EXHIBIT 99.1
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AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 23, 2006
AMONG
CASTLEWOOD HOLDINGS LIMITED
CWMS SUBSIDIARY CORP.
AND
THE ENSTAR GROUP, INC.
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Table of Contents
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ARTICLE I
THE MERGER; CERTAIN RELATED MATTERS
Section 1.1 The Merger.................................................... 1
Section 1.2 Closing....................................................... 2
Section 1.3 Effective Time................................................ 2
Section 1.4 Articles of Incorporation..................................... 2
Section 1.5 By-Laws....................................................... 2
Section 1.6 Directors..................................................... 3
Section 1.7 Officers...................................................... 3
Section 1.8 Effect on Capital Stock....................................... 3
Section 1.9 Treatment of Company Stock Options............................ 3
Section 1.10 Company Restricted Stock Units................................ 5
Section 1.11 Certain Adjustments........................................... 5
ARTICLE II
EXCHANGE OF CERTIFICATES
Section 2.1 Exchange Fund................................................. 5
Section 2.2 Exchange Procedures........................................... 6
Section 2.3 Distributions with Respect to Unexchanged Shares.............. 6
Section 2.4 No Further Ownership Rights in Company Common Stock........... 6
Section 2.5 No Fractional Parent Ordinary Shares.......................... 7
Section 2.6 Termination of Exchange Fund.................................. 7
Section 2.7 Lost Certificates............................................. 8
Section 2.8 Withholding Rights............................................ 8
Section 2.9 Further Assurances............................................ 8
Section 2.10 Stock Transfer Books.......................................... 8
Section 2.11 Affiliates.................................................... 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of Parent...................... 9
Section 3.2 Representations and Warranties of the Company................. 21
Section 3.3 Representations and Warranties of Parent and Merger Sub....... 32
Section 3.4 Representations and Warranties of the Parties................. 33
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Covenants of Parent........................................... 33
Section 4.2 Covenants of the Company...................................... 34
Section 4.3 Governmental Filings.......................................... 35
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Table of Contents
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Section 4.4 Actions Regarding Benefit Plans............................... 35
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Preparation of Proxy Statement; Shareholders Approval......... 36
Section 5.2 Access to Information/Employees............................... 37
Section 5.3 Reasonable Best Efforts....................................... 38
Section 5.4 No Solicitation; Change of Recommendation..................... 39
Section 5.5 Fees and Expenses............................................. 41
Section 5.6 Directors' and Officers' Indemnification and Insurance........ 41
Section 5.7 Public Announcements.......................................... 42
Section 5.8 Listing of Parent Ordinary Shares............................. 42
Section 5.9 Company Affiliates; Restrictive Legend........................ 42
Section 5.10 Tax Treatment................................................. 43
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.... 43
Section 6.2 Additional Conditions to Obligations of Parent................ 44
Section 6.3 Additional Conditions to Obligations of the Company........... 45
ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.1 General....................................................... 46
Section 7.2 Obligations in Event of Termination........................... 47
Section 7.3 Amendment..................................................... 47
Section 7.4 Extension; Waiver............................................. 47
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations, Warranties and Agreements.... 47
Section 8.2 Notices....................................................... 48
Section 8.3 Interpretation................................................ 49
Section 8.4 Counterparts.................................................. 49
Section 8.5 Entire Agreement; No Third Party Beneficiaries................ 49
Section 8.6 Governing Law................................................. 49
Section 8.7 Severability.................................................. 49
Section 8.8 Assignment.................................................... 50
Section 8.9 Submission to Jurisdiction; Waivers........................... 50
Section 8.10 Enforcement................................................... 50
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List of Exhibits
Exhibit Title
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1.4 Form of Articles of Incorporation
2.11 Form of Affiliate Agreement
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AGREEMENT AND PLAN OF MERGER, dated as of May 23, 2006 (this "Agreement"),
among Castlewood Holdings Limited, a Bermuda company ("Parent"), CWMS Subsidiary
Corp., a Georgia corporation and a direct wholly-owned subsidiary of Parent
("Merger Sub"), and The Enstar Group, Inc., a Georgia corporation (the "Company"
and together with Parent and Merger Sub, the "parties" and each, a "party").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of the Company, Parent and
Merger Sub deem it advisable and in the best interests of their corporations and
shareholders that the Company and Parent engage in a business combination in
order to advance the long-term strategic business interests of the Company and
Parent;
WHEREAS, in furtherance thereof, the respective Boards of Directors of the
Company, Parent and Merger Sub have approved and declared advisable this
Agreement and the merger (the "Merger") of Merger Sub with and into the Company,
on the terms and subject to the conditions set forth in this Agreement, and the
Board of Directors of the Company has resolved to recommend that the Company's
stockholders vote for the adoption of this Agreement;
WHEREAS, Parent and certain members of Parent have entered into an
agreement, dated as of the date hereof (the "Parent Recapitalization
Agreement"), pursuant to which, subject to the terms and conditions thereof,
certain changes to the capitalization of Parent shall be effected prior to the
Merger (collectively, the "Parent Recapitalization");
WHEREAS, Parent and certain shareholders of the Company (the "Principal
Shareholders") are entering into an agreement, dated as of the date hereof (the
"Support Agreement"), pursuant to which, subject to the terms and conditions
thereof, the Principal Shareholders have agreed, among other things, to vote
their shares of common stock, par value $0.01 per share, of the Company
("Company Common Stock") in favor of the adoption and approval of this
Agreement, the Merger and the other transactions contemplated hereby;
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
promulgated thereunder (each, a "Treasury Regulation"), and by executing this
Agreement the parties hereby adopt this Agreement as a plan of reorganization
for purposes of Section 368(a) of the Code and the Treasury Regulations.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements set forth in this Agreement, and intending
to be legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER; CERTAIN RELATED MATTERS
Section 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Georgia Business Corporation
Code (the "GBCC"),
Merger Sub shall be merged with and into the Company at the Effective Time.
Following the Merger, the separate corporate existence of Merger Sub shall cease
and the Company shall continue as the surviving corporation in the Merger (with
respect to all post-closing periods, the "Surviving Corporation"). At the
Effective Time, the effect of the Merger shall be as provided in this Agreement,
the Certificate of Merger and Section 14-2-1106 of the GBCC. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time, all
the property, rights, privileges, powers and franchises of the Company and
Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
Section 1.2 Closing. Upon the terms and subject to the conditions set
forth in Article VI, and the termination rights set forth in Article VII, the
closing of the Merger (the "Closing") will take place as promptly as practicable
(but no later than the third Business Day) after the satisfaction or waiver
(subject to applicable law) of the conditions (excluding conditions that, by
their nature, cannot be satisfied until the Closing Date, but subject to the
fulfillment or waiver of those conditions) set forth in Article VI, unless this
Agreement has been previously terminated pursuant to its terms or unless another
time or date is agreed to in writing by the parties (the actual date of the
Closing being referred to herein as the "Closing Date"). The Closing shall be
held at the offices of Debevoise & ββββββββ LLP, βββ� βββββ� ββββββ, βββ� ββββ, βββ�
ββββ, βββββ�, at 9:00 a.m. New York City time, unless another place is agreed to
in writing by the parties. "Business Day" shall mean any day other than a day on
which banks are required or authorized to close in the City of New York.
Section 1.3 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable following the satisfaction or waiver (subject to
applicable law) of the conditions set forth in Article VI, on the Closing Date
the parties shall (i) file a certificate of merger as contemplated by the GBCC
(the "Certificate of Merger"), together with any required related certificates,
with the Secretary of State of the State of Georgia, in such form as is required
by, and executed in accordance with, Section 14-2-1105(b) of the GBCC and (ii)
make all other filings or recordings required under the GBCC, including
publication of the notice of merger contemplated by Section 14-2-1105.1 of the
GBCC. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Secretary of State of the State of Georgia on the
Closing Date, or at such subsequent time as Parent and the Company shall agree
and as shall be specified in the Certificate of Merger (the date and time the
Merger becomes effective being the "Effective Time").
Section 1.4 Articles of Incorporation. The articles of incorporation of
the Company shall be amended and restated at the Effective Time to be in the
form of Exhibit 1.4 and, as so amended and restated, such articles of
incorporation shall be the articles of incorporation of the Surviving
Corporation (the "Articles of Incorporation"), until thereafter amended as
provided therein or by applicable law; provided, however, that such Articles of
Incorporation shall be amended to reflect that the name of the Surviving
Corporation shall be "Enstar USA, Inc."
Section 1.5 By-Laws. The by-laws of Merger Sub in effect immediately prior
to the Effective Time shall be the by-laws of the Surviving Corporation (the
"By-Laws") until thereafter amended as provided therein or by applicable law.
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Section 1.6 Directors. The directors of Merger Sub immediately prior to
the Effective Time shall, from and after the Effective Time, be directors of the
Surviving Corporation until their successors have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in accordance
with the Articles of Incorporation and the By-Laws.
Section 1.7 Officers. The officers of the Company immediately prior to the
Effective Time shall, from and after the Effective Time, be the officers of the
Surviving Corporation until their successors have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in accordance
with the Articles of Incorporation and the By-Laws.
Section 1.8 Effect on Capital Stock.
(a) At the Effective Time, by virtue of the Merger and without any action
on the part of any holder thereof, each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time, together with the Company
Rights, shall be converted into the right to receive one (the "Exchange Ratio")
validly issued, fully paid and non-assessable ordinary share, par value $1.00
per share, of Parent ("Parent Ordinary Shares") (together with any cash in lieu
of fractional Parent Ordinary Shares to be paid pursuant to Section 2.5, the
"Merger Consideration"). "Company Rights" shall mean the rights associated with
the Rights Agreement, dated as of January 20, 1997, as amended, between the
Company and American Stock Transfer and Trust Company (the "Company Rights
Agreement").
(b) At the Effective Time, by virtue of the Merger and without any action
on the part of any holder thereof, all shares of Company Common Stock and all
Company Rights issued and outstanding immediately prior to the Effective Time
shall cease to be outstanding and shall be canceled and retired, and each
certificate which immediately prior to the Effective Time represented any such
shares of Company Common Stock and/or Company Rights (the "Certificates") shall
thereafter represent only the right to receive the Merger Consideration with
respect to such shares of Company Common Stock and Company Rights formerly
represented thereby, and any dividends or other distributions to which the
holders thereof are entitled pursuant to Section 2.3.
(c) At the Effective Time, by virtue of the Merger and without any action
on the part of the Company, each share of Company Common Stock held by the
Company as treasury stock immediately prior to the Effective Time shall be
cancelled and retired and no payment shall be made with respect thereto.
(d) At the Effective Time, by virtue of the Merger and without any action
on the part of any holder thereof, each share of common stock of Merger Sub
issued and outstanding immediately prior to the Effective Time, shall be
converted into one validly issued, fully paid and non-assessable share of common
stock of the Surviving Corporation and such shares shall constitute the only
issued and outstanding shares of common stock of the Surviving Corporation.
Section 1.9 Treatment of Company Stock Options.
(a) Company Stock Options. At the Effective Time, by virtue of the Merger
and without any action on the part of the holders thereof, Parent will assume
each then outstanding option to purchase shares of Company Common Stock (a
"Company Stock Option") granted
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pursuant to any compensatory plan, program or arrangement providing for the
purchase of Company Common Stock (each, a "Company Stock Plan"), whether or not
exercisable at the Effective Time and regardless of the exercise price thereof,
in a manner consistent with the requirements of Section 424(a) of the Code.
Pursuant to the immediately preceding sentence, the following process shall be
applied to effect the assumption of such Company Stock Options. Parent shall
determine the ratio (the "Company Option Ratio") of (i) the exercise price for a
share of Company Common Stock subject to each Company Stock Option (the "Company
Exercise Price") to (ii) the average closing price of a share of Company Common
Stock for the five trading days ending on the trading day immediately prior to
the Effective Time (the "Company Closing Value"). Parent shall also determine
the product of (i) the remainder of (A) the Company Closing Value minus (B) the
Company Exercise Price, multiplied by (ii) the number of shares of Company
Common Stock subject to such Company Stock Option (such product hereinafter
called the "Company Option Spread"). Parent shall establish the exercise price
to purchase each Parent Ordinary Share (the "Parent Exercise Price") under each
assumed option such that the ratio of (i) the Parent Exercise Price to (ii) the
average closing price of each Parent Ordinary Share for the five trading days
starting with the first trading day occurring after the Effective Time (the
"Parent Closing Value") is equal to the Company Option Ratio. Parent shall
determine the number of Parent Ordinary Shares subject to each assumed Company
Stock Option by dividing (i) the Company Option Spread by (ii) the remainder of
(A) the Parent Closing Value minus (B) the Parent Exercise Price; provided, that
if the Company Option Spread is zero, the number of Parent Ordinary Shares
subject to each assumed Company Stock Option shall equal the Company Closing
Value multiplied by the number of shares of Company Common Stock subject to such
Company Stock Option and divided by the Parent Closing Value; provided, further,
that any fractional Parent Ordinary Share resulting from such quotient shall be
cashed out based on the Parent Closing Value and taking into account the
applicable portion of the Parent Exercise Price related thereto. Each assumed
Company Stock Option shall be deemed vested immediately following the Effective
Time as to the same percentage of the total number of shares subject thereto as
it was vested immediately prior to the Effective Time, except to the extent such
Company Stock Option by its written terms as set forth in the relevant option
agreement as in effect immediately prior to the date hereof provides for
acceleration of vesting by reason of the transactions contemplated hereby. Each
assumed Company Stock Option will otherwise continue to have, and be subject to,
the same terms and conditions as in effect immediately prior to the Effective
Time.
(b) Registrations. Prior to the Closing, Parent shall take all corporate
action necessary to reserve for issuance a sufficient number of Parent Ordinary
Shares for delivery upon exercise of Company Stock Options. Reasonably promptly
after the Effective Time, Parent shall file a registration statement on Form S-8
(or any successor form), with respect to the Parent Ordinary Shares subject to
such options and shall use commercially reasonable efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding.
(c) Section 16 Matters. Prior to the Effective Time, each of Parent and
the Company shall take all such reasonable steps as may be required and are
consistent with applicable law and regulations to cause any dispositions of
Company Common Stock (including derivative securities with respect to Company
Common Stock) or acquisitions of Parent Ordinary Shares
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(including derivative securities with respect to Parent Ordinary Shares) in the
transactions contemplated by this Agreement by each individual who is subject to
the reporting requirements of Section 16(a) of the Exchange Act with respect to
the Company, to be exempt under Rule 16b-3 promulgated under the Exchange Act.
Section 1.10 Company Restricted Stock Units. Each restricted stock unit
issued under The Enstar Group, Inc. Deferred Compensation and Stock Plan for
Non-Employee Directors (the "Directors Deferred Plan") that is outstanding
immediately prior to the Effective Time shall automatically convert, as of the
Effective Time, from a right in respect of a share of Company Common Stock into
a right in respect of the Merger Consideration. The Company has amended the
Directors Deferred Plan to provide that (i) no portion of any retainer or other
fees payable currently to a director from and after the date hereof shall be
distributable in the Company Common Stock and (ii) all amounts deferred under
the Directors Deferred Plan, or credited as dividends equivalents thereunder,
from and after the date hereof (the "Additional Accruals"), shall be valued by
reference to the Company's Common Stock prior to the Effective Time and the
Parent Ordinary Shares from and after the Effective Time, but such Additional
Accruals shall be distributable solely in cash, in accordance with the otherwise
applicable distributions provisions of the Directors Deferral Plan.
Section 1.11 Certain Adjustments. If, except pursuant to the Parent
Recapitalization, between the date of this Agreement and the Effective Time, the
outstanding Parent Ordinary Shares or shares of Company Common Stock shall have
been changed into a different number of shares or different class by reason of
any reclassification, recapitalization, stock split, split-up, combination or
exchange of shares or a stock dividend or dividend payable in any other
securities shall be declared with a record date within such period, or any
similar event shall have occurred, the Exchange Ratio shall be appropriately
adjusted to provide to the holders of Company Common Stock the same economic
effect as contemplated by this Agreement prior to such event.
ARTICLE II
EXCHANGE OF CERTIFICATES
Section 2.1 Exchange Fund. Prior to the Effective Time, Parent shall
appoint a commercial bank or trust company to act as exchange agent hereunder
(which entity shall be reasonably acceptable to the Company) for the purpose of
exchanging Certificates for the Merger Consideration (the "Exchange Agent"). At
or prior to the Effective Time, Parent shall deposit with the Exchange Agent, in
trust for the benefit of holders of record, as of the Effective Time, of Company
Common Stock, certificates representing the Parent Ordinary Shares issuable
pursuant to Section 1.8 in exchange for outstanding shares of Company Common
Stock. Parent agrees to make available, or cause the Surviving Corporation to
make available, directly or indirectly to the Exchange Agent, from time to time
as needed, cash sufficient to pay cash in lieu of fractional shares pursuant to
Section 2.5 and any dividends and other distributions pursuant to Section 2.3.
Any cash and certificates of Parent Ordinary Shares deposited with the Exchange
Agent shall hereinafter be referred to as the "Exchange Fund." The Exchange
Agent shall invest any cash included in the Exchange Fund as directed by Parent
on a daily basis; provided, that no such gain or loss thereon shall affect the
amounts payable to the holders of shares of Company
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Common Stock pursuant to Article I and this Article II. Any interest and other
income resulting from such investments shall promptly be paid to Parent.
Section 2.2 Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to each holder of
record, as of the Effective Time, of Company Common Stock (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the Company Common Stock shall pass, only upon proper delivery
of the Certificates to the Exchange Agent, and which letter shall be in
customary form and have such other provisions as Parent may reasonably specify
(such letter to be reasonably acceptable to the Company prior to the Effective
Time) and (ii) instructions for effecting the surrender of such Certificates in
exchange for the applicable Merger Consideration. Upon surrender of a
Certificate to the Exchange Agent together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto, and such
other documents as may reasonably be required by the Exchange Agent, the holder
of such Certificate shall be entitled to receive in exchange therefor (A) one or
more certificates for Parent Ordinary Shares representing, in the aggregate, the
whole number of Parent Ordinary Shares that such holder has the right to receive
pursuant to Section 1.8 (after taking into account all shares of Company Common
Stock surrendered by such holder) and (B) a check in the amount equal to the
cash that such holder has the right to receive pursuant to the provisions of
this Article II, consisting of cash in lieu of any fractional Parent Ordinary
Shares pursuant to Section 2.5 and dividends and other distributions pursuant to
Section 2.3. No interest will be paid or will accrue on any cash payable
pursuant to Section 2.3 or Section 2.5. In the event of a transfer of ownership
of Company Common Stock which is not registered in the transfer records of the
Company, one or more certificates for Parent Ordinary Shares evidencing, in the
aggregate, the proper number of Parent Ordinary Shares, a check in the proper
amount of cash in lieu of any fractional Parent Ordinary Shares pursuant to
Section 2.5 and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.3, may be issued with respect to such Company
Common Stock to such a transferee if the Certificate representing such shares of
Company Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.
Section 2.3 Distributions with Respect to Unexchanged Shares. All Parent
Ordinary Shares to be issued pursuant to the Merger shall be deemed issued and
outstanding as of the Effective Time. No dividends or other distributions
declared or made in respect of the Parent Ordinary Shares shall be paid to the
holder of any Certificate until the holder of such Certificate shall surrender
such Certificate in accordance with this Article II. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to such holder, without interest, all dividends or other distributions
payable with respect to the Parent Ordinary Shares delivered to such holder
pursuant to Section 2.2 with a record date after the Effective Time but prior to
such surrender and a payment date prior to such surrender.
Section 2.4 No Further Ownership Rights in Company Common Stock. All
Parent Ordinary Shares issued and cash paid upon conversion of shares of Company
Common Stock in accordance with the terms of Article I and this Article II
(including any cash paid pursuant to Section 2.3 or 2.5) shall be deemed to have
been issued or paid in full satisfaction of all rights pertaining to the shares
of Company Common Stock.
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Section 2.5 No Fractional Parent Ordinary Shares.
(a) No certificates or scrip representing fractional Parent Ordinary
Shares or book-entry credit of the same shall be issued upon the surrender for
exchange of Certificates and such fractional share interests will not entitle
the owner thereof to vote or to have any rights of a shareholder of Parent.
(b) Notwithstanding any other provision of this Agreement, each holder of
shares of Company Common Stock converted pursuant to the Merger who would
otherwise have been entitled to receive a fraction of Parent Ordinary Shares
(after taking into account all Certificates delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount equal to the
product of (i) such fractional part of a Parent Ordinary Share multiplied by
(ii) the average closing price for a share of Company Common Stock as reported
on the NASDAQ National Market System ("Nasdaq") for the five trading days ending
on the trading day prior to the Closing Date divided by (iii) the Exchange
Ratio.
(c) As promptly as practicable after the determination of the amount of
cash, if any, to be paid to holders of fractional interests, the Exchange Agent
shall so notify Parent, and Parent shall deposit or cause the Surviving
Corporation to deposit such amount with the Exchange Agent and shall cause the
Exchange Agent to forward payments to such holders of fractional interests
subject to and in accordance with the terms hereof.
Section 2.6 Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Certificates for six months after
the Effective Time shall be delivered to Parent or otherwise on the instruction
of Parent, and any holders of the Certificates who have not theretofore complied
with this Article II shall thereafter look only to Parent for the Merger
Consideration with respect to the shares of Company Common Stock formerly
represented thereby to which such holders are entitled pursuant to Section 1.8
and Section 2.2, any cash in lieu of fractional Parent Ordinary Shares to which
such holders are entitled pursuant to Section 2.5 and any dividends or
distributions with respect to Parent Ordinary Shares to which such holders are
entitled pursuant to Section 2.3. Any such portion of the Exchange Fund
remaining unclaimed by holders of shares of Company Common Stock five years
after the Effective Time (or such earlier date immediately prior to such time as
such amounts would otherwise escheat to or become property of any Governmental
Entity) shall, to the extent permitted by law, become the property of Parent
free and clear of any claims or interest of any Person previously entitled
thereto. None of Parent, Merger Sub, the Company, the Surviving Corporation or
the Exchange Agent shall be liable to any Person in respect of any Merger
Consideration from the Exchange Fund delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. "Governmental Entity"
shall mean (i) any nation or government, any state or other political
subdivision or instrumentality thereof, (ii) any entity, authority or body
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, (iii) any court, tribunal or
arbitrator, or (iv) any self regulatory organization. "Person" shall mean
individual, corporation, limited liability company, partnership, association,
trust, unincorporated organization, other entity or group (as defined in the
Securities Exchange Act of 1934, as amended, the "Exchange Act").
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Section 2.7 Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will deliver in exchange for such lost, stolen or destroyed
Certificate the applicable Merger Consideration with respect to the shares of
Company Common Stock formerly represented thereby, any cash in lieu of
fractional Parent Ordinary Shares to which such holders are entitled pursuant to
Section 2.5, and unpaid dividends and distributions on Parent Ordinary Shares to
which such holders are entitled pursuant to Section 2.3, as the case may be,
deliverable in respect thereof, pursuant to this Agreement.
Section 2.8 Withholding Rights. Each of Parent, the Surviving Corporation
and the Exchange Agent shall be entitled to deduct and withhold from the Merger
Consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock or Company Stock Options such amounts as it is
required to deduct and withhold with respect to the making of such payment under
the Code and Treasury Regulations, or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld by Parent, the Surviving
Corporation or the Exchange Agent, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of the shares
of Company Common Stock or Company Stock Options in respect of which such
deduction and withholding was made by Parent, the Surviving Corporation and the
Exchange Agent.
Section 2.9 Further Assurances. After the Effective Time, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of the Company or Merger Sub, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of the Company or Merger Sub, any other actions and things to vest,
perfect or confirm of record or otherwise in the Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger.
Section 2.10 Stock Transfer Books. The stock transfer books of the Company
shall be closed immediately upon the Effective Time and there shall be no
further registration of transfers of shares of Company Common Stock thereafter
on the records of the Company. From and after the Effective Time, any
Certificates presented to the Exchange Agent or Parent for any reason shall be
cancelled and converted into the right to receive the Merger Consideration with
respect to the shares of Company Common Stock formerly represented thereby
(including any cash in lieu of fractional Parent Ordinary Shares to which the
holders thereof are entitled pursuant to Section 2.5) and any dividends or other
distributions to which the holders thereof are entitled pursuant to Section 2.3.
Section 2.11 Affiliates. Notwithstanding anything to the contrary herein,
to the fullest extent permitted by law, no certificates representing Parent
Ordinary Shares or cash shall be delivered to a Person who may be deemed an
"affiliate" (an "Affiliate") of the Company in accordance with Section 5.9 for
purposes of Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act"), and applicable rules and regulations of the Securities and
Exchange Commission (the "SEC") until such Person has executed and delivered an
affiliate
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agreement in the form of Exhibit 2.11 to this Agreement pursuant to which such
Affiliate shall agree to be bound by the provisions of Rule 145 promulgated
under the Securities Act (an "Affiliate Agreement") to Parent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of Parent. Except (x) as set
forth in the Parent disclosure letter delivered by Parent to the Company prior
to the execution of this Agreement (the "Parent Disclosure Letter") (each
section of which qualifies the correspondingly numbered representation and
warranty or covenant and any other representation or warranty, if it is readily
apparent that the disclosure set forth in the Parent Disclosure Letter is
applicable to such other representation or warranty) or (y) as disclosed in the
Company SEC Reports as of the date hereof, but only to the extent the exception
is reasonably apparent from such disclosure, Parent represents and warrants to
the Company as follows:
(a) Organization, Standing and Power; Subsidiaries. Each of Parent and
each of its Subsidiaries is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization, as
the case may be, has the requisite corporate (or similar) power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted, except where the failures to be so organized, existing and in good
standing or to have such power and authority, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Parent, and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification necessary other than in such jurisdictions where the failures so
to qualify or to be in good standing, in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Parent. Exhibit 21 to the
Company's Annual Report on Form 10-K for the year ended December 31, 2005
("Company Exhibit 21") includes all the Subsidiaries of Parent. All the
outstanding shares of capital stock of, or other equity interests in, each
Subsidiary of Parent have been validly issued and are fully paid and
non-assessable and are owned directly or indirectly by Parent, free and clear of
all Liens and free of any other restriction except for restrictions imposed by
applicable securities laws. Except for the Subsidiaries listed on Company
Exhibit 21, neither Parent nor any of its Subsidiaries is the record or
beneficial owner, directly or indirectly, of any capital stock or other equity
ownership interest in any other Person.
(i) For purposes of this Agreement:
(A) "Lien" means any mortgage, pledge, deed of trust,
hypothecation, right of others, claim, security interest, encumbrance, burden,
title defect, title retention agreement, lease, sublease, license, occupancy
agreement, easement, covenant, condition, encroachment, voting trust agreement,
interest, option, right of first offer, negotiation or refusal, proxy, lien,
charge or other restrictions or limitations of any nature whatsoever.
(B) "Material Adverse Effect" means, with respect to any
entity, any event, change, circumstance or effect that, individually or in the
aggregate, is or
9
would be reasonably likely to be materially adverse to (x) the business,
financial condition, assets or results of operations of such entity and its
Subsidiaries, taken as a whole, other than any event, change, circumstance or
effect relating (i) to the economy or financial markets in general, (ii) to
changes in general in the industries in which such entity operates, provided,
however, that the effect of such changes shall be included to the extent of, and
in the amount of, the disproportionate impact (if any) they have on such entity
relative to the other participants in such industry, (iii) to changes in
applicable law or regulations or in generally accepted accounting principles
("GAAP"), provided, however, that the effect of such changes shall be included
to the extent of, and in the amount of, the disproportionate impact (if any)
they have on such entity relative to other Persons with similar lines of
business, or (iv) to the announcement of this Agreement or the transactions
contemplated hereby; or (y) the ability of such entity and its Subsidiaries to
consummate the transactions contemplated by this Agreement and by the Parent
Recapitalization Agreement.
(C) "Subsidiary" when used with respect to any party means any
corporation or other Person, whether incorporated or unincorporated, (x) of
which such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any Subsidiary of such party do not have a majority of the voting
interests in such partnership) or (y) at least 50% of the securities or other
interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other Person is directly or indirectly owned or
controlled by such party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries; provided, that when used with respect
to the Company, Subsidiary shall not refer to Parent and its Subsidiaries.
(D) "Board of Directors" means the Board of Directors of any
specified Person and any committees thereof.
(b) Capital Structure.
(i) As of the date hereof, the authorized capital stock of Parent
consisted of (A) Class A Ordinary Shares, par value $1.00 per share ("Parent
Class A Shares"), of which 6,000 shares were outstanding, (B) Class B Ordinary
Shares, par value $1.00 per share ("Parent Class B Shares"), of which 6,000
shares were outstanding, (C) Class C Ordinary Shares, par value $1.00 per share
("Parent Class C Shares" and together with Parent Class A Shares and Parent
Class B Shares, the "Parent Voting Ordinary Shares"), of which 6,153 shares were
outstanding, (D) Class D Non-Voting Ordinary Shares, par value $1.00 per share,
of which 740.658 shares were outstanding, and (E) Class E Non-Voting Ordinary
Redeemable Shares, par value $1.00 per share, of which zero shares were
outstanding. As of the Effective Time and prior to the issuance of the Merger
Consideration, the amended constitutive documents of Parent attached to the
Parent Recapitalization Agreement shall have become effective, the Parent
Recapitalization shall have occurred and the authorized capital stock of Parent
shall consist of (x) 100,000,000 Parent Ordinary Shares, of which 6,139,425
shares will be outstanding, (y) 6,000,000 non-voting ordinary shares, par value
$1.00 per share, of which 2,972,892 will be outstanding, and (z) 50,000,000
preferred shares, par value $1.00 per share, none of which will be issued. All
issued and outstanding shares of the capital stock of Parent are, and when
Parent Ordinary Shares are issued in the Merger or upon exercise of Company
Stock Options converted
10
in the Merger pursuant to Section 1.9, such shares will be, duly authorized,
validly issued, fully paid and non-assessable and free of any preemptive rights.
(ii) Except as otherwise set forth in this Section 3.1(b), as
contemplated by Section 1.8, Section 1.9, Section 1.10 and pursuant to the
Parent Recapitalization, there are no securities, options, warrants, calls,
rights commitments, agreements, arrangements or undertakings of any kind
outstanding or to which Parent or any of its Subsidiaries is a party or by which
any of them is bound obligating Parent or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of Parent or any of its Subsidiaries or
obligating Parent or any of its Subsidiaries to issue, grant, extend or enter
into any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. Except pursuant to the Parent Recapitalization,
there are no outstanding obligations of Parent or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of Parent or
any of its Subsidiaries. There are no outstanding obligations of Parent or any
of its Subsidiaries to provide funds or make any investment in any of its
Subsidiaries or any other entity, nor has Parent or any of its Subsidiaries
granted or agreed to grant to any Person any stock appreciation rights or
similar equity based rights.
(c) Authority; No Conflicts.
(i) Parent has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby,
subject to the approval of the Bermuda Monetary Authority of the issuance of the
Parent Ordinary Shares to be issued in the Merger (and the subsequent free
transferability of the corresponding shares between nonresident persons for
exchange control purposes), and the adoption and approval of this Agreement, the
Parent Recapitalization Agreement and the transactions contemplated hereby and
thereby by the members of Parent. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent subject to
the adoption and approval of this Agreement, the Parent Recapitalization
Agreement and the transactions contemplated hereby and thereby by the members of
Parent. This Agreement has been duly executed and delivered by Parent and
constitutes a valid and binding agreement of Parent, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws relating to
or affecting creditors generally or by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(ii) The execution and delivery of this Agreement by Parent does not
or will not, as the case may be, and the consummation by Parent of the Merger
and the other transactions contemplated hereby will not, conflict with, or
result in any violation of, or constitute a default (with or without notice or
lapse of time, or both) under, or give rise to any right of, or result by its
terms in the, termination, amendment, cancellation or acceleration of any
obligation or the loss of any material benefit under, or the creation of any
Lien on, or the loss of, any assets pursuant to: (A) any provision of the
memorandum of association, bye-laws or other organizational or constitutive
documents of Parent or any Subsidiary of Parent, or (B) except as, in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
Parent,
11
any loan or credit agreement, note, mortgage, bond, indenture, lease, benefit
plan or other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or any Subsidiary of Parent or their respective properties
or assets.
(iii) No consent, approval, order or authorization of, clearance by,
or registration, declaration or filing with any Governmental Entity is required
by or with respect to Parent or any Subsidiary of Parent in connection with the
execution and delivery of this Agreement by Parent or the consummation of the
Merger and the other transactions contemplated hereby, except for those required
under or in relation to (A) the ββββ-βββββ�-ββββββ Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (B) state securities or "blue sky" laws, (C)
the Securities Act, (D) the Exchange Act, (E) the GBCC with respect to the
filing of the Certificate of Merger and related documents, (F) rules and
regulations of the Nasdaq, (G) antitrust or other competition laws, of the
European Union or other jurisdictions, (H) permits, filings and approvals
required by the applicable insurance regulatory authorities as set forth in
Schedule 3.1(c)(iii) of the Parent Disclosure Letter and (I) the approval of the
issuance of the Parent Ordinary Shares to be issued in the Merger (and of the
subsequent free transferability of the corresponding shares between nonresident
persons for exchange control purposes) by the Bermuda Monetary Authority and (J)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to make or obtain, in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
Parent. Consents, approvals, orders, authorizations registrations, declarations
and filings required under or in relation to any of the foregoing clauses (A)
through (I) are hereinafter referred to as "Necessary Consents."
(d) Financial Statements; Undisclosed Liabilities; Indebtedness.
(i) Parent has made available to the Company complete and correct
copies of the consolidated balance sheet of Parent and its consolidated
subsidiaries as at December 31, 2003, December 31, 2004 and December 31, 2005,
along with the consolidated statement of earnings, comprehensive income, changes
in shareholders' equity and cash flows of Parent and its consolidated
subsidiaries for the fiscal year ending December 31, 2003, December 31, 2004 and
December 31, 2005, in each case together with the related audit report of
Deloitte & Touche, Parent's independent public accountants (all such financial
statements collectively, the "Parent Financial Statements"). Each of the Parent
Financial Statements (including the related notes and schedules) (A) is true and
correct in all material respects and presents fairly, in all material respects,
the consolidated financial position of Parent and its consolidated subsidiaries
and the results of their operations and their cash flows as of the respective
dates or for the respective periods set forth therein, (B) has been derived from
the accounting books and records of Parent and its subsidiaries, and (C) has
been prepared in accordance with GAAP consistently applied during the periods
involved.
(ii) Except as reflected or reserved against in the Parent Financial
Statements, Parent and its Subsidiaries have not incurred any liabilities that
are of a nature that would be required to be disclosed on a balance sheet of
Parent and its Subsidiaries or the footnotes thereto prepared in conformity with
GAAP, other than obligations under this Agreement or the Parent Recapitalization
Agreement or liabilities incurred in the ordinary course
12
of business and that, in the aggregate, would not reasonably be expected to have
a Material Adverse Effect on Parent. None of Parent or any of its Subsidiaries
has outstanding Indebtedness. For the purposes of this Agreement, "Indebtedness"
means, without duplication, (A) any indebtedness for borrowed money, (B) any
capital lease and (C) any indebtedness evidenced by any note, bond, debenture or
other debt security, in the case of clauses (A), (B) and (C), whether incurred,
assumed, guaranteed or secured or unsecured, and guarantees of any of the
foregoing of any other Person.
(iii) The reserves reflected in the Parent Financial Statements for
payment of benefits, losses, claims, expenses and similar purposes (including
claims litigation) under all presently issued insurance, reinsurance and other
applicable agreements issued by Parent and its Subsidiaries were determined in
accordance with prudent industry standards consistently applied, are fairly
stated in accordance with sound actuarial principles and are in material
compliance with the requirements of applicable Law. Except as disclosed in the
Parent Financial Statements, there are no agreements or arrangements to which
any of Parent or its Subsidiaries is a party relating to finite or other
non-traditional reinsurance.
(e) Information Supplied. None of the information supplied or to be
supplied by Parent for inclusion or incorporation by reference in (A) the
registration statement on Form S-4 with respect to issuance of Parent Ordinary
Shares in the Merger (the "Form S-4") will, at the time the Form S-4 is filed
with the SEC, at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act or (B) the SEC proxy materials which
shall constitute the Company Proxy Statement/Prospectus (such proxy
statement/prospectus, and any amendments thereto, the "Company Proxy
Statement/Prospectus") will, on the date it is first mailed to the Company's
shareholders or at the time of the Company Shareholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The Form
S-4 and the Company Proxy Statement/Prospectus will comply as to form in all
material respects with the requirements of the Exchange Act and the Securities
Act and the rules and regulations of the SEC thereunder. Notwithstanding the
foregoing provisions of this Section 3.1(e), no representation or warranty is
made by Parent with respect to statements made or incorporated by reference in
the Form S-4 or the Company Proxy Statement/Prospectus based on information
supplied by the Company for inclusion or incorporation by reference therein.
(f) Board Approval. The Board of Directors of Parent, by resolutions duly
adopted by unanimous vote at a meeting duly called and held and not subsequently
rescinded or modified in any way, has duly (i) determined that this Agreement
and the Merger are advisable and are fair to and in the best interests of Parent
and its stockholders and (ii) adopted and approved this Agreement and approved
the Merger and the other transactions contemplated by this Agreement.
(g) Vote Required. The affirmative votes of the holders of a majority of
the outstanding shares of capital stock of Parent (voting together as a single
class, or separately on a class-by-class basis as described in Schedule 3.1(j)
of the Parent Disclosure Letter (the "Parent Shareholder Approval") and the
holders of a majority of the voting shares of Merger Sub are the only votes of
the holders of any class or series of Parent's or Merger Sub's capital stock
necessary to consummate the transactions contemplated hereby. The agreement of
members set
13
forth in Section 8 of the Recapitalization Agreement includes members holding
the number of shares necessary to adopt the Recapitalization Agreement and the
Merger Agreement and to approve the Merger and the Recapitalization and the
other transactions contemplated by the Merger Agreement and the Recapitalization
Agreement and is otherwise sufficient to obtain the Parent Shareholder Approval.
None of Parent, Merger Sub or any of their respective affiliates or associates
(as such terms are defined in Section 14-2-1132 of the GBCC) is an "interested
shareholder" (as such term is defined in Section 14-2-1132 of the GBCC).
(h) Litigation; Compliance with Laws.
(i) Other than insurance claims litigation in the ordinary course of
business consistent with past practice that is reserved against or otherwise
disclosed in the Parent Financial Statements and is not material to Parent
individually or in the aggregate, there are no suits, actions or proceedings
(collectively "Actions") pending or, to the knowledge of Parent, threatened,
against or affecting Parent or any Subsidiary of Parent which, in the aggregate,
would reasonably be expected to have a Material Adverse Effect on Parent, nor
are there any judgments, decrees, injunctions, rulings or orders of any
Governmental Entity or arbitrator outstanding against Parent or any Subsidiary
of Parent which, in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Parent. For purposes of this Agreement, "known" or
"knowledge" means, with respect to any party, the actual knowledge of such
party's officers and senior management and such knowledge as would be reasonably
expected to be known by such officers and senior management in the ordinary and
usual course of the performance of their professional responsibilities to such
party.
(ii) Except as would, in the aggregate, not reasonably be expected
to have a Material Adverse Effect on Parent, Parent and its Subsidiaries hold
all permits, licenses, variances, exemptions, orders and approvals (including
all insurance permits and licenses) of all Governmental Entities which are
necessary for the operation of the businesses of Parent and its Subsidiaries,
taken as a whole (the "Parent Permits"). Parent and its Subsidiaries are in
compliance with the terms of the Parent Permits and none of the Parent Permits
are suspended or, to the knowledge of Parent, threatened to be suspended, except
where the failures to so comply or such suspensions or threats of suspension, in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect on Parent. Neither Parent nor any of its Subsidiaries is in violation of,
and Parent and its Subsidiaries have not received any notices of violation with
respect to, any laws, ordinances or regulations of any Governmental Entity
(including insurance laws and regulations), except for violations which, in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
Parent.
(iii) Parent and its Subsidiaries are in compliance, and since
January 1, 2001 have complied in all material respects, with each national,
federal, state, provincial, local, municipal, or transnational constitution,
law, directive, administrative ruling, order, ordinance, code, statute,
regulation or treaty ("Law") that is or was applicable to it or to the conduct
or operation of the business of Parent and its Subsidiaries or the ownership or
use of any of their assets. Neither Parent nor any of its Subsidiaries has
caused or taken any action that could reasonably be expected to result in any
material liability relating to any Law. Neither Parent nor its Subsidiaries have
been subject to any disqualification that would be a basis for denial,
suspension, nonrenewal or revocation of any material Governmental Authorization
required of
14
an insurance company, and there is no basis for, or proceeding or investigation
that is reasonably likely to become a basis for, any disqualification, denial,
suspension, nonrenewal, revocation, cancellation or modification of any such
Governmental Authorization.
(iv) Schedule 3.1(h)(iv) of the Parent Disclosure Letter sets forth
all jurisdictions where Parent or any of its Subsidiaries writes or is
authorized to conduct the business of insurance. Parent and its Subsidiaries
meet all statutory or regulatory requirements and have obtained all Governmental
Authorizations required to be an authorized insurer in all jurisdictions set
forth or required to be set forth in Schedule 3.1(h)(iv) of the Parent
Disclosure Letter. Parent and its Subsidiaries hold all Governmental
Authorizations necessary to conduct the business of insurance as currently
conducted by them. Such Governmental Authorizations are, and upon consummation
of the Merger will continue to be, in full force and effect, and Parent and its
Subsidiaries are in compliance with the terms and conditions thereof. Each
filing or other Governmental Authorization effected by any of Parent or its
Subsidiaries in connection with the insurance, reinsurance or other business of
Parent was true, correct and complete in all material respects at the time such
filing or Governmental Authorization was effected. Without limiting the
generality of the foregoing, the Subsidiaries of Parent are, where required (A)
duly licensed or authorized as insurance companies and reinsurers under the
applicable Laws and (B) duly authorized under the applicable Law to conduct each
line of business conducted by the Subsidiaries or reported as being written in
the Parent Financial Statements. To the knowledge of Parent and its
Subsidiaries, no proceeding or customer complaint has been filed with the
insurance regulatory authorities which could reasonably be expected to lead to
the denial, suspension, nonrenewal, revocation, material limitation or material
restriction of any such Governmental Authorization.
(v) No claims and assessments against Parent or its Subsidiaries by
any insurance guaranty association or other similar association or body (in
connection with a fund relating to insolvent insurers) is pending, Parent and
its Subsidiaries have not received notice of any such claim or assessment, and,
to the knowledge of Parent, there is no basis for the assertion of any such
claim or assessment against Parent or its Subsidiaries by any insurance guaranty
association.
(vi) For purposes of this Agreement, "Governmental Authorization"
shall mean any approval, franchise, certificate of authority, order, consent,
judgment, decree, license, permit, waiver or other authorization issued,
granted, given or otherwise made available by or under the authority of any
Governmental Entity or pursuant to any Law.
(i) Absence of Certain Changes or Events. Except for obligations under or
actions required by this Agreement, the Parent Recapitalization Agreement or the
transactions contemplated hereby or thereby, and except as permitted by Section
4.1, since December 31, 2005, (i) Parent and its Subsidiaries have conducted
their business only in the ordinary course; (ii) through the date hereof, there
has not been any declaration, setting aside or payment of any dividend or other
distribution in cash, stock or property in respect of Parent's capital stock;
(iii) there has not been any action taken by Parent or any of its Subsidiaries
during the period from December 31, 2005 through the date of this Agreement
that, if taken during the period from the date of this Agreement through the
Effective Time would constitute a breach of Section 4.1 or Section 4.4; and (iv)
except as required by GAAP, there has not been any change by Parent in
15
accounting principles, practices or methods. Since December 31, 2005, there have
not been any changes, circumstances or events which, in the aggregate, have had,
or would reasonably be expected to have, a Material Adverse Effect on Parent.
(j) Financial Advisors. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement, based upon arrangements made by
or on behalf of Parent.
(k) Employees; Employee Benefit Plans and Related Matters; ERISA.
(i) Employees. Section 3.1(k)(i) of the Parent Disclosure Letter
sets forth a complete list of (A) all agreements (other than customary offer
letters) by and between Parent and any of its Subsidiaries and their respective
employees relating to employment matters and (B) all such agreements to which
Parent or any of its Subsidiaries are a party that contain "change of control"
(or similar) provisions that would be triggered by the transactions contemplated
hereby. Parent has previously furnished to the Company correct and complete
copies of each of the agreements set forth in Section 3.1(k)(i) of the Parent
Disclosure Letter.
(ii) Employee Benefit Plans. Schedule 3.1(k) of the Parent
Disclosure Letter sets forth a complete and correct list of each Benefit Plan of
Parent and each of its Subsidiaries ("Parent Benefit Plan"). With respect to
each such Parent Benefit Plan, Parent has provided or made available to the
Company complete and correct copies of such Parent Benefit Plan, if written, or
a description of such Parent Benefit Plan if not written, and related documents
including the most recent summary plan description, the Forms 5500 for the three
most recent years, the most recent favorable determination letter, the most
recent actuarial valuation and nondiscrimination testing for the most recent
three years. Except with respect to amendments or modifications required solely
to avoid early recognition of income and the additional taxes imposed under
Section 409A of the Code or required by applicable Law, none of Parent or any of
its Subsidiaries has communicated to any current or former employee thereof any
intention or commitment to modify any Parent Benefit Plan or to establish or
implement any other employee or retiree benefit or compensation plan or
arrangement.
(iii) Compliance; Liability. Each of the Parent Benefit Plans has
been operated and administered in all material respects in compliance with its
terms, all applicable Laws and all applicable collective bargaining agreements
and, if applicable, in good faith compliance with Section 409A of the Code. Each
Parent Benefit Plan which is intended to be qualified within the meaning of Code
section 401(a) is so qualified and has received a favorable determination letter
from the United States Internal Revenue Service (the "IRS") with respect to all
plan document qualification requirements for which the applicable remedial
amendment period under Section 401(b) of the Code has closed, any amendments
required by such determination letter were made as and when required by such
determination letter and nothing has occurred, whether by action or failure to
act, that could reasonably be expected to cause the loss of such qualification.
There are no material pending or threatened claims by or on behalf of any
participant in any of the Parent Benefit Plans, or otherwise involving any such
Parent Benefit Plan or the assets of any Parent Benefit Plan, other than routine
claims for benefits. The Parent Benefit Plans are not presently under audit or
examination (nor has notice been received of a
16
potential audit or examination) by the IRS, the United States Department of
Labor ("Department of Labor"), or any other governmental agency or entity,
domestic or foreign. Neither Parent nor any of its Subsidiaries has ever
maintained or contributed to or been obligated to contribute to a "Multiemployer
Plan" (as such term is defined by Section 4001(a)(3) of ERISA) or to a plan
subject to Part 3 of Subtitle B of Title I of ERISA or Section 412 of the Code.
Neither Parent nor any of its Subsidiaries has any actual or potential liability
(i) under Section 4069, 4201 or 4212(c) of ERISA or any similar foreign law, or
(ii) attributable to any "employee benefit plan" (as defined in section 3(3) of
ERISA) covering any employees of any entity other than Parent or any of its
Subsidiaries that is or was treated as a single employer with Parent or any of
its Subsidiaries within the meaning of Section 414(b), 414(c), 414(m), or 414(o)
of the Code, or section 4001(b) of ERISA. Except as is otherwise required by
applicable Law, no person is or will become entitled to post-employment welfare
benefits of any kind by reason of employment with Parent or any of its
Subsidiaries. The entering into this Agreement or the consummation of the
transactions contemplated by this Agreement will not, separately or together
with any other event, result in an increase in the amount of compensation or
benefits or the acceleration of the vesting or timing of payment of any
compensation or benefits payable to or in respect of any current or former
employee, officer, director or independent contractor of Parent or any of its
Subsidiaries and no payment or deemed payment by Parent or any of its
Subsidiaries will arise or be made as a result of the entering into of this
Agreement or the consummation of the transactions contemplated by this Agreement
that would not be deductible pursuant to Section 280G of the Code.
(iv) For purposes of this Agreement, "Benefit Plans" means, with
respect to any Person, each foreign or domestic employee benefit plan, scheme,
program, policy, arrangement and contract (including, but not limited to, any
"employee benefit plan," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), whether or not subject to
ERISA, and any bonus, deferred compensation, stock bonus, stock purchase,
restricted stock, stock option, employment, termination, stay agreement or
bonus, change in control and severance plan, program, policy, arrangement and
contract, written or oral) which is currently maintained or contributed to (or
required to be contributed to) by Parent or the Company, as the case may be, or
any of their Subsidiaries, or with respect to which Parent or the Company, as
the case may be, or any of their Subsidiaries, has any liability.
(l) No Restrictions on the Merger; Takeover Statutes. The Board of
Directors of Parent has taken all necessary action to render any potentially
applicable anti-takeover or similar statute or regulation or provision of the
memorandum of association or bye-laws, or other organizational or constitutive
document or governing instruments of Parent or any of its Subsidiaries,
inapplicable to this Agreement and the transactions contemplated hereby.
(m) Environmental Matters. Except as, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Parent, each of
Parent and its Subsidiaries complies and since December 31, 2001 has always
complied with all applicable statutes, laws and regulations relating to the
environment or occupational health and safety ("Environmental Laws") and, to the
knowledge of Parent, no material expenditures are or will be required to comply
with any such existing Environmental Laws. None of Parent or its Subsidiaries
has caused or taken or failed to take any action that could reasonably be
expected to result in any material liability or obligation relating to any
Environmental Law.
17
(n) Intellectual Property. Except as, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Parent (A) Parent
and each of its Subsidiaries owns, or is licensed to use (in each case, free and
clear of any Liens), all Intellectual Property used in or necessary for the
conduct of its business as currently conducted; (B) to the knowledge of Parent,
the use of any Intellectual Property by Parent and its Subsidiaries does not
infringe on or otherwise violate the rights of any Person and is in accordance
with any applicable license pursuant to which Parent or any Subsidiary acquired
the right to use any Intellectual Property; (C) to the knowledge of Parent, no
Person is challenging, infringing on or otherwise violating any right of Parent
or any of its Subsidiaries with respect to any Intellectual Property owned by
and/or licensed to Parent or its Subsidiaries; and (D) neither Parent nor any of
its Subsidiaries has received any written notice or otherwise has knowledge of
any pending claim, order or proceeding with respect to any Intellectual Property
used by Parent and its Subsidiaries. For purposes of this Agreement,
"Intellectual Property" shall mean all (i) trademarks, service marks, trade
names, trade dress, domain names, copyrights and similar rights, including
registrations and applications to register or renew the registration of any of
the foregoing, (ii) letters patent, patent applications, inventions, processes,
designs, formulae, trade secrets, know-how, confidential information, computer
software, data and documentation, website content, and all similar intellectual
property rights, (iii) tangible embodiments of any of the foregoing in any
medium, (iv) information technology, and (v) licenses of any of the foregoing.
(o) Taxes.
(i) Parent and each of its Subsidiaries has timely filed, or has
caused to be timely filed, all Tax Returns required to be filed, and all such
Tax Returns are true, complete and accurate, except to the extent any failure to
file or any inaccuracies in any filed Tax Returns would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Parent. All Taxes shown to be due on such Tax Returns, have been timely paid,
except to the extent that any failure to have so paid would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
Parent or to the extent such taxes are being contested in good faith and by
appropriate proceedings and for which reserves have been properly maintained in
accordance with GAAP. All Taxes required to be withheld by Parent and each of
its Subsidiaries have been timely withheld and paid to the proper taxing
authority, except to the extent that any failure to have so withheld or paid
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent or to the extent such taxes are being
contested in good faith and by appropriate proceedings and for which reserves
have been properly maintained in accordance with GAAP.
(ii) The Parent Financial Statements reflect an adequate reserve in
accordance with GAAP for all Taxes payable by Parent and its Subsidiaries for
all taxable periods and portions thereof through the date of such Parent
Financial Statements, except to the extent that the failure to have so reserved
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent. No deficiency with respect to any Taxes has
been proposed, asserted or assessed in writing against Parent or any of its
Subsidiaries, and no requests for waivers of the time to assess any such Taxes
are pending, except to the extent any such deficiency or request for waiver,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Parent.
18
(iii) The United States, United Kingdom and Belgian Federal income
and VAT Tax Returns as applicable of Parent and each of its Subsidiaries
consolidated in such Tax Returns for all years through 2002 either have been
examined by and settled with the applicable governmental entity or the statutes
of limitation for assessment of deficiency with respect thereto have expired.
All material assessments for Taxes due with respect to such completed and
settled examinations or any concluded litigation have been fully paid.
(iv) There are no material Liens for Taxes (other than for current
Taxes not yet due and payable and for Taxes being contested in good faith) on
the assets of Parent or any of its Subsidiaries. Neither Parent nor any of its
Subsidiaries is bound by any Tax sharing agreements with third parties.
(v) Neither Parent nor any of its Subsidiaries has taken or agreed
to take any action that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(vi) For purposes of this Agreement:
(A) "Taxes" includes any tax, value-added tax, levy, impost,
duty, charge, assessment or fee of any nature, whenever created or imposed, and
whether of the United States or elsewhere, and whether imposed by a local,
municipal, governmental, state, foreign, federal or other Governmental Entity,
or in connection with any agreement with respect to Taxes, including all
interest, penalties and additions imposed with respect to such amounts.
(B) "Tax Return" means all Federal, state, local, provincial
and foreign Tax returns, declarations, statements, reports, schedules, forms and
information returns and any amended Tax return relating to Taxes.
(p) Contracts. There are no contracts to which any of Parent or its
Subsidiaries is a party, by which any of its assets may be bound or affected, or
under which any of Parent or its Subsidiaries receives any benefit, in each case
that (i) is material to the business, results of operations, condition
(financial or otherwise), assets or liabilities of Parent and its Subsidiaries,
taken as a whole, (ii) imposes material obligations (whether or not monetary) on
Parent or any of its Subsidiaries, or (iii) is otherwise necessary or advisable
for the proper and efficient operation of any of Parent or its Subsidiaries (any
such contract, together with any other contract or agreement to which Parent or
any of its Subsidiaries is a party or by which any of their respective assets
are bound or affected, a "Parent Contract"). Each Parent Contract is, and
following the consummation of the transactions contemplated herein will continue
to be, legal under applicable Law, valid, binding, enforceable and in full force
and effect and contains no provision relating to change in control or other
terms that will become applicable or inapplicable upon such consummation. To the
knowledge of Parent, no party is in breach or default, or has repudiated any
provision, of any such Parent Contract and no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification or acceleration under any such Parent Contract. No
Parent Contract, applicable Law or Governmental Authorization exists that
restricts the right of any of Parent or its Subsidiaries to carry on or continue
after the Closing Date its business in the ordinary course consistent with past
practice.
19
(q) Assets.
(i) Parent and its Subsidiaries own, or otherwise have sufficient
and legally enforceable rights to use, all of the properties and assets (real,
personal or mixed, tangible or intangible), necessary for the conduct of, or
otherwise material to, their business and operations as they are currently
conducted (the "Parent Assets"). Parent and its Subsidiaries have valid title
to, or in the case of leased property have valid leasehold interests in, all
such Parent Assets, including all such Parent Assets reflected in the Parent
Financial Statements or acquired since such date (except as may have been
disposed of since such date in the ordinary course of business consistent with
past practice), in each case free and clear of any Lien, except Parent Permitted
Liens. Schedule 3.1(q)(i) of the Parent Disclosure Letter sets forth a complete
and correct list of each of the countries in which Parent Assets are located.
(ii) "Parent Permitted Liens" means (A) Liens reserved against or
reflected in the Parent Financial Statements, to the extent so reserved or
reflected or described in the notes thereto, (B) Liens for Taxes not yet due and
payable or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on Parent's
books in accordance with GAAP, (C) those Liens set forth in Schedule 3.1(q)(ii)
of the Parent Disclosure Letter and (D) those Liens that, individually and in
the aggregate with all other Parent Permitted Liens, do not and will not
materially interfere with the use of the properties or assets of Parent and its
Subsidiaries taken as a whole as currently used, or otherwise have or result in
a Material Adverse Effect on Parent.
(r) Real Property.
(i) Parent and its Subsidiaries have good, valid and marketable fee
simple title to the Parent Owned Real Property, free and clear of any Liens
other than Parent Permitted Liens. Each Parent Lease grants the lessee under
such lease the exclusive right to use and occupy the premises and rights demised
thereunder free and clear of any Lien other than Parent Permitted Liens. Each of
Parent and its Subsidiaries has good and valid title to the leasehold estate or
other interest created under its respective Parent Leases free and clear of any
Liens other than Parent Permitted Liens. Each of Parent and its Subsidiaries
enjoys peaceful and undisturbed possession under its respective Parent Leases of
its respective Parent Leased Real Property. The Parent Real Property constitutes
all the interests in real property necessary for the conduct of, or otherwise
material to, the business of Parent and its Subsidiaries.
(ii) "Parent Leases" means the real property leases, subleases,
licenses and use or occupancy agreements pursuant to which Parent or any of its
Subsidiaries is the lessee, sublessee, licensee, user or occupant of real
property, or interests therein, necessary for the conduct of, or otherwise
material to, the business of Parent and its Subsidiaries as it is currently
conducted. "Parent Leased Real Property" means all interests in real property
pursuant to the Parent Leases. "Parent Owned Real Property" means the real
property owned by Parent and its Subsidiaries necessary for the conduct of, or
otherwise material to, the business of Parent and its Subsidiaries as it is
currently conducted. "Parent Real Property" means the Parent Owned Real Property
and the Parent Leased Real Property.
20
(s) Insurance. All insurance policies maintained by or on behalf of any of
Parent and its Subsidiaries under which any such entity is insured (other than
reinsurance or similar agreements) as of the date hereof are in full force and
effect, and all premiums due thereon have been paid. Parent and its Subsidiaries
have complied in all material respects with the terms and provisions of such
policies. The insurance coverage provided by such policies is suitable for the
business and operations of Parent and its Subsidiaries.
(t) Affiliate Transactions. Schedule 3.1(t) of the Parent Disclosure
Letter contains a complete and correct list of all agreements, contracts,
transfers or pledges of assets or transfers or assumptions of liabilities or
other commitments or transactions, whether or not entered into in the ordinary
course of business, to or by which Parent or any of its Subsidiaries, on the one
hand, and (i) the members or stockholders of Parent or any of its Subsidiaries
or any of their respective affiliates (other than Parent or any of its
Subsidiaries), or (ii) the directors of the Parent or any of its Subsidiaries
(other than the Principal Shareholders), on the other hand, are or have been a
party or otherwise bound or affected, and that (x) are currently pending or in
effect or by which the Parent or any of its Subsidiaries are bound or obligated
or (y) involve continuing liabilities or obligations that, individually or in
the aggregate, have been, are or will be $50,000 or more to Parent or any of its
Subsidiaries.
(u) Disclosure. No representation or warranty made by Parent contained in
this Agreement nor any certificate furnished by or on behalf of Parent pursuant
to Article VI contains or will contain any untrue statement of a material fact,
or omits or will omit to state any material fact required to make the statements
contained herein or therein not misleading.
Section 3.2 Representations and Warranties of the Company. Except (x) as
set forth in the Company disclosure letter delivered by the Company to Parent
prior to the execution of this Agreement (the "Company Disclosure Letter") (each
section of which qualifies the correspondingly numbered representation and
warranty or covenant and any other representation or warranty, if it is readily
apparent that the disclosure set forth in the Company Disclosure Letter is
applicable to such other representation or warranty) or (y) as disclosed in the
Company SEC Reports as of the date hereof, but only to the extent the exception
is reasonably apparent from such disclosure, and assuming for purposes of the
Company's representations and warranties and the conditions to Parent's
obligations to effect the Merger set forth in Section 6.2(a) that the
representations and warranties of Parent set forth in Section 3.1 are accurate,
but only to the extent that the same affect the truth, accuracy or validity of
the Company's representations or warranties, the Company represents and warrants
to Parent as follows:
(a) Organization, Standing and Power; Subsidiaries. Each of the Company
and each of its Subsidiaries is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization, as
the case may be, has the requisite corporate (or similar) power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted, except where the failures to be so organized, existing and in good
standing or to have such power and authority, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on the Company, and is
duly qualified and in good standing to do business in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary other than in such jurisdictions where the failures
so to qualify or to be in good standing, in the aggregate, would not reasonably
21
be expected to have a Material Adverse Effect on the Company. Company Exhibit 21
includes all the Subsidiaries of the Company. All the outstanding shares of
capital stock of, or other equity interests in, each Subsidiary of the Company
have been validly issued and are fully paid and non-assessable and are owned
directly or indirectly by the Company, free and clear of all Liens and free of
any other restriction except for restrictions imposed by applicable securities
laws. Except for the Subsidiaries listed on Company Exhibit 21, neither the
Company nor any of its Subsidiaries is the record or beneficial owner, directly
or indirectly, of any capital stock or other equity ownership interest in any
other Person.
(b) Capital Structure.
(i) As of the date hereof, the authorized capital stock of the
Company consisted of 55,000,000 shares of Company Common Stock, of which
5,739,378 shares were outstanding and 445,882 shares were held in the treasury
of the Company. All issued and outstanding shares of the capital stock of the
Company are duly authorized, validly issued, fully paid and free of any
preemptive rights. Section 3.2(b)(i)(1) of the Company Disclosure Letter
contains a correct and complete list as of the date hereof of the number of
outstanding Company Stock Options, the exercise price of all Company Stock
Options and the number of shares of Company Common Stock issuable at such
exercise price. Section 3.2(b)(i)(2) of the Company Disclosure Letter contains a
correct and complete list as of the date hereof of the number of restricted
stock units issued under the Directors Deferred Plan.
(ii) Except as otherwise set forth in this Section 3.2(b), there are
no securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind outstanding or to which the Company or
any of its Subsidiaries is a party or by which any of them is bound obligating
the Company or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other voting
securities of the Company or any of its Subsidiaries or obligating the Company
or any of its Subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement, arrangement or
undertaking. There are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of the Company or any of its Subsidiaries. There are no outstanding
obligations of the Company or any of its Subsidiaries to provide funds or make
any investment in any of its Subsidiaries or any other entity, nor has the
Company or any of its Subsidiaries granted or agreed to grant to any Person any
stock appreciation rights or similar equity based rights.
(c) Authority; No Conflicts.
(i) The Company has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby, subject in the case of the consummation of the Merger to the adoption
and approval of this Agreement by Company Shareholder Approval and the filing
and recordation of appropriate merger documents as required by the GBCC. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject in the case of the
consummation of the Merger to the adoption and approval of this Agreement by the
Company Shareholder Approval. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and
22
binding agreement of the Company, enforceable against it in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting creditors
generally or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(ii) The execution and delivery of this Agreement by the Company
does not or will not, as the case may be, and the consummation by the Company of
the Merger and the other transactions contemplated hereby will not, conflict
with, or result in any violation of, or result in a default (with or without
notice or lapse of time, or both) under, or give rise to any right of, or result
by its terms in the, termination, amendment, cancellation or acceleration of any
obligation or the loss of any material benefit under, or the creation of any
Lien on, or the loss of, any assets pursuant to (A) any provision of the
articles of incorporation, bylaws, or other organizational or constitutive
documents of the Company or any Subsidiary of the Company or (B) except as, in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect on the Company, any loan or credit agreement, note, mortgage, bond,
indenture, lease, benefit plan or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any Subsidiary of the
Company or their respective properties or assets.
(iii) No consent, approval, order or authorization of, clearance by,
or registration, declaration or filing with, any Governmental Entity is required
by or with respect to the Company or any Subsidiary of the Company in connection
with the execution and delivery of this Agreement by the Company or the
consummation of the Merger and the other transactions contemplated hereby,
except the Necessary Consents and such other consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of which to
make or obtain, in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on the Company.
(d) Reports and Financial Statements; Undisclosed Liabilities,
Indebtedness.
(i) The Company has filed or furnished all registration statements,
prospectuses, reports, schedules, forms, statements and other documents required
to be filed or furnished by it with the SEC since January 1, 2000 (collectively,
including all exhibits thereto, the "Company SEC Reports"). For purposes of the
representations set forth in Section 3.2, any reference to or representation
relating to the Company SEC Reports shall not include any matters related to
Parent or any of its Subsidiaries or documents or other information provided to
the Company by Parent or any of its Subsidiaries. None of the Company SEC
Reports, as of their respective dates (and, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing), (x)
contained or will contain any untrue statement of a material fact or omitted or
will omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading or (y) failed to comply in any material respect with the
applicable requirements of the Securities Act and the Exchange Act, as the case
may be, and the applicable rules and regulations of the SEC thereunder. Each of
the financial statements (including the related notes and schedules) included or
incorporated by reference in the Company SEC Reports (A) presents fairly, in all
material respects, the consolidated financial position of the Company and its
consolidated subsidiaries and the consolidated results of its operations and its
cash flows as of
23
the respective dates or for the respective periods set forth therein, (B) has
been derived from the accounting books and records of the Company and its
subsidiaries, and (C) has been prepared in accordance with GAAP consistently
applied during the periods involved.
(ii) Except as reflected or reserved against in the Company SEC
Reports, the Company and its Subsidiaries have not incurred any liabilities that
are of a nature that would be required to be disclosed on a balance sheet of the
Company and its Subsidiaries or the footnotes thereto prepared in conformity
with GAAP, other than obligations under this Agreement or the Parent
Recapitalization Agreement or liabilities incurred in the ordinary course of
business and that, in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on the Company. None of the Company or its Subsidiaries
has any outstanding Indebtedness.
(iii) The reserves reflected in the Company SEC Reports for payment
of benefits, losses, claims, expenses and similar purposes (including claims
litigation) under all presently issued insurance, reinsurance and other
applicable agreements issued by the Company and its Subsidiaries were determined
in accordance with prudent industry standards consistently applied, are fairly
stated in accordance with sound actuarial principles and are in material
compliance with the requirements of applicable Law. Except as disclosed in the
Company SEC Reports, there are no agreements or arrangements to which any of the
Company or its Subsidiaries is a party relating to finite or other
non-traditional reinsurance.
(iv) The Company maintains internal controls over financial
reporting as required by Rule 13a-15 under the Exchange Act. Such internal
controls over financial reporting were designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP. The
Company's "disclosure controls and procedures" (as defined in Rules 13a-15(e)
and 15d-15(e) of the Exchange Act) are reasonably designed to ensure that all
material information (both financial and non-financial) required to be disclosed
by the Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the SEC, 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 of the
chief executive officer and chief financial officer of the Company required
under the Exchange Act with respect to such reports.
(e) Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in (A) the
Form S-4 will, at the time the Form S-4 is filed with the SEC, at any time it is
amended or supplemented or at the time it becomes effective under the Securities
Act, or (B) the Company Proxy Statement/Prospectus will, on the date it is first
mailed to the Company's shareholders or at the time of the Company Shareholders
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Form S-4 and the Company Proxy Statement/Prospectus will
comply as to form in all material respects with the requirements of the Exchange
Act and the Securities Act and the rules and regulations of the SEC thereunder.
Notwithstanding the foregoing provisions of this Section 3.2(e), no
24
representation or warranty is made by the Company with respect to statements
made or incorporated by reference in the Form S-4 or the Company Proxy
Statement/Prospectus based on information supplied by Parent for inclusion or
incorporation by reference therein.
(f) Board Approval. The Board of Directors of the Company, by resolutions
duly adopted by unanimous vote at a meeting duly called and held and not
subsequently rescinded or modified in any way (the "Company Board Approval"),
has duly (i) determined that this Agreement and the Merger are advisable and are
fair to and in the best interests of the Company and its shareholders, (ii)
adopted and approved this Agreement and approved the Merger and the other
transactions contemplated by this Agreement and (iii) recommended that the
shareholders of the Company adopt and approve this Agreement and directed that
this Agreement and the transactions contemplated hereby be submitted for
consideration by the Company's shareholders at the Company Shareholders Meeting.
(g) Vote Required. The affirmative votes of the holders of the majority of
the voting power of the Company Common Stock to adopt and approve this Agreement
(the "Company Shareholder Approval") are the only votes of the holders of any
class or series of the Company's capital stock necessary to consummate the
transactions contemplated hereby.
(h) Litigation; Compliance with Laws.
(i) Other than insurance claims litigation in the ordinary course of
business consistent with past practice that is reserved against or otherwise
disclosed in the financial statements included or incorporated by reference in
the Company SEC Reports and is not material to the Company individually or in
the aggregate, there are no Actions pending or, to the knowledge of the Company,
threatened, against or affecting the Company or any Subsidiary of the Company
which, in the aggregate, would reasonably be expected to have a Material Adverse
Effect on the Company, nor are there any judgments, decrees, injunctions,
rulings or orders of any Governmental Entity or arbitrator outstanding against
the Company or any Subsidiary of the Company which, in the aggregate, would
reasonably be expected to have a Material Adverse Effect on the Company.
(ii) Except as would, in the aggregate, not reasonably be expected
to have a Material Adverse Effect on the Company, the Company and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals (including all insurance permits and licenses) of all Governmental
Entities which are necessary for the operation of the businesses of the Company
and its Subsidiaries, taken as a whole (the "Company Permits"). The Company and
its Subsidiaries are in compliance with the terms of the Company Permits and
none of the Company Permits are suspended or, to the knowledge of Company,
threatened to be suspended, except where the failures to so comply or such
suspensions or threats of suspension, in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on the Company. Neither the Company
nor any of its Subsidiaries is in violation of, and the Company and its
Subsidiaries have not received any notices of violation with respect to, any
laws, ordinances or regulations of any Governmental Entity (including insurance
laws and regulations), except for violations which, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on the Company.
25
(iii) The Company and its Subsidiaries are in compliance, and since
January 1, 2001 complied in all material respects, with each Law that is or was
applicable to it or to the conduct or operation of the business of the Company
and its Subsidiaries or the ownership or use of any of their assets. Neither the
Company nor any of its Subsidiaries have caused or taken any action that could
reasonably be expected to result in any material liability relating to any Law.
Neither the Company nor its Subsidiaries have been subject to any
disqualification that would be a basis for denial, suspension, nonrenewal or
revocation of any material Governmental Authorization required of an insurance
company and there is no basis for, or proceeding or investigation that is
reasonably likely to become a basis for, any disqualification, denial,
suspension, nonrenewal, revocation, cancellation or modification of any such
Governmental Authorization.
(iv) Schedule 3.2(h)(iv) of the Company Disclosure Letter sets forth
all jurisdictions where the Company or any of its Subsidiaries writes or is
authorized to conduct the business of insurance. The Company and its
Subsidiaries meet all statutory or regulatory requirements and have obtained all
Governmental Authorizations required to be an authorized insurer in all
jurisdictions set forth or required to be set forth in Schedule 3.2(h)(iv) of
the Company Disclosure Letter. The Company and its Subsidiaries hold all
Governmental Authorizations necessary to conduct the business of insurance as
currently conducted by them. Such Governmental Authorizations are, and upon
consummation of the Merger will continue to be, in full force and effect, and
the Company and its Subsidiaries are in compliance with the terms and conditions
thereof. Each filing or other Governmental Authorization effected by any of the
Company or its Subsidiaries in connection with the insurance, reinsurance or
other business of the Company was true, correct and complete in all material
respects at the time such filing or Governmental Authorization was effected.
Without limiting the generality of the foregoing, the Subsidiaries of the
Company are, where required (A) duly licensed or authorized as insurance
companies and reinsurers under the applicable Laws and (B) duly authorized under
the applicable Law to conduct each line of business conducted by the
Subsidiaries or reported as being written in the Company SEC Reports. To the
knowledge of the Company and its Subsidiaries, no proceeding or customer
complaint has been filed with the insurance regulatory authorities which could
reasonably be expected to lead to the denial, suspension, nonrenewal,
revocation, material limitation or material restriction of any such Governmental
Authorization.
(v) No claims and assessments against the Company or its
Subsidiaries by any insurance guaranty association or other similar association
or body (in connection with a fund relating to insolvent insurers) is pending,
the Company and its Subsidiaries have not received notice of any such claim or
assessment, and, to the knowledge of Company, there is no basis for the
assertion of any such claim or assessment against the Company or its
Subsidiaries by any insurance guaranty association.
(i) Absence of Certain Changes or Events. Except for obligations under or
actions required by this Agreement, the Parent Recapitalization Agreement or the
transactions contemplated hereby or thereby, and except as permitted by Section
4.2, since December 31, 2005, (i) the Company and its Subsidiaries have
conducted their business only in the ordinary course consistent with prior
practice; (ii) through the date hereof, there has not been any declaration,
setting aside or payment of any dividend or other distribution in cash, stock or
property in respect of the Company's capital stock; (iii) there has not been any
action by the
26
Company or any of its Subsidiaries during the period from December 31, 2005
through the date of this Agreement that, if taken during the period from the
date of this Agreement through the Effective Time would constitute a breach of
Section 4.2; and (iv) except as required by GAAP, there has not been any change
by the Company in accounting principles, practices or methods. Since December
31, 2005, there have not been any changes, circumstances or events which, in the
aggregate, have had, or would reasonably be expected to have, a Material Adverse
Effect on the Company.
(j) Financial Advisors. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement, based upon arrangements made by
or on behalf of the Company.
(k) Employees; Employee Benefit Plans and Related Matters; ERISA.
(i) Employees. Section 3.2(k)(i) of the Company Disclosure Letter
sets forth a complete list of (A) all agreements (other than customary offer
letters) by and between the Company and any of its Subsidiaries and their
respective employees relating to employment matters and (B) all such agreements
to which the Company or any of its Subsidiaries are a party that contain "change
of control" (or similar) provisions that would be triggered by the transactions
contemplated hereby. The Company has previously furnished to Parent correct and
complete copies of each of the agreements set forth in Section 3.2(k)(i) of the
Company Disclosure Letter.
(ii) Employee Benefit Plans. Schedule 3.2(k)(ii) of the Company
Disclosure Letter sets forth a complete and correct list of each Benefit Plan of
the Company and each of its Subsidiaries ("Company Benefit Plan"). With respect
to each such Company Benefit Plan, the Company has provided or made available to
Parent complete and correct copies of such Company Benefit Plan, if written, or
a description of such Company Benefit Plan if not written, and related documents
including the most recent summary plan description, the Forms 5500 for the three
most recent years, the most recent favorable determination letter, the most
recent actuarial valuation and nondiscrimination testing for the most recent
three years. Except with respect to amendments or modifications required solely
to avoid early recognition of income and the additional taxes imposed under
Section 409A of the Code or required by applicable Law, none of the Company or
any of its Subsidiaries has communicated to any current or former employee
thereof any intention or commitment to modify any Company Benefit Plan or to
establish or implement any other employee or retiree benefit or compensation
plan or arrangement.
(iii) Compliance; Liability. Each of the Company Benefit Plans has
been operated and administered in all material respects in compliance with its
terms, all applicable laws and all applicable collective bargaining agreements
and, if applicable, in good faith compliance with Section 409A of the Code. Each
Company Benefit Plan which is intended to be qualified within the meaning of
Code section 401(a) is so qualified and has received a favorable determination
letter from the IRS with respect to all plan document qualification requirements
for which the applicable remedial amendment period under Section 401(b) of the
Code has closed, any amendments required by such determination letter were made
as and when
27
required by such determination letter and nothing has occurred, whether by
action or failure to act, that could reasonably be expected to cause the loss of
such qualification. There are no material pending or threatened claims by or on
behalf of any participant in any of the Company Benefit Plans, or otherwise
involving any such Company Benefit Plan or the assets of any Company Benefit
Plan, other than routine claims for benefits. The Company Benefit Plans are not
presently under audit or examination (nor has notice been received of a
potential audit or examination) by the IRS, the Department of Labor, or any
other governmental agency or entity, domestic or foreign. Neither the Company
nor any of its Subsidiaries has ever maintained or contributed to or been
obligated to contribute to a "Multiemployer Plan" (as such term is defined by
Section 4001(a)(3) of ERISA) or to a plan subject to Part 3 of Subtitle B of
Title I of ERISA or Section 412 of the Code. Neither the Company nor any of its
Subsidiaries has any actual or potential liability (i) under Section 4069, 4201
or 4212(c) of ERISA or any similar foreign law, or (ii) attributable to any
"employee benefit plan" (as defined in section 3(3) of ERISA) covering any
employees of any entity other than the Company or any of its Subsidiaries that
is or was treated as a single employer with the Company or any of its
Subsidiaries within the meaning of Section 414(b), 414(c), 414(m), or 414(o) of
the Code, or section 4001(b) of ERISA. Except as is otherwise required by
applicable Law, no person is or will become entitled to post-employment welfare
benefits of any kind by reason of employment with Company or any of its
Subsidiaries. The entering into this Agreement or the consummation of the
transactions contemplated by this Agreement will not, separately or together
with any other event, result in an increase in the amount of compensation or
benefits or the acceleration of the vesting or timing of payment of any
compensation or benefits payable to or in respect of any current or former
employee, officer, director or independent contractor of Company or any of its
Subsidiaries and no payment or deemed payment by Company or any of its
Subsidiaries will arise or be made as a result of the entering into of this
Agreement or the consummation of the transactions contemplated by this Agreement
that would not be deductible pursuant to Section 280G of the Code.
(l) No Restrictions on the Merger; Takeover Statutes.
(i) The Board of Directors of the Company has taken all necessary
action to render any potentially applicable anti-takeover or similar statute or
regulation or provision of the certificate of incorporation or bylaws, or other
organizational or constitutive document or governing instruments of the Company
or any of its Subsidiaries, inapplicable to this Agreement, the Support
Agreement, the Recapitalization Agreement and the transactions contemplated
hereby and thereby. The approval of this Agreement, the Merger, the Support
Agreement, the Recapitalization Agreement and the transactions contemplated
hereby and thereby by the Board of Directors of the Company referred to in
Section 3.2(f) constitutes approval of this Agreement, the Merger, the Support
Agreement, the Recapitalization Agreement and the transactions contemplated
hereby and thereby for purposes of Section 14-2-1132 of the GBCC and represents
the only action necessary to ensure that Section 14-2-1132 shall not apply to
this Agreement, the Support Agreement, the Recapitalization Agreement or the
consummation of the Merger or the other transactions contemplated hereby and
thereby.
(ii) The Company has taken all action necessary to ensure that the
entering into of this Agreement, the Merger, the Support Agreement, the
Recapitalization Agreement and the other transactions contemplated hereby and
thereby will not result in the
28
grant of any rights to any person under the Company Rights Agreement or enable
or require the Company Rights to be exercised, distributed or triggered.
(m) Environmental Matters. Except as, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on the Company, each of
the Company and its Subsidiaries complies and since December 31, 2001 has always
complied with all Environmental Laws and, to the knowledge of the Company, no
material expenditures are or will be required to comply with any such existing
Environmental Laws. None of the Company or its Subsidiaries has caused or taken
or failed to take any action that could reasonably be expected to result in any
material liability or obligation relating to any Environmental Law.
(n) Intellectual Property. Except as, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on the Company, (i) the
Company and each of its Subsidiaries owns, or is licensed to use (in each case,
free and clear of any Liens), all Intellectual Property used in or necessary for
the conduct of its business as currently conducted; (ii) to the knowledge of the
Company, the use of any Intellectual Property by the Company and its
Subsidiaries does not infringe on or otherwise violate the rights of any Person
and is in accordance with any applicable license pursuant to which the Company
or any Subsidiary acquired the right to use any Intellectual Property; (iii) to
the knowledge of the Company, no Person is challenging, infringing on or
otherwise violating any right of the Company or any of its Subsidiaries with
respect to any Intellectual Property owned by and/or licensed to the Company or
its Subsidiaries; and (iv) neither the Company nor any of its Subsidiaries has
received any written notice or otherwise has knowledge of any pending claim,
order or proceeding with respect to any Intellectual Property used by the
Company and its Subsidiaries.
(o) Taxes.
(i) The Company and each of its Subsidiaries has timely filed, or
has caused to be timely filed, all Tax Returns required to be filed, and all
such Tax Returns are true, complete and accurate, except to the extent any
failure to file or any inaccuracies in any filed Tax Returns would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company. All Taxes shown to be due on such Tax Returns
have been timely paid, except to the extent that any failure to have so paid
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company or to the extent such taxes are being
contested in good faith and by appropriate proceedings and for which reserves
have been properly maintained in accordance with GAAP. All Taxes required to be
withheld by the Company and each of its Subsidiaries have been timely withheld
and paid to the proper taxing authority, except to the extent that any failure
to have so withheld or paid would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company or to
the extent such taxes are being contested in good faith and by appropriate
proceedings and for which reserves have been properly maintained in accordance
with GAAP.
(ii) The most recent financial statements contained in the Company
SEC Reports reflect an adequate reserve in accordance with GAAP for all Taxes
payable by the Company and its Subsidiaries for all taxable periods and portions
thereof through the date of such financial statements, except to the extent that
the failure to have so reserved would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
29
Company. No deficiency with respect to any Taxes has been proposed, asserted or
assessed in writing against the Company or any of its Subsidiaries, and no
requests for waivers of the time to assess any such Taxes are pending, except to
the extent any such deficiency or request for waiver, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
the Company.
(iii) The Federal income Tax Returns of the Company and each of its
Subsidiaries consolidated in such Tax Returns for all years through 2001 either
have been examined by and settled with the IRS or the statutes of limitation for
assessment of deficiency with respect thereto have expired (except that such
returns may remain open to the limited extent that they effect years subsequent
to the taxable year ended August 31, 2001). All material assessments for Taxes
due with respect to such completed and settled examinations or any concluded
litigation have been fully paid.
(iv) There are no material Liens for Taxes (other than for current
Taxes not yet due and payable and for Taxes being contested in good faith) on
the assets of the Company or any of its Subsidiaries. Neither the Company nor
any of its Subsidiaries is bound by any Tax sharing agreements with third
parties.
(v) Neither the Company nor any of its Subsidiaries has taken or
agreed to take any action that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(p) Contracts. There are no contracts to which any of the Company or its
Subsidiaries is a party, by which any of its assets may be bound or affected, or
under which any of the Company or its Subsidiaries receives any benefit, in each
case that (i) is material to the business, results of operations, condition
(financial or otherwise), assets or liabilities of the Company and its
Subsidiaries, taken as a whole (ii) imposes material obligations (whether or not
monetary) on the Company or any of its Subsidiaries, or (iii) is otherwise
necessary or advisable for the proper and efficient operation of any of the
Company or its Subsidiaries (any such contract, together with any other contract
or agreement to which Company or any of its Subsidiaries is a party or by which
any of their respective assets are bound or affected, a "Company Identified
Contract"). Each Company Identified Contract is, and following the consummation
of the transactions contemplated herein will continue to be, legal under
applicable Law, valid, binding, enforceable and in full force and effect and
contains no provision relating to change in control or other terms that will
become applicable or inapplicable upon such consummation. To the knowledge of
the Company, no party is in breach or default, or has repudiated any provision,
of any such Company Identified Contract and no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification or acceleration under any such Company Identified
Contract. No Company Identified Contract, applicable Law or Governmental
Authorization exists that restricts the right of any of the Company or its
Subsidiaries to carry on or continue after the Closing Date its business in the
ordinary course consistent with past practice.
(q) Assets.
30
(i) The Company and its Subsidiaries own, or otherwise have
sufficient and legally enforceable rights to use, all of the properties and
assets (real, personal or mixed, tangible or intangible), necessary for the
conduct of, or otherwise material to, their business and operations as they are
currently conducted (the "Company Assets"). The Company and its Subsidiaries
have valid title to, or in the case of leased property have valid leasehold
interests in, all such Company Assets, including all such Company Assets
reflected in the financial statements included in the Company SEC Reports or
acquired since such date (except as may have been disposed of since such date in
the ordinary course of business consistent with past practice), in each case
free and clear of any Lien, except Company Permitted Liens. Schedule 3.2(q)(i)
of the Company Disclosure Letter sets forth a complete and correct list of each
of the countries in which Company Assets are located.
(ii) "Company Permitted Liens" means (A) Liens reserved against or
reflected in the financial statements included in the Company SEC Reports, to
the extent so reserved or reflected or described in the notes thereto, (B) Liens
for Taxes not yet due and payable or which are being contested in good faith and
by appropriate proceedings if adequate reserves with respect thereto are
maintained on Company's books in accordance with GAAP, (C) those Liens set forth
in Schedule 3.2(q)(ii) of the Company Disclosure Letter and (D) those Liens
that, individually and in the aggregate with all other Company Permitted Liens,
do not and will not materially interfere with the use of the properties or
assets of Parent and its Subsidiaries taken as a whole as currently used, or
otherwise have or result in a Material Adverse Effect on the Company.
(r) Real Property.
(i) The Company and its Subsidiaries have good, valid and marketable
fee simple title to the Company Owned Real Property, free and clear of any Liens
other than Company Permitted Liens. Each Company Lease grants the lessee under
such lease the exclusive right to use and occupy the premises and rights demised
thereunder free and clear of any Lien other than Company Permitted Liens. Each
of the Company and its Subsidiaries has good and valid title to the leasehold
estate or other interest created under its respective Company Leases free and
clear of any Liens other than Company Permitted Liens. Each of the Company and
its Subsidiaries enjoys peaceful and undisturbed possession under its respective
Company Leases of its respective Company Leased Real Property. The Company Real
Property constitutes all the interests in real property necessary for the
conduct of, or otherwise material to, the business of the Company and its
Subsidiaries.
(ii) "Company Leases" means the real property leases, subleases,
licenses and use or occupancy agreements pursuant to which the Company or any of
its Subsidiaries is the lessee, sublessee, licensee, user or occupant of real
property, or interests therein, necessary for the conduct of, or otherwise
material to, the business of the Company and its Subsidiaries as it is currently
conducted. "Company Leased Real Property" means all interests in real property
pursuant to the Company Leases. "Company Owned Real Property" means the real
property owned by the Company and its Subsidiaries necessary for the conduct of,
or otherwise material to, the business of the Company and its Subsidiaries as it
is currently conducted. "Company Real Property" means the Company Owned Real
Property and the Company Leased Real Property.
31
(s) Insurance. All insurance policies maintained by or on behalf of any of
the Company and its Subsidiaries under which any such entity is insured (other
than reinsurance or similar agreements) as of the date hereof are in full force
and effect, and all premiums due thereon have been paid. The Company and its
Subsidiaries have complied in all material respects with the terms and
provisions of such policies. The insurance coverage provided by such policies is
suitable for the business and operations of the Company and its Subsidiaries.
(t) Affiliate Transactions. Schedule 3.2(t) of the Company Disclosure
Letter contains a complete and correct list of all agreements, contracts,
transfers or pledges of assets or transfers or assumptions of liabilities or
other commitments or transactions, whether or not entered into in the ordinary
course of business, to or by which the Company or any of its Subsidiaries, on
the one hand, and (i) the Principal Shareholders or any of their respective
affiliates (other than the Company or any of its Subsidiaries), or (ii) the
directors of the Company or any of its Subsidiaries (other than the Principal
Shareholders), on the other hand, are or have been a party or otherwise bound or
affected, and that (x) are currently pending or in effect or by which the
Company or any of its Subsidiaries are bound or obligated or (y) involve
continuing liabilities or obligations that, individually or in the aggregate,
have been, are or will be $50,000 or more to the Company or any of its
Subsidiaries.
(u) Disclosure. No representation or warranty made by the Company
contained in this Agreement nor any certificate furnished by or on behalf of the
Company pursuant to Article VI contains or will contain any untrue statement of
a material fact, or omits or will omit to state any material fact required to
make the statements contained herein or therein not misleading.
Section 3.3 Representations and Warranties of Parent and Merger Sub.
Parent and Merger Sub represent and warrant to the Company as follows:
(a) Organization. Merger Sub is a corporation duly formed, validly
existing and in good standing under the laws of Georgia. Merger Sub is a direct
wholly-owned subsidiary of Parent.
(b) Corporate Authorization. Merger Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Merger Sub of
this Agreement and the consummation by Merger Sub of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Merger Sub. This Agreement has been duly executed and delivered
by Merger Sub and constitutes a valid and binding agreement of Merger Sub,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors generally
or by general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law). The copies of the Articles of
Incorporation and the By-Laws of Merger Sub which were previously furnished or
made available to the Company are true, complete and correct copies of such
documents as in effect on the date of this Agreement.
(c) Non-Contravention. The execution, delivery and performance by Merger
Sub of this Agreement and the consummation by Merger Sub of the transactions
contemplated hereby
32
do not and will not contravene or conflict with the Articles of Incorporation or
the By-Laws of Merger Sub or any applicable Law binding on Merger Sub.
(d) No Business Activities. Merger Sub has not conducted any activities
other than in connection with the organization of Merger Sub, the negotiation
and execution of this Agreement and any amendments thereto and the consummation
of the transactions contemplated hereby. The Merger Sub has no Subsidiaries.
Section 3.4 Representations and Warranties of the Parties. Each party
hereto represents and warrants to the other parties that it is the explicit
intent of each party hereto that, except for the express representations and
warranties contained in this Article III and in any certificates delivered
pursuant to Article VI, none of Parent, Merger Sub or the Company is making any
representation or warranty whatsoever, whether express or implied, including any
implied representation or warranty as to condition, merchantability or
suitability as to any of the properties or assets of it or any of its
Subsidiaries. It is understood that any cost estimates, projections or other
predictions, any forward-looking financial information or any memoranda or
offering materials or presentations relating to the business of any party
provided to any of the other parties are not and shall not be deemed to be or to
include representations or warranties of the first party or any of the first
party's Subsidiaries or affiliates.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Covenants of Parent. During the period from the date of this
Agreement and continuing until the Effective Time, Parent agrees as to itself
and its Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or pursuant to the Parent Recapitalization Agreement):
(a) Ordinary Course. Parent and its Subsidiaries shall carry on their
respective businesses in the usual, regular and ordinary course in all material
respects, in substantially the same manner as heretofore conducted, including
with respect to their claims paying policies and practices, and shall use their
reasonable best efforts to preserve intact their present lines of business,
maintain their rights and franchises and preserve their relationships with all
third parties having business dealings with them.
(b) Dividends; Changes in Share Capital. Parent shall not (i) declare or
pay any dividends or distributions on or make other distributions in respect of
any of its capital stock, (ii) split, combine, reclassify or amend any terms of
its capital stock or issue or authorize any other securities in respect of or in
substitution for, shares of its capital stock or (iii) repurchase, redeem or
otherwise acquire, directly or indirectly, any shares of its capital stock or
any securities convertible into or exercisable for any shares of its capital
stock.
(c) Issuance of Securities. Parent shall not issue or sell, or authorize
the issuance or sale of, any shares of its capital stock or any securities
convertible into or exercisable for, or any rights, warrants, calls or options
to acquire, any such shares, or enter into any commitment, arrangement,
undertaking or agreement with respect to any of the foregoing, except that,
subject
33
to the next following sentence, Parent may issue up to 198 Class D Non-Voting
Ordinary Shares, par value $1.00 per share, to up to 35 employees of Parent and
may enter into agreements reasonably acceptable to the Company related to the
issuance of such shares. Notwithstanding anything herein to the contrary, at no
time shall Parent permit the parties to the Parent Recapitalization Agreement to
hold fewer than 80% of the Class D Non-Voting Ordinary Shares or such Class D
Non-Voting Ordinary Shares to be held by more than 35 holders thereof.
(d) Governing Documents. Parent shall not amend its memorandum of
association, bye-laws or other governing documents or agree to take or authorize
any action to wind up its affairs, liquidate or dissolve or change its corporate
or other organizational form.
(e) No Related Actions. Parent will not agree or commit to do any of the
foregoing.
Section 4.2 Covenants of the Company. During the period from the date of
this Agreement and continuing until the Effective Time, the Company agrees as to
itself and its Subsidiaries that (except as expressly contemplated or permitted
by this Agreement, the Parent Recapitalization Agreement or pursuant to the
exercise of any Company Stock Option):
(a) Ordinary Course. The Company and its Subsidiaries shall carry on their
respective businesses in the usual, regular and ordinary course in all material
respects, in substantially the same manner as heretofore conducted, including
with respect to their claims paying policies and practices, and shall use their
reasonable best efforts to preserve intact their present lines of business,
maintain their rights and franchises and preserve their relationships with all
third parties having business dealings with them.
(b) Dividends; Changes in Share Capital. Except for a dividend of up to
$17,560,000 payable in cash to shareholders of the Company prior to the
Effective Time, the Company shall not, and in the case of clauses (ii) and (iii)
below shall cause its Subsidiaries not to, (i) declare or pay any dividends or
distributions on or make other distributions in respect of any of its capital
stock, (ii) split, combine, reclassify or amend any terms of their respective
capital stock or issue or authorize any other securities in respect of or in
substitution for, shares of their respective capital stock, or (iii) repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of their
respective capital stock or any securities convertible into or exercisable for
any shares of their respective capital stock.
(c) Issuance of Securities. The Company shall not, and shall cause its
Subsidiaries to not, issue or sell, or authorize the issuance or sale of, any
shares of their respective capital stock or any securities convertible into or
exercisable for, or any rights, warrants, calls or options to acquire, any such
shares, or enter into any commitment, arrangement, undertaking or agreement with
respect to any of the foregoing.
(d) Governing Documents. The Company shall not amend its memorandum of
association, bye-laws or other governing documents or agree to take or authorize
any action to wind up its affairs, liquidate or dissolve or change its corporate
or other organizational form and shall cause its Subsidiaries to not amend their
articles of incorporation, bylaws or other governing documents in a manner
materially adverse to Parent.
34
(e) Indebtedness. The Company shall not, and shall cause its Subsidiaries
not to, (i) incur or guarantee any indebtedness for borrowed money or issue debt
securities; (ii) make any loans or capital contributions to, or investments in,
any other Person (other than to wholly-owned Subsidiaries of the Company or
loans, contributions or investments that have been committed or otherwise agreed
to prior to the date hereof); or (iii) enter into any material commitment or
transaction requiring a capital expenditure by the Company or its Subsidiaries;
provided, that Parent's consent to any of the transactions contemplated by this
subsection shall not be unreasonably withheld.
(f) Acquisitions. The Company shall not, and shall cause its Subsidiaries
not to, (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any Person or division thereof (other than an entity that is a
wholly-owned subsidiary of the Company as of the date of this Agreement); or
(ii) sell, transfer, or encumber any assets of the Company or any of its
Subsidiaries; provided, that Parent's consent to any of the transactions
contemplated by this subsection shall not be unreasonably withheld.
(g) No Related Actions. The Company will not, and (to the extent the
foregoing applies to its Subsidiaries) will cause its Subsidiaries not to, agree
or commit to do any of the foregoing.
Section 4.3 Governmental Filings. Each party shall (a) confer on a regular
basis with the other and (b) report to the other (to the extent permitted by law
or regulation or any applicable confidentiality agreement) on material
operational matters. The Company and Parent (i) shall cooperate with each other
in making all filings required to be filed by each of them with the SEC (and all
other Governmental Entities) between the date of this Agreement and the
Effective Time, (ii) shall timely file all such reports and (iii) shall (to the
extent permitted by law or regulation or any applicable confidentiality
agreement) notify the other party of the filing of all such reports,
announcements and publications promptly after the same are filed. For purposes
of this Agreement "other party" means, with respect to the Company, Parent and
means, with respect to Parent, the Company, unless the context otherwise
requires.
Section 4.4 Actions Regarding Benefit Plans. During the period from the
date of this Agreement and continuing until the Effective Time, except as
provided in the Parent Recapitalization Agreement, neither party shall, and each
party shall cause its Subsidiaries, its Board of Directors (and committees
thereof), the Board of Directors (and committees thereof) of its Subsidiaries,
its employees and the employees of its Subsidiaries not to, (a) take or cause to
be taken any action that would increase any payment, acceleration, termination,
forgiveness of indebtedness, vesting, distribution, compensation or benefits or
obligation to fund benefits, or increase the number of participants, in each
case, with respect to any Benefit Plan of such party; or (b) create or adopt any
new Benefit Plan.
35
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Preparation of Proxy Statement; Shareholders Approval.
(a) As promptly as reasonably practicable following the date hereof, the
Company shall prepare and file with the SEC the Company Proxy
Statement/Prospectus and Parent shall prepare and file the Form S-4. The Form
S-4 and the Company Proxy Statement/Prospectus shall comply as to form in all
material respects with the applicable provisions of the Securities Act and the
Exchange Act and the rules and regulations thereunder. Each of Parent and the
Company shall use reasonable best efforts to have the Company Proxy
Statement/Prospectus cleared by the SEC and the Form S-4 declared effective by
the SEC as promptly as practicable after the date hereof and to keep the Form
S-4 effective as long as is necessary to consummate the Merger and the
transactions contemplated thereby. Parent and the Company shall, as promptly as
practicable after receipt thereof, provide the other party copies of any written
comments and advise the other party of any oral comments, with respect to the
Form S-4 or the Company Proxy Statement/Prospectus, received from the SEC.
Parent and the Company shall provide the other party with a reasonable
opportunity to review and comment on any amendment or supplement to the Form S-4
or the Company Proxy Statement/Prospectus prior to filing such with the SEC, and
will promptly provide the other party with a copy of all such filings made with
the SEC. Notwithstanding any other provision herein to the contrary, no
amendment or supplement (including by incorporation by reference) to the Company
Proxy Statement/Prospectus or the Form S-4 shall be made without the approval of
both parties, which approval shall not be unreasonably withheld or delayed. The
Company shall use reasonable best efforts to cause the Company Proxy
Statement/Prospectus to be mailed to the Company's shareholders as soon as
reasonably practicable after the Form S-4 is declared effective under the
Securities Act. Parent shall take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified or filing a
general consent to service of process) required to be taken under any applicable
state securities laws in connection with the issuance of Parent Ordinary Shares
in the Merger, and the Company shall furnish all information concerning the
Company and the holders of Company Common Stock as may be reasonably requested
in connection with any such action. Each party shall advise the other party,
promptly after it receives notice thereof, of the time when the Form S-4 has
become effective, the issuance of any stop order, the suspension of the
qualification of the Parent Ordinary Shares issuable in connection with the
Merger for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Company Proxy Statement/Prospectus or the Form S-4. If at any
time prior to the Effective Time any information relating to Parent or the
Company, or any of their respective affiliates, officers or directors, should be
discovered by Parent or the Company which should be set forth in an amendment or
supplement to any of the Form S-4 or the Company Proxy Statement/Prospectus so
that any of such documents would not include any misstatement of a material fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, the party
which discovers such information shall promptly notify the other party hereto
and, to the extent required by law, rules or regulations, an appropriate
amendment or supplement describing such information shall be promptly filed with
the SEC and disseminated to the shareholders of the Company.
36
(b) The Company shall duly take (subject to compliance with the provisions
of Section 3.1(e) by Parent and all applicable laws) all necessary, proper and
advisable action to call, give notice of, convene and hold a meeting of its
shareholders on a date as soon as reasonably practicable (the "Company
Shareholders Meeting") for the purpose of obtaining the Company Shareholder
Approval with respect to the adoption and approval of this Agreement and shall
take reasonable and lawful action to solicit the adoption and approval of this
Agreement by the Company's shareholders; and the Board of Directors of the
Company shall recommend adoption and approval of this Agreement by the
shareholders of the Company to the effect as set forth in Section 3.2(f) (the
"Company Recommendation"), and shall not withdraw, modify or qualify in any
material respect (or propose to withdraw, modify or qualify in any material
respect) in any manner adverse to Parent such recommendation (collectively, a
"Change in the Company Recommendation"); provided, that the Board of Directors
of the Company may effect a Change in the Company Recommendation pursuant to
Section 5.4(d); and provided, further, that the foregoing shall not prohibit
accurate disclosure (and such disclosure shall not be deemed to be a Change in
the Company Recommendation) of factual information regarding the business,
financial condition or results of operations of Parent or the Company or other
material facts or developments in the Form S-4 or the Company Proxy
Statement/Prospectus or otherwise. This Agreement shall be submitted to the
shareholders of the Company at the Company Shareholders Meeting for the purpose
of adopting the Agreement and approving the Merger; provided, that this
Agreement shall not be required to be submitted to the shareholders of the
Company at the Company Shareholders Meeting if there has been a Change in the
Company Recommendation pursuant to Section 5.4(d) or this Agreement has been
terminated pursuant to Section 7.1.
Section 5.2 Access to Information/Employees.
(a) Upon reasonable notice, each party shall (and shall cause its
Subsidiaries to) afford to the officers, employees, accountants, counsel,
financial advisors and other authorized representatives of the other party
reasonable access during normal business hours, during the period prior to the
Effective Time, to all its properties, books, contracts, commitments, records,
officers and employees and, during such period, such party shall (and shall
cause its Subsidiaries to) furnish promptly to the other party (i) a copy of
each report, schedule, registration statement and other document filed,
published, announced or received by it during such period pursuant to the
requirements of Federal or state securities laws, as applicable (other than
documents which such party is not permitted to disclose under applicable law),
and (ii) all other information concerning it and its business, properties and
personnel as such other party may reasonably request (including consultation on
a regular basis with such parties, agents, advisors, attorneys and
representatives with respect to litigation matters); provided, however, that
either party may restrict the foregoing access to the extent that (A) in the
reasonable judgment of such party, any law, treaty, rule or regulation of any
Governmental Entity applicable to such party requires such party or its
Subsidiaries to restrict or prohibit access to any such properties or
information, (B) in the reasonable judgment of such party, the information is
subject to confidentiality obligations to a third party, or (C) disclosure of
any such information or document could result in the loss of attorney-client
privilege; provided, however, that with respect to this clause (C), the parties
and/or counsel for the parties shall use their reasonable best efforts to enter
into such joint defense agreements or other arrangements, as appropriate, so as
to avoid the loss of attorney-client privilege. Each party shall hold, and shall
cause its respective directors, officers, employees, Affiliates, agents and
advisors to hold, any such information obtained pursuant to
37
this Section 5.2, as well as any information about any Takeover Proposal, in
confidence to the extent required by, and in accordance with, the provisions of
the Confidentiality Agreement. For purposes of this Agreement, "Confidentiality
Agreement" means the letter agreement, dated May 4, 2006, between Parent and the
Company.
Section 5.3 Reasonable Best Efforts.
(a) Subject to the terms and conditions of this Agreement, each party will
use its reasonable best efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable under this
Agreement and applicable laws and regulations to consummate the Merger and the
other transactions contemplated by this Agreement as soon as practicable after
the date hereof, including (i) preparing and filing as promptly as practicable
all documentation to effect all necessary applications, notices, petitions,
filings and other documents and to obtain as promptly as practicable all
consents, clearances, waivers, licenses, orders, registrations, approvals,
permits and authorizations necessary or advisable to be obtained from any third
party and/or any Governmental Entity in order to consummate the Merger and each
of the other transactions contemplated by this Agreement and the Parent
Recapitalization Agreement and (ii) taking all reasonable steps as may be
necessary to obtain all such material consents, clearances, waivers, licenses,
registrations, permits, authorizations, orders and approvals. In furtherance and
not in limitation of the foregoing, each party hereto agrees to make an
appropriate filing of a Notification and Report Form pursuant to the HSR Act and
any other Regulatory Law with respect to the transactions contemplated hereby as
promptly as practicable after the date hereof and to supply as promptly as
practicable any additional information and documentary material that may be
requested pursuant to the HSR Act and any other Regulatory Law and use
reasonable best efforts to cause the expiration or termination of the applicable
waiting periods under the HSR Act as soon as practicable.
(b) To the extent permissible under applicable law or any rule, regulation
or restriction of a Governmental Entity, each of Parent and the Company shall,
and shall cause its respective Subsidiaries to, in connection with the efforts
referenced in Section 5.3(a) to obtain all requisite material approvals,
clearances and authorizations for the transactions contemplated by this
Agreement under the HSR Act or any other Regulatory 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) promptly inform the
other party of any communication received by such party from, or given by such
party to, the Antitrust Division of the Department of Justice (the "DOJ"), the
Federal Trade Commission (the "FTC") or any other Governmental Entity and of any
material communication received or given in connection with any proceeding by a
private party, in each case regarding any of the transactions contemplated
hereby, (iii) permit the other party, or the other party's legal counsel, to
review any communication given by it to, and consult with each other in advance
of any meeting or conference with, the DOJ, the FTC or any such other
Governmental Entity or, in connection with any proceeding by a private party,
with any other Person and (iv) give the other party the opportunity to attend
and participate in such meetings and conferences. For purposes of this
Agreement, "Regulatory Law" means the βββββββ� Act, as amended, Council
Regulation No. 4064/89 of the European Community, as amended, the βββββββ� Act,
as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all
other Federal, state and foreign, if any, statutes, rules, regulations, orders,
decrees, administrative
38
and judicial doctrines and other laws that are designed or intended to prohibit,
restrict or regulate (i) foreign investment or (ii) actions having the purpose
or effect of monopolization or restraint of trade or lessening of competition.
(c) If any objections are asserted with respect to the transactions
contemplated hereby under any Regulatory Law or if any suit is instituted by any
Governmental Entity or any private party challenging any of the transactions
contemplated hereby as violative of any Regulatory Law, each of Parent and the
Company shall use its reasonable best efforts to resolve any such objections or
challenge as such Governmental Entity or private party may have to such
transactions under such Regulatory Law so as to permit consummation of the
transactions contemplated by this Agreement.
Section 5.4 No Solicitation; Change of Recommendation.
(a) No Solicitation. The Company agrees that following the date of this
Agreement and prior to the earlier of the Effective Time or the Termination
Date, neither it nor any of its Subsidiaries nor any of the officers and
directors of it or its Subsidiaries shall, and that it shall use its reasonable
best efforts to cause its and its Subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly,
initiate inquiries regarding or solicit the making of any Takeover Proposal. The
Company further agrees that neither it nor any of its Subsidiaries nor any of
the officers and directors of it or its Subsidiaries shall, and that it shall
use its reasonable best efforts to cause its and its Subsidiaries' employees,
agents and representatives (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, engage in any negotiations concerning a Takeover Proposal.
Notwithstanding anything in this Agreement to the contrary, the Company and the
Company's Board of Directors shall be permitted to (A) comply with Rule 14d-9,
Rule 14e-2 and other applicable rules promulgated under the Exchange Act with
regard to a Takeover Proposal or (B) engage in any discussions or negotiations
with, or provide any information to, any Person in response to an unsolicited
Takeover Proposal by any such Person; provided, that prior to its receipt of any
information from the Company, such Person shall be required to enter into a
customary confidentiality agreement with the Company containing terms no less
restrictive than the terms of the Confidentiality Agreement and the Company
shall provide Parent with copies of all information provided to such Person to
the extent that such information has not been previously provided to Parent;
provided, further that any information provided to such Person shall be
concurrently provided to the Parent. The Company agrees that it will, and will
cause its officers, directors and representatives to, immediately cease and
cause to be terminated any negotiations existing as of the date of this
Agreement with any parties conducted heretofore with respect to any Takeover
Proposal. The Company agrees that it will use reasonable best efforts to
promptly inform its directors, officers, key employees, agents and
representatives of the obligations undertaken in this Section 5.4. Nothing in
this Section 5.4 shall permit Parent or the Company to terminate this Agreement
(except as specifically provided in Article VII).
(b) The Company shall as soon as reasonably practicable (and in any event
within forty-eight (48) hours) notify Parent in writing of the receipt of any
Takeover Proposal or of any request for information or inquiry that would
reasonably be expected to lead to the receipt of a Takeover Proposal, the terms
and conditions of any such Takeover Proposal, request or inquiry,
39
and the identity of the Person making such Takeover Proposal, request or
inquiry. The Company shall inform Parent on a reasonably prompt basis of the
status and material terms of any discussions regarding, or relating to, any
Takeover Proposal (including amendments) and, as promptly as practicable, of any
change in the price or material terms of and conditions regarding the Takeover
Proposal.
(c) For purposes of this Agreement:
"Takeover Proposal" means any proposal or offer in respect of (i) a
merger, consolidation, business combination, share exchange, reorganization,
recapitalization, sale of substantially all of the assets, liquidation,
dissolution or similar transaction involving the Company (any of the foregoing,
a "Business Combination Transaction") with any Person other than Parent, Merger
Sub or any controlled Affiliate thereof (a "Third Party"), (ii) the Company's
acquisition of any Third Party in a Business Combination Transaction in which
the shareholders of the Third Party immediately prior to consummation of such
Business Combination Transaction will own more than 35% of the Company's
outstanding capital stock immediately following such Business Combination
Transaction, including the issuance by the Company of more than 35% of any class
of its voting equity securities as consideration for assets or securities of a
Third Party, or (iii) any acquisition, whether by tender or exchange offer or
otherwise, by any Third Party of 35% or more of any class of capital stock of
the Company or of 35% or more of the consolidated assets of the Company, in a
single transaction or a series of related transactions.
"Superior Proposal" means a bona fide written proposal or offer made by a
Third Party in respect of a Business Combination Transaction involving, or any
purchase or acquisition of, (i) all or substantially all of the voting power of
the Company's capital stock or (ii) all or substantially all of the consolidated
assets of the Company, which Business Combination Transaction or other purchase
or acquisition contains terms and conditions that the Board of Directors
determines in good faith, after consultation with its outside counsel, would
result in a transaction that if consummated would be more favorable, from a
financial point of view, to the shareholders of the Company than the Merger.
(d) Change of Recommendation. Neither the Board of Directors of the
Company nor any committee thereof shall (i) effect a Change in the Company
Recommendation or (ii) approve any letter of intent, memorandum of
understanding, merger agreement or other agreement relating to, or that may
reasonably be expected to lead to, any Takeover Proposal. Notwithstanding the
foregoing, the Board of Directors of the Company may effect a Change in the
Company Recommendation; provided, that the Board of Directors of the Company
determines in good faith, after consultation with its outside legal counsel,
that the failure to do so would be reasonably likely to be inconsistent with the
fiduciary duties owed by the Company's Board of Directors to the shareholders of
the Company under applicable Law; provided, further, that the Board of Directors
of the Company may effect a Change in the Company Recommendation in response to
a Superior Proposal only (i) after the Company provides to Parent a written
notice (a "Notice of Superior Proposal") (x) advising Parent that the Board of
Directors of the Company has received a Superior Proposal, (y) specifying the
terms and conditions of such Superior Proposal and including a copy thereof and
(z) identifying the Person making such Superior Proposal, (ii) after negotiating
in good faith with Parent to make such
40
adjustments in the terms and conditions of this Agreement as would enable the
Company to proceed with the Company Recommendation without a Change in the
Company Recommendation if and to the extent Parent elects to seek to make such
adjustments; provided, however, that Parent shall not be obliged to propose or
agree to any such adjustment, and (iii) if Parent does not, within the earlier
of (A) five calendar days of Parent's receipt of the Notice of Superior Proposal
or (B) three Business Days prior to the scheduled meeting of the shareholders of
the Company called for the purpose of obtaining the Company Shareholder
Approval, make an offer that the Board of Directors of the Company determines in
good faith to be as favorable to the Company's shareholders as such Superior
Proposal.
Section 5.5 Fees and Expenses. Subject to Section 7.2, whether or not the
Merger is consummated, all Expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such Expenses, except, if the Merger is consummated, Parent or its relevant
Subsidiary shall pay, or cause to be paid, any and all property or transfer
taxes imposed on the Company or its Subsidiaries. As used in this Agreement,
"Expenses" includes all out-of-pocket expenses (including all fees and expenses
of counsel, accountants, investment bankers, 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 and
performance of this Agreement and the transactions contemplated hereby,
including the preparation, printing, filing and mailing of the Company Proxy
Statement/Prospectus and the solicitation of shareholder adoption and approval
and all other matters related to the transactions contemplated hereby.
Section 5.6 Directors' and Officers' Indemnification and Insurance.
(a) From and after the Effective Time Parent agrees that it will and will
cause the Surviving Corporation to (i) indemnify and hold harmless, against any
costs or expenses (including attorney's fees), judgments, fines, losses, claims,
damages or liabilities incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, and provide advancement of expenses to, all past and present
directors, officers, employees and agents of the Company and its Subsidiaries
(in all of their capacities) (A) to the same extent such persons are indemnified
or have the right to advancement of expenses as of the date of this Agreement by
the Company pursuant to the Company's articles of incorporation, bylaws and
indemnification agreements, if any, in existence on the date hereof with any
directors, officers or employees of the Company and its Subsidiaries and (B)
without limitation to clause (A), to the fullest extent permitted by law, in
each case, for acts or omissions at or prior to the Effective Time (including
for acts or omissions occurring in connection with the adoption and approval of
this Agreement and the consummation of the transactions contemplated hereby),
(ii) include and cause to be maintained in effect in the Surviving Corporation's
and Parent's (or any successor's) articles of incorporation and by-laws or
similar organizational or constitutive documents for a period of six years after
the Effective Time, the current provisions, or in the case of Parent,
substantially similar provisions (to the fullest extent permitted under Bermuda
law) regarding elimination of liability of directors, indemnification of
officers, directors and employees and advancement of expenses contained in the
articles of incorporation and bylaws of the Company and (iii) cause to be
maintained for a period of six years after the Effective Time the current
policies of directors' and officers' liability insurance and fiduciary liability
insurance maintained by the Company (provided, that Parent (or any successor)
may
41
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are, in the aggregate, no less
advantageous to the insured) with respect to claims arising from facts or events
that occurred on or before the Effective Time (including for acts or omissions
occurring in connection with the adoption and approval of this Agreement and the
consummation of the transactions contemplated hereby). Such substitute policies
shall be issued by insurance companies having the same or better ratings and
levels of creditworthiness as the insurance companies that have issued the
current policies. The obligations of Parent and the Surviving Corporation under
this Section 5.6 shall not be terminated or modified in such a manner as to
adversely affect any indemnitee to whom this Section 5.6 applies without the
consent of such affected indemnitee (it being expressly agreed that the
indemnitees to whom this Section 5.6 applies shall be third party beneficiaries
of this Section 5.6).
(b) If Parent or any of its successors or assigns (i) shall consolidate
with or merge into any other corporation or entity and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) shall transfer all or substantially all of its properties and assets to any
individual, corporation or other entity, then, and in each such case, proper
provisions shall be made so that the successors and assigns of Parent shall
assume all of the obligations set forth in this Section 5.6.
Section 5.7 Public Announcements. Parent and the Company shall use
reasonable best efforts to develop a joint communications plan and each party
shall use reasonable best efforts (a) to ensure that all press releases and
other public statements with respect to the transactions contemplated hereby
shall be consistent with such joint communications plan, and (b) unless
otherwise required by applicable law or by obligations pursuant to any listing
agreement with or rules of any securities exchange, to consult with each other
before issuing any press release or, to the extent practical, otherwise making
any public statement with respect to this Agreement or the transactions
contemplated hereby. In addition to the foregoing, except to the extent
disclosed in or consistent with the Form S-4 or the Company Proxy
Statement/Prospectus in accordance with the provisions of Section 5.1, neither
Parent nor the Company shall issue any press release or otherwise make any
public statement or disclosure concerning the other party or the other party's
business, financial condition or results of operations without the consent of
the other party, which consent shall not be unreasonably withheld or delayed;
provided, that the foregoing shall be subject to the requirements of law and to
each party's obligations pursuant to any listing agreement or the rules of any
national securities exchange.
Section 5.8 Listing of Parent Ordinary Shares. Parent shall use its
reasonable best efforts to cause Parent Ordinary Shares to be issued in the
Merger and the Parent Ordinary Shares held by the stockholders of Parent
immediately prior to the Effective Time and the Parent Ordinary Shares to be
reserved for issuance upon exercise of the Company Stock Options to be approved
for listing on the Nasdaq, subject to official notice of issuance, prior to the
Closing Date.
Section 5.9 Company Affiliates; Restrictive Legend. The Company will use
its reasonable best efforts to deliver or cause to be delivered to Parent, as
promptly as practicable on or following the date hereof, from each person
identified by the Company as an Affiliate of the Company, an executed Affiliate
Agreement. Parent will give stop transfer instructions to its
42
transfer agent with respect to any Parent Ordinary Shares received pursuant to
the Merger by any shareholder of the Company who may reasonably be deemed to be
an Affiliate of the Company and there will be placed on the certificates
representing such Parent Ordinary Shares, or any substitutions therefor, a
legend stating in substance that the shares were issued in a transaction to
which Rule 145 promulgated under the Securities Act applies and may only be
transferred (i) in conformity with Rule 145 or (ii) in accordance with a written
opinion of counsel, reasonably acceptable to Parent in form and substance, that
such transfer is exempt from registration under the Securities Act.
Section 5.10 Tax Treatment. Parent and the Company intend the Merger to
qualify as a reorganization within the meaning of Section 368(a) of the Code.
Each of Parent and the Company, and each of their respective controlled
affiliates shall, to the extent consistent with their rights and obligations
under this Agreement, use their reasonable best efforts to cause the Merger to
so qualify, and the Company shall use its reasonable best efforts to obtain the
opinion of Debevoise & ββββββββ LLP referred to in Section 6.1(j). For purposes
of such tax opinions, each of Parent and the Company shall provide
representation letters reasonably requested by such counsel, each dated on or
before the date the Form S-4 shall become effective, and subsequently, on the
Closing Date. Except for actions specifically contemplated by this Agreement,
each of Parent and the Company and each of their respective controlled
affiliates shall use their reasonable best efforts not to take any action, fail
to take any action, cause any action to be taken or not taken, or suffer to
exist any condition, which action or failure to take action or condition would
prevent, or would be reasonably likely to prevent the Merger from qualifying as
a reorganization within the meaning of Section 368(a) of the Code.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of the Company and Parent to effect the Merger are
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Governmental and Regulatory Approvals. Other than the filing provided
for under Section 1.3 and filings pursuant to the HSR Act (which are addressed
in Section 6.1(c)), all consents, clearances, approvals and actions of, filings
with and notices to any Governmental Entity required of Parent, the Company or
any of their Subsidiaries in connection with the execution and delivery of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby shall have been made or obtained (as the case may be),
except for those the failure of which to be made or obtained, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect on Parent and its Subsidiaries (including the Surviving Corporation and
its Subsidiaries), taken together after giving effect to the Merger; provided,
that each of the consents, clearances, approvals and actions of, filings with
and notices to any Governmental Entity listed on Schedule 6.1(a) of the Parent
Disclosure Letter shall have been obtained or made (as the case may be).
(b) No Injunctions or Restraints, Illegality. No Laws shall have been
adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other
43
order, judgment, decision, opinion or decree issued by a court or other
Governmental Entity of competent jurisdiction in the United States, Bermuda or
the European Union shall be in effect, having the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger.
(c) HSR Act. The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have expired,
and any investigation opened by means of a second request for additional
information or otherwise shall have been terminated or closed.
(d) Effectiveness of the Form S-4. The Form S-4 shall have been declared
effective by the SEC under the Securities Act. No stop order suspending the
effectiveness of the Form S-4 shall have been issued by the SEC and no
proceedings for that purpose shall have been threatened by the SEC or shall have
been initiated by the SEC and not concluded or withdrawn.
(e) Nasdaq Listing. The shares of Parent Ordinary Shares to be issued in
the Merger and such other Parent Ordinary Shares to be reserved for issuance in
connection with the Merger shall have been approved for listing on the Nasdaq,
subject to official notice of issuance.
(f) Blue Sky Approvals. Parent shall have received all state securities
and "blue sky" permits and approvals necessary to consummate the transactions
contemplated hereby.
(g) Shareholder Approval. The Company shall have obtained the Company
Shareholder Approval in connection with the adoption and approval of this
Agreement by the shareholders of the Company.
(h) Parent Approval. Parent shall have obtained the Parent Shareholder
Approval.
(i) Parent Recapitalization. The Parent Recapitalization shall have been
consummated pursuant to the Parent Recapitalization Agreement.
(j) The Company Rights Agreement. No Stock Acquisition Date or
Distribution Date (as such terms are defined in Company Rights Agreement) shall
have occurred pursuant to Company Rights Agreement.
(k) Tax Opinions. The Company and Parent shall have received from
Debevoise & ββββββββ LLP, counsel to the Company, on or before the date the Form
S-4 shall become effective, and subsequently on the Closing Date, written
opinions dated as of such dates, and in form and substance reasonably
satisfactory to the Company, to the effect that the Merger should qualify as a
reorganization within the meaning of Section 368(a) of the Code.
Section 6.2 Additional Conditions to Obligations of Parent. The
obligations of Parent to effect the Merger are subject to the satisfaction of,
or waiver by Parent, on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company set forth in this Agreement that is qualified as to
Material Adverse Effect shall be true and correct, and each of the
representations and warranties of the Company set forth in this
44
Agreement that is not so qualified shall be true and correct (disregarding for
purposes of this provision any qualification as to materiality), except where
the failure to be so true and correct, individually or in the aggregate, would
not have a Material Adverse Effect on the Company, in each case, as of the date
of this Agreement and as of the Closing Date as though made on and as of the
Closing Date (except to the extent in either case that such representations and
warranties speak as of another date), and Parent shall have received a
certificate of the chief executive officer, and the chief financial officer of
the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed or complied in all material respects with all agreements and covenants
required to be performed by it under this Agreement at or prior to the Closing
Date and shall have complied with Section 4.2(b) and (c) in all respects, and
Parent shall have received a certificate of the chief executive officer and the
chief financial officer of the Company to such effect.
Section 6.3 Additional Conditions to Obligations of the Company. The
obligations of the Company to effect the Merger are subject to the satisfaction
of, or waiver by the Company, on or prior to the Closing Date of the following
additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Parent or Merger Sub set forth in this Agreement that is qualified
as to Material Adverse Effect shall be true and correct, and each of the
representations and warranties of Parent or Merger Sub set forth in this
Agreement that is not so qualified shall be true and correct (disregarding for
purposes of this provision any qualification as to materiality), except where
the failure to be so true and correct, individually or in the aggregate, would
not have a Material Adverse Effect on Parent or Merger Sub, in each case, as of
the date of this Agreement and as of the Closing Date as though made on and as
of the Closing Date (except to the extent in either case that such
representations and warranties speak as of another date), and the Company shall
have received a certificate of the chief executive officer and the chief
financial officer of Parent and of Merger Sub to such effect.
(b) Performance of Obligations of Parent and Merger Sub. Parent and Merger
Sub shall have performed or complied in all material respects with all
agreements and covenants required to be performed by either of them under this
Agreement at or prior to the Closing Date and Parent shall have complied with
Section 4.1(c) in all respects, and the Company shall have received a
certificate of the chief executive officer and the chief financial officer of
Parent and of Merger Sub to such effect.
(c) Indemnity Agreement. The shareholder listed on Schedule 6.3(c) of the
Parent Disclosure Letter shall have received from Parent an indemnity agreement
with respect to the Gain Recognition Agreement anticipated to be filed by such
shareholder in accordance with Treasury Regulation Section 1.367(a)-8.
45
ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.1 General. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Effective Time
notwithstanding adoption and approval thereof by the shareholders of the
Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of the Company and Parent;
(b) by the Company or Parent if the Closing shall not have occurred
on or before January 31, 2007 (the "Termination 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 material obligation under
this Agreement has been the cause of, or resulted in, the failure of the Closing
to occur before such date;
(c) by the Company, if Parent or Merger Sub shall have breached in
any material respect any of its representations or warranties or failed to
perform in any material respect any of its covenants or other agreements
contained in this Agreement, which breach or failure to perform (i) is incapable
of being cured by Parent or Merger Sub, as appropriate, prior to the Termination
Date and (ii) renders the condition set forth in Section 6.3(a) or 6.3(b)
incapable of being satisfied prior to the Termination Date;
(d) by Parent, if the Company shall have breached in any material
respect any of its representations or warranties or failed to perform in any
material respect any of its covenants or other agreements contained in this
Agreement, which breach or failure to perform (i) is incapable of being cured by
the Company prior to the Termination Date and (ii) renders the condition set
forth in Section 6.2(a) or 6.2(b) incapable of being satisfied prior to the
Termination Date;
(e) by the Company or Parent, upon written notice to the other
party, if a Governmental Entity of competent jurisdiction in the United States
or of the European Union shall have issued an order, judgment, decision,
opinion, decree or ruling or taken any other action (which the party seeking to
terminate shall have used its reasonable best efforts to resist, resolve, annul,
quash, or lift, as applicable, subject to the provisions of Section 5.3)
permanently enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement, and such order, decree, ruling or
action shall have become final and non-appealable; provided, however, that the
party seeking to terminate this Agreement pursuant to this clause (e) has
fulfilled its obligations under Section 5.3;
(f) by Parent if (i) the Company or its Board of Directors
materially breaches any provision of Section 5.4 and such breach is not cured
within five Business Days after receiving notice of such breach, (ii) the Board
of Directors of the Company shall have effected a Change in the Company
Recommendation, whether or not permitted by the terms hereof, or (iii) for any
reason the Company fails to call or hold the Company Shareholders Meeting within
six months of the date hereof;
46
(g) by the Company, if (i) there has been a Change in the Company
Recommendation pursuant to Section 5.4(d), (ii) the Company notifies Parent in
writing that it intends to approve and enter into an agreement concerning a
transaction that constitutes a Superior Proposal, attaching the most current
version of such agreement (or a description of the material terms and conditions
thereof) to such notice, and (iii) Parent does not make, within five Business
Days of receipt of such notice, an offer that the Board of Directors of the
Company determines in good faith is at least as favorable to the Company's
shareholders as such Superior Proposal, it being understood that the Company
shall not approve or enter into any such binding agreement during such five-day
period; and
(h) by the Company or Parent, if the Company Shareholder Approval
shall not have been received at a duly held meeting of the shareholders of the
Company called for such purpose (including any adjournment or postponement
thereof).
Section 7.2 Obligations in Event of Termination. In the event of any
termination of this Agreement as provided in Section 7.1, this Agreement shall
forthwith become wholly void and of no further force and effect (except with
respect to Section 3.1(j), Section 3.2(j), Section 5.2 (as it relates to
confidential information only), Section 5.5, this Section 7.2 and Article VIII,
which shall remain in full force and effect) and there shall be no liability on
the part of the Company, Parent or Merger Sub; provided, however, that
termination shall not preclude any party from suing the other party for, or
relieve any party hereto from any liability arising from a, willful breach of
this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties, by
action taken or authorized by their respective Boards of Directors, at any time
before or after adoption and approval of the matters presented in connection
with the Merger by the shareholders of the Company and Parent, but, after any
such approval, no amendment shall be made which by law or in accordance with the
rules of any relevant stock exchange requires further approval by such
shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties.
Section 7.4 Extension; Waiver. At any time prior to the Effective Time,
the parties, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties, (b)
waive any inaccuracies in the representations and warranties contained herein or
in any document delivered pursuant hereto and (c) waive compliance with any of
the agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth in
a written instrument signed on behalf of such party. The failure of any party to
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of those rights.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations, Warranties and Agreements.
None of the representations, warranties, covenants and other agreements in this
Agreement or in any
47
instrument delivered pursuant to this Agreement, including any rights arising
out of any breach of such representations, warranties, covenants and other
agreements, shall survive the Effective Time, except for those covenants and
agreements contained herein and therein (including Section 5.6) that by their
terms apply or are to be performed in whole or in part after the Effective Time
and this Article VIII.
Section 8.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed duly given (a) on the date of delivery if
delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt, (b) on the first Business Day following the date of dispatch if
delivered by a recognized next-day courier service, or (c) on the tenth Business
Day following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
(a) if to Parent or Merger Sub, to:
Castlewood Holdings Limited
β�.β�. βββ� ββ ββββ
βββββββ� βββββ�, βββ� βββββ�
18 Queen Street
ββββββββ ββ JX
Bermuda
Fax: (βββ�) βββ�-ββββ
Attention: ββββ β�'ββββ
with a copy to:
Drinker ββββββ & βββββ� LLP
One βββββ� Square
ββββ βββ� ββββββ βββββββ�
ββββββββββββ, ββ βββββ�
Fax: (βββ�) βββ�-ββββ
Attention: ββββββ β�. βββββ�, Esq.
(b) if to the Company to:
The Enstar Group, Inc.
The ββββββββ House
βββ� βββββββ� ββββββ
ββββββββββ, βββββββ� βββββ�
Fax: (βββ�) βββ�-ββββ
Attention: ββββ β�. ββββ
48
with a copy to:
Debevoise & ββββββββ LLP
βββ� βββββ� ββββββ
βββ� ββββ, ββ βββββ�
Fax: (βββ�) βββ�-ββββ
Attention: ββββββ β�. ββββββββββ, ββ., Esq.
Section 8.3 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
Section 8.5 Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the Exhibits and Schedules hereto), the Parent Recapitalization
Agreement, the Support Agreement and the Confidentiality Agreement constitute
the entire agreement, and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof and thereof. This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other Person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement, other than
Section 5.6 (which is intended to be for the benefit of the individuals covered
thereby, and may be enforced by such individuals).
Section 8.6 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of New York, without giving effect to
its principles and rules of conflict of laws to the extent such principles or
rules would require the application of the law of another jurisdiction;
provided, however, that issues involving the consummation and effects of the
Merger shall be governed by the GBCC.
Section 8.7 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any law or public policy,
all other terms and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Notwithstanding the foregoing, upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
49
Section 8.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties, in
whole or in part (whether by operation of law or otherwise), without the prior
written consent of the other party, and any attempt to make any such assignment
without such consent shall be null and void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
Section 8.9 Submission to Jurisdiction; Waivers. Each of the parties
hereto (i) consents to submit itself to the personal jurisdiction of the United
States District Court for the Southern District of New York or any court of the
State of New York located in such district in the event any dispute arises out
of this Agreement or any of the transactions contemplated by this Agreement and
(ii) agrees that it will not attempt to deny or defeat such personal
jurisdiction or venue by motion or other request for leave from any such court.
THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM BROUGHT BY ANY OF THEM AGAINST ANY OTHER PARTY HERETO IN ANY
MATTERS ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.
Section 8.10 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of New York, this being in addition to any other remedy to
which they are entitled at law or in equity.
50
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
CASTLEWOOD HOLDINGS LIMITED
By: /s/ β�.β�. ββββββ
-----------------------------------------------
Name: β�.β�. ββββββ
Title: Chief Financial Officer
CWMS SUBSIDIARY CORP.
By: /s/ ββββββ β�. βββββ�
-----------------------------------------------
Name: ββββββ β�. βββββ�
Title: Director
THE ENSTAR GROUP, INC.
By: /s/ ββββββ β�. ββββββ
-----------------------------------------------
Name: ββββββ β�. ββββββ
Title: Chairman and CEO
51
Index of Defined Terms
Section
------------
Actions........................................................................................ 3.1(h)(i)
Additional Accruals............................................................................ 1.10
Affiliate...................................................................................... 2.11
Affiliate Agreement............................................................................ 2.11
Agreement...................................................................................... Preamble
Articles of Incorporation...................................................................... 1.4
Benefit Plans.................................................................................. 3.1(k)(iv)
Board of Directors............................................................................. 3.1(a)(i)(D)
Business Combination Transaction............................................................... 5.4(a)
Business Day................................................................................... 1.2
By-Laws........................................................................................ 1.5
Certificate of Merger.......................................................................... 1.3
Certificates................................................................................... 1.8(b)
Change in the Company Recommendation........................................................... 5.1(b)
Closing........................................................................................ 1.2
Closing Date................................................................................... 1.2
Code........................................................................................... Recitals
Company........................................................................................ Preamble
Company Assets................................................................................. 3.2(q)(i)
Company Benefit Plan........................................................................... 3.2(k)(ii)
Company Board Approval......................................................................... 3.2(f)
Company Closing Value.......................................................................... 1.9(a)
Company Common Stock........................................................................... Recitals
Company Disclosure Letter...................................................................... 3.2
Company Exercise Price......................................................................... 1.9(a)
Company Exhibit 21............................................................................. 3.1(a)
Company Identified Contract.................................................................... 3.2(p)
Company Leased Real Property................................................................... 3.2(r)(ii)
Company Leases................................................................................. 3.2(r)(ii)
Company Option Ratio........................................................................... 1.9(a)
Company Option Spread.......................................................................... 1.9(a)
Company Owned Real Property.................................................................... 3.2(r)(ii)
Company Permits................................................................................ 3.2(h)(ii)
Company Permitted Liens........................................................................ 3.1(q)(ii)
Company Proxy Statement/Prospectus............................................................. 3.1(e)
Company Real Property.......................................................................... 3.2(r)(ii)
Company Recommendation......................................................................... 5.1(b)
Company Rights................................................................................. 1.8(a)
Company Rights Agreement....................................................................... 1.8(a)
Company SEC Reports............................................................................ 3.2(d)
Company Shareholder Approval................................................................... 3.2(g)
52
Company Shareholders Meeting................................................................... 5.1(b)
Company Stock Option........................................................................... 1.9(a)
Company Stock Plan............................................................................. 1.9(a)
Confidentiality Agreement...................................................................... 5.2(a)
Department of Labor............................................................................ 3.1(k)(iii)
Directors Deferred Plan........................................................................ 1.10
DOJ............................................................................................ 5.3(b)
Effective Time................................................................................. 1.3
Environmental Laws............................................................................. 3.1(m)
ERISA.......................................................................................... 3.1(k)(iv)
Exchange Act................................................................................... 2.6
Exchange Agent................................................................................. 2.1
Exchange Fund.................................................................................. 2.1
Exchange Ratio................................................................................. 1.8(a)
Expenses....................................................................................... 5.5
Form S-4....................................................................................... 3.1(e)
FTC............................................................................................ 5.3(b)
GAAP........................................................................................... 3.1(a)(i)(B)
GBCC........................................................................................... 1.1
Governmental Authorization..................................................................... 3.1(h)(vi)
Governmental Entity............................................................................ 2.6
HSR Act........................................................................................ 3.1(c)(iii)
Indebtedness................................................................................... 3.1(d)(ii)
Intellectual Property.......................................................................... 3.1(n)
IRS............................................................................................ 3.1(k)(iii)
knowledge...................................................................................... 3.1(h)(i)
known.......................................................................................... 3.1(h)(i)
Law............................................................................................ 3.1(h)(iii)
Lien........................................................................................... 3.1(a)(i)(A)
Material Adverse Effect........................................................................ 3.1(a)(i)(B)
Merger......................................................................................... Recitals
Merger Consideration........................................................................... 1.8(a)
Merger Sub..................................................................................... Preamble
Nasdaq......................................................................................... 2.5(b)
Necessary Consents............................................................................. 3.1(c)(iii)
Notice of Superior Proposal.................................................................... 5.4(d)
other party.................................................................................... 4.3
Parent......................................................................................... Preamble
Parent Assets.................................................................................. 3.1(q)(i)
Parent Benefit Plan............................................................................ 3.1(k)(ii)
Parent Class A Shares.......................................................................... 3.1(b)(i)
Parent Class B Shares.......................................................................... 3.1(b)(i)
Parent Class C Shares.......................................................................... 3.1(b)(i)
Parent Closing Value........................................................................... 1.9(a)
Parent Contract................................................................................ 3.1(p)
Parent Disclosure Letter....................................................................... 3.1
53
Parent Exercise Price.......................................................................... 1.9(a)
Parent Financial Statements.................................................................... 3.1(d)(i)
Parent Leased Real Property.................................................................... 3.1(r)(ii)
Parent Leases.................................................................................. 3.1(r)(ii)
Parent Ordinary Shares......................................................................... 1.8(a)
Parent Owned Real Property..................................................................... 3.1(r)(ii)
Parent Permits................................................................................. 3.1(h)(ii)
Parent Permitted Liens......................................................................... 3.2(q)(ii)
Parent Real Property........................................................................... 3.1(r)(ii)
Parent Recapitalization........................................................................ Recitals
Parent Recapitalization Agreement.............................................................. Recitals
Parent Voting Ordinary Shares.................................................................. 3.2(q)(ii)
parties........................................................................................ Preamble
Person......................................................................................... 2.6
Principal Shareholders......................................................................... Recitals
Regulatory Law................................................................................. 5.3(b)
SEC............................................................................................ 2.11
Securities Act................................................................................. 2.11
Subsidiary..................................................................................... 3.1(a)(i)(C)
Superior Proposal.............................................................................. 5.4(a)
Support Agreement.............................................................................. Recitals
Surviving Corporation.......................................................................... 1.1
Takeover Proposal.............................................................................. 5.4(a)
Tax Return..................................................................................... 3.1(o)(vi)(B)
Taxes.......................................................................................... 3.1(o)(vi)(A)
Termination Date............................................................................... 7.1(b)
Third Party.................................................................................... 5.4(a)
Treasury Regulation............................................................................ Recitals
54