Vote Required; Share Ownership of Directors and Executive
Officers
In order
to adopt the Merger Agreement, holders of at least a majority
of the outstanding
shares of our common stock entitled to vote must vote in favor of adopting the
Merger Agreement. Each holder of our common stock is entitled to one
vote for each share held of record on the record date.
If you withhold a vote or abstain
from voting on the proposal relating to the adoption of the Merger Agreement, it
will have the same effect as a vote “AGAINST” the proposal.
As of the
record date, our executive officers (who comprise Fred R. Lowe, our
Chairman, President and Chief Executive Officer; Debra Cerre-Ruedisili, our
Executive Vice President and Chief Operating Officer; Kumar Gursahaney, our
Senior Vice President and Chief Financial Officer; George Harris, our Senior
Vice President, General Counsel and Secretary; Colin Williams, our President of
the Texas Region; Lisa Perrizo, our President of the Midwest Region;
Timothy J. Spear, our President of the Mid-Atlantic Region and Frank
Pinson, our President of the Southern Region) as a group and our directors
(other than Fred R. Lowe and Debra Cerre-Ruedisili, who are also executive
officers) as a group owned and were entitled to vote 302,953 shares and
1,007,221 shares, respectively, of our common stock, which represent
approximately [2.0]% and [6.6]%, respectively, of our total common stock
outstanding on that date.
Each of
our directors and executive officers has indicated that he or she intends to
vote in favor of the adoption of the Merger Agreement and for the approval of
the adjournment, if necessary or appropriate, of the special meeting, but, in
each case, has no obligation to do so other than as described in the next
sentence. In connection with the Merger Agreement,
(a) Fred R. Lowe, (b) Sam Stephens, one of our directors,
and (c) Welsh, Carson, Anderson & Stowe VII L.P., an entity which
Paul B. Queally, one of our directors, may be deemed to have shared
investment and voting power of, who collectively hold and are entitled to vote
approximately [17.2]% of our total common stock outstanding on the record date,
have entered into separate voting agreements in which each has agreed to vote in
favor of the adoption of the Merger Agreement and the transactions contemplated
thereby and the proposal to adjourn the special meeting, subject to specified
exceptions.
Assuming
that the directors, as a group, the executive officers, as a group, Welsh,
Carson, Anderson & Stowe VII L.P. and WCAS Healthcare Partners, L.P., which
also entered into a voting agreement on the same terms as summarized above, who
collectively are entitled to vote approximately [17.7]% of our total common
stock outstanding on the record date, vote in favor of the adoption of the
Merger Agreement, other stockholders holding at least 4,943,286 shares of our
common stock, representing approximately [32.3]% of all shares outstanding on
the record date, must vote in favor of the adoption of the Merger Agreement in
order for this proposal to be approved.
Approval
of the proposal to adjourn the special meeting, if necessary or appropriate,
requires the favorable vote of a majority of the votes cast at the special
meeting, in person or by proxy, even if less than a quorum. The
Voting Agreement Parties, holding approximately [17.2%] of our outstanding
voting power, have unconditionally and irrevocably agreed to vote all of their
shares in favor of the approval of the proposal to adjourn the special
meeting. For the proposal to adjourn the special meeting, abstentions
will have no effect on the outcome, since an abstention is not a vote
cast.
Under
stock market rules currently in effect, brokerage firms and nominees have the
authority to vote their customers’ unvoted shares on certain “routine” matters
if the customers have not furnished voting instructions within a specified
period prior to the special meeting. However, the proposal to adopt
the Merger Agreement and the proposal to adjourn the special meeting, if
necessary or appropriate, to solicit additional proxies, are not considered
“routine” matters, and brokerage firms and nominees will not be able to vote the
shares of customers from whom they have not received voting instructions with
regard to the proposal to adopt the Merger Agreement or the proposal to adjourn
the special meeting. If you hold your shares directly in your own
name, they will not be counted as shares present for the purposes of
establishing a quorum or be voted if you do not provide a proxy or attend the
special meeting and vote the shares yourself.
Broker
non-votes occur when shares held by a broker are not voted with respect to a
proposal because (a) the broker has not received voting instructions from
the beneficial owner of the shares and (b) the broker lacks the authority
to vote the shares at the broker’s discretion. Broker non-votes will
have no effect on the proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies because broker non-votes will not be
considered votes cast, but will be counted as shares present and entitled to
vote for the purposes of determining the presence of a quorum. With
regard to the adoption of the Merger Agreement, the shares represented by broker
non-votes will also be considered present at the special meeting for the
purposes of determining a quorum, but will have the same effect as a vote
“AGAINST” the proposal because holders of a majority of the outstanding shares
of our common stock entitled to vote must vote in favor of the adoption of the
Merger Agreement in order for this proposal to be approved.
Voting of Proxies
After
carefully reading and considering the information contained in the proxy
statement and even if you plan to attend the special meeting, you should either
sign and date the enclosed proxy card and mail the proxy card in the enclosed
postage-paid envelope as soon as possible or promptly submit your proxy by
telephone or over the Internet following the instructions on the proxy card so
that your shares of common stock are represented at the special
meeting. If you elect to submit your proxy by telephone or via the
Internet, you will need to provide the control number set forth on the enclosed
proxy card.
If no
specification is indicated, all shares of common stock represented by valid
proxies that have been submitted will be voted “FOR” the adoption of the Merger
Agreement and “FOR” the adjournment of the special meeting, if necessary or
appropriate, to solicit additional proxies.
We do not
expect that any matter other than the proposal to adopt the Merger Agreement and
to adjourn the special meeting, if necessary or appropriate, will be brought
before the special meeting. If, however, our Board properly presents
other matters, each of the persons named as a proxy will vote in accordance with
his judgment as to matters that he believes to be in the best interests of the
stockholders. A proxy in the accompanying form or properly submitted
by telephone or over the Internet will give authority to Fred R. Lowe, our
Chairman, President and Chief Executive Officer, Debra Cerre-Ruedisili, our
Executive Vice President and Chief Operating Officer, and Kumar Gursahaney, our
Senior Vice President and Chief Financial Officer, and each of them, to vote on
such matters at their respective discretion and they intend to do so in
accordance with their respective best judgment on any such matter.
Revocability of Proxies
The grant
of a proxy on the enclosed form of proxy or submission of a proxy by telephone
or over the Internet pursuant to the instructions on the proxy card does not
preclude a stockholder from voting in person at the special
meeting. Until your proxy is voted at the special meeting, you can
revoke your proxy and change your vote in any of the following
ways:
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by
giving written notice of the revocation to our Secretary;
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by
properly submitting another proxy by mail, telephone or the Internet, with
a later date; or
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by
voting in person at the special meeting (if your shares are registered
directly on our books and not held through a broker, bank or other
nominee).
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Your
attendance at the special meeting will not, in and of itself, constitute a
revocation of your proxy.
If you
have instructed a broker to vote your shares, the above-described options for
changing your vote do not apply; instead, you must follow the instructions
received from your broker to change your vote.
Solicitation of Proxies
We will bear the cost of
solicitation
of proxies by
us. In addition to soliciting stockholders by mail, our directors,
officers and employees, without additional remuneration, may solicit proxies in
person or by telephone or other means of electronic communication. We
will not pay these individuals for their solicitation activities but will
reimburse them for their reasonable out-of-pocket expenses. Brokers
and other custodians, nominees and fiduciaries will be requested to forward
proxy-soliciting material to the owners of stock held in their names, and we
will reimburse such brokers and other custodians, nominees and fiduciaries for
their reasonable out-of-pocket costs. Solicitation by our directors,
officers and employees may also be made of some stockholders in person or by
mail, telephone or other means of electronic communication following the
original solicitation.
We have
retained the firm of MacKenzie Partners, Inc. to assist in the solicitation of
proxies for a base fee of $7,500, plus reasonable out-of-pocket expenses, and
have agreed to indemnify MacKenzie Partners, Inc.
for specified
liabilities and expenses.
You should not send your stock
certificates with your proxy
. A letter of transmittal with
instructions for the surrender of our common stock certificates will be mailed
to you promptly after the consummation of the merger.
THE MERGER
This
section describes material aspects of the merger, including the Merger
Agreement. Although we believe that the description covers the
material terms of the Merger Agreement and the transactions contemplated
thereby, this summary may not contain all of the information that is important
to you. You should read carefully this entire document and the other
documents referred to in this proxy statement for a more complete understanding
of the Merger Agreement and the transactions contemplated thereby.
The Companies
AmCOMP
Incorporated
701 U.S.
Highway One
North
Palm Beach, Florida 33408
(561)
840-7171
AmCOMP
Incorporated is an insurance holding company whose wholly-owned subsidiaries,
AmCOMP Preferred and AmCOMP Assurance, are mono-line workers’ compensation
insurers with products that focus on value-added services to
policyholders. Currently marketing insurance policies in 17 core
states and targeting small to mid-sized employers in a variety of industries,
AmCOMP distributes its products through independent agencies.
Employers
Holdings, Inc.
9790
Gateway Drive
Reno,
Nevada 89521-5906
(775)
327-2754
Employers
Holdings, Inc. is a holding company with subsidiaries that are specialty
providers of workers’ compensation insurance and services focused on select,
small businesses engaged in low-to-medium hazard industries. The
company, through its subsidiaries, operates in 11 states from 13 office
locations. The company’s insurance subsidiaries, Employers Insurance
Company of Nevada and Employers Compensation Insurance Company are rated A-
(Excellent) by the A.M. Best Company.
Sapphire
Acquisition Corp.
c/o
Employers Holdings, Inc.
9790
Gateway Drive
Reno,
Nevada 89521-5906
(775)
327-2754
Sapphire
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent, was formed solely for the purpose of effecting the merger and the
transactions related to the Merger Agreement. It has not engaged in
any business except in furtherance of this purpose.
Background of the Merger
Our Board
continually reviews our results of operations and competitive position, as well
as the strategic alternatives available to us. During the
eighteen-month period from June 2006 through December 2007, we received nine
unsolicited expressions of interest to explore the possibility of a business
combination. In all but one instance, these discussions began with a
call to Fred Lowe, our Chairman, President and Chief Executive
Officer. After preliminary discussions with management, five of these
nine parties who expressed interest in a possible transaction declined to
execute non-disclosure agreements and proceed any further due to lack of
strategic fit, concerns about the condition of our markets or differences in
perceived value. The other four interested parties, including Parent,
executed non-disclosure agreements, and each provided a written expression of
interest.
On May 3,
2007, a member of our Board received a written indication of interest regarding
a possible acquisition of us from a publicly traded insurance holding company,
which we refer to as AI. This was the first expression of interest
from AI. This was followed on May 9, 2007, by a written indication of
interest from a private group, which we refer to as BI. Subject to
due diligence, AI indicated its preliminary interest in a transaction to acquire
us based on a valuation in the range of 1.15 to 1.30x then-stated stockholders’
equity, which was a premium of approximately 20% to the market price of our
common stock at that time. BI’s indication of interest in a cash
purchase included an initial valuation range of $11.75 to $12.50 per
share.
On May
13, 2007, our Board convened via teleconference to discuss the proposals from AI
and BI. At this time, it was determined that it would be necessary to
retain a financial advisor to review the indications of interest, oversee the
due diligence process and act as intermediary between us and the interested
parties. We retained Raymond James on May 22, 2007 to act in this
capacity.
On May
16, 2007 and May 30, 2007, we entered into confidentiality agreements with AI
and BI, respectively. Over the course of the next several weeks,
members of our management and Raymond James met with members of the senior
management teams of both AI and BI while they performed limited operational,
actuarial, and financial due diligence.
Following
this due diligence, on June 22, 2007, AI submitted a letter to our Board
indicating that it would be interested in pursuing a transaction at a price of
$11.00 per share, subject to the completion of confirmatory due
diligence. Our Board deemed this proposal to be inadequate and it was
the consensus of the Board to cease a continuing dialogue with AI if it was
unwilling to increase the value of its proposal. After communicating
this to AI’s financial advisor, AI withdrew its indication of interest to pursue
an acquisition, but indicated that it would be willing to reconsider its
interest following the release of our second quarter financial
information. Although there was ongoing dialogue between Raymond
James and AI’s financial advisor through the beginning of July 2007, AI never
indicated a willingness to revise the value of its initial indication of
interest.
On July
3, 2007, Raymond James received an email communication from BI which indicated
that, following its due diligence, it would be unable to propose a transaction
that was consistent with the valuation range set forth in its letter dated May
9, 2007. BI further indicated that it might be interested in
revisiting the opportunity, potentially at a valuation consistent with its
initial range, once our second quarter financial results were
available. Although our Board did not wish to foreclose such a
possibility, on July 9, 2007, it instructed Raymond James to terminate
discussions with BI.
On August
8, 2007, we released our second quarter financial results. On August
23, 2007, BI submitted a proposal to acquire us for a cash price of $10.50 per
share, which was the consensus of the Board to reject.
During
September 2007, we were approached regarding a potential merger by two
additional parties, a mutual insurance company, which we refer to as CI, and
Parent. Following preliminary discussions, we executed non-disclosure
agreements with CI on September 19, 2007 and with Parent on October 8,
2007. Prior to beginning their due diligence, both parties were
instructed that the Board would be unlikely to support offers below $13.00 per
share, and that if at any time during the due diligence process, either party
concluded that a transaction at this price would not be possible, all due
diligence efforts would cease. Both CI and Parent acknowledged to
these terms and began due diligence shortly after execution of the
confidentiality agreements.
At
management’s direction, on October 15, 2007, Raymond James advised both CI and
Parent, in writing, that the deadline to submit non-binding indications of
interest would be 5:00 p.m. on October 26, 2007. These parties
were informed that the indications of interest should include the proposed terms
of the transaction, including the consideration to be paid to holders of our
common stock, a schedule for completing due diligence and any other requirements
necessary to close the transaction.
On
October 24, 2007, Parent submitted a non-binding proposal for a merger
transaction with an indicated range of $152.0 million to $212.0 million in
cash. Parent’s letter indicated that it was prepared to complete its
due diligence in 30 days, but indicated that any final offer would be contingent
upon satisfactory completion of due diligence and final approval of its board of
directors.
On
October 25, 2007, CI submitted a non-binding proposal to acquire all of our
outstanding common stock and common stock equivalents for a range of $185.0
million to $200.0 million, payable in cash. CI indicated that it was
willing to move on an expedited basis to complete confirmatory due diligence,
contingent upon our agreement to a 90-day period of exclusivity. In
addition, CI sought reimbursement for its out-of-pocket due diligence expenses
if we breached the exclusivity agreement. CI’s final offer would be
contingent upon satisfactory completion of due diligence, final approval from
its board of directors, confirmation of our financial statements as of June 30,
2007 and affirmation that the combined entity would receive an “A-” rating from
A.M. Best.
Our Board
met on October 29, 2007 via teleconference to review the proposals received from
CI and Parent. Raymond James presented a summary of the terms of each
letter to our Board as well as an overview of both entities. After
careful review, our Board elected to proceed with full due diligence with Parent
and CI. At the same time, our Board instructed Raymond James to
reaffirm to Parent’s Chief Executive Officer, Douglas D. Dirks, that while the
high end of Parent’s proposed range was acceptable, our Board was not prepared
to support a price per share of less than $13.00. Our Board further
instructed Raymond James to communicate this same message to CI, and also to
inform CI that we would not agree to a period of exclusivity at that time or
agree to reimburse CI for any out-of-pocket expenses. On October 30,
2007, Raymond James communicated these messages to both Parent and to CI’s
financial advisor. Both Parent and CI acknowledged to these terms and
proceeded to full due diligence.
During
the month of November, both CI and Parent performed extensive operational,
financial, actuarial, and legal due diligence in preparation for meetings with
members of our senior management.
From
December 1, 2007 through December 4, 2007 members of Parent’s senior management
performed on-site due diligence and completed interviews with members of our
senior management. At the completion of its on-site diligence, Parent
indicated to Raymond James that there were a small number of outstanding items
it would need in order to complete its due diligence and submit a binding
offer. Over the next two weeks, we worked to provide these
outstanding items.
Following
its examination and detailed review of documents, CI was scheduled to perform
on-site due diligence from December 10, 2007 through December 12,
2007. At a meeting of the board of directors of CI’s parent on
December 7, 2007, however, CI’s Chief Executive Officer was informed that the
board of directors of CI’s parent would no longer support an acquisition of us
and that CI should remove itself from the process. CI cited
deteriorating market conditions in the workers’ compensation segment as the
reason for electing to remove itself from the process.
On
December 10, 2007, Parent submitted a revised non-binding proposal for a merger
transaction with cash consideration of $12.00 per share. In its
letter, Parent indicated that it planned to finance the acquisition through a
combination of cash and newly-issued debt securities. Parent
indicated that it would not anticipate including a financing condition in the
definitive merger agreement and that its proposal was subject to final approval
from its board of directors and successful completion of confirmatory due
diligence. The letter also stated that, based on the time and
resources expended up to that point and in light of the resources Parent
anticipated deploying with respect to confirmatory due diligence and contract
negotiations, it would require a 30-day period of exclusivity to continue active
discussion regarding its proposal. This revised letter was
accompanied by an exclusivity agreement and a list of additional due diligence
requirements.
On
December 13, 2007, our Board convened a meeting via conference call to discuss
Parent’s revised non-binding proposal. After discussion, it was
determined that Mr. Lowe should respond directly to Mr. Dirks
regarding Parent’s revised offer. Mr. Lowe was instructed to
convey to Mr. Dirks that Parent’s $12.00 per share offer was
insufficient. Nonetheless, our Board authorized Mr. Lowe to
advise Parent that our Board would (a) agree to grant Parent a period of
exclusivity through January 7, 2008 and (b) had instructed our outside
legal counsel, Olshan Grundman Frome Rosenzweig & Wolosky LLP, to deliver a
draft of the Merger Agreement to Parent and its outside legal counsel, Skadden,
Arps, Slate, Meagher & Flom LLP, no later than December 17, 2007, if
Parent were willing to (a) proceed expeditiously with its confirmatory due
diligence and negotiations of the Merger Agreement, (b) agree to work
toward executing the Merger Agreement by January 7, 2008 and (c) state that
it would be willing to support a price of $12.50 per share.
Mr.
Dirks, responding on Parent’s behalf, agreed to these terms, but indicated that
Parent would need its outside auditor to complete confirmatory financial and
other due diligence. Mr. Dirks further communicated the need for
Parent to speak to A.M. Best to ensure that the acquisition would not jeopardize
the “A-” rating of Parent’s insurance subsidiaries, and that it would need to
speak with the insurance regulatory agencies in both Florida and Nevada to
ensure that there were no regulatory impediments to closing. Based on
certain timing constraints, Parent requested that the period of exclusivity be
extended until January 9, 2008. These terms being agreeable, our
counsel delivered a draft of the Merger Agreement to Parent and their counsel on
December 14, 2007.
Between
December 17, 2007 and December 19, 2007, our counsel and counsel for Parent
negotiated the terms of the exclusivity agreement. On December 19,
2007, we executed the exclusivity agreement with Parent, which provided for an
exclusive negotiating period ending January 9, 2008.
On
December 21, 2007, counsel for Parent sent to our counsel a mark-up of the draft
merger agreement and a draft of the Voting Agreement for use by the Voting
Agreement Parties.
On
December 26, 2007, our executive officers met with our counsel to discuss the
comments to the Merger Agreement delivered by Parent’s counsel on December 21,
2007.
On
December 28, 2007, our counsel delivered to our management and Board a revised
draft of the Merger Agreement, which was discussed with members of our
management and certain members of our Board on a telephonic call on January 2,
2008.
On
January 3, 2008, our Board met via teleconference to discuss the status of the
proposed transaction and the latest draft of the Merger
Agreement. After this meeting and later in the day on January 3,
2008, our counsel delivered a revised draft of the Merger Agreement to Parent
and its counsel.
Between
January 3, 2008 and January 10, 2008, our counsel and counsel for Parent
exchanged numerous drafts and negotiated the final terms and provisions of the
Merger Agreement. In addition, between such dates, counsel for Parent
and each of the Voting Agreement Parties negotiated the final terms and
provisions of the Voting Agreements.
On
January 7, 2008, our Board met via teleconference to discuss any open issues in
the negotiations and to review the latest draft of the Merger
Agreement.
On
January 10, 2008, we completed negotiations with Parent of the terms of the
Merger Agreement, which included a final price per share of
$12.50. On January 10, 2008, a special meeting of our Board was held
to consider the proposed transaction with Parent. Members of our
management and our outside counsel updated the Board on their negotiations and
the resolution of the principal terms of the Merger
Agreement. Raymond James provided to the Board its financial analysis
of the proposed transaction, and then delivered to the Board its oral opinion
(subsequently confirmed in writing) to the effect that, as of January 10, 2008,
and subject to and based upon the assumptions made, matters considered and
limits of the review set forth in its opinion, the $12.50 per share
consideration to be received by the holders of our common stock was fair to our
stockholders from a financial point of view. Our outside counsel
reviewed with the members of the Board their fiduciary duties under Delaware
law, as well as the terms and provisions of the Merger Agreement. The
Board was advised of the negotiations between each of Ms. Cerre-Ruedisili
and Mr. Gursahaney and Parent concerning the Integration Bonus and Enhanced
Severance Agreements. After extensive discussion, including an
in-depth analysis of the reasons for engaging in the transaction, our Board
unanimously determined, with Ms. Cerre-Ruedisili abstaining, that the
merger and the Merger Agreement are advisable and are fair to us and in our best
interest and the best interest of our stockholders. Accordingly, the
Board unanimously approved the Merger Agreement, with Ms. Cerre-Ruedisili
abstaining, and resolved to recommend that our stockholders adopt the Merger
Agreement and approve the transactions contemplated thereby.
On
January 10, 2008, Parent, Merger Sub, and we executed the Merger
Agreement. In addition, the Voting Agreements were executed by Parent
and each of the Voting Agreement Parties. Also on January 10, 2008,
we issued a press release announcing the signing of the Merger
Agreement.
Reasons for the Merger
In
reaching its decision to approve the merger and the Merger Agreement and to
recommend that our stockholders vote to adopt the Merger Agreement, our Board
consulted with senior management, as well as our legal and financial advisors,
reviewed a significant amount of information, and considered a number of
factors, including, among others, the following:
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the
alternatives to the merger (including the possibility of continuing to
operate as an independent entity), the perceived risks of each of the
alternatives, the perceived risks of the merger, the range of possible
benefits to our stockholders of such alternatives and the timing and
likelihood of accomplishing the goals of these alternatives, and our
Board’s assessment that the merger with Parent presented a superior
opportunity to such alternatives;
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the
challenges facing us in our traditional workers’ compensation market,
given the continuing price competition in the market and the fact that we
believed that this price competition would continue for at least 18 to 24
months, compounded by the fact that we do not have an insurance rating
from A.M. Best;
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the
current weakness in the overall economy, particularly the construction
markets, which was having an adverse effect on many of our customers and
resulting in declining payrolls and a corresponding reduction in the
workers’ compensation premium revenue received from these customers;
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the
costs and risks of remaining a public company, including our relatively
small stockholder base and relatively illiquid nature of our common stock;
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the
risk that the stockholder value generated by us as a stand-alone entity,
through stock price appreciation, would not be as high as the merger
consideration offered by Parent, in light of an assessment of the current
and prospective demand for our core business services in the workers’
compensation industry, the effect of global, national and local economic
conditions on this sector and the competitive landscape for participants
in the industry generally;
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the
fact that our financial advisor believed that the Termination Fee and
other deal protection provisions included in the Merger Agreement would be
unlikely to deter another buyer if one were to emerge;
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the
price proposed by Parent as compared to current and historical market
prices and trading information with respect to shares of our common stock
in light of historical, current and prospective industry valuations of us
and comparable companies;
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prospects
for, and trends within, the workers’ compensation industry generally,
particularly the aggressive competition we face in this industry from
companies with greater resources and higher degrees of market recognition;
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other
historical information concerning our business, prospects, financial
performance and condition, operations, technology, management and
competitive position;
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the
fact that the merger consideration is all cash, so that the transaction
would allow our stockholders to immediately realize a fair value for their
investment and would provide our stockholders certainty of value for their
shares of our common stock;
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the
per share consideration of $12.50 to be paid in the merger represented a
premium for our common stock of approximately 44.0% to the closing price
for our common shares on January 9, 2008, and a premium of 35.9%, 28.9%
and 32.6% to our one-month, three-month and six-month average closing
prices for the relevant periods preceding the date immediately preceding
the date on which the merger was announced;
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the
financial presentation of Raymond James and its opinion that as of January
10, 2008, and based on and subject to the factors and assumptions set
forth therein, the $12.50 per share in cash to be paid to holders of our
common stock pursuant to the Merger Agreement is fair from a financial
point of view to such holders;
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our
right, prior to the approval of the Merger Agreement by stockholders, and
so long as we are in compliance in all material respects with the
non-solicitation provisions of the Merger Agreement, to engage in
negotiations with, and provide information to, a third party that makes an
unsolicited acquisition proposal if our Board determines in good faith,
after consultation with its legal and financial advisors, that such
proposal could reasonably be expected to lead to a transaction that is
more favorable to our stockholders than the merger (subject to our
compliance with the terms and conditions of the Merger Agreement);
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the
Parent Termination Fee that is payable to us in certain circumstances;
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the
view of our Board, after consultation with its financial and legal
advisors, that as a percentage of the merger consideration to be paid in
the merger, the Termination Fee and expense reimbursement provisions were
within the range of fees and expenses provided for in similar size
transactions;
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the
limited closing conditions in the Merger Agreement; and
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the
likelihood of consummation of the merger, including an assessment of
regulatory risks and an assessment that Parent has the financial
capability to acquire us for the merger consideration.
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Our Board
also considered the potential risks of the merger, including:
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the
risk that the merger might not be completed in a timely manner or at all;
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the
fact that following the merger, our stockholders would not participate in
any of our future earnings or growth and would not benefit from any
appreciation in our value;
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|
|
·
|
the
fact that it is a condition to closing that no governmental authority
require any action by Parent or us in connection with consummating the
transaction, including, any requirement that Parent, the surviving
corporation or any of its or their subsidiaries (a) provide or commit
to provide additional capital to the surviving company, (b) maintain
operations or employees in the State of Florida, or (c) provide any
surplus maintenance, guarantee, keep-well or similar agreements or
commitments;
|
|
|
·
|
the
possibility of management and employee disruption associated with the
merger;
|
|
|
·
|
the
fact that the merger consideration consists of cash and would therefore be
taxable to our stockholders for United States federal income tax purposes;
|
|
|
·
|
the
requirement that we pay to Parent the Termination Fee if the agreement is
terminated in order for our Board to accept a superior proposal and in
certain other circumstances; and
|
|
|
·
|
the
restrictions on the conduct of our business prior to consummation of the
merger, including the requirement to conduct our business only in the
ordinary course, subject to specific limitations or consent by Parent,
which may delay or prevent us from undertaking business opportunities that
may arise pending completion of the merger.
|
In view
of the variety of factors and the quality and amount of information considered
as well as the complexity of these matters, our Board did not find it
practicable to, and did not attempt to, make specific assessments of, quantify,
rank or otherwise assign relative weights to the specific factors considered in
reaching this determination. Our Board conducted an overall analysis
of the factors described above, as well as others, including thorough discussion
with, and questioning of, our senior management and our legal and financial
advisors, and considered the benefits of the merger to outweigh the risks and
the factors overall to be favorable to, and to support, its
determination. Our Board did not undertake to make any specific
determination as to whether any particular factor, or any aspect of any factor,
was favorable or unfavorable to its ultimate
determination. Individual members of our Board may have given
different weight to different factors.
Recommendation of the Board of Directors
After
careful consideration, our Board has unanimously determined (with any interested
directors abstaining from voting) that the Merger Agreement and the merger are
advisable and are fair to us and our stockholders, and in our best interest and
the best interest of our stockholders and has unanimously approved (with any
interested directors abstaining from voting) the Merger
Agreement.
The Board
unanimously recommends (with any interested directors abstaining from such
recommendation) that you vote “FOR” the adoption of the Merger Agreement at the
special meeting and “FOR” the approval of the adjournment of the special
meeting, if necessary or appropriate, to solicit additional
proxies.
Opinion of Financial Advisor
On May
22, 2007, we engaged Raymond James to provide financial advisory and investment
banking services in connection with the possible sale of our company or an
equity interest in our company to another corporation or business
entity. In connection with such engagement, we requested that Raymond
James evaluate the fairness, from a financial point of view, of the merger
consideration to be received by eligible holders of our common stock in a
transaction. We selected Raymond James based upon its qualifications,
expertise in the valuation of insurance businesses and reputation as a
nationally recognized investment banking firm.
In
connection with Raymond James’ engagement, at a meeting of our Board on
January 10, 2008, Raymond James delivered to our Board its opinion that,
based upon and subject to the various considerations set forth in its written
opinion dated January 10, 2008, the merger consideration of $12.50 cash per
share to be received by common stock holders pursuant to the terms and
conditions of the Merger Agreement was fair, from a financial point of view, to
the common stock holders.
Raymond
James expressed no opinion as to the underlying business decision to approve the
Merger Agreement, the structure or tax consequences of the Merger Agreement or
the availability or advisability of any alternatives to the Merger
Agreement. Raymond James did not structure the Merger Agreement or
negotiate the final terms of the Merger Agreement. Raymond James’
opinion is limited to the fairness, from a financial point of view, of the
merger consideration to be received by the common stock holders pursuant to the
terms and conditions of the Merger Agreement. Raymond James expressed
no opinion with respect to any other reasons, legal, business, or otherwise,
that may support the decision of the Board to approve or consummate the Merger
Agreement. In formulating its opinion, Raymond James considered only
what it understood to be the merger consideration to be received by the eligible
holders of our common stock, and its opinion does not address any other payments
that may be made to our employees or other stockholders in connection with the
merger. The opinion of Raymond James was one of many factors taken
into consideration by our Board in making its determination to approve the
Merger Agreement. Consequently, the analyses described below should
not be viewed as determinative of the Board’s or our management’s opinion with
respect to the value of our company.
The full
text of Raymond James’ opinion, which sets forth, among other things, the
assumptions made, procedures followed, matters considered and limits on the
review undertaken by Raymond James, is attached as Annex B to this proxy
statement. No limitations were imposed by our Board upon Raymond
James with respect to the investigations made or procedures followed by it in
rendering this opinion. Holders of our common stock are urged to read
the opinion in its entirety. Any description of or reference to
Raymond James’ opinion is subject to, and qualified in its entirety by reference
to, the full text of such opinion.
Raymond James’ opinion is directed to
our Board and does not constitute a recommendation to any holder of our common
stock or any other person as to whether such person should vote to approve the
Merger Agreement.
In
connection with its review of the proposed Merger Agreement and the preparation
of its opinion, Raymond James, among other things:
|
|
·
|
reviewed
the financial terms and conditions as stated in the Merger Agreement;
|
|
|
·
|
reviewed
the annual reports to stockholders on Form 10-K of our company for the two
fiscal years ended December 31, 2005 and December 31, 2006;
|
|
|
·
|
reviewed
the quarterly reports to stockholders on Form 10-Q of our company for the
fiscal quarters ended March 31, 2007, June 30, 2007 and September 30,
2007;
|
|
|
·
|
reviewed
other financial and operating information requested from and/or provided
by our company;
|
|
|
·
|
reviewed
the Annual Statements of AmCOMP Preferred Insurance Company and AmCOMP
Assurance Corporation, which we refer to as the Insurance Subsidiaries, as
well as the combined Annual Statements of the AmCOMP Incorporated Group
filed with the Florida Department of Financial Services for the years
ended December 31, 2004, 2005 and 2006;
|
|
|
·
|
reviewed
the reports of our company’s independent actuarial firm, dated December
31, 2006, June 30, 2007 and September 30, 2007;
|
|
|
·
|
reviewed
certain other publicly available information on our company;
|
|
|
·
|
discussed
with members of our senior management certain information relating to the
aforementioned and any other matters which Raymond James deemed relevant
to its inquiry;
|
|
|
·
|
reviewed
and discussed with our senior management the historical and anticipated
future financial performance and prospects of our company, including the
review of forecasts prepared by senior management of our company;
|
|
|
·
|
reviewed
the reported price and trading activity for the shares of our common
stock;
|
|
|
·
|
compared
financial and stock market information for our company with similar
information for comparable companies with publicly traded securities;
|
|
|
·
|
reviewed
the financial terms of recent business combinations involving companies in
comparable businesses; and
|
|
|
·
|
performed
a discounted cash flow analysis of our company on a stand-alone basis and
performed such other analyses and studies, and considered such other
factors, as Raymond James considered appropriate.
|
Raymond
James’ opinion is necessarily based upon market, economic, financial and other
circumstances and conditions existing and disclosed to it as of January 9, 2008,
and any material change in such circumstances and conditions would require a
reevaluation of its opinion, which Raymond James is under no obligation to
undertake.
In
preparing its opinion, Raymond James relied on and assumed the accuracy and
completeness of the financial and other information that was provided to it or
was publicly available and did not undertake any duty or responsibility to
verify independently any of such information. Raymond James, with our
consent, assumed that forecasts provided by us were reasonably prepared on a
basis reflecting the best currently available estimates and judgments of our
company, and expressed no opinion with respect to such forecasts or the
assumptions on which they are based. In addition, Raymond James did
not make or obtain any evaluations or appraisals of our properties, assets,
liabilities, reserves or surplus, nor was Raymond James furnished with any such
appraisals. Raymond James was not furnished with any actuarial
analysis or reports, except for certain analysis and reports prepared by our
independent actuarial advisors. Raymond James is not an actuarial
firm and its services did not include actuarial determinations or evaluations by
it or an attempt to evaluate any actuarial assumptions. In that
regard, Raymond James has made no analysis of, and expresses no opinion as to,
the adequacy of our losses and loss adjustment expense reserves under any state
or federal laws relating to bankruptcy, insolvency or similar
matters.
Raymond
James also assumed that all material governmental, regulatory or other approvals
and consents required in connection with the consummation of the Merger
Agreement would be obtained and that in connection with obtaining any necessary
governmental, regulatory or other approvals and consents, or any amendments,
modifications or waivers to any agreements, instruments or orders to which we
are a party or are subject or by which we are bound, no limitations,
restrictions or conditions would be imposed or amendments, modifications or
waivers would be made that would have a material adverse effect on us or
materially reduce the contemplated benefits of the Merger
Agreement.
With
respect to the comparison of selected comparable companies and merger and
acquisition transactions analyses, no company utilized as a comparison is
completely identical to our company and no transaction is completely identical
to the merger. Such analyses necessarily involve complex
considerations and judgments concerning the differences in financial and
operating characteristics of the companies and other factors that could affect
the acquisition or public trading values of the companies
concerned. Estimates of the financial value of companies do not
purport to be appraisals or to reflect the prices at which companies or
securities may actually be sold. Accordingly, Raymond James’ analyses
and estimates are inherently subject to substantial uncertainty.
In
arriving at its opinion, Raymond James did not attribute any particular weight
to any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and
factor. The preparation of a fairness opinion is a complex process
involving various determinations as to the most appropriate and relevant methods
of financial analysis and the application of those methods to the particular
circumstances and, therefore, a fairness opinion is not readily susceptible to
partial analysis or summary description. Raymond James arrived at its
opinion based on the results of all the analyses that it undertook assessed as a
whole, and did not draw conclusions from, or with regard to, any one method of
analysis. Accordingly, Raymond James believes that its analyses must
be considered as a whole and that selecting portions of its analyses, without
considering all of its analyses, would create an incomplete view of the process
underlying its opinion.
The
following is a summary of the material financial analyses underlying Raymond
James’ opinion, dated January 10, 2008, that Raymond James presented to our
Board in connection with the Merger Agreement at a meeting of the Board on
January 10, 2008. The order of the analysis does not represent
relative importance or weight given to those analyses used by Raymond
James. The financial analyses summarized below include information
presented in tabular format. In order to fully understand Raymond
James’ financial analyses, the tables must be read together with the text of
each summary. The tables alone do not constitute a complete
description of the financial analyses. Considering the data below
without considering the full narrative description of the financial analyses,
including the methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of Raymond James’ financial analyses and
opinion.
Summary of Merger
Consideration.
Raymond James reviewed the financial terms of
the merger consideration. Pursuant to the Merger Agreement, each
share of common stock will be converted into the right to receive $12.50 in
cash.
Analysis of
Historical Trading Prices.
Raymond James reviewed the
historical trading prices for the shares of our common stock for the 52-week
period from January 9, 2007 through January 9, 2008. Raymond James’
analysis showed the following concerning the merger consideration of $12.50 per
share relative to historical prices of our common stock:
|
|
|
|
Premium/
|
|
|
AmCOMP
|
|
(Discount)
|
|
|
|
|
|
|
Merger
Consideration
|
$12.50
|
|
-
|
|
Closing
Price on January 9, 2008
|
$8.68
|
|
44.0%
|
|
52-week
high (2/9/07)
|
$12.11
|
|
3.2%
|
|
52-week
low (8/9/07)
|
$7.32
|
|
70.8%
|
|
IPO
Price (2/9/06)
|
$9.00
|
|
38.9%
|
Summary of
Comparable Companies Analysis.
Raymond James compared publicly
available historical and projected operating earnings, net income, and book
value of eight publicly held property-casualty insurance companies operating in
the workers’ compensation insurance marketplace. These companies were
selected based on Raymond James’ professional judgment considering
characteristics such as the type of insurance written and market
capitalization. None of the selected companies are directly
comparable to us and, therefore, the results of the selected company’s analysis
are primarily financial calculations rather than detailed analyses of the
differences in operating characteristics and business mixes of the various
companies. Appropriate use of the data includes qualitative judgments
concerning, among other things, differences among the companies.
Selected
companies as of January 9, 2008 included:
|
|
·
|
Zenith
National Insurance Corp.
|
|
|
·
|
Employers
Holdings, Inc.
|
|
|
·
|
SeaBright
Insurance Holdings, Inc.
|
|
|
·
|
Meadowbrook
Insurance Group, Inc.
|
|
|
·
|
PMA
Capital Corporation
|
|
|
·
|
Eastern
Insurance Holdings, Inc.
|
Raymond
James calculated various financial multiples for each company, including
(a) market value compared to net operating income, where net operating
income is defined as income from continuing operations minus any realized gains
or losses, for the most recent available twelve month period, which we refer to
as LTM; (b) market value per share compared to earnings per share, which we
refer to as EPS, using Wall Street research analyst estimates, as reported by
First Call, for the selected companies for calendar years ending December 31,
2007 and 2008, which we refer to as CY07E and CY08E; (c) market value to
stated book value as of the most recent reporting period; and (d) market
value to tangible book value as of the most recent reporting period. The
estimates published by Wall Street research
analysts
were not prepared in connection with the merger or at Raymond James’ request and
may or may not prove to be accurate. Raymond James reviewed the
minimum, mean, median and maximum relative valuation multiples of the selected
public companies and compared them to corresponding valuation multiples for our
company implied by the merger consideration. The results of the
selected public companies analysis based on market price information as of
January 9, 2008 are summarized below:
|
|
|
Merger
|
|
|
Comparable
Companies
|
|
|
|
|
Consideration
|
|
|
Min
|
|
|
Median
|
|
|
Mean
|
|
|
Max
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
value as a multiple of LTM net operating income
|
|
|
10.8
|
x
|
|
|
6.2
|
x
|
|
|
7.5
|
x
|
|
|
8.3
|
x
|
|
|
13.1
|
x
|
|
Market
value as a multiple of CY07E EPS
|
|
|
9.5
|
x
|
|
|
6.2
|
x
|
|
|
7.3
|
x
|
|
|
8.7
|
x
|
|
|
13.5
|
x
|
|
Market
value as a multiple of CY08E EPS
|
|
|
11.5
|
x
|
|
|
5.5
|
x
|
|
|
7.7
|
x
|
|
|
8.2
|
x
|
|
|
10.6
|
x
|
|
Market
value as a multiple of book value
|
|
|
1.3
|
x
|
|
|
0.7
|
x
|
|
|
1.1
|
x
|
|
|
1.1
|
x
|
|
|
1.5
|
x
|
|
Market
value as a multiple of tangible book value
|
|
|
1.3
|
x
|
|
|
0.7
|
x
|
|
|
1.2
|
x
|
|
|
1.2
|
x
|
|
|
1.5
|
x
|
Furthermore,
Raymond James applied the minimum, mean, median and maximum relative valuation
multiples for each of the metrics to our company’s actual and Wall Street
research analysts’ projected financial results, as reported by First Call, and
determined the implied market price per share for our common stock and then
compared those implied market values per share to the merger consideration of
$12.50 per share. The results of this are summarized
below:
|
|
|
Merger
|
|
|
Comparable
Companies
|
|
|
|
|
Consideration
|
|
|
Min
|
|
|
Median
|
|
|
Mean
|
|
|
Max
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied
market value multiples of LTM net operating income
|
|
$
|
12.50
|
|
|
$
|
7.15
|
|
|
$
|
8.70
|
|
|
$
|
9.58
|
|
|
$
|
15.16
|
|
|
Implied
market value multiples of CY07E EPS
|
|
$
|
12.50
|
|
|
$
|
8.24
|
|
|
$
|
9.63
|
|
|
$
|
11.52
|
|
|
$
|
17.86
|
|
|
Implied
market value multiples of CY08E EPS
|
|
$
|
12.50
|
|
|
$
|
6.01
|
|
|
$
|
8.43
|
|
|
$
|
8.97
|
|
|
$
|
11.51
|
|
|
Implied
market value multiples of book value
|
|
$
|
12.50
|
|
|
$
|
6.52
|
|
|
$
|
11.34
|
|
|
$
|
11.25
|
|
|
$
|
14.76
|
|
|
Implied
market value multiples of tangible book value
|
|
$
|
12.50
|
|
|
$
|
6.46
|
|
|
$
|
11.61
|
|
|
$
|
11.60
|
|
|
$
|
14.93
|
|
Summary of
Precedent Transactions Analysis.
Raymond James reviewed five
merger and acquisition transactions announced since September 1, 2006 in which
the transaction value was less than $500 million and that involved insurance
companies for which public information was available considered by Raymond James
to be most comparable to our company. These transactions
included:
|
Transaction
|
|
|
|
|
|
Announced
|
|
Buyer
|
|
Target
|
|
|
|
|
|
|
|
01/03/08
|
|
QBE
Insurance Group
|
|
North
Pointe Holdings Corporation
|
|
10/15/07
|
|
The
Doctors Company
|
|
SCPIE
Holdings Inc.
|
|
10/20/07
|
|
Rockhill
Holding Company
|
|
RTW
Inc.
|
|
04/27/07
|
|
Alleghany
Corp.
|
|
Employers
Direct
|
|
09/08/06
|
|
CRM
Holdings Ltd.
|
|
Embarcadero
Insurance Holdings, Inc.
|
In
reviewing these transactions, Raymond James evaluated, among other things, the
equity value relative to the acquired company’s book value and net income, in
each case, for the most recent available twelve month period prior to the
announcement of the transaction. Raymond James reviewed the minimum,
mean, median and maximum relative valuation multiples of the selected
transactions and compared them to corresponding valuation multiples for our
company implied by the merger consideration.
The
following table presents the results of this analysis:
|
|
|
Merger
|
|
|
Precedent
Transactions
|
|
|
|
|
Consideration
|
|
|
Min
|
|
|
Median
|
|
|
Mean
|
|
|
Max
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price
to book value
|
|
|
1.3
|
x
|
|
|
1.0
|
x
|
|
|
1.3
|
x
|
|
|
1.3
|
x
|
|
|
1.5
|
x
|
|
Price
to LTM earnings
|
|
|
10.9
|
x
|
|
|
4.2
|
x
|
|
|
17.9
|
x
|
|
|
14.4
|
x
|
|
|
21.1
|
x
|
Furthermore,
Raymond James applied the minimum, mean, median and maximum relative valuation
multiples to our most recent available last twelve months earnings and book
value to determine the implied equity price per share and then compared those
implied equity values per share to the merger consideration of $12.50 per
share. The results of the selected transactions analysis are
summarized below:
|
|
|
Merger
|
|
|
Precedent
Transactions
|
|
|
|
|
Consideration
|
|
|
Min
|
|
|
Median
|
|
|
Mean
|
|
|
Max
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price
to book value
|
|
$
|
12.50
|
|
|
$
|
9.88
|
|
|
$
|
12.37
|
|
|
$
|
12.79
|
|
|
$
|
14.93
|
|
|
Price
to LTM earnings
|
|
$
|
12.50
|
|
|
$
|
4.68
|
|
|
$
|
20.05
|
|
|
$
|
16.10
|
|
|
$
|
23.58
|
|
Summary of
Premiums Paid Analysis.
Raymond James compared the premium
implied by the merger consideration of $12.50 per share to our historical stock
prices to that of premiums paid in acquisitions of other publicly-traded
companies. As part of its analysis, Raymond James reviewed 54 merger
and acquisition transactions in the United States across all industries with an
equity purchase price between $100 million and $500 million announced since July
1, 2007 until January 9, 2008 and in which the value per share was greater than
five dollars. Raymond James measured each transaction price per share
relative to each target’s closing price per share one day, two weeks and one
month prior to announcement of the transaction. Raymond James
compared the minimum, mean, median and maximum premiums paid from this set of
transactions to the per share merger consideration expressed as a premium
relative to the closing stock price of our company for the respective time
periods. The results of the transaction premium analysis are
summarized below:
|
|
|
One
Day
|
|
|
Two
Week
|
|
|
One
Month
|
|
|
|
|
Premium/
|
|
|
Premium/
|
|
|
Premium/
|
|
|
|
|
(Discount)
|
|
|
(Discount)
|
|
|
(Discount)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger
Consideration
|
|
|
44.0
|
%
|
|
|
34.7
|
%
|
|
|
27.6
|
%
|
|
Minimum
|
|
|
2.1
|
%
|
|
|
(9.4
|
%)
|
|
|
(18.6
|
%)
|
|
Median
|
|
|
32.1
|
%
|
|
|
31.5
|
%
|
|
|
31.1
|
%
|
|
Mean
|
|
|
44.2
|
%
|
|
|
41.1
|
%
|
|
|
38.0
|
%
|
|
Maximum
|
|
|
166.7
|
%
|
|
|
166.7
|
%
|
|
|
151.6
|
%
|
Furthermore,
Raymond James applied the minimum, mean, median and maximum premiums for each of
the metrics to our actual corresponding closing stock prices to determine the
implied equity price per share and then compared those implied equity values per
share to the merger consideration of $12.50 per share. The results of
this are summarized below:
|
|
|
One
Day
|
|
|
Two
Week
|
|
|
One
Month
|
|
|
|
|
Premium/
|
|
|
Premium/
|
|
|
Premium/
|
|
|
|
|
(Discount)
|
|
|
(Discount)
|
|
|
(Discount)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger
Consideration
|
|
$
|
12.50
|
|
|
$
|
12.50
|
|
|
$
|
12.50
|
|
|
Minimum
|
|
$
|
8.87
|
|
|
$
|
8.41
|
|
|
$
|
7.97
|
|
|
Median
|
|
$
|
11.46
|
|
|
$
|
12.21
|
|
|
$
|
12.85
|
|
|
Mean
|
|
$
|
12.51
|
|
|
$
|
13.10
|
|
|
$
|
13.53
|
|
|
Maximum
|
|
$
|
23.15
|
|
|
$
|
24.75
|
|
|
$
|
24.65
|
|
Discounted Cash
Flow Analysis
. Raymond James performed a discounted cash flow
analysis to generate a range for the implied present value per share of our
company assuming we continued operating as a stand-alone public
company. This range was determined:
|
|
(a)
|
By
adding (1) the present value of estimated future free cash flows to
our stockholders for the years 2008 through 2012, and (2) the present
value of the terminal value of our common stock. Terminal
values for our common stock were calculated based on a range of forward
price-to-earnings multiples applied to the estimated 2013 net income of
our company.
|
|
|
(b)
|
By
adding (1) the present value of estimated future free cash flows to
our stockholders for the years 2008 through 2012, and (2) the present
value of the terminal value of our common stock. Terminal
values for our common stock were calculated based on a range of terminal
multiples applied to the year-end 2012 book value of our company.
|
In
connection with this analysis, Raymond James utilized, with our consent,
projections provided by our management reflecting its best currently available
estimates and judgments of the future financial performance of our
company. As part of its analysis, and with our consent, Raymond James
assumed, among other things, that (a) all excess capital not needed to
maintain a net-premiums-written to surplus ratio of 1.24x in 2008, and 1.20x
thereafter, is considered excess capital and paid to our stockholders in the
form of a cash dividend, and (b) that our company is sold at December 31,
2012 with proceeds being discounted back to the beginning of January
2008.
Raymond
James estimated the range for the implied valuation per share of our common
stock by varying the following assumptions, which Raymond James, in its
professional judgment, deemed reasonable for a small market capitalization
company such as ours with the risk characteristics of our insurance
operations:
|
|
·
|
a
range of terminal multiples applied to year 2013 estimated net income of
9.0x to 11.0x;
|
|
|
·
|
a
range of terminal multiples applied to year-end 2012 estimated book value
of 1.2x to 1.5x; and
|
|
|
·
|
discount
rates representing an un-levered cost of equity ranging from 11.0% to
14.0%.
|
The
results of this analysis can be seen in the following table:
|
|
|
Min
|
|
|
Median
|
|
|
Mean
|
|
|
Max
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger
Consideration
|
|
$
|
12.50
|
|
|
$
|
12.50
|
|
|
$
|
12.50
|
|
|
$
|
12.50
|
|
|
Applying
terminal price-to-earnings multiple
|
|
$
|
9.18
|
|
|
$
|
10.67
|
|
|
$
|
10.68
|
|
|
$
|
12.33
|
|
|
Applying
terminal book value multiple
|
|
$
|
10.41
|
|
|
$
|
12.26
|
|
|
$
|
12.28
|
|
|
$
|
14.32
|
|
Miscellaneous.
The
Board retained Raymond James based upon the recognized experience and expertise
of Raymond James’ Financial Services Group and its prior experience with Raymond
James as a financial advisor. Raymond James is a recognized
investment banking and advisory firm. Raymond James, as a part of its
investment banking and advisory business, is continually engaged in the
valuation of investment securities in connection with mergers and acquisitions,
public offerings, private placements, and valuations for estate, corporate and
other purposes and provides research reports to its clients on many insurance
companies. The Board selected Raymond James as its financial advisor
because of its reputation and because of its substantial experience in
transactions similar to this transaction. In the ordinary course of
business, Raymond James may trade in the equity securities of our company for
its own account or for the accounts of its customers and, accordingly, at any
time may hold a long or short position in such securities.
Raymond
James received a $350,000 fee for services rendered in connection with delivery
of the fairness opinion provided to us, plus reimbursement of out-of-pocket
expenses. This fee was payable even if Raymond James concluded the
merger consideration was not fair to our company. We have also agreed
to pay Raymond James approximately $2,300,000 as an advisory fee for services in
connection with the merger, which is contingent upon the closing of the
merger. We also agreed to indemnify Raymond James against certain
liabilities, including liabilities under the federal securities
laws.
Material United States Federal Income Tax
Consequences
The
following general discussion summarizes the material United States federal
income tax consequences to our stockholders as a result of the exchange of their
shares of our common stock solely in exchange for cash either pursuant to the
Merger Agreement or as a result of dissenting and perfecting their appraisal
rights. This discussion is based on the Internal Revenue Code of
1986, as amended (referred to herein as “Internal Revenue Code”), the current
Treasury Regulations promulgated thereunder, existing administrative
interpretations and court decisions, all of which are subject to change,
possibly with retroactive effect. This discussion assumes that our
stockholders hold their shares of our common stock as capital assets, within the
meaning of Section 1221 of the Internal Revenue Code.
This
discussion does not address all aspects of United States federal income taxation
that may be important to stockholders in light of their particular circumstances
or if they are subject to special rules. These special rules include
rules relating to:
|
|
·
|
stockholders
who are not citizens or residents of the United States;
|
|
|
·
|
financial
institutions;
|
|
|
·
|
tax-exempt
organizations;
|
|
|
·
|
pass-through
entities and investors in such entities;
|
|
|
·
|
dealers
in securities; and
|
|
|
·
|
stockholders
who acquired their shares of stock through the exercise of options or
similar derivative securities or otherwise as compensation.
|
This
discussion also does not address the alternative minimum tax or any tax
consequences under state, local or foreign laws.
The
discussion that follows neither binds nor precludes the Internal Revenue Service
from adopting a position contrary to that expressed in this proxy statement, and
we cannot assure you that such a contrary position could not be asserted
successfully by the Internal Revenue Service or adopted by a court if the
positions were litigated. We do not intend to obtain a ruling from
the Internal Revenue Service with respect to the United States federal income
tax consequences of the exchange of your shares of our common stock for the
merger consideration pursuant to the merger and the related transactions, nor do
we intend to obtain an opinion from tax counsel with respect to the United
States federal income tax consequences of these transactions.
Except as
otherwise indicated, this summary describes the United States federal income tax
consequences for U.S. stockholders. U.S. stockholder means a
beneficial owner of our common stock that is for United States federal income
tax purposes:
|
|
·
|
a
citizen or resident of the United States;
|
|
|
·
|
a
corporation organized under the laws of the United States, any state of
the United States or the District of Columbia;
|
|
|
·
|
an
estate, the income of which is subject to United States federal income
taxation regardless of its source; or
|
|
|
·
|
a
trust if (a) a court within the United States is able to exercise
primary supervision over its administration and one or more United States
Persons (as such term is defined in the Internal Revenue Code) have
authority to control all substantial decisions of the trust, or
(b) the trust was in existence on August 20, 1996, and validly
elected to continue to be treated as a United States domestic trust.
|
As used
herein, the term non-U.S. stockholder means all stockholders that are not U.S.
stockholders.
Exchanging
Stockholder.
The receipt of the cash by you pursuant to the
Merger Agreement, or as a result of dissenting and perfecting your appraisal
rights, will be a taxable transaction. You will recognize gain or
loss for United States federal income tax purposes in an amount equal to the
difference between the cash you receive and your adjusted tax basis in your
shares of our common stock exchanged therefor. This gain or loss will
be capital gain or capital loss if you held your shares of our common stock as a
capital asset at the effective date of the merger. Any such capital
gain will be long-term capital gain if you held the exchanged shares for more
than one year as of the effective date of the merger. Net long-term
capital gains generally will be subject to United States federal income tax at
capital gain rates applicable to the exchanging stockholder (e.g., up to a
maximum net long-term capital gains tax rate of 15.0% for taxpayers that are
individuals). Capital losses may be subject to certain
limitations.
Non-U.S.
Stockholders.
In general, if you are a non-U.S. stockholder,
you will generally not be subject to United States federal income tax or any
withholding thereof with respect to the gain recognized on the receipt of cash
in exchange for your shares of our common stock (either pursuant to the merger
and the related transactions or as a result of dissenting and perfecting your
appraisal rights) unless one of the following situation applies.
|
|
·
|
The
gain is effectively connected with your conduct of a trade or business in
the United States and, if a tax treaty applies, is attributable to a
permanent establishment maintained by you in the United States. In this
case, you will generally be taxed on your net gain derived from the
disposition of your shares of our common stock at the regular graduated
United States federal income tax rates in much the same manner as if you
were a U.S. person and, if you are a foreign corporation, then you may
also be subject to a branch profits tax.
|
|
|
·
|
You
are an individual who is present in the United States for 183 days or more
in the taxable year that the merger occurs and you meet certain other
requirements. In this case, you will be subject to United States federal
income tax at a rate of 30.0% (or a reduced rate under an applicable
treaty) on the amount by which capital gains (including gain recognized on
the sale or other disposition of our common stock) allocable to U.S.
sources exceed capital losses allocable to U.S. sources.
|
|
|
·
|
If
our common stock constitutes a “United States real property interest” by
reason of our status as a “United States real property holding
corporation,” or a USRPHC, for United States federal income tax purposes
at any time during the shorter of the five-year period ending immediately
on the date you dispose of our common stock or the period you held our
common stock. The determination of whether we are a USRPHC
depends upon the fair market value of our United States real property
interests relative to the fair market value of our business
assets. However, due to our common stock being “regularly
traded on an established securities market” within the meaning of Section
897(c)(3) of the Internal Revenue Code, even if we are a USRPHC, our
common stock will not be treated as a United States real property
interest, except as noted in the next sentence. If you are a
non-U.S. stockholder and directly or indirectly owned more than 5.0% of
our common stock at any time during the five-year period immediately
preceding the date you exchange your shares and we are a USRPHC, any gain
you recognize on the exchange of your shares will be treated as income
that is effectively connected to a U.S. trade or business and you may be
subject to withholding at a United States federal income tax withholding
rate of 10.0% of the gross proceeds you realize with respect to the sale
of your shares of our common stock. Any amount withheld in
excess of the actual tax owed may be refundable if specified requirements
are satisfied.
|
Backup
withholding.
You may be subject to backup withholding at a
28.0% rate on any cash consideration that you receive in connection with the
merger. Backup withholding will not apply, however, if
you:
|
|
·
|
furnish
to us a correct taxpayer identification number and certify that you are
not subject to backup withholding on the substitute Form W-9 or successor
form included in the letter of transmittal to be delivered to you
following the date of the completion of the merger;
|
|
|
·
|
provide
a certification of foreign status on Form W-8BEN or another type of W-8
form; or
|
|
|
·
|
are
otherwise exempt from backup withholding.
|
Backup
withholding is not an additional tax but is credited against the United States
federal income tax liability of the taxpayer subject to the
withholding. If backup withholding results in an overpayment of a
taxpayer’s United States federal income taxes, that taxpayer may obtain a refund
from the Internal Revenue Service.
THE
PRECEDING DISCUSSION OF THE MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER IS FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT
TAX ADVICE. AMCOMP INCORPORATED STOCKHOLDERS ARE URGED TO CONSULT
THEIR TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE
MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF ANY CHANGES IN U.S. FEDERAL OR OTHER
APPLICABLE TAX LAWS.
Voting Agreements
In
connection with the Merger Agreement, each of the Voting Agreement Parties
entered into the Voting Agreements with Parent, which agreements relate to an
aggregate of 2,627,094 shares of common stock, representing approximately
[17.2]% of our outstanding common stock. Pursuant to the Voting
Agreements and as more fully described therein, each of the Voting Agreement
Parties, among other things, unconditionally and irrevocably agreed, at any duly
called meeting of our stockholders (or any adjournment or postponement thereof),
and in any action by written consent of our stockholders, to vote all
of such stockholder’s respective common stock (a) in favor of
the merger and the approval of the Merger Agreement and the other transactions
contemplated thereby (and any actions in furtherance thereof) and
(b) against any action, proposal, transaction or agreement that would
result in a breach in any respect of any covenant, representation or warranty or
any other obligation or agreement of ours contained in the Merger Agreement or
of the above contained in the voting agreement.
Each
party to a voting agreement remains subject to the terms of the Voting Agreement
even if (a) our Board changes its recommendation or withdraws its
recommendation, see “The Merger Agreement—Recommendation”, or (b) we breach
any of our representations, warranties, agreements or covenants set forth in the
Merger Agreement.
Each of
the Voting Agreement Parties also, among other things, (a) agreed that it
will not, and will cause its representatives not to, (1) directly or
indirectly solicit, initiate, or knowingly encourage or facilitate any inquiries
or alternative proposals from third parties with respect to us or any of our
subsidiaries, (2) enter into any agreement with respect to an third party
takeover proposal or (3) directly or indirectly participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, a third party takeover proposal; (b) agreed to certain transfer
restrictions with respect to their respective common stock and agreed to hold
their respective common stock free and clear of any liens; (c) granted
Parent and its designees an irrevocable proxy to vote their respective common
stock in a manner consistent with the voting agreements (subject to the receipt
of any required regulatory approvals); and (d) agreed not to seek appraisal
or assert any rights of dissent from the merger.
Each
Voting Agreement is to terminate upon the earliest to occur of (a) the
mutual written consent of Parent and the applicable Voting Agreement Party,
(b) the effective time of the merger, (c) the date of termination of
the Merger Agreement in accordance with its terms, (d) the date of any
change or amendment to the Merger Agreement that results in any decrease in the
merger consideration, or (e) October 31, 2009.
Nothing
in the Voting Agreements are to restrict, in any way, Messrs. Lowe, Stephens or
Queally in the exercise of their fiduciary duties as an executive officer and/or
director of us.
Regulatory Matters
In
addition to the filing of a certificate of merger with the Secretary of State of
the State of Delaware at or before the effective date of the merger, it is a
condition to the consummation of the transactions under the Merger Agreement
that (a) the waiting period under the HSR Act has expired or been
terminated and (b) we obtain the authorization, consent or approval of any
governmental authorities under applicable non-U.S. antitrust laws.
U.S.
Antitrust Filing
On
February 7, 2008, we and Parent filed our respective Notification and
Report Forms under the HSR Act with the Federal Trade Commission, which we refer
to as the FTC, and the Antitrust Division of the United States Department of
Justice. We do not believe that the merger requires the
authorization, consent or approval of any governmental authorities under
applicable non-U.S. antitrust laws. On February 19, 2008, we and
Parent received notice that the waiting period under the HSR Act was terminated
as of February 19, 2008.
Insurance
Laws and Regulations
State
insurance laws and regulations generally require that, prior to the acquisition
of an insurance company domiciled or, in some cases, commercially domiciled in
that jurisdiction, the acquiring company must obtain the approval of the
insurance commissioner of that jurisdiction. Parent will make all
necessary filings with all appropriate insurance commissioners, including
Florida, our domicile state. Parent made the necessary filings in
Florida on February 8, 2008.
In
addition, the insurance laws and regulations of certain U.S. states require
that, prior to an acquisition of an insurance company doing business in that
state or licensed by that state (or the acquisition of its holding company), a
notice filing disclosing certain market share data in the applicable
jurisdiction must be made and an applicable waiting period must expire or be
terminated. These notice filings, if any, will be made in the
applicable jurisdictions.
Although
we and Parent do not expect these regulatory authorities to raise any
significant concerns in connection with their review of the merger, there is no
assurance that we and Parent will obtain all required regulatory approvals, or
that those approvals will not include:
|
|
·
|
any
action or the commitment to take any action, or consent or agreement to
any condition, restriction or undertaking requested or imposed by any
governmental authority, whether in connection with obtaining any required
regulatory approval or otherwise, that, in the good faith determination of
Parent, such action, condition, restriction or undertaking, individually
or in the aggregate, with all other such actions, conditions, restrictions
or undertakings, would materially adversely affect the benefits, taken as
a whole, that Parent reasonably expects to derive from the transactions
contemplated by the Merger Agreement; or
|
|
|
·
|
any
requirement that Parent, the surviving corporation or any of its or their
subsidiaries (a) provide or commit to provide additional capital to
us, (b) maintain operations or employees in the state of Florida, or
(c) provide any surplus maintenance, guarantee, keep-well or similar
agreements or commitments.
|
Parent
may terminate the Merger Agreement in the event that any such condition or
obligation is imposed by regulatory authorities.
Other
than the filings described above, neither we nor Parent is aware of any
regulatory approvals required to be obtained, or waiting periods to expire, to
complete the merger. If the parties discover that other approvals or
waiting periods are necessary, they will seek to obtain or comply with them. If
any additional approval or action is needed, however, we or Parent may not be
able to obtain it. Even if Parent or us obtain all necessary
approvals, and the Merger Agreement is adopted by the our stockholders,
conditions may be placed on any such approval that could cause either Parent or
us to abandon the merger.
Interests of Certain Persons in the Merger
In
considering the recommendation of the Board with respect to the adoption of the
Merger Agreement, you should be aware that some of our directors and executive
officers have interests in the merger that are different from, or in addition
to, the interests of our stockholders generally. These interests may
present them with actual or potential conflicts of interest, and these
interests, to the extent material, are described below. The Board was
aware of these interests and considered them, among other matters, in approving
the Merger Agreement and the merger.
Treatment
of Stock Options
A holder
of outstanding options to purchase shares of our common stock, whether or not
then vested, at the effective time of the merger, will be entitled to receive a
cash amount equal to the product of (a) the amount, if any, by which $12.50
exceeds the exercise price per share of each option held by such person at the
effective time of the merger, and (b) the number of shares subject to such
option held by such person, less any applicable withholdings for
taxes. No consideration will be paid in respect of any stock options
for which the exercise price equals or exceeds $12.50 per share.
Each of
our directors and executive officers owns vested and/or unvested options with
exercise prices of less than $12.50 per share. The following table
sets forth the cash consideration that the directors and executive officers,
individually and as a group, are to be entitled to receive under the Merger
Agreement in consideration for the cancellation of unvested and vested options
held by such directors and executive officers.
|
|
|
Number
of Shares Subject to Unvested Options
|
|
|
Consideration
for Cancellation of Unvested Options
|
|
|
Number
of Shares Subject to Vested Options
|
|
|
Consideration
for Cancellation of Vested Options
|
|
|
Total
Number of Shares Subject to Options
|
|
|
Total
Consideration for Cancellation of Unvested and Vested
Options
|
|
|
Fred R.
Lowe
|
|
|
72,768
|
|
|
$
|
254,688
|
|
|
|
145,534
|
|
|
$
|
509,369
|
|
|
|
218,302
|
|
|
$
|
764,057
|
|
|
Debra
Cerre-Ruedisili
|
|
|
78,661
|
|
|
|
275,314
|
|
|
|
78,659
|
|
|
|
275,307
|
|
|
|
157,320
|
|
|
|
550,620
|
|
|
George
Harris
|
|
|
30,000
|
|
|
|
54,600
|
|
|
|
10,000
|
|
|
|
18,200
|
|
|
|
40,000
|
|
|
|
72,800
|
|
|
Kumar
Gursahaney
|
|
|
46,585
|
|
|
|
138,784
|
|
|
|
58,415
|
|
|
|
187,661
|
|
|
|
105,000
|
|
|
|
326,445
|
|
|
Colin
Williams
|
|
|
656
|
|
|
|
2,296
|
|
|
|
655
|
|
|
|
2,293
|
|
|
|
1,311
|
|
|
|
4,589
|
|
|
Timothy
J. Spear
|
|
|
21,284
|
|
|
|
74,494
|
|
|
|
21,284
|
|
|
|
74,494
|
|
|
|
42,568
|
|
|
|
148,988
|
|
|
Lisa
Perrizo
|
|
|
19,647
|
|
|
|
68,765
|
|
|
|
19,647
|
|
|
|
68,765
|
|
|
|
39,294
|
|
|
|
137,529
|
|
|
Sam
A. Stephens
|
|
|
4,658
|
|
|
|
14,215
|
|
|
|
5,288
|
|
|
|
17,712
|
|
|
|
9,946
|
|
|
|
31,927
|
|
|
Frank
Pinson
|
|
|
4,366
|
|
|
|
15,281
|
|
|
|
4,366
|
|
|
|
15,281
|
|
|
|
8,732
|
|
|
|
30,562
|
|
|
Paul
B. Queally
|
|
|
4,658
|
|
|
|
14,215
|
|
|
|
5,288
|
|
|
|
17,712
|
|
|
|
9,946
|
|
|
|
31,927
|
|
|
Donald
C. Stewart
|
|
|
4,658
|
|
|
|
14,215
|
|
|
|
5,288
|
|
|
|
17,712
|
|
|
|
9,946
|
|
|
|
31,927
|
|
|
Spencer
L. Cullen, Jr.
|
|
|
4,658
|
|
|
|
14,215
|
|
|
|
5,288
|
|
|
|
17,712
|
|
|
|
9,946
|
|
|
|
31,927
|
|
|
All
directors and executive officers as a group
|
|
|
292,599
|
|
|
$
|
941,082
|
|
|
|
359,712
|
|
|
$
|
1,222,218
|
|
|
|
652,311
|
|
|
$
|
2,163,298
|
|
Existing
Employment Agreements
We have
entered into employment agreements with Fred R. Lowe, our Chairman,
President and Chief Executive Officer, Debra Cerre-Ruedisili, our Chief
Operating Officer, Kumar Gursahaney, our Chief Financial Officer, George Harris,
our Senior Vice President, General Counsel and Secretary, Colin Williams, our
President of the Texas Region, Lisa Perrizo, our President of the Midwest
Region, Timothy J. Spear, our President of the Mid-Atlantic Region and
Frank Pinson, our President of the Southern Region. In addition, we
and Parent have entered into Integration Bonus and Enhanced Severance Agreements
with Debra Cerre-Ruedisili and Kumar Gursahaney.
As a
result of her Integration Bonus and Enhanced Severance Agreement,
Ms. Cerre-Ruedisili, also a director, abstained on the vote to recommend to
our stockholders to adopt the Merger Agreement and approve the
merger.
The
employment agreements with our executive officers other than George Harris do
not contain change in control provisions and our executive officers other than
George Harris are only entitled to receive a severance payment following the
termination of such individual’s employment under certain
circumstances. Mr. Harris’ employment agreement provides that
upon his termination under certain circumstances he is entitled to certain
payments and upon a change of control followed within 90 days by a termination
of his employment under certain circumstances, non-renewal of his employment
agreement or a material diminution in his duties, Mr. Harris would receive
additional payments.
We
entered into an amended and restated employment agreement with Fred R. Lowe, the
stated term of which expires on December 31, 2008, and which is automatically
extended for successive one-year terms, unless either party to such agreement
gives notice of a decision not to renew. Under the agreement, in
addition to his base salary of $325,000, Mr. Lowe is eligible to receive
incentive compensation, conditioned upon our achieving annual performance
objectives established by Mr. Lowe and our Board. The agreement
contains customary confidentiality, non-competition and non-solicitation
provisions. The non-competition and non-solicitation provisions apply
during the period of Mr. Lowe’s employment and following termination of his
employment for any reason, for the same period that he would receive severance
payment, if applicable.
Pursuant
to our employment agreement with Mr. Lowe, if the employment of
Mr. Lowe is terminated for any reason other than death, disability or
cause, or we do not renew his employment at the end of the initial term or any
renewal term provided in the agreement, we are required for the period equal to
the greater of 18 months or the number of whole months remaining in the stated
term of the agreement, commencing in the month after the month in which
employment terminates, (a) to pay monthly to Mr. Lowe, as severance pay, an
amount equal to the sum of (1) 1/12 of Mr. Lowe’s then annual salary, and
(2) 1/12 of the amount of Mr. Lowe’s prior year’s incentive compensation
and bonus, (b) to provide Mr. Lowe health and welfare benefits, at our
expense; and (c) to pay to Mr. Lowe such other amounts, if any, that may
then be otherwise payable to Mr. Lowe pursuant to the terms of our benefit
plans or arrangements. In addition, Mr. Lowe will be entitled to
receive a $600,000 termination payment upon nonrenewal or termination for any
reason, payable in three installments, the first of which must be made within 15
days after such nonrenewal or termination, with the second and third
installments to be made on the first and second anniversaries of the first such
installment, respectively.
We
entered into an amended and restated employment agreement with Debra
Cerre-Ruedisili and Kumar Gursahaney, and an employment agreement with George
Harris, the stated terms of which expire on December 31, 2008 and which are
automatically extended for successive one-year terms, unless either party gives
notice of a decision not to renew. Under the agreements, in addition
to Ms. Cerre-Ruedisili’s and Messrs. Gursahaney’s and Harris’ base salaries
of $285,000, $220,000 and $220,000, respectively, each of
Ms. Cerre-Ruedisili and Messrs. Gursahaney and Harris are eligible to
receive incentive compensation and bonuses as our Board may in its discretion
determine to award each of them, and to which each of them may be entitled under
the terms of any of our plans, programs or agreements as from time to time are
in effect. The agreement contains customary confidentiality,
non-competition and non-solicitation provisions. The non-competition
and non-solicitation provisions apply during the period of
Ms. Cerre-Ruedisili’s and Messrs. Gursahaney’s and Harris’ employment and
for an 18-month period following termination of employment for any
reason.
Pursuant
to our employment agreements with Ms. Cerre-Ruedisili and
Mr. Gursahaney, if the employment of Ms. Cerre-Ruedisili or
Mr. Gursahaney is terminated for any reason other than death, disability or
for cause, or we do not renew her or his employment at the end of the initial
term or any renewal term provided in the agreement, the applicable employment
agreement provides for (1) payment of termination benefits over an 18-month
period in equal monthly installments, each in an amount equal to the sum of
(a) 1/12 of her or his then annual base salary plus (b) 1/12 of her or
his prior year’s incentive compensation and bonuses and (2) payment of amounts
otherwise payable to her or him under our health and welfare benefit
plans.
Pursuant
to our employment agreement with Mr. Harris, if the employment of
Mr. Harris is terminated for any reason other than death, disability or
incapacity for a period of 180 days or more within a 12 month period or for
cause as defined in his employment agreement, or if we do not renew his
employment at the end of the initial term or any renewal term provided in the
agreement, Mr. Harris is entitled to receive: (a) payment
of severance pay over an 18 month period in equal monthly installments, each in
an amount equal to the amount of (1) 1/12 of his then annual base salary
plus (2) 1/12 of his incentive compensation and bonuses in respect of our
most recent fiscal year and (b) payment of amounts otherwise payable to him
under our health and other benefit plans as described in the employment
agreement. In addition, with respect to Mr. Harris’ employment
agreement, if within 90 days after a change of control (which the merger
qualifies as), we or the surviving corporation terminate Mr. Harris’
employment other than for cause, death, disability or incapacity for
a period of 180 days or more within a 12 month period or determine not to renew
his employment or if there occurs a material diminution in his duties,
Mr. Harris is entitled to the payments and benefits described above for a
period of 30 months.
We
entered into employment agreements with each of Colin Williams and Lisa Perrizo,
the stated terms of which expired on December 31, 2006 and May 31, 2005,
respectively, but which are automatically extended for successive one-year
terms, unless either party to each such agreement gives notice of a decision not
to renew. Under these agreements, for the fiscal year ended December
31, 2007, Mr. Williams and Ms. Perrizo were paid base salaries of
$160,000 and $140,000, respectively, and were eligible to receive incentive
compensation and bonuses as our Board in its discretion
determined. In addition, Mr. Williams and Ms. Perrizo are
paid such incentive compensation and bonuses to which each may be entitled to
under the terms of any of our plans, programs or agreements as from time to time
are in effect. Mr. Williams is entitled to additional
compensation based upon the underwriting profit of the our Texas
region. Ms. Perrizo is entitled to additional compensation based
upon the underwriting profit of our Midwest region. Each of the
agreements of Mr. Williams and Ms. Perrizo contains customary
confidentiality and non-competition provisions. The non-competition
provisions apply during the period of employment and for a 12-month period
following termination of employment for any reason.
We
entered into an employment agreement with Timothy J. Spear, the stated term of
which expires on October 31, 2008, but which is automatically extended for
successive one-year terms, unless either party to this agreement gives notice of
a decision not to renew. Under this agreement, in addition to his
base salary of $140,000, Mr. Spear is eligible to receive incentive compensation
and bonuses as our Board may in its discretion determine to award him, and to
which he may be entitled under the terms of any of our plans, programs or
agreements as from time to time are in effect. Mr. Spear is entitled
to additional compensation based upon the underwriting profit of our
Mid-Atlantic region. This agreement contains customary
confidentiality and non-competition provisions. The non-competition
provisions apply during the period of employment and for a 12-month period
following termination of employment for any reason.
Pursuant
to our employment agreements with Messrs. Williams and Spear and
Ms. Perrizo, if the employment of Messrs. Williams or Spear or
Ms. Perrizo is terminated for any reason other than death, disability or
for cause, or we do not renew his or her employment at the end of the initial
term or any renewal term provided in the agreement, each of Messrs. Williams and
Spear and Ms. Perrizo are entitled to receive 12 monthly payments, each of
which monthly payment equal to the sum of (a) 1/12 of such employee’s then
annual salary, and (b) 1/12 of the amount of such employee’s prior year’s
incentive compensation and bonus, provided that in no event shall the amount
paid pursuant to such employee exceed 30% of such employee’s then annual base
salary. If we terminate the employment of Ms. Perrizo for any
reason other than for cause, if she is covered under our group health plan at
the time of termination, she may elect to continue our group health coverage for
herself, her spouse and her dependents for a period of 18 months at our cost and
expense.
Integration
Bonus and Enhanced Severance Agreements
On
January 31, 2008, we entered into Integration Bonus and Enhanced Severance
Agreements, effective as of January 10, 2008, with Parent and each of
Ms. Cerre-Ruedisili and Mr. Gursahaney. Under the
agreements, each of Ms. Cerre-Ruedisili’s and Mr. Gursahaney’s
employment with us or the surviving corporation is to terminate 60 calendar days
after the effective time of the merger. Ms. Cerre-Ruedisili and
Mr. Gursahaney have each agreed to use best efforts to ensure a smooth
transition and integration in the merger and to perform certain other duties
prior to and following the closing of the merger. In consideration of
the above, and subject to the consummation of the merger, provided that
Ms. Cerre-Ruedisili and Mr. Gursahaney either remains employed by us
or the surviving corporation through 60 calendar days after the effective time
of the merger or is terminated by Parent or by us other than for cause on or
prior to 60 calendar days after the effective time of the merger,
Ms. Cerre-Ruedisili and Mr. Gursahaney will be entitled to receive a
bonus in an amount equal to $200,000 and $110,000, respectively, as soon as
practicable, but in no event later than, 75 calendar days after the effective
time of the merger.
In
addition, as a modification to Ms. Cerre-Ruedisili’s and
Mr. Gursahaney’s employment agreements, and provided that
Ms. Cerre-Ruedisili and Mr. Gursahaney remain employed by us or the
surviving corporation for 60 calendar days after the effective time of the
merger, or are terminated by us, the surviving corporation or Parent other than
due to death, disability or for cause at any time following the closing of the
merger, then in lieu of payments set forth above, Parent is to pay or cause us
or the surviving corporation to pay to Ms. Cerre-Ruedisili or
Mr. Gursahaney, as the case may be, 18 months of severance pay, each
monthly payment in an amount equal to the sum of (i) 1/6 of annual salary
in the case of Ms. Cerre-Ruedisili, and one-eighth of annual salary in the
case of Mr. Gursahaney, each as in effect immediately prior to such
termination and (ii) 1/12 of the amount of incentive compensation and
bonuses approved and accrued for Ms. Cerre-Ruedisili or
Mr. Gursahaney, as the case may be, in respect of the most recent fiscal
year preceding such termination. In addition,
Ms. Cerre-Ruedisili and Mr. Gursahaney are also entitled to continued
eligibility to participate in any medical and health plans or other employee
welfare benefit plans that may be provided by us or the surviving corporation
for our senior executive employees for 18 months following 60 calendar days
after the effective time of the merger. Payments under
Ms. Cerre-Ruedisili’s and Mr. Gursahaney’s employment agreements may
be subject to a six-month delay to the extent necessary to avoid negative tax
consequences imposed by the deferred compensation requirements under Section
409A of the Internal Revenue Code.
Each of
Ms. Cerre-Ruedisili and Mr. Gursahaney have also acknowledged and
agreed that each of them are to continue to be subject to the terms and
conditions of the restrictive covenants set forth in their respective employment
agreements for the 18-month period set forth therein. Each of
Ms. Cerre-Ruedisili and Mr. Gursahaney further agreed to be available
to us, the surviving corporation and Parent and to assist us, the surviving
corporation and Parent during the 18-month period following their termination in
performing such duties as we, the surviving corporation or Parent may request
from time to time.
Indemnification
and Insurance
A
description of the obligations of Parent, Merger Sub and the surviving
corporation to (a) indemnify our officer and directors and
(b) maintain (1) directors’ and officers’ and (2) corporate
counsel liability insurance, is contained in “The Merger
Agreement—Indemnification and Insurance.”
Appraisal or Dissenters’ Rights
Under
Section 262 of the Delaware General Corporation Law, which we refer to as
the DGCL, any holder of our common stock who does not wish to accept the $12.50
per share merger consideration may dissent from the merger and elect to exercise
appraisal rights. A stockholder who properly exercises appraisal
rights may ask the Delaware Court of Chancery to determine the “fair value” (as
defined in Section 262 of the DGCL) of his or her shares (exclusive of any
element of value arising from the accomplishment or expectation of the merger),
and receive payment of “fair value” in cash, together with interest, if any,
provided that the stockholder complies with the provisions of Section 262
of the DGCL.
The
following discussion is not a complete statement of the law pertaining to
appraisal rights under the DGCL, and is qualified in its entirety by the
reference to Section 262 of the DGCL, the full text of which is attached to
this proxy statement as Annex C. All references in
Section 262 of the DGCL or in this summary to a “stockholder” are to the
record holder of the shares of our common stock who asserts appraisal
rights.
Under
Section 262 of the DGCL, when a merger agreement is submitted for adoption
at a meeting of stockholders, as in the case of the Merger Agreement, the
corporation, not less than 20 days prior to the meeting, must notify each of its
stockholders who was a stockholder on the record date for the meeting that
appraisal rights are available and include in the notice a copy of
Section 262 of the DGCL. This proxy statement constitutes our
notice, and we have attached Section 262 of the DGCL to this proxy
statement as Annex C. Any holder of our common stock who wishes
to exercise appraisal rights or who wishes to preserve the right to do so should
review the following discussion and Annex C carefully. Failure
to comply with the procedures of Section 262 of the DGCL, in a timely and
proper manner, will result in the loss of appraisal rights.
Stockholders
wishing to exercise the right to dissent from the merger and seek an appraisal
of their shares must do ALL of the following:
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The
stockholder must NOT vote in favor of adoption of the Merger Agreement. A
signed proxy that does not contain voting instructions will, unless
properly revoked, be voted in favor of the adoption of the Merger
Agreement. A vote in favor of the adoption of the Merger Agreement, by
proxy or in person, will constitute a waiver of such stockholder’s
appraisal rights in respect to our common stock so voted and will nullify
any previously filed written demands for appraisal by such stockholder.
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The
stockholder must deliver to us a written demand for appraisal of his or
her common stock BEFORE the vote on the adoption of the Merger Agreement
at the special meeting and must not withdraw his or her demand.
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The
stockholder must continuously hold the shares from the date of making the
demand through the effective date of the merger. A stockholder will lose
appraisal rights if the stockholder transfers the shares before the
effective date of the merger.
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A
petition demanding appraisal must be filed in the Delaware Court of
Chancery within 120 days after the effective date of the merger, by a
stockholder who has properly demanded appraisal and not effectively
withdrawn such demand, or by the surviving corporation in the merger. In
addition, a beneficial owner of shares as to which demand has been
properly made and not effectively withdrawn, where such shares are held in
a voting trust or by a nominee on behalf of such beneficial owner, may, in
his or her own name, file such a petition. The corporation is not
obligated to file such a petition and has no present intention to file
such a petition. Accordingly, a stockholder desiring to file such a
petition is advised to file the petition on a timely basis unless such
stockholder receives notice that a petition already has been filed by the
surviving corporation or another dissenting stockholder.
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Neither
voting (in person or by proxy) against, abstaining from voting on nor failing to
vote on the proposal to adopt the Merger Agreement will constitute a written
demand for appraisal within the meaning of Section 262 of the
DGCL. The written demand for appraisal must be in addition to and
separate from any proxy or vote. The demand must reasonably inform us
of the identity of the stockholder making the demand and that the stockholder
intends thereby to demand an appraisal of the fair value of the shares held of
record by such stockholder. A stockholder who elects to exercise
appraisal rights under Section 262 of the DGCL should mail or deliver a written
demand to: AmCOMP Incorporated, 701 U.S. Highway One, North Palm
Beach, Florida 33408, Attention: Secretary.
Only a
stockholder of record of shares of our common stock, or a person duly authorized
and explicitly purporting to act on his or her behalf, may demand appraisal of
the shares of stock registered in that holder’s name. A holder of
shares wishing to demand appraisal rights must be the record holder of such
shares on the date the written demand for appraisal is made and must continue to
hold such shares until the completion of the merger. Accordingly, a
holder of shares who is the record holder of such shares on the date when the
written demand for appraisal is made, but who thereafter transfers such shares
prior to the completion of the merger, will lose any right to appraisal of such
shares. A demand for appraisal must be executed by or on behalf of
the stockholder of record, fully and correctly, as the stockholder’s name
appears on the stock certificates. Persons who hold their shares in
brokerage accounts, voting trusts, or other nominee forms,
and who
wish to exercise appraisal rights, should consult with their brokers or other
appropriate nominee holders to determine the appropriate procedures for the
nominee holder to make a demand for appraisal of those shares. A
person having a beneficial interest in shares held of record in the name of
another person, such as a broker or other nominee, must act promptly to cause
the record holder to follow properly and in a timely manner the steps necessary
to perfect appraisal rights.
A record
holder, such as a broker who holds shares as a nominee for others, may exercise
appraisal rights with respect to the shares held for one or more beneficial
owners, while not exercising such rights for other beneficial
owners. In such a case, the written demand should set forth the
number and class of shares as to which the demand is made. Where the
number and class of shares is not expressly set forth, the demand will be
presumed to cover all shares of common stock held in the name of such record
holder.
A demand
for the appraisal of shares owned of record by two or more joint holders must
identify and be signed by all of the holders. A demand for appraisal
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity must identify the record owner(s) and must be signed in such person’s
fiduciary or representative capacity.
Upon
completion of the merger, we will give written notice of the effective date of
the merger within 10 days after such time to each of our former stockholders who
did not vote in favor of adoption of the Merger Agreement and who made, and has
not effectively withdrawn, a written demand for appraisal in accordance with
Section 262 of the DGCL. Within 120 days after the effective date of
the merger, but not later, either we or any stockholder who has complied with
the requirements of Section 262 of the DGCL may commence an appraisal proceeding
by filing a petition in the Delaware Court of Chancery demanding a determination
of the value of the shares of our common stock held by all stockholders entitled
to appraisal. In addition, a beneficial owner of shares as to which
demand has been properly made and not effectively withdrawn, where such shares
are held in a voting trust or by a nominee on behalf of such beneficial owner,
may, in his or her own name, file such a petition. The surviving
corporation is under no obligation to and has no present intention to file a
petition. Stockholders who desire to have their shares appraised
should initiate any petitions necessary for the perfection of their appraisal
rights within the time periods and in the manner prescribed in Section 262 of
the DGCL, unless such stockholder receives notice that a petition already has
been filed by the surviving corporation or another dissenting
stockholder. If within the 120-day period, no petition shall have
been filed as provided above, all rights to appraisal will cease and all of the
dissenting stockholders will become entitled to receive the merger
consideration, without interest thereon.
Within
120 days after the effective date of the merger, any stockholder who has
complied with the provisions of Section 262 of the DGCL to that point in time
may receive from us, upon written request, a statement setting forth the
aggregate number of shares not voted in favor of adoption of the Merger
Agreement and with respect to which we have received demands for appraisal, and
the aggregate number of holders of those shares. We must mail this
statement to the stockholder within 10 days after receipt of the request or
within 10 days after expiration of the period for delivery of demands for
appraisals under Section 262 of the DGCL, whichever is later. In
addition, a beneficial owner of shares as to which demand has been properly made
and not effectively withdrawn, where such shares are held in a voting trust or
by a nominee on behalf of such beneficial owner, may, in his or her own name,
request such written statement.
If a
stockholder files a petition for appraisal in a timely manner, service of a copy
thereof shall be made upon the corporation surviving the merger, and the
surviving corporation will then be obligated, within 20 days after receiving a
copy of the petition, to file with the Register in Chancery a duly verified list
containing the names and addresses of all stockholders who have demanded an
appraisal of their shares and with whom an agreement as to the value of their
shares has not been reached.
Upon the
filing of the petition, the Delaware Court of Chancery may order that notice of
the time and place fixed for the hearing on the petition be mailed to the
corporation surviving the merger and all of the stockholders shown on the
verified list. Such notice also shall be published at least one week
before the day of the hearing in a newspaper of general circulation published in
the City of Wilmington, Delaware or in another publication determined by the
court. The costs of these notices are borne by the surviving
corporation.
If a
hearing on the petition is held, the Delaware Court of Chancery will determine
which stockholders are entitled to appraisal rights. The court may
require the stockholders demanding appraisal who hold certificated shares to
submit their stock certificates to the Register in Chancery for notation thereon
of the pendency of the appraisal proceedings. If the stockholder
fails to comply with the court’s direction, the court may dismiss the proceeding
as to the stockholder. The Delaware Court of Chancery will conduct
the appraisal hearing in accordance with the court’s rules, including any rules
specifically governing appraisal proceedings. The court will appraise
the shares at their “fair value,” exclusive of any element of value arising from
the accomplishment or expectation of the merger, together with interest, if any,
to be paid on the amount determined to be fair value.
In
determining the “fair value,” the Delaware Court of Chancery will take into
account all relevant factors. Unless the court in its discretion
determines otherwise for good cause shown, interest from the effective date of
the merger through the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve discount rate
(including any surcharge) as established from time to time during the period
between the effective date of the merger and the date of payment of the
judgment. The Delaware Court of Chancery may determine the fair value
to be more than, less than or equal to the consideration that the dissenting
stockholder would otherwise receive under the Merger Agreement.
Upon
application by the corporation surviving the merger or by any stockholder
entitled to participate in the appraisal proceeding, the Delaware Court of
Chancery may, in its discretion, proceed to trial upon the appraisal prior to
the final determination of the stockholders entitled to an
appraisal. Any stockholder whose name appears on the verified list
and who has submitted his or her certificates of stock to the Register in
Chancery, if such is required, may participate fully in all proceedings until it
is finally determined that he or she is not entitled to appraisal
rights.
The
Delaware Court of Chancery may also determine the costs of the appraisal
proceeding and allocate those costs among the parties as the Delaware Court of
Chancery determines to be equitable under the circumstances. Upon the
application of a stockholder, the Delaware Court of Chancery may order all or a
portion of the expenses incurred by any stockholder in connection with the
appraisal proceeding, including reasonable attorneys’ fees and the fees and
expenses of experts, to be charged pro rata against the value of all shares
entitled to appraisal.
The
Delaware Court of Chancery shall direct the payment of the fair value of the
shares, together with interest, if any, by the corporation surviving the merger
to the stockholders entitled thereto. Payment shall be so made to
each such stockholder upon the surrender to the surviving corporation of his or
her certificates. The court’s decree may be enforced as other decrees
in the Delaware Court of Chancery may be enforced.
Any
stockholder who has duly demanded an appraisal in compliance with Section 262 of
the DGCL may not, after the effective date of the merger, vote the shares
subject to the demand for any purpose or receive any dividends or other
distributions on those shares (except dividends or other distributions payable
to holders of record of shares as of a record date prior to the effective date
of the merger).
An
appraisal demand may be withdrawn by a stockholder within sixty (60) days after
the effective date of the merger without the approval of the corporation
surviving the merger, or thereafter with the approval of the surviving
corporation; provided that the stockholder shall not have commenced an appraisal
proceeding with respect to such stockholder’s shares or joined such a proceeding
as a named party. Upon the effective withdrawal of an appraisal
demand by a stockholder, such stockholder will be entitled to receive the merger
consideration. No appraisal proceeding in the Delaware Court of
Chancery will be dismissed as to any stockholder without the approval of the
Delaware Court of Chancery, and such approval may be subject to such conditions
as the Delaware Court of Chancery deems just. This shall not,
however, affect the right of a stockholder who has not commenced an appraisal
proceeding as to such stockholder’s shares, or joined such an appraisal
proceeding as a named party, to withdraw his or her demand for appraisal within
60 days after the effective date of the merger and to accept the merger
consideration. If the stockholder fails to perfect, effectively
withdraws or otherwise loses the appraisal right, the stockholder’s shares will
be converted into the right to receive the merger consideration.
Under the
Merger Agreement, Parent and Merger Sub are not required to complete the merger
if holders of more than 15.0% of our outstanding common stock as of the
effective date of the merger demand appraisal of their shares in accordance with
Delaware law.
Any
stockholder considering demanding appraisal is advised to consult legal
counsel.
OTHER MATTERS
Other Business
As of this time, our Board knows of no
other matters to be brought before the meeting. However, if other
matters properly come before the meeting or any adjournment thereof, and if
discretionary authority to vote with respect thereto has been conferred by the
enclosed proxy, the persons named in the proxy will vote the proxy in accordance
with their best judgment as to such matters.
Delivery of Proxy Statement
Some
banks, brokers and other record holders have begun the practice of
“householding” proxy statements and annual reports. “Householding” is
the term used to describe the practice of delivering a single set of the proxy
statement and annual report to any household at which two or more stockholders
share an address. This procedure would reduce the volume of duplicate
information stockholders receive and would also reduce our printing and mailing
costs. We will deliver promptly, upon written or oral request, a
separate copy of this proxy statement to a stockholder at a shared address to
which a single copy of this proxy statement was delivered. A
stockholder who wishes to receive a separate copy of our proxy statements and
annual reports, now or in the future, should submit this request to our proxy
solicitor, MacKenzie Partners, Inc., at (212) 929-5500 (call collect) or
toll-free at (800) 322-2885 or via email at
proxy@mackenziepartners.com. Beneficial owners sharing an address who
are receiving multiple copies of proxy materials and annual reports and who wish
to receive a single copy of these materials in the future will need to contact
their broker, bank or other nominee to request that only a single copy of each
document be mailed to all shareowners at the shared address in the
future.
Other Proxy Statement Matters
A form of
proxy is enclosed for your use. Please sign, date and return the
proxy at your earliest convenience in the enclosed postage-paid envelope or
submit your proxy by telephone or over the Internet following the instructions
on the proxy card. A prompt submission of your proxy will be
appreciated.
This
proxy statement does not constitute an offer to sell or to buy, or a
solicitation of an offer to sell or to buy, any securities, or the solicitation
of a proxy, in any jurisdiction to or from any person to whom it is not lawful
to make any offer or solicitation in such jurisdiction.
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By
Order of the Board of Directors
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Fred R.
Lowe
Chairman,
President and Chief Executive
Officer
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ANNEX
A
EXECUTION
VERSION
AGREEMENT
AND PLAN OF MERGER
by
and
among
AMCOMP
INCORPORATED,
EMPLOYERS
HOLDINGS, INC.
and
SAPPHIRE
ACQUISITION CORP.
Dated
as of January 10, 2008
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Table
of
Contents
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ARTICLE
I
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TERMS
OF THE MERGER
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1.1
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2
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1.2
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2
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1.3
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2
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1.4
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3
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1.5
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5
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1.6
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6
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1.7
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7
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1.8
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7
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1.9
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7
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1.10
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7
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ARTICLE
II
|
|
|
|
|
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
|
|
|
2.1
|
|
8
|
|
2.2
|
|
9
|
|
2.3
|
|
11
|
|
2.4
|
|
12
|
|
2.5
|
|
12
|
|
2.6
|
|
13
|
|
2.7
|
|
13
|
|
2.8
|
|
16
|
|
2.9
|
|
16
|
|
2.10
|
|
17
|
|
2.11
|
|
17
|
|
2.12
|
|
18
|
|
2.13
|
|
19
|
|
2.14
|
|
19
|
|
2.15
|
|
21
|
|
2.16
|
|
22
|
|
2.17
|
|
24
|
|
2.18
|
|
25
|
|
2.19
|
|
26
|
|
2.20
|
|
26
|
|
2.21
|
|
26
|
|
2.22
|
|
27
|
|
2.23
|
|
28
|
|
2.24
|
|
29
|
|
2.25
|
|
29
|
|
2.26
|
|
29
|
|
2.27
|
|
32
|
|
2.28
|
|
32
|
|
|
|
ARTICLE
III
|
|
|
|
|
|
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
|
|
|
|
3.1
|
|
33
|
|
3.2
|
|
33
|
|
3.3
|
|
33
|
|
3.4
|
|
33
|
|
3.5
|
|
34
|
|
3.6
|
|
34
|
|
3.7
|
|
34
|
|
3.8
|
|
34
|
|
3.9
|
|
35
|
|
3.10
|
|
35
|
|
3.11
|
|
35
|
|
|
|
ARTICLE
IV
|
|
|
|
|
|
ADDITIONAL
COVENANTS OF THE COMPANY
|
|
|
|
4.1
|
|
35
|
|
4.2
|
|
38
|
|
4.3
|
|
39
|
|
4.4
|
|
40
|
|
4.5
|
|
44
|
|
4.6
|
|
44
|
|
4.7
|
|
44
|
|
|
|
ARTICLE
V
|
|
|
|
|
|
ADDITIONAL
COVENANTS OF THE PARTIES
|
|
|
|
5.1
|
|
44
|
|
5.2
|
|
45
|
|
5.3
|
|
47
|
|
5.4
|
|
48
|
|
5.5
|
|
50
|
|
5.6
|
|
50
|
|
5.7
|
|
50
|
|
|
|
ARTICLE
VI
|
|
|
|
|
|
CONDITIONS
|
|
|
|
6.1
|
|
51
|
|
6.2
|
|
51
|
|
6.3
|
|
52
|
|
6.4
|
|
53
|
|
|
|
ARTICLE
VII
|
|
|
|
|
|
TERMINATION
AND ABANDONMENT
|
|
|
|
7.1
|
|
53
|
|
7.2
|
|
55
|
|
7.3
|
|
55
|
|
7.4
|
|
57
|
|
7.5
|
|
57
|
|
|
|
ARTICLE
VIII
|
|
|
|
|
|
MISCELLANEOUS
|
|
|
|
8.1
|
|
58
|
|
8.2
|
|
58
|
|
8.3
|
|
59
|
|
8.4
|
|
59
|
|
8.5
|
|
59
|
|
8.6
|
|
60
|
|
8.7
|
|
60
|
|
8.8
|
|
60
|
|
8.9
|
|
61
|
|
8.10
|
|
61
|
|
8.11
|
|
61
|
|
|
|
|
|
Defined
Terms
|
Page
|
|
|
|
|
Action
|
18
|
|
affiliate
|
60
|
|
Affiliate
Transaction
|
29
|
|
Aggregate
Consideration
|
3
|
|
Agreement
|
1
|
|
Antitrust
Laws
|
45
|
|
Balance
Sheet Date
|
14
|
|
Board
|
1
|
|
Burdensome
Condition
|
47
|
|
Business
Day
|
60
|
|
Bylaws
|
8
|
|
Cash
Amount
|
5
|
|
Certificate
of Incorporation
|
8
|
|
Certificate
of Merger
|
2
|
|
Certificates
|
4
|
|
Change
of Recommendation
|
42
|
|
Closing
|
2
|
|
Closing
Date
|
2
|
|
Code
|
5
|
|
Common
Stock
|
1
|
|
Company
|
1
|
|
Company
401(k) Plan
|
49
|
|
Company
Actuarial Analyses
|
31
|
|
Company
Balance Sheet
|
14
|
|
Company
Capital Stock
|
9
|
|
Company
Damages
|
56
|
|
Company
Disclosure Schedule
|
8
|
|
Company
Employee Plans
|
22
|
|
Company
Financials
|
14
|
|
Company
Intellectual Property
|
21
|
|
Company
Material Adverse Effect
|
8
|
|
Company
Material Contract
|
19
|
|
Company
Option Plans
|
5
|
|
Company
Options
|
5
|
|
Company
Permits
|
18
|
|
Company
Producers
|
30
|
|
Company
Real Property
|
26
|
|
Company
Reinsurance Agreements
|
30
|
|
Company
Representatives
|
41
|
|
Company
SAP Statements
|
15
|
|
Company
SEC Reports
|
13
|
|
Company
Stockholder Approval
|
26
|
|
Company
Subsidiaries
|
8
|
|
Company
Subsidiary
|
8
|
|
Company
Superior Offer
|
41
|
|
Company
Takeover Proposal
|
40
|
|
Confidentiality
Agreement
|
39
|
|
Consent
|
12
|
|
Covered
Proceeding
|
47
|
|
DGCL
|
1
|
|
Dissenting
Shares
|
6
|
|
DOJ
|
45
|
|
DOL
|
23
|
|
Effective
Time
|
2
|
|
Employee
|
48
|
|
Encumbrances
|
13
|
|
Enforceability
Exceptions
|
12
|
|
Environmental
Laws
|
29
|
|
ERISA
|
22
|
|
ERISA
Affiliate
|
22
|
|
Exchange
Act
|
6
|
|
Exchange
Fund
|
3
|
|
Expenses
|
55
|
|
Financing
|
50
|
|
FTC
|
45
|
|
GAAP
|
8
|
|
Governmental
Authority
|
12
|
|
Hazardous
Substance
|
29
|
|
HSR
Act
|
13
|
|
Indebtedness
|
10
|
|
Indemnified
Parties
|
47
|
|
Intellectual
Property
|
21
|
|
IRS
|
22
|
|
knowledge
|
60
|
|
Law
|
13
|
|
Laws
|
13
|
|
Licensed
Intellectual Property
|
21
|
|
Merger
|
1
|
|
Merger
Consideration
|
3
|
|
Merger
Sub
|
1
|
|
Notice
of Superior Offer
|
43
|
|
Off-the-Shelf
Software Agreements
|
20
|
|
Order
|
18
|
|
Outside
Date
|
53
|
|
Parent
|
1
|
|
Parent
Disclosure Schedule
|
32
|
|
Parent
Material Adverse Effect
|
33
|
|
Parent
Representatives
|
38
|
|
Parent
Termination Fee
|
56
|
|
Parent
Welfare Benefit Plans
|
49
|
|
Parties
|
1
|
|
Party
|
1
|
|
Paying
Agent
|
3
|
|
Permitted
Encumbrances
|
27
|
|
Person
|
60
|
|
Preferred
Stock
|
9
|
|
Proxy
Statement
|
40
|
|
Qualifying
Transaction
|
56
|
|
Raymond
James
|
25
|
|
Requisite
Regulatory Approvals
|
51
|
|
SAP
|
8
|
|
SEC
|
12
|
|
Secretary
of State
|
2
|
|
Securities
Act
|
13
|
|
Shares
|
1
|
|
Special
Meeting
|
39
|
|
SSAP
No. 62
|
31
|
|
subsidiary
|
60
|
|
Surviving
Corporation
|
2
|
|
Takeover
Laws
|
26
|
|
Tax
|
25
|
|
Tax
Returns
|
24
|
|
Taxes
|
25
|
|
Tenant
Leases
|
26
|
|
Terminating
Company Breach
|
54
|
|
Terminating
Parent Breach
|
54
|
|
Termination
Date
|
53
|
|
Termination
Fee
|
56
|
|
Total
Cash Amount
|
5
|
|
Total
Merger Consideration
|
3
|
|
Voting
Agreement
|
1
|
|
Voting
Debt
|
9
|
|
Withdrawal
of Recommendation
|
43
|
AGREEMENT
AND PLAN OF MERGER
This
Agreement and Plan of Merger (this “
Agreement
”) is made and
entered into as of January 10, 2008 by and among AmCOMP Incorporated, a Delaware
corporation (the “
Company
”), Employers Holdings,
Inc., a Nevada corporation (“
Parent
”), and Sapphire
Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Parent
(“
Merger
Sub
”). Parent, Merger Sub and the Company are sometimes
referred to herein as a “
Party
” and collectively as the
“
Parties
.”
WITNESSETH:
A.
The Boards of Directors of Parent, Merger Sub and the Company each deem it
advisable that Parent acquire the Company upon the terms and subject to the
conditions provided for in this Agreement.
B.
In furtherance thereof, it is proposed that the acquisition be accomplished by
means of the merger of Merger Sub with and into the Company (the “
Merger
”), with the Company
continuing as the surviving corporation in the Merger, as a result of which each
issued and outstanding share of common stock, par value $0.01 per share (the
“
Common Stock
”), of the
Company (the shares of Common Stock being hereinafter referred to as the “
Shares
”) will automatically be
converted into the right to receive $12.50 per Share in cash, without interest,
upon the terms and subject to the conditions set forth in this
Agreement.
C.
The Board of Directors of the Company (the “
Board
”) has unanimously
approved (with any interested directors abstaining from voting) this Agreement
and the Merger, and such approval is sufficient to render inapplicable to this
Agreement, the Merger and the other transactions and agreements contemplated by
this Agreement (including the Voting Agreements) the restriction against the
parties hereto and thereto engaging in any business combination as set forth in
Section 203 of the General Corporation Law of the State of Delaware (the “
DGCL
”) and the Board has
determined that this Agreement, the Merger and the other transactions
contemplated hereby are advisable and in the best interests of the Company and
its stockholders, and has resolved to recommend that its stockholders adopt this
Agreement.
D.
The Board of Directors of Parent (on its own behalf and as the sole stockholder
of Merger Sub) and the respective Boards of Directors of Merger Sub and the
Company have each approved this Agreement and the Merger.
E.
Concurrently with the execution and delivery of this Agreement, as a condition
and inducement to Parent’s and Merger Sub’s willingness to enter into this
Agreement, Parent and Merger Sub are entering into Voting Agreements with
certain stockholders of the Company (each, a “
Voting Agreement
”) pursuant to
which each of those stockholders has agreed, upon the terms and subject to the
conditions set forth therein, to vote all Shares beneficially owned by such
stockholders in accordance with the terms of such Voting
Agreements.
NOW,
THEREFORE, in consideration of the representations, warranties, covenants and
agreements contained in this Agreement and intending to be legally bound hereby,
the Parties hereto agree as follows:
ARTICLE
I
TERMS OF THE
MERGER
Upon the
terms and subject to the conditions of this Agreement, the Merger shall be
consummated in accordance with the DGCL. At the Effective Time, upon
the terms and subject to the conditions of this Agreement, Merger Sub shall be
merged with and into the Company in accordance with the DGCL and the separate
existence of Merger Sub shall thereupon cease, and the Company, as the surviving
corporation in the Merger (the “
Surviving Corporation
”), shall
continue its corporate existence under the laws of the State of Delaware as a
wholly owned subsidiary of Parent. It is intended that the Merger
shall constitute a taxable purchase of the Shares by Parent for foreign,
federal, state and local tax purposes.
|
|
1.2
|
The
Closing; Effective Time; Effect
.
|
(a)
Subject to the satisfaction or, if permissible, waiver by the Party entitled to
the benefit thereof, of the conditions set forth in Article VI hereof (other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the fulfillment or waiver of those conditions at the Closing),
the closing of the Merger (the “
Closing
”) shall take place at
the offices of Olshan Grundman Frome Rosenzweig & Wolosky LLP, Park Avenue
Tower, 65 East 55th Street, New York, New York 10022, at 10:00 a.m. local time
on a date to be specified by the Parties, which shall be no later than the third
Business Day after the date that all of the closing conditions set forth in
Article VI have been satisfied or waived (if waivable) , unless another time,
date or place is agreed upon in writing by the Parties hereto. The
date on which the Closing occurs is herein referred to as the “
Closing Date
.”
(b)
Subject to the terms and conditions hereof, concurrently with the Closing, the
Parties shall file with the Secretary of State of the State of Delaware (the
“
Secretary of State
”) a
certificate of merger in accordance with the DGCL (the “
Certificate of Merger
”)
executed in accordance with the relevant provisions of the DGCL and shall make
all other filings or recordings required under the DGCL in order to effect the
Merger. The Merger shall become effective upon the filing of the
Certificate of Merger or at such other time as is agreed by the Parties hereto
and specified in the Certificate of Merger. The time when the Merger
shall become effective is herein referred to as the “
Effective Time
.”
(c)
From and after the Effective Time, the Merger shall have the effects set forth
in Section 259 of the DGCL and, except as otherwise expressly set forth herein,
the Surviving Corporation shall possess all properties, rights, privileges,
powers and franchises of the Company and Merger Sub, and all of the claims,
obligations, liabilities, debts and duties of the Company and Merger Sub shall
become the claims, obligations, liabilities, debts and duties of the Surviving
Corporation.
|
|
1.3
|
Conversion of
Securities
.
|
At the
Effective Time, by virtue of the Merger and without any action on the part of
the Company, Merger Sub or the holders of any securities of Merger Sub or the
Company:
(a)
Each Share that is owned by Parent, Merger Sub or any direct or indirect wholly
owned subsidiary of Parent, or that is owned by the Company as treasury stock,
in each case immediately before the Effective Time, shall automatically be
canceled and retired and shall cease to exist, and no consideration or payment
shall be delivered in exchange therefor.
(A)
Each Share issued and outstanding immediately prior to the Effective Time (other
than Shares to be canceled in accordance with Section 1.3(a) hereof and
Dissenting Shares (as defined in Section 1.6)) shall automatically be converted
into the right to receive $12.50 in cash (the “
Merger Consideration
”),
payable, without interest, to the holder of such Share upon surrender, in the
manner provided in Section 1.4 hereof, of the certificate that formerly
evidenced such Share. All such Shares shall, by virtue of the Merger
and without any action on the part of the holders thereof, be automatically
cancelled and shall cease to exist, and each holder of a certificate
representing any such Shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration, without interest
thereon, upon the surrender of such certificate in accordance with Section 1.4
hereof.
(b)
Each issued and outstanding share of common stock, par value $0.01 per share, of
Merger Sub shall be converted into one validly issued, fully paid and
non-assessable share of common stock, par value $0.01 per share, of the
Surviving Corporation, and all such shares shall constitute the only outstanding
shares of capital stock of the Surviving Corporation following the Effective
Time. From and after the Effective Time, any certificate representing the common
stock of Merger Sub shall be deemed for all purposes to represent that number of
shares of common stock of the Surviving Corporation into which such shares of
common stock of Merger Sub represented thereby were converted in accordance with
the immediately preceding sentence.
|
|
1.4
|
Tender
of and Payment for Certificates
.
|
(a)
Paying Agent; Deposit
of Exchange Fund
. Prior to the Effective Time, Parent shall
designate a paying agent (the “
Paying Agent
”) reasonably
acceptable to the Company for the payment of the Merger
Consideration. No later than the Effective Time, Parent shall
deposit, or cause to be deposited with the Paying Agent for the benefit of
holders of Shares and Company Options, cash constituting an amount equal to
(i) the sum of the Total Merger Consideration plus (ii) the Total Cash
Amount (as defined in Section 1.5) (such sum, the “
Aggregate Consideration
,” and
such Aggregate Consideration as deposited with the Paying Agent, the “
Exchange
Fund
”). The Paying Agent shall cause the Exchange Fund to be
(i) held for the benefit of the holders of Shares and Company Options and
(ii) applied promptly to making the payments pursuant to Section 1.3(b)
hereof. Such aggregate Merger Consideration shall be invested by the
Paying Agent as directed by Parent. For purposes of this Agreement,
“
Total Merger
Consideration
” means the product of (x) the number of Shares issued
and outstanding (other than those shares retired pursuant to Section 1.3(a)
hereof and Dissenting Shares) immediately prior to the Effective Time multiplied
by (y) the Merger Consideration.
(b)
Exchange
Procedures
. Promptly after the Effective Time, Parent and the
Surviving Corporation shall cause the Paying Agent to mail (i) to each
holder of record, as of the Effective Time, of a certificate or certificates,
which immediately prior to the Effective Time represented outstanding Shares
(the “
Certificates
”),
which Shares were converted pursuant to Section 1.3(b) hereof into the right to
receive the Merger Consideration, (x) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Shares shall pass, only upon proper delivery of the Certificates (or affidavits
of loss in lieu thereof) to the Paying Agent and shall be in such form and have
such other provisions as Parent may reasonably specify) and (y) instructions for
use in effecting the surrender of the Certificates in exchange for the Merger
Consideration and (ii) to each holder of a Company Option, a check in an
amount due and payable to such holder pursuant to Section 1.5 hereof in respect
of such Company Option. Upon surrender of a Certificate (or affidavit
of loss in lieu thereof) for cancellation to the Paying Agent, together with a
letter of transmittal, properly completed and duly executed in accordance with
the instructions thereto, and such other documents as may be reasonably required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for each Share formerly
represented by such Certificate, to be mailed promptly following the Paying
Agent’s receipt of such Certificate (or affidavit of loss in lieu thereof), and
the Certificate so surrendered shall forthwith be canceled. No
interest shall be paid or accrued for the benefit of holders of the Certificates
on the Merger Consideration payable upon the surrender of the Certificates, or
in respect of Company Options. If payment of the Merger Consideration
is to be made to a Person (as defined in Section 8.7) other than the Person in
whose name the surrendered Certificate is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or shall
be otherwise in proper form for transfer and that the Person requesting such
payment shall have paid all transfer and other Taxes (as defined in Section
2.17) required by reason of the issuance to a Person other than the registered
holder of the Certificate surrendered or such Person shall have established to
the satisfaction of the Surviving Corporation that such Tax either has been paid
or is not applicable. Until surrendered as contemplated by this Section 1.4,
each Certificate shall be deemed at all times after the Effective Time to
represent only the right to receive the Merger Consideration for each Share in
cash as contemplated by Section 1.3(b) hereof, without interest
thereon. The Paying Agent shall accept such Certificates (or
affidavits of loss in lieu thereof) upon compliance with such reasonable terms
and conditions as the Paying Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices.
(c)
Transfer Books; No
Further Ownership Rights in the Shares
. At the Effective Time,
the stock transfer books of the Company shall be closed, and thereafter there
shall be no further registration of transfers of Shares on the records of the
Company or the Surviving Corporation. From and after the Effective
Time, the holders of Certificates evidencing ownership of the Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares, except as otherwise provided for herein or by applicable
Law (as defined in Section 2.6). If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled against delivery of the Merger Consideration, as provided for
in Section 1.3(b) hereof, for each Share formerly represented by such
Certificates.
(d)
Termination of
Exchange Fund; No Liability
. Any portion of the Exchange Fund
(including any interest received with respect thereto) that remains
undistributed to the holders of Shares or Company Options following the
six-month anniversary of the Effective Time shall be delivered to the Surviving
Corporation upon demand, and any holders who have not theretofore complied with
this Article I shall thereafter be entitled to look only to the Surviving
Corporation (subject to abandoned property, escheat or other similar Laws) only
as general creditors thereof
with
respect to the Merger Consideration, payable upon due surrender of their
Certificates without any interest thereon. Notwithstanding the
foregoing, none of Parent, Merger Sub, the Company, the Surviving Corporation or
the Paying Agent shall be liable to any Person in respect of any cash held in
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law. If any Certificates or
Company Options shall not have been surrendered prior to one year after the
Effective Time (or immediately prior to such earlier date on which any cash in
respect of such Certificate or Company Option would otherwise escheat to or
become the property of any Governmental Authority), any such cash in respect of
such Certificate or Company Option shall, to the extent permitted by applicable
Law, become the property of Parent, free and clear of all claims or interest of
any Person previously entitled thereto.
(e)
Lost, Stolen or
Destroyed Certificates
. In the event any Certificate(s) shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the Person claiming such Certificate(s) to be lost, stolen or destroyed
and, if required by Parent, the posting by such Person of a bond in such sum as
Parent may reasonably direct as indemnity against any claim that may be made
against any Party hereto or the Surviving Corporation with respect to such
Certificate(s), the Paying Agent will disburse the Merger Consideration pursuant
to Section 1.3(b) payable in respect of the Shares represented by such lost,
stolen or destroyed Certificate(s).
(f)
Withholding
Taxes
. Parent and the Surviving Corporation shall be entitled
to deduct and withhold, or cause the Paying Agent to deduct and withhold, from
the Merger Consideration payable to a holder of Shares pursuant to the Merger
any such amounts as are required under the Internal Revenue Code of 1986, as
amended (the “
Code
”), or
any applicable provision of state, local or foreign Tax Law. To the
extent that amounts are so withheld by Parent or the Surviving Corporation, or
caused to be withheld by the Paying Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the Shares in respect of which such deduction and withholding was made by
Parent, the Surviving Corporation or the Paying Agent, as the case may
be.
(a)
As of the Effective Time, all outstanding options to purchase Shares (the “
Company Options
”) granted
under the Company’s 1996 Stock Option Plan, Amended and Restated Directors’
Stock Option Plan, 2005 Stock Option Plan or those certain stock option
agreements between the Company and those individuals listed on
Section 1.5(a)
of the
Company Disclosure Schedule (collectively, the “
Company Option Plans
”),
whether or not then vested, subject to the terms and conditions set forth below
in this Section 1.5(a), shall, by virtue of the Merger and without any action on
the part of any holder of any Company Option, become fully vested and converted
into the right to receive, as promptly as reasonably practicable following the
Effective Time, the net amount of (A) the product of
(i) the excess, if any, of the Merger Consideration over the exercise price
per share of such Company Option at the Effective Time, multiplied by
(ii) the number of shares subject to such Company Option, less (B) any
applicable withholdings for Taxes (such net amount, the “
Cash Amount
,” and the
aggregate of all such Cash Amounts, the “
Total Cash
Amount
”). If the exercise price per share of any Company
Option equals or exceeds the Merger Consideration, the Cash Amount therefor
shall be
zero. Notwithstanding
the foregoing, with respect to any Person subject to Section 16(a) of the
Securities Exchange Act of 1934, as amended (together with the rules and
regulations promulgated thereunder, the “
Exchange Act
”), the Cash
Amount, if any, to be paid to such Person in accordance with this Section 1.5(a)
shall be paid as soon as practicable after the payment can be made without
liability to such Person under Section 16(b) of the Exchange Act.
(b)
As of the Effective Time, except as provided in this Section 1.5, all rights
under any Company Option and any provision of the Company Option Plans and any
other plan, program or arrangement providing for the issuance or grant of any
other interest in respect of the capital stock of the Company shall be canceled,
shall no longer be outstanding and shall automatically cease to exist, and each
holder of a Company Option shall cease to have any rights with respect thereto,
except the right to receive a Cash Payment, if applicable. The Company shall
take all such actions as are necessary to ensure that, as of and after the
Effective Time, except as provided in this Section 1.5, no Person shall have any
right under the Company Option Plans or any other plan, program, agreement or
arrangement with respect to securities of the Company, the Surviving Corporation
or any subsidiary thereof.
(c)
At or before the Effective Time, the Company shall cause to be effected any
necessary amendments to the Company Option Plans and any other resolutions,
consents or notices, in such form reasonably acceptable to Parent, required
under the Company Option Plans or any Company Options to give effect to the
foregoing provisions of this Section 1.5.
Notwithstanding
any provision of this Agreement to the contrary, to the extent that holders of
Shares are entitled to appraisal rights under Section 262 of the DGCL,
Shares issued and outstanding immediately prior to the Effective Time with
respect to which the holder thereof has properly exercised and perfected the
right to dissent from the Merger and to be paid fair value in accordance with
Section 262 of the DGCL and as to which, as of the Effective Time, the
holder thereof has not failed to timely perfect or shall have not effectively
withdrawn or lost dissenters’ rights under Section 262 of the DGCL (the
“
Dissenting Shares
”),
shall not be converted into or represent a right to receive the Merger
Consideration into which Shares are converted pursuant to Section 1.3(b) hereof,
but the holder thereof shall be entitled only to such rights as are granted by
the DGCL. Notwithstanding the immediately preceding sentence, if any
holder of Shares who demands dissenters’ rights with respect to its Shares under
the DGCL effectively withdraws or loses (through failure to perfect or
otherwise) its dissenters’ rights, then as of the Effective Time or the
occurrence of such event, whichever later occurs, such holder’s Shares shall
thereupon be deemed to have been converted as of the Effective Time into the
right to receive the Merger Consideration as provided in Section 1.3(b) hereof,
without interest thereon, upon surrender of the Certificate or Certificates
formerly representing such Shares, and such Shares shall no longer be Dissenting
Shares. At the Effective Time, any holder of Dissenting Shares shall
cease to have any rights with respect thereto, except the rights provided in
Section 262 of Delaware Law and as provided in this Section
1.6. The Company shall give Parent (i) prompt written notice of
any notice of intent to demand fair value for any Shares, withdrawals of such
notices, and any other instruments served pursuant to the DGCL and received by
the Company, and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for fair value of Shares under the
DGCL. The Company shall not, except with the prior written consent of
Parent, voluntarily make any payment with respect to any demands for fair value
of Shares or offer to settle or settle any such demands.
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|
1.7
|
Certificate of
Incorporation and Bylaws
.
|
Subject
to Section 5.3 hereof, at and after the Effective Time and by virtue of the
Merger, and until the same have been duly amended, (i) the Certificate of
Incorporation (as defined in Section 2.1) shall be amended and restated in its
entirety to read as the certificate of incorporation of Merger Sub in effect
immediately prior to the Effective Time, except in each case that references to
Merger Sub’s name shall be replaced by references to “AmCOMP Incorporated”, and,
as so amended, shall be the certificate of incorporation of the Surviving
Corporation and (ii) the bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the bylaws of the Surviving
Corporation.
|
|
1.8
|
Directors and
Officers
.
|
At and
after the Effective Time, the directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, and the
individuals set forth on Schedule 1.8 of the Parent Disclosure Schedule (as
defined in Article III hereof) shall be the officers of the Surviving
Corporation, in each case until their respective successors are duly elected or
appointed and qualify. Each of the Parties hereto shall take all
necessary action to effectuate the forgoing sentence. If, at the
Effective Time, a vacancy shall exist on the Board of Directors or in any office
of the Surviving Corporation, such vacancy may thereafter be filled in the
manner provided by Law.
|
|
1.9
|
Other
Effects of the Merger
.
|
The
Merger shall have all further effects as specified in the applicable provisions
of the DGCL.
|
|
1.10
|
Additional
Actions
.
|
If, at
any time after the Effective Time, the Surviving Corporation shall consider or
be advised that any deeds, bills of sale, assignments, assurances or any other
actions or things are necessary or desirable to vest, perfect or confirm of
record or otherwise in the Surviving Corporation its right, title or interest
in, to or under any of the rights, properties or assets of Merger Sub or the
Company or otherwise carry out this Agreement, the officers and directors of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of Merger Sub or the Company, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of
Merger Sub or the Company, all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under such rights, properties or assets in the Surviving Corporation
or otherwise to carry out this Agreement.
ARTICLE
II
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The
following representations and warranties by the Company to Parent and Merger Sub
are qualified by the Company Disclosure Schedule, which sets forth certain
disclosures concerning the Company, its subsidiaries (each a “
Company Subsidiary
” and
collectively, the “
Company
Subsidiaries
”) and its business (the “
Company Disclosure Schedule
”)
(
provided
that
any fact or item disclosed with respect to one representation or warranty shall
be deemed to be disclosed with respect to each other representation or warranty,
but only to the extent that the applicability of such fact or item with respect
to such other representation or warranty can reasonably be inferred from the
disclosure with respect to such fact or item contained in the Company Disclosure
Schedule). The Company hereby represents and warrants to Parent and
Merger Sub as follows:
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|
2.1
|
Due
Organization and Good Standing
.
|
Each of
the Company and the Company Subsidiaries 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 power and authority to own, lease
and operate its properties and to carry on its business as now being
conducted. Each of the Company and the Company Subsidiaries is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the character of the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. The Company has
heretofore made available to Parent accurate and complete copies of the
Company’s Amended and Restated Certificate of Incorporation (the “
Certificate of Incorporation
”)
and its Amended and Restated Bylaws (the “
Bylaws
”) and the equivalent
organizational documents of each of the Company Subsidiaries, each as currently
in effect. None of the Company or any Company Subsidiary is in
violation of any provision of the Certificate of Incorporation, the Bylaws or
its equivalent organizational documents.
For
purposes of this Agreement, the term “
Company Material Adverse
Effect
” shall mean any occurrence, state of facts, change, event, effect
or circumstance that, individually or in the aggregate, (a) has, or would
reasonably be expected to have, a material adverse effect on the assets,
liabilities, business, results of operations or financial condition of the
Company and the Company Subsidiaries taken as a whole, other than any
occurrence, state of facts, change, event, effect or circumstance to the extent
resulting from (i) changes in general economic conditions or financial,
banking or securities markets in general; (ii) changes in the workers’
compensation insurance industry generally; (iii) any changes in statutes,
rules, or regulations applicable to the Company or any Company Subsidiary or any
of their respective properties or assets; (iv) any outbreak or escalation
of hostilities or war (whether declared or not declared) or any act of terrorism
whether or not pursuant to the declaration of a national emergency or war;
(v) the announcement of this Agreement and the transactions contemplated
hereby (including the Merger); (vi) changes in United States of America
generally accepted accounting principles (“
GAAP
”) or statutory accounting
principles (“
SAP
”) or
any authoritative interpretation
thereof
promulgated after the date hereof by the Financial Accounting Standards Board or
the National Association of Insurance Commissioners, respectively;
(vii) the availability or cost of financing to Parent or Merger Sub (for
the avoidance of doubt, the exception in this clause (vii) shall not
prevent or otherwise affect a determination that the underlying cause of such
unavailability or cost constitutes a Company Material Adverse Effect); or
(ix) changes in loss reserves occasioned by the report of the Company’s
independent actuary as at December 31, 2007, if such changes, when aggregated
with other changes in loss reserves for the fiscal year 2007, are not less
favorable than changes in loss reserves for the fiscal year 2006, in the
aggregate;
provided
,
however
, that the
exceptions set forth in clauses (i), (ii), (iii) and (vi) shall not be
given effect to the extent that such occurrence, state of facts, change, event,
effect or circumstance has a disproportionate adverse effect on the Company and
the Company Subsidiaries taken as a whole as compared to the effect on other
Persons operating in the industry generally, or (b) would, or would
reasonably be expected to, prevent or materially delay or impair the ability of
the Company or the Company Subsidiaries to consummate the Merger and the other
transactions contemplated by this Agreement.
(a)
The authorized capital stock of the Company consists of 45,000,000 shares of
Common Stock and 5,000,000 shares of preferred stock, par value $.01 per share
(the “
Preferred Stock
”
and, together with the Common Stock, the “
Company Capital
Stock
”). As of the date hereof, (i) 15,290,181 shares of
Common Stock were issued and outstanding, (ii) 613,895 shares of Common
Stock were held in treasury, (iii) no shares of Common Stock were held by
any Company Subsidiary and (iv) no shares of Preferred Stock are issued or
outstanding. As of the date hereof, there were 386,010 shares of
Common Stock authorized and reserved for issuance pursuant to outstanding
Company Options. All of the outstanding shares of Company Capital
Stock are, and all shares of Company Capital Stock that may be issued pursuant
to the exercise of outstanding Company Options will be, when issued in
accordance with the respective terms thereof, duly authorized, validly issued,
fully paid and non-assessable and not subject to any preemptive or similar
rights. None of the outstanding securities of the Company has been
issued in violation of any foreign, federal or state securities
Laws. Except as set forth above and in Section 2.2(f) below, no
shares of Company Capital Stock, or other equity or voting interests in the
Company, or options, warrants or other rights to acquire any such stock or
securities were issued, reserved for issuance or outstanding. Since
February 9, 2006, the Company has not issued any Common Stock other than
pursuant to the exercise of Company Options outstanding on such date, has not
granted any restricted stock, warrants or other rights to purchase Company
Capital Stock or entered into any other agreements or commitments to issue any
Common Stock and has not split, combined or reclassified any shares of Company
Capital Stock.
(b)
Except as set forth above or as set forth in
Section 2.2(b)
of the
Company Disclosure Schedule, (i) the Company directly or indirectly owns
all of the capital stock of, or other equity interests in, the Company
Subsidiaries, (ii) there are no (x) outstanding options, warrants,
puts, calls, convertible securities, preemptive or similar rights,
(y) bonds, debentures, notes or other indebtedness having general
voting rights or that are convertible or exchangeable into securities having
such rights (collectively, “
Voting Debt
”) or (z)
subscriptions or other rights, agreements, arrangements, contracts or
commitments of any character, relating to the issued or unissued capital stock
of, or other equity interests in, the
Company
or any of the Company Subsidiaries or obligating the Company or any of the
Company Subsidiaries to issue, transfer, deliver or sell or cause to be issued,
transferred, delivered, sold or repurchased any options or shares of capital
stock or Voting Debt of, or other equity interest in, the Company or any of the
Company Subsidiaries or securities convertible into or exchangeable for such
shares or equity interests, or obligating the Company or any of the Company
Subsidiaries to grant, extend or enter into any such option, warrant, call,
subscription or other right, agreement, arrangement or commitment and
(iii) there are no outstanding obligations of the Company or any of the
Company Subsidiaries to repurchase, redeem or otherwise acquire any Company
Capital Stock, or other capital stock of, or equity interests in, the Company or
any of the Company Subsidiaries or to provide funds to make any investment (in
the form of a loan, capital contribution or otherwise) in any other
entity.
(c)
There are no stockholders agreements, voting trusts or other agreements or
understandings to which the Company or any Company Subsidiary is a party with
respect to the voting of the Company Capital Stock or the capital stock or
equity interests of any Company Subsidiary.
(d)
Following the Effective Time, no holder of Company Options will have any right
to receive shares of common stock of the Surviving Corporation upon exercise of
Company Options.
(e)
Except as disclosed in
Section 2.2(e)
of the
Company Disclosure Schedule, no Indebtedness of the Company or any of the
Company Subsidiaries contains any restriction upon (i) the prepayment of
any of such Indebtedness, (ii) the incurrence of Indebtedness by the
Company or any of the Company Subsidiaries, or (iii) the ability of the
Company or any of the Company Subsidiaries to grant any Encumbrance (as defined
in Section 2.6) on its properties or assets. As used in this
Agreement, “
Indebtedness
” means
(A) all indebtedness for borrowed money or for the deferred purchase price
of property or services (other than current trade liabilities incurred in the
ordinary course of business and payable in accordance with customary practices),
(B) any other indebtedness that is evidenced by a note, bond, debenture,
credit agreement or similar instrument, (C) all obligations under financing
leases, (D) all obligations in respect of acceptances issued or created,
(E) all liabilities secured by an Encumbrance on any property and
(F) all guarantee obligations.
(f)
Section 2.2(f)
of the Company Disclosure Schedule lists (i) all Company Options
outstanding as of the date hereof, (ii) the name of the holder of each
Company Option, (iii) the number of shares of Common Stock subject to such
Company Options, (iv) the date of grant of such Company Options,
(v) the exercise price of such Company Options, (vi) the expiration
date of such Company Options and the vesting schedule of such Company Options,
(vii) whether the holder is an employee of the Company, (viii) the
Company Stock Plan under which such Company Option was granted,
(ix) whether such Company Option is an “incentive stock option” (as defined
in Section 422 of the Code) or a non-qualified stock option, (x) the extent
to which such Company Option was vested and exercisable as of the date hereof,
and (xi) whether such Company Option was granted with a per share exercise
price lower than the fair market value of one Share on the date of grant as
determined in good faith by the administrator of the applicable Company Stock
Plan (as determined pursuant to the terms of each such plan).
(g)
No agreement or arrangement requires consent or approval from the holder of any
Company Option to effectuate the terms of this Agreement.
(h)
Since February 9, 2006, the Company has not declared or paid any dividend or
distribution in respect of the Company Capital Stock and, other than as set
forth on
Section
2.2(h)
of the Company Disclosure Schedule, has not repurchased, redeemed
or otherwise acquired any Company Capital Stock, and the Board has not
authorized any of the foregoing.
(a)
Section 2.3(a)
of the Company Disclosure Schedule contains a true, complete and correct list of
all Company Subsidiaries and their respective jurisdictions of
organization. Each Company Subsidiary is wholly owned, directly or
indirectly, by the Company, except as set forth in
Section 2.3(a)
of the
Company Disclosure Schedule. All of the capital stock and other
equity interests of the Company Subsidiaries are owned, directly or indirectly,
by the Company free and clear of any Encumbrance with respect thereto, except as
set forth in
Section
2.3(a)
of the Company Disclosure Schedule. All of the
outstanding shares of capital stock or other equity interests in each of the
Company Subsidiaries are duly authorized, validly issued, fully paid and
non-assessable and were issued free of preemptive rights and in compliance with
applicable Laws. No equity securities or other equity interests of
any of the Company Subsidiaries are or may become required to be issued or
purchased by reason of any options, warrants, rights to subscribe to, puts,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of any capital stock of, or
other equity interests in, any Company Subsidiary, and there are no contracts,
commitments, understandings or arrangements by which any Company Subsidiary is
bound to issue additional shares of its capital stock or other equity interests,
or options, warrants or rights to purchase or acquire any additional shares of
its capital stock or other equity interests or securities convertible into or
exchangeable for such shares or interests. Neither the Company nor
any Company Subsidiary owns any shares of capital stock or other equity or
voting interests in (including any securities exercisable or exchangeable for or
convertible into capital stock or other equity or voting interests in) any other
Person, other than capital stock of the Company Subsidiaries owned by the
Company or another Company Subsidiary.
(b)
The Company conducts all of its insurance operations through certain of the
Company Subsidiaries.
Section 2.3(b)
of the
Company Disclosure Schedule lists the jurisdiction of domicile of each Company
Subsidiary conducting insurance operations and all jurisdictions in which each
such Company Subsidiary is licensed to write insurance
business. Neither the Company nor any Company Subsidiary is or has
been since January 1, 2005 “commercially domiciled” in any jurisdiction other
than its jurisdiction of organization or is or since January 1, 2005 otherwise
has been treated as domiciled in a jurisdiction other than its jurisdiction of
organization. Except as set forth in
Section 2.3(b)
of the
Company Disclosure Schedule, each of the Company Subsidiaries conducting
insurance operations is (i) duly licensed or authorized as an insurance
company in its state of organization, (ii) duly licensed or authorized as
an insurance company in each other jurisdiction where it is required to be so
licensed or authorized and (iii) duly authorized in its jurisdiction of
incorporation and each other applicable jurisdiction to write each line of
business reported as
being
written in the Company SAP Statements (as defined in Section
2.7). All of the Company Permits of such Company Subsidiaries
conducting insurance operations are in full force and effect and there is no
proceeding or, to the knowledge of the Company, investigation to which the
Company or any Company Subsidiary is subject before a Governmental Authority
that is pending or, to the knowledge of the Company, threatened that would
reasonably be expected to lead to the revocation, amendment, failure to renew,
limitation, suspension or restriction of any such Company Permits.
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|
2.4
|
Authorization; Binding
Agreement.
|
The
Company has all requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, including the Merger, have
been duly and validly authorized and approved by the Board. The Board
has taken all action necessary to render inapplicable to this Agreement, the
Merger, the Voting Agreements and the other transactions contemplated by this
Agreement the provisions of Section 203 of the DGCL such that said provisions
will not apply to this Agreement, the Merger, the Voting Agreements and the
other transactions contemplated by this Agreement and such action is effective
and in force, and no other corporate proceedings on the part of the Company are
necessary to authorize the execution and delivery of this Agreement or to
consummate the transactions contemplated hereby, other than receipt of the
Company Stockholder Approval (as defined in Section 2.20). This
Agreement has been duly and validly executed and delivered by the Company and
(assuming the due authorization, execution and delivery hereof by Parent and
Merger Sub) constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws of general
application affecting the enforcement of creditors’ rights generally, and the
fact that equitable remedies or relief (including, but not limited to, the
remedy of specific performance) are subject to the discretion of the court from
which such relief may be sought (collectively, the “
Enforceability
Exceptions
”).
|
|
2.5
|
Governmental
Approvals
.
|
No
consent, approval, waiver, authorization or permit of, or notice to or
declaration or filing with (each, a “
Consent
”), any nation or
government, any state or other political subdivision thereof, any entity,
authority or body exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including any
governmental or regulatory authority, agency, department, board, commission,
administration or instrumentality, any court, tribunal or arbitrator or any
self-regulatory organization (each, a “
Governmental Authority
”) on
the part of the Company or any of the Company Subsidiaries is required to be
obtained or made in connection with the execution, delivery or performance by
the Company of this Agreement or the consummation by the Company of the
transactions contemplated hereby (including the Merger), other than (i) the
filing of the Certificate of Merger with the Secretary of State in accordance
with the DGCL, (ii) such filings as may be required with the Securities and
Exchange Commission (the “
SEC
”), foreign and state
securities Laws administrators and The Nasdaq Stock Market, (iii) such
filings as
may be
required in any jurisdiction where the Company or any of its subsidiaries is
qualified or authorized to do business as a foreign corporation in order to
maintain such qualification or authorization, (iv) pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “
HSR Act
”), and other Antitrust
Laws, (v) those consents, approvals, authorizations, waivers, permits,
filings or notices set forth in
Section 2.5
of the
Company Disclosure Schedule, and (vi) those Consents that, if not obtained
or given, would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
The
execution and delivery by the Company of this Agreement, the consummation by the
Company of the Merger and the other transactions contemplated hereby, and
compliance by the Company with any of the provisions hereof, will not
(i) conflict with or violate any provision of the Certificate of
Incorporation or Bylaws or equivalent organizational documents of the Company or
any of the Company Subsidiaries, (ii) except as set forth in
Section 2.6
of the
Company Disclosure Schedule, require any Consent under or result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation,
amendment or acceleration) under, any Company Material Contract (as defined in
Section 2.14) to which the Company or any of the Company Subsidiaries is a party
or by which the Company’s or any of the Company Subsidiaries’ assets are bound,
(iii) result (immediately or with the passage of time or otherwise) in the
creation or imposition of any liens, claims, mortgages, pledges, security
interests, equities, options, assignments, hypothecations, preferences,
priorities, deposit arrangements, easements, proxies, voting trusts or charges
of any kind or restrictions (whether on voting, sale, transfer, disposition or
otherwise) or other encumbrances or restrictions of any nature whatsoever,
whether imposed by agreement, Law or equity, or any conditional sale contract,
title retention contract or other contract to give or refrain from giving any of
the foregoing (the “
Encumbrances
”) upon any of the
properties, rights or assets of the Company or any of the Company Subsidiaries
or (iv) subject to obtaining the Consents from Governmental Authorities
referred to in Section 2.5 hereof, conflict with, contravene or violate in any
respect any foreign, federal, state or local Order, statute, law, rule,
regulation, ordinance, writ, injunction, arbitration award, directive, judgment,
decree, principle of common law, constitution, treaty or any interpretation
thereof enacted, promulgated, issued, enforced or entered by any Governmental
Authority (each, a “
Law
”
and collectively, the “
Laws
”) to which the Company or
any of the Company Subsidiaries or any of their respective assets or properties
is subject.
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|
2.7
|
SEC
Filings; Company Financial Statements
.
|
(a)
The Company has filed all forms, reports, schedules, statements and other
documents required to be filed or furnished by the Company with the SEC since
February 1, 2006 under the Exchange Act or the Securities Act of 1933, as
amended (the “
Securities
Act
”), together with any amendments, restatements or supplements thereto,
and will file all such forms, reports, schedules, statements and other documents
required to be filed subsequent to the date of this Agreement. All
such required forms, reports and documents (including those that the Company may
file subsequent to the date hereof) are referred to herein as the “
Company SEC
Reports
.” At the time when filed (or if amended or superseded
by a subsequent filing prior to the date hereof then on the date of such later
filing), the Company SEC Reports, as amended to date, (i) complied, and
each
of the
Company SEC Reports to be filed subsequent to the date hereof will comply, in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, the Sarbanes-Oxley Act of 2002 and the rules
and regulations of the SEC thereunder applicable to such Company SEC Reports and
(ii) did not at the time they were filed, and will not at the time they
will be filed, as the case may be, 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 the light of the
circumstances under which they were made, or will be made, as the case may be,
not misleading.
(b)
The consolidated financial statements (including, in each case, any related
notes thereto) contained in the Company SEC Reports as amended to date (the
“
Company Financials
”)
and in each Company SEC Report filed after the date hereof until the Effective
Time, (i) was or will be prepared from, in accordance with, and in all
material respects accurately reflects or will reflect the Company’s books and
records as of the times and for the periods referred to therein,
(ii) complied or will comply in all material respects with the published
rules and regulations of the SEC with respect thereto, (iii) was or will be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
with respect to Quarterly Reports on Form 10-Q under the Exchange Act), and
(iv) fairly present or will fairly present in all material respects the
consolidated financial position of the Company as of the respective dates
thereof and the consolidated results of the Company’s operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements may not contain footnotes and were, are or will be subject to normal
and recurring year-end adjustments. The consolidated balance sheet of the
Company contained in the Company SEC Report as of September 30, 2007 (the “
Balance Sheet Date
”) as filed
with the SEC before the date hereof is hereinafter referred to as the “
Company Balance
Sheet
.”
(c)
The Company has established and maintains disclosure controls and procedures and
internal controls over financial reporting (as such terms are defined in
paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange
Act) as required by Rule 13a-15 under the Exchange Act. The Company’s
disclosure controls and procedures are designed to ensure that information
required to be disclosed in the Company’s periodic reports filed or furnished
under the Exchange Act are recorded, processed, summarized and reported within
the required time periods and that all such information is accumulated and
communicated to the Company’s management as appropriate to allow timely
decisions regarding required disclosure and to make the certifications required
pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of
2002. To the Company’s knowledge (as defined in Section 8.7), the
Company has disclosed, based on its most recent evaluation of internal controls
over financial reporting, to the Company’s outside auditors and the audit
committee of the Board (i) all significant deficiencies or material
weaknesses in the design or operation of the Company’s internal controls over
financial reporting that 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)
Except as set forth in
Section 2.7(d)
of the
Company Disclosure Schedule, since February 9, 2006, (i) none of the
Company, any Company Subsidiary, or any director, officer, auditor or accountant
of the Company or any Company Subsidiary or any employee of the Company or
Company Subsidiary whose position includes monitoring the Company’s audit
committee complaint reporting procedures has received any complaint, allegation,
assertion or claim, whether or not in writing, regarding the accounting or
auditing practices, procedures, methodologies or methods of the Company or any
Company Subsidiary or their respective internal accounting controls, including
any complaint, allegation, assertion or claim that the Company or any Company
Subsidiary has engaged in questionable accounting or auditing practices, and
(ii) no attorney representing the Company or any Company Subsidiary,
whether or not employed by the Company or any Company Subsidiary, has reported
evidence of any violation of securities Laws, breach of fiduciary duty or
similar violation by the Company or any of its officers, directors, employees or
agents to the Board or any committee thereof or to any director or executive
officer of the Company.
(e)
As used herein, the term “
Company SAP Statements
” means
the statutory statements of each of the Company Subsidiaries as filed with the
Florida Office of Insurance Regulation for the years ended December 31, 2005 and
December 31, 2006 and the quarterly period ended September 30, 2007 and any such
annual and quarterly statutory statements filed subsequent to the date
hereof. The Company has made available to Parent true and complete
copies of the Company SAP Statements filed as of the date of this Agreement with
respect to the Company Subsidiaries required to file such Company SAP
Statements. Each of the Company Subsidiaries has filed or submitted,
or will file or submit, all Company SAP Statements required to be filed with or
submitted to the Florida Office of Insurance Regulation on forms prescribed or
permitted by the Florida Office of Insurance Regulation. The Company
SAP Statements were, and any Company SAP Statements filed after the date hereof
will be, prepared in all material respects in conformity with SAP consistently
applied for the periods covered thereby (except as may be indicated in the notes
thereto), and the Company SAP Statements present, and any Company SAP Statements
filed after the date hereof will present, in all material respects the statutory
financial position of such Company Subsidiaries as at the respective dates
thereof and the results of operations of such Company Subsidiaries for the
respective periods then ended. The Company SAP Statements complied,
and the Company SAP Statements filed after the date hereof will comply, in all
material respects with all applicable Laws when filed, and no deficiency has
been asserted with respect to any Company SAP Statements filed prior to the date
hereof by the Florida Office of Insurance Regulation or any other Governmental
Authority. The annual statutory balance sheets and income statements
included in the Company SAP Statements as of the date hereof have been, where
required by applicable Law, audited by an independent accounting firm of
recognized national or international reputation, and the Company has made
available to Parent true and complete copies of all audit opinions related
thereto. Except as indicated therein, all assets that are reflected
as admitted assets on the Company SAP Statements comply in all material respects
with all applicable Laws. There are no permitted practices utilized
by the Company or any Company Subsidiary in the preparation of the Company SAP
Statements.
(f)
The policy reserves and other actuarial amounts carried on the Company SAP
Statements of each Company Subsidiary, as of the respective dates of such
Company SAP Statements, (i) were in compliance in all material respects
with the requirements for reserves established by the Florida Office of
Insurance Regulation, (ii) have been computed in all material respects in
accordance with the requirements for reserves established by the Florida Office
of Insurance Regulation, (iii) were determined in all material respects in
accordance with generally accepted actuarial principles in effect at such time,
consistently applied and prepared in accordance with applicable SAP,
(iv) were computed on the basis of methodologies consistent in all material
respects with those used in computing the corresponding reserves in prior fiscal
years, except as otherwise noted in the Company SAP Statements, (v) have
been computed on the basis of assumptions consistent with those used to compute
the corresponding items in such financial statements, (vi) were fairly
stated in all material respects in accordance with sound actuarial principles,
and (vii) include provisions for all actuarial reserves and related items
which ought to be established in accordance with applicable Laws and in
accordance, in all material respects, with prudent insurance practices generally
followed in the insurance industry. To the knowledge of the Company,
there are no facts or circumstances that could reasonably necessitate any
material change in such reserves above those reflected in the Company SAP
Statements (other than increases consistent with past experience resulting from
the ordinary course of business).
(g)
Except (i) as disclosed in
Section 2.7(g)
of the Company Disclosure Schedule, (ii) for assessments of residual or
state mandated funds and associations and (iii) workers compensation claims
made in the ordinary course of business under insurance policies issued by the
Company, no claim or assessment is pending or, to the knowledge of the Company,
threatened against any Company Subsidiary.
|
|
2.8
|
Absence
of Certain Changes
.
|
(a)
Except as disclosed in
Section 2.8
of the
Company Disclosure Schedule, since the Balance Sheet Date, the Company and the
Company Subsidiaries have conducted their respective businesses in the ordinary
course of business consistent with past practice and there has not occurred any
action that would constitute a breach of Section 4.1 if such action were to
occur or be taken after the date of this Agreement.
(b)
Since the Balance Sheet Date, there has not been any fact, change, effect,
occurrence, event, development or state of circumstances that has had or would
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
|
|
2.9
|
Absence
of Undisclosed Liabilities
.
|
Except
(a) as adequately reflected or reserved against in the Company Balance
Sheet, (b) for liabilities and obligations incurred in the ordinary course
of business consistent with past practice since the Balance Sheet Date or
(c) as set forth on
Section 2.9
of the
Company Disclosure Schedule, neither the Company nor any of the Company
Subsidiaries has incurred any liabilities or obligations of any nature, whether
or not accrued, contingent or otherwise, and whether or not required by GAAP to
be recognized, reflected or disclosed on a consolidated balance sheet of the
Company or in the notes thereto.
|
|
2.10
|
Compliance with
Laws
.
|
Neither
the Company nor any of the Company Subsidiaries is in conflict with, or in
default or violation of, nor since January 1, 2005 has it received any written
notice of any conflict with, or default or violation of, (A) any applicable
Law by which it or any property or asset of the Company or any Company
Subsidiary is bound or affected, or (B) any contract (including any Company
Material Contract), agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any Company Subsidiary is a
party or by which the Company or any Company Subsidiary or any property, asset
or right of the Company or any Company Subsidiary is bound or affected, except,
in each case, for any such conflicts, defaults or violations that would not
reasonably be expected to be material to the Company or any of its
Subsidiaries. Notwithstanding the generality of the foregoing,
(x) each Company Subsidiary and, to the knowledge of the Company, its
agents, have marketed, sold and issued insurance products in compliance in all
material respects with all Laws applicable to the business of such Company
Subsidiary and in the respective jurisdictions in which such products have been
sold, (y) since January 1, 2005, the Company and each Company Subsidiary have
given or made all required notices, submissions, reports or other filings under
applicable Law, including insurance holding company statutes, and (z) all
contracts, agreements, arrangements and transactions in effect between any
Company Subsidiary and any affiliate are in compliance in all material respects
with the requirements of all applicable insurance holding company
statutes. In addition, except as disclosed in
Section 2.10
of the
Company Disclosure Schedule, (i) there is no pending or, to the knowledge
of the Company, threatened proceeding or investigation to which the Company or a
Company Subsidiary is subject before any Governmental Authority regarding
whether any of the Company Subsidiaries has violated, and none of the Company or
any Company Subsidiary has received written or, to the knowledge (without the
need for due inquiry) of the Company, oral (or otherwise has any knowledge of
any) notice since January 1, 2005, of any material violation of or noncompliance
with, any Law applicable to the Company or any Company Subsidiary, or directing
the Company or any Company Subsidiary to take any remedial action with respect
to such applicable Law or otherwise, and no material deficiencies of the Company
or any Company Subsidiary have been asserted to the Company or any Company
Subsidiary in writing or, to the knowledge (without the need for due inquiry) of
the Company, orally, by any Governmental Authority with respect to possible
violations of, any applicable Laws; and (ii) since January 1, 2005, the
Company and the Company Subsidiaries have filed all material reports,
statements, documents, registrations, filings or submissions required to be
filed with any insurance regulatory authority or Governmental Authority, and all
such reports, registrations, filings and submissions are in compliance (and
complied at the relevant time) with applicable Law and no material deficiencies
have been asserted by any such Governmental Authority since January 1, 2005 with
respect to any reports, statements, documents, registrations, filings or
submissions required to be filed with respect to the Company or the Company
Subsidiaries with any Governmental Authority that have not been
remedied. Since January 1, 2005, the businesses of the Company and
each Company Subsidiary are and have been conducted in compliance in all
material respects with any applicable Laws.
|
|
2.11
|
Regulatory Agreements;
Permits
.
|
(a)
Except as disclosed in
Section 2.11
of the
Company Disclosure Schedule, there are no (1) written agreements, consent
agreements, memoranda of understanding, commitment letters, cease and desist
orders, or similar undertakings binding on the Company Subsidiaries to which the
Company or any Company Subsidiary is a party, on the one hand, and any
Governmental Authority is a party or addressee, on the other
hand,
(2) Orders or directives of or supervisory letters from a Governmental
Authority specifically with respect to the Company or any Company Subsidiary, or
(3) resolutions or policies or procedures adopted by the Company or a
Company Subsidiary at the request of a Governmental Authority, that
(A) limit in any respect the ability of the Company or any of the Company
Subsidiaries to issue insurance policies, (B) in any manner impose any
requirements on the Company or any of the Company Subsidiaries in respect of
risk-based capital requirements that add to or otherwise modify in any respect
the risk-based capital requirements imposed under applicable Laws,
(C) require the Company or any of its affiliates to make capital
contributions, purchase surplus notes or make loans to a Company Subsidiary, or
(D) in any manner relate to the ability of the Company or any of the
Company Subsidiaries to pay dividends or otherwise restrict the conduct of
business of the Company or any of the Company Subsidiaries in any
respect.
(b)
The Company and the Company Subsidiaries hold all permits, licenses, franchises,
grants, authorizations, consents, exceptions, variances, exemptions, orders and
other governmental authorizations, certificates, consents and approvals
necessary to lawfully conduct their businesses as presently conducted and
contemplated to be conducted, and to own, lease and operate their assets and
properties (collectively, the “
Company Permits
”), all of
which are in full force and effect, and no suspension or cancellation of any of
the Company Permits is pending or, to the knowledge of the Company, threatened,
except where the failure of any Company Permits to have been in full force and
effect, or the suspension or cancellation of any of the Company Permits, would
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. The Company and the Company Subsidiaries are
not in violation in any material respect of the terms of any Company
Permit.
(c)
Except as disclosed in
Section 2.11(c)
of
the Company Disclosure Schedule, no investigation, review or market conduct
examination by any Governmental Authority with respect to the Company or any
Company Subsidiary is pending or, to the knowledge of the Company, threatened,
nor has any Governmental Authority indicated an intention to conduct any such
investigation or review.
Except as
disclosed in Section 2.12 of the Company Disclosure Schedule, there is no
private or governmental action, suit, proceeding, litigation, claim, arbitration
or investigation (each, an “
Action
”) pending before any
arbitrator, agency, court or tribunal, foreign or domestic, or, to the knowledge
of the Company, threatened against the Company, any of the Company Subsidiaries
or any of their respective properties, rights or assets or any of their
respective officers or directors (in their capacities as such) that would
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. There is no decree, directive, order, writ,
judgment, stipulation, determination, decision, award, injunction, temporary
restraining order, cease and desist order or other order by, or any capital
plan, supervisory agreement or memorandum of understanding with any Governmental
Authority (each, an “
Order
”) binding against the
Company, any of the Company Subsidiaries or any of their respective properties,
rights or assets or any of their respective officers or directors (in their
capacities as such) that would prohibit,
prevent,
enjoin, restrict or materially alter or delay any of the transactions
contemplated by this Agreement (including the Merger), or that would reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect. The Company and the Company Subsidiaries are in
material compliance with all Orders, if any, set forth in Section 2.12 of the
Company Disclosure Schedule. Except as disclosed in Section 2.12 of
the Company Disclosure Schedule, there is no material Action that the Company or
any of the Company Subsidiaries has pending against other parties.
|
|
2.13
|
Restrictions on
Business Activities
.
|
There is
no agreement or Order binding upon the Company or any of the Company
Subsidiaries that has or could reasonably be expected to have the effect of
prohibiting, preventing, restricting or impairing in any respect any business
practice of the Company or any of the Company Subsidiaries, any acquisition of
property by the Company or any of the Company Subsidiaries, the conduct of
business by the Company or any of the Company Subsidiaries, or restricting in
any respect the ability of the Company or any of the Company Subsidiaries from
engaging in business or from competing with other parties.
|
|
2.14
|
Material
Contracts
.
|
(a)
Section 2.14
of
the Company Disclosure Schedule sets forth a list of, and the Company has made
available to Parent true, correct and complete copies of, each written contract,
agreement, commitment, arrangement, lease or plan and each other instrument to
which the Company or any Company Subsidiary is a party or by which the Company
or any Company Subsidiary is bound as of the date hereof (each, a “
Company Material Contract
”)
that:
(i)
constitutes a “material contract” (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC) or is described in the Company SAP Statements for the
year ended December 31, 2006;
(ii)
contains covenants that materially limit the ability of the Company (or which,
following the consummation of the Merger, could materially restrict the ability
of the Surviving Corporation or any of its affiliates) (A) to compete in
any line of business or with any Person or in any geographic area or to sell,
supply, price, develop or distribute any service, product or asset, including
any non-competition covenants, exclusivity restrictions, rights of first refusal
or most-favored pricing clauses or (B) to purchase or acquire an interest
in any other entity, except, in each case, for any such contract that may be
canceled without any penalty or other liability to the Company or any Company
Subsidiary upon notice of 60 days or less;
(iii) with
respect to a joint venture, partnership, limited liability or other similar
agreement or arrangement relating to the formation, creation, operation,
management or control of any partnership or joint venture that is material to
the business of the Company and the Company Subsidiaries, taken as a
whole;
(iv) involves
any exchange traded, over-the-counter or other swap, cap, floor, collar, futures
contract, forward contract, option or other derivative financial instrument or
contract, based on any commodity, security, instrument, asset, rate or index of
any kind or nature whatsoever, whether tangible or intangible, including
currencies, interest rates, foreign currency and indices;
(v)
relates to indebtedness (whether incurred, assumed, guaranteed or secured by any
asset) having an outstanding principal amount in excess of $1.0
million;
(vi) was
entered into after January 1, 2005 or has not yet been consummated, and involves
the acquisition or disposition, directly or indirectly (by merger or otherwise),
of assets or capital stock or other equity interests of another
Person;
(vii) by
its terms calls for aggregate payments by the Company and the Company
Subsidiaries under such contract of more than $250,000 per year;
(viii) with
respect to any material acquisition, pursuant to which the Company or any
Company Subsidiary has (A) any continuing indemnification obligations or
(B) any “earn-out” or other contingent payment obligations;
(ix)
involves any directors or executive officers of the Company that cannot be
cancelled by the Company (or the applicable Company Subsidiary) within 60 days’
notice without liability, penalty or premium;
(x)
obligates the Company or any of its subsidiaries to provide indemnification or a
guarantee in excess of $100,000;
(xi)
obligates the Company to make any capital commitment or expenditure (including
pursuant to any joint venture);
(xii) relates
to the development, ownership, licensing or use of any Intellectual Property
material to the business of the Company or any of its subsidiaries, other than
“shrink wrap,” “click wrap,” and “off the shelf” software agreements and other
agreements for software commercially available on reasonable terms to the public
generally with license, maintenance, support and other fees of less than $50,000
per year (collectively, “
Off-the-Shelf Software
Agreements
”); or
(xiii) provides
for any confidentiality or standstill arrangements.
(b) With
respect to each Company Material Contract, except as set forth in
Section 2.14
of the
Company Disclosure Schedule: (i) the Company Material Contract
is legal, valid, binding and enforceable against the Company or the Company
Subsidiary party thereto and, to the Company’s knowledge, the other party
thereto, and in full force and effect; (ii) the Company Material Contract
will continue to be legal, valid, binding and enforceable against the Surviving
Corporation or such Company Subsidiary and, to the Company’s knowledge, the
other party thereto, and in full force and effect on identical terms following
the Effective Time; (iii) neither the Company nor any of the Company
Subsidiaries is in breach or default in any material respect, and no event has
occurred that with the passage of time or giving of notice or both would
constitute such a breach or default by the Company or any of the Company
Subsidiaries, or permit termination or acceleration by the other party, under
the Company Material Contract; and (iv) to the Company’s knowledge, no
other party to the Company Material Contract is in breach or default in any
material respect, and no event has occurred that with the passage of time or
giving of notice or both would constitute such a breach or default by such other
party, or permit termination or acceleration by the Company or any of the
Company Subsidiaries, under such Company Material Contract.
|
|
2.15
|
Intellectual
Property
.
|
(a)
Section 2.15(a)
of the Company Disclosure Schedule contains a list of (A) all registered
Intellectual Property, Intellectual Property that is the subject of a pending
application for registration, and material unregistered Intellectual Property,
in each case that is, owned by the Company or any of the Company Subsidiaries
and (B) all material Intellectual Property, other than Off-the-Shelf
Software Agreements, licensed, used or held for use by the Company or any of the
Company Subsidiaries in the conduct of its business (“
Licensed Intellectual
Property
”). Each of the Company and the Company Subsidiaries
has (i) all right, title and interest in and to all Company Intellectual
Property owned by it, (the “
Company Intellectual
Property
”) free and clear of all Encumbrances, other than Permitted
Encumbrances (as defined in Section 2.21) and (ii) all necessary
proprietary rights in and to all of its Licensed Intellectual Property, free and
clear of all Encumbrances, other than Permitted Encumbrances. Neither
the Company nor any of the Company Subsidiaries has received any written
communication alleging that it has infringed, diluted or misappropriated, or, by
conducting its business as proposed, would infringe, dilute or misappropriate,
the Intellectual Property rights of any Person and there is no valid basis for
any such allegation. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
impair or materially alter the Company’s or any Company Subsidiary’s rights to
any Company Intellectual Property or Licensed Intellectual
Property. To the knowledge of the Company, there is no unauthorized
use, infringement or misappropriation of the Company Intellectual Property or
Licensed Intellectual Property by any third party. All of the rights
within the Company Intellectual Property and Licensed Intellectual Property are
valid, enforceable and subsisting, and there is no Action that is pending or, to
the Company’s knowledge, threatened that challenges the rights of the Company or
any of the Company Subsidiaries in respect of any Company Intellectual Property
or Licensed Intellectual Property or the validity, enforceability or
effectiveness thereof. The Company Intellectual Property and the
Licensed Intellectual Property constitute all material Intellectual Property
used in or necessary for the operation by the Company and the Company
Subsidiaries of their respective businesses as currently
conducted. Neither the Company nor any of the Company Subsidiaries is
in breach or default in any material respect (or would with the giving of notice
or lapse of time or both be in such breach or default) under any license to use
any of the Licensed Intellectual Property.
(b)
For purposes of this Agreement, “
Intellectual Property
” means
(A) United States, international and foreign patents and patent
applications, including divisionals, continuations, continuations-in-part,
reissues, reexaminations and extensions thereof and counterparts claiming
priority therefrom; utility models; invention disclosures; and statutory
invention registrations and certificates; (B) United States and foreign
registered, pending and unregistered trademarks, service marks, trade dress,
logos, trade names, corporate names and other source identifiers, domain names,
Internet sites and web pages; and registrations and applications for
registration for any of the foregoing, together with all of the goodwill
associated therewith; (C) United States and foreign registered and
unregistered copyrights, and registrations and applications for registration
thereof; rights of publicity; and copyrightable works; (D) all inventions
and design rights (whether patentable or unpatentable) and all categories of
trade secrets as defined in the Uniform Trade Secrets Act, including business,
technical and financial information; and (E) confidential and proprietary
information, including know-how.
|
|
2.16
|
Employee Benefit
Plans
.
|
(a)
Section 2.16(a)
of the Company Disclosure Schedule lists, with respect to the Company and the
Company Subsidiaries and any trade or business (whether or not incorporated)
that is treated as a single employer with the Company and the Company
Subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the Code
(an “
ERISA Affiliate
”),
(i) all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (“
ERISA
”)), (ii) loans to
officers and directors other than advances for expense reimbursements incurred
in the ordinary course of business and any stock option, stock purchase, phantom
stock, stock appreciation right, equity-related, supplemental retirement,
severance, sabbatical, medical, dental, vision care, disability, employee
relocation, cafeteria benefit (Code Section 125) or dependent care (Code Section
129), life insurance or accident insurance plans, programs, agreements or
arrangements, (iii) all bonus, pension, retirement, profit sharing,
savings, deferred compensation or incentive plans, programs, policies,
agreements or arrangements, (iv) other fringe, perquisite, or employee
benefit plans, programs, policies, agreements or arrangements of the Company and
the Company Subsidiaries and (v) any current or former employment,
consulting, change of control, retention or executive compensation, termination
or severance plans, programs, policies, agreements or arrangements, written or
otherwise, as to which unsatisfied liabilities or obligations (contingent or
otherwise) of the Company or any of the Company Subsidiaries remain for the
benefit of, or relating to, any present or former employee, consultant or
director of the Company or any of the Company Subsidiaries, or with respect to
which the Company or any of the Company Subsidiaries could reasonably be
expected to have any liabilities or obligations (together, the “
Company Employee
Plans
”).
(b)
Any Company Employee Plan intended to be qualified under Section 401(a) of the
Code has either obtained from the Internal Revenue Service (“
IRS
”) a current favorable
determination letter as to its qualified status under the Code, including all
amendments to the Code effected by the Tax Reform Act of 1986, or has applied to
the IRS for such a determination letter prior to the expiration of the requisite
period under applicable Treasury Regulations or IRS pronouncements in which to
apply for such determination letter and to make any amendments necessary to
obtain a favorable determination or has been established under a standardized
prototype plan for which an IRS opinion letter has been obtained by the plan
sponsor and is valid as to the adopting employer.
(c)
There has been no “prohibited transaction,” as such term is defined in Section
406 of ERISA and Section 4975 of the Code, by the Company or, to the knowledge
of the Company, by any trusts created thereunder, any trustee or administrator
thereof or any other Person, with respect to any Company Employee
Plan. Each Company Employee Plan has been administered in accordance
with its terms and in material compliance with the requirements prescribed by
any and all applicable Laws (including ERISA and the Code), and the Company and
each ERISA Affiliate have performed all obligations required to be performed by
them under, are not in any respect in default under or violation of,
and
have
no knowledge of any default or violation by any other party to, any of the
Company Employee Plans. All contributions and premiums required to be
made by the Company or any ERISA Affiliate to any Company Employee Plan have
been made on or before their due dates, including any legally permitted
extensions. No Action has been brought, or to the knowledge of the
Company is threatened, against or with respect to any such Company Employee
Plan, including any audit or inquiry by the IRS, United States Department of
Labor (the “
DOL
”), the
SEC or other Governmental Authority, other than routine claims for
benefits. To the knowledge of the Company, each Company Employee Plan
that is a “nonqualified deferred compensation plan” within the meaning of
Section 409A of the Code and any awards thereunder, in each case that is subject
to Section 409A of the Code, has been operated in good faith compliance, in all
material respects, with Section 409A of the Code since January 1,
2005.
(d)
Except as disclosed in
Section 2.16(d)
of
the Company Disclosure Schedule or as otherwise provided in this Agreement, the
consummation of the transactions contemplated by this Agreement will not, either
alone or in combination with any other event or events, (i) entitle any
current or former employee, director or consultant of the Company or any of the
Company Subsidiaries to any payment (whether of severance pay, unemployment
compensation, golden parachute, bonus or otherwise), (ii) accelerate,
forgive indebtedness, vest, distribute, or increase benefits or obligation to
fund benefits with respect to any employee or director of the Company or any of
the Company Subsidiaries, or (iii) accelerate the time of payment or
vesting of Company Options, or increase the amount of compensation due any such
employee, director or consultant.
(e)
No amounts payable under any of the Company Employee Plans or any other
contract, agreement or arrangement with respect to which the Company or any of
the Company Subsidiaries may have any liability will not be deductible for
federal income tax purposes by virtue of Section 162(m) or Section 280G of the
Code. None of the Company Employee Plans contains any provision requiring a
gross-up pursuant to Section 280G or 409A of the Code or similar tax
provisions.
(f)
No Company Employee Plan maintained by the Company or any of the Company
Subsidiaries provides benefits, including death or medical benefits (whether or
not insured), with respect to current or former employees of the Company or any
of the Company Subsidiaries after retirement or other termination of service
(other than (i) coverage mandated by applicable Laws, (ii) death
benefits or retirement benefits under any “employee pension benefit plan,” as
that term is defined in Section 3(2) of ERISA, or (iii) benefits, the full
direct cost of which is borne by the current or former employee (or beneficiary
thereof)).
(g)
Neither the Company nor any ERISA Affiliate has any liability with respect to
any (i) employee pension benefit plan (within the meaning of Section 3(2)
of ERISA) which is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV
of ERISA or Section 412 of the Code , (ii) “multiemployer plan” as defined
in Section 3(37) of ERISA or (iii) “multiple employer plan” within the
meaning of Sections 4063 and 4064 of ERISA or Section 413(c) of the
Code.
(h)
To the knowledge of the Company, all Company Options have been properly approved
by the Company’s Board of Directors (or a duly authorized committee or
subcommittee thereof) in compliance with all applicable Law, and otherwise
granted in compliance with the terms of the applicable Company Employee Plan,
with applicable Law, and with the applicable provisions of the Certificate of
Incorporation and Bylaws as in effect at the applicable time. All
such Company Options have been appropriately accounted for in accordance with
GAAP and disclosed in accordance with applicable Law, accounting rules and stock
exchange requirements, and no such grants involved any “back dating,” “forward
dating” or similar practices with respect to such grants.
(i)
Neither the Company nor any of its ERISA Affiliates has (i) used the
services or workers provided by third party contract labor suppliers, temporary
employees, “leased employees” (as that term is defined in Section 414(n) of the
Code), or individuals who have provided services as independent contractors to
an extent that would reasonably be expected to result in the disqualification of
any of the Company Employee Plans or the imposition of penalties or excise taxes
with respect to the Company Employee Plans by the IRS or the DOL.
(a)
The Company has timely filed, or caused to be timely filed, all material
federal, state, local and foreign Tax returns and reports required to be filed
by it or the Company Subsidiaries (collectively, “
Tax Returns
”), and has paid,
collected or withheld, or caused to be paid, collected or withheld, all material
Taxes required to be paid, collected or withheld, other than such Taxes for
which adequate reserves in the Company Financials have been established in
accordance with GAAP. There are no claims, assessments, audits,
examinations, investigations or other proceedings pending against the Company or
any of the Company Subsidiaries in respect of any Tax, and neither the Company
nor any of the Company Subsidiaries has been notified in writing of any proposed
Tax claims or assessments against the Company or any of the Company Subsidiaries
(other than, in each case, claims or assessments for which adequate reserves in
the Company Financials have been established in accordance with GAAP or are
immaterial in amount). Neither the Company nor any of the Company
Subsidiaries has any outstanding waivers or extensions of any applicable statute
of limitations to assess any material amount of Taxes. There are no
outstanding requests by the Company or any of the Company Subsidiaries for any
extension of time within which to file any Tax Return or within which to pay any
Taxes shown to be due on any Tax Return. There are no Encumbrances
for material amounts of Taxes on the assets of the Company or any of the Company
Subsidiaries, except for statutory liens for current Taxes not yet due and
payable or that are being contested in good faith and for which adequate
reserves in the Company Financials have been established in accordance with
GAAP.
(b)
Neither the Company nor any of the Company Subsidiaries has constituted either a
“distributing corporation” or a “controlled corporation” (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock (to any Person or
entity that is not a member of the consolidated group of which the Company is
the common parent corporation) qualifying for, or intended to qualify for,
tax-free treatment under Section 355 of the Code (i) within the two-year
period ending on the date hereof or (ii) in a distribution which could
otherwise constitute part of a “plan” or “series of related transactions”
(within the meaning of Section 355(e) of the Code) in conjunction with the
Merger.
(c)
Neither the Company nor any of the Company Subsidiaries is or (i) has been
at any time within the five-year period ending on the date hereof a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code and (ii) has ever been a member of any consolidated, combined,
unitary or affiliated group of corporations for any Tax purposes other than a
group of which the Company is or was the common parent corporation.
(d)
Neither the Company nor any of the Company Subsidiaries has made any change in
accounting method or received a ruling from, or signed an agreement with, any
taxing authority that would reasonably be expected to have a Company Material
Adverse Effect following the Closing.
(e)
As of the date hereof, neither the Company nor any of the Company Subsidiaries
is being audited by any taxing authority or has been notified by any tax
authority that any such audit is contemplated or pending.
(f)
Neither the Company nor any of the Company Subsidiaries participated in, or
sold, distributed or otherwise promoted, any “reportable transaction,” as
defined in Treasury Regulation section 1.6011-4.
(g)
Neither the Company nor any of the Company Subsidiaries has taken any action
that would reasonably be expected to give rise to (i) a “deferred
intercompany transaction” within the meaning of Treasury Regulation section
1.1502-13 or an “excess loss account” within the meaning of Treasury Regulation
section 1.1502-19, or (ii) the recognition of a deferred intercompany
transaction.
(h)
Except as set forth in
Section 2.17(h)
of the Company Disclosure Schedule, since December 31, 2006, neither the Company
nor any of the Company Subsidiaries have (i) changed any Tax accounting
methods, policies or procedures except as required by a change in Law,
(ii) made, revoked, or amended any material Tax election, (iii) filed
any amended Tax Returns or claim for refund, or (iv) entered into any
closing agreement affecting or otherwise settled or compromised any material Tax
liability or refund.
(i)
For purposes of this Agreement, the term “
Tax
” or “
Taxes
” shall mean any tax,
custom, duty, governmental fee or other like assessment or charge of any kind
whatsoever, imposed by any Governmental Authority (including any federal, state,
local, foreign or provincial income, gross receipts, property, sales, use, net
worth, premium, license, excise, franchise, employment, payroll, alternative or
added minimum, ad valorem, transfer or excise tax) together with any interest,
addition or penalty imposed thereon.
|
|
2.18
|
Finders
and Investment Bankers
.
|
Except
for Raymond James & Associates, Inc. (“
Raymond James
”), the fees of
which will be borne by the Company, no broker, finder or investment banker is
entitled to any brokerage, finder’s or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of the Company.
On or
prior to the date hereof, the Board has received from Raymond James, its
financial advisor, a written opinion addressed to it for inclusion in the Proxy
Statement (as defined in Section 4.3) to the effect that the consideration to be
received in the Merger by the Company’s stockholders is fair to the Company’s
stockholders (other than Parent, Merger Sub and their respective affiliates)
from a financial point of view.
|
|
2.20
|
Vote
Required; Board Action
.
|
(a)
No “fair price,” “business combination,” “moratorium,” “control share
acquisition” or other similar anti-takeover Law or regulation (collectively,
“
Takeover Laws
”) of any
jurisdiction is applicable or purports to be applicable to the transactions
contemplated by this Agreement. The affirmative vote of the holders
of a majority of the outstanding Shares (the “
Company Stockholder Approval
”)
is the only vote or consent of the holders of any class or series of the Company
Capital Stock that is necessary to approve and adopt this Agreement and to
consummate the transaction contemplated hereby (including the
Merger).
(b)
The Board, by resolutions duly adopted by unanimous vote at a meeting duly
called and held, has duly (i) determined that this Agreement and the Merger
are advisable and in the best interests of the Company and its stockholders,
(ii) approved the execution, delivery and performance of this Agreement and
the Merger, (iii) recommended that the stockholders of the Company adopt
this Agreement and directed that this Agreement and the Merger be submitted for
adoption by the Company’s stockholders in accordance with Section 251 of the
DGCL and this Agreement, and (iv) has taken all action necessary to cause
dispositions of Shares and Company Options pursuant to the transactions
contemplated by this Agreement (including the Merger) 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 that certain No-Action Letter dated
January 12, 1999 issued by the SEC regarding such matters.
|
|
2.21
|
Title
to Properties; Assets
.
|
(a)
Section 2.21(a
)
of the Company Disclosure Schedule contains a correct and complete list of all
real property and interests in real property leased or subleased by the Company
or any of the Company Subsidiaries from or to any Person (collectively, the
“
Company Real
Property
”). The list set forth in
Section 2.21(a)
of
the Company Disclosure Schedule contains, with respect to each of the Company
Real Properties, all existing leases, subleases, licenses or other occupancy
contracts to which the Company or any of the Company Subsidiaries is a party or
by which the Company or any of the Company Subsidiaries is bound, and all
amendments, modifications, extensions and supplements thereto (collectively, the
“
Tenant Leases
”), the
terms of which have been complied with by the Company and any Company Subsidiary
in all material respects. The Company Real Property set forth in
Section 2.21(a)
of the Company Disclosure Schedule comprises all of the real property necessary
and/or currently used in the operations of the business of the Company and the
Company Subsidiaries. The Company does not own any real
property. Except as would not have a Company Material Adverse Effect,
the Company or a Company Subsidiary has good and valid title to all of its
personal property, assets and rights, free and clear of all Encumbrances other
than Permitted Encumbrances.
(b)
A correct and complete copy of each Tenant Lease has been furnished to Parent
prior to the date hereof. The Company or the Company Subsidiary party thereto
has a valid, binding and enforceable leasehold interest under each of the Tenant
Leases, free and clear of all Encumbrances other than Permitted Encumbrances,
and each of the Tenant Leases is in full force and effect. Neither the Company
or any of the Company Subsidiaries nor, to the knowledge of the Company, any
other party to any Tenant Lease is in breach of or in default under, in any
material respect, any of the Tenant Leases. The Company and the Company
Subsidiaries enjoy peaceful and undisturbed possession under all such Tenant
Leases, have not received notice of any material default, delinquency or breach
on the part of the Company or any Company Subsidiary, and there are no existing
material defaults (with or without notice or lapse of time or both) by the
Company or any Company Subsidiary or, to the knowledge of the Company, any other
party thereto. For purposes of this Agreement, the term “
Permitted Encumbrances
” means
(i) Encumbrances with respect to Taxes either not yet due or being
contested in good faith in appropriate proceedings (and for which adequate
reserves in the Company Financials have been established in accordance with
GAAP); (ii) mechanics’, materialmen’s or similar statutory Encumbrances for
amounts not yet due or being contested in good faith in appropriate proceedings;
(iii) the terms and conditions of the lease creating the leaseholds; and
(iv) other exceptions with respect to the Company Real Property (including
easements of public record) that do not and would not materially interfere with
the current and currently intended use of such Company Real
Property.
(a)
Except as set forth in
Schedule 2.22(a)
of
the Company Disclosure Schedule, there are no Actions pending or, to the
knowledge of the Company, threatened involving the Company or any of the Company
Subsidiaries and any of their employees or former employees, including any
harassment, discrimination, retaliatory act or similar claim. There
has been: (i) to the knowledge of the Company, no labor union organizing or
attempting to organize any employee of the Company or any of the Company
Subsidiaries into one or more collective bargaining units; and (ii) no
labor dispute, strike, work slowdown, work stoppage or lock out or other
collective labor action by or with respect to any employees of the Company or
any of the Company Subsidiaries pending or, to the Company’s knowledge,
threatened against the Company or any of the Company
Subsidiaries. Neither the Company nor any of the Company Subsidiaries
is a party to, or bound by, any collective bargaining agreement or other
agreement with any labor organization applicable to the employees of the Company
or any of the Company Subsidiaries and no such agreement is currently being
negotiated.
(b)
The Company and the Company Subsidiaries (i) are in compliance in all
material respects with all applicable Laws respecting employment and employment
practices, terms and conditions of employment, health and safety and wages and
hours, including Laws relating to discrimination, disability, labor relations,
hours of work, payment of wages and overtime wages, pay equity, immigration,
workers compensation, working conditions, employee scheduling, occupational
safety and health, family and medical leave, and employee terminations,
(ii) are not engaged in any unfair labor practice, (ii) are not liable
for any material arrears of wages or any material penalty for failure to comply
with any of the foregoing, and (iii) are not liable for any material
payment to any trust or other fund or to any Governmental Authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for employees (other than routine payments to be made in the
ordinary course of business and consistent with past
practice). Except as would not result in any material liability to
the Company or any Company Subsidiary, there are no complaints, lawsuits,
arbitrations, administrative proceedings, or other Actions pending or, to the
knowledge of the Company, threatened against the Company or any Company
Subsidiary brought by or on behalf of any applicant for employment, any current
or former employee, any Person alleging to be a current or former employee, any
class of the foregoing, or any Governmental Authority, relating to any such Law
or regulation, or alleging breach of any express or implied contract of
employment, wrongful termination of employment, or alleging any other
discriminatory, wrongful or tortious conduct in connection with the employment
relationship.
|
|
2.23
|
Environmental
Matters
.
|
Except as
set forth in
Section
2.23
of the Company Disclosure Schedule or as would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect:
(a)
Neither the Company nor any of the Company Subsidiaries is the subject of any
federal, state, local or foreign Order, judgment or claim, and neither the
Company nor any of the Company Subsidiaries has received any written notice or
claim, or entered into any negotiations or agreements with any Person, relating
to any liability or remedial action under any applicable Environmental Laws or
alleging that the Company or any of its subsidiaries is in violation of, or
liable under, any Environmental Law;
(b)
The Company and the Company Subsidiaries are in compliance with all applicable
Environmental Laws;
(c)
Neither the Company nor any of the Company Subsidiaries has manufactured,
treated, stored, disposed of, arranged for or knowingly permitted the disposal
of, generated, handled or released any Hazardous Substance, or owned or operated
any property or facility, in a manner that has given or would reasonably be
expected to give rise to any liability under all applicable Environmental Laws;
and
(d)
Each of the Company and the Company Subsidiaries holds and is in compliance with
all Company Permits required to conduct its business and operations under all
applicable Environmental Laws.
(e)
Neither the Company, any Company Subsidiary nor any of their respective
properties are subject to any Order, judgment or written claim asserted or
arising under any Environmental Law.
“
Environmental Laws
” means any
Law relating to (a) the protection, preservation or restoration of the
environment (including air, water vapor, surface water, groundwater, drinking
water supply, surface land, subsurface land, plant and animal life or any other
natural resource), or (b) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of Hazardous Substances, in each case as in
effect at the date hereof.
“
Hazardous Substance
” means any
substance listed, defined, designated or classified as hazardous, toxic,
radioactive or dangerous or as a pollutant or contaminant under any
Environmental Law. Hazardous Substances include any substance to
which exposure is regulated by any Governmental Authority or any Environmental
Law, including (a) petroleum or any derivative or byproduct thereof, toxic
mold, asbestos or asbestos containing material or polychlorinated biphenyls and
(b) all substances defined as Hazardous Substances, Oils, Pollutants or
Contaminants in the National and Hazardous Substances Contingency Plan, 40
C.F.R. Section 300.5.
The Proxy
Statement will not, on the date it (or any amendment or supplement thereto) is
first mailed to stockholders of the Company, and at the time of the Special
Meeting (as defined in Section 4.3(a)), 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 made therein, in the light of the
circumstances under which they are made, not misleading. The Proxy
Statement will, when filed by the Company with the SEC, comply as to form in all
material respects with the applicable provisions of the Exchange Act and the
rules and regulations thereunder. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to information supplied
in writing or electronically by or on behalf of Parent or Merger Sub expressly
for inclusion in the Proxy Statement.
|
|
2.25
|
Transactions with
Affiliates
.
|
Section 2.25
of the
Company Disclosure Schedule sets forth a true, correct and complete list of the
contracts or arrangements that are in existence as of the date of this Agreement
under which there are any existing or future liabilities or obligations between
the Company or any of the Company Subsidiaries, on the one hand, and, on the
other hand, any (a) present officer or director of either the Company or
any of its subsidiaries, or (b) record or beneficial owner of more than 5%
of the outstanding Company Capital Stock as of the date hereof (each, an “
Affiliate
Transaction
”).
(a)
Examinations
. The
Company has made available to Parent copies of all draft and final financial
examination reports and market conduct examination reports of state insurance
departments with respect to any Company Subsidiary that have been issued since
June 1, 2004.
(b)
Policy
Materials
. To the extent required under applicable Laws, all
policies, binders, slips or other agreements of insurance and other agreements
and materials that are issued or used in connection with the Company
Subsidiaries’ business, including applications, brochures and marketing
materials, premium rates and reinsurance agreements, are, in all material
respects, on forms approved by applicable insurance regulatory authorities or
filed and not objected to by such authorities within the period provided for
objection, and, in either case, not subsequently disapproved or required to be
withdrawn or retired from issuance or use which have not been so withdrawn or
retired. Any rates or rating plans of the Company Subsidiaries
required to be filed with or approved by any applicable Governmental Authority
have in all material respects been so filed or approved and the rates applied by
each of the Company or the Company Subsidiaries to the contracts of insurance
conform in all material respects to the relevant filed or approved
rates.
(c)
Agents and
Producers
. To the knowledge of the Company, no Person
performing the duties of insurance producer, reinsurance intermediary, agency,
agent, managing general agent, wholesaler or broker with respect to the Company
or any of the Company Subsidiaries (collectively, “
Company Producers
”)
individually accounting for 2% or more of the total gross premiums of all
Company Subsidiaries for the year ended December 31, 2006, has indicated to the
Company or any Company Subsidiary that such Company Producer will be unable or
unwilling to continue its relationship as a Company Producer with the Company or
any Company Subsidiary within 12 months after the date hereof. To the
knowledge of the Company, at the time any Company Producer wrote, sold, or
produced business, or performed such other act for or on behalf of the Company
or any Company Subsidiary that may require a license under applicable Insurance
Laws, such Company Producer was duly licensed and appointed as required by
applicable Insurance Law, in the particular jurisdiction in which such Company
Producer wrote, sold, produced, solicited, or serviced such business, and 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 Company Subsidiary, is valid, binding and in full force and
effect in accordance with its terms. To the knowledge of the Company,
no Company Producer has been since January 1, 2006, 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
or production of insurance or other business of the Company or any Company
Subsidiary. The contracts and other agreements pursuant to which
Company Producers act on behalf of the Company or any Company Subsidiary are
valid, binding and in full force and effect in accordance with their terms, and
none of the parties to such contracts and agreements are in default thereunder
in any material respect. The Company has made available to Parent a
true and complete copy of each standard form agency agreement used by the
Company or any Company Subsidiary.
(d)
Reinsurance
.
Section 2.26(d)
of
the Company Disclosure Schedule sets forth a list of all ceded reinsurance
treaties and agreements, including retrocessional agreements, to which the
Company or any Company Subsidiary is a party or under which the Company or any
Company Subsidiary has any material existing rights, obligations or liabilities
(the “
Company Reinsurance
Agreements
”). Copies of all Company Reinsurance Agreements
that are in effect on the date of this Agreement have been made available to
Parent. Neither the Company nor any Company Subsidiary, nor, to the
knowledge of the Company, any other party to a reinsurance treaty, binder or
other agreement to which the Company or any Company Subsidiary is a party, is in
default in any material respect as to any provision thereof. The
Company has no knowledge that the financial condition of any party to any
Company Reinsurance Agreement is impaired to the extent that a default
thereunder may be
reasonably
anticipated. Except as disclosed in
Section 2.26(d)
of
the Company Disclosure Schedule, the Company Subsidiaries are entitled under
applicable Law to take full credit on the applicable Company SAP Statement with
respect to any Company Reinsurance Agreement pursuant to which such subsidiary
has ceded reinsurance. Except as set forth in
Section 2.26(d)
of
the Company Disclosure Schedule, neither the Company nor any Company Subsidiary
have received any notice from any party to any reinsurance agreement or treaty
of any dispute or default with respect to such reinsurance agreement or
treaty. Assuming no default by any party other than any subsidiary of
the Company, all such Company Reinsurance Agreements are in full force and
effect to the respective dates noted thereon. There are no entities,
other than the Company and the Company Subsidiaries, that have rights to access
coverage under any such Company Reinsurance Agreements.
(e)
Finite Risk Insurance
or Reinsurance
. Except as disclosed in
Section 2.26(e)
of
the Company Disclosure Schedule, with respect to any Company Reinsurance
Agreement for which the Company or any Company Subsidiary is taking credit on
its most recent statutory financial statements or has taken credit on any
statutory financial statements from and after January 1, 2005, (i) there
has been no separate written or oral agreement between the Company or any
Company Subsidiary 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 under which the Company or
any Company Subsidiary has or may have recoverables, and 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 Statement of Statutory Accounting
Principles No. 62 (“
SSAP No.
62
”), is available for review by the domiciliary state insurance
departments for the Company and the Company Subsidiaries, (iii) each of the
Company and the Company Subsidiaries complies and has complied from and after
January 1, 2005 with all of the requirements set forth in SSAP No. 62 and
(iv) each of the Company and the Company Subsidiaries has and has had from
and after January 1, 2001 appropriate controls in place to monitor the use of
reinsurance and comply with the provisions of SSAP No. 62.
(f)
Actuarial
Reports
. Prior to the date of this Agreement, the Company has
made available to Parent a true and complete copy of all actuarial reports
prepared by independent actuaries, with respect to the Company or any Company
Subsidiary since January 1, 2005, and all attachments, addenda, supplements and
modifications thereto (the “
Company Actuarial
Analyses
”). There have been no actuarial reports of a similar
nature covering any of the entities referred to in those reports in respect of
any period subsequent to the latest period covered in such actuarial
reports. To the knowledge of the Company, the information and data
furnished by the Company or any Company Subsidiary to its independent actuaries
in connection with the preparation of any Company Actuarial Analysis was
accurate in all material respects for the periods covered in such
reports. Each Company Actuarial Analysis was based upon an accurate
inventory of policies in force for the Company and the Company Subsidiaries, as
the case may be, at the relevant time of preparation and was prepared in
conformity with generally accepted actuarial principles in effect at such time,
consistently applied (except as may be noted therein).
(g)
Policy
Dividends
. Except as set forth in
Section 2.26(g)
of
the Company Disclosure Schedule, there are no insurance policies issued,
reinsured or assumed by the Company or any of the Company Subsidiaries that are
currently in force under which the Company or any of the Company Subsidiaries
may be required to pay dividends to the holders thereof.
The
Company and each Company Subsidiary is covered by valid and currently effective
insurance policies issued in favor of the Company or one or more of the Company
Subsidiaries that are customary for companies of similar size in the industry
and locales in which the Company and the Company Subsidiaries
operate.
Section 2.27
of the
Company Disclosure Schedule sets forth a true, correct and complete list of all
material insurance policies issued in favor of the Company or any Company
Subsidiary, or pursuant to which the Company or any Company Subsidiary is a
named insured or otherwise a beneficiary, as well as any historic
incurrence-based policies still in force. With respect to each such
insurance policy, (i) the policy is in full force and effect and all
premiums due thereon have been paid, (ii) neither the Company nor any
Company Subsidiary is in any material respect, in breach of or default under,
and neither the Company nor any Company Subsidiary have taken any action or
failed to take any action which, with notice or the lapse of time or both, would
constitute such a breach or default, or permit termination or modification of,
any such policy, and (iii) to the knowledge of the Company, no insurer on
any such policy has been declared insolvent or placed in receivership,
conservatorship or liquidation, and no notice of cancellation or termination has
been received with respect to any such policy.
All of
the books and records of the Company and the Company Subsidiaries are complete
and accurate in all material respects and have been maintained in the ordinary
course and in accordance with applicable Laws and standard industry practices
with regard to the maintenance of such books and records.
ARTICLE
III
REPRESENTATIONS AND
WARRANTIES OF PARENT AND MERGER SUB
The
following representations and warranties by Parent and Merger Sub to the Company
are qualified by the Parent Disclosure Schedule, which sets forth certain
disclosures concerning Parent and Merger Sub (the “
Parent Disclosure Schedule
”)
(
provided
that
any fact or item disclosed with respect to one representation or warranty shall
be deemed to be disclosed with respect to each other representation or warranty,
but only to the extent that the applicability of such fact or item with respect
to such other representation or warranty can reasonably be inferred from the
disclosure with respect to such fact or item contained in the Parent Disclosure
Schedule). Parent and Merger Sub hereby jointly and severally
represent and warrant to the Company as follows:
|
|
3.1
|
Due
Organization and Good Standing
.
|
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 power and authority to own, lease and operate its properties
and to carry on its business as now being conducted.
|
|
3.2
|
Authorization; Binding
Agreement
.
|
Parent
and Merger Sub have all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, including the Merger,
(a) have been duly and validly authorized by the Board of Directors of
Parent and Merger Sub, and (b) no other corporate proceedings on the part
of Parent or Merger Sub are necessary to authorize the execution and delivery of
this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and
delivered by each of Parent and Merger Sub and (assuming the due authorization,
execution and delivery hereof by the Company) constitutes the legal, valid and
binding obligation of each of Parent and Merger Sub, enforceable against each of
Parent and Merger Sub in accordance with its terms, subject to the
Enforceability Exceptions.
|
|
3.3
|
Governmental
Approvals
.
|
No
Consent of or with any Governmental Authority on the part of Parent or Merger
Sub is required to be obtained or made in connection with the execution,
delivery or performance by Parent or Merger Sub of this Agreement or the
consummation by Parent or Merger Sub of the transactions contemplated hereby
(including the Merger) other than (i) the filing of the Certificate of
Merger with the Secretary of State in accordance with the DGCL, (ii) such
filings as may be required with the SEC and foreign and state securities Laws
administrators, (iii) pursuant to the HSR Act and other Antitrust Laws
(iv) those consents, approvals, authorizations, waivers, permits, filings
or notices set forth in
Section 3.3
of the
Parent Disclosure Schedule, which schedule includes all such consents,
approvals, authorizations, waivers, permits, filings or notices with the Florida
Office of Insurance Regulation, and (v) those Consents that, if they were
not obtained or made, would not reasonably be expected to have, individually or
in the aggregate, a Parent Material Adverse Effect. For purposes of
this Agreement, “
Parent
Material Adverse Effect
” means any change, effect or circumstance that,
individually or in the aggregate, would reasonably be expected to prevent the
ability of Parent or Merger Sub to consummate the transactions contemplated by
this Agreement (including the Merger).
The
execution and delivery by Parent and Merger Sub of this Agreement and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
(including the Merger) and compliance by Parent and Merger Sub with any of the
provisions hereof will not (i) conflict with or violate any provision of
the certificate of incorporation or bylaws or other governing instruments of
Parent or Merger Sub, (ii) require any Consent under or result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give
rise to
any right of termination, cancellation or acceleration) under, any note, bond,
mortgage, indenture, contract, lease, license, agreement or instrument to which
Parent or Merger Sub is a party or by which its assets are bound,
(iii) result in the creation or imposition of any Encumbrance upon any of
the properties, rights or assets of Parent or Merger Sub or (iv) subject to
obtaining the Consents from Governmental Authorities referred to in Section 3.3
hereof, and the waiting periods referred to therein have expired, and any
condition precedent to such consent, approval, authorization or waiver has been
satisfied, conflict with, contravene or violate in any respect any Law to which
Parent or Merger Sub or any of their respective assets or properties is subject,
except, in the case of clauses (ii), (iii) and (iv) above, for any
deviations from the foregoing that would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
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3.5
|
Finders
and Investment Bankers
.
|
Except
for Morgan Stanley & Co. Incorporated, the fees of which will be borne by
Parent, no broker, finder or investment banker is entitled to any brokerage,
finder’s or other fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Parent or
Merger Sub.
The
information supplied by Parent or Merger Sub for inclusion in the Proxy
Statement will not, on the date the Proxy Statement (or any amendment or
supplement thereto) is first mailed to stockholders of the Company, 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
the light of the circumstances under which they are made, not
misleading.
At the
Effective Time, Parent and Merger Sub will have sufficient cash and cash
equivalent resources available to pay the aggregate Merger
Consideration.
There is
no Action pending before any arbitrator, agency, court or tribunal, foreign or
domestic, or, to the knowledge of Parent, threatened against Parent, Merger Sub,
any of their respective subsidiaries or any of their respective properties,
rights or assets or, any of their respective officers, directors, partners,
managers or members (in their capacities as such) that would reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect. There is no Order against Parent, Merger Sub, any of their
respective subsidiaries or any of their respective properties, rights or assets
or any of their respective officers, directors, partners, managers or members
(in their capacities as such) that would prohibit, prevent, enjoin, restrict or
materially alter or delay any of the transactions contemplated by this Agreement
(including the Merger).
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|
3.9
|
Ownership of
Shares
.
|
As of the
date hereof, neither Parent nor Merger Sub is the record or beneficial owner of
any Shares (except to the extent that Parent may be deemed to be the beneficial
owner of any Shares that are the subject of any Voting Agreement).
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|
3.10
|
Management
Arrangements
.
|
As of the
date hereof, none of Parent or Merger Sub, or any of their respective
affiliates, has entered into any contract, agreement, arrangement or
understanding with any of the officers or directors of the Company, or any of
their respective affiliates, that is currently in effect or that would become
effective in the future (upon consummation of the Merger or otherwise) and that
has not been disclosed to the Company.
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|
3.11
|
Investigation by
Parent and Merger Sub
.
|
Each of
Parent and Merger Sub acknowledges and agrees that, other than as set forth in
this Agreement, none of the Company, the Company Subsidiaries or any of their
respective directors, officers, employees, stockholders, affiliates, agents or
other representatives makes any representation or warranty, either express or
implied, as to the accuracy or completeness of any of the information provided
or made available to Parent or Merger Sub or its agents or other representatives
prior to the execution of this Agreement.
ARTICLE
IV
ADDITIONAL COVENANTS OF THE
COMPANY
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|
4.1
|
Conduct
of Business of the Company
.
|
(a)
Unless Parent shall otherwise agree in writing or except as otherwise expressly
provided for in this Agreement or as set forth in
Section 4.1
of the
Company Disclosure Schedule, during the period from the date of this Agreement
to the Effective Time, (i) the Company and the Company Subsidiaries shall
conduct their business in, and shall not take any action other than in, the
ordinary course of business consistent with past practice and (ii) the
Company shall use its reasonable best efforts to preserve intact its business
organization, to keep available the services of its and the Company
Subsidiaries’ officers, employees, Company Producers and consultants, to
maintain existing relationships with all Persons with whom it and the Company
Subsidiaries do business, and to preserve the possession, control and condition
of its and the Company Subsidiaries’ assets.
(b)
Without limiting the generality of the foregoing clause (a) and except as
otherwise expressly provided for in this Agreement or as set forth in
Section 4.1
of the
Company Disclosure Schedule, during the period from the date of this Agreement
to the Effective Time, neither the Company nor any of the Company Subsidiaries
will, without the prior written consent of Parent:
(A)
amend, waive or otherwise change, in any respect, its Certificate of
Incorporation or Bylaws (or comparable governing instruments);
(B)
authorize for issuance, issue, grant, sell, pledge, dispose of or propose to
issue, grant, sell, pledge or dispose of any shares of, or any options,
warrants, commitments, subscriptions or rights of any kind to acquire or sell
any shares of, its capital stock or other securities or equity interests or any
Voting Debt, including any securities convertible into or exchangeable for
shares of stock of any class and any other equity-based awards, except for the
issuance of Shares pursuant to the exercise of Company Options outstanding on
the date of this Agreement and set forth on
Section 2.2(f)
of the
Company Disclosure Schedule in accordance with their present terms;
(C)
split, combine, recapitalize or reclassify any shares of its capital stock or
equity interests or issue any other securities in respect thereof, or declare,
pay or set aside any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock or equity
interests, or directly or indirectly redeem, purchase or otherwise acquire or
offer to acquire any shares of its capital stock or other securities or equity
interests, other than dividends and distributions paid by a Company Subsidiary
to the Company or to another Company Subsidiary;
(D)
incur, create, assume, prepay or otherwise become liable for any indebtedness
(directly, contingently or otherwise), make a loan or advance to or investment
in any third party, or guarantee or endorse any indebtedness, liability or
obligation of any Person, except for indebtedness incurred under the Company’s
existing credit facilities described on
Section 4.1(d)
of the
Company Disclosure Schedule in the ordinary course of business consistent with
past practice in an aggregate principal amount not to exceed
$250,000;
(E)
increase the wages, salaries, bonus, compensation or other benefits of any of
its current or former consultants, officers, directors or employees, or enter
into, establish, amend or terminate any Company Employee Plan or any other
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-related, pension, retirement, consulting,
vacation, severance, separation, termination, deferred compensation, fringe,
perquisite, or other compensation or benefit plan, policy, program, agreement,
trust, fund or other arrangement with, for or in respect of any current or
former consultant, officer, director or employee, in each case other than as
required by applicable Law or pursuant to the terms of any Company Employee Plan
in effect on the date of this Agreement, or, solely with respect to increases in
wages or salaries of employees who are not officers or directors, in the
ordinary course of business consistent with past practice;
(F)
make or rescind any material election relating to Taxes, settle any claim,
action, suit, litigation, proceeding, arbitration, investigation, audit or
controversy relating to Taxes, file any amended Tax Return or claim for refund,
or make any change in its accounting or Tax policies or procedures, in each case
except as required by applicable Law or GAAP;
(G)
transfer or license to any Person or otherwise extend, materially amend or
modify, permit to lapse or fail to preserve any of the Company Intellectual
Property or Licensed Intellectual Property, other than nonexclusive licenses in
the ordinary course of business consistent with past practice, or disclose to
any Person who has not entered into a confidentiality agreement any trade
secrets;
(H) modify
or amend in any material manner, terminate or waive or assign any material right
under any Company Material Contract or enter into any contract that would be a
Company Material Contract with a term longer than one year that cannot be
terminated without payment of a material penalty and upon notice of 60 days or
less, in each case other than in the ordinary course of business consistent with
past practice;
(I)
fail to maintain its books, accounts and records in all material respects in the
ordinary course of business consistent with past practice;
(J)
establish any subsidiary or enter into any new line of business;
(K) fail
to keep in force insurance policies or replacement or revised policies providing
insurance coverage with respect to the assets, operations and activities of the
Company and the Company Subsidiaries as are currently in effect;
(L)
revalue any of its material assets or make any change in accounting methods,
principles or practices, except as required by GAAP and approved by the
Company’s outside auditors;
(M) other
than in connection with the adjustment, negotiation or settlement of workers’
compensation insurance claims in the ordinary course of business consistent with
past practice, waive, release, assign, settle or compromise any claim, action or
proceeding (including any suit, action, claim, proceeding or investigation
relating to this Agreement or the transactions contemplated hereby, including
the Merger), other than waivers, releases, assignments, settlements or
compromises that involve only the payment of monetary damages (and not the
imposition of equitable relief on, or the admission of wrongdoing by, the
Company or any of the Company Subsidiaries) not in excess of $100,000
individually or in the aggregate, or otherwise pay, discharge or satisfy any
claims, liabilities or obligations other than in the ordinary course of business
consistent with past practice;
(N) close
or materially reduce the Company’s or any Company Subsidiary’s activities, or
effect any layoff or other Company-initiated personnel reduction or change, at
any of the Company’s or any Company Subsidiary’s facilities;
(O) acquire,
including by merger, consolidation, acquisition of stock or assets, or any other
form of business combination, any corporation, partnership, limited liability
company, other business organization or any division thereof, or any material
amount of assets;
(P)
make any capital expenditures;
(Q) adopt
a plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization;
(R) voluntarily
incur any material liability or obligation (whether absolute, accrued,
contingent or otherwise) other than in the ordinary course of business
consistent with past practice;
(S) sell,
lease, license, transfer, exchange or swap, mortgage or otherwise pledge or
encumber (including securitizations), or otherwise dispose of any material
portion of its properties, assets or rights;
(T) enter
into any agreement, understanding or arrangement with respect to the voting or
registration of the Company Capital Stock or the capital stock of any Company
Subsidiary;
(U) take
any action that would reasonably be expected to delay or impair the obtaining of
any consents or approvals of any Governmental Authority to be obtained in
connection with this Agreement;
(V) enter
into, amend, waive or terminate (other than terminations in accordance with
their terms) any Affiliate Transaction; or
(W) enter
into any new reinsurance transaction as assuming or ceding insurer
(i) which does not contain market cancellation, termination and commutation
provisions or (ii) which adversely changes the existing reinsurance profile
of the Company and the Company Subsidiaries on a consolidated basis outside of
the ordinary course of business consistent with past practice;
(X) alter
or amend in any material respect any existing underwriting, claims handling,
loss control, investment, actuarial, financial reporting or accounting
practices, guidelines or policies (including compliance policies) or any
material assumption underlying an actuarial practice or policy, except as may be
required by GAAP, applicable SAP, any Governmental Authority or applicable Law,
or
(Y)
authorize or agree to do any of the foregoing actions.
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4.2
|
Access
and Information; Confidentiality
.
|
(a)
Between the date of this Agreement and the Effective Time, the Company will
give, and shall direct its accountants and legal counsel to give, Parent (and
its officers, directors, employees, accountants, actuaries, legal counsel,
financial advisors, financing sources, agents and other representatives,
collectively, “
Parent
Representatives
”), at reasonable times and upon reasonable intervals and
notice and following advance consultation with the Company’s Chief Executive
Officer or Chief Operating Officer, access to all offices and other facilities
and to all employees, properties, contracts, agreements, commitments, books and
records of or pertaining to the Company and the Company Subsidiaries (including
Tax Returns, internal work papers, client files, client contracts and director
service agreements) and such financial and operating data and other information,
all of the foregoing as Parent or the Parent Representatives may reasonably
request regarding the business, assets, liabilities, employees and other aspects
of the Company and the Company Subsidiaries (including providing Parent and the
Parent Representatives with unaudited quarterly financial statements, including
a consolidated quarterly balance sheet and income statement, in the form such
financial statements have been delivered to Parent prior to the date hereof, of
the Company and providing Parent and the Parent Representatives with the
financial results of the Company in advance of any filing by the Company with
the SEC containing such financial results) and instruct the officers,
directors,
employees, accountants, consultants, legal counsel and financial advisors of the
Company and the Company Subsidiaries to cooperate with Parent and the Parent
Representatives in their investigation of the Company and the Company
Subsidiaries (including by reading available independent public accountant’s
work papers), and a copy of each material report, schedule and other document
filed or received by the Company pursuant to the requirements of applicable
securities Laws;
provided
that Parent
and the Parent Representatives shall conduct any such activities in such a
manner as not to interfere unreasonably with the business or operations of the
Company. No such access, inspections or furnishing of information
shall have any adverse effect on Parent or Merger Sub’s ability to assert that
conditions to Closing or to the consummation of the Merger have not been
satisfied.
(b)
All information obtained by Parent or Merger Sub pursuant to this Section 4.2
shall be kept confidential in accordance with the confidentiality agreement,
dated October 8, 2007 (the “
Confidentiality Agreement
”),
between Parent and the Company.
(c)
Notwithstanding anything to the contrary contained in this Agreement, the
Company shall not take any action to waive or release, or to exempt any third
party from, any standstill arrangements to which it is a party or the provisions
of any Takeover Laws;
provided
,
however
, that with
respect to such standstill arrangements, the Company may waive appropriate
provisions of such arrangements if requested to do so by the other party or
parties thereto, but solely to the extent (i) necessary to permit such
party or parties to submit a Company Takeover Proposal to the Company or the
Company’s stockholders, (ii) that following consultation with outside legal
counsel and its financial advisors, the Board determines in good faith that the
failure to grant such waiver would violate the fiduciary duties of the Board to
the stockholders of the Company under all applicable Law and (iii) the
Company simultaneously, irrevocably and permanently waives compliance by Parent
with paragraph 10 of the Confidentiality Agreement.
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|
4.3
|
Special
Meeting; Proxy Statement
.
|
As
promptly as practicable following the execution of this Agreement, the Company,
acting through its Board, shall, in accordance with applicable Law:
(a)
duly call, give notice of, convene and hold a special meeting of its
stockholders (the “
Special
Meeting
”) for the purposes of considering and taking action upon the
approval and adoption of this Agreement and the Merger, including adjourning
such meeting for up to 30 Business Days to obtain such
approval. Except to the extent that the Board shall have withdrawn or
modified its approval or recommendation of this Agreement as permitted by
Section 4.4, the Company shall (i) use reasonable best efforts to solicit
the approval of this Agreement by the stockholders of the Company and
(ii) include in the Proxy Statement the Board’s declaration of the
advisability of this Agreement and its recommendation to the stockholders of the
Company that they adopt this Agreement and approve the
Merger. Notwithstanding the foregoing, the Company may adjourn or
postpone the Special Meeting as and to the extent required by applicable
Law. Unless this Agreement shall have been terminated in accordance
with Section 7.1, the Company shall submit this Agreement to its stockholders at
the Special Meeting even if the Board shall have effected a Change of
Recommendation or a Withdrawal of Recommendation;
(b)
prepare and, within 45 days after the date hereof, file with the SEC a
preliminary proxy statement relating to the Merger and this Agreement and, after
consultation with Parent, respond as promptly as reasonably practicable to any
comments made by the SEC with respect to the preliminary proxy statement
(including filing as promptly as reasonably practicable any amendments or
supplements thereto necessary to be filed in response to any such comments or as
required by applicable Law), use reasonable best efforts to have the SEC confirm
that it has no further comments and cause a definitive proxy statement,
including any amendments or supplements thereto (the “
Proxy Statement
”), to be
mailed to its stockholders at the earliest practicable date after the date that
the SEC confirms it has no further comments;
provided
,
however
, that no
amendments or supplements to the Proxy Statement will be made by the Company
without prior consultation with Parent and its counsel and after providing
Parent a reasonable opportunity to review and comment on such amendments or
supplements; and
(c)
notify Parent promptly 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 and supply Parent with copies of
all correspondence between the Company or any of the Company Representatives (as
defined in Section 4.4(b)), on the one hand, and the SEC or its staff, on the
other hand, with respect to the proxy statement. The Company shall give Parent a
reasonable opportunity to review and comment on the Proxy Statement (including
each amendment or supplement thereto), any correspondence with the SEC or its
staff or any other materials proposed to be submitted to the SEC or its staff
prior to transmission to the SEC or its staff and shall not, unless required by
Law, transmit any such material to which Parent reasonably objects. If at any
time prior to the Special Meeting there shall be discovered any information that
should be set forth in an amendment or supplement to the Proxy Statement, after
obtaining the consent of Parent to such amendment or supplement (which consent
shall not be unreasonably withheld or delayed), the Company shall promptly
transmit such amendment or supplement to its stockholders.
(a)
For purposes of this Agreement, “
Company Takeover Proposal
”
means (other than the Merger) any inquiry, proposal or offer, or any indication
of interest in making an offer or proposal, from any Person or group at any time
relating to (1) any direct or indirect acquisition or purchase of assets of
the Company and the Company Subsidiaries representing 15% or more of the assets
or business of the Company and the Company Subsidiaries, including by way of the
purchase of stock of the Company Subsidiaries, (2) any issuance, sale or
other disposition of (including by way of merger, recapitalization,
consolidation, business combination, share exchange, joint venture or any
similar transaction) securities (or options, rights or warrants to purchase, or
securities convertible into or exchangeable for, such securities), including any
single or multi-step transaction or series of related transactions, representing
15% or more of the voting power of the Company or any Company Subsidiary,
(3) any tender offer, exchange offer or other transaction that, if
consummated, would result in any Person or “group” (as such term is defined
under the Exchange Act) having beneficial ownership (as such term is defined in
Rule 13d-3 under the Exchange Act), or the right to acquire beneficial
ownership, of 15% or more of the voting power or the capital stock of the
Company or any Company Subsidiary, or (4) any merger, consolidation, share
exchange, business combination, recapitalization, liquidation or dissolution,
including any single or multi-step transaction or series of related
transactions,
involving the Company or any Company Subsidiary. For purposes of this
Agreement, a “
Company Superior
Offer
” means an unsolicited, bona fide written Company Takeover Proposal
(except that the references to “15%” shall be replaced by “50%”) on terms that
the Board determines, in good faith, based upon consultations with its outside
legal counsel and its financial advisors, (i) are more favorable to the
Company’s stockholders, from a financial point of view, than this Agreement and
the Merger, taken as a whole, after giving effect to any adjustments to the
terms and conditions of this Agreement proposed in writing by Parent in response
to such Company Takeover Proposal pursuant to Section 4.4(e) or otherwise, and
(ii) is reasonably likely to be consummated on the terms so proposed, in
each case with respect to clauses (i) and (ii), taking into account, among
other things, all legal, financial, regulatory, timing and other aspects of, and
conditions to, the Company Superior Offer and the Person or group making the
Company Superior Offer (including any financing required by such Person or
group).
(b)
From and after the date hereof, neither the Company nor any Company Subsidiary
shall, directly or indirectly, and shall not, directly or indirectly, authorize
or permit any officer, director, employee, accountant, consultant, legal
counsel, financial advisor, agent or other representative of the Company or any
Company Subsidiary (collectively, the “
Company Representatives
”) to,
(i) solicit, encourage, assist, initiate or facilitate the making,
submission or announcement of any Company Takeover Proposal, (ii) furnish
any non-public information regarding the Company or any Company Subsidiary or
the Merger to any Person or group (other than Parent, Merger Sub or their
representatives) in connection with or in response to a Company Takeover
Proposal, (iii) engage or participate in discussions or negotiations with
any Person or group with respect to, or that could be expected to lead to, any
Company Takeover Proposal, (iv) withdraw, modify or qualify, or propose
publicly to withdraw, modify or qualify, in a manner adverse to Parent, the
approval of this Agreement or the Merger or the Board’s recommendation that
holders of Shares adopt this Agreement, (v) approve, endorse or recommend,
or publicly propose to approve, endorse or recommend, any Company Takeover
Proposal, (vi) cause the Company or any Company Subsidiary to discuss,
negotiate or enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any Company Takeover
Proposal, or (vii) release any third party from, or waive any provision of,
any confidentiality or standstill agreement to which the Company or any Company
Subsidiary is a party (except as permitted pursuant to Section 4.2(c)
hereof). The Company shall request the prompt return or destruction
of any confidential information provided to any Person or group prior to the
date hereof in connection with a possible Company Takeover Proposal, including
in accordance with any confidentiality agreement entered into with such Person
or group, and shall deny access to any data room (virtual or actual) containing
any such information to any such Person or group. Without limiting
the foregoing, it is agreed that any action by any Company Representatives that
would constitute a violation of the restrictions set forth in this Section 4.4
if done by the Company, whether or not such Company Representative is purporting
to act on behalf of the Company or any Company Subsidiary, shall constitute a
breach of this Section 4.4 by the Company. The Company shall promptly
inform the Company Representatives of the obligations undertaken in this Section
4.4.
(c)
Notwithstanding the provisions of Section 4.4(b), nothing in this Agreement
shall prohibit or limit the Company, or the Board, at any time prior to
obtaining the Company Stockholder Approval, and so long as the Company is in
compliance in all material respects with this Section 4.4, from
(i) furnishing non-public information regarding the Company to, or
(ii) entering into discussions or negotiations with, any Person or group in
response to an unsolicited, bona fide written Company Takeover Proposal received
after the date of this Agreement that did not result from a violation of this
Section 4.4, if (A) the Board determines in good faith, after consultation
with its outside legal and financial advisors, that (1) such Company
Takeover Proposal constitutes or could be expected to result in, after the
taking of any of the actions referred to in clauses (i) or (ii) above,
a Company Superior Offer, and (2) such action with respect to such Company
Takeover Proposal is necessary for the Board to comply with its fiduciary duties
to the Company’s stockholders under all applicable Law; (B) the Company
receives from such Person or group an executed confidentiality agreement with
provisions no less favorable, in the aggregate, to the Company than, and with
terms at least as restrictive of such Person or group (including with respect to
the standstill provisions thereof), those contained in the Confidentiality
Agreement; and (C) contemporaneously with furnishing any such information
to such Person or group, the Company furnishes such information to Parent to the
extent that such information has not been previously furnished to Parent;
provided
,
however
, that prior
to the taking of any such actions by the Company or the Board as described in
clauses (i) or (ii) above, the Company shall provide written notice to
Parent of such determination of the Board.
(d)
The Company shall notify Parent as promptly as practicable (and in any event
within 48 hours) orally and in writing of the receipt by the Company or any of
the Company Representatives of (i) any bona fide inquiries, proposals or
offers, requests for information or requests for discussions or negotiations
regarding or constituting any Company Takeover Proposal or any bona fide
inquiries, proposals or offers, requests for information or requests for
discussions or negotiations that could be expected to result in a Company
Takeover Proposal, and (ii) any request for non-public information relating
to the Company or the Company Subsidiaries, specifying in each case the material
terms and conditions thereof (including a copy thereof if in writing) and the
identity of the party making such inquiry, proposal, offer or request for
information. The Company shall keep Parent promptly informed of the
status of any such discussions or negotiations and of any modifications to such
inquiries, proposals, offers or requests for information. From and
after the date of this Agreement, the Company shall, and shall cause each
Company Subsidiary to, immediately cease and cause to be terminated any
solicitations, discussions or negotiations with any parties with respect to any
Company Takeover Proposal and shall direct, and use its reasonable best efforts
to cause, the Company Representatives to cease and terminate any such
solicitations, discussions or negotiations.
(e)
Notwithstanding anything in this Agreement to the contrary, including Section
4.4(b), the Board may, at any time prior to obtaining the Company Stockholder
Approval: (A) withdraw or modify its recommendation that holders of Shares
adopt this Agreement and approve the Merger in connection with a Company
Takeover Proposal or (B) approve or recommend a Company Superior Offer
(each, a “
Change of
Recommendation
”) if, in the case of both clause (A) and
(B) above (w) an unsolicited, bona fide written offer is made to the
Company by a third party representing a Company Takeover Proposal, (x) the
Company is in compliance in all material respects with its obligations under
this Section 4.4, (y) the Board determines in good faith after consultation with
the Company’s outside legal and financial advisors that such Company Takeover
Proposal
constitutes
a Company Superior Offer (after giving effect to all adjustments to the terms of
this Agreement which may be proposed by Parent, including pursuant to clause
(ii) below), and (z) following consultation with outside legal counsel and
its financial advisors, the Board determines in good faith that the withdrawal
or modification of its recommendation that holders of Shares adopt this
Agreement and approve the Merger is required to comply with the fiduciary duties
of the Board to the stockholders of the Company under applicable Law, but only,
in the case of both clause (A) and (B) above, if prior to taking any
such action (i) the Company provides written notice to Parent (a “
Notice of Superior Offer
”)
advising Parent (1) that the Board has received a Company Superior Offer
and intends to make a Change of Recommendation in accordance with this Section
4.4(e), (2) specifying the material terms and conditions of such Company
Superior Offer(including a copy thereof if in writing) and identifying the
Person or group making such Company Superior Offer, and (3) providing to
Parent all materials and information delivered or made available to the Person
or group making such proposed Company Superior Offer (it being understood and
agreed that any amendment to the financial or other material terms of any such
proposed Company Superior Offer shall require a new Notice of Superior Offer and
a new five Business Day period), and (ii) during the five Business Days
following Parent’s receipt of the Notice of Superior Offer, the Company shall,
and shall direct the Company Representatives to, cooperate and negotiate in good
faith with Parent (to the extent that Parent requests the same) to enable Parent
to propose in writing such adjustments to the terms of this Agreement so that
any Company Takeover Proposal ceases to constitute a Company Superior
Offer. Any Change of Recommendation shall not change the approval of
this Agreement or any other approval of the Board in any respect that would have
the effect of causing any Takeover Law to be applicable to the transactions
contemplated hereby, including the Merger.
(f)
Notwithstanding anything to the contrary contained in this Section 4.4, the
Board may, prior to obtaining the Company Stockholder Approval and other than as
a result of the receipt of a Company Takeover Proposal, withdraw or modify its
approval of this Agreement or its recommendation that the Company’s stockholders
adopt this Agreement and approve the Merger (a “
Withdrawal of
Recommendation
”), if the Board determines in good faith (after
consultation with its outside legal and financial advisors) that the failure to
take such action would violate its fiduciary duties under applicable
Law. Any Withdrawal of Recommendation shall not change the approval
of this Agreement or any other approval of the Board in any respect that would
have the effect of causing any Takeover Law to be applicable to the transactions
contemplated hereby, including the Merger.
(g)
Nothing contained in this Section 4.4 shall prohibit the Board from taking and
disclosing to the stockholders of the Company a position contemplated by Rule
14d-9 and Rule 14e-2(a) promulgated under the Exchange Act;
provided
, that any
such disclosure other than (i) a “stop-look-and-listen” communication to
the stockholders of the Company pursuant to Rule 14d-9(f) promulgated under the
Exchange Act (or any similar communications to the stockholders of the Company),
(ii) an express rejection of any applicable Company Takeover Proposal or
(iii) an express reaffirmation of its recommendation to the stockholders of
the Company in favor of the Merger shall be deemed to be a Change of
Recommendation;
provided
further
that the Board shall not be
permitted to recommend that the Company’s stockholders tender any securities in
connection with any tender or exchange offer (or otherwise approve, endorse or
recommend any Company Takeover Proposal or withhold, withdraw or modify the
recommendation that holders of Shares adopt this Agreement and approve the
Merger), unless in each case, in connection therewith, the Board effects a
Change of Recommendation in accordance with the terms of Section
4.4(e).
Notwithstanding
any other provision in this Agreement, if any Takeover Law may become, or may
purport to be, applicable to the transactions contemplated by this Agreement,
the Company and the members of its Board will grant such approvals and take such
actions as are necessary so that the transactions contemplated by this Agreement
may be consummated as promptly as practicable on the terms and conditions
contemplated hereby and otherwise act to eliminate the effect of any Takeover
Law on any of the transactions contemplated by this Agreement.
|
|
4.6
|
Stockholder
Litigation
.
|
The
Company shall give Parent the opportunity to participate in, subject to a
customary joint defense agreement, of any stockholder litigation against the
Company or its directors or officers relating to the Merger or any other
transactions contemplated hereby;
provided
,
however
, that no
settlement of any such litigation shall be agreed to without Parent’s
consent.
Between
the date of this Agreement and the Effective Time, the Company will timely file
with the SEC all Company SEC Reports required to be filed by it under the
Exchange Act.
ARTICLE
V
ADDITIONAL COVENANTS OF THE
PARTIES
|
|
5.1
|
Notification of
Certain Matters
.
|
Each of
Parent and the Company shall give prompt notice to the other (and, if in
writing, furnish copies of) if any of the following occurs after the date of
this Agreement: (i) there has been a material failure on the part of the
Party providing the notice to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; (ii) receipt of
any notice or other communication in writing from any third party alleging that
the Consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement, (including the Merger);
(iii) receipt of any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this Agreement
(including the Merger); (iv) 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 reasonably be expected to cause or result in any
of the conditions to the Merger set forth in Article VI not being satisfied or
the satisfaction of those conditions being materially delayed; or (v) the
commencement or threat, in writing, of any Action against any Party or any of
its affiliates, or any of their respective properties or assets, or, to the
knowledge of the Company or Parent, as applicable, any officer, director,
partner, member or manager, in his or her capacity as such, of the Company or
Parent, as applicable, or
any of
their affiliates with respect to the consummation of the Merger. No
such notice to any Party shall constitute an acknowledgement or admission by the
Party providing notice regarding whether or not any of the conditions to Closing
or to the consummation of the Merger have been satisfied or in determining
whether or not any of the representations, warranties or covenants contained in
this Agreement have been breached.
|
|
5.2
|
Reasonable Best
Efforts
.
|
(a)
Subject to the terms and conditions of this Agreement, prior to the Effective
Time, each Party shall use its reasonable best efforts, and shall cooperate
fully with the other Parties, to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable under
applicable Laws and regulations to consummate the Merger and the other
transactions contemplated by this Agreement, including the receipt of all
Requisite Regulatory Approvals (as defined in Section 6.1(c)), and to comply as
promptly as practicable with all requirements of Governmental Authorities
applicable to the transactions contemplated by this Agreement. In furtherance
and not in limitation of the foregoing, to the extent required under the HSR Act
or any other Laws that are designed to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade (“
Antitrust Laws
”), each Party
hereto agrees to make an appropriate filing of a Notification and Report Form
pursuant to the HSR Act or other required filing or application under Antitrust
Laws, as applicable, with respect to the transactions contemplated hereby as
promptly as practicable, to supply as promptly as reasonably practicable any
additional information and documentary material that may be requested pursuant
to the HSR Act or such Antitrust Laws, as applicable, and to take all other
actions necessary, proper or advisable to cause the expiration or termination of
the applicable waiting periods under the HSR Act or to obtain consent, approvals
or authorizations under Antitrust Laws as soon as practicable, including by
requesting early termination of the waiting period provided for in the HSR
Act.
(b)
Each of Parent and Merger Sub, on the one hand, and the Company, on the other
hand, shall, in connection with the efforts referenced in Section 5.2(a) to
obtain all requisite approvals and authorizations for the transactions
contemplated by this Agreement under the HSR Act or any Antitrust Law, use its
reasonable best efforts to: (i) cooperate in all respects with each other
in connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a private
party; (ii) keep the other Party reasonably informed of any communication
received by such Party from, or given by such Party to, the Federal Trade
Commission (the “
FTC
”),
the Antitrust Division of the Department of Justice (the “
DOJ
”) or any other U.S. or
foreign Governmental Authority and of any communication received or given in
connection with any proceeding by a private party, in each case regarding any of
the transactions contemplated hereby; and (iii) permit the other Party and
its outside counsel to review any communication given by it to, and consult with
each other in advance of any meeting or conference with, the FTC, the DOJ or any
other Governmental Authority or, in connection with any proceeding by a private
party, with any other Person, and to the extent permitted by the FTC, the DOJ or
such other applicable Governmental Authority or other Person, give the other
Party the opportunity to attend and participate in such meetings and
conferences.
(c)
In furtherance and not in limitation of the covenants of the Parties contained
in Section 5.2(a) and Section 5.2(b), (i) as soon as reasonably practicable
following the date of this Agreement, the Company and Parent shall cooperate in
all respects with each other and use (and shall cause their respective
subsidiaries to use) their respective reasonable best efforts to prepare and
file with the relevant insurance regulators requests for approval of the
transactions contemplated by this Agreement (including the Merger) and shall use
all reasonable efforts to have such insurance regulators approve the
transactions contemplated by this Agreement, and (ii) each of Parent and
Merger Sub, on the one hand, and the Company, on the other hand, shall give
prompt written notice if such Party receives any notice from any insurance
regulator in connection with the transactions contemplated by this Agreement,
and, in the case of any such written notice, shall promptly furnish the other
Party with a copy thereof. If an insurance regulator requires that a
hearing be held in connection with its approval of the transactions contemplated
hereby, each Party shall use its reasonable best efforts to arrange for such
hearing to be held promptly. At Parent’s request, the Company shall
obtain from applicable regulatory authorities written assurances in form
reasonably satisfactory to Parent with respect to the applicability to the
Company and/or any of the Company Subsidiaries of orders, decrees or
pronouncements of such regulatory authorities.
(d)
In furtherance and not in limitation of the covenants of the Parties contained
in Section 5.2(a), Section 5.2(b) and Section 5.2(c), if any objections are
asserted with respect to the transactions contemplated hereby under the HSR Act,
any Antitrust Law or any other applicable Law or if any suit is instituted (or
threatened to be instituted) by the FTC, the DOJ or any other applicable
Governmental Authority or any private party challenging any of the transactions
contemplated hereby as violative of the HSR Act, any Antitrust Law or any other
applicable Law or which would otherwise prevent, materially impede or materially
delay the consummation of the transactions contemplated hereby, each of Parent,
Merger Sub and the Company shall use its reasonable best efforts to resolve any
such objections or suits so as to permit consummation of the transactions
contemplated by this Agreement, including in order to resolve such objections or
suits which, in any case if not resolved, could reasonably be expected to
prevent, materially impede or materially delay the consummation of the
transactions contemplated hereby (including the Merger).
(e)
In the event that any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) by a Governmental Authority or
private party challenging the Merger or any other transaction contemplated by
this Agreement, or any other agreement contemplated hereby, each of Parent,
Merger Sub and the Company shall cooperate in all respects with each other and
use its respective reasonable best efforts to contest and resist any such action
or proceeding and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts
consummation of the transactions contemplated by this Agreement.
(f)
Prior to the Effective Time, the Company shall use its commercially reasonable
efforts to obtain any Consents of third parties with respect to any Contracts to
which the Company or any Company Subsidiary is a party as may be necessary or
appropriate for the consummation of the transactions contemplated hereby or
required by the terms of any Contract as a result of the execution, performance
or consummation of the transactions contemplated hereby (including the
Merger).
(g)
Notwithstanding anything to the contrary contained in this Agreement, nothing in
this Agreement shall obligate Parent, Merger Sub or any of their respective
affiliates to take any action or commit to take any action, or consent or agree
to any condition, restriction or undertaking requested or imposed by any
Governmental Authority, whether in connection with obtaining any Requisite
Regulatory Approval or otherwise, if, in the good faith determination of Parent,
such action, condition, restriction or undertaking, individually or in the
aggregate, with all other such actions, conditions, restrictions or
undertakings, would materially adversely affect the benefits, taken as a whole,
that Parent reasonably expects to derive from the transactions contemplated by
this Agreement (a
“
Burdensome Condition
”);
provided
,
however
, that any
requirement that Parent, the Surviving Corporation or any of its or their
subsidiaries (i) provide or commit to provide additional capital to the
Company, (ii) maintain operations or employees in the State of Florida, or
(iii) provide any surplus maintenance, guarantee, keep-well or similar
agreements or commitments shall each be deemed to be a Burdensome
Condition.
|
|
5.3
|
Indemnification and
Insurance
.
|
(a)
The Certificate of Incorporation and Bylaws of the Surviving Corporation shall
contain provisions no less favorable with respect to indemnification than are
set forth in the Certificate of Incorporation and Bylaws, respectively, of the
Company, which provisions shall not be amended, repealed or otherwise modified
for a period of six years from the Effective Time in any manner that would
affect adversely the rights thereunder of individuals who, at or prior to the
Effective Time, were directors, officers, or employees, of the Company or any of
the Company Subsidiaries. During the period ending on the sixth anniversary of
the Effective Time, Parent and the Surviving Corporation shall, jointly and
severally, to the fullest extent that the Company would have been permitted to
do so under applicable Law, indemnify and hold harmless each present and former
director and officer of the Company and each of the Company Subsidiaries
(collectively, the “
Indemnified
Parties
”) against all costs and expenses (including reasonable attorneys’
fees), judgments, fines, losses, claims, damages, liabilities and settlement
amounts paid in connection with any claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), whether
civil, criminal, administrative or investigative, arising out of or pertaining
to any action or omission, in his or her capacity as an officer, director, or
employee of the Company, occurring on or before the Effective Time (a “
Covered
Proceeding
”). In the event of any such claim, action, suit,
proceeding or investigation, Parent or the Surviving Corporation shall pay the
reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to the Surviving Corporation,
promptly after statements therefor are received (
provided
the
applicable Indemnified Party provides an undertaking to repay all advanced
expenses if it is finally judicially determined that such Indemnified Party is
not entitled to indemnification);
provided
,
howeve
r, that neither
Parent nor the Surviving Corporation shall be liable for any settlement effected
without Parent’s or the Surviving Corporation’s written consent (which consent
shall not be unreasonably withheld or delayed);
provided
,
further
, that Parent
and the Surviving Corporation shall not be required to agree to the entry of any
judgment or settlement that provides for injunctive or other non-monetary relief
affecting the Parent, the Surviving Corporation or any of their respective
subsidiaries. Neither Parent nor the Surviving Corporation shall be
obligated
pursuant to this Section 5.3(a) to pay the fees and expenses of more than one
counsel (selected by a plurality of the applicable Indemnified Parties) for all
Indemnified Parties with respect to such Covered Proceeding unless there is,
under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties,
in which case Parent shall pay the fees of such additional counsel required by
such conflict;
provided
, that, in
the event that any claim for indemnification is asserted or made within such
six-year period, all rights to indemnification in respect of such claim shall
continue until the disposition of such claim. Any Indemnified Party
that desires to claim indemnification under this Section 5.3(a) upon becoming
aware of any such Covered Proceeding shall promptly notify Parent and the
Surviving Corporation.
(b)
Immediately after the Effective Time, Parent shall have obtained and paid for,
and there shall be in effect, a tail policy of (i) directors’ and officers’
liability insurance and (ii) corporate counsel liability insurance covering
the Company’s Senior Vice President, General Counsel and Secretary, in respect
of acts or omissions occurring prior to the Effective Time covering each of
those Persons who are covered by (x) the Company’s and any Company
Subsidiary’s directors’ and officers’ liability insurance policy and (y)
corporate counsel liability insurance, as of the date hereof for a period of six
years commencing as of the Effective Time, it being understood that, if
requested in writing by Parent, the Company shall, prior to the Effective Time,
obtain such extended reporting period coverage under its existing insurance
programs (to be effective as of the Effective Time).
(c)
In the event Parent or the Surviving Corporation or any of their respective
successors or assigns (i) consolidates with or merges into any other Person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers all or substantially all of its
properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall succeed to the obligations set
forth in this Section 5.3.
(d)
Parent shall cause the Surviving Corporation to perform all of the obligations
of the Surviving Corporation under this Section 5.3.
(e)
The provisions of this Section 5.3 (i) are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
representatives and (ii) are in addition to, and not in substitution for,
any other rights to indemnification or contribution that any such Person may
have by contract or otherwise.
|
|
5.4
|
Benefit
Plans and Employee Matters
.
|
(a)
Parent hereby agrees that, for a period commencing on the Effective Time and
ending on the last day of the calendar year that includes the first anniversary
of the Effective Time, it shall, or it shall cause the Surviving Corporation or
its subsidiaries to, (i) provide each employee of the Company or the
Company Subsidiaries as of the Effective Time (each, an “
Employee
”), while such
Employee remains employed with the Surviving Corporation or any of its
subsidiaries, with at least the same level of base salary or wages, that was
provided to each such Employee immediately prior to the Effective Time, and
(ii) provide the Employees with base salary, wages, cash incentive
compensation, other cash variable compensation and other employee benefits
(other than equity-based compensation) that are, in the aggregate, no less
favorable than, at Parent’s election, (A) those provided to such Employees
immediately prior to the Effective Time or (B) those provided to similarly
situated employees of Parent, or at Parent’s election, any subsidiary of
Parent.
(b)
Each Employee shall receive credit for purposes of eligibility to participate,
vesting, and, solely with respect to vacation, other paid time off and
severance, benefit accrual (but excluding benefit accruals under any defined
benefit pension plan or for any other purpose) under any employee benefit plan,
program or arrangement (including vacation plans, programs and arrangements)
established or maintained by Parent, the Surviving Corporation or any of their
respective subsidiaries under which such Employee is eligible to participate on
or after the Effective Time for service with the Company and the Company
Subsidiaries through the Effective Time to the same extent recognized for such
purpose by the Company or any of the Company Subsidiaries under comparable
Company Employee Plans immediately prior to the Effective Time;
provided
,
however
, that such
crediting of service shall not operate to duplicate any benefit or the funding
of any such benefit.
(c)
With respect to the welfare benefit plans, programs and arrangements maintained,
sponsored or contributed to by Parent or the Surviving Corporation (“
Parent Welfare Benefit Plans
”)
in which an Employee is or becomes eligible to participate on or after the
Effective Time, Parent shall (a) waive, or cause its insurance carrier to
waive, all limitations as to preexisting and at-work conditions, if any, with
respect to participation and coverage requirements applicable to each Employee
under any Parent Welfare Benefit Plan to the same extent waived under a
comparable Company Employee Plan (to the extent permitted by the applicable
Parent Welfare Benefit Plan), and (b) provide credit to each Employee for
any co-payments, deductibles and out-of-pocket expenses paid by such Employee
under the Company Employee Plans during the plan year that includes the
Effective Time for the plan year under the applicable Parent Welfare Benefit
Plan that includes the Effective Time.
(d)
From and after the Effective Time, the Surviving Corporation shall honor, in
accordance with their terms, all employment and severance agreements listed in
Section 5.4(d)
of the Company Disclosure Schedule in effect immediately prior to the Effective
Time that are applicable to any current or former employees or directors of the
Company or any of the Company Subsidiaries.
(e)
Nothing in this Section 5.4 shall amend, or be deemed to amend, any Company
Employee Plan, shall prevent the amendment or termination of any Company
Employee Plans by Parent, the Surviving Corporation or their respective
subsidiaries, or shall limit the right of Parent, the Surviving Corporation or
any of their respective subsidiaries to terminate the employment of any Employee
at any time.
(f)
Unless otherwise directed in writing by Parent at least one Business Day prior
to the Effective Time, the Company will terminate the Company’s 401(k) (the
“
Company 401(k) Plan
”),
effective as of the day immediately preceding the Effective Time. The
Company shall provide Parent evidence that such resolutions to terminate the
Company 401(k) Plan have been adopted by the Board. The form and
substance of such resolutions shall be subject to the reasonable approval of
Parent. The Company shall also take such other actions in furtherance
of terminating
the
Company 401(k) Plan as Parent may reasonably request. Immediately
prior to such termination, the Company will make (or cause to be made) all
necessary payments to fund the contributions (i) necessary or required to
maintain the tax-qualified status of the Company 401(k) Plan, (ii) for
elective deferrals made pursuant to Company 401(k) Plan for the period prior to
termination, and (iii) for employer matching contributions (if any) for the
period prior to termination.
|
|
5.5
|
Public
Announcements
.
|
Parent
and the Company agree that no public release or announcement concerning this
Agreement or the Merger shall be issued by either Party or any of their
affiliates without the prior consent of the other Party (which consent shall not
be unreasonably withheld or delayed), except as such release or announcement may
be required by applicable Law or the rules or regulations of any securities
exchange, in which case the applicable Party shall use reasonable best efforts
to allow the other Party reasonable time to comment on such release or
announcement in advance of such issuance;
provided
,
however
, that either
Parent or the Company may make any public statement in response to specific
questions by the press, analysts, investors or those attending industry
conferences or financial analyst conference calls, so long as any such
statements are not inconsistent with previous public releases or announcements
made by Parent or the Company in compliance with this Agreement.
As
promptly as practical following the date of this Agreement, and in any event
within 10 Business Days, and in compliance with applicable Law, Parent and the
Company shall develop a joint plan for the communication by the Company
regarding the transactions contemplated by this Agreement (including the Merger)
with the Company Producers. The Company shall obtain the written
consent of Parent (such consent not to be unreasonably withheld, conditioned or
delayed) prior to initiating any communication with any Company Producers
regarding the transactions contemplated by this Agreement (including the
Merger). Without the prior written consent of the Company (such
consent not to be unreasonably withheld, delayed or conditioned), Parent shall
not orally or in writing initiate any communication with any Company Producer,
provided
,
however
, that the
foregoing shall not prohibit Parent from responding to inquiries initiated by
Company Producers. For purposes of this Section 5.6, “Company
Producers” shall not mean any insurance producer, reinsurance intermediary,
agency, agent, managing general agent, wholesaler, broker or other Person with
whom Parent or any subsidiary of Parent has an existing relationship as of the
date hereof.
The
Company shall, and shall cause the Company Subsidiaries to, reasonably cooperate
in connection with the arrangement of any financing by Parent or any of its
subsidiaries in connection with the transactions contemplated by this Agreement
(the “
Financing
”) as may
be reasonably requested by Parent (provided that such requested cooperation does
not unreasonably interfere with the ongoing operations of the Company and the
Company Subsidiaries and;
provided
,
further
, that Parent
reimburses the Company for any reasonable costs or expenses incurred in
connection with such cooperation). Such cooperation by the Company
shall include (a) providing to the parties providing Financing all
financial
statements
and other information relating to the Company and the Company Subsidiaries that
are reasonably required for financings similar to the Financing and using
reasonable best efforts to provide such other financial information as Parent
shall reasonably request in order to consummate the Financing, (b) review
for accuracy (i) one or more offering documents or confidential information
memoranda for the Financing and (ii) materials for rating agency
presentations, (c) executing and delivering and causing the Company
Subsidiaries to execute and deliver, customary certificates and similar items
ancillary to the Financing as may be reasonably requested by Parent in
connection with the Financing, and (d) assisting Parent in requesting
accounting comfort letters from the Company’s independent
auditors. Notwithstanding anything in this Agreement to the contrary,
neither the Company nor any Company Subsidiary shall be required to pay any
commitment or other fee or incur any other liability or obligation in connection
with the Financing (or any replacements thereof) prior to the Effective
Time.
ARTICLE
VI
CONDITIONS
|
|
6.1
|
Conditions to Each
Party’s Obligations
.
|
The
obligations of each Party to consummate the Merger shall be subject to the
satisfaction or waiver (where permissible), at or prior to the Effective Time,
of the following conditions:
(a)
Stockholder
Approval
. The Company Stockholder Approval shall have been
obtained in accordance with the DGCL.
(b)
HSR
Act
. The applicable waiting period (and any extension thereof)
under the HSR Act shall have expired or been terminated.
(c)
Requisite Regulatory
Approvals
. All authorizations, approvals and permits required
to be obtained from or made with any Governmental Authority in order to
consummate the transactions contemplated by this Agreement (the “
Requisite Regulatory
Approvals
”) shall have been obtained or made.
(d)
No
Law
. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any Law (whether temporary, preliminary or
permanent) or Order that is then in effect and has the effect of making the
Merger illegal or otherwise preventing or prohibiting consummation of the
Merger.
|
|
6.2
|
Conditions to
Obligations of Parent and Merger Sub
.
|
The
obligations of Parent and Merger Sub to consummate the Merger are subject to the
satisfaction or waiver by Parent, at or prior to the Effective Time, of the
following additional conditions:
(a)
Representations and
Warranties
.
(i)
Each of the representations and warranties of the Company contained in Section
2.1, Section 2.2 (other than subsections (e) and (h)), Section 2.3(a),
Section 2.4, Section 2.7(c), Section 2.8(b), Section 2.18 and Section 2.20 shall
be true and correct in all respects as of the date of this Agreement and as of
the Effective Time as though made as of the Effective Time (except to the extent
that any of such representations and warranties expressly speaks only as of an
earlier date, in which case such representation and warranty shall be true and
correct as of such earlier date); and
(ii)
each of the other representations and warranties of the Company set forth in
this Agreement shall be true and correct (disregarding all qualifications or
limitations as to “materiality”, “Company Material Adverse Effect” and words of
similar import set forth therein) as of the date of this Agreement and as of the
Effective Time as though made at and as of the Effective Time (except to the
extent that any of such representations and warranties expressly speaks only as
of an earlier date, in which case such representation and warranty shall be true
and correct as of such earlier date), except where the failure of such
representations and warranties to be so true and correct has not had and would
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(b)
Agreements and
Covenants
. The Company shall have performed, in all material
respects, all of its obligations and complied with, in all material respects,
all of its agreements and covenants to be performed or complied with by it under
this Agreement at or prior to the Effective Time.
(c)
Officer
Certificate
. The Company shall have delivered to Parent a
certificate, dated the Closing Date, signed by the chief executive officer or
chief financial officer of the Company, certifying in such capacity as to the
satisfaction of the conditions specified in Sections 6.2(a), 6.2(b) and
6.2(d).
(d)
Company Material
Adverse Effect
. No Company Material Adverse Effect shall have
occurred since the date of this Agreement.
(e)
Burdensome
Condition
. The Requisite Regulatory Approvals shall not have
included or contained, or resulted in the imposition of, any Burdensome
Condition.
(f)
Dissenting
Shares
. No more than 15% of the outstanding Shares shall
constitute Dissenting Shares.
|
|
6.3
|
Conditions to
Obligations of the Company
.
|
The
obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver by the Company, at or prior to the Effective Time, of the
following additional conditions:
(a)
Representations and
Warranties
. Each of the representations and warranties of
Parent and Merger Sub set forth in this Agreement shall be true and correct as
of the date of this Agreement and as of the Effective Time as though made at and
as of the Effective Time (except to the extent such representations and
warranties expressly relate to an earlier date, in which case as of such earlier
date), except where the failure of such representations and warranties to be so
true and correct has not had and would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
(b)
Agreements and
Covenants
. Each of Parent and Merger Sub shall have performed,
in all material respects, its obligations and complied with, in all material
respects, its agreements and covenants to be performed or complied with by it
under this Agreement at or prior to the Effective Time.
(c)
Officer
Certificate
. Parent shall have delivered to the Company a
certificate, dated the Closing Date, signed by the chief executive officer or
chief financial officer of Parent, certifying in such capacity as to the
satisfaction of the conditions specified in Sections 6.3(a) and
6.3(b).
|
|
6.4
|
Frustration of
Conditions
.
|
Neither
Parent nor the Company may rely on the failure of any condition set forth in
this Article VI to be satisfied if such failure was caused by such Party’s
failure to comply with or perform any of its covenants or obligations set forth
in this Agreement.
ARTICLE
VII
TERMINATION AND
ABANDONMENT
This
Agreement may be terminated and the Merger and the other transactions
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding any approval of the matters presented in connection with the
Merger by the stockholders of the Company (the date of any such termination, the
“
Termination Date
”), as
follows:
(a)
by mutual written consent of each of the Company and Parent, as duly authorized
by the Board of Directors of each of Parent the Company;
(b)
by written notice by either Parent or the Company, if the Effective Time shall
not have occurred on or before October 31, 2008 (the “
Outside Date
”);
provided
,
however
, that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any Party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Merger to be
consummated on or before the Outside Date;
(c)
by written notice by either Parent or the Company, if any Governmental Authority
shall have enacted, issued, promulgated, enforced or entered any Order or Law
that is, in each case, then in effect and is final and nonappealable and has the
effect of permanently restraining, enjoining or otherwise preventing or
prohibiting the transactions contemplated by this Agreement (including the
Merger);
provided
,
however
, that the
right to terminate this Agreement under this Section 7.1(c) shall not be
available to any Party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, any such Order or Law to have
been enacted, issued, promulgated, enforced or entered;
(d)
by written notice by Parent (if Parent is not in material breach of any of its
representations, warranties, covenants or agreements under this Agreement), if
there has been a breach by the Company of any of its representations,
warranties, covenants or agreements contained in this Agreement, or if any
representation or warranty of the Company shall have become untrue or
inaccurate, in either case that would result in a failure of a condition set
forth in Section 6.2(a) or 6.2(b) (a “
Terminating Company Breach
”);
provided
, that
if such Terminating Company Breach is reasonably curable by the Company, within
20 days after the Company has received written notice from Parent of such
Terminating Company Breach, through the exercise of commercially reasonable
efforts and for as long as the Company continues to exercise such commercially
reasonable efforts, Parent may not terminate this Agreement under this Section
7.1(d) until the earlier of the expiration of such 20-day period and the Outside
Date;
(e)
by written notice by the Company (if the Company is not in material breach of
any of its representations, warranties, covenants or agreements under this
Agreement), if there has been a breach by Parent or Merger Sub of any of its
representations, warranties, covenants or agreements contained in this
Agreement, or if any representation or warranty of Parent or Merger Sub shall
have become untrue or inaccurate, in either case that would result in a failure
of a condition set forth in Section 6.3(a) or 6.3(b) (a “
Terminating Parent Breach
”);
provided
, that
if such Terminating Parent Breach is reasonably curable by Parent or Merger Sub,
within 20 days after Parent has received written notice from the Company of such
Terminating Parent Breach, through the exercise of commercially reasonable
efforts and for as long as Parent or Merger Sub, as the case may be, continues
to exercise such commercially reasonable efforts, the Company may not terminate
this Agreement under this Section 7.1(e) until the earlier of the expiration of
such 20-day period and the Outside Date;
(f)
by written notice by Parent, if the Board (i) withdraws, modifies or
qualifies in a manner adverse to Parent or Merger Sub, or publicly proposes to
withdraw, modify or qualify in a manner adverse to parent or Merger Sub, its
recommendation that the holders of Shares adopt this Agreement; (ii) fails
to include in the Proxy Statement its recommendation to the holders of Shares
that they give the Company Stockholder Approval; (iii) approves, endorses
or recommends, or publicly proposes to approve, endorse or recommend, any
Company Takeover Proposal, (iv) makes a Change of Recommendation or a
Withdrawal of Recommendation, or (v) in the case of a Company Takeover
Proposal made by way of a tender offer or exchange offer, fails to recommend
that the Company’s stockholders reject such tender offer or exchange offer
within the ten Business Day period specified in Section 14e-2(a) under the
Exchange Act or (if later than the end of such ten Business Day period) fails to
reconfirm its recommendation that the holders of Shares adopt this Agreement and
approve the Merger within five Business Days after a request by Parent to do so;
or
(g)
by written notice by either Parent or the Company, if, at the Special Meeting
(including any adjournment or postponement thereof at which this Agreement is
voted upon), the Company Stockholder Approval is not obtained;
provided
,
however
, that the
right to terminate this Agreement under this Section 7.1(g) shall not be
available to the Company where the failure to obtain the Company Stockholder
Approval shall have resulted from the Company’s breach of this
Agreement.
|
|
7.2
|
Effect
of Termination
.
|
In the
event of the termination of this Agreement pursuant to Section 7.1, this
Agreement shall forthwith become void, and there shall be no liability on the
part of any Party hereto or any of their respective affiliates or the directors,
officers, partners, members, managers, employees, agents or other
representatives of any of them, and all rights and obligations of each Party
hereto shall cease, except (i) as set forth in this Section 7.2 and in
Section 7.3 and Article VIII and (ii) subject to Section 7.3(c), nothing
herein shall relieve any Party from liability for any fraud or willful breach of
this Agreement. Without limiting the foregoing, Section 4.2(b), this
Section 7.2, Section 7.3 and Article VIII shall survive the termination of this
Agreement. Prior to the Effective Time, the liability of Parent and
Merger Sub to the Company under the Agreement is specifically limited to the
amount of the Parent Termination Fee, if and as payable in accordance with
Section 7.3(c).
(a)
Except as otherwise set forth in this Section 7.3, all Expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the Party incurring such expenses, whether or not the Merger or any
other related transaction is consummated;
provided
,
however
, that the
filing fee under the HSR Act shall be borne equally by the Company and
Parent. As used in this Agreement, “
Expenses
” shall include all
out-of-pocket expenses (including all fees and expenses of counsel, accountants,
investment bankers, financing sources, experts and consultants to a Party hereto
and its affiliates) incurred by a Party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution or performance
of this Agreement, the preparation, printing, filing or mailing of the Proxy
Statement, the solicitation of stockholder approvals and all other matters
related to the consummation of the Merger and the other transactions
contemplated hereby
(b)
If
(i)
(x) at any time on or after the date of this Agreement, a Company Takeover
Proposal is made to the Board or the Company or is publicly proposed or publicly
disclosed or any Person or group shall have publicly announced or disclosed an
intention to make a Company Takeover Proposal, (y) thereafter, this Agreement is
terminated by Parent or the Company pursuant to Section 7.1(b) or Section
7.1(g), or by Parent pursuant to Section 7.1(d), and (z) on or within 12 months
after the date of such termination, any definitive agreement providing for a
Qualifying Transaction shall have been executed or a Qualifying Transaction
shall have been consummated with any Person;
(ii)
this Agreement is terminated by Parent pursuant to Section 7.1(f);
or,
(iii)
this Agreement is terminated by the Company or Parent pursuant to Section 7.1(g)
and prior to such termination, the Company shall have made a Change of
Recommendation or a Withdrawal of Recommendation,
then in
any such event the Company shall pay to Parent a fee of $8,000,000 in cash (the
“
Termination Fee
”), such
payment to be made (1) in the case of termination described in Section
7.3(b)(i), upon the earlier to occur of execution of an agreement providing for
a Qualifying Transaction or consummation of such Qualifying Transaction, and
(2) in the case of a termination described in Section 7.3(b)(ii) or Section
7.3(b)(iii), within two Business Days after such termination. In
addition, in the case of any termination of this Agreement pursuant to Section
7.1(g), (1) the Expenses of Parent shall be paid by the Company to Parent
in cash (A) concurrently with and as a condition to any such termination
effected by the Company and (B) on the second Business Day following any
such termination effected by Parent, and (2) the amount of such Expenses so
paid shall not be in excess of $2,000,000 and shall be credited against the
Termination Fee that is or becomes payable in connection with such termination
pursuant to this Section 7.3(b). For the avoidance of doubt, the
Company shall not be required to pay the Termination Fee or the Expenses
pursuant to more than one clause of this Section 7.3(b). For the
purposes of this Agreement, a “
Qualifying Transaction
” means
any Company Takeover Proposal (substituting “50%” for “15%” in the definition of
“Company Takeover Proposal”).
(c)
Parent agrees that (i) if this Agreement shall be terminated by the Company
pursuant to Section 7.1(e) as a result of a breach by Parent of (x) Section
3.7 or (y) its covenants and agreements contained in this Agreement and
(ii) the notice of termination includes a demand, which demand shall be
irrevocable, to receive the Parent Termination Fee, Parent shall pay $8,000,000
(the “
Parent Termination
Fee
”) to the Company no later than two (2) Business Days after such
termination,
provided
that the
Company’s right to receive the Parent Termination Fee shall terminate and be of
no further force or effect (1) if the Company makes any demand or claim for
Company Damages (as defined below) in any Action, other than for the payment of
the Parent Termination Fee, or (2) if any condition to the obligation of
Parent or Merger Sub to consummate the Merger set forth in Section 6.2 becomes
incapable of being satisfied. Notwithstanding anything in this
Agreement to the contrary, the right to receive the Parent Termination Fee in
accordance with this Section 7.3(c) shall be the sole and exclusive remedy
(whether at law, in equity, in contract, in tort or otherwise) of the Company,
the Company Subsidiaries, and its and their affiliates against Parent, Merger
Sub and any of their respective current, former or future directors, officers,
employees, agents, partners, managers, members, affiliates, stockholders,
assignees or representatives for any loss, claim, damage, liability or expense
(x) suffered in connection with this Agreement or the transactions
contemplated hereby (including any breach of this Agreement by Parent or Merger
Sub) or (y) as a result of the failure of the Merger or any of the other
transactions contemplated hereby to be consummated in circumstances giving rise
to the right to receive the Parent Termination Fee (“
Company Damages
”), and upon
payment of the Parent Termination Fee, none of Parent, Merger Sub and any of
their respective current, former or future directors, officers, employees,
agents, partners, managers, members, affiliates, stockholders, assignees or
representatives shall have any further liability or obligation relating to or
arising out of this Agreement or the transactions contemplated
hereby. For the avoidance of doubt, in no event shall Parent or
Merger Sub have any liability under or in respect of this Agreement or the
transactions related hereto (including the Merger) in excess of an aggregate
amount equal to the Parent Termination Fee and the Parent Termination Fee shall
not be payable on more than one instance.
(d)
In the event that the Company shall fail to pay the Termination Fee when due or
Parent shall fail to pay the Parent Termination Fee when due, the Company shall
reimburse Parent or Parent shall reimburse the Company, as the case may be, for
all reasonable costs and expenses actually incurred or accrued by Parent or the
Company, as the case may be(including reasonable fees and expenses of counsel),
in connection with the collection under and enforcement of this Section 7.3 and
such Termination Fee or Parent Termination Fee, as the case may be, shall accrue
interest for the period commencing on the date such Termination Fee or Parent
Termination Fee, as the case may be, first became due, at a rate of interest
published from time to time in
The Wall Street Journal
,
Eastern Edition (or any successor publication thereto), designated therein as
the prime rate on the date such Termination Fee or Parent Termination Fee, as
the case may be, was due.
(e)
Each of the Parties hereto acknowledges that the Termination Fee, the Parent
Termination Fee and the other provisions of this Section 7.3 are an integral
part of the transactions contemplated by this Agreement, that the Termination
Fee, the Parent Termination Fee and the other provisions of this Section 7.3 are
not subject to the requirement that the Company Stockholder Approval be obtained
and that these provisions shall be effective without regard to whether the
Company Stockholder Approval is obtained. Each of the Parties hereto further
acknowledges that, without the Termination Fee, the Parent Termination Fee and
the other provisions of this Section 7.3, neither Parent nor the Company would
not enter into this Agreement, and that neither the Termination Fee nor the
Parent Termination Fee is a penalty, but rather is liquidated damages in a
reasonable amount that will compensate Parent or the Company, as the case may
be, for the efforts and resources expended and opportunities foregone while
negotiating this Agreement and in reliance on this Agreement and on the
expectation of the consummation of the transactions contemplated hereby, which
amount would otherwise be impossible to calculate with precision.
This
Agreement may be amended by the Parties hereto by action taken by or on behalf
of their respective Boards of Directors at any time prior to the Effective Time;
provided
, that,
after the adoption of this Agreement and approval of the Merger by the
stockholders of the Company, no amendment may be made that would reduce the
amount or change the type of consideration into which each Share shall be
converted upon consummation of the Merger or that would otherwise by Law require
approval of the stockholders of the Company, without approval of such
stockholders. This Agreement may only be amended pursuant to a
written agreement signed by each of the Parties hereto.
At any
time prior to the Effective Time, subject to applicable Law, any Party hereto
may in its sole discretion (i) extend the time for the performance of any
obligation or other act of any other Party hereto, (ii) waive any
inaccuracy in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any
agreement or condition contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the Party
or Parties to be bound thereby. 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 of any other right
hereunder.
ARTICLE
VIII
MISCELLANEOUS
The
respective representations and warranties of the Company and Parent contained
herein or in any certificates or other documents delivered prior to or at the
Closing shall terminate at the Effective Time.
All
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given when delivered in person, by facsimile, receipt
confirmed, or on the next business day when sent by reliable overnight courier
to the respective Parties at the following addresses (or at such other address
for a Party as shall be specified by like notice):
(i)
if to the Company, to:
AmCOMP
Incorporated
701 U.S.
Highway One
North
Palm Beach, Florida 33408
Attention:
Fred R. Lowe, Chairman and Chief Executive Officer
Facsimile:
561-863-2603
with a
copy to (but which shall not constitute notice to the Company):
Olshan
Grundman Frome Rosenzweig & Wolosky LLP
Park
Avenue Tower
65 East
55th Street
New York,
New York 10022
Attention:
David J. Adler, Esq.
Facsimile:
(212) 451-2222
(ii)
if to Parent or Merger Sub, to:
Employers
Holdings, Inc.
9790
Gateway Drive
Reno,
Nevada 89521
Attention:
Lenard T. Ormsby, Esq., General Counsel
Facsimile:
(775) 886-1854
with a
copy to (but which shall not constitute notice to Parent or Merger
Sub):
Skadden,
Arps, Slate, Meagher & Flom LLP
Four
Times Square
New York,
New York 10036
Attention:
Robert J. Sullivan, Esq.
David C.
Ingles, Esq.
Facsimile:
(212) 735-2000
|
|
8.3
|
Binding
Effect; Assignment
.
|
This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the Parties hereto and their respective successors and permitted
assigns. This Agreement shall not be assigned by operation of law or
otherwise without the prior written consent of the other Parties, and any
assignment without such consent shall be null and void, except that Parent and
Merger Sub may assign any or all of their rights and obligations hereunder to
any direct or indirect wholly owned subsidiary of Parent,
provided
that no such
assignment shall relieve the assigning Party of its obligations
hereunder.
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|
8.4
|
Governing Law;
Jurisdiction
.
|
This
Agreement shall be governed by, construed and enforced in accordance with the
Laws of the State of Delaware without regard to the conflict of laws principles
thereof. All Actions arising out of or relating to this Agreement
shall be heard and determined exclusively in any Delaware state or federal
court. The Parties hereto hereby (A) submit to the exclusive
jurisdiction of any Delaware state or federal court for the purpose of any
Action arising out of or relating to this Agreement brought by any Party hereto
and (B) irrevocably waive, and agree not to assert by way of motion,
defense or otherwise, in any such Action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that the Action is brought in an
inconvenient forum, that the venue of the Action is improper, or that this
Agreement or the transactions contemplated hereby may not be enforced in or by
any of the above-named courts;
provided
,
however
, that such
consent to jurisdiction is solely for the purpose referred to in this Section
8.4 and shall not be deemed to be a general submission to the jurisdiction of
such court or in the State of Delaware other than for such
purposes. Each of Parent, Merger Sub and the Company agrees that a
final judgment in any 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 Law. Each of Parent, Merger Sub and the Company
irrevocably consents to the service of the summons and complaint and any other
process in any other action or proceeding relating to the transactions
contemplated by this Agreement, on behalf of itself or its property, by personal
delivery of copies of such process to such Party. Nothing in this
Section 8.4 shall affect the right of any Party to serve legal process in any
other manner permitted by Law.
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|
8.5
|
Waiver
of Jury Trial
.
|
Each of
the Parties hereto hereby waives to the fullest extent permitted by applicable
Law any right it may have to a trial by jury with respect to any Action directly
or indirectly arising out of, under or in connection with this Agreement or the
transactions contemplated hereby. Each of the Parties hereto
(A) certifies that no representative, agent or attorney of any other party
has represented, expressly or otherwise, that such other party would not, in the
event of any Action, seek to enforce that foregoing waiver and
(B) acknowledges that it and the other Parties hereto have been induced to
enter into this Agreement by, among other things, the mutual waivers and
certifications in this Section 8.5.
This
Agreement may be executed and delivered (including by facsimile transmission) in
one or more counterparts, and by the different Parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same
agreement.
The
article and section headings contained in this Agreement are solely for the
purpose of reference, are not part of the agreement of the Parties and shall not
in any way affect the meaning or interpretation of this Agreement. As
used in this Agreement, (i) the term “
Person
” shall mean and include
an individual, a partnership, a joint venture, a corporation, a limited
liability company, a trust, an association, an unincorporated organization, a
Governmental Authority and any other entity, (ii) unless otherwise
specified herein, the term “
affiliate
,” with respect to
any Person, shall mean and include any Person, directly or indirectly, through
one or more intermediaries controlling, controlled by or under common control
with such Person, (iii) the term “
subsidiary
” of any specified
Person shall mean any corporation a majority of the outstanding voting power of
which, or any partnership, joint venture, limited liability company or other
entity a majority of the total equity interests of which, is directly or
indirectly (either alone or through or together with any other subsidiary) owned
by such specified Person, (iv) the term “
knowledge
,” when used with
respect to the Company, shall mean the knowledge of the executive officers and
other employees of the Company after due inquiry set forth on
Section 8.7
of the
Company Disclosure Schedule and, when used with respect to Parent, shall mean
the knowledge of the executive officers of Parent after due inquiry set forth on
Section 8.7
of
the Parent Disclosure Schedule, and (v) the term “
Business Day
” means any day on
which the principal offices of the SEC in Washington, D.C. are open to accept
filings, or, in the case of determining a date when any payment is due, any day
on which banks are not required or authorized to close in the City of New
York. 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,” “hereby” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. The Parties have participated jointly in the negotiation
and drafting of this Agreement. Consequently, in the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly 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.
This
Agreement and the documents or instruments referred to herein, including any
exhibits attached hereto and the Company Disclosure Schedule referred to herein,
which exhibits and Company Disclosure Schedule are incorporated herein by
reference, any Voting Agreement and the Confidentiality Agreement embody the
entire agreement and understanding of the Parties hereto in respect of the
subject matter contained herein. There are no restrictions, promises,
representations, warranties, covenants or undertakings, other than those
expressly set forth or referred to herein. This Agreement and such
other agreements supersede all prior agreements and the understandings among the
Parties with respect to such subject matter.
In case
any provision in this Agreement shall be held invalid, illegal or unenforceable
in a jurisdiction, such provision shall be modified or deleted, as to the
jurisdiction involved, only to the extent necessary to render the same valid,
legal and enforceable, and the validity, legality and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired thereby
nor shall the validity, legality or enforceability of such provision be affected
thereby in any other jurisdiction. 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 in a mutually
acceptable manner in order that the Merger be consummated as originally
contemplated to the fullest extent possible.
|
|
8.10
|
Specific
Performance
.
|
The
Parties hereto agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed by the Company in
accordance with their specific terms or were otherwise
breached. Accordingly, the Parties further agree that prior to the
termination of this Agreement pursuant to Article VI, Parent and Merger Sub
shall be entitled to seek an injunction or restraining order to prevent breaches
of this Agreement and to seek to enforce specifically the terms and provisions
hereof, this being in addition to any other right or remedy to which Parent and
Merger Sub may be entitled under this Agreement, at law or in
equity. Notwithstanding anything to the contrary in this Agreement,
each of the Parties hereto agrees that the Company shall not be entitled to an
injunction, restraining order or any other equitable remedies to prevent
breaches of this Agreement by Parent or Merger Sub or to enforce specifically
any term or provision of this Agreement and that the sole and exclusive remedy
available to the Company with respect to any such breach shall be the remedy
available to the Company in accordance with Section 7.3(c).
Nothing
contained in this Agreement or in any instrument or document executed by any
party in connection with the transactions contemplated hereby shall create any
rights in, or be deemed to have been executed for the benefit of, any Person
that is not a party hereto or thereto or a successor or permitted assign of such
a party other than Section 5.3 hereof (which is intended to be for the benefit
of the Persons covered thereby and may be enforced by such
Persons). Without limiting the foregoing, the provisions of Section
5.4 hereof are for the sole benefit of the Parties to this Agreement and nothing
herein, expressed or implied, is intended, or shall be construed, to confer upon
or give to any Person (including for the avoidance of doubt, any Employee),
other than the Parties hereto and their respective permitted successors and
assigns, any legal or equitable or other rights or remedies (with respect to the
matters provided for in Section 5.4) under or by reason of any provision of this
Agreement.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the Parties hereto have caused this Agreement and Plan of
Merger to be signed and delivered by their respective duly authorized officers
as of the date first above written.
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|
AMCOMP
INCORPORATED
|
|
|
|
|
|
By:
|
|
|
|
|
Name:
|
Fred
R. Lowe
|
|
|
|
Title:
|
Chairman,
President and Chief Executive
Officer
|
|
|
EMPLOYERS
HOLDINGS, INC.
|
|
|
|
|
|
By:
|
|
|
|
|
Name:
|
Douglas
D. Dirks
|
|
|
|
Title:
|
Chief
Executive Officer
|
|
|
SAPPHIRE
ACQUISITION CORP.
|
|
|
|
|
|
By:
|
|
|
|
|
Name:
|
Douglas
D. Dirks
|
|
|
|
Title:
|
Chief
Executive Officer
|
[SIGNATURE
PAGE TO AGREEMENT AND PLAN OF MERGER]
ANNEX
B
January
10, 2008
Board of
Directors
AmCOMP
Incorporated
701 U.S.
Highway One
Suite
200
North
Palm Beach, FL 33408
Members
of the Board:
You have
requested our opinion as to the fairness, from a financial point of view, to the
Stockholders, other than Employers Holdings, Inc (“Employers”) and its
subsidiaries and affiliates, (the “Stockholders”) of the outstanding common
stock, par value $0.01 (the “Common Stock”) of AmCOMP Incorporated (the
“Company”) of the consideration to be received by such holders in connection
with the proposed merger (the “Merger”) of Sapphire Acquisition Corp., a
Delaware corporation and wholly-owned subsidiary of Employers (“Sapphire”) into
the Company pursuant and subject to the Agreement and Plan of Merger by and
among the Company, Employers and Sapphire dated as of January 10, 2008
(the
“Agreement”). Under and subject to the terms of the Agreement, the
consideration to be received by the Stockholders in exchange for each
outstanding share of Common Stock of the Company will be the right to receive
$12.50 in cash.
In
connection with our review of the proposed Merger and the preparation of our
opinion herein, we have, among other things:
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1.
|
reviewed
the financial terms and conditions as stated in the Agreement;
|
|
|
2.
|
reviewed
the annual reports to Stockholders on Form 10-K of the Company for the two
fiscal years ended December 31, 2005 and December 31, 2006
;
|
|
|
3.
|
reviewed
the quarterly reports to Stockholders on Form 10-Q of the Company for the
fiscal quarters ended March 31, 2007, June 30, 2007 and September 30,
2007;
|
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|
4.
|
reviewed
other Company financial and operating information requested from and/or
provided by the Company;
|
|
|
5.
|
reviewed
the Annual Statements of AmCOMP Preferred Insurance Company and AmCOMP
Assurance Corporation (together the “Insurance Subsidiaries”) as well as
the combined Annual Statements of the AmCOMP Incorporated Group filed with
the Florida Department of Financial Services for the years ended December
31, 2004, 2005 and 2006;
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6.
|
reviewed
the reports of the Company’s independent actuarial firm, dated December
31, 2006, June 30, 2007 and September 30, 2007
|
|
|
7.
|
reviewed
certain other publicly available information on the Company;
|
|
|
8.
|
discussed
with members of the senior management of the Company certain information
relating to the aforementioned and any other matters which we have deemed
relevant to our inquiry;
|
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|
9.
|
reviewed
and discussed with senior management of the Company the historical and
anticipated future financial performance and prospects of the Company,
including the review of forecasts prepared by senior management of the
Company;
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10.
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reviewed
the reported price and trading activity for the shares of the Company
Common Stock;
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11.
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compared
financial and stock market information for the Company with similar
information for comparable companies with publicly traded securities;
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12.
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reviewed
the financial terms of recent business combinations involving companies in
comparable businesses;
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performed
a discounted cash flow analysis of the Company on a stand-alone basis and
performed other such analyses and studies, and considered such other
factors, as we considered appropriate.
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With your
consent, we have assumed and relied upon the accuracy and completeness of all
information supplied or otherwise made available to us by the Company, Employers
or any other party, and we have undertaken no duty or responsibility to verify
independently any of such information. We have not made or obtained
an independent appraisal of the assets or liabilities (contingent or otherwise)
of the Company. With respect to financial forecasts and other
information and data provided to or otherwise reviewed by or discussed with us,
we have, with your consent, assumed that such forecasts and other information
and data have been reasonably prepared in good faith on bases reflecting the
best currently available estimates and judgments of management, and we have
relied upon each party to advise us promptly if any information previously
provided became inaccurate or was required to be updated during the period of
our review. We have assumed that the final form of the Agreement will be
substantially similar to the draft reviewed by us, and that the Merger will be
consummated in accordance with the terms of the Agreement without waiver of any
conditions thereof.
Our
opinion is based upon market, economic, financial and other circumstances and
conditions existing and disclosed to us as of January 9, 2008 and any material
change in such circumstances and conditions would require a reevaluation of this
opinion, which we are under no obligation to undertake.
We
express no opinion as to the underlying business decision to effect the Merger,
the structure or tax consequences of the Agreement or the availability or
advisability of any alternatives to the Merger. We did not structure
the Merger or negotiate the final terms of the Merger. Our opinion is
limited to the fairness, from a financial point of view, of the Merger to the
Stockholders. We express no opinion with respect to any other
reasons,
legal, business, or otherwise, that may support the decision of the Board of
Directors to approve or consummate the Merger. In formulating our
opinion, we have considered only what we understand to be the consideration to
be received by the Stockholders as is described above, and we have not
considered, and this opinion does not address, any other payments that may be
made in connection to Company employees or other Stockholders in connection with
the Transaction.
In
conducting our investigation and analyses and in arriving at our opinion
expressed herein, we have taken into account such accepted financial and
investment banking procedures and considerations as we have deemed relevant,
including the review of (i) historical and projected revenues, net income
and capitalization of the Company and certain other publicly held companies in
businesses we believe to be comparable to the Company; (ii) the current and
projected financial position and results of operations of the Company;
(iii) the historical market prices and trading activity of the Common Stock
of the Company; (iv) financial and operating information concerning
selected business combinations which we deemed comparable in whole or in part;
and (v) the general condition of the securities markets. The
delivery of this opinion was approved by our fairness opinion
committee.
In
arriving at this opinion, Raymond James & Associates, Inc. (“Raymond James”)
did not attribute any particular weight to any analysis or factor considered by
it, but rather made qualitative judgments as to the significance and relevance
of each analysis and factor. Accordingly, Raymond James believes that
its analyses must be considered as a whole and that selecting portions of its
analyses, without considering all analyses, would create an incomplete view of
the process underlying this opinion.
Raymond
James is actively engaged in the investment banking business and regularly
undertakes the valuation of investment securities in connection with public
offerings, private placements, business combinations and similar
transactions. Raymond James has been engaged to render financial
advisory services to the Company in connection with the proposed
Merger and will receive
a fee for such services, which fee is contingent upon consummation of the
Merger. Raymond James will also receive a fee upon the delivery of
this opinion. In addition, the Company has agreed to indemnify us
against certain liabilities arising out of our
engagement. Additionally, Raymond James served as an underwriter of
the Company’s initial public offering of shares in February 2006, and has served
as the Company’s broker in connection with its share repurchase plan, for which
it has received a commission.
In the
ordinary course of our business, Raymond James may trade in the securities of
the Company or Employers for our own account or for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
It is
understood that this letter is for the information of the Board of Directors of
the Company in evaluating the proposed Merger and does not constitute a
recommendation to any Stockholder of the Company regarding how said Stockholder
should vote on the proposed Merger. Furthermore, this letter should
not be construed as creating any fiduciary duty on the part of Raymond James to
any such party. This opinion is not to be quoted or referred to, in
whole or in part, without our prior written consent, which will not be
unreasonably withheld.
Based
upon and subject to the foregoing, it is our opinion that, as of January 10,
2008, the consideration to be received by the Stockholders of the Company
pursuant to the Agreement is fair, from a financial point of view, to such
holders of the Company’s outstanding Common Stock.
Very
truly yours,
Raymond
James & Associates, Inc.
RAYMOND
JAMES & ASSOCIATES, INC.
ANNEX
C
Section 262
of the Delaware General Corporation Law
§ 262. Appraisal
rights.
(a)
Any stockholder of a corporation of this State who holds shares of stock on the
date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to § 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder’s shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this
section, the word “stockholder” means a holder of record of stock in a stock
corporation and also a member of record of a nonstock corporation; the words
“stock” and “share” mean and include what is ordinarily meant by those words and
also membership or membership interest of a member of a nonstock corporation;
and the words “depository receipt” mean a receipt or other instrument issued by
a depository representing an interest in one or more shares, or fractions
thereof, solely of stock of a corporation, which stock is deposited with the
depository.
(b)
Appraisal rights shall be available for the shares of any class or series of
stock of a constituent corporation in a merger or consolidation to be effected
pursuant to § 251 (other than a merger effected pursuant to § 251(g) of this
title), § 252, § 254, § 257, § 258, § 263 or § 264 of this title:
(1)
Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or (ii) held of record by
more than 2,000 holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f) of
§ 251 of this title.
(2)
Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to §§ 251, 252, 254, 257, 258,
263 and 264 of this title to accept for such stock anything except:
a.
Shares of stock of the corporation surviving or resulting from such merger or
consolidation, or depository receipts in respect thereof;
b.
Shares of stock of any other corporation, or depository receipts in respect
thereof, which shares of stock (or depository receipts in respect thereof) or
depository receipts at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of record by more than
2,000 holders;
c.
Cash in lieu of fractional shares or fractional depository receipts described in
the foregoing subparagraphs a. and b. of this paragraph; or
d.
Any combination of the shares of stock, depository receipts and cash in lieu of
fractional shares or fractional depository receipts described in the foregoing
subparagraphs a., b. and c. of this paragraph.
(3)
In the event all of the stock of a subsidiary Delaware corporation party to a
merger effected under § 253 of this title is not owned by the parent corporation
immediately prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
(c)
Any corporation may provide in its certificate of incorporation that appraisal
rights under this section shall be available for the shares of any class or
series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections
(d) and (e) of this section, shall apply as nearly as is
practicable.
(d)
Appraisal rights shall be perfected as follows:
(1)
If a proposed merger or consolidation for which appraisal rights are provided
under this section is to be submitted for approval at a meeting of stockholders,
the corporation, not less than 20 days prior to the meeting, shall notify each
of its stockholders who was such on the record date for such meeting with
respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for
any or all of the shares of the constituent corporations, and shall include in
such notice a copy of this section. Each stockholder electing to demand the
appraisal of such stockholder’s shares shall deliver to the corporation, before
the taking of the vote on the merger or consolidation, a written demand for
appraisal of such stockholder’s shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such stockholder’s shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2)
If the merger or consolidation was approved pursuant to § 228 or § 253 of this
title, then either a constituent corporation before the effective date of the
merger or consolidation or the surviving or resulting corporation within 10 days
thereafter shall notify each of the holders of any class or series of stock of
such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section. Such
notice may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of the
merger or consolidation. Any stockholder entitled to appraisal rights
may, within 20 days after the date of mailing of such notice, demand in writing
from the surviving or resulting corporation the appraisal of such holder’s
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holder’s shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation notifying
each of the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the effective date of the
merger or consolidation or (ii) the surviving or resulting corporation
shall send such a second notice to all such holders on or within 10 days after
such effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice need
only be sent to each stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder’s shares in accordance with this subsection.
An affidavit of the secretary or assistant secretary or of the transfer agent of
the corporation that is required to give either notice that such notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix, in advance, a
record date that shall be not more than 10 days prior to the date the notice is
given, provided, that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such effective
date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e)
Within 120 days after the effective date of the merger or consolidation, the
surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) of this section hereof and who is otherwise
entitled to appraisal rights, may commence an appraisal proceeding by filing a
petition in the Court of Chancery demanding a determination of the value of the
stock of all such stockholders. Notwithstanding the foregoing, at any
time within 60 days after the effective date of the merger or consolidation, any
stockholder who has not commenced an appraisal proceeding or joined that
proceeding as a named party shall have the right to withdraw such stockholder's
demand for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) of this section hereof, upon written request,
shall be entitled to receive from the corporation surviving the merger or
resulting from the consolidation a statement setting forth the aggregate number
of shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholder's written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) of this section hereof, whichever is
later. Notwithstanding subsection (a) of this section, a person
who is the beneficial owner of shares of such stock held either in a voting
trust or by a nominee on behalf of such person may, in such person's own name,
file a petition or request from the corporation the statement described in this
subsection.
(f)
Upon the filing of any such petition by a stockholder, service of a copy thereof
shall be made upon the surviving or resulting corporation, which shall within 20
days after such service file in the office of the Register in Chancery in which
the petition was filed a duly verified list containing the names and addresses
of all stockholders who have demanded payment for their shares and with whom
agreements as to the value of their shares have not been reached by the
surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting
corporation.
(g)
At the hearing on such petition, the Court shall determine the stockholders who
have complied with this section and who have become entitled to appraisal
rights. The Court may require the stockholders who have demanded an appraisal
for their shares and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation thereon of the
pendency of the appraisal proceedings; and if any stockholder fails to comply
with such direction, the Court may dismiss the proceedings as to such
stockholder.
(h)
After the Court determines the stockholders entitled to an appraisal, the
appraisal proceeding shall be conducted in accordance with the rules of the
Court of Chancery, including any rules specifically governing appraisal
proceedings. Through such proceeding the Court shall determine the fair value of
the shares exclusive of any element of value arising from the accomplishment or
expectation of the merger or consolidation, together with interest, if any, to
be paid upon the amount determined to be the fair value. In determining such
fair value, the Court shall take into account all relevant factors. Unless the
Court in its discretion determines otherwise for good cause shown, interest from
the effective date of the merger through the date of payment of the judgment
shall be compounded quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time to time during
the period between the effective date of the merger and the date of payment of
the judgment. Upon application by the surviving or resulting corporation or by
any stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal prior to the final
determination of the stockholders entitled to an appraisal. Any stockholder
whose name appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted such
stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i)
The Court shall direct the payment of the fair value of the shares, together
with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree may
be enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of any
state.
(j)
The costs of the proceeding may be determined by the Court and taxed upon the
parties as the Court deems equitable in the circumstances. Upon application of a
stockholder, the Court may order all or a portion of the expenses incurred by
any stockholder in connection with the appraisal proceeding, including, without
limitation, reasonable attorney’s fees and the fees and expenses of experts, to
be charged pro rata against the value of all the shares entitled to an
appraisal.
(k)
From and after the effective date of the merger or consolidation, no stockholder
who has demanded appraisal rights as provided in subsection (d) of this
section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just; provided, however that this provision shall not affect the right of any
stockholder who has not commenced an appraisal proceeding or joined that
proceeding as a named party to withdraw such stockholder's demand for appraisal
and to accept the terms offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set forth in
subsection (e) of this section.
(l)
The shares of the surviving or resulting corporation to which the shares of such
objecting stockholders would have been converted had they assented to the merger
or consolidation shall have the status of authorized and unissued shares of the
surviving or resulting corporation.
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SPECIAL
MEETING OF STOCKHOLDERS OF
AMCOMP
INCORPORATED
_____________________
Please
date, sign and mail
your
proxy card in the postage-paid
envelope
provided as soon
as
possible.
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Please
detach along perforated line and mail in the envelope
provided.
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THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSALS 1 AND
2. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK
INK AS SHOWN HERE
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1.
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To
adopt the Agreement and Plan of Merger, dated as of January 10, 2008
(the “Merger Agreement”), by and among AmCOMP Incorporated (the
“Company”), Employers Holdings, Inc. and Sapphire Acquisition Corp.,
pursuant to which, each share of the Company’s common stock, other than
any such share held by Employers Holdings, Inc. or Sapphire Acquisition
Corp. or us, or by the Company’s stockholders who perfect appraisal rights
under Delaware law, will automatically be converted into the right to
receive merger consideration of $12.50 per share of common stock, in cash,
without interest.
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2.
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To
approve the adjournment of the special meeting, if necessary or
appropriate, to solicit additional proxies if there are insufficient votes
at the time of the special meeting to adopt the Merger
Agreement.
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FOR
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AGAINST
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ABSTAIN
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3.
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In
their discretion, the Proxies are authorized to consider and take action
upon such other matters as may properly come before the meeting or any
adjournment thereof.
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To
change the address on your account, please check the box at right and
indicate your new address in the address space above. Please
note that changes to the registered name(s) on the account may not be
submitted via this method.
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PROPERLY
EXECUTED PROXIES WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED. IF NO SUCH DIRECTIONS ARE GIVEN, SUCH PROXIES WILL
BE VOTED FOR PROPOSALS 1 AND 2.
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The
undersigned revokes any prior proxies to vote the shares covered by this
proxy.
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PLEASE
SIGN, DATE AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
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Signature
of Stockholder
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Date:
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Signature
of Stockholder
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Date:
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NOTE:
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Please
sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing
as executor, administrator, attorney, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign
full corporate name by duly authorized officer, giving full title as
such. If signer is a partnership, please sign in partnership
name by authorized
person.
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Please
detach along perforated line and mail in the envelope
provided.
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AMCOMP
INCORPORATED
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL
MEETING OF STOCKHOLDERS
_________________
The
undersigned hereby appoints Fred R. Lowe, Debra Cerre-Ruedisili, and
Kumar Gursahaney, and each of them, as proxies, each with the power to
appoint his substitute, and authorizes each of them to represent and to
vote, as designated on the reverse hereof, all of the shares of common
stock, par value $0.01 per share, of AmCOMP Incorporated (the “Company”)
held of record by the undersigned at the close of business on __________
at the special meeting of stockholders of the Company to be held on [Day
of Week], [Date] at [time], New York City Time, at the [Place], or at any
adjournment or postponement thereof, on the matters described in the
Notice of Special Meeting of Stockholders and proxy statement and upon
such other business as may properly come before such meeting or any
adjournments or postponements thereof, hereby revoking any proxies
heretofore given.
(Continued,
and to be dated and signed on the other side.)
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SPECIAL
MEETING OF STOCKHOLDERS OF
AMCOMP
INCORPORATED
_________________
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Voting by
telephone or Internet is quick, easy and immediate
. As a
stockholder of the Company, you have the option of voting your shares
electronically through the Internet or on the telephone, eliminating the
need to return the proxy card. Your electronic vote authorizes the named
proxies to vote your shares in the same manner as if you signed, dated and
returned the proxy card. Votes submitted electronically over the Internet
or by telephone must be received by [_________], Eastern Time, on
[_______________].
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To Vote Your Proxy by
Internet
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www.continentalstock.com
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Have
your proxy card available when you access the above website. Follow the
prompts to vote your shares.
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To Vote Your Proxy by
Phone
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1
(866) 894-0537
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Use
any touch-tone telephone to vote your proxy. Have your proxy card
available when you call. Follow the voting instructions to vote your
shares.
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PLEASE
DO NOT RETURN THE CARD BELOW IF YOU ARE VOTING ELECTRONICALLY OR BY
PHONE.
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To Vote Your Proxy by
Mail
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Sign
and date your proxy card below, detach it, and return it in the
postage-paid envelope provided.
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Please
detach along perforated line and mail in the envelope provided IF
▼
you
are not voting via telephone or the
internet.
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THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSALS 1 AND
2. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE
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1.
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To
adopt the Agreement and Plan of Merger, dated as of January 10, 2008
(the “Merger Agreement”), by and among AmCOMP Incorporated (the
“Company”), Employers Holdings, Inc. or Sapphire Acquisition Corp.,
pursuant to which, each share of the Company’s common stock, other than
any such share held by Employers Holdings, Inc. or Sapphire Acquisition
Corp. or us, or by the Company’s stockholders who perfect appraisal rights
under Delaware law, will automatically be converted into the right to
receive merger consideration of $12.50 per share of common stock, in cash,
without interest.
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2.
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To
approve the adjournment of the
special meeting, if
necessary or appropriate, to solicit additional proxies if there
are insufficient votes at the time of the special meeting to adopt the
Merger Agreement.
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FOR
o
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AGAINST
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ABSTAIN
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FOR
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ABSTAIN
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3.
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In
their discretion, the Proxies are authorized to consider and take action
upon such other matters as may properly come before the meeting or any
adjournment thereof.
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PROPERLY
EXECUTED PROXIES WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED. IF NO SUCH DIRECTIONS ARE GIVEN, SUCH PROXIES WILL
BE VOTED FOR PROPOSALS 1 AND 2.
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To
change the address on your account, please check the box at right and
indicate your new address in the address space above. Please
note that changes to the registered name(s) on the account may not be
submitted via this method.
o
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The
undersigned revokes any prior proxies to vote the shares covered by this
proxy.
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PLEASE
SIGN, DATE AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED REPLY ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
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Signature
of Stockholder
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Date:
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Signature
of Stockholder
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Date:
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NOTE:
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Please
sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing
as executor, administrator, attorney, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign
full corporate name by duly authorized officer, giving full title as
such. If signer is a partnership, please sign in partnership
name by authorized
person.
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▼
Please
detach along perforated line and mail in the envelope provided IF
▼
you
are not voting via telephone or the internet.
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AMCOMP
INCORPORATED
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL
MEETING OF STOCKHOLDERS
_________________
The
undersigned hereby appoints Fred R. Lowe, Debra Cerre-Ruedisili, and
Kumar Gursahaney, and each of them, as proxies, each with the power to
appoint his substitute, and authorizes each of them to represent and to
vote, as designated on the reverse hereof, all of the shares of common
stock, par value $0.01 per share, of AmCOMP Incorporated (the “Company”)
held of record by the undersigned at the close of business on __________
at the special meeting of stockholders of the Company to be held on [Day
of Week], [Date] at [time], New York City Time, at the [Place], or at any
adjournment or postponement thereof, on the matters described in the
Notice of Special Meeting of Stockholders and proxy statement and upon
such other business as may properly come before such meeting or any
adjournments or postponements thereof, hereby revoking any proxies
heretofore given.
(Continued,
and to be dated and signed on the other side.)
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Amcomp Incorporated (MM) (NASDAQ:AMCP)
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