reflected in the most recent applicable Required
Company SEC Document plus any applicable third party insurance proceeds, except (A) as required by
the express terms of any Contract in effect
36
prior to the execution and delivery of this Agreement,
(B) for any settlements or compromises of insurance claims or litigation or arbitration arising in
the ordinary course of business or (C) for any settlements or compromises involving total aggregate
payments not in excess of the amount set forth in Section 5.3(o) of the Company Disclosure
Schedule, it being understood that this subsection (C) shall be in addition to and not in
limitation of subsections (A) and (B) above, or (ii) enter into any consent decree, injunction or
similar restraint or form of equitable relief in settlement of any material claim or audit that
would materially restrict the operations of the business after the Effective Time;
(p) enter into any Contract of reinsurance with a counterparty that has a financial strength
rating of less than “A-” as rated by AM Best, Xxxxx’x Investor Services or Standard & Poor’s, or an
equivalent rating by the relevant rating agency with respect to such counterparty (in each case,
unless such Contract is fully collateralized including, for the avoidance of doubt, collateralized
by a letter of credit issued by an institution with an “A-” or better rating);
(q) alter or amend in any material respect any existing underwriting, claim handling, loss
control, investment, actuarial, financial reporting or Tax or other accounting practices,
guidelines or policies (including compliance policies and those practices, guidelines and policies
used in the preparation of its financial statements and the establishment of reserves) or any
material assumption underlying an actuarial practice or policy, except as may be required by a
change in GAAP, SAP or applicable Law after the date hereof; or
(r) agree to take or authorize any of the foregoing actions.
SECTION 5.4. Conduct of Business by Parent and Merger Sub. Subject to Section
5.5, Parent and Merger Sub agree that, between the date of this Agreement and the Effective
Time, except as required by this Agreement, they shall not, directly or indirectly, without the
prior written consent of the Company, take or cause to be taken any action that could reasonably be
expected to materially delay or impair the consummation of the Transactions or their ability to
perform any of their respective obligations hereunder, or propose, announce an intention, enter
into any agreement or otherwise make a commitment to take any such action.
SECTION 5.5. Reasonable Best Efforts.
(a) Subject to the terms and conditions of this Agreement, each of the parties hereto shall
cooperate with the other parties hereto and use (and shall cause their respective Subsidiaries to
use) their respective reasonable best efforts to promptly (i) take, or cause to be taken, all
actions, and do, or cause to be done, all things, necessary to
cause the conditions to Closing to be satisfied as promptly as practicable and to consummate
and make effective, in the most expeditious manner practicable, the Transactions, including
preparing and filing promptly and fully all documentation to effect all necessary filings, notices,
petitions, statements, registrations, submissions of information, applications and other documents
(including any required filings under
37
applicable Antitrust Laws), and (ii) obtain all approvals,
consents, registrations, permits, authorizations and other confirmations (A) required from third
parties in connection with the Transactions (provided that no party hereto shall be obligated to
pay any consideration or grant any financial accommodation) to any third party from whom any such
approval, consent or other confirmation is requested and (B) from Governmental Authorities
(including the New York State Department of Insurance and the Arizona Department of Insurance)
necessary, proper or advisable to consummate the Transactions. In furtherance and not in
limitation of the foregoing, as promptly as practicable following the date of this Agreement (and
in any event within two (2) weeks of the date hereof), (i) Parent shall prepare and file with the
relevant insurance regulators requests for approval of the Transactions and (ii) each of the
parties hereto shall make an appropriate filing of a Notification and Report Form pursuant to the
HSR Act with respect to the Transactions. Except as set forth on Section 5.5(a) of the Parent
Disclosure Letter, the Company will have the right to review in advance, and Parent shall consult
with the Company in advance, in each case subject to applicable Laws relating to the exchange of
information, with respect to all the information relating to the Company or any Subsidiary of the
Company that appears in any filing made with, or materials submitted to, any third party or any
Governmental Authority by Parent or any of its affiliates relating to this Agreement or the Merger.
(b) Each of the parties hereto shall use its reasonable best efforts to (i) cooperate in all
respects with each other in connection with any filing or submission with a Governmental Authority
in connection with the Transactions and in connection with any investigation or other inquiry by or
before a Governmental Authority relating to the Transactions, including any proceeding initiated by
a private party, and (ii) keep the other parties informed in all material respects and on a
reasonably timely basis of any material communication received by such party from, or given by such
party to, the Federal Trade Commission, the Antitrust Division of the Department of Justice or any
other Governmental Authority and of any material communication received or given in connection with
any proceeding by a private party, in each case regarding any of the Transactions.
(c) In furtherance and not in limitation of the covenants of the parties contained in this
Section 5.5, each of the parties hereto shall use its reasonable best efforts to resolve
such objections, if any, as may be asserted by a Governmental Authority or other Person with
respect to the Transactions.
(d) Notwithstanding the foregoing or any other provision of this Agreement, the Company shall
not, without Parent’s prior written consent, commit to any divestiture transaction or agree to any
restriction on its business, and nothing in this Section 5.5 shall, (i) limit any
applicable rights a party may have to terminate this Agreement pursuant to Section 7.1 so
long as such party has up to then complied in all
material respects with its obligations under this Section 5.5; (ii) require any
Person, other than Parent or Merger Sub, to offer, accept or agree to dispose or hold separate any
part of its or the Surviving Corporation’s (or their respective Subsidiaries’) businesses,
operations, assets or product lines; (iii) require Parent or Merger Sub, to offer, accept or agree
to dispose or hold separate any part of its or the Surviving Corporation’s (or their
38
respective Subsidiaries’) businesses, operations, assets or product lines, except as would not (A) materially
impair or interfere with the ability of the Company and its Subsidiaries taken as a whole to
conduct their respective businesses substantially in the manner as such businesses are now being
conducted, (B) have a Company Material Adverse Effect or (C) have a material adverse effect on
Parent and its Subsidiaries taken as a whole; or (iv) require any Person (including Parent, Merger
Sub or any of their respective Affiliates) to (A) not compete in any geographic area or line of
business (other than, with respect to the Company or any of its Subsidiaries, any such restrictions
to which the Company or any of its Subsidiaries is subject as of the date of this Agreement or to
which the Company or any of its Subsidiaries is permitted to become subject in accordance with
Section 5.3(k)), (B) restrict the manner in which, or whether, such Person or any of its
Affiliates may carry on business in any part of the world (other than, with respect to the Company
or any of its Subsidiaries, any such restrictions to which the Company or any of its Subsidiaries
is subject as of the date of this Agreement or to which the Company or any of its Subsidiaries is
permitted to become subject in accordance with Section 5.3(k)) and/or (C) enter into a
capital maintenance agreement, keepwell or similar agreement.
SECTION 5.6. Public Announcements. The initial press release with respect to the
execution of this Agreement shall be a joint press release to be reasonably agreed upon by Parent
and the Company. Thereafter, neither the Company nor Parent shall issue or cause the publication
of any press release or other public announcement (to the extent not previously issued or made in
accordance with this Agreement) with respect to the Merger, this Agreement or the other
Transactions without the prior consent of the other party (which consent shall not be unreasonably
withheld, conditioned or delayed), except as may be required by Law or by any applicable listing
agreement with a national securities exchange as determined in the good faith judgment of the party
proposing to make such release (in which case the party required to make the release or
announcement shall use its commercially reasonable efforts to allow the other party reasonable time
to comment on such release or announcement in advance of such issuance).
SECTION 5.7. Access to Information; Confidentiality. The Company shall, and shall
cause each of its Subsidiaries to, afford to Parent and Parent’s Representatives reasonable access
during normal business hours to all of the Company’s and its Subsidiaries’ properties, books and
records, correspondence, Contracts and Representatives and shall furnish promptly to Parent all
other information concerning its and its Subsidiaries’ business, properties and personnel as Parent
may reasonably request. Notwithstanding the foregoing, the Company and its Subsidiaries shall not
be obligated to disclose any information that, in the reasonable judgment of the Company, would
result in the loss of attorney-client privilege with respect to such information; provided
that the Company shall use its commercially reasonable efforts to develop an alternative to
providing such information and/or enter into a joint defense agreement if doing so would reasonably
permit the disclosure of such information without jeopardizing such
attorney-client privilege. Parent shall schedule and coordinate all inspections with the
Company and shall give the Company at least twenty-four (24) hours prior written notice thereof,
setting forth the inspection or materials that Parent or its representatives intend to conduct or
review, as applicable. The Company shall be entitled to have representatives present at all times
during any such inspection, and no such inspection shall unreasonably
39
disrupt or interfere with the
operations of the Company or any Subsidiary of the Company. The information provided shall be
subject to the terms of the Confidentiality Agreement. No investigation, or information received,
pursuant to this Section 5.7 will modify any of the representations and warranties of the
Company.
SECTION 5.8. Indemnification and Insurance.
(a) From and after the Effective Time, Parent shall, and shall cause the Surviving Corporation
to, (i) indemnify and hold harmless each individual who at the Effective Time is, or at any time
prior to the Effective Time was, a director or officer of the Company or a Subsidiary of the
Company (each, an “Indemnitee” and, collectively, the “Indemnitees”) with respect
to all claims, liabilities, losses, damages, judgments, fines, penalties, costs (including amounts
paid in settlement or compromise) and expenses (including fees and expenses of legal counsel) in
connection with any claim, suit, action, proceeding or investigation (whether civil, criminal,
administrative or investigative), whenever asserted, based on or arising out of, in whole or in
part, (A) the fact that an Indemnitee was a director, officer or employee of the Company or a
Subsidiary of the Company or (B) acts or omissions by an Indemnitee in the Indemnitee’s capacity as
a director, officer or employee of the Company or a Subsidiary of the Company or taken at the
request of the Company or a Subsidiary of the Company (including in connection with serving at the
request of the Company or a Subsidiary of the Company as a director, officer, employee, agent,
trustee or fiduciary of another Person (including any employee benefit plan)), in each case under
(A) or (B), at, or at any time prior to, the Effective Time (including any claim, suit, action,
proceeding or investigation relating in whole or in part to the Transactions), to the fullest
extent permitted under applicable Law and (ii) assume all obligations of the Company and its
Subsidiaries to the Indemnitees in respect of advancement of expenses, and indemnification and
exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time, as
provided in (A) the Company Charter Documents and the Subsidiary Documents as in effect on the date
hereof and (B) the indemnification agreements listed on Section 5.8(a) of the Company Disclosure
Schedule, which indemnification agreements shall survive the Transactions and continue in full
force and effect in accordance with their respective terms, in each case, whether or not insurance
covers such costs.
(b) Without limiting the foregoing, from and after the Effective Time, Parent shall cause the
organizational documents of the Surviving Corporation to contain provisions no less favorable to
the Indemnitees with respect to limitation of liabilities of directors and officers,
indemnification and advancement of expenses than are set forth as of the date hereof in the Company
Charter Documents, which provisions shall not be amended, repealed or otherwise modified in a
manner that would adversely affect the rights thereunder of the Indemnitees. In addition, from and
after the Effective Time,
Parent shall, and shall cause the Surviving Corporation to, pay all expenses (including fees
and expenses of legal counsel) of each Indemnitee under this Section 5.8 (including in
connection with enforcing the indemnity and other obligations referred to in this Section
5.8) as incurred to the fullest extent permitted under applicable Law; provided
40
that
the person to whom expenses are advanced provides an undertaking to repay such advances to the
extent required by applicable Law.
(c) Parent shall cause the individuals serving as officers and directors of the Company
immediately prior to the Effective Time who are then covered by the directors’ and officers’
liability insurance policy currently maintained by the Company (a correct and complete copy of
which has heretofore been delivered to Parent) to be covered for a period of six (6) years from the
Effective Time by such policy (provided that Parent may substitute therefor policies of at least
the same coverage and amounts containing terms and conditions that are not less advantageous in any
material respect than such policy) with respect to acts or omissions occurring prior to the
Effective Time that were committed by such officers and directors in their capacity as such;
provided that in no event shall Parent be required to expend per year of coverage more than
300% of the amount currently expended by the Company per year of coverage as of the date of this
Agreement (the “Maximum Amount”) to maintain or procure insurance coverage pursuant hereto.
If Parent is unable to maintain or obtain the insurance called for by this Section 5.8(c),
Parent shall obtain as much comparable insurance as available for the Maximum Amount. The
Indemnitees may be required to make reasonable application and provide reasonable and customary
representations and warranties to applicable insurance carriers for the purpose of obtaining such
insurance.
(d) The Indemnitees to whom this Section 5.8 applies shall be third party
beneficiaries of this Section 5.8. The provisions of this Section 5.8 are intended
to be for the benefit of each Indemnitee and his or her heirs.
SECTION 5.9. Section 16 Matters. Prior to the Effective Time, the Company shall take
such steps as are permitted and reasonably necessary to cause the Transactions, including any
dispositions of Company Shares (including derivative securities related thereto) by each individual
who is a director or officer of the Company to be exempt under Rule 16b-3 promulgated under the
Exchange Act in accordance with the interpretative guidance set forth by the SEC with respect to
such matters.
SECTION 5.10. Notification of Certain Matters. The Company shall give prompt notice
to Parent, and Parent shall give prompt notice to the Company, of (a) any notice or other
communication received by such party from any Governmental Authority in connection with the
Transactions, (b) any notice or other communication received by such party from any Person alleging
that the consent of such Person is or may be required in connection with the Transactions, if the
subject matter of such communication or the failure of such party to obtain such consent would have
a Company Material Adverse Effect or a Material Adverse Effect on Parent, (c) any material actions,
suits, claims, investigations or proceedings commenced or, to such party’s Knowledge, threatened
against, relating to or involving or otherwise affecting such party or any of its Subsidiaries
which relate to the Transactions, (d) the discovery of any fact or
circumstance that, or the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which, would cause any representation or warranty made by such party contained in
this Agreement (i) that is qualified as to materiality or Material Adverse Effect to be untrue and
(ii) that is not so qualified to be untrue in any material
41
respect, and (e) any material failure of
such party to comply with or satisfy any covenant or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.10 shall not (x) cure any breach of, or non-compliance with, any other provision
of this Agreement or (y) limit the remedies available to the party receiving such notice;
provided, further, that a failure to comply with this Section 5.10 will not
result in the failure of any condition set forth in Article VI to be satisfied, unless the
underlying circumstance would independently cause a condition to not be satisfied.
SECTION 5.11. Employee Matters.
(a) At Parent’s written request provided to the Company no later than five (5) days prior to
the Closing Date, the Company shall take all actions reasonably necessary so that each employee of
the Company or any of its Subsidiaries is fully vested in his or her entire account balance in any
of the Company’s pension plans identified by Parent immediately prior to the Closing and to
terminate such pension plan effective on the Closing Date.
(b) Parent shall, or shall cause its Affiliates to, recognize the service of each employee of
the Company or any of its Subsidiaries with the Company or its Subsidiaries (and their
predecessors) prior to the Closing Date as service with Parent, the Surviving Corporation or any of
their Affiliates in connection with, and pursuant to the terms of, any tax-qualified pension plan,
401(k) savings plan, severance plan, welfare benefit plan (including any plan or arrangement
relating to vacation, paid time off or holidays), and any other compensation or employee benefits
plan maintained by Parent, the Surviving Corporation or any of their Affiliates in which such
employee participates, or which are made available by Parent, the Surviving Corporation or any of
their Affiliates following the Closing Date for purposes of any waiting period, vesting,
eligibility and benefit entitlement (but excluding benefit accruals); provided that with
respect to any defined benefit pension plan maintained by Parent, the Surviving Corporation or any
of their Affiliates in which such employee participates following the Closing Date, such service
credit shall be measured from the earliest date that such employee commenced participation in a
tax-qualified pension or savings plan maintained by the Company or one of its Affiliates.
(c) During the calendar year in which the Closing Date occurs Parent shall, or shall cause its
Affiliates to, (i) waive any pre-existing condition limitations, exclusions, actively-at-work
requirements and waiting periods under any employee welfare benefit plans maintained by Parent, the
Surviving Corporation or any of their Affiliates in which employees of the Company or any of its
Subsidiaries as of the Effective Time who remain employed following the Closing by the Parent, the
Surviving Corporation or any of their Affiliates (“Company Employees”) participate from and
after the Closing Date, to the extent such pre-existing condition limitations, exclusions, active-at-work requirements and waiting period requirements would not apply under the corresponding
Company Plans immediately prior to the Effective Time; and (ii) credit the dollar amount incurred
by each Company Employee (and his or her eligible dependents) during such calendar year for
purposes of satisfying such year’s deductibles, co-pays and
42
similar expenses under such employee
welfare benefit plans maintained by Parent, the Surviving Corporation or any of their Affiliates in
which such Company Employee participates from and after the Closing Date.
(d) Without limiting the generality of Section 8.6, this Section 5.11 shall be
binding upon and inure solely to the benefit of each of the parties to this Agreement, and nothing
in this Section 5.11, expressed or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this Section 5.11 and no
provision of this Section 5.11 will create any third party beneficiary rights in any
current or former employee, director or individual independent contractor of the Company or any of
its Subsidiaries in respect of continued employment (or resumed employment) or service or any other
matter.
SECTION 5.12. Securityholder Litigation. In the event any securityholder litigation
related to this Agreement, the Merger or the other Transactions is brought against the Company
and/or its directors, the Company shall have the right to control the defense of such litigation;
provided that no settlement shall be agreed to without Parent’s prior written consent (not
to be unreasonably withheld, conditioned or delayed). The Company shall keep Parent reasonably
informed of the status of all such litigation, including with respect to any settlement
discussions relating thereto, unless, in the reasonable judgment of the Company, doing so would
result in the loss of attorney-client privilege.
SECTION 5.13. Redemption Requests. Following the date hereof, the Company shall
submit to each fund set forth on Section 5.13 of the Company Disclosure Schedule, in accordance
with Section 5.13 of the Company Disclosure Schedule, a request (“Redemption Request”) in
form satisfactory to the applicable fund, that such fund redeem the Company’s interests therein.
SECTION 5.14. Fees and Expenses. Except as provided in Section 7.3, all fees
and expenses incurred in connection with this Agreement, the Merger and the Transactions shall be
paid by the party incurring such fees or expenses, whether or not the Merger is consummated.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. Conditions to Each Party’s Obligation to Effect the Merger. The
respective obligations of each party hereto to effect the Merger shall be subject to the
satisfaction (or waiver, if permissible under applicable Law) on or prior to the Closing Date of
the following conditions:
(a) Company Shareholder Approval. The Company Shareholder Approval shall have been
obtained.
(b) Antitrust. The waiting period (and any extension thereof) applicable to the
Merger under the HSR Act and any other applicable competition,
43
merger control, Antitrust Law or
similar Laws shall have been terminated or shall have expired.
(c) Insurance Regulatory Approvals. The consents, approvals, Licenses and
authorizations listed in Section 3.5 of the Company Disclosure Schedule or Section 4.5 of the
Parent Disclosure Schedule shall have been obtained and shall be in full force and effect, in each
case without any condition, restriction or limitation that would reasonably be expected to (x)
materially impair or interfere with the ability of the Company Insurance Subsidiaries taken as a
whole to conduct their respective businesses substantially in the manner as such businesses are now
being conducted, (y) have a Company Material Adverse Effect or (z) have a material adverse effect
on Parent and its Subsidiaries taken as a whole.
(d) No Injunctions or Restraints. No Law, injunction, judgment or ruling enacted,
promulgated, issued, entered, amended or enforced by any Governmental Authority (collectively,
“Restraints”) shall be in effect (i) enjoining, restraining, preventing or prohibiting
consummation of the Merger or the ownership or operation of the Company or its business by Parent
or (ii) making the consummation of the Merger illegal.
SECTION 6.2. Conditions to Obligations of Parent and Merger Sub. The obligations of
Parent and Merger Sub to effect the Merger are further subject to the satisfaction (or waiver by
Parent, if permissible under applicable Law) on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. (i) The representations and warranties of the
Company contained in Section 3.8(b) and Section 3.23 shall be true and correct as
of the date hereof and as of the Closing Date (or to the extent given as of a specific date, as of
such date); (ii) the representations and warranties of the Company contained in Section 3.2
shall be true and correct as of the date hereof and as of the Closing Date (or, to the extent given
as of a specific date, as of such date), except for de minimis inaccuracies; (iii) the
representations and warranties of the Company contained in Section 3.1(b) shall be true and
correct as of the date hereof and as of the Closing Date in all material respects and (iv) all
other representations and warranties of the Company contained in this Agreement, disregarding all
qualifications and exceptions contained therein relating to materiality or Material Adverse Effect,
shall be true and correct, in each case, as of the date hereof and as of the Closing Date (or, to
the extent given as of a specific date, as of such date) except, in the case of clause (iv), for
such failures to be true and correct that, individually or in the aggregate, would not have a
Company Material Adverse Effect.
(b) Performance of Obligations of the 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 Closing Date.
44
(c) Redemption Requests. The Company shall have complied in all material respects
with Section 5.13 and shall not have waived, revoked or withdrawn any of the Redemption
Requests, each of which shall be in full force and effect.
(d) Tangible Book Value. The tangible book value of the Company shall be no less than
$205,000,000, as calculated in good faith by the Company in accordance with GAAP and the Company’s
accounting principles, methods and practices in effect on March 31, 2010, and, at least five (5)
days prior to the anticipated Closing Date, Parent shall have received from the Chief Executive
Officer or Chief Financial Officer of the Company a certificate setting forth in reasonable detail
such calculation.
(e) Certificate. Parent shall have received a certificate of either the Chief
Executive Officer or Chief Financial Officer of the Company, dated the Closing Date, certifying on
behalf of the Company that the conditions specified in Section 6.2(a), Section
6.2(b), Section 6.2(c) and Section 6.2(d) have been satisfied.
SECTION 6.3. Conditions to Obligation of the Company. The obligation of the Company
to effect the Merger is further subject to the satisfaction (or waiver by the Company, if
permissible under applicable Law) on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and warranties of Parent and
Merger Sub contained in this Agreement, disregarding all qualifications and exceptions contained
therein relating to materiality or Material Adverse Effect, shall be true and correct, in each
case, as of the date hereof and as of the Closing Date (or, to the extent given as of a specific
date, as of such date), except for such failures to be true and correct that would not,
individually or in the aggregate, prevent, restrict or limit Parent or Merger Sub from consummating
the Merger.
(b) Performance of Obligations of Parent and Merger Sub. Parent and Merger Sub shall
have performed in all material respects all obligations required to be performed by them under this
Agreement at or prior to the Closing Date.
(c) Certificate. The Company shall have received a certificate of an executive
officer of Parent, dated the Closing Date, certifying on behalf of Parent that the conditions
specified in Section 6.3(a) and Section 6.3(b) have been satisfied.
SECTION 6.4. Frustration of Closing Conditions. None of the Company, Parent or Merger
Sub may rely on the failure of any condition set forth in Section 6.1, Section 6.2
or Section 6.3, as the case may be, to be satisfied if such failure was caused by such
party’s failure to use its reasonable best efforts to consummate the Merger and the other
Transactions, as required by and subject to Section 5.5.
45
ARTICLE VII
TERMINATION
SECTION 7.1. Termination. This Agreement may be terminated and the Transactions
abandoned at any time prior to the Effective Time:
(a) by the mutual written consent of the Company and Parent;
(b) by either of the Company or Parent, if:
(i) the Merger shall not have been consummated on or before April 15, 2011 (the
“Outside Date”); provided that the right to terminate this Agreement
pursuant to this Section 7.1(b)(i) shall not be available to any party whose breach
of this Agreement has proximately contributed to the cause of the failure of the Merger to
be consummated on or before the Outside Date;
(ii) any Restraint having the effect set forth in Section 6.1(d) shall be in
effect and shall have become final and nonappealable; provided that the right to
terminate this Agreement pursuant to this Section 7.1(b)(ii) shall not be available
to any party whose breach of this Agreement proximately contributed to the cause of the
issuance of such final, nonappealable Restraint; or
(iii) the Company Shareholder Approval shall not have been obtained at the Company
Shareholders Meeting duly convened therefor or at any adjournment or postponement thereof.
(c) by Parent, if:
(i) a breach of the Company’s representations, warranties, covenants and agreements
set forth in this Agreement shall have occurred, which breach (A) would (if it occurred or
was continuing as of the Closing Date) give rise to the failure of a condition set forth in
Section 6.2(a) or Section 6.2(b) and (B) cannot be cured by the Company by
the Outside Date or, if capable of being cured by the Company by the Outside Date, shall
not have been cured within thirty (30) calendar days following receipt of written notice
from Parent stating Parent’s intention to terminate this Agreement pursuant to this
Section 7.1(c)(i) and the basis for such termination; provided that the
right to terminate this Agreement pursuant to this Section 7.1(c)(i) shall not be
available to Parent or Merger Sub if either such party is in material breach of this
Agreement; or
(ii) (A) an Adverse Recommendation Change shall have occurred, (B) the Company shall
have failed to include the Company Recommendation in the Proxy Statement or (C) the Company
Board (1) shall not have rejected any publicly disclosed Takeover Proposal within five (5)
Business Days of the making thereof (including, for these purposes, by taking no position
with respect to the acceptance by the Company’s shareholders of a tender offer or exchange
offer, which shall constitute a failure to reject such Takeover Proposal) or (2) shall have
46
failed to publicly reconfirm the Company Recommendation within five (5) Business Days
after receipt of a written request from Parent that it do so following the making by any
Person of a publicly disclosed Takeover Proposal.
(d) by the Company:
(i) if a breach of Parent’s or Merger Sub’s representations, warranties, covenants and
agreements set forth in this Agreement shall have occurred, which breach or failure to
perform (A) would (if it occurred or was continuing as of the Closing Date) give rise to
the failure of a condition set forth in Section 6.3(a) or Section 6.3(b)
and (B) cannot be cured by Parent and Merger Sub by the Outside Date or, if capable of
being cured by Parent and Merger Sub by the Outside Date, shall not have been cured within
thirty (30) calendar days following receipt of written notice from the Company stating the
Company’s intention to terminate this Agreement pursuant to this Section 7.1(d)(i)
and the basis for such termination; provided that the right to terminate this
Agreement pursuant to this Section 7.1(d)(i) shall not be available to the Company
if the Company is in material breach of this Agreement; or
(ii) prior to the receipt of the Company Shareholder Approval, in accordance with
clause (iii) of Section 5.2(c); provided that concurrently with such
termination, the Company enters into the Company Acquisition Agreement and pays to Parent
the Company Termination Fee pursuant to Section 7.3(a)(iii).
SECTION 7.2. Effect of Termination. In the event of the termination of this Agreement
as provided in Section 7.1, written notice thereof shall be given to the other party or
parties, specifying the provision hereof pursuant to which such termination is made, and this
Agreement shall forthwith become null and void (other than the penultimate sentence of Section
5.7, this Section 7.2, Section 7.3 and Article VIII, all of which shall
survive termination of this Agreement), and there shall be no liability on the part of Parent,
Merger Sub or the Company or their respective directors, officers and Affiliates, except (a) as
provided in Section 7.3 and (b) that nothing shall relieve any party from liability for
fraud or any willful breach of this Agreement.
SECTION 7.3. Termination Fee.
(a) (i) (1) If, after the date hereof, a Takeover Proposal shall have been made to the Company
(or its shareholders generally) or any Person shall have announced (or otherwise made known to the
Company Board) an intention (that has not been withdrawn) to make a Takeover Proposal, and (2)
following the occurrence of an event described in clause (1), this Agreement shall have been
terminated (A) by the Company or Parent pursuant to Section 7.1(b)(i) or Section
7.1(b)(iii) or (B) by Parent pursuant to Section 7.1(c)(i) and (3) within twelve (12)
months of the date this Agreement is terminated as described in clause (2), the Company enters into
a definitive Company Acquisition Agreement with respect to, or consummates a transaction
contemplated by, any Takeover Proposal (provided, that for purposes of this clause (3),
47
the references to “twenty percent (20%)” in the definition of Takeover Proposal shall be deemed to be references
to “fifty percent (50%)”);
(ii) if this Agreement is terminated by Parent pursuant to Section 7.1(c)(ii);
or
(iii) if this Agreement is terminated by the Company pursuant to Section
7.1(d)(ii);
then in the case of any of clause (i), clause (ii) or clause (iii), the Company shall pay to Parent
(or designee(s) of Parent), in cash (by wire transfer of immediately available funds to an account
to be designated by Parent), an amount equal to $9,300,000 (the “Company Termination Fee”).
In the event that the Company Termination Fee is required to be paid under Section
7.3(a)(i), such fee shall be paid promptly following the earlier to occur of the execution of a
definitive agreement with respect to, or the consummation of, any transaction contemplated by a
Takeover Proposal as described in Section 7.3(a)(i). In the event that the Company
Termination Fee is required to be paid under Section 7.3(a)(ii), such fee shall be paid
promptly (but in any event within two (2) Business Days) following such termination. In the event
that the Company Termination Fee is required to be paid under Section 7.3(a)(iii), such fee
shall be paid prior to or concurrently with such termination. In no event shall Parent be entitled
to the Company Termination Fee on more than one occasion.
(b) In the event that Parent (or its designee(s)) shall receive the Company Termination Fee
pursuant to Section 7.3(a), the receipt of such fee shall be deemed to be liquidated
damages for any and all losses or damages suffered or incurred by Parent, Merger Sub or any of
their respective Affiliates or any other Person in connection with this Agreement (and the
termination hereof), the Merger (and the abandonment thereof) or any matter forming the basis for
such termination, and none of Parent, Merger Sub, any of their respective Affiliates or any other
Person shall be entitled to bring or maintain any other claim, action or proceeding against the
Company or any of its subsidiaries or any of their respective Affiliates arising out of this
Agreement and the Transactions, including the Merger, or any matters forming the basis for such
termination.
(c) The parties hereto acknowledge that the agreement contained in this Section 7.3 is
an integral part of the Transactions, and that, without that agreement, the other parties would not
enter into this Agreement. If the Company fails to make payment of the Company Termination Fee
when due, and Parent commences a suit to collect such fee, the Company shall indemnify and
reimburse Parent for its fees and expenses (including attorneys fees and expenses) incurred in
connection with such suit and shall pay interest on the amount of the payment at the prime rate as
published in The Wall Street Journal in effect on the date the applicable fee was payable.
48
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Survival. The representations, warranties, covenants and agreements in
this Agreement (or pursuant to any certificate delivered pursuant to Section 6.2 or
Section 6.3) shall terminate at the Effective Time or, except as otherwise provided in
Section 7.2, upon the termination of this Agreement pursuant to Section 7.1, as the
case may be, except that (a) the covenants and agreements set forth in Article II and
Section 5.8, and any other covenant or agreement set forth in this Agreement which
contemplates performance after the Effective Time, shall survive the Effective Time, and (b) the
covenants and agreements set forth in Section 7.2, Section 7.3 and this Article
VIII shall survive termination.
SECTION 8.2. Amendment or Supplement. At any time prior to the Effective Time, this
Agreement may be amended or supplemented in any and all respects, whether before or after receipt
of the Company Shareholder Approval, by written agreement of the parties hereto; provided
that following the receipt of the Company Shareholder Approval, there shall be no amendment or
change to the provisions hereof which by Law would require further approval by the shareholders of
the Company without such approval.
SECTION 8.3. Extension of Time, Waiver. At any time prior to the Effective Time, any
party may, subject to applicable Law, (a) waive any inaccuracies in the representations and
warranties of any other party hereto, (b) extend the time for the performance of any of the
obligations or acts of any other party hereto or (c) waive compliance by the other party with any
of the agreements contained herein or, except as otherwise provided herein, waive any of such
party’s conditions. Notwithstanding the foregoing, no failure or delay by the Company, Parent or
Merger Sub in exercising any right hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or the exercise of any
other right hereunder. Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of such party.
SECTION 8.4. Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned, in whole or in part, by operation of Law or otherwise, by
any of the parties without the prior written consent of the other parties. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted assigns. Any
purported assignment not permitted under this Section 8.4 shall be null and void.
SECTION 8.5. Entire Agreement. This Agreement, the Shareholders Agreement, the
Guarantee and the Confidentiality Agreement (and all exhibits and schedules hereto and thereto)
constitute the entire agreement, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject matter hereof and
thereof.
49
SECTION 8.6. No Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to or shall confer upon any Person other than the parties hereto (and their
respective successors and permitted assigns) any right or remedy of any nature whatsoever under or
by reason of this Agreement, other than as provided in Section 5.8, Section 8.8(d)
and Section 8.8(e).
SECTION 8.7. Governing Law; Jurisdiction; Waiver of Jury Trial.
(a) This Agreement, and any other agreement, document or instrument delivered pursuant hereto,
and all claims or causes of action (whether in contract or tort) that may be based upon, arise out
of or relate to this Agreement (or such other document) or the negotiation, execution, termination,
performance or nonperformance of this Agreement (or such other document) (including any claim or
cause of action based upon, arising out of or related to any representation or warranty made in or
in connection with this Agreement or as an inducement to enter into this Agreement), shall be
governed by the internal laws of the State of New York, without regard to its conflicts of law
principles.
(b) All actions and proceedings arising out of or relating to this Agreement shall be heard
and determined in the United States District Court located in the Borough of Manhattan in the City
of New York or, if such court does not accept jurisdiction over the applicable action or
proceeding, the state courts of the State of New York located in the Borough of Manhattan in the
City of New York (collectively, the “Agreed Courts”), and the parties hereto hereby
irrevocably submit to the exclusive jurisdiction of such courts (and, in the case of appeals,
appropriate appellate courts therefrom) in any such action or proceeding and irrevocably waive the
defense of an inconvenient forum to the maintenance of any such action or proceeding. The consents
to jurisdiction set forth in this paragraph shall not constitute general consents to service of
process in the State of New York and shall have no effect for any purpose except as provided in
this paragraph and shall not be deemed to confer rights on any Person other than the parties
hereto. The parties hereto agree that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by applicable law.
(c) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 8.8. Specific Enforcement. (a) The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached, and that money damages or other
legal remedies would not be an adequate remedy for any such damages. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement
and the Guarantees (with respect to the Guarantees, to the extent such rights are expressly
provided for therein, in accordance with the terms thereof) to enforce specifically the terms and
provisions of this
50
Agreement and the Guarantees (with respect to the Guarantees, to the extent such rights are
expressly provided for therein, in accordance with the terms thereof) in the Agreed Courts, this
being in addition to any other remedy to which they are entitled at law or in equity (subject to
Section 8.8(b)). The right for specific enforcement shall include the right of the Company
to cause Parent and Merger Sub to satisfy their covenants and obligations under this Agreement and
to cause the Merger and the transactions contemplated by the Merger to be consummated on the terms
and subject to the conditions set forth in this Agreement. Each of the parties hereby waives (i)
any defenses in any action for specific performance, including the defense that a remedy at law
would be adequate and (ii) any requirement under any Law to post a bond or other security as a
prerequisite to obtaining equitable relief. If, prior to the Outside Date, any party brings any
action to enforce specifically the performance of the terms and provisions hereof by any other
party, the Outside Date shall automatically be extended by (x) the amount of time during which such
action is pending, plus twenty (20) Business Days or (y) such other time period established by the
Agreed Court presiding over such action.
(b) The Company hereby agrees that specific performance shall be its sole and exclusive remedy
with respect to breaches by Parent or Merger Sub or any other Person or otherwise in connection
with this Agreement or the Transactions and, except as provided in Section 8.8(c), that it
may not seek or accept any other form of relief that may be available for breach under this
Agreement or otherwise in connection with this Agreement or the Transactions (including monetary
damages).
(c) If the Agreed Courts have declined to specifically enforce the obligations of Parent and
Merger Sub to consummate the Merger pursuant to this Section 8.8, the Company may pursue
any other remedy available to it at law or in equity, including monetary damages. If an Agreed
Court has granted an award of damages for such alleged breach against Parent or Merger Sub, the
Company may enforce such award and accept damages for such alleged breach only if, within five (5)
days following such determination, the Company confirms to Parent in writing that it is prepared
and willing to consummate the Merger in accordance with this Agreement, and Parent is not willing
to consummate the Merger within such five (5) day period in accordance with the terms and
conditions hereof. In addition, the Company agrees to cause any legal action or proceeding still
pending to be dismissed with prejudice at such time as Parent and Merger Sub consummate the Merger,
except for claims against the Surviving Corporation as set forth and contemplated by Section
5.8. Parent and Merger Sub acknowledge and agree that in the event of any breach, or wrongful
repudiation or termination, of this Agreement by Parent or Merger Sub, the damages incurred by the
Company for purposes of determining any remedy at law or equity under this Agreement shall not be
limited to reimbursement of expenses or out of pocket costs and would include any damages incurred
by the Company’s shareholders in the event such shareholders would not receive the benefit of the
bargain negotiated by the Company on their behalf as set forth in this Agreement (taking into
consideration relevant matters, including other combination opportunities and the time value of
money).
51
(d) The Company, on its own behalf and (to the fullest extent permissible by applicable Law)
on behalf of its directors, Affiliates, officers or agents, as the case may be, covenants, agrees
and acknowledges, that it shall not bring any action or proceeding (regardless of the legal theory
or claim involved or the procedural nature of any such action or proceeding) against any former,
current and future direct or indirect equity holders, controlling persons, directors, officers,
employees, agents, Affiliates, members, managers, general or limited partners or assignees of
Parent or Merger Sub (each, a “Parent Related Person” and collectively, the “Parent
Related Persons”) or any Parent Related Person of any Parent Related Person in connection with
the Transactions; provided that nothing in this Section 8.8(d) shall prohibit (i)
any such action or proceeding against any Guarantor or any successor to any Guarantor or any
transferee of assets pursuant to a transfer in contravention of the Guarantee to enforce the
Guarantee, (ii) any action permitted to be taken under the Guarantee or (iii) claims against the
Surviving Corporation as set forth and contemplated by Section 5.8. The provisions of this
Section 8.8(d) are intended to be for the benefit of, and shall be enforceable by, each
member of the Related Persons.
(e) Each of Parent and Merger Sub, on its own behalf and (to the fullest extent permissible by
applicable Law) on behalf of its directors, Affiliates, officers or agents, as the case may be,
covenants, agrees and acknowledges, that it shall not bring any action or proceeding (regardless of
the legal theory or claim involved or the procedural nature of any such action or proceeding)
against any former, current and future direct or indirect shareholders, controlling persons,
directors, officers, employees, agents, Affiliates, members, managers, general or limited partners
or assignees of the Company (each, a “Company Related Person” and collectively, the
“Company Related Persons”) or any Company Related Person of any Company Related Person in
connection with the Transactions; provided that nothing in this Section 8.8(e)
shall prohibit any such action or proceeding against any Company Related Person that is party to
the Shareholders Agreement (or any successor to any Company Related Person) to enforce the
Shareholders Agreement. The provisions of this Section 8.8(e) are intended to be for the
benefit of, and shall be enforceable by, each member of the Company Related Persons.
SECTION 8.9. Notices. All notices, requests and other communications to any party
hereunder shall be in writing and shall be deemed given if delivered personally, emailed (which is
confirmed), facsimiled (which is confirmed), or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses:
If to Parent or Merger Sub, to:
c/o Goldman, Xxxxx & Co.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx Xxxxxx
Facsimile: 000-000-0000
Email: xxxxx.xxxxxx@xx.xxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx Xxxxxx
Facsimile: 000-000-0000
Email: xxxxx.xxxxxx@xx.xxx
52
and to:
c/o TPG Capital, L.P.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx Cami
Facsimile: 415-743-1501
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx Cami
Facsimile: 415-743-1501
with a copy (which shall not constitute notice) to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxxxx, Xx.
Facsimile: (000) 000-0000
Email: xxxxxxx.xxxxxx@xxxx.xxx
xxxxxx.xxxxxxxx@xxxx.xxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxxxx, Xx.
Facsimile: (000) 000-0000
Email: xxxxxxx.xxxxxx@xxxx.xxx
xxxxxx.xxxxxxxx@xxxx.xxx
If to the Company, to:
NYMAGIC,
INC.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxx
Facsimile: 212-551-0724
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxx
Facsimile: 212-551-0724
Email: xxxxx@xxx.xxx
with a copy (which shall not constitute notice) to:
Xxxxx & XxXxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
Email: xxxxxxxxxx@xx.xxx
xxxxxxxxxx@xx.xxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
Email: xxxxxxxxxx@xx.xxx
xxxxxxxxxx@xx.xxx
or such other address, email address or facsimile number as such party may hereafter specify by
like notice to the other parties hereto. All such notices, requests and other communications shall
be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m.
in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any
such notice, request or communication shall be deemed not to have been received until the next
succeeding Business Day in the place of receipt.
53
SECTION 8.10. Severability. If any term or other provision of this Agreement is
determined by a court of competent jurisdiction to be invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other terms, provisions and conditions of this
Agreement shall nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.
SECTION 8.11. Definitions.
(a) As used in this Agreement, the following terms have the meanings ascribed thereto below:
“Acceptable Confidentiality Agreement” means any confidentiality agreement entered into after
the date hereof that contains provisions that are no less favorable in the aggregate to the Company
(and no less restrictive in any material respect with respect to the conduct of the Person to whom
information is disclosed, including with respect to “standstill” provisions) than those contained
in the Confidentiality Agreement and containing provisions that expressly permit the Company to
comply with the provisions of Section 5.2.
“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls,
or is controlled by, or is under common control with, such Person. For this purpose, “control”
(including, with its correlative meanings, “controlled by” and “under common control with”) means
the possession, directly or indirectly, of the power to direct or cause the direction of management
or policies of a Person, whether through the ownership of securities or partnership or other
ownership interests, by contract or otherwise.
“Antitrust Laws” means the Xxxxxxx Act, as amended, the Xxxxxxx Act, as amended, the HSR Act,
and the Federal Trade Commission Act, as amended, and all other applicable Laws issued by a
Governmental Authority that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade or harm to competition.
“Business Day” means a day except a Saturday, a Sunday or other day on which the SEC or banks
in the City of New York are authorized or required by Law to be closed.
“Company Intellectual Property” means all Intellectual Property used in or necessary for the
conduct of the business of the Company or any of its Subsidiaries, or material Intellectual
Property owned or held for use by the Company or any of its Subsidiaries.
“Company SAP Statements” means the statutory statements of each of the Company Insurance
Subsidiaries as filed with the insurance departments in their
54
respective jurisdictions of domicile for the quarter ended March 31, 2010 and the years ended
December 31, 2009 and 2008.
“Company SEC Documents” means any report, schedule, form, certification, prospectus and
registration, proxy or other statement filed or furnished by the Company, as applicable, with the
SEC, together with all exhibits and schedules thereto and documents incorporated by reference
therein.
“Confidentiality Agreement” means the Confidentiality Agreement, dated as of December 9, 2009,
between the Company and GS Capital Partners VI Fund, L.P., as it may be amended from time to time.
“Contract” means loan or credit agreement, debenture, note, bond, mortgage, indenture, deed of
trust, license, lease, contract or other agreement, instrument or obligation.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“GAAP” means generally accepted accounting principles in the United States.
“Governmental Authority” means any government, court, regulatory or administrative agency,
commission or authority or other governmental instrumentality, federal, state or local, domestic,
foreign or multinational.
“HSR Act” means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended.
“Insurance Pool” means any insurance pool in which any Subsidiary of the Company currently
participates or previously participated, including with respect to the administration or operation
of such pool or the underwriting of risks thereunder.
“Intellectual Property” means all right, title and interest in or relating to intellectual
property, whether protected, created or arising under the laws of the United States or any other
jurisdiction, including: (i) all patents and applications therefor, including all continuations,
divisionals, and continuations-in-part thereof and patents issuing thereon, along with all
reissues, reexaminations and extensions thereof; (ii) all trademarks, service marks, trade names,
service names, brand names, trade dress rights, logos, corporate names, trade styles, logos and
other source or business identifiers and general intangibles of a like nature, together with the
goodwill associated with any of the foregoing, along with all applications, registrations, renewals
and extensions thereof; (iii) all Internet domain names; (iv) all copyrights and all mask work,
database and design rights, whether or not registered or published, all registrations and
recordations thereof and all applications in connection therewith, along with all reversions,
extensions and renewals thereof; (iv) trade secrets; (v) all other intellectual property rights
arising from or relating to Technology, and (vi) all Contracts granting any right relating to or
under the foregoing.
55
“Knowledge” means, with respect to the Company and its Subsidiaries, the actual knowledge
after reasonable inquiry of the individuals set forth in Section 8.11(a) of the Company Disclosure
Schedule.
“Laws” means laws (including common law), statutes, ordinances, codes, rules, regulations,
decrees and orders of Governmental Authorities.
“Material Adverse Effect” means, with respect to any party, any event, occurrence, state of
facts, condition, change, development or effect (“Effect”) that individually or in the aggregate,
with all other Effects, is, or would reasonably be expected to be, materially adverse to the
business, assets, properties, results of operations or condition (financial or otherwise) of such
party and its Subsidiaries, taken as a whole; provided that none of the following, alone or
in combination, shall constitute or be deemed to contribute to a Material Adverse Effect, or shall
otherwise be taken into account in determining whether a Material Adverse Effect has occurred or
would reasonably be likely to occur: (i) any change in the conditions in the U.S. or global
economy or capital or financial markets generally, including changes in interest rates or exchange
rates or relating to the industry or segment thereof in which the Company or any of its
Subsidiaries operates in general; (ii) any change in general legal (including proposed or adopted
legislation or any other proposal or enactment by any Governmental Authority), tax, regulatory,
political or business conditions in the geographic regions in which the Company or any of its
Subsidiaries is operated; (iii) any change, or proposed change, in any applicable Law relating to
the industries or markets in which the Company or any of its Subsidiaries is operated; (iv) any
change in general economic conditions in the industries or markets in which the Company or any of
its Subsidiaries is operated or in the geographic areas in which the Company or any of its
Subsidiaries operate; (v) national or international political conditions, including any engagement
in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the
occurrence of any military or terrorist attack occurring prior to, on or after the date of this
Agreement; (vi) changes in accounting requirements or principles or the interpretation thereof,
including GAAP or SAP; (vii) the negotiation, execution or announcement of, the performance of
obligations under, or the consummation of the transactions contemplated by, this Agreement; (viii)
earthquakes, hurricanes, floods or other natural disasters; (ix) shortfalls or declines in
revenues, earnings or margins of the Company or any of its Subsidiaries (including seasonal
reductions) or any failure to meet any internal or external projections, forecasts or estimates of
revenues, earnings or other financial performance of or for the Company or any of its Subsidiaries
for any period; (x)(A) any action taken by Parent, Merger Sub, or any of their respective
Affiliates or (B) the omission of an action that was required to be, or reasonably should have
been, taken by Parent, Merger Sub, or any of their respective Affiliates; (xi) any action taken by
the Company or any of its Affiliates at the request or with the consent of Parent, Merger Sub, or
any of their respective Affiliates; (xii) changes, in and of themselves, in the market price or
trading volume of the Company Shares on the NYSE; and (xiii) any matter set forth in the Company
Disclosure Schedule or that is cured prior to the Effective Time; provided, however, in the cases
of clauses (i)-(iv) above, such Effect shall not be excluded from any determination of whether a
Company Material Adverse Effect has occurred to the extent that such Effect has had a
disproportionate effect on the Company
56
and its Subsidiaries, taken as a whole, relative to other participants in the property and
casualty industry in similar geographic areas in which the Company and its Subsidiaries operate.
“Material Licenses” means (i) all material licenses, royalty agreements, and other rights
granted by the Company or any of its Subsidiaries to any Person with respect to any Intellectual
Property owned by the Company or any of its Subsidiaries and (ii) all material licenses,
agreements, and other rights granted by any Person to the Company or any of its Subsidiaries with
respect to any Intellectual Property (other than “shrink wrapped” or “off the shelf” Software
licensed to the Company or any of its Subsidiaries on standard terms for less than $50,000 per
annum for any such license).
“NYSE” means New York Stock Exchange, Inc.
“Owned Intellectual Property” means (i) each issued patent owned by the Company or any of its
Subsidiaries, each pending patent application filed by or on behalf of the Company or any of its
Subsidiaries, each trademark registration, service xxxx registration, and copyright registration
owned by the Company or any of its Subsidiaries, each application for trademark registration,
service xxxx registration, and copyright registration made by or on behalf of the Company or any of
its Subsidiaries, each domain name registered by or on behalf of the Company or any of its
Subsidiaries, each material trade name, d/b/a, unregistered trademark, and unregistered service
xxxx used by the Company or any of its Subsidiaries in connection with its business, and (ii)
material Software developed by or for the Company or any of its Subsidiaries and owned by the
Company or any of its Subsidiaries.
“Person” means an individual, a corporation, a limited liability company, a partnership, an
association, a trust or any other entity, including a Governmental Authority.
“Permitted Liens” means (i) statutory Liens for Taxes, assessments or other similar charges by
Governmental Authorities securing payments not yet due, (ii) mechanics’, materialmen’s, carriers’,
workmen’s, warehouseman’s, repairmen’s, landlords’ and similar Liens which arise in the ordinary
course of business and (iii) such other Liens or imperfections of title that, individually or in
the aggregate, do not, and would not reasonably be expected to, materially detract from the value
of, or materially impair the existing use of, the property or asset affected by the applicable
Lien.
“Pool Agreement” means any Contract to which the Company or any of its Subsidiaries is a party
relating in any manner to an Insurance Pool.
“Pool Member” means any current or former member of an Insurance Pool (other than a Company
Insurance Subsidiary).
“SAP” means statutory accounting principals prescribed or permitted by the domiciliary state
insurance department of the applicable Company Insurance Subsidiary.
57
“Xxxxxxxx-Xxxxx Act” means the Sarbanes Oxley Act of 2002, as amended.
“SEC” means the U.S. Securities and Exchange Commission.
“Software” means any and all (i) computer programs, including any and all software
implementations of algorithms, models and methodologies, whether in source code or object code;
(ii) databases and compilations, including any and all data and collections of data, whether
machine readable or otherwise; (iii) descriptions, flow-charts and other work product used to
design, plan, organize and develop any of the foregoing, screens, user interfaces, report formats,
firmware, development tools, templates, menus, buttons and icons; and (iv) all documentation,
including user manuals and other training documentation related to any of the foregoing.
“Subsidiary” when used with respect to any party, means any corporation, limited liability
company, partnership, association, trust or other entity (i) the accounts of which would be
consolidated with those of such party in such party’s consolidated financial statements if such
financial statements were prepared in accordance with GAAP or (ii) of which securities or other
ownership interests representing fifty percent (50%) or more of the equity or fifty percent (50%)
or more of the ordinary voting power (or, in the case of a partnership, fifty percent (50%) or more
of the general partnership interests) are, as of such date, owned by such party (either alone,
directly, or indirectly through, or together with, one or more of its Subsidiaries).
“Subsidiary Documents” means the certificates of incorporation and by-laws (or comparable
organizational documents) of each of the Company’s Subsidiaries.
“Tax” or “Taxes” means (i) all United States federal, state, local, and foreign income,
excise, gross receipts, gross income, ad valorem, profits, gains, property, capital, sales,
transfer, use, payroll, employment, severance, withholding, backup withholding, duties,
intangibles, franchise, and other taxes, charges, fees, levies or like assessments, (ii) any
penalties and additions to tax and interest thereon, and (iii) any liability in respect of any item
described in clause (i) or (ii) payable by reason of contract, assumption, transferee liability,
operation of law or otherwise.
“Tax Return” means any return, declaration, report, claim for refund, or information return or
statement relating to Taxes, including any schedule or attachment thereto, and including any
amendment thereof, supplied or required to be supplied to a Governmental Authority.
“Technology” means, collectively, all Software, information, designs, formulae, algorithms,
procedures, methods, techniques, ideas, know-how, research and development, technical data,
programs, subroutines, tools, materials, specifications, processes, inventions (whether patentable
or unpatentable and whether or not reduced to practice), apparatus, creations, improvements, works
of authorship and other similar materials, and all recordings, graphs, drawings, reports, analyses,
and other writings, and other tangible embodiments of the foregoing, in any form whether or not
specifically
58
listed herein, and all related technology, that are used in, incorporated in, embodied in,
displayed by or relate to, or are used in connection with the foregoing.
“Transactions” refers collectively to this Agreement and the transactions contemplated hereby,
including the Merger and the Shareholders Agreement.
“United States” means the United States of America.
(b) The following terms are defined in the provision of this Agreement set forth opposite such
term below:
Adverse Recommendation Change
|
5.2 | (b) | ||
Agreed Courts
|
8.7 | (b) | ||
Agreement
|
Preamble | |||
Bankruptcy and Equity Exception
|
3.3 | (a) | ||
Balance Sheet Date
|
3.7 | |||
Book-Entry Shares
|
2.1 | (c) | ||
Certificate
|
2.1 | (c) | ||
Certificate of Merger
|
1.3 | |||
Closing
|
1.2 | |||
Closing Date
|
1.2 | |||
Code
|
2.6 | |||
Company
|
Preamble | |||
Company Acquisition Agreement
|
5.2 | (b) | ||
Company Board
|
3.3 | (a) | ||
Company Charter Documents
|
3.1 | (c) | ||
Company Contract
|
3.16(a)(xi) | |||
Company Disclosure Schedule
|
Article III | |||
Company DSU
|
2.7 | (b) | ||
Company Employees
|
5.11 | (c) | ||
Company Insurance Intermediary
|
3.20 | (a) | ||
Company Insurance Subsidiaries
|
3.20 | (a) | ||
Company Material Adverse Effect
|
3.1 | (a) | ||
Company Option
|
2.7 | (a) | ||
Company Plans
|
3.14 | (a) | ||
Company Producers
|
3.20 | (f) | ||
Company PSU
|
2.7 | (b) | ||
Company Recommendation
|
5.1 | (c) | ||
Company Related Person / Company Related Persons
|
8.8 | (e) | ||
Company Reinsurance Agreements
|
3.20 | (b) | ||
Company RSU
|
2.7 | (b) | ||
Company Shareholder Approval
|
3.3 | (c) | ||
Company Shareholders Meeting
|
5.1 | (b) | ||
Company Shares
|
2.1 | |||
Company Stock Plans
|
2.7 | (a) | ||
Company Termination Fee
|
7.3 | (a) | ||
Effective Time
|
1.3 | |||
59
Engagement Letter
|
3.23 | |||
Environmental Laws
|
3.15(b)(i) | |||
ERISA
|
3.14(a) | |||
ERISA Affiliates
|
3.14(a) | |||
Exchange Fund
|
2.3(a) | |||
Guarantee
|
Recitals | |||
Guarantor
|
Recitals | |||
Hazardous Materials
|
3.15(b)(ii) | |||
Indemnitee / Indemnitees
|
5.8(a) | |||
Liens
|
3.2(c) | |||
Material Contracts
|
3.16(a)(x) | |||
Maximum Amount
|
5.8(c) | |||
Merger
|
Recitals | |||
Merger Consideration
|
2.1(c) | |||
Merger Sub
|
Preamble | |||
Negotiating Committee
|
3.3(b) | |||
NYBCL
|
1.1 | |||
Option Consideration
|
2.7(a) | |||
Outside Date
|
7.1(b)(i) | |||
Parent
|
Preamble | |||
Parent Disclosure Schedule
|
Article IV | |||
Parent Related Person / Parent Related Persons
|
8.8(d) | |||
Paying Agent
|
2.3(a) | |||
Permits
|
3.10 | |||
Proxy Statement
|
3.5 | |||
Redemption Request
|
5.13 | |||
Representatives
|
5.2(a) | |||
Required Company SEC Documents
|
3.6(a) | |||
Restraints
|
6.1(d) | |||
Securities Act
|
3.2(c) | |||
Shareholders Agreement
|
Recitals | |||
Superior Proposal
|
5.2(f)(i) | |||
Surviving Corporation
|
1.1 | |||
Takeover Proposal
|
5.2(f)(ii) | |||
WARN
|
3.14(h) | |||
Underwater Option
|
2.7(a) | |||
SECTION 8.12. Interpretation.
(a) When a reference is made in this Agreement to an Article, a Section, Exhibit or Schedule,
such reference shall be to an Article of, a Section of, or an Exhibit or Schedule to, this
Agreement unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used
in this Agreement, they shall be deemed to be followed by the words “without limitation.” The
words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement
shall refer to this
60
Agreement as a whole and not to any particular provision of this Agreement. The word “extent”
in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and
such phrase shall not mean simply “if.” All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered pursuant hereto unless
otherwise defined therein. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well as to the feminine
and neuter genders of such term. Any agreement, instrument or statute defined or referred to
herein or in any agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented, including (in the
case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession
of comparable successor statutes and references to all attachments thereto and instruments
incorporated therein. References to a Person are also to its permitted successors and assigns.
(b) The parties hereto have participated jointly in the negotiation and drafting of this
Agreement and, in the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision
of this Agreement.
SECTION 8.13. Counterparts. This Agreement may be executed in counterparts (each of
which shall be deemed to be an original but all of which taken together shall constitute one and
the same agreement) and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
[Signature Page Follows]
61
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered as of the date first above written.
| PROSIGHT SPECIALTY INSURANCE HOLDINGS, INC. |
||||
| By: | /s/ Xxxxx Xxxxxx | |||
| Name: | Xxxxx Xxxxxx | |||
| Title: | Vice President | |||
| PSI MERGER SUB INC. |
||||
| By: | /s/ Xxxxx Xxxxxx | |||
| Name: | Xxxxx Xxxxxx | |||
| Title: | Vice President | |||
| NYMAGIC, INC. |
||||
| By: | /s/ Xxxxxx X. Xxxxxxxx, III | |||
| Name: | Xxxxxx X. Xxxxxxxx, III | |||
| Title: | President and Chief Executive Officer | |||
TABLE OF CONTENTS
| Page | ||||
ARTICLE I THE MERGER |
1 | |||
Section 1.1. The Merger |
1 | |||
Section 1.2. Closing |
2 | |||
Section 1.3. Effective Time |
2 | |||
Section 1.4. Effects of the Merger |
2 | |||
Section 1.5. Certificate of Incorporation and By-laws of the Surviving Corporation |
2 | |||
Section 1.6. Directors and Officers of the Surviving Corporation |
2 | |||
ARTICLE II EFFECT OF THE MERGER ON CAPITAL STOCK |
3 | |||
Section 2.1. Effect on Capital Stock |
3 | |||
Section 2.2. No Appraisal Rights |
3 | |||
Section 2.3. Exchange of Certificates |
4 | |||
Section 2.4. Termination of Fund |
5 | |||
Section 2.5. No Liability |
6 | |||
Section 2.6. Withholding Taxes |
6 | |||
Section 2.7. Company Stock Plans |
6 | |||
Section 2.8. Adjustments |
7 | |||
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
7 | |||
Section 3.1. Organization, Standing and Corporate Power |
8 | |||
Section 3.2. Capitalization |
8 | |||
Section 3.3. Authority; Voting Requirements |
9 | |||
Section 3.4. Non-Contravention |
10 | |||
Section 3.5. Governmental Approvals |
11 | |||
Section 3.6. Company SEC Documents; Internal Controls |
11 | |||
Section 3.7. Undisclosed Liabilities |
13 | |||
Section 3.8. Absence of Certain Changes or Events |
13 | |||
Section 3.9. Legal Proceedings |
13 | |||
Section 3.10. Compliance With Laws; Permits |
14 | |||
Section 3.11. Company SAP Statements |
14 | |||
i
TABLE OF CONTENTS
(continued)
(continued)
| Page | ||||
Section 3.12. Information Supplied |
14 | |||
Section 3.13. Tax Matters |
14 | |||
Section 3.14. Employee Benefits and Labor Matters |
16 | |||
Section 3.15. Environmental Matters |
18 | |||
Section 3.16. Contracts |
19 | |||
Section 3.17. Title to Property |
21 | |||
Section 3.18. Technology and Intellectual Property |
21 | |||
Section 3.19. Insurance |
23 | |||
Section 3.20. Insurance Matters |
23 | |||
Section 3.21. Policy Reserves |
26 | |||
Section 3.22. Opinion of Financial Advisor |
26 | |||
Section 3.23. Brokers |
26 | |||
Section 3.24. Rating |
26 | |||
Section 3.25. State Takeover Statutes |
27 | |||
Section 3.26. No Other Representations or Warranties |
27 | |||
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB |
27 | |||
Section 4.1. Organization |
27 | |||
Section 4.2. Ownership and Operations of Merger Sub |
27 | |||
Section 4.3. Authority |
28 | |||
Section 4.4. Non-Contravention |
28 | |||
Section 4.5. Governmental Approvals |
28 | |||
Section 4.6. Legal Proceedings |
29 | |||
Section 4.7. Information Supplied |
29 | |||
Section 4.8. Financing |
29 | |||
Section 4.9. Ownership of Company Shares |
29 | |||
Section 4.10. Guarantee |
29 | |||
Section 4.11. No Other Representations or Warranties |
29 | |||
ARTICLE V ADDITIONAL COVENANTS AND AGREEMENTS |
30 | |||
Section 5.1. Proxy Statement; Company Shareholders Meeting |
30 | |||
ii
TABLE OF CONTENTS
(continued)
(continued)
| Page | ||||
Section 5.2. Takeover Proposals; Board Recommendation; Etc |
31 | |||
Section 5.3. Conduct of Business by the Company |
34 | |||
Section 5.4. Conduct of Business by Parent and Merger Sub |
37 | |||
Section 5.5. Reasonable Best Efforts |
37 | |||
Section 5.6. Public Announcements |
39 | |||
Section 5.7. Access to Information; Confidentiality |
39 | |||
Section 5.8. Indemnification and Insurance |
40 | |||
Section 5.9. Section 16 Matters |
41 | |||
Section 5.10. Notification of Certain Matters |
41 | |||
Section 5.11. Employee Matters |
42 | |||
Section 5.12. Securityholder Litigation |
43 | |||
Section 5.13. Redemption Requests |
43 | |||
Section 5.14. Fees and Expenses |
43 | |||
ARTICLE VI CONDITIONS PRECEDENT |
43 | |||
Section 6.1. Conditions to Each Party’s Obligation to Effect the Merger |
43 | |||
Section 6.2. Conditions to Obligations of Parent and Merger Sub |
44 | |||
Section 6.3. Conditions to Obligation of the Company |
45 | |||
Section 6.4. Frustration of Closing Conditions |
45 | |||
ARTICLE VII TERMINATION |
46 | |||
Section 7.1. Termination |
46 | |||
Section 7.2. Effect of Termination |
47 | |||
Section 7.3. Termination Fee |
47 | |||
ARTICLE VIII MISCELLANEOUS |
49 | |||
Section 8.1. Survival |
49 | |||
Section 8.2. Amendment or Supplement |
49 | |||
Section 8.3. Extension of Time, Waiver |
49 | |||
Section 8.4. Assignment |
49 | |||
Section 8.5. Entire Agreement |
49 | |||
Section 8.6. No Third Party Beneficiaries |
50 | |||
iii
TABLE OF CONTENTS
(continued)
(continued)
| Page | ||||
Section 8.7. Governing Law; Jurisdiction; Waiver of Jury Trial |
50 | |||
Section 8.8. Specific Enforcement |
50 | |||
Section 8.9. Notices |
52 | |||
Section 8.10. Severability |
54 | |||
Section 8.11. Definitions |
54 | |||
Section 8.12. Interpretation |
60 | |||
Section 8.13. Counterparts |
61 | |||
iv
