SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Filed by the
Registrant
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Filed by a Party other than the
Registrant
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Check the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to § 240.14a-12
AMCOMP INCORPORATED
(Name of Registrant as Specified in
Its Charter)
(Name of Person(s) Filing Proxy
Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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1)
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Title of each class of securities to which transaction applies:
Common Stock, $0.01 par value per share, of AmCOMP
Incorporated.
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2)
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Aggregate number of securities to which transaction applies:
15,290,181 shares of common stock and options to
purchase 905,042 shares of common stock.
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3)
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(Set forth the amount on which the filing is calculated and
state how it was determined):
The filing fee was determined
by multiplying 0.0000393 by the sum of (i) $191,127,263,
which is the product of 15,290,181 outstanding shares of AmCOMP
Incorporated common stock and the merger consideration of $12.50
per share and (ii) $2,778,479 which is the product of
outstanding options to purchase 905,042 shares of common
stock and $3.07, which is the amount equal to the excess of
$12.50 per share over the weighted average exercise price per
share of such outstanding options.
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4)
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Proposed maximum aggregate value of transaction:
$193,905,742
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5)
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Total fee paid:
$7,620
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Fee paid previously with preliminary materials:
$7,620
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Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
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1)
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Amount Previously Paid:
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2)
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Form, Schedule or Registration Statement No.:
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AMCOMP
INCORPORATED
701 U.S. Highway One
North Palm Beach, Florida 33408
Dear Stockholder:
You are cordially invited to attend a special meeting of the
stockholders of AmCOMP Incorporated. The special meeting will be
held on May 29, 2008 at 9:00 AM, Eastern Time, at Palm
Beach Gardens Marriott, 4000 RCA Boulevard, Palm Beach Gardens,
Florida 33410.
At the special meeting (or any adjournment or postponement
thereof), you will be asked to consider and vote on a proposal
to adopt the Agreement and Plan of Merger, dated as of
January 10, 2008, as amended on April 28, 2008, by and
among AmCOMP Incorporated, a Delaware corporation, Employers
Holdings, Inc., a Nevada corporation, and Sapphire Acquisition
Corp., a Delaware corporation and wholly-owned subsidiary of
Employers Holdings, Inc. (the Merger Agreement).
Pursuant to the Merger Agreement, if the merger is completed,
each issued and outstanding share of common stock,
$0.01 par value, of AmCOMP Incorporated not held by
Employers Holdings, Inc., Sapphire Acquisition Corp. or AmCOMP
Incorporated, or by AmCOMP Incorporateds stockholders who
perfect their appraisal rights under Delaware law, will be
converted into the right to receive $12.50 per share in cash. As
part of the Merger Agreement, Sapphire Acquisition Corp. is to
merge with and into AmCOMP Incorporated, with AmCOMP
Incorporated being the surviving corporation in the merger. As a
result of the merger, AmCOMP Incorporated will cease to be a
publicly traded company and will become a wholly-owned
subsidiary of Employers Holdings.
Our board of directors has unanimously determined (with an
interested director abstaining from voting) that the merger and
the Merger Agreement are advisable and are fair to us and our
stockholders, and in our best interest and the best interest of
our stockholders. Accordingly, the board of directors has
unanimously approved the merger agreement (with an interested
director abstaining from voting).
The board of directors
unanimously recommends (with an interested director abstaining
from the recommendation) that you vote FOR the
adoption of the Merger Agreement at the special meeting and
FOR the approval of the adjournment of the special
meeting, if necessary or appropriate, to solicit additional
proxies.
We cannot consummate the merger unless the holders of a majority
of the outstanding shares of our common stock entitled to vote
approve the Merger Agreement.
Very truly yours,
Fred R. Lowe
Chairman, President and Chief Executive Officer
Your vote is extremely important.
Even if you plan to attend the special meeting, we ask that
you either promptly sign, date and return the enclosed proxy
card in the postage-paid envelope provided or promptly submit
your proxy by telephone or over the Internet following the
instructions on the proxy card.
AMCOMP
INCORPORATED
701 U.S. Highway One
North Palm Beach, Florida 33408
NOTICE
OF
SPECIAL MEETING OF STOCKHOLDERS
MAY 29, 2008
Notice is hereby given that a special meeting of the
stockholders of AmCOMP Incorporated will be held on May 29,
2008 at 9:00 AM, Eastern Time, at Palm Beach Gardens
Marriott, 4000 RCA Boulevard, Palm Beach Gardens, Florida 33410.
The special meeting is being held for the following purposes:
1. To consider and vote upon a proposal to adopt the
Agreement and Plan of Merger, dated as of January 10, 2008,
as amended on April 28, 2008, by and among AmCOMP
Incorporated, a Delaware corporation, Employers Holdings, Inc.,
a Nevada corporation, and Sapphire Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of Employers Holdings,
Inc. (the Merger Agreement), pursuant to which
Sapphire Acquisition Corp. will merge with and into AmCOMP
Incorporated, with AmCOMP Incorporated being the surviving
corporation in the merger and continuing as a wholly-owned
subsidiary of Employers Holdings; and each issued and
outstanding share of common stock, $0.01 par value, of
AmCOMP Incorporated not held by Employers Holdings, Inc.,
Sapphire Acquisition Corp. or AmCOMP Incorporated, or by AmCOMP
Incorporateds stockholders who perfect their appraisal
rights under Delaware law, will be converted into the right to
receive $12.50 per share in cash;
2. To approve the adjournment of the special meeting, if
necessary or appropriate, to solicit additional proxies if there
are insufficient votes at the time of the special meeting to
adopt the Merger Agreement; and
3. To transact such other business as may properly come
before the special meeting or any adjournment or postponement
thereof.
The board of directors unanimously recommends (with an
interested director abstaining from the recommendation) that you
vote FOR the adoption of the Merger Agreement and
FOR the approval of the adjournment of the special
meeting, if necessary or appropriate, to solicit additional
proxies.
The proxy statement accompanying this notice provides a more
complete description of the matters to be acted upon at the
special meeting. Stockholders of record at the close of business
on April 23, 2008 are entitled to receive notice of and to
vote at the special meeting and any adjournment or postponement
thereof. A list of such stockholders will be available for
examination by any stockholder for any purpose related to the
special meeting during ordinary business hours at AmCOMP
Incorporated, 701 U.S. Highway One, North Palm Beach,
Florida 33408, during the
10-day
period preceding the special meeting.
In order to approve the Merger Agreement, holders of a majority
of the outstanding shares of our common stock entitled to vote
must vote in favor of adopting the Merger Agreement.
In connection with the Merger Agreement, each of (a) Fred
Lowe, our Chairman, Chief Executive Officer and President,
(b) Sam A. Stephens, one of our directors, (c) WCAS
Healthcare Partners, L.P. and (d) Welsh, Carson,
Anderson & Stowe, VII L.P., as to which Paul B.
Queally, one of our directors, may be deemed to have shared
investment and voting power of shares of our common stock held
by it, have each entered into voting agreements under which they
have agreed to vote all of their shares in favor of the merger.
These stockholders hold approximately 17.2% of our outstanding
voting power.
All stockholders are cordially invited to attend the special
meeting. Whether or not you expect to attend, please sign and
return the enclosed proxy card promptly in the postage-paid
envelope provided or promptly submit your proxy by telephone or
over the Internet following the instructions on the proxy card.
If you attend the special meeting and vote by ballot, any
previously submitted proxy will be revoked.
If you fail to
vote in person or by proxy, or abstain from voting, it will have
exactly the same effect as voting against adoption of the Merger
Agreement.
Stockholders of AmCOMP Incorporated who do not
vote in favor of the adoption of the Merger Agreement will have
the right to seek appraisal of the fair value of their shares of
common stock if they deliver a demand for appraisal before the
vote is taken on the Merger Agreement and comply with all
requirements of Delaware law, which are summarized in the
accompanying proxy statement.
This proxy statement and the form of the proxy are first being
sent to stockholders on or about April 29, 2008.
By Order of the Board of Directors
Fred R. Lowe
Chairman, President and Chief Executive Officer
TABLE OF
CONTENTS
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Agreement and Plan of Merger, dated as of
January 10, 2008, by and among AmCOMP Incorporated,
Employers Holdings, Inc. and Sapphire Acquisition Corp.
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A-1
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Amendment No. 1 to Agreement and Plan of
Merger, dated as of April 28, 2008, by and among AmCOMP
Incorporated, Employers Holdings, Inc. and Sapphire Acquisition
Corp.
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B-1
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Opinion of Raymond James & Associates,
Inc.
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C-1
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Section 262 of the Delaware General
Corporation Law
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D-1
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ii
SUMMARY
TERM SHEET
This summary term sheet highlights selected information from
this proxy statement about the proposed transactions
contemplated by the merger agreement and the special meeting and
may not contain all of the information that is important to you
as a stockholder of AmCOMP Incorporated. Accordingly, we
encourage you to read carefully this entire document and the
other documents to which we refer you.
As a result of the transactions contemplated by the merger
agreement, each issued and outstanding share of common stock of
AmCOMP Incorporated not held by Employers Holdings, Inc.,
Sapphire Acquisition Corp. or by us, or by our stockholders who
perfect their appraisal rights under Delaware law, will be
converted into the right to receive $12.50 per share in cash. As
part of the merger agreement, Sapphire Acquisition Corp. is to
merge with and into AmCOMP Incorporated, with AmCOMP
Incorporated being the surviving corporation in the merger. As a
result of the merger, AmCOMP Incorporated will cease to be a
publicly traded company and will become a wholly-owned
subsidiary of Employers Holdings.
References in this proxy statement to AmCOMP,
we, our, our company and
us mean, unless the context indicates otherwise,
AmCOMP Incorporated and its subsidiaries; all references to
Parent refer to Employers Holdings, Inc.; all
references to Merger Sub refer to Sapphire
Acquisition Corp.; all references to the Merger
Agreement refer to the Agreement and Plan of Merger, dated
as of January 10, 2008, as amended on April 28, 2008,
by and among AmCOMP Incorporated, Employers Holdings, Inc., and
Sapphire Acquisition Corp., as it may be further amended from
time to time; all references to the merger refer to
the merger of Merger Sub with and into us pursuant to the Merger
Agreement; and all references to the transactions
refer to the merger and any other transactions contemplated by
the Merger Agreement. A copy of the Agreement and Plan of
Merger, dated as of January 10, 2008, by and among AmCOMP
Incorporated, Employers Holdings, Inc., and Sapphire Acquisition
Corp. is attached as Annex A to this proxy statement and
Amendment No. 1 to the Agreement and Plan of Merger, dated
as of April 28, 2008, by and among AmCOMP Incorporated,
Employers Holdings, Inc., and Sapphire Acquisition Corp. is
attached as Annex B to this proxy statement.
The
Companies (page 19)
AmCOMP Incorporated
701 U.S. Highway One
North Palm Beach, Florida 33408
(561) 840-7171
AmCOMP Incorporated is an insurance holding company whose
wholly-owned subsidiaries, AmCOMP Preferred and AmCOMP
Assurance, are mono-line workers compensation insurers
with products that focus on value-added services to
policyholders. Currently marketing insurance policies in 17 core
states and targeting small to mid-sized employers in a variety
of industries, AmCOMP distributes its products through
independent agencies.
Employers Holdings, Inc.
10375 Professional Circle
Reno, Nevada
89521-5906
(775) 327-2754
Employers Holdings, Inc. is a holding company with subsidiaries
that are specialty providers of workers compensation
insurance and services focused on select, small businesses
engaged in low-to-medium hazard industries. The company, through
its subsidiaries, operates in 11 states from 13 office
locations. The companys insurance subsidiaries, Employers
Insurance Company of Nevada and Employers Compensation Insurance
Company, are rated A− (Excellent) by the
A.M. Best Company.
Sapphire Acquisition Corp.
c/o Employers
Holdings, Inc.
10375 Professional Circle
Reno, Nevada
89521-5906
(775) 327-2754
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Sapphire Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent, was formed solely for the
purpose of effecting the merger and the transactions related to
the Merger Agreement. It has not engaged in any business except
in furtherance of this purpose.
The
Special Meeting (page 16)
Date,
Time and Place (page 16)
The special meeting will be held on May 29, 2008 at
9:00 AM, Eastern Time, at Palm Beach Gardens Marriott, 4000
RCA Boulevard, Palm Beach Gardens, Florida 33410, to consider
and vote upon proposals to adopt the Merger Agreement, to
approve the adjournment of the special meeting, if necessary or
appropriate, to solicit additional proxies if there are
insufficient votes at the time of the special meeting to approve
the adoption of the Merger Agreement, and to transact such other
business as may properly come before the special meeting and any
adjournment or postponement thereof.
Record
Date (page 16)
Only holders of record of our common stock at the close of
business on April 23, 2008, the record date for the special
meeting, are entitled to notice of, and to vote at, the special
meeting. On the record date, 15,294,371 shares of our
common stock were outstanding and held by approximately 44
holders of record.
Vote
Required (page 16)
In order to approve the Merger Agreement, holders of a majority
of the outstanding shares of our common stock entitled to vote
must vote in favor of adopting the Merger Agreement.
If you
withhold a vote or abstain from voting on the proposal for the
adoption of the Merger Agreement, it will have the same effect
as a vote AGAINST the proposal.
Approval of the
proposal to adjourn the special meeting, if necessary or
appropriate, requires the favorable vote of a majority of the
votes cast at the special meeting, in person or by proxy, even
if less than a quorum.
Voting
Agreements (page 34)
In connection with the Merger Agreement, each of (a) Fred
Lowe, our Chairman, Chief Executive Officer and President,
(b) Sam A. Stephens, one of our directors, (c) WCAS
Healthcare Partners, L.P. and (d) Welsh, Carson,
Anderson & Stowe, VII L.P., which we refer to
collectively as the Voting Agreement Parties, entered into a
voting and support agreement, which we refer to together as the
Voting Agreements, with Parent, which agreements relate to an
aggregate of 2,627,094 shares of common stock, representing
approximately 17.2% of our outstanding common stock. Paul B.
Queally, one of our directors, may be deemed to have shared
investment and voting power over shares of our common stock held
by Welsh, Carson, Anderson & Stove, VII L.P. Pursuant
to the Voting Agreements and as more fully described therein,
the Voting Agreement Parties, among other things,
unconditionally and irrevocably agreed, at any duly called
meeting of our stockholders (or any adjournment or postponement
thereof), and in any action by written consent of our
stockholders, to vote all of their common stock (a) in
favor of the merger and the approval of the Merger Agreement and
the other transactions contemplated thereby (and any actions in
furtherance thereof) and (b) against any action, proposal,
transaction or agreement that would result in a breach in any
respect of any covenant, representation or warranty or any other
obligation or agreement of ours contained in the Merger
Agreement or of the Voting Agreement Parties contained in the
Voting Agreements.
Each Voting Agreement terminates upon the earliest to occur of
(a) the mutual written consent of Parent and the other
party to the Voting Agreement, (b) the effective time of
the merger, (c) the date of termination of the Merger
Agreement in accordance with its terms, (d) the date of any
change or amendment to the Merger Agreement that results in any
decrease in the merger consideration, or
(e) October 31, 2009.
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Voting
of Proxies (page 18)
After carefully reading and considering the information
contained in this proxy statement and even if you plan to attend
the special meeting, you should either sign and date the
enclosed proxy card and mail the proxy card in the enclosed
postage-paid envelope as soon as possible or promptly submit
your proxy by telephone or over the Internet following the
instructions on the proxy card so that your shares of common
stock are represented at the special meeting. If you elect to
submit your proxy by telephone or via the Internet, you will
need to provide the control number set forth on the enclosed
proxy card.
If no specification is indicated, all of your
shares of common stock represented by valid proxies that have
been submitted will be voted FOR the adoption of the
Merger Agreement and FOR the adjournment of the
special meeting, if necessary or appropriate, to solicit
additional proxies.
Revocability
of Proxies (page 18)
Until your proxy is voted at the special meeting, you can revoke
your proxy and change your vote in any of the following ways:
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by giving written notice of the revocation to our Secretary;
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by properly submitting another proxy by mail, telephone or the
Internet, with a later date; or
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by voting in person at the special meeting (if your shares are
registered directly on our books and not held through a broker,
bank or other nominee).
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Your attendance at the special meeting will not in and of itself
constitute a revocation of your proxy.
If you have instructed your broker or other nominee to vote your
shares, you must follow the procedures provided by your broker
or nominee to change those instructions.
The
Merger (page 19)
Certain
Effects of the Merger (page 45)
If the Merger Agreement is approved and adopted by our
stockholders and the other conditions to closing are satisfied
or, if permissible, waived, and the proposed merger is
consummated, each issued and outstanding share of our common
stock not held by Parent, Merger Sub or us, or by our
stockholders who perfect their appraisal rights under Delaware
law, will be converted into the right to receive $12.50 per
share in cash. As part of the Merger Agreement, Merger Sub is to
merge with and into us, with our company being the surviving
corporation in the merger and continuing as a wholly-owned
subsidiary of Parent. As a result of the merger, we will cease
to be a publicly traded company and thus you will cease to have
any ownership interest in us and will not participate in any of
our future earnings and growth or losses.
Reasons
for the Merger (page 24)
Our Board has unanimously determined to recommend (with an
interested director abstaining from such recommendation) the
adoption of the Merger Agreement based on its consideration of a
number of factors, which are described in the section of this
proxy statement entitled The Merger Reasons
for the Merger.
Recommendation
of the Board of Directors (page 26)
After careful consideration, our Board (with an interested
director abstaining from voting) has unanimously determined that
the Merger Agreement and the merger are advisable and are fair
to us and our stockholders, and in our best interest and the
best interest of our stockholders, and has unanimously (with an
interested director abstaining from voting) approved the Merger
Agreement and the merger.
Our Board unanimously recommends
(with an interested director abstaining from the recommendation)
that you vote FOR the adoption of the Merger
Agreement and the approval of the transactions contemplated
thereby at the special meeting and FOR the approval
of the adjournment of the special meeting, if necessary or
appropriate, to solicit additional proxies.
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Opinion
Delivered to the Board of Directors (page 26)
In connection with its consideration and approval of the merger,
the Board received a written opinion, dated January 10,
2008, from Raymond James & Associates, Inc., which we
refer to as Raymond James, as to the fairness to our
stockholders, from a financial point of view and as of the date
of the opinion, of the $12.50 per share merger consideration.
The full text of the written opinion of Raymond James is
attached to this proxy statement as Annex C. We encourage
you to read this opinion carefully in its entirety for a
description of the assumptions made, procedures followed,
matters considered and limitations on the review undertaken by
Raymond James. The opinion was provided to the Board in
connection with its evaluation of the $12.50 per share merger
consideration to be received by our stockholders and relates
only to the fairness to our stockholders, from a financial point
of view and as of January 10, 2008, of the $12.50 per share
merger consideration. The opinion does not address any other
terms, aspects or implications of the merger and does not
constitute a recommendation to any stockholder as to how such
stockholder should vote or act on any matter relating to the
proposed transactions.
Background
of the Merger (page 19)
The section of the proxy statement entitled The
Merger Background of the Merger contains a
description of the process that we undertook in reaching a
definitive merger agreement with Parent and Merger Sub, and
includes a discussion of our contacts and discussions with
Parent and its affiliates that led to the Merger Agreement.
Material
United States Federal Income Tax Consequences
(page 32)
Holders of our common stock that exchange all of their shares of
our common stock for cash (either pursuant to the Merger
Agreement or as a result of perfecting their appraisal rights)
will recognize gain or loss on the exchange in an amount equal
to the difference between the amount of the cash received and
their respective adjusted tax basis in the shares of our common
stock exchanged therefor.
Interests
of Certain Persons in the Merger (page 36)
When considering the unanimous recommendation of our
disinterested directors that our stockholders vote in favor of
the adoption of the Merger Agreement, you should be aware that
some of our directors and executive officers have interests in
the merger that are different from, or in addition to, the
interests of our stockholders. See The Merger
Interests of Certain Persons in the Merger for a
description of such interests that may be different from, or in
addition to, the interests of our stockholders.
Our Board knew about these additional interests and considered
them, among other matters, when it approved the Merger Agreement
and determined that the merger and the Merger Agreement are
advisable and are fair to us and our stockholders, and in our
best interest and the best interest of our stockholders. As a
result of these interests, specifically the negotiation with
Debra Cerre-Ruedisili, a director and our executive vice
president and chief operating officer, of an Integration Bonus
and Enhanced Severance Agreement, Ms. Cerre-Ruedisili
abstained from voting on the approval of the Merger Agreement
and the determination that the merger and the Merger Agreement
are advisable and are fair to us and our stockholders, and in
our best interests and the best interests of our stockholders.
Appraisal
or Dissenters Rights (page 41)
Under Delaware law, our stockholders who comply with the
requirements of Section 262 of the General Corporation Law
of the State of Delaware are entitled to appraisal rights in
connection with the merger. To exercise appraisal rights, you
must:
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be a stockholder of ours, as defined in
Section 262 of the General Corporation Law of the State of
Delaware, on the date you make a written demand for appraisal
and continuously hold your shares through the effective date of
the merger;
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before the taking of the vote on the proposal to approve the
Merger Agreement at the special meeting, deliver to us a written
demand for appraisal and not withdraw your demand;
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NOT vote in favor of the proposal to approve the Merger
Agreement; and
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comply with other procedures as required by Section 262 of
the General Corporation Law of the State of Delaware.
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Your failure to follow exactly the procedures specified under
Delaware law will result in the loss of your appraisal rights. A
copy of the full text of Section 262 of the General
Corporation Law of the State of Delaware is attached to this
proxy statement as Annex D.
Under the Merger Agreement, Parent is not required to complete
the merger if holders of more than 15.0% of our outstanding
common stock as of the effective date of the merger make a
written demand for appraisal of their shares in accordance with
Delaware law.
The
Merger Agreement (page 45)
Treatment
of Stock Options (page 47)
A holder of outstanding options to purchase shares of our common
stock, whether or not then vested, at the effective time of the
merger is entitled to receive a cash amount equal to the product
of (a) the amount, if any, by which $12.50 exceeds the
exercise price per share of each option held by such person at
the effective time of the merger, and (b) the number of
shares subject to such option held by such person, less any
applicable withholdings for taxes. No consideration is to be
paid in respect of any stock options for which the exercise
price equals or exceeds $12.50 per share.
Solicitation
(page 53)
From the date of the Merger Agreement, neither we nor our
subsidiaries may, directly or indirectly, nor may we or our
subsidiaries, directly or indirectly, authorize or permit any of
our respective representatives, to:
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solicit, encourage, assist, initiate or facilitate the making,
submission or announcement of a third party takeover proposal;
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furnish any non-public information regarding us or any of our
subsidiaries or the merger to any person or group (other than to
Parent, Merger Sub or their representatives) in connection with
or in response to a third party takeover proposal;
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engage or participate in discussions or negotiations with any
person or group with respect to, or that could be expected to
lead to, a third party takeover proposal;
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withdraw, modify or qualify, or propose publicly to withdraw,
modify or qualify, in a manner adverse to Parent, the approval
of the Merger Agreement or the merger or the recommendation of
our Board that holders of shares of our common stock adopt the
Merger Agreement;
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approve, endorse or recommend, or publicly propose to approve,
endorse or recommend, a third party takeover proposal;
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cause ourselves or any of our subsidiaries to discuss, negotiate
or enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any
third party takeover proposal; or
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release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which we or any of
our subsidiaries are a party (except in specified circumstances).
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In addition, we must request the prompt return or destruction of
any confidential information provided to any person or group
prior to the date hereof in connection with a third party
takeover proposal (as such term is defined in Merger
Agreement Solicitation), including in
accordance with any confidentiality agreement entered into with
such person or group, and must deny access to any data room
(virtual or actual) containing any such information to any such
person or group.
Notwithstanding the aforementioned restrictions, at any time
prior to the approval of the Merger Agreement by our
stockholders, and provided that we are otherwise in compliance
in all material respects with the covenants
5
relating to solicitation and changes in or withdrawal of our
Boards recommendation, we are not prohibited or limited
from (a) furnishing non-public information regarding us to,
or (b) entering into discussions or negotiations with any
person or group in response to an unsolicited, bona fide written
third party takeover proposal received after the date we entered
into the Merger Agreement that did not result from a violation
of the restrictions described above if:
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our Board determines in good faith, after consultation with our
outside legal and financial advisors, that (a) such third
party takeover proposal constitutes or could be expected to
result in, after the taking of any of the actions referred to
above, a superior offer (as such term is defined in
Merger Agreement Solicitation), and
(b) such action with respect to such third party takeover
proposal is necessary for our Board to comply with its fiduciary
duties to our stockholders under all applicable law;
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we receive from such person or group an executed confidentiality
agreement with provisions no less favorable, in the aggregate,
to us than, and with terms at least as restrictive of such
person or group (including with respect to the standstill
provisions thereof), as those contained in our confidentiality
agreement with Parent; and
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contemporaneously with furnishing any such information to such
person or group, we furnish such information to Parent to the
extent that such information has not been previously furnished
to Parent; and
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prior to the taking of any such actions by us or our Board as
described above, we provide written notice to Parent of such
determination of our Board.
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From and after the date of the Merger Agreement, we must notify
Parent within 48 hours if we receive any acquisition
proposal.
Change
of Recommendation/Withdrawal of Recommendation
(page 55)
Our Board may, at any time prior to the adoption of the Merger
Agreement and approval of the merger by our stockholders:
(a) withdraw or modify its recommendation that holders of
shares of our common stock adopt the Merger Agreement and
approve the merger in connection with a third party takeover
proposal; or (b) approve or recommend a superior offer, if,
in the case of both clause (a) and (b) above:
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an unsolicited, bona fide written offer is made to us by a third
party representing a third party takeover proposal;
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we are in compliance in all material respects with our
obligations with respect to solicitation and changes in or
withdrawal of the recommendation of our Board;
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our Board determines in good faith after consultation with our
outside legal and financial advisors that such third party
takeover proposal constitutes a superior offer (after giving
effect to all adjustments to the terms of the Merger Agreement
that may be proposed by Parent); and
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following consultation with our outside legal counsel and
financial advisors, our Board determines in good faith that the
withdrawal or modification of the Boards recommendation
that holders of common stock adopt the Merger Agreement and
approve the merger is required to comply with the Boards
fiduciary duties to our stockholders under applicable law;
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but prior to taking any action described above, (a) we
provide a written notice to Parent advising Parent:
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that our Board has received a superior offer and the Board
intends to approve or recommend that our stockholders approve
the superior offer;
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specifying the material terms and conditions of such superior
offer (including a copy thereof, if in writing) and identifying
the person or group making such superior offer; and
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providing to Parent all materials and information delivered or
made available to the person or group making such proposed
superior offer (it being understood and agreed that any
amendment to the financial or other material terms of any such
proposed superior offer would require a new notice to Parent
including all of the items listed here and a new five business
day period as described in clause (b) below),
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and (b) during the five business days following
Parents receipt of the notice described above, we, and we
direct our representatives to, cooperate and negotiate in good
faith with Parent (to the extent that Parent requests the same)
to enable Parent to propose in writing such adjustments to the
terms of the Merger Agreement so that any third party takeover
proposal ceases to constitute a superior offer.
Our Board may, at any time prior to the adoption of the Merger
Agreement and approval of the merger by our stockholders and
other than as a result of the receipt of a third party takeover
proposal, withdraw or modify its approval of the Merger
Agreement or the Boards recommendation that our
stockholders adopt the Merger Agreement and approve the merger
if our Board determines in good faith (after consultation with
our outside legal and financial advisors) that the failure to
take such action would violate the Boards fiduciary duties
under applicable law.
Conditions
to the Merger (page 58)
The respective obligations of each party to effect the merger
are subject to the fulfillment or waiver of the following
conditions:
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the approval of the Merger Agreement by our stockholders (which
is not waivable by the parties);
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the expiration or termination of the waiting period (and any
extensions thereof) under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, which we refer
to as the HSR Act (which is not waivable by the parties) (on
February 19, 2008, we and Parent received notice that the
waiting period under the HSR Act was terminated as of
February 19, 2008);
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the receipt of all authorizations, approvals and permits
required to be obtained from any governmental authority in order
to consummate the merger; and
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the absence of any enactment, issuance, promulgation,
enforcement or entrance by any governmental authority in the
United States of any law (whether temporary, preliminary or
permanent) or order that is then in effect and has the effect of
making the merger illegal or otherwise preventing or prohibiting
consummation of the merger (which is not waivable by the
parties).
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Except as indicated above, all of the closing conditions are
waivable. Neither we nor Parent have to date considered the
waiver of any of the closing conditions that may be waived under
the Merger Agreement.
In addition to the conditions described above, there are certain
other conditions to the obligation to consummate the merger by
both Parent and Merger Sub and us, including Parents and
Merger Subs ability not to consummate the merger if
(a) in connection with obtaining regulatory approval any
regulatory authority imposes certain conditions on Parent or
(b) a material adverse effect on us occurs after the date
the Merger Agreement was entered into but before the effective
time of the Merger.
Termination
of the Merger Agreement (page 59)
The Merger Agreement may be terminated and the merger and the
other transactions contemplated thereby may be abandoned at any
time prior to the effective time of the merger, notwithstanding
any approval of the matters presented in connection with the
merger by our stockholders, as follows:
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by mutual written consent of each of us and Parent, as duly
authorized by our Board and Parents board of directors;
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by written notice by either Parent or us, if the effective time
of the merger has not occurred on or before October 31,
2008, provided that this right is not available to a party that
is in breach of the Merger Agreement;
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by written notice by either Parent or us, if any governmental
authority has enacted, issued, promulgated, enforced or entered
any order or law that is, in each case, then in effect and is
final and nonappealable and has the effect of permanently
restraining, enjoining or otherwise preventing or prohibiting
the transactions contemplated by the Merger Agreement, provided
that this right is not available to a party that is in breach of
the Merger Agreement;
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by written notice by Parent (if Parent is not in material breach
of any of its representations, warranties, covenants or
agreements under the Merger Agreement), if there has been a
breach by us of any of our representations, warranties,
covenants or agreements contained in the Merger Agreement, or if
any of our representations or warranties have become untrue or
inaccurate, in either case that would result in a failure of a
condition to closing (subject to a
20-day
cure
period);
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by written notice by us (if we are not in material breach of any
of our representations, warranties, covenants or agreements
under the Merger Agreement), if there has been a breach by
Parent or Merger Sub of any of its representations, warranties,
covenants or agreements contained in the Merger Agreement, or if
any representation or warranty of Parent or Merger Sub has
become untrue or inaccurate, in either case that would result in
a failure of a condition to closing (subject to a
20-day
cure
period);
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by written notice by Parent, if our Board:
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withdraws, modifies or qualifies in a manner adverse to Parent
or Merger Sub, or publicly proposes to withdraw, modify or
qualify in a manner adverse to Parent or Merger Sub, its
recommendation that the holders of our shares of common stock
adopt the Merger Agreement;
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fails to include in this proxy statement its recommendation to
the holders of our shares of common stock that they adopt the
Merger Agreement and approve the merger;
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approves, endorses or recommends, or publicly proposes to
approve, endorse or recommend, any third party takeover proposal;
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withdraws or changes its recommendation with respect to the
merger; or
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in the case of a third party takeover proposal made by way of a
tender offer or exchange offer, fails to recommend that our
stockholders reject such tender offer or exchange offer within
the ten business day period specified in
Section 14e-2(a)
under the Exchange Act or (if later than the end of such ten
business day period) fails to reconfirm its recommendation that
the holders of shares of our common stock adopt the Merger
Agreement and approve the merger within five business days after
a request by Parent to do so; or
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by written notice by either Parent or us, if, at the special
meeting (including any adjournment or postponement thereof at
which the Merger Agreement is voted upon), our stockholders do
not adopt the Merger Agreement or approve the merger, provided
that this right is not available to us if the failure to adopt
the Merger Agreement or approve the merger by our stockholders
is a result of our breach of the Merger Agreement.
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Effect
of Termination of the Merger Agreement
(page 60)
In the event of the termination of the Merger Agreement as
described in Termination of the Merger
Agreement above, the Merger Agreement would become void,
and there would be no liability under the Merger Agreement on
the part of any party to the Merger Agreement or any of their
respective affiliates or the directors, officers, partners,
members, managers, employees, agents or representatives of any
of them, and all rights and obligations of each party to the
Merger Agreement would cease, except that:
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the parties would remain liable for fees and expenses under the
circumstances described below;
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the parties would remain subject to the confidentiality and
certain other provisions of the Merger Agreement;
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the parties would remain subject to certain other provisions as
specified in the Merger Agreement; and
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nothing described above would relieve us from liability for any
fraud or willful breach by us of the Merger Agreement.
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8
Fees
and Expenses (page 60)
Except as otherwise set forth below, all expenses incurred in
connection with the Merger Agreement and the transactions
contemplated thereby are to be paid by the party incurring such
expenses, whether or not the merger or any other related
transaction is consummated. In addition, the filing fee under
the HSR Act is to be borne equally by us and Parent.
If any of the following occur:
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at any time on or after January 10, 2008, a third party
takeover proposal is made to us or proposed to be made to us;
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thereafter, the Merger Agreement is terminated (1) by us or
Parent because the merger has not occurred on or before
October 31, 2008 or because our stockholders do not adopt
the Merger Agreement and approve the merger at the special
meeting, or (2) by Parent because we have breached the
Merger Agreement (assuming Parent is not in material
breach); and
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on or within 12 months after the date of such termination,
any definitive agreement providing for a qualifying
transaction has been executed or a qualifying transaction
has been consummated with any person (any such event, a
triggering event);
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(b) the Merger Agreement is terminated by Parent because
our Board withdraws or changes its recommendation that our
stockholders adopt the Merger Agreement and approve the
merger; or
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(c) the Merger Agreement is terminated by us or Parent
because our stockholders do not adopt the Merger Agreement and
approve the merger at the special meeting and prior to such
termination, our Board withdraws or changes its recommendation
that our stockholders adopt the Merger Agreement and approve the
merger,
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then we are to pay to Parent a fee of $8.0 million in cash
(except that, in the case of (a) above, the fee is
$5.0 million in cash if no triggering event occurs on or
within six months after the date of termination of the Merger
Agreement but a triggering event occurs thereafter but within
twelve months after the date of termination), which we refer to
as the Termination Fee, either upon entering into a
qualifying transaction or, in the case of
(b) or (c) above, within two days following
termination. If our stockholders do not adopt the Merger
Agreement and approve the merger at the special meeting, the
expenses of Parent, up to $2.0 million, and to be credited
against the Termination Fee, are to be paid either concurrently
with termination by us or within two business days after
termination by Parent.
In addition to the right of Parent and Merger Sub to receive the
Termination Fee in the foregoing circumstances, Parent and
Merger Sub may also be entitled to recover additional damages as
well as specific performance of the Merger Agreement.
For purposes of this proxy statement, a qualifying
transaction means any third party takeover proposal (as
defined in Merger Agreement
Solicitation), except any references to 15% in the
definition of third party takeover proposal are replaced with
50%.
If we terminate the Merger Agreement as a result of
Parents breach of its representation that it has
sufficient funds to complete the merger or Parents breach
of its covenants and agreements contained in the Merger
Agreement and we demand payment of the parent termination fee of
$8.0 million, which we refer to as the Parent Termination
Fee, at the time of such termination, Parent is to pay us such
fee within two business days after our termination.
Our right to receive the Parent Termination Fee would terminate:
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if we make any demand or claim for any loss, claim, damage,
liability or expense suffered in connection with the Merger
Agreement or the merger or as a result of the failure of the
merger to be consummated in
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circumstances giving rise to the right to receive the Parent
Termination Fee in any action, in each case, other than for the
payment of the Parent Termination Fee; or
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if any of the specified conditions to the obligations of Parent
or Merger Sub to consummate the merger become incapable of being
satisfied.
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Our right to receive the Parent Termination Fee is our sole and
exclusive remedy against Parent, Merger Sub or their affiliates
for any loss, claim, damage, liability or expense:
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suffered in connection with the Merger Agreement or the merger
(including any breach of the Merger Agreement by Parent or
Merger Sub); or
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as a result of the failure of the merger to be consummated in
circumstances giving rise to the right to receive the Parent
Termination Fee.
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Upon payment of the Parent Termination Fee, none of Parent,
Merger Sub or their affiliates would have any further liability
or obligation relating to or arising out of the Merger Agreement
or the merger and the payment of the Parent Termination Fee
constitutes our sole and exclusive remedy relating to or arising
out of the Merger Agreement or the merger. In no event would
Parent or Merger Sub be required to pay us more than the Parent
Termination Fee and we will have no right against Parent or
Merger Sub to specifically enforce the Merger Agreement.
In the event that we were to fail to pay the Termination Fee
when due or Parent were to fail to pay the Parent Termination
Fee when due, we or Parent would be required to reimburse the
other for all reasonable costs and expenses actually incurred or
accrued by us or Parent (including reasonable fees and expenses
of counsel) in connection with the collection and enforcement of
the applicable termination fee. If not paid when due, the
applicable termination fee would accrue interest for the period
commencing on the date such termination fee first became equal
to the prime rate.
10
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers briefly address some
commonly asked questions regarding the special meeting, the
merger and the Merger Agreement. These questions and answers may
not address all questions that may be important to you. Please
refer to the more detailed information contained elsewhere in
this proxy statement, the appendices to this proxy statement and
the other documents we refer to in this proxy statement.
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Q.
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Why are our stockholders receiving these materials?
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A.
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Our Board is sending these proxy materials to provide our
stockholders with information about the merger so that they may
determine how to vote their shares in connection with the
special meeting.
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Q.
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When and where is the special meeting?
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A.
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The special meeting will be held on May 29, 2008 at
9:00 AM, Eastern Time, at Palm Beach Gardens Marriott, 4000
RCA Boulevard, Palm Beach Gardens, Florida 33410.
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Q.
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Who is soliciting my proxy?
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A.
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This proxy is being solicited by our Board.
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Q.
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Who is paying for the solicitation of proxies?
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A.
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We will bear the cost of solicitation of proxies by us. In
addition to soliciting stockholders by mail, our directors,
officers and employees, without additional remuneration, may
solicit proxies in person or by telephone or other means of
electronic communication. We will not pay these individuals for
their solicitation activities but will reimburse them for their
reasonable out-of-pocket expenses. Brokers and other custodians,
nominees and fiduciaries will be requested to forward
proxy-soliciting material to the owners of stock held in their
names, and we will reimburse such brokers and other custodians,
nominees and fiduciaries for their reasonable out-of-pocket
costs. Solicitation by our directors, officers and employees may
also be made of some stockholders in person or by mail,
telephone or other means of electronic communication following
the original solicitation. In addition, we have retained
MacKenzie Partners, Inc., at a cost of $7,500, to assist in the
solicitation of proxies.
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Q.
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What matters will we vote on at the special meeting?
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A.
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You will vote on the following proposals:
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to adopt the Merger Agreement;
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to approve the adjournment of the special meeting,
if necessary or appropriate, to solicit additional proxies if
there are insufficient votes at the time of the special meeting
to adopt the Merger Agreement; and
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to transact such other business as may properly come
before the special meeting or any adjournment or postponement
thereof.
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None of the proposals to be acted upon at the special meeting is
conditioned upon the approval of any other proposal.
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Q.
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How does our Board recommend I vote on the proposals?
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A.
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Our Board, other than Debra Cerre-Ruedisili, who abstained from
the vote, recommends that you vote:
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FOR the adoption of the Merger
Agreement; and
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FOR the adjournment of the special
meeting, if necessary or appropriate, to solicit additional
proxies.
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Q.
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What is the required vote for the adoption of the Merger
Agreement?
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A.
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In order to approve the Merger Agreement, holders of a majority
of the outstanding shares of our common stock entitled to vote
must vote in favor of adopting the Merger Agreement. The Voting
Agreement Parties, holding approximately 17.2% of our
outstanding voting power, have unconditionally and irrevocably
agreed to vote all of their shares in favor of the adoption of
the Merger Agreement.
If you withhold a vote or abstain from
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voting on the proposal for the adoption of the Merger
Agreement, it will have the same effect as a vote
AGAINST the proposal.
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Q.
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What is the required vote for the approval of the adjournment
of the special meeting?
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A.
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Approval of the proposal to adjourn the special meeting, if
necessary or appropriate, requires the favorable vote of a
majority of the votes cast at the special meeting, in person or
by proxy, even if less than a quorum.
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Q.
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How do I vote my shares at the special meeting?
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A.
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If you hold shares in your name as a stockholder of record, you
may vote those shares in person at the meeting by giving us a
signed proxy card or ballot before voting is closed. If you want
to do that, please bring proof of identification with you. Even
if you plan to attend the meeting, we recommend that you vote
your shares in advance as described below, so your vote will be
counted if you later decide not to attend. If you hold shares in
street name through a broker, bank or other nominee, you may
vote those shares in person at the meeting only if you obtain
and bring with you a signed proxy from the necessary nominees
giving you the right to vote the shares. To do this, you should
contact your nominee.
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Q.
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If my shares are held in street name by my
broker, will my broker vote my shares for me?
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A.
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Yes, but your broker will only be permitted to vote your shares
of our common stock if you instruct your broker how to vote. You
should follow the procedures provided to you by your broker
regarding how to instruct your broker to vote your shares.
Failure to instruct your broker to vote your shares will have
exactly the same effect as voting against adoption of the Merger
Agreement.
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Q.
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What does it mean if I get more than one proxy card?
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A.
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If your shares are registered in multiple accounts with one or
more brokers and/or our transfer agent, you will receive more
than one proxy card. If you are submitting your proxy by
completing and returning your proxy card, please complete and
return each of the proxy cards you receive to ensure that all of
your shares are voted.
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Q.
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What is a quorum?
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A.
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A quorum will be present at the special meeting if
the holders of a majority of the outstanding shares of our
common stock entitled to vote on the record date are represented
in person or by proxy. This quorum of our shares must be present
at the special meeting, in person or by proxy, in order for the
special meeting to be held. Shares present by proxy will be
counted as present for purposes of determining the presence of a
quorum even if the proxy does not have authority to vote on all
matters.
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Q.
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What happens if I withhold my vote or abstain from voting?
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A.
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If you withhold a vote or abstain from voting on the proposal
for the adoption of the Merger Agreement, it will have the same
effect as a vote AGAINST the proposal.
Approval
of the proposal to adjourn the special meeting, if necessary or
appropriate, requires the favorable vote of a majority of the
votes cast at the special meeting, in person or by proxy, even
if less than a quorum, and, therefore, withholding a vote or
abstaining from voting will have no effect on the proposal to
adjourn the special meeting.
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Q.
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Will my shares be voted if I do not provide my proxy?
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A.
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Under stock market rules currently in effect, brokerage firms
and nominees have the authority to vote their customers
unvoted shares on certain routine matters if the
customers have not furnished voting instructions within a
specified period prior to the special meeting. However, the
proposal to adopt the Merger Agreement and the proposal to
adjourn the special meeting, if necessary or appropriate, to
solicit additional proxies, are not considered
routine matters and hence brokerage firms and
nominees will not be able to vote the shares of customers from
whom they have not received voting instructions with regard to
the proposal to adopt the Merger Agreement or the proposal to
adjourn the special meeting. If you hold your shares of record
directly in your own name, they will not be counted as shares
present for the purposes of establishing a quorum or be voted if
you do not submit a proxy or attend the special meeting and vote
the shares yourself.
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Broker non-votes occur when shares held by a broker are not
voted with respect to a proposal because (a) the broker has
not received voting instructions from the beneficial owner of
the shares and (b) the broker lacks the authority to vote
the shares at the brokers discretion. Broker non-votes
will have no effect on the proposal to adjourn the special
meeting, if necessary or appropriate, to solicit additional
proxies because broker non-votes will not be considered votes
cast, but will be counted as shares present and entitled to vote
for the purposes of determining the presence of a quorum. With
regard to the proposal to adopt the Merger Agreement, the shares
represented by broker non-votes will also be considered present
at the special meeting for the purposes of determining a quorum,
but will have the same effect as a vote AGAINST the
proposal because holders of a majority of the outstanding shares
of our common stock entitled to vote must vote in favor of the
adoption of the Merger Agreement in order for this proposal to
be approved.
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Q.
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If I have given a proxy, may I change my vote?
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A.
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Yes. Until your proxy is voted at the special meeting, you can
revoke your proxy and change your vote in any of the following
ways:
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by giving written notice of the revocation to our
Secretary;
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by properly submitting another proxy by mail,
telephone or the Internet with a later date; or
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by voting in person at the special meeting (if your
shares are registered directly on our books and not held through
a broker, bank or other nominee).
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If you have instructed a broker to vote your shares, the
above-described options for changing your vote do not apply;
instead, you must follow the instructions received from your
broker to change your vote.
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Your attendance at the special meeting will not in and of itself
constitute a revocation of your proxy.
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Q.
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What are the proposed transactions?
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A.
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The proposed transactions involve the merger of Merger Sub with
and into us with our company being the surviving corporation in
the merger. As a result of the merger, we will cease to be a
publicly traded company and will become a wholly-owned
subsidiary of Parent. If the merger is completed, each issued
and outstanding share of common stock of our company not held by
Parent, Merger Sub or us, or by our stockholders who perfect
their appraisal rights under Delaware law, will be converted
into the right to receive $12.50 per share in cash. Holders of
outstanding options to acquire our common stock will be entitled
to receive a cash amount equal to the product of (a) the
amount, if any, by which $12.50 exceeds the exercise price per
share of each option held by such person at the effective time
of the merger, and (b) the number of shares subject to such
option held by such person, less any applicable withholdings for
taxes. No consideration will be paid in respect of any stock
options for which the exercise price equals or exceeds $12.50
per share.
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Q.
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Am I entitled to appraisal rights?
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A.
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Yes, provided that you follow the requirements of Delaware law.
Under Delaware law, record holders of our common stock who do
not vote in favor of adopting the Merger Agreement will have the
right to seek appraisal of the fair value of their shares as
determined by the Delaware Court of Chancery if the merger is
completed, but only if they properly submit a written demand for
an appraisal prior to the vote on the adoption of the Merger
Agreement at the special meeting and they comply with the
procedures and requirements under Delaware law, which are
summarized in this proxy statement. A copy of the applicable
provisions under Delaware law is included as Annex D to
this proxy statement and a summary of this provision can be
found along with additional information about appraisal rights
under Appraisal and Dissenters Rights
beginning on page 41 of this proxy statement.
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Q.
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Will the transactions be taxable to me?
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A.
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If you are a U.S. stockholder (as defined in the section
entitled The Merger Material United States
Federal Income Taxes), the exchange of your shares of our
common stock for cash will be taxable to you. You will recognize
gain or loss for United States federal income tax purposes in an
amount equal to the difference between the cash you receive
(either as merger consideration of $12.50 per share or as a
result of dissenting and
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13
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receiving your appraisal rights) and your adjusted tax basis in
your shares of our common stock exchanged therefor. See the
section entitled The Merger Material United
States Federal Income Tax Consequences.
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You should consult your tax advisor on how specific tax
consequences of the merger and the other transactions
contemplated by the Merger Agreement apply to you.
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Q.
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Is the Merger subject to the satisfaction of any
conditions?
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A.
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Yes. In addition to the adoption of the Merger Agreement by our
stockholders, the merger is subject to the satisfaction or
waiver of other customary conditions (including approval under
applicable antitrust laws and insurance regulatory authorities).
For a description of these conditions (including those that are
waivable by the parties), please see The Merger
Agreement Conditions to the Merger beginning
on page 58 of this proxy statement. The consummation of the
transactions contemplated by the Merger Agreement is NOT
conditioned on Parent obtaining financing.
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Q.
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What should I do now?
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A.
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After carefully reading and considering the information
contained in this proxy statement, including the appendices,
please authorize your shares of our common stock to be voted by
either signing and dating the enclosed proxy card and returning
it in the postage-paid envelope provided as soon as possible or
promptly submitting your proxy by telephone or over the Internet
following the instructions on the proxy card. DO NOT enclose or
return your stock certificates with the proxy card.
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If you sign, date and mail in your proxy card without indicating
how you want to vote, your proxy will be counted as a vote in
favor of the proposal to adopt the Merger Agreement and approve
the merger. If you fail to return your proxy card, or to attend
and vote at the special meeting, the effect will be a vote
against the proposal to adopt the Merger Agreement and approve
the merger, and your shares will not be counted on any other
proposals that may properly come before the special meeting.
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Q.
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What happens if I sell my shares of common stock before the
special meeting?
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A.
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The record date for the special meeting is April 23, 2008,
which is earlier than the date of the special meeting. If you
held your shares of our common stock as of the close of business
on the record date for the special meeting, you will retain your
right to vote at the special meeting. If you transfer your
shares of our common stock after the record date for the special
meeting, but prior to the date on which the merger is completed,
you will lose the right to receive the merger consideration for
the shares of our common stock that you have sold. The right to
receive the merger consideration will pass to the person who
owns your shares of our common stock when the merger is
completed.
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Q.
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When do you expect to complete the merger?
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A.
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We are working toward completing the merger as quickly as
possible. We currently expect to complete the merger as soon as
possible after the special meeting and after all the conditions
to the merger are satisfied or waived. In order to complete the
merger, we must obtain stockholder approval, the applicable
waiting period under the HSR Act must expire or terminate, the
Florida Office of Insurance Regulation must consent to the
merger and the other closing conditions under the Merger
Agreement must be satisfied or waived. See The Merger
Agreement Conditions to the Merger.
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Q.
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What happens to AmCOMP if the Merger Agreement is not
adopted?
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A.
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If the Merger Agreement is not adopted, the merger will not be
consummated, and our stockholders will not receive any payment
for their shares. We will remain an independent public company,
and we would expect to be operated by our management in a manner
similar to that in which we are being operated today.
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Q.
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After the special meeting, how can I determine whether the
proposal to adopt the Merger Agreement has been approved by our
stockholders?
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A.
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Promptly after the special meeting, we anticipate that we will
issue a press release announcing whether or not the proposal to
adopt the Merger Agreement has been approved by holders of a
sufficient number of outstanding shares of our common stock.
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14
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Q.
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Should I send in my stock certificates now?
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A.
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No. After we complete the merger, you will receive written
instructions informing you how to send in your stock
certificates in order to receive the merger consideration. You
will receive your cash payment as soon as practicable after
receipt of the stock certificates representing the shares of our
common stock that you own, together with the completed documents
requested in the instructions.
PLEASE DO NOT SEND ANY STOCK
CERTIFICATES WITH YOUR PROXY CARD.
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Q.
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Where can I find more information about AmCOMP?
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A.
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We file periodic reports and other information with the
Securities and Exchange Commission, which we refer to as the
SEC. This information is available at the SECs
public reference facilities, and at the Internet site maintained
by the SEC at
http://www.sec.gov.
For a more detailed description of the information available,
please see the section of this proxy statement entitled
Where You Can Find Additional Information.
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Q.
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Who can help answer my questions?
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A.
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If you have questions about the special meeting or the merger
after reading this proxy statement, you should contact our proxy
solicitor, MacKenzie Partners, Inc., at
(212) 929-5500
(call collect) or toll-free at
(800) 322-2885
or via email at proxy@mackenziepartners.com.
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15
THE
SPECIAL MEETING
We are furnishing this proxy statement to our stockholders as
part of the solicitation of proxies by our Board for use at the
special meeting.
Date,
Time and Place
The special meeting will be held on May 29, 2008 at
9:00 AM, Eastern Time, at Palm Beach Gardens Marriott, 4000
RCA Boulevard, Palm Beach Gardens, Florida 33410.
Purpose
of the Special Meeting
The special meeting is being called to consider and vote upon
the Merger Agreement, pursuant to which Parent will acquire our
entire company and our stockholders will receive merger
consideration of $12.50 per share in cash.
Specifically, at the special meeting, we will ask holders of our
common stock to consider and vote on the following proposals:
1. To consider and vote upon a proposal to adopt the
Agreement and Plan of Merger, dated as of January 10, 2008,
as amended on April 28, 2008, by and among AmCOMP
Incorporated, a Delaware corporation, Employers Holdings, Inc.,
a Nevada corporation, and Sapphire Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of Employers Holdings,
Inc., pursuant to which Sapphire Acquisition Corp. will merge
with and into AmCOMP Incorporated, with AmCOMP Incorporated
being the surviving corporation in the merger and continuing as
a wholly-owned subsidiary of Employers Holdings; and each issued
and outstanding share of common stock, $0.01 par value, of
AmCOMP Incorporated not held by Employers Holdings, Inc.,
Sapphire Acquisition Corp. or us, or by our stockholders who
perfect their appraisal rights under Delaware law, will be
converted into the right to receive $12.50 per share in cash;
2. To approve the adjournment of the special meeting, if
necessary or appropriate, to solicit additional proxies if there
are insufficient votes at the time of the special meeting to
adopt the Merger Agreement; and
3. To transact such other business as may properly come
before the special meeting or any adjournment or postponement
thereof.
Our Board has unanimously determined (with an interested
director abstaining from voting) that the merger and the Merger
Agreement are advisable and are fair to us and our stockholders,
and in our best interest and the best interest of our
stockholders. Accordingly, the Board has unanimously approved
(with an interested director abstaining from voting) the Merger
Agreement.
The Board unanimously recommends (with an
interested director abstaining from the recommendation) that you
vote FOR the adoption of the Merger Agreement at the
special meeting and FOR the approval of the
adjournment of the special meeting, if necessary or appropriate,
to solicit additional proxies.
Record
Date, Shares Entitled to Vote and Quorum
Only holders of record of our common stock at the close of
business on April 23, 2008, the record date for the special
meeting, are entitled to notice of, and to vote at, the special
meeting. On the record date, 15,294,371 shares of our
common stock were outstanding and held by approximately 44
holders of record. A quorum will be present at the special
meeting if the holders of a majority of the outstanding shares
of our common stock entitled to vote on the record date are
represented in person or by proxy.
Vote
Required; Share Ownership of Directors and Executive
Officers
In order to adopt the Merger Agreement, holders of at least a
majority of the outstanding shares of our common stock entitled
to vote must vote in favor of adopting the Merger Agreement.
Each holder of our common stock is entitled to one vote for each
share held of record on the record date.
If you withhold a
vote or abstain from voting on the proposal relating to the
adoption of the Merger Agreement, it will have the same effect
as a vote AGAINST the proposal.
As of the record date, our executive officers (comprised of Fred
R. Lowe, our Chairman, President and Chief Executive Officer;
Debra Cerre-Ruedisili, our Executive Vice President and Chief
Operating Officer; Kumar Gursahaney, our Senior Vice President
and Chief Financial Officer; George Harris, our Senior Vice
President,
16
General Counsel and Secretary; Colin Williams, our President of
the Texas Region (who subsequently resigned after the record
date); Lisa Perrizo, our President of the Midwest Region;
Timothy J. Spear, our President of the Mid-Atlantic Region and
Frank Pinson, our President of the Southern Region) as a group
and our directors (other than Fred R. Lowe and Debra
Cerre-Ruedisili, who are also executive officers) as a group
owned and were entitled to vote 303,608 shares and
2,374,286 shares (including 1,367,065 shares held by
Welsh, Carson, Anderson & Stowe VII, L.P., with
respect to which Paul B. Queally, one of our directors, may be
deemed to have shared investment and voting power),
respectively, of our common stock, which represent approximately
2.0% and 15.5%, respectively, of our total common stock
outstanding on that date. See The Merger
Interests of Certain Persons in the Merger for a table
detailing the common stock ownership of each of our executive
officers and directors.
Each of our current directors and executive officers has
indicated that he or she intends to vote in favor of the
adoption of the Merger Agreement and for the approval of the
adjournment, if necessary or appropriate, of the special
meeting, but, in each case, has no obligation to do so other
than as described in the next sentence. In connection with the
Merger Agreement, (a) Fred R. Lowe, (b) Sam Stephens,
one of our directors, and (c) Welsh, Carson,
Anderson & Stowe VII L.P., an entity as to which
Mr. Queally may be deemed to have shared investment and
voting power of shares of our common stock held by it, who
collectively hold and are entitled to vote approximately 17.2%
of our total common stock outstanding on the record date, have
entered into separate voting agreements in which each has agreed
to vote in favor of the adoption of the Merger Agreement and the
transactions contemplated thereby and the proposal to adjourn
the special meeting, subject to specified exceptions.
Assuming that the directors, as a group, the executive officers,
as a group, Welsh, Carson, Anderson & Stowe VII L.P.
and WCAS Healthcare Partners, L.P., which also entered into a
voting agreement on the same terms as summarized above, who
collectively are entitled to vote approximately 17.7% of our
total common stock outstanding on the record date, all vote in
favor of the adoption of the Merger Agreement, other
stockholders holding at least 4,944,726 shares of our
common stock, representing approximately 32.3% of all shares
outstanding on the record date, must vote in favor of the
adoption of the Merger Agreement in order for this proposal to
be approved.
Approval of the proposal to adjourn the special meeting, if
necessary or appropriate, requires the favorable vote of a
majority of the votes cast at the special meeting, in person or
by proxy, even if less than a quorum. The Voting Agreement
Parties, holding approximately 17.2% of our outstanding voting
power, have unconditionally and irrevocably agreed to vote all
of their shares in favor of the approval of the proposal to
adjourn the special meeting. For the proposal to adjourn the
special meeting, abstentions will have no effect on the outcome,
since an abstention is not a vote cast.
Under stock market rules currently in effect, brokerage firms
and nominees have the authority to vote their customers
unvoted shares on certain routine matters if the
customers have not furnished voting instructions within a
specified period prior to the special meeting. However, the
proposal to adopt the Merger Agreement and the proposal to
adjourn the special meeting, if necessary or appropriate, to
solicit additional proxies, are not considered
routine matters, and brokerage firms and nominees
will not be able to vote the shares of customers from whom they
have not received voting instructions with regard to the
proposal to adopt the Merger Agreement or the proposal to
adjourn the special meeting. If you hold your shares directly in
your own name, they will not be counted as shares present for
the purposes of establishing a quorum or be voted if you do not
provide a proxy or attend the special meeting and vote the
shares yourself.
Broker non-votes occur when shares held by a broker are not
voted with respect to a proposal because (a) the broker has
not received voting instructions from the beneficial owner of
the shares and (b) the broker lacks the authority to vote
the shares at the brokers discretion. Broker non-votes
will have no effect on the proposal to adjourn the special
meeting, if necessary or appropriate, to solicit additional
proxies because broker non-votes will not be considered votes
cast, but will be counted as shares present and entitled to vote
for the purposes of determining the presence of a quorum. With
regard to the adoption of the Merger Agreement, the shares
represented by broker non-votes will also be considered present
at the special meeting for the purposes of determining a quorum,
but will have the same effect as a vote AGAINST the
proposal because holders of a majority of the outstanding shares
of our common stock entitled to vote must vote in favor of the
adoption of the Merger Agreement in order for this proposal to
be approved.
17
Voting of
Proxies
After carefully reading and considering the information
contained in the proxy statement and even if you plan to attend
the special meeting, you should either sign and date the
enclosed proxy card and mail the proxy card in the enclosed
postage-paid envelope as soon as possible or promptly submit
your proxy by telephone or over the Internet following the
instructions on the proxy card so that your shares of common
stock are represented at the special meeting. If you elect to
submit your proxy by telephone or via the Internet, you will
need to provide the control number set forth on the enclosed
proxy card.
If no specification is indicated, all shares of
common stock represented by valid proxies that have been
submitted will be voted FOR the adoption of the
Merger Agreement and FOR the adjournment of the
special meeting, if necessary or appropriate, to solicit
additional proxies.
We do not expect that any matter other than the proposal to
adopt the Merger Agreement and to adjourn the special meeting,
if necessary or appropriate, will be brought before the special
meeting. If, however, our Board properly presents other matters,
each of the persons named as a proxy will vote in accordance
with his judgment as to matters that he believes to be in the
best interests of the stockholders. A proxy in the accompanying
form or properly submitted by telephone or over the Internet
will give authority to Fred R. Lowe, our Chairman, President and
Chief Executive Officer, Debra Cerre-Ruedisili, our Executive
Vice President and Chief Operating Officer, and Kumar
Gursahaney, our Senior Vice President and Chief Financial
Officer, and each of them, to vote on such matters at their
respective discretion and they intend to do so in accordance
with their respective best judgment on any such matter.
Revocability
of Proxies
The grant of a proxy on the enclosed form of proxy or submission
of a proxy by telephone or over the Internet pursuant to the
instructions on the proxy card does not preclude a stockholder
from voting in person at the special meeting. Until your proxy
is voted at the special meeting, you can revoke your proxy and
change your vote in any of the following ways:
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by giving written notice of the revocation to our Secretary;
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by properly submitting another proxy by mail, telephone or the
Internet, with a later date; or
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by voting in person at the special meeting (if your shares are
registered directly on our books and not held through a broker,
bank or other nominee).
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Your attendance at the special meeting will not, in and of
itself, constitute a revocation of your proxy.
If you have instructed a broker to vote your shares, the
above-described options for changing your vote do not apply;
instead, you must follow the instructions received from your
broker to change your vote.
Solicitation
of Proxies
We will bear the cost of solicitation of proxies by us. In
addition to soliciting stockholders by mail, our directors,
officers and employees, without additional remuneration, may
solicit proxies in person or by telephone or other means of
electronic communication. We will not pay these individuals for
their solicitation activities but will reimburse them for their
reasonable out-of-pocket expenses. Brokers and other custodians,
nominees and fiduciaries will be requested to forward
proxy-soliciting material to the owners of stock held in their
names, and we will reimburse such brokers and other custodians,
nominees and fiduciaries for their reasonable out-of-pocket
costs. Solicitation by our directors, officers and employees may
also be made of some stockholders in person or by mail,
telephone or other means of electronic communication following
the original solicitation.
We have retained the firm of MacKenzie Partners, Inc. to assist
in the solicitation of proxies for a base fee of $7,500, plus
reasonable out-of-pocket expenses, and have agreed to indemnify
MacKenzie Partners, Inc. for specified liabilities and expenses.
You should not send your stock certificates with your
proxy.
A letter of transmittal with instructions
for the surrender of our common stock certificates will be
mailed to you promptly after the consummation of the merger.
18
THE
MERGER
This section describes material aspects of the merger,
including the Merger Agreement. Although we believe that the
description covers the material terms of the Merger Agreement
and the transactions contemplated thereby, this summary may not
contain all of the information that is important to you. You
should read carefully this entire document and the other
documents referred to in this proxy statement for a more
complete understanding of the Merger Agreement and the
transactions contemplated thereby.
The
Companies
AmCOMP Incorporated
701 U.S. Highway One
North Palm Beach, Florida 33408
(561) 840-7171
AmCOMP Incorporated is an insurance holding company whose
wholly-owned subsidiaries, AmCOMP Preferred and AmCOMP
Assurance, are mono-line workers compensation insurers
with products that focus on value-added services to
policyholders. Currently marketing insurance policies in 17 core
states and targeting small to mid-sized employers in a variety
of industries, AmCOMP distributes its products through
independent agencies.
Employers Holdings, Inc.
10375 Professional Circle
Reno, Nevada
89521-5906
(775) 327-2754
Employers Holdings, Inc. is a holding company with subsidiaries
that are specialty providers of workers compensation
insurance and services focused on select, small businesses
engaged in low-to-medium hazard industries. The company, through
its subsidiaries, operates in 11 states from 13 office
locations. The companys insurance subsidiaries, Employers
Insurance Company of Nevada and Employers Compensation Insurance
Company are rated A− (Excellent) by the
A.M. Best Company.
Sapphire Acquisition Corp.
c/o Employers
Holdings, Inc.
10375 Professional Circle
Reno, Nevada
89521-5906
(775) 327-2754
Sapphire Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent, was formed solely for the
purpose of effecting the merger and the transactions related to
the Merger Agreement. It has not engaged in any business except
in furtherance of this purpose.
Background
of the Merger
Our Board continually reviewed our results of operations and
competitive position, as well as the strategic alternatives that
were available to us. During the
18-month
period from June 2006 through December 2007, we received nine
unsolicited expressions of interest to explore the possibility
of a business combination with us. The interested parties
included those whom Raymond James and we believed to be most of
the logical strategic buyers in our industry. We were aware
during this time that most of the investment banks specializing
in serving small and mid-sized insurance companies, including
workers compensation insurance companies, were actively
seeking to promote business combinations among such insurers. We
believe that these activities were directly connected to some of
the expressions of interest that we received.
Eight of the expressions of interest began with a call to Fred
Lowe, our Chairman, President and Chief Executive Officer. After
preliminary discussions with management, five of these nine
parties who expressed interest in a possible transaction
declined to execute non-disclosure agreements and proceed any
further due to lack of strategic fit, concerns about the
condition of our markets or differences in perceived value. The
other four interested parties, including Parent, executed
non-disclosure agreements, and each provided a written
expression of interest.
19
On May 3, 2007, a member of our Board received a written
indication of interest regarding a possible acquisition of us
from a publicly traded insurance holding company, which we refer
to as AI. This was the first expression of interest from AI.
This was followed on May 9, 2007, by a written indication
of interest from a private group, which we refer to as BI.
Subject to due diligence, AI indicated its preliminary interest
in a transaction to acquire us based on a valuation in the range
of 1.15 to 1.30x then-stated stockholders equity, which
was a premium of approximately 20% to the market price of our
common stock at that time. BIs indication of interest in a
cash purchase included an initial valuation range of $11.75 to
$12.50 per share.
On May 13, 2007, our Board convened via teleconference to
discuss the proposals from AI and BI. At this time, it was
determined that it would be necessary to retain a financial
advisor to review the indications of interest, oversee the due
diligence process and act as intermediary between us and the
interested parties. We retained Raymond James on May 22,
2007 to act in this capacity. Prior to May 22, 2007, we did
not solicit any investment banks other than Raymond James.
On May 16, 2007 and May 30, 2007, we entered into
confidentiality agreements with AI and BI, respectively. Over
the course of the next several weeks, members of our management
and Raymond James met with members of the senior management
teams of both AI and BI while they performed limited
operational, actuarial, and financial due diligence.
Following this due diligence, on June 22, 2007, AI
submitted a letter to our Board indicating that it would be
interested in pursuing a transaction at a price of $11.00 per
share, subject to the completion of confirmatory due diligence.
Our Board deemed this proposal to be inadequate and it was the
consensus of the Board to cease a continuing dialogue with AI if
it was unwilling to increase the value of its proposal. After we
communicated this to AIs financial advisor, AI withdrew
its indication of interest to pursue an acquisition, but
indicated that it would be willing to reconsider its interest
following the release of our second quarter financial
information. Although there was ongoing dialogue between Raymond
James and AIs financial advisor through the beginning of
July 2007, AI never indicated a willingness to revise the value
of its initial indication of interest.
On July 3, 2007, Raymond James received an email
communication from BI which indicated that, following its due
diligence, it would be unable to propose a transaction that was
consistent with the valuation range set forth in its letter
dated May 9, 2007. BI further indicated that it might be
interested in revisiting the opportunity, potentially at a
valuation consistent with its initial range, once our second
quarter financial results were available. Although our Board did
not wish to foreclose such a possibility, on July 9, 2007,
it instructed Raymond James to terminate discussions with BI.
On August 8, 2007, we released our second quarter financial
results. On August 23, 2007, BI submitted a proposal to
acquire us for a cash price of $10.50 per share, which it was
the consensus of the Board to reject.
During September 2007, we were approached regarding a potential
merger by two additional parties, a mutual insurance company,
which we refer to as CI, and Parent. Following preliminary
discussions, we executed non-disclosure agreements with CI on
September 19, 2007 and with Parent on October 8, 2007.
Prior to beginning their due diligence, both parties were
instructed that the Board would be unlikely to support offers
below $13.00 per share, and that if at any time during the due
diligence process, either party concluded that a transaction at
this price would not be possible, all due diligence efforts
would cease. Both CI and Parent acknowledged these terms and
began due diligence shortly after execution of the respective
confidentiality agreements. Management and our Board of
Directors, in consultation with Raymond James, believed at this
point in time that $13.00 per share was an attractive price for
our stockholders because it represented a substantial premium
based on recent trading values for our stock and their
assessment of our then current and future prospects.
At managements direction, on October 15, 2007,
Raymond James advised both CI and Parent, in writing, that the
deadline to submit non-binding indications of interest would be
5:00 p.m. on October 26, 2007. These parties were
informed that the indications of interest should include the
proposed terms of the transaction, including the consideration
to be paid to holders of our common stock, a schedule for
completing due diligence and any other requirements necessary to
close the transaction.
On October 24, 2007, Parent submitted a non-binding
proposal for a merger transaction with an indicated range of
$152.0 million to $212.0 million in cash.
Parents letter indicated that it was prepared to complete
its due
20
diligence in 30 days, but indicated that any final offer
would be contingent upon satisfactory completion of due
diligence and final approval of its board of directors.
On October 25, 2007, CI submitted a non-binding proposal to
acquire all of our outstanding common stock and common stock
equivalents for a range of $185.0 million to
$200.0 million, payable in cash. CI indicated that it was
willing to move on an expedited basis to complete confirmatory
due diligence, contingent upon our agreement to a
90-day
period of exclusivity. In addition, CI sought reimbursement for
its out-of-pocket due diligence expenses if we breached the
exclusivity agreement. CIs final offer would be contingent
upon satisfactory completion of due diligence, final approval
from its board of directors, confirmation of our financial
statements as of June 30, 2007 and affirmation that the
combined entity would receive an A− rating
from A.M. Best.
Our Board met on October 29, 2007 via teleconference to
review the proposals received from CI and Parent. Raymond James
presented a summary of the terms of each letter to our Board as
well as an overview of both entities. After careful review, our
Board elected to proceed with full due diligence with Parent and
CI. At the same time, our Board instructed Raymond James to
reaffirm to Parents Chief Executive Officer, Douglas D.
Dirks, that while the high end of Parents proposed range
was acceptable, our Board was not prepared to support a price
per share of less than $13.00. Our Board further instructed
Raymond James to communicate this same message to CI, and also
to inform CI that we would not agree to a period of exclusivity
at that time or agree to reimburse CI for any out-of-pocket
expenses. On October 30, 2007, Raymond James communicated
these messages to both Parent and to CIs financial
advisor. Both Parent and CI acknowledged these terms and
proceeded to full due diligence.
During the month of November, both CI and Parent performed
extensive operational, financial, actuarial, and legal due
diligence in preparation for meetings with members of our senior
management.
From December 1, 2007 through December 4, 2007 members
of Parents senior management performed
on-site
due
diligence and completed interviews with members of our senior
management. At the completion of its
on-site
diligence, Parent indicated to Raymond James that there were a
small number of outstanding items it would need in order to
complete its due diligence and submit a binding offer. Over the
next two weeks, we worked to provide these outstanding items.
Following its examination and detailed review of documents, CI
was scheduled to perform
on-site
due
diligence from December 10, 2007 through December 12,
2007. At a meeting of the board of directors of CIs parent
on December 7, 2007, however, CIs Chief Executive
Officer was informed that the board of directors of CIs
parent would no longer support an acquisition of us and that CI
should remove itself from the process. CI cited deteriorating
market conditions in the workers compensation segment as
the reason for electing to remove itself from the process.
On December 10, 2007, Parent submitted a revised
non-binding proposal for a merger transaction with cash
consideration of $12.00 per share. In its letter, Parent
indicated that it planned to finance the acquisition through a
combination of cash and newly-issued debt securities. Parent
indicated that it would not anticipate including a financing
condition in the definitive merger agreement and that its
proposal was subject to final approval from its board of
directors and successful completion of confirmatory due
diligence. The letter also stated that, based on the time and
resources expended up to that point and in light of the
resources Parent anticipated deploying with respect to
confirmatory due diligence and contract negotiations, it would
require a
30-day
period of exclusivity to continue active discussion regarding
its proposal. This revised letter was accompanied by an
exclusivity agreement and a list of additional due diligence
requirements.
On December 13, 2007, our Board convened a meeting via
conference call to discuss Parents revised non-binding
proposal. After discussion, it was determined that Mr. Lowe
should respond directly to Mr. Dirks regarding
Parents revised offer. Mr. Lowe was instructed to
convey to Mr. Dirks that Parents $12.00 per share
offer was insufficient. Nonetheless, our Board authorized
Mr. Lowe to advise Parent that our Board would agree to
grant Parent a period of exclusivity through January 7,
2008 and had instructed our outside legal counsel, Olshan
Grundman Frome Rosenzweig & Wolosky LLP, to deliver a
draft of the Merger Agreement to Parent and its outside legal
counsel, Skadden, Arps, Slate, Meagher & Flom LLP, no
later than December 17, 2007, if Parent were willing to
(a) proceed expeditiously with its confirmatory due
diligence and negotiation of the Merger Agreement,
(b) agree
21
to work toward executing the Merger Agreement by January 7,
2008 and (c) state that it would be willing to support a
price of $12.50 per share. In doing so, our Board believed that:
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having negotiated an increase from $12.00 to $12.50 per share,
it could not expect Parent to offer more in the merger;
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any significant delay in signing a definitive agreement with
Parent could cause Parent to withdraw its expression of
interest; and
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as a result of the worsening general economic conditions and
changes in the rate environment in the workers
compensation market:
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we might not be able to attract a comparable bid for the Company
for a significant period of time, or at all (see The
Merger Reasons for the Merger for a full
description of the Boards considerations in accepting the
price of $12.50 per share); and
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if the Board had attempted to reopen discussions with any of the
eight parties who had previously expressed an interest in the
possibility of a business combination:
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in the case of those who had previously expressed interest at a
stated price, any succeeding expression would have been no
greater than the initial expressions, all of which were lower
than $12.50 per share; and
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in the case of those who had not previously expressed interest
at a stated price, either their perceived value of our company
would be significantly lower than $12.50 per share or the time
it would take to complete due diligence and formulate
transaction terms would have caused Parent to terminate
discussions.
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Mr. Dirks, responding on Parents behalf, agreed to
these terms, but indicated that Parent would need its outside
auditor to complete confirmatory financial and other due
diligence. Mr. Dirks further communicated the need for
Parent to speak to A.M. Best to ensure that the acquisition
would not jeopardize the A− rating of
Parents insurance subsidiaries, and that it would need to
speak with the insurance regulatory agencies in both Florida and
Nevada to ensure that there were no regulatory impediments to
closing. Based on certain timing constraints, Parent requested
that the period of exclusivity be extended until January 9,
2008. These terms being agreeable, our counsel delivered a draft
of the Merger Agreement to Parent and their counsel on
December 14, 2007.
Between December 17, 2007 and December 19, 2007, our
counsel and counsel for Parent negotiated the terms of the
exclusivity agreement. On December 19, 2007, we executed
the exclusivity agreement with Parent, which provided for an
exclusive negotiating period ending January 9, 2008.
On December 21, 2007, counsel for Parent sent to our
counsel a
mark-up
of
the draft merger agreement and a draft of the Voting Agreement
for use by the Voting Agreement Parties.
On December 26, 2007, our executive officers telephonically
met with our counsel to discuss the comments to the Merger
Agreement delivered by Parents counsel on
December 21, 2007.
On December 28, 2007, our counsel delivered to our
management and Board a revised draft of the Merger Agreement,
which was discussed with members of our management and certain
members of our Board on a telephone call on January 2, 2008.
On January 3, 2008, our Board met via teleconference to
discuss the status of the proposed transaction and the latest
draft of the Merger Agreement. After this meeting and later in
the day on January 3, 2008, our counsel delivered a revised
draft of the Merger Agreement to Parent and its counsel.
Between January 3, 2008 and January 10, 2008, our
counsel and counsel for Parent exchanged numerous drafts and
negotiated the final terms and provisions of the Merger
Agreement. In addition, between such dates, counsel for Parent
and each of the Voting Agreement Parties negotiated the final
terms and provisions of the Voting Agreements.
22
On January 7, 2008, our Board met via teleconference to
discuss any open issues in the negotiations and to review the
latest draft of the Merger Agreement.
On January 10, 2008, we completed negotiations with Parent
of the terms of the Merger Agreement, which included a final
price per share of $12.50. On January 10, 2008, a special
meeting of our Board was held to consider the proposed
transaction with Parent. Members of our management and our
outside counsel updated the Board on their negotiations and the
resolution of the principal terms of the Merger Agreement.
Raymond James provided to the Board its financial analysis of
the proposed transaction, and then delivered to the Board its
oral opinion (subsequently confirmed in writing) to the effect
that, as of January 10, 2008, and subject to and based upon
the assumptions made, matters considered and limits of the
review set forth in its opinion, the $12.50 per share
consideration to be received by the holders of our common stock
was fair to our stockholders from a financial point of view. Our
outside counsel reviewed with the members of the Board their
fiduciary duties under Delaware law, as well as the terms and
provisions of the Merger Agreement. The Board was advised of the
negotiations between each of Ms. Cerre-Ruedisili and
Mr. Gursahaney and Parent concerning the Integration Bonus
and Enhanced Severance Agreements. After extensive discussion,
including an in-depth analysis of the reasons for engaging in
the transaction, our Board unanimously determined, with an
interested director abstaining from voting, that the merger and
the Merger Agreement are advisable and are fair to us and in our
best interest and the best interest of our stockholders.
Accordingly, the Board unanimously approved the Merger Agreement
(with an interested director abstaining from voting) and
resolved to recommend that our stockholders adopt the Merger
Agreement and approve the transactions contemplated thereby.
On January 10, 2008, Parent, Merger Sub, and we executed
the Merger Agreement. In addition, the Voting Agreements were
executed by Parent and each of the Voting Agreement Parties.
Also on January 10, 2008, we issued a press release
announcing the signing of the Merger Agreement.
On March 4, 2008, a purported
class-action
complaint was filed in the Circuit Court of the
15th Judicial Circuit, in and for Palm Beach County,
Florida, on behalf of Broadbased Equities, allegedly a
stockholder of the Company, and all others similarly situated.
The complaint, which names as defendants the Company, the
Companys directors Fred R. Lowe, Debra Cerre-Ruedisili,
Sam A. Stephens, Paul B. Queally, Donald C. Stewart and Spencer
L. Cullen, Jr., and Parent, asserts claims related to the
proposed merger with Parent for breaches of fiduciary duty and,
in the case of Parent, aiding and abetting such breaches, in
connection with the directors determination to sell the
Company. The complaint seeks a declaratory judgment that the
defendants have breached their fiduciary duties to plaintiff and
the purported class members and/or, in the case of Parent, aided
and abetted such breaches; compensatory
and/or
rescissory damages, as well as pre and post-trial interest, as
allowed by law; and the costs and disbursements of the action,
including reasonable attorneys and experts fees and
other costs. We believe that these claims are entirely without
merit and are vigorously defending this action.
In contemplation of a potential settlement of the litigation, we
agreed to make certain additional disclosures to our
stockholders, which are contained in this proxy statement. Also
in contemplation of a potential settlement, Parent, Sapphire and
we have entered into an amendment to the Merger Agreement to
provide that the termination fee payable to Parent would be
reduced from $8.0 million to $5.0 million in cash in
the following circumstances:
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at any time on or after January 10, 2008, a third party
takeover proposal is made to us or is proposed to be made to us;
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thereafter, the Merger Agreement is terminated (1) by us or
Parent because the merger has not occurred on or before
October 31, 2008 or because our stockholders do not adopt
the Merger Agreement and approve the merger at the special
meeting, or (2) by Parent because we have breached the
Merger Agreement (assuming Parent is not in material
breach); and
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a definitive agreement providing for a qualifying
transaction is executed between 6 months and
12 months after the date of such termination or a
qualifying transaction has been consummated during such
six-month period.
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The parties are currently discussing the possible terms of a
memorandum of understanding providing for a settlement of the
litigation. If the memorandum is executed, the parties will,
subject to certain conditions, enter into and seek court
approval for a stipulation of settlement. There can be no
assurance that the memorandum of
23
understanding or the stipulation will be executed or that any
stipulation will be approved by the court. Any potential
settlement will not affect the amount of merger consideration to
be paid in the merger or, other than the amendment of the
provisions regarding payment of the Termination Fee described
above, any other terms of the Merger Agreement.
Reasons
for the Merger
In reaching its decision to approve the merger and the Merger
Agreement and to recommend that our stockholders vote to adopt
the Merger Agreement, our Board consulted with senior
management, as well as our legal and financial advisors,
reviewed a significant amount of information, and considered a
number of factors, including, among others, the following:
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the alternatives to the merger (including the possibility of
continuing to operate as an independent entity), the perceived
risks of each of the alternatives, the perceived risks of the
merger, the range of possible benefits to our stockholders of
such alternatives and the timing and likelihood of accomplishing
the goals of these alternatives, and our Boards assessment
that the merger with Parent presented a superior opportunity to
such alternatives;
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the challenges facing us in our traditional workers
compensation market, given the continuing price competition in
the market and the fact that we believed that this price
competition would continue for at least 18 to 24 months,
compounded by the fact that we do not have an insurance rating
from A.M. Best;
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the current weakness in the overall economy, particularly the
construction markets, which was having an adverse effect on many
of our customers and resulting in declining payrolls and a
corresponding reduction in the workers compensation
premium revenue received from these customers;
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the costs and risks of remaining a public company, including our
relatively small stockholder base and relatively illiquid nature
of our common stock;
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the risk that the stockholder value generated by us as a
stand-alone entity, through stock price appreciation, would not
be as high as the merger consideration offered by Parent, in
light of an assessment of the current and prospective demand for
our core business services in the workers compensation
industry, the effect of global, national and local economic
conditions on this sector and the competitive landscape for
participants in the industry generally;
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the fact that our financial advisor believed that the
Termination Fee and other deal protection provisions included in
the Merger Agreement would be unlikely to deter another buyer if
one were to emerge;
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the price proposed by Parent as compared to current and
historical market prices and trading information with respect to
shares of our common stock in light of historical, current and
prospective industry valuations of us and comparable companies;
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prospects for, and trends within, the workers compensation
industry generally, particularly the aggressive competition we
face in this industry from companies with greater resources and
higher degrees of market recognition;
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other historical information concerning our business, prospects,
financial performance and condition, operations, technology,
management and competitive position;
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the fact that the merger consideration is all cash, so that the
transaction would allow our stockholders to immediately realize
a fair value for their investment and would provide our
stockholders certainty of value for their shares of our common
stock;
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the per share consideration of $12.50 to be paid in the merger
represented a premium for our common stock of approximately
44.0% to the closing price for our common shares on
January 9, 2008; a premium of 35.9%, 28.9% and 32.6% to our
one-month, three-month and six-month average closing prices for
the relevant periods ending on the date immediately preceding
the date on which the merger was announced; and a premium of
70.8% over our 52-week low closing price ($7.32 on
August 9, 2007) and 3.2% over our 52-
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week high closing price ($12.11 on February 9,
2007) for the relevant periods ending on the date
immediately preceding the date on which the merger was announced;
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the financial presentation of Raymond James and its opinion that
as of January 10, 2008, and based on and subject to the
factors and assumptions set forth therein, the $12.50 per share
in cash to be paid to holders of our common stock pursuant to
the Merger Agreement is fair from a financial point of view to
such holders;
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our right, prior to the approval of the Merger Agreement by
stockholders, and so long as we are in compliance in all
material respects with the non-solicitation provisions of the
Merger Agreement, to engage in negotiations with, and provide
information to, a third party that makes an unsolicited
acquisition proposal if our Board determines in good faith,
after consultation with its legal and financial advisors, that
such proposal could reasonably be expected to lead to a
transaction that is more favorable to our stockholders than the
merger (subject to our compliance with the terms and conditions
of the Merger Agreement);
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the Parent Termination Fee that is payable to us in certain
circumstances;
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the view of our Board, after consultation with its financial and
legal advisors, that as a percentage of the merger consideration
to be paid in the merger, the Termination Fee and expense
reimbursement provisions were within the range of fees and
expenses provided for in similar size transactions;
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the limited closing conditions in the Merger Agreement; and
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the likelihood of consummation of the merger, including an
assessment of regulatory risks and an assessment that Parent has
the financial capability to acquire us for the merger
consideration.
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Our Board also considered the potential risks of the merger,
including:
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the risk that the merger might not be completed in a timely
manner or at all;
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the fact that following the merger, our stockholders would not
participate in any of our future earnings or growth and would
not benefit from any appreciation in our value;
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the fact that it is a condition to closing that no governmental
authority require any action by Parent or us in connection with
consummating the transaction, including, any requirement that
Parent, the surviving corporation or any of its or their
subsidiaries (a) provide or commit to provide additional
capital to the surviving company, (b) maintain operations
or employees in the State of Florida, or (c) provide any
surplus maintenance, guarantee, keep-well or similar agreements
or commitments;
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the possibility of management and employee disruption associated
with the merger;
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the fact that the merger consideration consists of cash and
would therefore be taxable to our stockholders for United States
federal income tax purposes;
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the requirement that we pay to Parent the Termination Fee if the
agreement is terminated in order for our Board to accept a
superior proposal and in certain other circumstances; and
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the restrictions on the conduct of our business prior to
consummation of the merger, including the requirement to conduct
our business only in the ordinary course, subject to specific
limitations or consent by Parent, which may delay or prevent us
from undertaking business opportunities that may arise pending
completion of the merger.
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In view of the variety of factors and the quality and amount of
information considered as well as the complexity of these
matters, our Board did not find it practicable to, and did not
attempt to, make specific assessments of, quantify, rank or
otherwise assign relative weights to the specific factors
considered in reaching this determination. Our Board conducted
an overall analysis of the factors described above, as well as
others, including thorough discussion with, and questioning of,
our senior management and our legal and financial advisors, and
considered the benefits of the merger to outweigh the risks and
the factors overall to be favorable to, and to support, its
determination. Our Board did not undertake to make any specific
determination as to whether any particular factor, or any aspect
of any factor, was favorable or unfavorable to its ultimate
determination. Individual members of our Board may have given
different weight to different factors.
25
Recommendation
of the Board of Directors
After careful consideration, our Board has unanimously
determined (with an interested director abstaining from voting)
that the Merger Agreement and the merger are advisable and are
fair to us and our stockholders, and in our best interest and
the best interest of our stockholders and has unanimously
approved (with an interested director abstaining from voting)
the Merger Agreement.
The Board unanimously recommends (with
an interested director abstaining from such recommendation) that
you vote FOR the adoption of the Merger Agreement at
the special meeting and FOR the approval of the
adjournment of the special meeting, if necessary or appropriate,
to solicit additional proxies.
Opinion
of Financial Advisor
On May 22, 2007, we engaged Raymond James to provide
financial advisory and investment banking services in connection
with the possible sale of our company or an equity interest in
our company to another corporation or business entity. In
connection with such engagement, we requested that Raymond James
evaluate the fairness, from a financial point of view, of the
merger consideration to be received by eligible holders of our
common stock in a transaction. We selected Raymond James based
upon its qualifications, expertise in the valuation of insurance
businesses and reputation as a nationally recognized investment
banking firm. As a part of its investment banking business,
Raymond James and its affiliates are regularly engaged in the
valuation of businesses and their securities in connection with
mergers and acquisitions, investments for passive and control
purposes, and advisory assignments for the boards of various
public and private companies. Raymond James has an investment
banking team that is dedicated to servicing financial services
companies including insurance companies, and its bankers have as
many as 20 years experience in providing investment banking
services to insurers. Prior to engaging Raymond James in
connection with a possible sale of the Company, we selected
Raymond James to act as a co-manager for our initial public
offering in February 2006 and to act as an agent in the
execution of our share repurchase plan in 2007. Raymond James
was paid approximately $1.60 million and $17,000,
respectively, for these services. To our knowledge, Raymond
James has had no previous relationship with Parent or Merger
Sub, nor does it have any proposed future relationship with
Parent, Merger Sub or the surviving corporation.
In connection with Raymond James engagement, at a meeting
of our Board on January 10, 2008, Raymond James delivered
to our Board its opinion that, based upon and subject to the
various considerations set forth in its written opinion dated
January 10, 2008, the merger consideration of $12.50 cash
per share to be received by common stock holders pursuant to the
terms and conditions of the Merger Agreement was fair, from a
financial point of view, to the common stock holders.
Raymond James expressed no opinion as to the underlying business
decision to approve the Merger Agreement, the structure or tax
consequences of the Merger Agreement or the availability or
advisability of any alternatives to the Merger Agreement.
Raymond James did not structure the Merger Agreement or
negotiate the final terms of the Merger Agreement. Raymond
James opinion is limited to the fairness, from a financial
point of view, of the merger consideration to be received by the
common stock holders pursuant to the terms and conditions of the
Merger Agreement. Raymond James expressed no opinion with
respect to any other reasons, legal, business, or otherwise,
that may support the decision of the Board to approve or
consummate the Merger Agreement. In formulating its opinion,
Raymond James considered only what it understood to be the
merger consideration to be received by the eligible holders of
our common stock, and its opinion does not address any other
payments that may be made to our employees or other stockholders
in connection with the merger. The opinion of Raymond James was
one of many factors taken into consideration by our Board in
making its determination to approve the Merger Agreement.
Consequently, the analyses described below should not be viewed
as determinative of the Boards or our managements
opinion with respect to the value of our company.
The full text of Raymond James opinion, which sets forth,
among other things, the assumptions made, procedures followed,
matters considered and limits on the review undertaken by
Raymond James, is attached as Annex C to this proxy
statement. No limitations were imposed by our Board upon Raymond
James with respect to the investigations made or procedures
followed by it in rendering this opinion. Holders of our common
stock are urged to read the opinion in its entirety. Any
description of or reference to Raymond James opinion is
subject to, and qualified in its entirety by reference to, the
full text of such opinion.
Raymond James opinion is
directed to
26
our Board and does not constitute a recommendation to any
holder of our common stock or any other person as to whether
such person should vote to approve the Merger Agreement.
In connection with its review of the proposed Merger Agreement
and the preparation of its opinion, Raymond James, among other
things:
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reviewed the financial terms and conditions as stated in the
Merger Agreement;
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reviewed the annual reports to stockholders on
Form 10-K
of our company for the two fiscal years ended December 31,
2005 and December 31, 2006;
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reviewed the quarterly reports to stockholders on
Form 10-Q
of our company for the fiscal quarters ended March 31,
2007, June 30, 2007 and September 30, 2007;
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reviewed other financial and operating information requested
from
and/or
provided by our company;
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reviewed the Annual Statements of AmCOMP Preferred Insurance
Company and AmCOMP Assurance Corporation, which we refer to as
the Insurance Subsidiaries, as well as the combined Annual
Statements of the AmCOMP Incorporated Group filed with the
Florida Department of Financial Services for the years ended
December 31, 2004, 2005 and 2006;
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reviewed the reports of our companys independent actuarial
firm, dated December 31, 2006, June 30, 2007 and
September 30, 2007;
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reviewed certain other publicly available information on our
company;
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discussed with members of our senior management certain
information relating to the aforementioned and any other matters
which Raymond James deemed relevant to its inquiry;
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reviewed and discussed with our senior management the historical
and anticipated future financial performance and prospects of
our company, including the review of forecasts prepared by
senior management of our company;
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reviewed the reported price and trading activity for the shares
of our common stock;
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compared financial and stock market information for our company
with similar information for comparable companies with publicly
traded securities;
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reviewed the financial terms of recent business combinations
involving companies in comparable businesses; and
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performed a discounted cash flow analysis of our company on a
stand-alone basis and performed such other analyses and studies,
and considered such other factors, as Raymond James considered
appropriate.
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Raymond James opinion is necessarily based upon market,
economic, financial and other circumstances and conditions
existing and disclosed to it as of January 9, 2008, and any
material change in such circumstances and conditions would
require a reevaluation of its opinion, which Raymond James is
under no obligation to undertake.
In preparing its opinion, Raymond James relied on and assumed
the accuracy and completeness of the financial and other
information that was provided to it or was publicly available
and did not undertake any duty or responsibility to verify
independently any of such information. Raymond James, with our
consent, assumed that forecasts provided by us were reasonably
prepared on a basis reflecting the best currently available
estimates and judgments of our company, and expressed no opinion
with respect to such forecasts or the assumptions on which they
are based. In addition, Raymond James did not make or obtain any
evaluations or appraisals of our properties, assets,
liabilities, reserves or surplus, nor was Raymond James
furnished with any such appraisals. Raymond James was not
furnished with any actuarial analysis or reports, except for
certain analysis and reports prepared by our independent
actuarial advisors. Raymond James is not an actuarial firm and
its services did not include actuarial determinations or
evaluations by it or an attempt to evaluate any actuarial
assumptions. In that regard, Raymond James has made no analysis
of, and expresses no opinion as to, the adequacy of our losses
and loss adjustment expense reserves under any state or federal
laws relating to bankruptcy, insolvency or similar matters.
27
Raymond James also assumed that all material governmental,
regulatory or other approvals and consents required in
connection with the consummation of the Merger Agreement would
be obtained and that in connection with obtaining any necessary
governmental, regulatory or other approvals and consents, or any
amendments, modifications or waivers to any agreements,
instruments or orders to which we are a party or are subject or
by which we are bound, no limitations, restrictions or
conditions would be imposed or amendments, modifications or
waivers would be made that would have a material adverse effect
on us or materially reduce the contemplated benefits of the
Merger Agreement.
With respect to the comparison of selected comparable companies
and merger and acquisition transactions analyses, no company
utilized as a comparison is completely identical to our company
and no transaction is completely identical to the merger. Such
analyses necessarily involve complex considerations and
judgments concerning the differences in financial and operating
characteristics of the companies and other factors that could
affect the acquisition or public trading values of the companies
concerned. Estimates of the financial value of companies do not
purport to be appraisals or to reflect the prices at which
companies or securities may actually be sold. Accordingly,
Raymond James analyses and estimates are inherently
subject to substantial uncertainty.
In arriving at its opinion, Raymond James did not attribute any
particular weight to any analysis or factor considered by it,
but rather made qualitative judgments as to the significance and
relevance of each analysis and factor. The preparation of a
fairness opinion is a complex process involving various
determinations as to the most appropriate and relevant methods
of financial analysis and the application of those methods to
the particular circumstances and, therefore, a fairness opinion
is not readily susceptible to partial analysis or summary
description. Raymond James arrived at its opinion based on the
results of all the analyses that it undertook assessed as a
whole, and did not draw conclusions from, or with regard to, any
one method of analysis. Accordingly, Raymond James believes that
its analyses must be considered as a whole and that selecting
portions of its analyses, without considering all of its
analyses, would create an incomplete view of the process
underlying its opinion.
The following is a summary of the material financial analyses
underlying Raymond James opinion, dated January 10,
2008, that Raymond James presented to our Board in connection
with the Merger Agreement at a meeting of the Board on
January 10, 2008. The order of the analysis does not
represent relative importance or weight given to those analyses
used by Raymond James. The financial analyses summarized below
include information presented in tabular format. In order to
fully understand Raymond James financial analyses, the
tables must be read together with the text of each summary. The
tables alone do not constitute a complete description of the
financial analyses. Considering the data below without
considering the full narrative description of the financial
analyses, including the methodologies and assumptions underlying
the analyses, could create a misleading or incomplete view of
Raymond James financial analyses and opinion.
Summary of Merger Consideration.
Raymond James
reviewed the financial terms of the merger consideration.
Pursuant to the Merger Agreement, each share of common stock
will be converted into the right to receive $12.50 in cash.
Analysis of Historical Trading Prices.
Raymond
James reviewed the historical trading prices for the shares of
our common stock for the 52-week period from January 9,
2007 through January 9, 2008. Raymond James analysis
showed the following concerning the merger consideration of
$12.50 per share relative to historical prices of our common
stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premium/
|
|
|
|
AmCOMP
|
|
|
(Discount)
|
|
|
Merger Consideration
|
|
$
|
12.50
|
|
|
|
|
|
Closing Price on January 9, 2008
|
|
$
|
8.68
|
|
|
|
44.0
|
%
|
52-week high (2/9/07)
|
|
$
|
12.11
|
|
|
|
3.2
|
%
|
52-week low (8/9/07)
|
|
$
|
7.32
|
|
|
|
70.8
|
%
|
IPO Price (2/9/06)
|
|
$
|
9.00
|
|
|
|
38.9
|
%
|
Summary of Comparable Companies
Analysis.
Raymond James compared publicly
available historical and projected operating earnings, net
income, and book value of eight publicly held property-casualty
insurance companies operating in the workers compensation
insurance marketplace. These companies were selected based
28
on Raymond James professional judgment considering
characteristics such as the type of insurance written and market
capitalization. None of the selected companies are directly
comparable to us and, therefore, the results of the selected
companys analysis are primarily financial calculations
rather than detailed analyses of the differences in operating
characteristics and business mixes of the various companies.
Appropriate use of the data includes qualitative judgments
concerning, among other things, differences among the companies.
Selected companies as of January 9, 2008 included:
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|
Zenith National Insurance Corp.
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|
Employers Holdings, Inc.
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|
|
SeaBright Insurance Holdings, Inc.
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|
|
Meadowbrook Insurance Group, Inc.
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|
PMA Capital Corporation
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|
|
AMERISAFE, Inc.
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|
|
|
Eastern Insurance Holdings, Inc.
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|
|
|
CRM Holdings, Ltd.
|
Raymond James calculated various financial multiples for each
company, including (a) market value compared to net
operating income, where net operating income is defined as
income from continuing operations minus any realized gains or
losses, for the most recent available twelve month period, which
we refer to as LTM; (b) market value per share compared to
earnings per share, which we refer to as EPS, using Wall Street
research analyst estimates, as reported by First Call, for the
selected companies for calendar years ending December 31,
2007 and 2008, which we refer to as CY07E and CY08E;
(c) market value to stated book value as of the most recent
reporting period; and (d) market value to tangible book
value as of the most recent reporting period. The estimates
published by Wall Street research analysts were not prepared in
connection with the merger or at Raymond James request and
may or may not prove to be accurate. Raymond James reviewed the
minimum, mean, median and maximum relative valuation multiples
of the selected public companies and compared them to
corresponding valuation multiples for our company implied by the
merger consideration. The results of the selected public
companies analysis based on market price information as of
January 9, 2008 are summarized below:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger
|
|
|
Comparable Companies
|
|
|
|
Consideration
|
|
|
Min
|
|
|
Median
|
|
|
Mean
|
|
|
Max
|
|
|
Market value as a multiple of LTM net operating income
|
|
|
10.8
|
x
|
|
|
6.2
|
x
|
|
|
7.5
|
x
|
|
|
8.3
|
x
|
|
|
13.1
|
x
|
Market value as a multiple of CY07E EPS
|
|
|
9.5
|
x
|
|
|
6.2
|
x
|
|
|
7.3
|
x
|
|
|
8.7
|
x
|
|
|
13.5
|
x
|
Market value as a multiple of CY08E EPS
|
|
|
11.5
|
x
|
|
|
5.5
|
x
|
|
|
7.7
|
x
|
|
|
8.2
|
x
|
|
|
10.6
|
x
|
Market value as a multiple of book value
|
|
|
1.3
|
x
|
|
|
0.7
|
x
|
|
|
1.1
|
x
|
|
|
1.1
|
x
|
|
|
1.5
|
x
|
Market value as a multiple of tangible book value
|
|
|
1.3
|
x
|
|
|
0.7
|
x
|
|
|
1.2
|
x
|
|
|
1.2
|
x
|
|
|
1.5
|
x
|
Furthermore, Raymond James applied the minimum, mean, median and
maximum relative valuation multiples for each of the metrics to
our companys actual and Wall Street research
analysts projected financial results, as reported by First
Call, and determined the implied market price per share for our
common stock and then compared
29
those implied market values per share to the merger
consideration of $12.50 per share. The results of this are
summarized below:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger
|
|
|
Comparable Companies
|
|
|
|
Consideration
|
|
|
Min
|
|
|
Median
|
|
|
Mean
|
|
|
Max
|
|
|
Implied market value multiples of LTM net operating income
|
|
$
|
12.50
|
|
|
$
|
7.15
|
|
|
$
|
8.70
|
|
|
$
|
9.58
|
|
|
$
|
15.16
|
|
Implied market value multiples of CY07E EPS
|
|
$
|
12.50
|
|
|
$
|
8.24
|
|
|
$
|
9.63
|
|
|
$
|
11.52
|
|
|
$
|
17.86
|
|
Implied market value multiples of CY08E EPS
|
|
$
|
12.50
|
|
|
$
|
6.01
|
|
|
$
|
8.43
|
|
|
$
|
8.97
|
|
|
$
|
11.51
|
|
Implied market value multiples of book value
|
|
$
|
12.50
|
|
|
$
|
6.52
|
|
|
$
|
11.34
|
|
|
$
|
11.25
|
|
|
$
|
14.76
|
|
Implied market value multiples of tangible book value
|
|
$
|
12.50
|
|
|
$
|
6.46
|
|
|
$
|
11.61
|
|
|
$
|
11.60
|
|
|
$
|
14.93
|
|
Summary of Precedent Transactions
Analysis.
Raymond James reviewed five merger and
acquisition transactions announced since September 1, 2006
in which the transaction value was less than $500 million
and that involved insurance companies for which public
information was available considered by Raymond James to be most
comparable to our company. These transactions included:
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|
|
|
|
|
|
Transaction
|
|
|
|
|
|
|
|
Announced
|
|
Buyer
|
|
Target
|
|
Deal Value
|
|
|
|
|
|
|
|
(In millions)
|
|
|
01/03/08
|
|
QBE Insurance Group
|
|
North Pointe Holdings Corporation
|
|
$
|
145.9
|
|
10/15/07
|
|
The Doctors Company
|
|
SCPIE Holdings Inc.
|
|
$
|
279.8
|
|
10/20/07
|
|
Rockhill Holding Company
|
|
RTW Inc.
|
|
$
|
67.3
|
|
04/27/07
|
|
Alleghany Corp.
|
|
Employers Direct
|
|
$
|
195.0
|
|
09/08/06
|
|
CRM Holdings Ltd.
|
|
Embarcadero Insurance Holdings, Inc.
|
|
$
|
46.3
|
|
In reviewing these transactions, Raymond James evaluated, among
other things, the equity value relative to the acquired
companys book value and net income, in each case, for the
most recent available twelve month period prior to the
announcement of the transaction. Raymond James reviewed the
minimum, mean, median and maximum relative valuation multiples
of the selected transactions and compared them to corresponding
valuation multiples for our company implied by the merger
consideration.
The following table presents the results of this analysis:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger
|
|
Precedent Transactions
|
|
|
Consideration
|
|
Min
|
|
Median
|
|
Mean
|
|
Max
|
|
Price to book value
|
|
|
1.3
|
x
|
|
|
1.0
|
x
|
|
|
1.3
|
x
|
|
|
1.3
|
x
|
|
|
1.5
|
x
|
Price to LTM earnings
|
|
|
10.9
|
x
|
|
|
4.2
|
x
|
|
|
17.9
|
x
|
|
|
14.4
|
x
|
|
|
21.1
|
x
|
Furthermore, Raymond James applied the minimum, mean, median and
maximum relative valuation multiples to our most recent
available last twelve months earnings and book value to
determine the implied equity price per share and then compared
those implied equity values per share to the merger
consideration of $12.50 per share. The results of the selected
transactions analysis are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger
|
|
Precedent Transactions
|
|
|
Consideration
|
|
Min
|
|
Median
|
|
Mean
|
|
Max
|
|
Price to book value
|
|
$
|
12.50
|
|
|
$
|
9.88
|
|
|
$
|
12.37
|
|
|
$
|
12.79
|
|
|
$
|
14.93
|
|
Price to LTM earnings
|
|
$
|
12.50
|
|
|
$
|
4.68
|
|
|
$
|
20.05
|
|
|
$
|
16.10
|
|
|
$
|
23.58
|
|
Summary of Premiums Paid Analysis.
Raymond
James compared the premium implied by the merger consideration
of $12.50 per share to our historical stock prices to that of
premiums paid in acquisitions of other publicly-traded
companies. As part of its analysis, Raymond James reviewed 54
merger and acquisition transactions
30
in the United States across all industries with an equity
purchase price between $100 million and $500 million
announced since July 1, 2007 until January 9, 2008 and
in which the value per share was greater than five dollars.
Raymond James measured each transaction price per share relative
to each targets closing price per share one day, two weeks
and one month prior to announcement of the transaction. Raymond
James compared the minimum, mean, median and maximum premiums
paid from this set of transactions to the per share merger
consideration expressed as a premium relative to the closing
stock price of our company for the respective time periods. The
results of the transaction premium analysis are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One Day
|
|
|
Two Week
|
|
|
One Month
|
|
|
|
Premium/
|
|
|
Premium/
|
|
|
Premium/
|
|
|
|
(Discount)
|
|
|
(Discount)
|
|
|
(Discount)
|
|
|
Merger Consideration
|
|
|
44.0
|
%
|
|
|
34.7
|
%
|
|
|
27.6
|
%
|
Minimum
|
|
|
2.1
|
%
|
|
|
(9.4
|
)%
|
|
|
(18.6
|
)%
|
Median
|
|
|
32.1
|
%
|
|
|
31.5
|
%
|
|
|
31.1
|
%
|
Mean
|
|
|
44.2
|
%
|
|
|
41.1
|
%
|
|
|
38.0
|
%
|
Maximum
|
|
|
166.7
|
%
|
|
|
166.7
|
%
|
|
|
151.6
|
%
|
Furthermore, Raymond James applied the minimum, mean, median and
maximum premiums for each of the metrics to our actual
corresponding closing stock prices to determine the implied
equity price per share and then compared those implied equity
values per share to the merger consideration of $12.50 per
share. The results of this are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One Day
|
|
|
Two Week
|
|
|
One Month
|
|
|
|
Premium/
|
|
|
Premium/
|
|
|
Premium/
|
|
|
|
(Discount)
|
|
|
(Discount)
|
|
|
(Discount)
|
|
|
Merger Consideration
|
|
$
|
12.50
|
|
|
$
|
12.50
|
|
|
$
|
12.50
|
|
Minimum
|
|
$
|
8.87
|
|
|
$
|
8.41
|
|
|
$
|
7.97
|
|
Median
|
|
$
|
11.46
|
|
|
$
|
12.21
|
|
|
$
|
12.85
|
|
Mean
|
|
$
|
12.51
|
|
|
$
|
13.10
|
|
|
$
|
13.53
|
|
Maximum
|
|
$
|
23.15
|
|
|
$
|
24.75
|
|
|
$
|
24.65
|
|
Discounted Cash Flow Analysis.
Raymond James
performed a discounted cash flow analysis to generate a range
for the implied present value per share of our company assuming
we continued operating as a stand-alone public company. This
range was determined:
(a) By adding (1) the present value of estimated
future free cash flows to our stockholders for the years 2008
through 2012, and (2) the present value of the terminal
value of our common stock. Terminal values for our common stock
were calculated based on a range of forward price-to-earnings
multiples applied to the estimated 2013 net income of our
company.
(b) By adding (1) the present value of estimated
future free cash flows to our stockholders for the years 2008
through 2012, and (2) the present value of the terminal
value of our common stock. Terminal values for our common stock
were calculated based on a range of terminal multiples applied
to the year-end 2012 book value of our company.
In connection with this analysis, Raymond James utilized, with
our consent, projections provided by our management reflecting
its best currently available estimates and judgments of the
future financial performance of our company. As part of its
analysis, and with our consent, Raymond James assumed, among
other things, that (a) all excess capital not needed to
maintain a net-premiums-written to surplus ratio of 1.24x in
2008, and 1.20x thereafter, is considered excess capital and
paid to our stockholders in the form of a cash dividend, and
(b) that our company is sold at December 31, 2012 with
proceeds being discounted back to the beginning of January 2008.
Raymond James estimated the range for the implied valuation per
share of our common stock by varying the following assumptions,
which Raymond James, in its professional judgment, deemed
reasonable for a small market capitalization company such as
ours with the risk characteristics of our insurance operations:
|
|
|
|
|
a range of terminal multiples applied to year 2013 estimated net
income of 9.0x to 11.0x;
|
31
|
|
|
|
|
a range of terminal multiples applied to year-end 2012 estimated
book value of 1.2x to 1.5x; and
|
|
|
|
discount rates representing an un-levered cost of equity ranging
from 11.0% to 14.0%.
|
The results of this analysis can be seen in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Min
|
|
|
Median
|
|
|
Mean
|
|
|
Max
|
|
|
Merger Consideration
|
|
$
|
12.50
|
|
|
$
|
12.50
|
|
|
$
|
12.50
|
|
|
$
|
12.50
|
|
Applying terminal price-to-earnings multiple
|
|
$
|
9.18
|
|
|
$
|
10.67
|
|
|
$
|
10.68
|
|
|
$
|
12.33
|
|
Applying terminal book value multiple
|
|
$
|
10.41
|
|
|
$
|
12.26
|
|
|
$
|
12.28
|
|
|
$
|
14.32
|
|
Miscellaneous.
The Board retained Raymond
James based upon the recognized experience and expertise of
Raymond James Financial Services Group and its prior
experience with Raymond James as a financial advisor. Raymond
James is a recognized investment banking and advisory firm.
Raymond James, as a part of its investment banking and advisory
business, is continually engaged in the valuation of investment
securities in connection with mergers and acquisitions, public
offerings, private placements, and valuations for estate,
corporate and other purposes and provides research reports to
its clients on many insurance companies. The Board selected
Raymond James as its financial advisor because of its reputation
and because of its substantial experience in transactions
similar to this transaction. In the ordinary course of business,
Raymond James may trade in the equity securities of our company
for its own account or for the accounts of its customers and,
accordingly, at any time may hold a long or short position in
such securities.
Raymond James received a $350,000 fee for services rendered in
connection with delivery of the fairness opinion provided to us,
plus reimbursement of out-of-pocket expenses. This fee was
payable even if Raymond James concluded the merger consideration
was not fair to our company. We have also agreed to pay Raymond
James approximately $2,300,000 as an advisory fee for services
in connection with the merger, which is contingent upon the
closing of the merger. We also agreed to indemnify Raymond James
against certain liabilities, including liabilities under the
federal securities laws.
Material
United States Federal Income Tax Consequences
The following general discussion summarizes the material United
States federal income tax consequences to our stockholders as a
result of the exchange of their shares of our common stock
solely in exchange for cash either pursuant to the Merger
Agreement or as a result of dissenting and perfecting their
appraisal rights. This discussion is based on the Internal
Revenue Code of 1986, as amended (referred to herein as
Internal Revenue Code), the current Treasury
Regulations promulgated thereunder, existing administrative
interpretations and court decisions, all of which are subject to
change, possibly with retroactive effect. This discussion
assumes that our stockholders hold their shares of our common
stock as capital assets, within the meaning of Section 1221
of the Internal Revenue Code.
This discussion does not address all aspects of United States
federal income taxation that may be important to stockholders in
light of their particular circumstances or if they are subject
to special rules. These special rules include rules relating to:
|
|
|
|
|
stockholders who are not citizens or residents of the United
States;
|
|
|
|
financial institutions;
|
|
|
|
tax-exempt organizations;
|
|
|
|
insurance companies;
|
|
|
|
pass-through entities and investors in such entities;
|
|
|
|
dealers in securities; and
|
|
|
|
stockholders who acquired their shares of stock through the
exercise of options or similar derivative securities or
otherwise as compensation.
|
32
This discussion also does not address the alternative minimum
tax or any tax consequences under state, local or foreign laws.
The discussion that follows neither binds nor precludes the
Internal Revenue Service from adopting a position contrary to
that expressed in this proxy statement, and we cannot assure you
that such a contrary position could not be asserted successfully
by the Internal Revenue Service or adopted by a court if the
positions were litigated. We do not intend to obtain a ruling
from the Internal Revenue Service with respect to the United
States federal income tax consequences of the exchange of your
shares of our common stock for the merger consideration pursuant
to the merger and the related transactions, nor do we intend to
obtain an opinion from tax counsel with respect to the United
States federal income tax consequences of these transactions.
Except as otherwise indicated, this summary describes the United
States federal income tax consequences for
U.S. stockholders. U.S. stockholder means a beneficial
owner of our common stock that is for United States federal
income tax purposes:
|
|
|
|
|
a citizen or resident of the United States;
|
|
|
|
a corporation organized under the laws of the United States, any
state of the United States or the District of Columbia;
|
|
|
|
an estate, the income of which is subject to United States
federal income taxation regardless of its source; or
|
|
|
|
a trust if (a) a court within the United States is able to
exercise primary supervision over its administration and one or
more United States Persons (as such term is defined in the
Internal Revenue Code) have authority to control all substantial
decisions of the trust, or (b) the trust was in existence
on August 20, 1996, and validly elected to continue to be
treated as a United States domestic trust.
|
As used herein, the term
non-U.S. stockholder
means all stockholders that are not U.S. stockholders.
Exchanging Stockholder.
The receipt of the
cash by you pursuant to the Merger Agreement, or as a result of
dissenting and perfecting your appraisal rights, will be a
taxable transaction. You will recognize gain or loss for United
States federal income tax purposes in an amount equal to the
difference between the cash you receive and your adjusted tax
basis in your shares of our common stock exchanged therefor.
This gain or loss will be capital gain or capital loss if you
held your shares of our common stock as a capital asset at the
effective date of the merger. Any such capital gain will be
long-term capital gain if you held the exchanged shares for more
than one year as of the effective date of the merger. Net
long-term capital gains generally will be subject to United
States federal income tax at capital gain rates applicable to
the exchanging stockholder (e.g., up to a maximum net long-term
capital gains tax rate of 15.0% for taxpayers that are
individuals). Capital losses may be subject to certain
limitations.
Non-U.S. Stockholders.
In
general, if you are a
non-U.S. stockholder,
you will generally not be subject to United States federal
income tax or any withholding thereof with respect to the gain
recognized on the receipt of cash in exchange for your shares of
our common stock (either pursuant to the merger and the related
transactions or as a result of dissenting and perfecting your
appraisal rights) unless one of the following situation applies.
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The gain is effectively connected with your conduct of a trade
or business in the United States and, if a tax treaty applies,
is attributable to a permanent establishment maintained by you
in the United States. In this case, you will generally be taxed
on your net gain derived from the disposition of your shares of
our common stock at the regular graduated United States federal
income tax rates in much the same manner as if you were a
U.S. person and, if you are a foreign corporation, then you
may also be subject to a branch profits tax.
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You are an individual who is present in the United States for
183 days or more in the taxable year that the merger occurs
and you meet certain other requirements. In this case, you will
be subject to United States federal income tax at a rate of
30.0% (or a reduced rate under an applicable treaty) on the
amount by which capital gains (including gain recognized on the
sale or other disposition of our common stock) allocable to
U.S. sources exceed capital losses allocable to
U.S. sources.
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If our common stock constitutes a United States real
property interest by reason of our status as a
United States real property holding corporation, or
a USRPHC, for United States federal income tax purposes at any
time during the shorter of the five-year period ending
immediately on the date you dispose of our
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33
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common stock or the period you held our common stock. The
determination of whether we are a USRPHC depends upon the fair
market value of our United States real property interests
relative to the fair market value of our business assets.
However, due to our common stock being regularly traded on
an established securities market within the meaning of
Section 897(c)(3) of the Internal Revenue Code, even if we
are a USRPHC, our common stock will not be treated as a United
States real property interest, except as noted in the next
sentence. If you are a
non-U.S. stockholder
and directly or indirectly owned more than 5.0% of our common
stock at any time during the five-year period immediately
preceding the date you exchange your shares and we are a USRPHC,
any gain you recognize on the exchange of your shares will be
treated as income that is effectively connected to a
U.S. trade or business and you may be subject to
withholding at a United States federal income tax withholding
rate of 10.0% of the gross proceeds you realize with respect to
the sale of your shares of our common stock. Any amount withheld
in excess of the actual tax owed may be refundable if specified
requirements are satisfied.
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Backup withholding.
You may be subject to
backup withholding at a 28.0% rate on any cash consideration
that you receive in connection with the merger. Backup
withholding will not apply, however, if you:
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furnish to us a correct taxpayer identification number and
certify that you are not subject to backup withholding on the
substitute
Form W-9
or successor form included in the letter of transmittal to be
delivered to you following the date of the completion of the
merger;
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provide a certification of foreign status on
Form W-8BEN
or another type of
W-8
form; or
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are otherwise exempt from backup withholding.
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Backup withholding is not an additional tax but is credited
against the United States federal income tax liability of the
taxpayer subject to the withholding. If backup withholding
results in an overpayment of a taxpayers United States
federal income taxes, that taxpayer may obtain a refund from the
Internal Revenue Service.
THE PRECEDING DISCUSSION OF THE MATERIAL UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER IS FOR GENERAL
INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. AMCOMP
INCORPORATED STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX
ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM OF
THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF
ANY CHANGES IN U.S. FEDERAL OR OTHER APPLICABLE TAX
LAWS.
Voting
Agreements
In connection with the Merger Agreement, each of the Voting
Agreement Parties entered into the Voting Agreements with
Parent, which agreements relate to an aggregate of
2,627,094 shares of common stock, representing
approximately 17.2% of our outstanding common stock. Pursuant to
the Voting Agreements and as more fully described therein, each
of the Voting Agreement Parties, among other things,
unconditionally and irrevocably agreed, at any duly called
meeting of our stockholders (or any adjournment or postponement
thereof), and in any action by written consent of our
stockholders, to vote all of such stockholders respective
common stock (a) in favor of the merger and the approval of
the Merger Agreement and the other transactions contemplated
thereby (and any actions in furtherance thereof) and
(b) against any action, proposal, transaction or agreement
that would result in a breach in any respect of any covenant,
representation or warranty or any other obligation or agreement
of ours contained in the Merger Agreement or of the above
contained in the voting agreement.
Each party to a voting agreement remains subject to the terms of
the Voting Agreement even if (a) our Board changes its
recommendation or withdraws its recommendation, see The
Merger Agreement Recommendation, or
(b) we breach any of our representations, warranties,
agreements or covenants set forth in the Merger Agreement.
Each of the Voting Agreement Parties also, among other things,
(a) agreed that it will not, and will cause its
representatives not to, (1) directly or indirectly solicit,
initiate, or knowingly encourage or facilitate any inquiries or
alternative proposals from third parties with respect to us or
any of our subsidiaries, (2) enter into any agreement
34
with respect to an third party takeover proposal or
(3) directly or indirectly participate in any discussions
or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, a third
party takeover proposal; (b) agreed to certain transfer
restrictions with respect to their respective common stock and
agreed to hold their respective common stock free and clear of
any liens; (c) granted Parent and its designees an
irrevocable proxy to vote their respective common stock in a
manner consistent with the voting agreements (subject to the
receipt of any required regulatory approvals); and
(d) agreed not to seek appraisal or assert any rights of
dissent from the merger.
Each Voting Agreement is to terminate upon the earliest to occur
of (a) the mutual written consent of Parent and the
applicable Voting Agreement Party, (b) the effective time
of the merger, (c) the date of termination of the Merger
Agreement in accordance with its terms, (d) the date of any
change or amendment to the Merger Agreement that results in any
decrease in the merger consideration, or
(e) October 31, 2009.
Nothing in the Voting Agreements are to restrict, in any way,
Messrs. Lowe, Stephens or Queally in the exercise of their
fiduciary duties as an executive officer
and/or
director of us.
Regulatory
Matters
In addition to the filing of a certificate of merger with the
Secretary of State of the State of Delaware at or before the
effective date of the merger, it is a condition to the
consummation of the transactions under the Merger Agreement that
(a) the waiting period under the HSR Act has expired or
been terminated and (b) we obtain the authorization,
consent or approval of any governmental authorities under
applicable
non-U.S. antitrust
laws.
U.S.
Antitrust Filing
On February 7, 2008, we and Parent filed our respective
Notification and Report Forms under the HSR Act with the Federal
Trade Commission, which we refer to as the FTC, and the
Antitrust Division of the United States Department of Justice.
We do not believe that the merger requires the authorization,
consent or approval of any governmental authorities under
applicable
non-U.S. antitrust
laws. On February 19, 2008, we and Parent received notice
that the waiting period under the HSR Act was terminated as of
February 19, 2008.
Insurance
Laws and Regulations
State insurance laws and regulations generally require that,
prior to the acquisition of an insurance company domiciled or,
in some cases, commercially domiciled in that jurisdiction, the
acquiring company must obtain the approval of the insurance
commissioner of that jurisdiction. Parent will make all
necessary filings with all appropriate insurance commissioners,
including Florida, our domicile state. Parent made the necessary
filings in Florida on February 8, 2008.
In addition, the insurance laws and regulations of certain
U.S. states require that, prior to an acquisition of an
insurance company doing business in that state or licensed by
that state (or the acquisition of its holding company), a notice
filing disclosing certain market share data in the applicable
jurisdiction must be made and an applicable waiting period must
expire or be terminated. These notice filings, if any, will be
made in the applicable jurisdictions.
Although we and Parent do not expect these regulatory
authorities to raise any significant concerns in connection with
their review of the merger, there is no assurance that we and
Parent will obtain all required regulatory approvals, or that
those approvals will not include:
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any action or the commitment to take any action, or consent or
agreement to any condition, restriction or undertaking requested
or imposed by any governmental authority, whether in connection
with obtaining any required regulatory approval or otherwise,
that, in the good faith determination of Parent, such action,
condition, restriction or undertaking, individually or in the
aggregate, with all other such actions, conditions, restrictions
or undertakings, would materially adversely affect the benefits,
taken as a whole, that Parent reasonably expects to derive from
the transactions contemplated by the Merger Agreement; or
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35
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any requirement that Parent, the surviving corporation or any of
its or their subsidiaries (a) provide or commit to provide
additional capital to us, (b) maintain operations or
employees in the state of Florida, or (c) provide any
surplus maintenance, guarantee, keep-well or similar agreements
or commitments.
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Parent may terminate the Merger Agreement in the event that any
such condition or obligation is imposed by regulatory
authorities.
Other than the filings described above, neither we nor Parent is
aware of any regulatory approvals required to be obtained, or
waiting periods to expire, to complete the merger. If the
parties discover that other approvals or waiting periods are
necessary, they will seek to obtain or comply with them. If any
additional approval or action is needed, however, we or Parent
may not be able to obtain it. Even if Parent or us obtain all
necessary approvals, and the Merger Agreement is adopted by the
our stockholders, conditions may be placed on any such approval
that could cause either Parent or us to abandon the merger.
Interests
of Certain Persons in the Merger
In considering the recommendation of the Board with respect to
the adoption of the Merger Agreement, you should be aware that
some of our directors and executive officers have interests in
the merger that are different from, or in addition to, the
interests of our stockholders generally. These interests may
present them with actual or potential conflicts of interest, and
these interests, to the extent material, are described below.
The Board was aware of these interests and considered them,
among other matters, in approving the Merger Agreement and the
merger.
Treatment
of Stock Options
A holder of outstanding options to purchase shares of our common
stock, whether or not then vested, at the effective time of the
merger, will be entitled to receive a cash amount equal to the
product of (a) the amount, if any, by which $12.50 exceeds
the exercise price per share of each option held by such person
at the effective time of the merger, and (b) the number of
shares subject to such option held by such person, less any
applicable withholdings for taxes. No consideration will be paid
in respect of any stock options for which the exercise price
equals or exceeds $12.50 per share.
36
Each of our directors and executive officers owns vested
and/or
unvested options with exercise prices of less than $12.50 per
share. The following table sets forth the cash consideration
that the directors and executive officers, individually and as a
group, are to be entitled to receive under the Merger Agreement
in consideration for the cancellation of unvested and vested
options held by such directors and executive officers.
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Number of
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Consideration
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Number of
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Consideration
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Total
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Total
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Shares
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for
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Shares
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for
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Number
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Consideration
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Subject to
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Cancellation
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Subject to
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Cancellation
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of Shares
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for Cancellation
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Unvested
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of Unvested
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Vested
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of Vested
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Subject to
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of Unvested and
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Name
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Options
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Options
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Options
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Options
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Options
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Vested Options
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Fred R. Lowe
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72,768
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$
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254,688
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145,534
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$
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509,369
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218,302
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$
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764,057
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Debra Cerre-Ruedisili
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78,661
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275,314
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78,659
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275,307
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157,320
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550,620
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George Harris
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30,000
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54,600
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10,000
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18,200
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40,000
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72,800
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Kumar Gursahaney
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46,585
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138,784
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58,415
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187,661
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105,000
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326,445
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Colin Williams(1)
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656
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2,296
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0
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0
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656
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2,296
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Timothy J. Spear
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21,284
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74,494
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21,284
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74,494
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42,568
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148,988
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Lisa Perrizo
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19,647
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68,765
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19,647
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68,765
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39,294
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137,529
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Sam A. Stephens
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4,658
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14,215
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5,288
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17,712
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9,946
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31,927
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Frank Pinson
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4,366
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15,281
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4,366
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15,281
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8,732
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30,562
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Paul B. Queally
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4,658
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14,215
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5,288
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17,712
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9,946
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31,927
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Donald C. Stewart
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4,658
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14,215
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5,288
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17,712
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9,946
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31,927
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Spencer L. Cullen, Jr.
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4,658
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14,215
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5,288
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17,712
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9,946
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31,927
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All directors and executive officers as a group
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292,599
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$
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941,082
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359,057
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$
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1,219,925
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651,656
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$
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2,161,005
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(1)
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Effective as of April 1, 2008, Mr. Williams resigned
from his position as President of the Texas region. All
unexercised options held by Mr. Williams expire on
May 1, 2008 and he will not be compensated for any unvested
options.
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Existing
Employment Agreements
We have entered into employment agreements with Fred R. Lowe,
our Chairman, President and Chief Executive Officer; Debra
Cerre-Ruedisili, our Chief Operating Officer; Kumar Gursahaney,
our Chief Financial Officer; George Harris, our Senior Vice
President, General Counsel and Secretary; Colin Williams, former
President of the Texas Region; Lisa Perrizo, our President of
the Midwest Region; Timothy J. Spear, our President of the
Mid-Atlantic Region; and Frank Pinson, our President of the
Southern Region. In addition, we and Parent have entered into
Integration Bonus and Enhanced Severance Agreements with Debra
Cerre-Ruedisili and Kumar Gursahaney.
As a result of her Integration Bonus and Enhanced Severance
Agreement, Ms. Cerre-Ruedisili, also a director, abstained
on the vote to recommend to our stockholders to adopt the Merger
Agreement and approve the merger.
The employment agreements with our executive officers other than
George Harris do not contain change in control provisions and
our executive officers other than George Harris are only
entitled to receive a severance payment following the
termination of such individuals employment under certain
circumstances. Mr. Harris employment agreement
provides that upon his termination under certain circumstances
he is entitled to certain payments and upon a change of control
followed within 90 days by a termination of his employment
under certain circumstances, non-renewal of his employment
agreement or a material diminution in his duties,
Mr. Harris would receive additional payments.
We entered into an amended and restated employment agreement
with Fred R. Lowe, the stated term of which expires on
December 31, 2008, and which is automatically extended for
successive one-year terms, unless either party to such agreement
gives notice of a decision not to renew. Under the agreement, in
addition to his base salary of $325,000, Mr. Lowe is
eligible to receive incentive compensation, conditioned upon our
achieving annual
37
performance objectives established by Mr. Lowe and our
Board. The agreement contains customary confidentiality,
non-competition and non-solicitation provisions. The
non-competition and non-solicitation provisions apply during the
period of Mr. Lowes employment and following
termination of his employment for any reason, for the same
period that he would receive severance payment, if applicable.
Pursuant to our employment agreement with Mr. Lowe, if the
employment of Mr. Lowe is terminated for any reason other
than death, disability or cause, or we do not renew his
employment at the end of the initial term or any renewal term
provided in the agreement, we are required for the period equal
to the greater of 18 months or the number of whole months
remaining in the stated term of the agreement, commencing in the
month after the month in which employment terminates,
(a) to pay monthly to Mr. Lowe, as severance pay, an
amount equal to the sum of (1) 1/12 of Mr. Lowes
then annual salary, and (2) 1/12 of the amount of
Mr. Lowes prior years incentive compensation
and bonus, (b) to provide Mr. Lowe health and welfare
benefits, at our expense; and (c) to pay to Mr. Lowe
such other amounts, if any, that may then be otherwise payable
to Mr. Lowe pursuant to the terms of our benefit plans or
arrangements. In addition, Mr. Lowe will be entitled to
receive a $600,000 termination payment upon nonrenewal or
termination for any reason, payable in three installments, the
first of which must be made within 15 days after such
nonrenewal or termination, with the second and third
installments to be made on the first and second anniversaries of
the first such installment, respectively.
We entered into amended and restated employment agreements with
Debra Cerre-Ruedisili and Kumar Gursahaney, and an employment
agreement with George Harris, the stated terms of which expire
on December 31, 2008 and which are automatically extended
for successive one-year terms, unless either party gives notice
of a decision not to renew. Under the agreements, in addition to
Ms. Cerre-Ruedisilis and
Messrs. Gursahaneys and Harris base salaries of
$285,000, $220,000 and $220,000, respectively, each of
Ms. Cerre-Ruedisili and Messrs. Gursahaney and Harris
are eligible to receive incentive compensation and bonuses as
our Board may in its discretion determine to award each of them,
and to which each of them may be entitled under the terms of any
of our plans, programs or agreements as from time to time are in
effect. The agreement contains customary confidentiality,
non-competition and non-solicitation provisions. The
non-competition and non-solicitation provisions apply during the
period of Ms. Cerre-Ruedisilis and
Messrs. Gursahaneys and Harris employment and
for an
18-month
period following termination of employment for any reason.
In connection with the Merger, we entered into Integration Bonus
and Enhanced Severance Agreements with Parent and each of
Ms. Cerre-Ruedisili and Mr. Gursahaney, which
delineated the duties of each of Ms. Cerre-Ruedisili and
Mr. Gursahaney for the surviving corporation. In connection
with the entry into the Integration Bonus and Enhanced Severance
Agreements, certain terms of each of
Ms. Cerre-Ruedisilis and Mr. Gursahaneys
employment agreements were modified, including terms related to
payments upon termination (see below). In the event the merger
is not consummated, the Integration Bonus and Enhanced Severance
Agreements and the modifications to the employment agreements
will not remain in effect and the terms of the current
employment agreements with each of Ms. Cerre-Ruedisili and
Mr. Gursahaney will govern the employment terms with each
of them. Pursuant to our current employment agreements with
Ms. Cerre-Ruedisili and Mr. Gursahaney, if the
employment of Ms. Cerre-Ruedisili or Mr. Gursahaney is
terminated for any reason other than death, disability or for
cause, or we do not renew her or his employment at the end of
the initial term or any renewal term provided in the agreement,
the applicable employment agreement provides for
(1) payment of termination benefits over an
18-month
period in equal monthly installments, each in an amount equal to
the sum of
(a)
1
/
12
of her or his then annual base salary plus (b) 1/12 of her
or his prior years incentive compensation and bonuses and
(2) payment of amounts otherwise payable to her or him
under our health and welfare benefit plans. See
Integration Bonus and Enhanced Severance
Agreements for more information.
Pursuant to our employment agreement with Mr. Harris, if
the employment of Mr. Harris is terminated for any reason
other than death, disability or incapacity for a period of
180 days or more within a 12 month period or for cause
as defined in his employment agreement, or if we do not renew
his employment at the end of the initial term or any renewal
term provided in the agreement, Mr. Harris is entitled to
receive: (a) payment of severance pay over an 18 month
period in equal monthly installments, each in an amount equal to
the amount of (1) 1/12 of his then annual base salary plus
(2) 1/12 of his incentive compensation and bonuses in
respect of our most recent fiscal year and (b) payment of
amounts otherwise payable to him under our health and other
benefit plans as described in the employment agreement. In
addition, with respect to Mr. Harris employment
agreement, if within 90 days after a
38
change of control (which the merger qualifies as), we or the
surviving corporation terminate Mr. Harris employment
other than for cause, death, disability or incapacity for a
period of 180 days or more within a 12 month period or
determine not to renew his employment or if there occurs a
material diminution in his duties, Mr. Harris is entitled
to the payments and benefits described above for a period of
30 months.
Integration
Bonus and Enhanced Severance Agreements
On January 31, 2008, we entered into Integration Bonus and
Enhanced Severance Agreements, effective as of January 10,
2008, with Parent and each of Ms. Cerre-Ruedisili and
Mr. Gursahaney. Under the agreements, each of
Ms. Cerre-Ruedisilis and Mr. Gursahaneys
employment with us or the surviving corporation is to terminate
60 calendar days after the effective time of the merger.
Ms. Cerre-Ruedisili and Mr. Gursahaney have each
agreed to use best efforts to ensure a smooth transition and
integration in the merger and to perform certain other duties
prior to and following the closing of the merger. In
consideration of the above, and subject to the consummation of
the merger, provided that Ms. Cerre-Ruedisili and
Mr. Gursahaney either remains employed by us or the
surviving corporation through 60 calendar days after the
effective time of the merger or is terminated by Parent or by us
other than for cause on or prior to 60 calendar days after the
effective time of the merger, Ms. Cerre-Ruedisili and
Mr. Gursahaney will be entitled to receive a bonus in an
amount equal to $200,000 and $110,000, respectively, as soon as
practicable, but in no event later than, 75 calendar days after
the effective time of the merger.
In addition, as a modification to
Ms. Cerre-Ruedisilis and Mr. Gursahaneys
employment agreements, and provided that
Ms. Cerre-Ruedisili and Mr. Gursahaney remain employed
by us or the surviving corporation for 60 calendar days after
the effective time of the merger, or are terminated by us, the
surviving corporation or Parent other than due to death,
disability or for cause at any time following the closing of the
merger, then in lieu of payments set forth above, Parent is to
pay or cause us or the surviving corporation to pay to
Ms. Cerre-Ruedisili or Mr. Gursahaney, as the case may
be, 18 months of severance pay, each monthly payment in an
amount equal to the sum of (i) 1/6 of annual salary in the
case of Ms. Cerre-Ruedisili, and one-eighth of annual
salary in the case of Mr. Gursahaney, each as in effect
immediately prior to such termination and (ii) 1/12 of the
amount of incentive compensation and bonuses approved and
accrued for Ms. Cerre-Ruedisili or Mr. Gursahaney, as
the case may be, in respect of the most recent fiscal year
preceding such termination. In addition,
Ms. Cerre-Ruedisili and Mr. Gursahaney are also
entitled to continued eligibility to participate in any medical
and health plans or other employee welfare benefit plans that
may be provided by us or the surviving corporation for our
senior executive employees for 18 months following 60
calendar days after the effective time of the merger. Payments
under Ms. Cerre-Ruedisilis and
Mr. Gursahaneys employment agreements may be subject
to a six-month delay to the extent necessary to avoid negative
tax consequences imposed by the deferred compensation
requirements under Section 409A of the Internal Revenue
Code.
Each of Ms. Cerre-Ruedisili and Mr. Gursahaney have
also acknowledged and agreed that each of them are to continue
to be subject to the terms and conditions of the restrictive
covenants set forth in their respective employment agreements
for the
18-month
period set forth therein. Each of Ms. Cerre-Ruedisili and
Mr. Gursahaney further agreed to be available to us, the
surviving corporation and Parent and to assist us, the surviving
corporation and Parent during the
18-month
period following their termination in performing such duties as
we, the surviving corporation or Parent may request from time to
time.
39
The following table summarizes the expected compensation amounts
to be received by the indicated executive officers upon
consummation of the merger.
|
|
|
|
|
Name
|
|
Total ($)
|
|
|
Fred Lowe
|
|
|
|
|
Severance payments under employment agreement(1)
|
|
$
|
712,500
|
|
Additional termination benefits(2)
|
|
|
600,000
|
|
Health and welfare benefits(3)
|
|
|
60,404
|
|
|
|
|
|
|
Total:
|
|
$
|
1,372,904
|
|
Debra Cerre-Ruedisili
|
|
|
|
|
Aggregate severance payments under Enhanced Severance
Agreement(4)
|
|
$
|
1,051,500
|
|
Lump sum payment pursuant to Enhanced Severance Agreement(5)
|
|
|
200,000
|
|
Health and welfare benefits(6)
|
|
|
61,842
|
|
|
|
|
|
|
Total:
|
|
$
|
1,313,342
|
|
Kumar Gursahaney
|
|
|
|
|
Aggregate severance payments under Enhanced Severance
Agreement(7)
|
|
$
|
646,500
|
|
Lump sum payment pursuant to Enhanced Severance Agreement(8)
|
|
|
110,000
|
|
Health and welfare benefits(9)
|
|
|
33,945
|
|
|
|
|
|
|
Total:
|
|
$
|
790,445
|
|
George Harris
|
|
|
|
|
Severance payments under employment agreement(10)
|
|
$
|
670,000
|
|
Health and welfare benefits under employment agreement(11)
|
|
|
38,056
|
|
|
|
|
|
|
Total:
|
|
$
|
708,056
|
|
Grand Total
|
|
$
|
4,184,747
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Represents the sum of 18 monthly payments of $39,583, which
amount is equal to the sum of (1) 1/12 of
Mr. Lowes annual salary of $325,000, and
(2) 1/12 of the amount of Mr. Lowes prior
years incentive compensation and bonus of $150,000.
|
|
(2)
|
|
Represents an amount equal to the sum of three annual payments
of $200,000, the first of which must be made within 15 days
after nonrenewal of his employment agreement or termination of
his employment agreement by the Company for any reason, with the
second and third installments to be made on the first and second
anniversaries of the first such installment, respectively.
|
|
(3)
|
|
Represents health and welfare benefits provided at our expense
for a period of 18 months, commencing in the month after
the month in which Mr. Lowes employment terminates.
|
|
(4)
|
|
Represents the sum of 18 monthly payments of $58,417, which
amount is equal to the sum of (1) 1/6 of
Ms. Cerre-Ruedisilis annual salary of $285,000, and
(2) 1/12 of the amount of Ms. Cerre-Ruedisilis
prior years incentive compensation and bonus of $131,000.
|
|
(5)
|
|
Payable, subject to the consummation of the merger, upon the
earlier of (a) completion of 60 calendar days of
employment following the consummation of the merger or
(b) termination of employment other than for cause.
|
|
(6)
|
|
Represents health and welfare benefits provided at our expense
for a period of 18 months following the date that is 60
calendar days following the consummation of the merger.
|
|
(7)
|
|
Represents the sum of 18 monthly payments of $35,917, which
amount is equal to the sum of (1) 1/8 of
Mr. Gursahaneys annual salary of $220,000, and
(2) 1/12 of the amount of Mr. Gursahaneys prior
years incentive compensation and bonus of $101,000.
|
40
|
|
|
(8)
|
|
Payable, subject to the consummation of the merger, upon the
earlier of (a) completion of 60 calendar days of
employment following the consummation of the merger or
(b) termination of employment other than for cause.
|
|
(9)
|
|
Represents health and welfare benefits provided at our expense
for a period of 18 months following the date that is 60
calendar days following the consummation of the merger.
|
|
(10)
|
|
Represents the sum of 30 monthly payments of $22,333, which
amount is equal to the sum of (1) 1/12 of
Mr. Harris annual salary of $220,000, and
(2) 1/12 of the amount of Mr. Harris prior
years incentive compensation and bonus of $48,000.
|
|
(11)
|
|
Represents health and welfare benefits provided at our expense
for a period of 18 months, commencing in the month after
the month in which Mr. Harris employment terminates.
|
We entered into employment agreements with each of Colin
Williams, Lisa Perrizo, Timothy J. Spear and Frank Pinson, the
stated terms of which expired or will expire on
December 31, 2006, May 31, 2005, October 31, 2008
and December 31, 2008, respectively, but which are
automatically extended for successive one-year terms, unless
either party to each such agreement gives notice of a decision
not to renew. Under these agreements, in addition to a base
salary of $160,000 for Mr. Williams and base salaries of
$140,000 for each of Ms. Perrizo and Messrs. Spear and
Pinson, Messrs. Williams, Spear and Pinson and
Ms. Perrizo are eligible to receive incentive compensation
and bonuses as our Board may in its discretion determine to
award each of them, and to which they may be entitled under the
terms of any of our plans, programs or agreements as from time
to time are in effect. Under these agreements,
Messrs. Williams, Spear and Pinson and Ms. Perrizo are
entitled to additional compensation based upon the underwriting
profit of our Texas region, Mid-Atlantic region, Southern region
and Midwest region, respectively. Each of the agreements of
Messrs. Williams, Spear and Pinson and Ms. Perrizo
contains customary confidentiality and non-competition
provisions. The non-competition provisions apply during the
period of employment and for a
12-month
period following termination of employment for any reason.
Effective April 1, 2008, Mr. Williams resigned from
his position as President of the Texas Region.
Pursuant to our employment agreements with Messrs. Spear
and Pinson and Ms. Perrizo, if the employment of
Messrs. Spear or Pinson or Ms. Perrizo is terminated
for any reason other than death, disability or for cause, or we
do not renew his or her employment at the end of the initial
term or any renewal term provided in the agreement, each of
Messrs. Spear and Pinson and Ms. Perrizo are entitled
to receive 12 monthly payments, each of which monthly
payment equal to the sum of (a) 1/12 of such
employees then annual salary, and (b) 1/12 of the
amount of such employees prior years incentive
compensation and bonus, provided that in no event shall the
amount paid pursuant to such employee exceed 30% of such
employees then annual base salary. If we terminate the
employment of Ms. Perrizo for any reason other than for
cause, if she is covered under our group health plan at the time
of termination, she may elect to continue our group health
coverage for herself, her spouse and her dependents for a period
of 18 months at our cost and expense.
Indemnification
and Insurance
A description of the obligations of Parent, Merger Sub and the
surviving corporation to (a) indemnify our officers and
directors and (b) maintain (1) directors and
officers and (2) corporate counsel liability
insurance, is contained in The Merger
Agreement Indemnification and Insurance.
Appraisal
or Dissenters Rights
Under Section 262 of the Delaware General Corporation Law,
which we refer to as the DGCL, any holder of our common stock
who does not wish to accept the $12.50 per share merger
consideration may dissent from the merger and elect to exercise
appraisal rights. A stockholder who properly exercises appraisal
rights may ask the Delaware Court of Chancery to determine the
fair value (as defined in Section 262 of the
DGCL) of his or her shares (exclusive of any element of value
arising from the accomplishment or expectation of the merger),
and receive payment of fair value in cash, together
with interest, if any, provided that the stockholder complies
with the provisions of Section 262 of the DGCL.
41
The following discussion is not a complete statement of the law
pertaining to appraisal rights under the DGCL, and is qualified
in its entirety by the reference to Section 262 of the
DGCL, the full text of which is attached to this proxy statement
as Annex D. All references in Section 262 of the DGCL
or in this summary to a stockholder are to the
record holder of the shares of our common stock who asserts
appraisal rights.
Under Section 262 of the DGCL, when a merger agreement is
submitted for adoption at a meeting of stockholders, as in the
case of the Merger Agreement, the corporation, not less than
20 days prior to the meeting, must notify each of its
stockholders who was a stockholder on the record date for the
meeting that appraisal rights are available and include in the
notice a copy of Section 262 of the DGCL. This proxy
statement constitutes our notice, and we have attached
Section 262 of the DGCL to this proxy statement as
Annex D. Any holder of our common stock who wishes to
exercise appraisal rights or who wishes to preserve the right to
do so should review the following discussion and Annex D
carefully. Failure to comply with the procedures of
Section 262 of the DGCL, in a timely and proper manner,
will result in the loss of appraisal rights.
Stockholders wishing to exercise the right to dissent from the
merger and seek an appraisal of their shares must do ALL of the
following:
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|
|
|
|
The stockholder must NOT vote in favor of adoption of the Merger
Agreement. A signed proxy that does not contain voting
instructions will, unless properly revoked, be voted in favor of
the adoption of the Merger Agreement. A vote in favor of the
adoption of the Merger Agreement, by proxy or in person, will
constitute a waiver of such stockholders appraisal rights
in respect to our common stock so voted and will nullify any
previously filed written demands for appraisal by such
stockholder.
|
|
|
|
The stockholder must deliver to us a written demand for
appraisal of his or her common stock BEFORE the vote on the
adoption of the Merger Agreement at the special meeting and must
not withdraw his or her demand.
|
|
|
|
The stockholder must continuously hold the shares from the date
of making the demand through the effective date of the merger. A
stockholder will lose appraisal rights if the stockholder
transfers the shares before the effective date of the merger.
|
|
|
|
A petition demanding appraisal must be filed in the Delaware
Court of Chancery within 120 days after the effective date
of the merger, by a stockholder who has properly demanded
appraisal and not effectively withdrawn such demand, or by the
surviving corporation in the merger. In addition, a beneficial
owner of shares as to which demand has been properly made and
not effectively withdrawn, where such shares are held in a
voting trust or by a nominee on behalf of such beneficial owner,
may, in his or her own name, file such a petition. The
corporation is not obligated to file such a petition and has no
present intention to file such a petition. Accordingly, a
stockholder desiring to file such a petition is advised to file
the petition on a timely basis unless such stockholder receives
notice that a petition already has been filed by the surviving
corporation or another dissenting stockholder.
|
Neither voting (in person or by proxy) against, abstaining from
voting on nor failing to vote on the proposal to adopt the
Merger Agreement will constitute a written demand for appraisal
within the meaning of Section 262 of the DGCL. The written
demand for appraisal must be in addition to and separate from
any proxy or vote. The demand must reasonably inform us of the
identity of the stockholder making the demand and that the
stockholder intends thereby to demand an appraisal of the fair
value of the shares held of record by such stockholder. A
stockholder who elects to exercise appraisal rights under
Section 262 of the DGCL should mail or deliver a written
demand to: AmCOMP Incorporated, 701 U.S. Highway One, North
Palm Beach, Florida 33408, Attention: Secretary.
Only a stockholder of record of shares of our common stock, or a
person duly authorized and explicitly purporting to act on his
or her behalf, may demand appraisal of the shares of stock
registered in that holders name. A holder of shares
wishing to demand appraisal rights must be the record holder of
such shares on the date the written demand for appraisal is made
and must continue to hold such shares until the completion of
the merger. Accordingly, a holder of shares who is the record
holder of such shares on the date when the written demand for
appraisal is made, but who thereafter transfers such shares
prior to the completion of the merger, will lose any right to
appraisal of such shares. A demand for appraisal must be
executed by or on behalf of the stockholder of record, fully and
correctly, as the stockholders name appears on the stock
certificates. Persons who hold their shares in
42
brokerage accounts, voting trusts, or other nominee forms, and
who wish to exercise appraisal rights, should consult with their
brokers or other appropriate nominee holders to determine the
appropriate procedures for the nominee holder to make a demand
for appraisal of those shares. A person having a beneficial
interest in shares held of record in the name of another person,
such as a broker or other nominee, must act promptly to cause
the record holder to follow properly and in a timely manner the
steps necessary to perfect appraisal rights.
A record holder, such as a broker who holds shares as a nominee
for others, may exercise appraisal rights with respect to the
shares held for one or more beneficial owners, while not
exercising such rights for other beneficial owners. In such a
case, the written demand should set forth the number and class
of shares as to which the demand is made. Where the number and
class of shares is not expressly set forth, the demand will be
presumed to cover all shares of common stock held in the name of
such record holder.
A demand for the appraisal of shares owned of record by two or
more joint holders must identify and be signed by all of the
holders. A demand for appraisal signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or
representative capacity must identify the record owner(s) and
must be signed in such persons fiduciary or representative
capacity.
Upon completion of the merger, we will give written notice of
the effective date of the merger within 10 days after such
time to each of our former stockholders who did not vote in
favor of adoption of the Merger Agreement and who made, and has
not effectively withdrawn, a written demand for appraisal in
accordance with Section 262 of the DGCL. Within
120 days after the effective date of the merger, but not
later, either we or any stockholder who has complied with the
requirements of Section 262 of the DGCL may commence an
appraisal proceeding by filing a petition in the Delaware Court
of Chancery demanding a determination of the value of the shares
of our common stock held by all stockholders entitled to
appraisal. In addition, a beneficial owner of shares as to which
demand has been properly made and not effectively withdrawn,
where such shares are held in a voting trust or by a nominee on
behalf of such beneficial owner, may, in his or her own name,
file such a petition. The surviving corporation is under no
obligation to and has no present intention to file a petition.
Stockholders who desire to have their shares appraised should
initiate any petitions necessary for the perfection of their
appraisal rights within the time periods and in the manner
prescribed in Section 262 of the DGCL, unless such
stockholder receives notice that a petition already has been
filed by the surviving corporation or another dissenting
stockholder. If within the
120-day
period, no petition shall have been filed as provided above, all
rights to appraisal will cease and all of the dissenting
stockholders will become entitled to receive the merger
consideration, without interest thereon.
Within 120 days after the effective date of the merger, any
stockholder who has complied with the provisions of
Section 262 of the DGCL to that point in time may receive
from us, upon written request, a statement setting forth the
aggregate number of shares not voted in favor of adoption of the
Merger Agreement and with respect to which we have received
demands for appraisal, and the aggregate number of holders of
those shares. We must mail this statement to the stockholder
within 10 days after receipt of the request or within
10 days after expiration of the period for delivery of
demands for appraisals under Section 262 of the DGCL,
whichever is later. In addition, a beneficial owner of shares as
to which demand has been properly made and not effectively
withdrawn, where such shares are held in a voting trust or by a
nominee on behalf of such beneficial owner, may, in his or her
own name, request such written statement.
If a stockholder files a petition for appraisal in a timely
manner, service of a copy thereof shall be made upon the
corporation surviving the merger, and the surviving corporation
will then be obligated, within 20 days after receiving a
copy of the petition, to file with the Register in Chancery a
duly verified list containing the names and addresses of all
stockholders who have demanded an appraisal of their shares and
with whom an agreement as to the value of their shares has not
been reached.
Upon the filing of the petition, the Delaware Court of Chancery
may order that notice of the time and place fixed for the
hearing on the petition be mailed to the corporation surviving
the merger and all of the stockholders shown on the verified
list. Such notice also shall be published at least one week
before the day of the hearing in a newspaper of general
circulation published in the City of Wilmington, Delaware or in
another publication determined by the court. The costs of these
notices are borne by the surviving corporation.
43
If a hearing on the petition is held, the Delaware Court of
Chancery will determine which stockholders are entitled to
appraisal rights. The court may require the stockholders
demanding appraisal who hold certificated shares to submit their
stock certificates to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings. If the
stockholder fails to comply with the courts direction, the
court may dismiss the proceeding as to the stockholder. The
Delaware Court of Chancery will conduct the appraisal hearing in
accordance with the courts rules, including any rules
specifically governing appraisal proceedings. The court will
appraise the shares at their fair value, exclusive
of any element of value arising from the accomplishment or
expectation of the merger, together with interest, if any, to be
paid on the amount determined to be fair value.
In determining the fair value, the Delaware Court of
Chancery will take into account all relevant factors. Unless the
court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. The Delaware
Court of Chancery may determine the fair value to be more than,
less than or equal to the consideration that the dissenting
stockholder would otherwise receive under the Merger Agreement.
Upon application by the corporation surviving the merger or by
any stockholder entitled to participate in the appraisal
proceeding, the Delaware Court of Chancery may, in its
discretion, proceed to trial upon the appraisal prior to the
final determination of the stockholders entitled to an
appraisal. Any stockholder whose name appears on the verified
list and who has submitted his or her certificates of stock to
the Register in Chancery, if such is required, may participate
fully in all proceedings until it is finally determined that he
or she is not entitled to appraisal rights.
The Delaware Court of Chancery may also determine the costs of
the appraisal proceeding and allocate those costs among the
parties as the Delaware Court of Chancery determines to be
equitable under the circumstances. Upon the application of a
stockholder, the Delaware Court of Chancery may order all or a
portion of the expenses incurred by any stockholder in
connection with the appraisal proceeding, including reasonable
attorneys fees and the fees and expenses of experts, to be
charged pro rata against the value of all shares entitled to
appraisal.
The Delaware Court of Chancery shall direct the payment of the
fair value of the shares, together with interest, if any, by the
corporation surviving the merger to the stockholders entitled
thereto. Payment shall be so made to each such stockholder upon
the surrender to the surviving corporation of his or her
certificates. The courts decree may be enforced as other
decrees in the Delaware Court of Chancery may be enforced.
Any stockholder who has duly demanded an appraisal in compliance
with Section 262 of the DGCL may not, after the effective
date of the merger, vote the shares subject to the demand for
any purpose or receive any dividends or other distributions on
those shares (except dividends or other distributions payable to
holders of record of shares as of a record date prior to the
effective date of the merger).
An appraisal demand may be withdrawn by a stockholder within
sixty (60) days after the effective date of the merger
without the approval of the corporation surviving the merger, or
thereafter with the approval of the surviving corporation;
provided that the stockholder shall not have commenced an
appraisal proceeding with respect to such stockholders
shares or joined such a proceeding as a named party. Upon the
effective withdrawal of an appraisal demand by a stockholder,
such stockholder will be entitled to receive the merger
consideration. No appraisal proceeding in the Delaware Court of
Chancery will be dismissed as to any stockholder without the
approval of the Delaware Court of Chancery, and such approval
may be subject to such conditions as the Delaware Court of
Chancery deems just. This shall not, however, affect the right
of a stockholder who has not commenced an appraisal proceeding
as to such stockholders shares, or joined such an
appraisal proceeding as a named party, to withdraw his or her
demand for appraisal within 60 days after the effective
date of the merger and to accept the merger consideration. If
the stockholder fails to perfect, effectively withdraws or
otherwise loses the appraisal right, the stockholders
shares will be converted into the right to receive the merger
consideration.
Under the Merger Agreement, Parent and Merger Sub are not
required to complete the merger if holders of more than 15.0% of
our outstanding common stock as of the effective date of the
merger demand appraisal of their shares in accordance with
Delaware law.
Any stockholder considering demanding appraisal is advised to
consult legal counsel.
44
THE
MERGER AGREEMENT (PROPOSAL NO. 1)
The Board is asking our stockholders to vote on a proposal to
adopt the Merger Agreement.
This section of the proxy statement summarizes some of the
material terms and conditions of the Merger Agreement, but is
not intended to be an exhaustive discussion of the Merger
Agreement. The rights and obligations of the parties are
governed by the express terms and conditions of the Merger
Agreement and not the summary set forth in this section or any
other information contained in this proxy statement. This
summary is qualified entirely by reference to the complete text
of the Agreement and Plan of Merger, dated as of
January 10, 2008 and Amendment No. 1 to the Agreement
and Plan of Merger, dated as of April 28, 2008, copies of
which are attached as Annex A and Annex B,
respectively, to this proxy statement and are incorporated into
this proxy statement by reference. We urge you to read the
Agreement and Plan of Merger and Amendment No. 1 thereto.
The Merger Agreement contains representations and warranties
made by and to the parties to the Merger Agreement as of
specific dates. The assertions embodied in those representations
and warranties were made for purposes of the Merger Agreement
and are subject to important qualifications, limitations and
exceptions agreed to by the respective parties in connection
with negotiating the terms of the Merger Agreement. In addition,
some representations and warranties were made as of a specified
date, may be subject to a contractual standard of materiality
different from what might be viewed as material to stockholders,
or may have been used for the purpose of allocating risk between
the respective parties rather than establishing matters as
facts. For the foregoing reasons, you should not rely on the
representations and warranties as statements of factual
information at the time they were made or otherwise.
Structure
of the Merger and Consideration to be Received by our
Stockholders in the Merger
As a result of the transactions contemplated by the Merger
Agreement, each issued and outstanding share of our common stock
not held by Parent, Merger Sub or us, or by our stockholders who
perfect their appraisal rights under Delaware law, will be
converted into the right to receive $12.50 per share in cash,
without interest. As part of the Merger Agreement, Merger Sub is
to merge with and into us, with our company being the surviving
corporation in the merger and continuing as a wholly-owned
subsidiary of Parent. As a result of the merger, we will cease
to be a publicly traded company and thus you will cease to have
any ownership interest in us and will not participate in any of
our future earnings and growth or losses.
Pursuant to Delaware law, holders of shares of our common stock
will have the right to dissent from the merger and receive the
fair value of their shares. For a complete description of the
procedures that must be followed to dissent from the merger, see
The Merger Appraisal or Dissenters
Rights as well as the text of Section 262 of the
DGCL, set forth in Annex D.
Closing
of the Merger
The closing of the merger is to take place at such time as the
parties agree, but no later than the third business day after
the date that all of the conditions to the completion of the
transactions set forth in the Merger Agreement are satisfied or
waived (if waivable), other than those that by their terms are
to be satisfied or waived at the closing. The merger will become
effective upon the filing of a certificate of merger with the
Secretary of State of the State of Delaware.
Payment
Procedures
Prior to the effective time of the merger, Parent is to
designate a paying agent reasonably acceptable to us. No later
than the effective time of the merger, Parent is to deposit or
cause to be deposited, with the paying agent, for the benefit of
the holders of shares of our common stock who have not perfected
dissenters rights and holders of options to purchase our common
stock, cash in an amount sufficient to pay the aggregate
consideration required to be paid pursuant to the Merger
Agreement. The paying agent is to cause this amount, which we
refer to as the exchange fund, to be (a) held for the
benefit of the holders of our shares of common stock and options
to purchase our common stock and (b) applied promptly to
making the payments to such holders after the effective time of
the merger. Such aggregate consideration is to be invested by
the paying agent as directed by Parent.
45
Promptly after the effective time of the merger, Parent and the
surviving corporation are to cause the paying agent to mail
(a) to each holder of record, as of the effective time of
the merger, of a certificate or certificates, which immediately
prior to the effective time of the merger represented
outstanding shares of our common stock, other than shares of our
common stock held by Parent, Merger Sub or us, or by our
stockholders who perfect their appraisal rights under Delaware
law, (1) a letter of transmittal (which is to specify that
delivery is to be effected, and risk of loss and title to the
shares of our common stock are to pass, only upon proper
delivery of the certificate or certificates (or affidavits of
loss in lieu thereof) to the paying agent and are to be in such
form and have such other provisions as Parent may reasonably
specify) and (2) instructions for use in effecting the
surrender of the certificate or certificates in exchange for the
merger consideration, and (b) to each holder of options to
purchase our common stock, a check in an amount due and payable
to such holder equal to the product of (1) the amount, if
any, by which $12.50 exceeds the exercise price per share of
each option held by such person at the effective time of the
merger, and (2) the number of shares subject to such option
held by such person, less any applicable withholdings for taxes.
Upon surrender of a certificate that immediately prior to the
effective time of the merger represented shares of our common
stock (or affidavit of loss in lieu thereof) for cancellation to
the paying agent, together with a letter of transmittal,
properly completed and duly executed in accordance with the
instructions thereto, and such other documents as may be
reasonably required pursuant to such instructions, the holder of
such certificate is entitled to receive in exchange therefor the
merger consideration for each share formerly represented by such
certificate, such amount to be mailed promptly following the
paying agents receipt of such certificate (or affidavit of
loss in lieu thereof), and the certificate so surrendered is to
forthwith be canceled. No interest is to be paid or accrued for
the benefit of holders of the certificates on the merger
consideration payable upon the surrender of the certificates, or
in respect of options to purchase our common stock.
If payment of the merger consideration is to be made to a person
other than the person in whose name the surrendered certificate
is registered, it is a condition of payment that the certificate
so surrendered is to be properly endorsed or is to otherwise be
in proper form for transfer and that the person requesting such
payment is to have paid all transfer and other taxes required by
reason of the issuance to a person other than the registered
holder of the certificate surrendered or such person is to have
established to the satisfaction of the surviving corporation
that such tax either has been paid or is not applicable. Until
surrendered, each certificate that immediately prior to the
effective time of the merger represented shares of our common
stock is to be deemed at all times after the effective time of
the merger to represent only the right to receive the merger
consideration for each share of our common stock in cash,
without interest thereon. The paying agent is to accept such
certificates (or affidavits of loss in lieu thereof) upon
compliance with such reasonable terms and conditions as the
paying agent may impose to effect an orderly exchange thereof in
accordance with normal exchange practices.
At the effective time of the merger, our stock transfer books
will be closed, and thereafter there will be no further
registration of transfers of our shares of common stock on our
records or the records of the surviving corporation. From and
after the effective time of the merger, the holders of
certificates evidencing ownership of the shares of our common
stock outstanding immediately prior to the effective time of the
merger will cease to have any rights with respect to such shares
of our common stock, except as otherwise provided for in the
Merger Agreement or by applicable law. If, after the effective
time of the merger, certificates are presented to the surviving
corporation for any reason, they are to be canceled against
delivery of the merger consideration, for each share of our
common stock formerly represented by such certificates.
Any portion of the exchange fund (including any interest
received with respect thereto) that remains undistributed to the
holders of shares of our common stock or options to purchase our
common stock following the six-month anniversary of the
effective time of the merger are to be delivered to the
surviving corporation upon demand, and any holders who have not
exchanged their certificates or options to purchase our common
stock would be entitled to look only to the surviving
corporation (subject to abandoned property, escheat or other
similar laws) only as general creditors thereof with respect to
the merger consideration, payable upon due surrender of their
certificates without any interest thereon. Notwithstanding the
foregoing, none of Parent, Merger Sub, us, the surviving
corporation or the paying agent is to be liable to any person in
respect of any cash held in the exchange fund delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar law. If any certificates or options to
purchase our common stock are not surrendered prior to one year
after the effective time of the merger (or immediately prior to
such earlier date on which any cash in respect of such
certificate or option to
46
purchase our common stock would otherwise escheat to or become
the property of any governmental authority), any such cash in
respect of such certificate or option to purchase our common
stock would, to the extent permitted by applicable law, become
the property of Parent, free and clear of all claims or interest
of any person previously entitled thereto.
In the event any certificate(s) are lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person
claiming such certificate(s) to be lost, stolen or destroyed
and, if required by Parent, the posting by such person of a bond
in such sum as Parent may reasonably direct as indemnity against
any claim that may be made against any party to the Merger
Agreement or the surviving corporation with respect to such
certificate(s), the paying agent is to disburse the merger
consideration as described above in respect of the shares of our
common stock represented by such lost, stolen or destroyed
certificate(s).
Parent and the surviving corporation will be entitled to deduct
and withhold, or cause the paying agent to deduct and withhold,
from the merger consideration payable to a holder of shares of
our common stock pursuant to the merger any such amounts as are
required under the Internal Revenue Code of 1986, as amended, or
any applicable provision of state, local or foreign tax law. To
the extent that amounts are so withheld by Parent or the
surviving corporation, or caused to be withheld by the paying
agent, such withheld amounts are to be treated for all purposes
of the Merger Agreement as having been paid to the holder of the
shares of our common stock in respect of which such deduction
and withholding was made by Parent, the surviving corporation or
the paying agent, as the case may be.
Treatment
of Stock Options
A holder of outstanding options to purchase shares of our common
stock, whether or not then vested, at the effective time of the
merger is entitled to receive, in respect of each such option, a
cash amount equal to the net amount of the product of
(a) the amount, if any, by which $12.50 exceeds the
exercise price per share of such option held by such person at
the effective time of the merger, and (b) the number of
shares subject to such option held by such person, less any
applicable withholdings for taxes. No consideration is to be
paid in respect of any stock options for which the exercise
price equals or exceeds $12.50 per share.
At or before the effective time of the merger, we will cause
(a) each of the following plans to be terminated:
(1) 1996 Stock Option Plan, (2) Amended and Restated
Directors Stock Option Plan, (3) 2005 Stock Option
Plan and (4) stock option agreements between us and certain
executive officers; and (b) all outstanding options to
purchase common stock, whether or not then vested, at the
effective time of the merger to become fully vested and
converted into the right to receive the merger consideration, as
described above, or to cause any stock option that is not
exchanged to be cancelled as of the effective time of the merger.
Certificate
of Incorporation and Bylaws; Directors and Officers
The certificate of incorporation and bylaws of Merger Sub, as in
effect immediately prior to the effective time of the merger,
are to be the certificate of incorporation and bylaws of the
surviving corporation.
The directors of Merger Sub immediately prior to the effective
time of the merger are to be the initial directors of the
surviving corporation. The officers of the surviving corporation
will be (a) Douglas D. Dirks, Chief Executive Officer,
(b) Martin J. Welch, President, (c) Lenard T. Ormsby,
Secretary and (d) William E. Yocke, Treasurer, the
(a) President and Chief Executive Officer, (b) Chief
Operating Officer, (c) Chief Legal Officer and
(d) Chief Financial Officer, respectively, of Parent or its
subsidiaries. Each of the directors and executive officers is to
serve in such capacity until their respective successors are
duly elected or appointed and qualified.
47
Representations
and Warranties
Our
Representations and Warranties
In the Merger Agreement, we make representations and warranties
to Parent and Merger Sub with respect to us and our
subsidiaries. These include representations and warranties
regarding, among other things:
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corporate organization, existence, good standing, qualification
and corporate power; accuracy and no violation of our
certificate of incorporation and bylaws;
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capitalization;
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subsidiaries;
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corporate power and authority relative to the Merger Agreement
and the consummation of the transactions contemplated by the
Merger Agreement;
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governmental and regulatory approvals required to complete the
transactions contemplated by the Merger Agreement;
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ability to enter into and consummate the transactions
contemplated by the Merger Agreement without violation of
organizational and governing documents, permits, contracts or
applicable law or the creation of liens or other encumbrances or
restrictions;
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documents filed with the SEC and the accuracy of information
contained in those documents;
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financial statements;
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absence of certain material changes since September 30,
2007;
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absence of undisclosed liabilities;
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compliance with regulatory agreements, permits, contracts and
applicable law;
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litigation matters;
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restrictions on business activities;
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contracts;
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intellectual property;
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employee benefit plans;
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tax matters;
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brokers or finders fees;
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fairness opinion;
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necessary actions to approve the merger;
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property, leases and personal property;
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employee matters;
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environmental matters;
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disclosures by us in this proxy statement;
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transactions with affiliates;
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insurance matters;
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other insurance matters related to the operation of our
business; and
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books and records.
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48
Some of our representations and warranties are subject to the
qualification that such representations and warranties will be
inaccurate or untrue only where the exception to such
representation or warranty, individually or in the aggregate,
would reasonably be expected to have a material adverse
effect on us, which means, for purposes of the Merger
Agreement, any occurrence, state of facts, change, event, effect
or circumstance that, individually or in the aggregate,
(a) has, or would reasonably be expected to have, a
material adverse effect on the assets, liabilities, business,
results of operations or financial condition of our company and
our subsidiaries taken as a whole, other than any occurrence,
state of facts, change, event, effect or circumstance to the
extent resulting from (1) changes in general economic
conditions or financial, banking or securities markets in
general; (2) changes in the workers compensation
insurance industry generally; (3) any changes in statutes,
rules, or regulations applicable to our company or any of our
subsidiaries or any of our respective properties or assets;
(4) any outbreak or escalation of hostilities or war
(whether declared or not declared) or any act of terrorism
whether or not pursuant to the declaration of a national
emergency or war; (5) the announcement of the Merger
Agreement and the transactions contemplated thereby (including
the merger); (6) changes in United States of America
generally accepted accounting principles or statutory accounting
principles or any authoritative interpretation thereof
promulgated after the date of the merger agreement by the
Financial Accounting Standards Board or the National Association
of Insurance Commissioners, respectively; (7) the
availability or cost of financing to Parent or Merger Sub (with
the exception in this clause (7) not preventing or
otherwise affecting a determination that the underlying cause of
such unavailability or cost constitutes a material adverse
effect on us); or (8) changes in loss reserves occasioned
by the report of our companys independent actuary as at
December 31, 2007, if such changes, when aggregated with
other changes in loss reserves for the fiscal year 2007, are not
less favorable than changes in loss reserves for the fiscal year
200, in the aggregate;
provided
,
however
, that the
exceptions set forth in clauses (1), (2), (3) and
(6) are not to be given effect to the extent that such
occurrence, state of facts, change, event, effect or
circumstance has a disproportionate adverse effect on our
company and our subsidiaries taken as a whole as compared to the
effect on other persons operating in the industry generally, or
(b) would, or would reasonably be expected to, prevent or
materially delay or impair the ability of the Company or our
subsidiaries to consummate the merger and the other transactions
contemplated by the Merger Agreement.
Parents
and Merger Subs Representations and
Warranties
In the Merger Agreement, Parent and Merger Sub, jointly and
severally, make representations and warranties to us. These
include representations and warranties regarding, among other
things:
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corporate organization, existence and good standing and
corporate power;
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authority relative to the Merger Agreement and the consummation
of the transactions contemplated by the Merger Agreement;
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governmental and regulatory approvals required to complete the
transactions contemplated by the Merger Agreement;
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ability to enter into and consummate the transactions
contemplated by the Merger Agreement without violation of
organizational and governing documents, permits, contracts or
applicable law or the creation of liens or other encumbrances or
restrictions;
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brokers or finders fees;
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disclosures supplied to us for inclusion in this proxy statement;
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availability of sufficient cash and cash equivalent resources to
pay the aggregate merger consideration;
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litigation matters;
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ownership of equity interests of our company;
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undisclosed arrangements between Parent and Merger Sub with any
of our officers or directors; and
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matters with respect to the investigation of us conducted by
Parent and Merger Sub.
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49
Principal
Covenants
Conduct
of Business of the Company Pending the Merger
Except as agreed to in writing by Parent, expressly contemplated
by the Merger Agreement or as separately disclosed to Parent,
during the period from the date of the Merger Agreement to the
effective time of the merger:
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we and each of our subsidiaries are to conduct our business in,
and not take any action other than in, the ordinary course of
business consistent with past practice; and
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we are to use our reasonable best efforts to preserve intact the
business organization, to keep available the services of our and
our subsidiaries officers, employees, consultants and
persons performing the duties of insurance producers,
reinsurance intermediaries and agencies, to maintain existing
relationships with all persons with whom we or our subsidiaries
do business and to preserve the possession, control and
condition of our and our subsidiaries assets.
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We have further agreed that, except as expressly contemplated by
the Merger Agreement or as separately disclosed to Parent,
during the period from the date of the Merger Agreement to the
effective time of the merger, neither we nor any of our
subsidiaries are to, without the prior written consent of Parent:
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amend, waive or otherwise change, in any respect, our or our
subsidiaries certificate of incorporation or bylaws (or
comparable governing instruments);
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authorize for issuance, issue, grant, sell, pledge, dispose of
or propose to issue, grant, sell, pledge or dispose of any
shares of, or any options, warrants, commitments, subscriptions
or rights of any kind to acquire or sell any shares of, our
capital stock or other securities or equity interests or any
indebtedness of ours having voting rights or that is convertible
or exchangeable into securities having such rights, including
any securities convertible into or exchangeable for shares of
stock of any class and any other equity-based awards, except for
the issuance of shares of common stock pursuant to the exercise
of options outstanding on the date of the Merger Agreement and
set forth in the schedules to the Merger Agreement in accordance
with their present terms;
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split, combine, recapitalize or reclassify any shares of our or
our subsidiaries capital stock or equity interests or
issue any other securities in respect thereof, or declare, pay
or set aside any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect
of our capital stock or equity interests, or directly or
indirectly redeem, purchase or otherwise acquire or offer to
acquire any shares of ours or our subsidiaries capital
stock or other securities or equity interests, other than
dividends and distributions paid by any of our subsidiaries to
us or another one of our subsidiaries;
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incur, create, assume, prepay or otherwise become liable for any
indebtedness (directly, contingently or otherwise), make a loan
or advance to or investment in any third party, or guarantee or
endorse any indebtedness, liability or obligation of any person,
except for indebtedness incurred under our existing credit
facilities in the ordinary course of business consistent with
past practice in an aggregate principal amount not to exceed
$250,000;
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increase the wages, salaries, bonus, compensation or other
benefits of any of our or our subsidiaries current or
former consultants, officers, directors or employees, or enter
into, establish, amend or terminate any of our employee benefit
plans or any other employment, consulting, retention, change in
control, collective bargaining, bonus or other incentive
compensation, profit sharing, health or other welfare, stock
option or other equity or equity-related, pension, retirement,
consulting, vacation, severance, separation, termination,
deferred compensation, fringe, perquisite, or other compensation
or benefit plan, policy, program, agreement, trust, fund or
other arrangement with, for or in respect of any current or
former consultant, officer, director or employee, in each case
other than as required by applicable law or pursuant to the
terms of any of our employee benefit plans in effect on the date
of the Merger Agreement, or, solely with respect to increases in
wages or salaries of employees who are not officers or
directors, in the ordinary course of business consistent with
past practice;
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make or rescind any material election relating to taxes, settle
any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to taxes, file any
amended tax return or claim for refund, or make any change in
our accounting or tax policies or procedures, in each case
except as required by applicable law or generally accepted
accounting principles;
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transfer or license to any person or otherwise extend,
materially amend or modify, permit to lapse or fail to preserve
any of our owned or licensed intellectual property, other than
nonexclusive licenses in the ordinary course of business
consistent with past practice, or disclose to any person who has
not entered into a confidentiality agreement any trade secrets;
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modify or amend in any material manner, terminate or waive or
assign any material right under any of our material contracts or
enter into any contract that would be a material to us with a
term longer than one year that cannot be terminated without
payment of a material penalty and upon notice of 60 days or
less, in each case other than in the ordinary course of business
consistent with past practice;
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fail to maintain our or our subsidiaries books, accounts
and records in all material respects in the ordinary course of
business consistent with past practice;
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establish any subsidiary or enter into any new line of business;
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fail to keep in force insurance policies or replacement or
revised policies providing insurance coverage with respect to
our assets, operations and activities or those of our
subsidiaries as are currently in effect;
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revalue any of our material assets or make any change in
accounting methods, principles or practices, except as required
by generally accepted accounting principles and approved by our
outside auditors;
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other than in connection with the adjustment, negotiation or
settlement of workers compensation insurance claims in the
ordinary course of business consistent with past practice,
waive, release, assign, settle or compromise any claim, action
or proceeding (including any suit, action, claim, proceeding or
investigation relating to the Merger Agreement or the
transactions contemplated thereby, including the merger), other
than waivers, releases, assignments, settlements or compromises
that involve only the payment of monetary damages (and not the
imposition of equitable relief on, or the admission of
wrongdoing by, us or our subsidiaries) not in excess of $100,000
individually or in the aggregate, or otherwise pay, discharge or
satisfy any claims, liabilities or obligations other than in the
ordinary course of business consistent with past practice;
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close or materially reduce our or our subsidiaries
activities, or effect any layoff or other personnel reduction or
change initiated by us, at any of our or our subsidiaries
facilities;
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acquire, including by merger, consolidation, acquisition of
stock or assets, or any other form of business combination, any
corporation, partnership, limited liability company, other
business organization or any division thereof, or any material
amount of assets;
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make any capital expenditures;
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adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization;
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voluntarily incur any material liability or obligation (whether
absolute, accrued, contingent or otherwise) other than in the
ordinary course of business consistent with past practice;
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sell, lease, license, transfer, exchange or swap, mortgage or
otherwise pledge or encumber (including securitizations), or
otherwise dispose of any material portion of our properties,
assets or rights;
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enter into any agreement, understanding or arrangement with
respect to the voting or registration of our capital stock or
the capital stock of any of our subsidiaries;
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take any action that would reasonably be expected to delay or
impair the obtaining of any consents or approvals of any
governmental authority to be obtained in connection with the
Merger Agreement;
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enter into, amend, waive or terminate (other than terminations
in accordance with their terms) any transaction between us and
an affiliate;
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enter into any new reinsurance transaction as assuming or ceding
insurer (a) that does not contain market cancellation,
termination and commutation provisions or (b) that
adversely changes our or our subsidiaries reinsurance
profile on a consolidated basis outside of the ordinary course
of business consistent with past practice;
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alter or amend in any material respect any existing
underwriting, claims handling, loss control, investment,
actuarial, financial reporting or accounting practices,
guidelines or policies (including compliance policies) or any
material assumption underlying an actuarial practice or policy,
except as may be required by generally accepted accounting
principles, applicable statutory accounting practices, any
governmental authority or applicable law, or
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authorize or agree to do any of the foregoing actions.
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Special
Meeting; Proxy Statement
As promptly as practicable following the execution of the Merger
Agreement, we, acting through our Board, are to, in accordance
with applicable law:
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duly call, give notice of, convene and hold a special meeting of
our stockholders for the purposes of considering and taking
action upon the approval and adoption of the Merger Agreement
and the merger, including adjourning such meeting for up to 30
business days to obtain such approval;
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except to the extent that our Board withdraws or modifies its
approval or recommendation of the Merger Agreement as permitted
by the Merger Agreement, (a) use reasonable best efforts to
solicit the approval of the Merger Agreement by our stockholders
and (b) include in this proxy statement the declaration of
our Board of the advisability of the Merger Agreement and the
recommendation of our Board to our stockholders that they adopt
the Merger Agreement and approve the merger;
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adjourn or postpone the special meeting of stockholders to
solicit additional proxies;
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unless the Merger Agreement has been terminated in accordance
with the terms of the Merger Agreement, submit the Merger
Agreement to our stockholders at the special meeting of
stockholders even if our Board changes or withdraws its
recommendation that our stockholders adopt the Merger Agreement
and approve the merger;
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prepare and, within 45 days after the date the Merger
Agreement was entered into, file with the SEC a preliminary
proxy statement relating to the merger and the Merger Agreement
and, after consultation with Parent, respond as promptly as
reasonably practicable to any comments made by the SEC with
respect to the preliminary proxy statement (including filing as
promptly as reasonably practicable any amendments or supplements
thereto necessary to be filed in response to any such comments
or as required by applicable law);
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use reasonable best efforts to have the SEC confirm that it has
no further comments and cause a definitive proxy statement,
including any amendments or supplements thereto, to be mailed to
our stockholders at the earliest practicable date after the date
that the SEC confirms it has no further comments; however, we
may not make any amendments or supplements to the proxy
statement without prior consultation with Parent and its counsel
and after providing Parent a reasonable opportunity to review
and comment on such amendments or supplements;
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notify Parent promptly of the receipt of any comments from the
SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the proxy statement or for
additional information;
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supply Parent with copies of all correspondence between us or
our representatives, on the one hand, and the SEC or its staff,
on the other hand, with respect to the proxy statement;
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give Parent a reasonable opportunity to review and comment on
the proxy statement (including each amendment or supplement
thereto), any correspondence with the SEC or its staff or any
other materials proposed to be submitted to the SEC or its staff
prior to transmission to the SEC or its staff and, unless
required by law, not transmit any such material to which Parent
reasonably objects; and
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if at any time prior to the special meeting of stockholders, we
discover any information that should be set forth in an
amendment or supplement to the proxy statement, after obtaining
the consent of Parent to such amendment or supplement (which
consent may not be unreasonably withheld or delayed), we may
promptly transmit such amendment or supplement to our
stockholders.
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Solicitation
From the date of the Merger Agreement, neither we nor our
subsidiaries may, directly or indirectly, nor may we or our
subsidiaries, directly or indirectly, authorize or permit any of
our respective representatives, to:
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solicit, encourage, assist, initiate or facilitate the making,
submission or announcement of a third party takeover proposal;
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furnish any non-public information regarding us or any of our
subsidiaries or the merger to any person or group (other than to
Parent, Merger Sub or their representatives) in connection with
or in response to a third party takeover proposal;
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engage or participate in discussions or negotiations with any
person or group with respect to, or that could be expected to
lead to, a third party takeover proposal;
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withdraw, modify or qualify, or propose publicly to withdraw,
modify or qualify, in a manner adverse to Parent, the approval
of the Merger Agreement or the merger or the recommendation of
our Board that holders of shares of our common stock adopt the
Merger Agreement;
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approve, endorse or recommend, or publicly propose to approve,
endorse or recommend, a third party takeover proposal;
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cause ourselves or any of our subsidiaries to discuss, negotiate
or enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any
third party takeover proposal; or
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release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which we or any of
our subsidiaries are a party (except in specified circumstances).
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In addition, we must request the prompt return or destruction of
any confidential information provided to any person or group
prior to the date hereof in connection with a third party
takeover proposal, including in accordance with any
confidentiality agreement entered into with such person or
group, and must deny access to any data room (virtual or actual)
containing any such information to any such person or group.
Notwithstanding the aforementioned restrictions, at any time
prior to the approval of the Merger Agreement by our
stockholders, and provided that we are otherwise in compliance
in all material respects with the covenants relating to
solicitation and changes in or withdrawal of our Boards
recommendation, we are not prohibited or limited from
(a) furnishing non-public information regarding us to, or
(b) entering into discussions or negotiations with any
person or group in response to an unsolicited, bona fide written
third party takeover proposal received after the date we entered
into the Merger Agreement that did not result from a violation
of the restrictions summarized above, if:
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our Board determines in good faith, after consultation with our
outside legal and financial advisors, that (a) such third
party takeover proposal, constitutes or could be expected to
result in, after the taking of any of the actions referred to
above, a superior offer, and (b) such action with respect
to such third party takeover proposal is necessary for our Board
to comply with its fiduciary duties to our stockholders under
all applicable law;
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we receive from such person or group an executed confidentiality
agreement with provisions no less favorable, in the aggregate,
to us than, and with terms at least as restrictive of such
person or group (including
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with respect to the standstill provisions thereof), as those
contained in our confidentiality agreement with Parent;
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contemporaneously with furnishing any such information to such
person or group, we furnish such information to Parent to the
extent that such information has not been previously furnished
to Parent; and
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prior to the taking of any such actions by us or our Board as
described above, we provide written notice to Parent of such
determination of our Board.
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From and after the date of the Merger Agreement, we must notify
Parent as promptly as practicable (and in any event within
48 hours) orally and in writing of the receipt by us or any
of our representatives of:
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any bona fide inquiries, proposals or offers, requests for
information or requests for discussions or negotiations
regarding or constituting any third party takeover proposal or
any bona fide inquiries, proposals or offers, requests for
information or requests for discussions or negotiations that
could be expected to result in a third party takeover
proposal; and
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any request for non-public information relating to us or our
subsidiaries,
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specifying in each case the material terms and conditions
thereof (including a copy thereof if in writing) and the
identity of the party making such inquiry, proposal, offer or
request for information.
We must keep Parent promptly informed of the status of any such
discussions or negotiations and of any modifications to such
inquiries, proposals, offers or requests for information. From
and after the date of the Merger Agreement, we must and must
cause each of our subsidiaries to, immediately cease and cause
to be terminated any solicitations, discussions or negotiations
with any parties with respect to any third party takeover
proposal and must direct, and use our reasonable best efforts to
cause, our representatives to cease and terminate any such
solicitations, discussions or negotiations.
A third party takeover proposal means (other than
the merger) any inquiry, proposal or offer, or any indication of
interest in making an offer or proposal, from any person or
group at any time relating to (a) any direct or indirect
acquisition or purchase of our and our subsidiaries assets
representing 15% or more of our and our subsidiaries
assets or business, including by way of the purchase of stock of
our subsidiaries, (b) any issuance, sale or other
disposition of (including by way of merger, recapitalization,
consolidation, business combination, share exchange, joint
venture or any similar transaction) securities (or options,
rights or warrants to purchase, or securities convertible into
or exchangeable for, such securities), including any single or
multi-step transaction or series of related transactions,
representing 15% or more of the voting power or capital stock of
the Company or any subsidiary, (c) any tender offer,
exchange offer or other transaction that, if consummated, would
result in any person or group (as such term is
defined under the Exchange Act) having beneficial ownership (as
such term is defined in
Rule 13d-3
under the Exchange Act), or the right to acquire beneficial
ownership, of 15% or more of the voting power or capital stock
of ours or any of our subsidiaries, or (d) any merger,
consolidation, share exchange, business combination,
recapitalization, liquidation or dissolution, including any
single or multi-step transaction or series of related
transactions, involving us or our subsidiaries.
A superior offer means an unsolicited, bona fide
written third party takeover proposal (except that references to
15% are replaced by 50%) on terms that
our Board determines, in good faith, based upon consultations
with its outside legal counsel and its financial advisors,
(a) are more favorable to our stockholders, from a
financial point of view, than the Merger Agreement and the
merger, taken as a whole, after giving effect to any adjustments
to the terms and conditions of the Merger Agreement proposed in
writing by Parent in response to such third party takeover
proposal, and (b) is reasonably likely to be consummated on
the terms so proposed, in each case, taking into account, among
other things, all legal, financial, regulatory, timing and other
aspects of, and conditions to, the superior offer and the person
or group making the superior offer (including any financing
required by such person or group).
54
Change
of Recommendation/Withdrawal of Recommendation
Our Board may, at any time prior to the adoption of the Merger
Agreement and approval of the merger by our stockholders:
(a) withdraw or modify its recommendation that holders of
shares of our common stock adopt the Merger Agreement and
approve the merger in connection with a third party takeover
proposal; or (b) approve or recommend a superior offer, if,
in the case of both clause (a) and (b) above:
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an unsolicited, bona fide written offer is made to us by a third
party representing a third party takeover proposal;
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we are in compliance in all material respects with our
obligations with respect to solicitation and changes in or
withdrawal of the recommendation of our Board;
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our Board determines in good faith after consultation with our
outside legal and financial advisors that such third party
takeover proposal constitutes a superior offer (after giving
effect to all adjustments to the terms of the Merger Agreement
that may be proposed by Parent); and
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following consultation with our outside legal counsel and
financial advisors, our Board determines in good faith that the
withdrawal or modification of the Boards recommendation
that holders of our shares of common stock adopt the Merger
Agreement and approve the merger is required to comply with the
Boards fiduciary duties to our stockholders under
applicable law;
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but prior to taking any action described above, (a) we
provide a written notice to Parent:
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advising Parent that our Board has received a superior offer and
the Board intends to approve or recommend that our stockholders
approve the superior offer;
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specifying the material terms and conditions of such superior
offer (including a copy thereof, if in writing) and identifying
the person or group making such superior offer; and
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providing to Parent all materials and information delivered or
made available to the person or group making such proposed
superior offer (it being understood and agreed that any
amendment to the financial or other material terms of any such
proposed superior offer would require a new notice to Parent
including all of the items listed here and a new five business
day period as described in clause (b) below),
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and (b) during the five business days following
Parents receipt of the notice described above, we, and we
direct our representatives to, cooperate and negotiate in good
faith with Parent (to the extent that Parent requests the same)
to enable Parent to propose in writing such adjustments to the
terms of the Merger Agreement so that any third party takeover
proposal ceases to constitute a superior offer.
In no event will any approval or recommendation of a superior
offer by our Board change the approval of the Merger Agreement
or any other approval of our Board in any respect that would
have the effect of causing any takeover law to be applicable to
the transactions contemplated hereby, including the merger.
Our Board may, at any time prior to the adoption of the Merger
Agreement and approval of the merger by our stockholders and
other than as a result of the receipt of a third party takeover
proposal, withdraw or modify its approval of the Merger
Agreement or the Boards recommendation that our
stockholders adopt the Merger Agreement and approve the merger
if our Board determines in good faith (after consultation with
our outside legal and financial advisors) that the failure to
take such action would violate the Boards fiduciary duties
under applicable law. Any withdrawal of the Boards
recommendation described in this paragraph would not change the
approval of the Merger Agreement or any other approval of our
Board in any respect that would have the effect of causing any
takeover law to be applicable to the transactions contemplated
hereby, including the merger.
55
Certain
Other Covenants
The Merger Agreement contains additional covenants, including
covenants relating to our obligations to:
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provide Parent and its representatives access to our personnel,
offices and facilities and information regarding us and our
subsidiaries;
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take actions necessary to complete the transactions contemplated
by the Merger Agreement and to eliminate the effect of any
possible takeover laws that may affect the transactions
contemplated by the Merger Agreement;
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give Parent the opportunity to participate in any stockholder
litigation relating to the Merger Agreement or the
merger; and
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timely file all filings required by the SEC.
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The Merger Agreement contains additional covenants, including
covenants relating to our and Parents obligations to:
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notify each other of specified matters, changes and events;
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issue public announcements relating to the Merger Agreement and
the transactions contemplated by the Merger Agreement;
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communicate with insurance producers, reinsurance intermediaries
and agencies regarding the merger;
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cooperate with Parents arrangement of financing in
connection with the merger (although such financing by Parent is
not a condition to the closing of the merger);
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use our reasonable best efforts, and cooperate fully, to take,
or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable
laws and regulations to consummate the merger and the other
transactions contemplated by the Merger Agreement, including the
receipt of all required regulatory approvals and comply as
promptly as practicable with all requirements of governmental
authorities applicable to the transactions contemplated by the
Merger Agreement;
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file any notification and report forms and related material
required to be filed with the FTC and the Antitrust Division of
the United States Department of Justice under the HSR Act, as
promptly as practicable;
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prepare and file with the relevant insurance regulators,
including the Florida Office of Insurance Regulation, all
requests for approval of the transactions contemplated by the
Merger Agreement;
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cooperate with each other in the event that any administrative
or judicial action or proceeding is instituted (or threatened to
be instituted) by a governmental authority or private party
challenging the merger or any other transaction contemplated by
the Merger Agreement;
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obtain any required consents of third parties with respect to
any contracts to which we or Parent are a party;
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provide each of our employees, while they remain employed by
either the surviving corporation or any affiliates thereof with
at least the same level of base salary or wages that were
provided to each such employee immediately prior to the
effective time of the merger;
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provide each of our employees with base salary, wages, cash
incentive compensation, other cash variable compensation and
other employee benefits (other than equity- based compensation)
that are, in the aggregate, no less favorable than, at
Parents election, (a) those provided to such
employees immediately prior to the effective time of the merger
or (b) those provided to similarly situated employees of
Parent, or at Parents election, any subsidiary of
Parent; and
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take or refrain from taking certain actions relating to our
employee benefit and 401(k) plans.
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56
Indemnification
and Insurance
The certificate of incorporation and bylaws of the surviving
corporation are to contain provisions that are no less favorable
with respect to indemnification than are set forth in our
current certificate of incorporation and bylaws, respectively.
These provisions relating to indemnification in the surviving
corporations certificate and bylaws are not be amended,
repealed or otherwise modified for a period of six years from
the effective time of the merger in any manner that would affect
adversely the rights of our directors, officers, or employees at
the effective time of the merger. For six years after the
effective time of the merger, Parent and the surviving
corporation, jointly and severally, to the fullest extent that
we would have been permitted to do so under applicable law, are
to indemnify and hold harmless each of our present and former
directors and officers against all costs and expenses (including
reasonable attorneys fees), judgments, fines, losses,
claims, damages, liabilities and settlement amounts paid in
connection with any claim, action, suit, proceeding or
investigation (whether arising before or after the effective
time of the merger), whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or
omission, in his or her capacity as our officer, director, or
employee, occurring on or before the effective time of the
merger, which we refer to as a Covered Proceeding.
In the event of any claim, action, suit, proceeding or
investigation described above, Parent or the surviving
corporation is to pay the reasonable fees and expenses of
counsel selected by the person or persons entitled to
indemnification, which counsel is to be reasonably satisfactory
to the surviving corporation, promptly after statements therefor
are received. If it is finally judicially determined that the
person or persons who received the reasonable fees and expenses
for their counsel are not entitled to indemnification, such
person or persons are to repay all advanced expenses. Neither
Parent nor the surviving corporation are to be liable for any
settlement effected without Parents or the surviving
corporations written consent (which consent is not to be
unreasonably withheld or delayed). Parent and the surviving
corporation are not be required to agree to the entry of any
judgment or settlement that provides for injunctive or other
non-monetary relief affecting the Parent, the surviving
corporation or any of their respective subsidiaries. Neither
Parent nor the surviving corporation is to be obligated to pay
the fees and expenses of more than one counsel (selected by a
plurality of the applicable persons entitled to indemnification)
for all persons entitled to indemnification with respect to a
Covered Proceeding unless there is, under applicable standards
of professional conduct, a conflict on any significant issue
between the positions of any two or more of the persons entitled
to indemnification, in which case Parent is to pay the fees of
such additional counsel required by such conflict. In the event
that any claim for indemnification is asserted or made within
such six-year period, all rights to indemnification in respect
of such claim are to continue until the disposition of such
claim. Any person entitled to indemnification, upon becoming
aware of any such Covered Proceeding, is to promptly notify
Parent and the surviving corporation.
Immediately after the effective time of the merger, Parent must
have obtained and paid for, and must maintain in effect, a tail
policy of (a) directors and officers liability
insurance and (b) corporate counsel liability insurance
covering George Harris, our Senior Vice President, General
Counsel and Secretary, in respect of acts or omissions occurring
prior to the effective time of the merger covering each of those
persons who are covered by (1) our directors and
officers liability insurance policy and (2) corporate
counsel liability insurance, as of January 10, 2008, the
date we signed the Merger Agreement, for a period of six years
commencing as of the effective time of the merger. If Parent
requests in writing, prior to the effective time of the merger,
we are to obtain such extended reporting period coverage under
our existing insurance programs (to be effective as of the
effective time of the merger).
If Parent or the surviving corporation or any of its successors
or assigns (a) consolidates with or merges into any other
person and is not the continuing or surviving corporation or
entity of such consolidation or merger or (b) transfers all
or substantially all of its properties and assets to any person,
then, and in each such case, proper provision is to be made so
that the successors and assigns of Parent or the surviving
corporation assume these indemnification and insurance
obligations.
The rights to indemnification described above (a) are
intended to be for the benefit of, and are to be enforceable by,
each person entitled to indemnification, his or her heirs and
representatives and (b) are to be in addition to, and not
in substitution for, any other rights to indemnification or
contribution that any person entitled to indemnification may
have by contract or otherwise.
57
Conditions
to the Merger
At any time prior to the consummation of the merger, subject to
applicable law, any party to the Merger Agreement, may in its
sole discretion (a) extend the time for the performance of
any obligation or other act of any other party to the Merger
Agreement, (b) waive any inaccuracy in the representations
and warranties contained therein or in any document delivered
pursuant thereto and (c) waive compliance with any
agreement or condition contained therein. Any such extension or
waiver is to be valid only if set forth in an instrument in
writing signed by the party or parties to the Merger Agreement
to be bound thereby.
The respective obligations of each party to effect the merger
are subject to the fulfillment or waiver of the following
conditions:
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the approval of the Merger Agreement by our stockholders (which
is not waivable by the parties);
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the expiration or termination of the waiting period (and any
extensions thereof) under the HSR Act (which is not waivable by
the parties);
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the receipt of all authorizations, approvals and permits
required to be obtained from or made with any governmental
authority in order to consummate the merger; and
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the absence of any enactment, issuance, promulgation,
enforcement or entrance by any governmental authority in the
United States of any law (whether temporary, preliminary or
permanent) or order that is then in effect and has the effect of
making the merger illegal or otherwise preventing or prohibiting
consummation of the merger (which is not waivable by the
parties).
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The obligations of Parent and Merger Sub to consummate the
merger are subject to the fulfillment of the following
additional conditions:
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each of our representations and warranties relating to our due
organization and good standing, authorization and enforceability
of the Merger Agreement, finders and investment bankers fees,
the vote required for the merger and actions by our Board and
certain of our representations relating to capitalization, our
subsidiaries, our SEC filings, and changes we have incurred
since September 30, 2007 must be true and correct in all
respects as of the date we entered into the Merger Agreement and
as of the effective time of the merger as though made as of the
effective time of the merger (except to the extent that any of
such representations and warranties expressly speaks only as of
an earlier date, in which case such representation and warranty
must be true and correct as of such earlier date);
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each of our other representations and warranties set forth in
the Merger Agreement must be true and correct (disregarding
materiality qualifications and exceptions) as of the date we
entered into the Merger Agreement and as of the effective time
of the merger as though made at and as of the effective time of
the merger (except to the extent that any of such
representations and warranties expressly speaks only as of an
earlier date, in which case such representation and warranty
must be true and correct as of such earlier date), except where
the failure of such representations and warranties to be so true
and correct has not had and would not reasonably be expected to
have, individually or in the aggregate, a material adverse
effect on us;
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our performance in all material respects of our obligations and
compliance in all material respects with our agreements and
covenants to be performed or complied with by us under the
Merger Agreement;
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the furnishing to Parent by us of a certificate signed on our
behalf by our chief executive officer or chief financial officer
certifying that the conditions relating to our representations,
warranties and covenants have been satisfied and the absence of
any material adverse effect with respect to us;
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the absence of any material adverse effect with respect to us
since the date of the Merger Agreement;
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the absence of any burdensome conditions imposed in connection
with any required regulatory approvals, which burdensome
conditions include:
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any action or the commitment to take any action, or consent or
agreement to any condition, restriction or undertaking requested
or imposed by any governmental authority, whether in connection
with obtaining any required regulatory approval or otherwise,
if, in the good faith determination of Parent, such action,
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condition, restriction or undertaking, individually or in the
aggregate, with all other such actions, conditions, restrictions
or undertakings, would materially adversely affect the benefits,
taken as a whole, that Parent reasonably expects to derive from
the transactions contemplated by the Merger Agreement; or
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any requirement that Parent, the surviving corporation or any of
its or their subsidiaries (a) provide or commit to provide
additional capital to us, (b) maintain operations or
employees in the state of Florida, or (c) provide any
surplus maintenance, guarantee, keep-well or similar agreements
or commitments; and
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no more than 15% of the holders of outstanding shares of our
common stock shall have exercised and perfected the right to
dissent from the merger and shall not have prior to the
consummation of the merger effectively withdrawn or lost such
dissenters rights.
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Our obligations to consummate the merger are subject to the
fulfillment of the following additional conditions:
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each of the representations and warranties of Parent and Merger
Sub set forth in the Merger Agreement must be true and correct
as of the date the Merger Agreement was entered into and as of
the effective time of the merger as though made at and as of the
effective time of the merger (except to the extent such
representations and warranties expressly relate to an earlier
date, in which case such representation and warranty must be
true and correct as of such earlier date), except where the
failure of such representations and warranties to be so true and
correct has not had and would not reasonably be expected to
have, individually or in the aggregate, a materially adverse
effect on Parent or Merger Subs ability to consummate the
merger;
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the performance by Parent and Merger Sub, in all material
respects, of their respective obligations and compliance, in all
material respects, with their respective agreements and
covenants to be performed or complied with by them under the
Merger Agreement; and
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the furnishing by Parent to us of a certificate signed on its
behalf by the chief executive officer or chief financial officer
certifying that the conditions relating to its representations,
warranties and covenants have been satisfied.
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Except as indicated above, all of the closing conditions are
waivable. Neither we nor Parent have to date considered the
waiver of any of the closing conditions that may be waived under
the Merger Agreement.
Termination
of the Merger Agreement
The Merger Agreement may be terminated and the merger and the
other transactions contemplated thereby may be abandoned at any
time prior to the effective time of the merger, notwithstanding
any approval of the matters presented in connection with the
merger by our stockholders, as follows:
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by mutual written consent of each of us and Parent, as duly
authorized by our Board and Parents board of directors;
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by written notice by either Parent or us, if the effective time
of the merger has not occurred on or before October 31,
2008, provided that this right is not available to a party that
is in breach of the Merger Agreement;
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by written notice by either Parent or us, if any governmental
authority has enacted, issued, promulgated, enforced or entered
any order or law that is, in each case, then in effect and is
final and nonappealable and has the effect of permanently
restraining, enjoining or otherwise preventing or prohibiting
the transactions contemplated by the Merger Agreement, provided
that this right is not available to a party that is in breach of
the Merger Agreement;
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by written notice by Parent (if Parent is not in material breach
of any of its representations, warranties, covenants or
agreements under the Merger Agreement), if there has been a
breach by us of any of our representations, warranties,
covenants or agreements contained in the Merger Agreement, or if
any of our representations or warranties have become untrue or
inaccurate, in either case that would result in a failure of a
condition to closing (subject to a
20-day
cure
period);
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by written notice by us (if we are not in material breach of any
of our representations, warranties, covenants or agreements
under the Merger Agreement), if there has been a breach by
Parent or Merger Sub of any of its representations, warranties,
covenants or agreements contained in the Merger Agreement, or if
any representation or warranty of Parent or Merger Sub has
become untrue or inaccurate, in either case that would result in
a failure of a condition to closing (subject to a
20-day
cure
period);
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by written notice by Parent, if our Board:
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withdraws, modifies or qualifies in a manner adverse to Parent
or Merger Sub, or publicly proposes to withdraw, modify or
qualify in a manner adverse to Parent or Merger Sub, its
recommendation that the holders of our shares of common stock
adopt the Merger Agreement;
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fails to include in this proxy statement its recommendation to
the holders of our shares of common stock that they adopt the
Merger Agreement and approve the merger;
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approves, endorses or recommends, or publicly proposes to
approve, endorse or recommend, any third party takeover proposal;
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withdraws or changes its recommendation with respect to the
merger; or
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in the case of a third party takeover proposal made by way of a
tender offer or exchange offer, fails to recommend that our
stockholders reject such tender offer or exchange offer within
the ten business day period specified in
Section 14e-2(a)
under the Exchange Act or (if later than the end of such ten
business day period) fails to reconfirm its recommendation that
the holders of shares of our common stock adopt the Merger
Agreement and approve the merger within five business days after
a request by Parent to do so; or
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by written notice by either Parent or us, if, at the special
meeting (including any adjournment or postponement thereof at
which the Merger Agreement is voted upon), our stockholders do
not adopt the Merger Agreement or approve the merger, provided
that this right is not available to us if the failure to adopt
the Merger Agreement or approve the merger by our stockholders
is a result of our breach of the Merger Agreement.
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Effect of
Termination of the Merger Agreement
In the event of the termination of the Merger Agreement as
described above, the Merger Agreement would become void, and
there would be no liability under the Merger Agreement on the
part of any party to the Merger Agreement or any of their
respective affiliates or the directors, officers, partners,
members, managers, employees, agents or representatives of any
of them, and all rights and obligations of each party to the
Merger Agreement would cease, except that:
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the parties would remain liable for fees and expenses under the
circumstances described under The Merger
Agreement Fees and Expenses below;
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the parties would remain subject to the confidentiality
provisions of the Merger Agreement;
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the parties would remain subject to certain other provisions as
specified in the Merger Agreement; and
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nothing described above would relieve us from liability for any
fraud or willful breach by us of the Merger Agreement.
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Fees and
Expenses
Except as otherwise set forth below, all expenses incurred in
connection with the Merger Agreement and the transactions
contemplated thereby are to be paid by the party incurring such
expenses, whether or not the merger or any other related
transaction is consummated. In addition, the filing fee under
the HSR Act is to be borne equally by us and Parent.
60
If any of the following occur:
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at any time on or after January 10, 2008, a third party
takeover proposal is made to us or proposed to be made to us;
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thereafter, the Merger Agreement is terminated (1) by us or
Parent because the merger has not occurred on or before
October 31, 2008 or because our stockholders do not adopt
the Merger Agreement and approve the merger at the special
meeting, or (2) by Parent because we have breached the
Merger Agreement (assuming Parent is not in material
breach); and
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on or within 12 months after the date of such termination,
any definitive agreement providing for a qualifying transaction
has been executed or a qualifying transaction has been
consummated with any person;
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(b) the Merger Agreement is terminated by Parent because
our Board withdraws or changes its recommendation that our
stockholders adopt the Merger Agreement and approve the merger;
or,
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(c) the Merger Agreement is terminated by us or Parent
because our stockholders do not adopt the Merger Agreement and
approve the merger at the special meeting and prior to such
termination, our Board withdraws or changes its recommendation
that our stockholders adopt the Merger Agreement and approve the
merger,
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then we are to pay to Parent the Termination Fee, either upon
entering into a qualifying transaction or, in certain
circumstances within two days following termination. If our
stockholders do not adopt the Merger Agreement and approve the
merger at the special meeting, the expenses of Parent, up to
$2.0 million and to be credited against the Termination
Fee, are to be paid either concurrently with termination by us
or within two business days after termination by Parent.
If we terminate the Merger Agreement as a result of
Parents breach of its representation that it has
sufficient funds to complete the merger or Parents breach
of its covenants and agreements contained in the Merger
Agreement and demand payment of the Parent Termination Fee,
Parent is to pay us such fee within two business days after our
termination.
Our right to receive the Parent Termination Fee would terminate:
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if we make any demand or claim for any loss, claim, damage,
liability or expense suffered in connection with the Merger
Agreement or the merger or as a result of the failure of the
merger to be consummated in circumstances giving rise to the
right to receive the Parent Termination Fee in any action, other
than for the payment of the Parent Termination Fee; or
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if any of the conditions to closing to the obligation of Parent
or Merger Sub to consummate the merger become incapable of being
satisfied.
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Our right to receive the Parent Termination Fee is our sole and
exclusive remedy against Parent, Merger Sub or their affiliates
for any loss, claim, damage, liability or expense:
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suffered in connection with the Merger Agreement or the merger
(including any breach of the Merger Agreement by Parent or
Merger Sub); or
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as a result of the failure of the merger to be consummated in
circumstances giving rise to the right to receive the Parent
Termination Fee.
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In addition to the right of Parent and Merger Sub to receive the
Termination Fee in certain circumstances, Parent and Merger Sub
may also be entitled to receive additional damages as well as
specific performance of the Merger Agreement.
Upon payment of the Parent Termination Fee, none of Parent,
Merger Sub or their affiliates would have any further liability
or obligation relating to or arising out of this Merger
Agreement or the merger and the payment of the Parent
Termination Fee constitutes our sole and exclusive remedy
relating to or arising out of the Merger
61
Agreement or the merger. In no event would Parent or Merger Sub
be required to pay more than the Parent Termination Fee and we
will have no right against Parent or Merger Sub to specifically
enforce the Merger Agreement.
In the event that we were to fail to pay the Termination Fee
when due or Parent were to fail to pay the Parent Termination
Fee when due, we or Parent would be required to reimburse the
other for all reasonable costs and expenses actually incurred or
accrued by us or Parent (including reasonable fees and expenses
of counsel) in connection with the collection and enforcement of
the applicable termination fee. If not paid when due, the
applicable termination fee would accrue interest for the period
commencing on the date such termination fees first became equal
to the prime rate.
Amendment
of the Merger Agreement
The Merger Agreement may be amended by the parties thereto by
action taken by or on behalf of their respective boards of
directors at any time prior to the effective time of the merger;
provided, that, after the adoption of the Merger Agreement and
approval of the merger by our stockholders, no amendment may be
made that would reduce the amount or change the type of
consideration into which each share of common stock is to be
converted upon consummation of the merger or that would
otherwise by law require approval of our stockholders, without
approval of such stockholders. The Merger Agreement may only be
amended pursuant to a written agreement signed by each of the
parties thereto.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS (WITH AN
INTERESTED DIRECTOR ABSTAINING FROM VOTING) THAT YOU VOTE
FOR THE ADOPTION OF THE MERGER AGREEMENT.
ADJOURNMENT
OF THE SPECIAL MEETING (PROPOSAL NO. 2)
The Board is asking our stockholders to vote on a proposal to
adjourn the special meeting, if necessary or appropriate, in
order to allow for the solicitation of additional proxies if
there are insufficient votes at the time of the special meeting
to adopt the Merger Agreement.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS (WITH AN
INTERESTED DIRECTOR ABSTAINING FROM VOTING) THAT YOU VOTE
FOR THE APPROVAL OF THE ADJOURNMENT OF THE SPECIAL
MEETING, IF NECESSARY OR APPROPRIATE, TO SOLICIT ADDITIONAL
PROXIES.
62
MARKET
PRICE OF AMCOMP INCORPORATED COMMON STOCK
Our common stock is quoted on the Nasdaq Global Select Market
under the symbol AMCP. As of the record date, there
were approximately 44 holders of record of our common stock. The
following table sets forth, for the periods indicated, the high
and low prices during the day for our common stock, as reported
on Nasdaq. We currently anticipate that all of our future
earnings will be retained for the development of our business
and do not anticipate paying cash dividends on our common stock
for the foreseeable future. We have never paid cash dividends.
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High
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Low
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Year Ended December 31, 2008
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First Quarter(1)
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$
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12.33
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$
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8.66
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Second Quarter (through April 28, 2008)(2)
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$
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12.38
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$
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12.20
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Year Ended December 31, 2007
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First Quarter
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$
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12.11
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$
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9.26
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Second Quarter
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$
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10.93
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$
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8.69
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Third Quarter
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$
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10.10
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$
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7.32
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Fourth Quarter
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$
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10.90
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$
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8.80
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Year Ended December 31, 2006
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First Quarter(3)
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$
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10.20
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$
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8.37
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Second Quarter
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$
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10.55
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$
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9.31
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Third Quarter
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$
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10.38
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$
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7.75
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Fourth Quarter
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$
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11.37
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$
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9.05
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(1)
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On January 10, 2008, the date that the Merger was
announced, the closing price of our common stock was $8.75.
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(2)
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On April 28, 2008, the date of this Proxy Statement, the
closing price of our common stock was $12.35.
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(3)
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Includes the period from February 10, 2006, the date on
which we began trading on the Nasdaq Global Select Market,
through March 31, 2006.
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63
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect
to the beneficial ownership of our common stock as of the record
date for (a) each of our directors, (b) each of our
executive officers, (c) each stockholder known to be the
beneficial owner of more than five percent of any class of our
voting securities, and (d) all directors and executive
officers as a group. Beneficial ownership has been determined in
accordance with
Rule 13d-3
under the Exchange Act and does not necessarily bear on the
economic incidents of ownership or the rights to transfer the
shares described below. Unless otherwise indicated,
(a) each stockholder has sole voting power and dispositive
power with respect to the indicated shares and (b) the
address of each stockholder who is a director or executive
officer is
c/o AmCOMP
Incorporated, 701 U.S. Highway One, North Palm Beach,
Florida 33408. The percentage of shares owned is based on
15,294,371 shares outstanding as of April 23, 2008,
the record date.
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Number of Shares
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Percentage of Shares
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Name of Beneficial Owner:
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Beneficially Owned(1)
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Beneficially Owned(1)
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5% Stockholders:
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Entities affiliated with Welsh Carson(2)
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1,391,631
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9.1
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%
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Entities affiliated with Credit Suisse(3)
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1,691,968
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11.1
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%
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Entities affiliated with TCW Group, Inc.(4)
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995,962
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6.5
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%
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Royce & Associates, LLC(5)
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1,021,814
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6.7
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%
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Entities affiliated with SuNOVA(6)
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1,365,000
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8.9
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%
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Entities affiliated with Newcastle(7)
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1,138,706
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7.4
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%
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Dimensional Fund Advisors LP(8)
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773,488
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5.1
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%
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Named Executive Officers and Directors:
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Fred R. Lowe
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375,005
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(9)
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2.4
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%
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Debra Cerre-Ruedisili
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177,864
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(10)
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1.2
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%
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Kumar Gursahaney
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70,915
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(11)
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*
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George Harris
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14,366
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(12)
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*
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Colin Williams
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10,655
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(13)
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*
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Sam A. Stephens
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1,011,280
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(14)
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6.6
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%
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Paul B. Queally
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1,373,582
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(15)
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9.0
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%
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Donald C. Stewart
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5,288
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(16)
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*
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Spencer L. Cullen, Jr.
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5,288
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(17)
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*
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All directors and executive officers as a group (12 persons)
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3,096,526
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(18)
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19.7
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%
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*
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Less than one percent.
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(1)
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Beneficial ownership is determined in accordance with the rules
of the SEC, based on factors including voting and investment
power with respect to shares. Shares of common stock subject to
options or warrants currently exercisable, or exercisable within
60 days after the record date, are deemed outstanding for
the purpose of computing the percentage ownership of the person
holding such options and of all directors and officers as a
group, but are not deemed outstanding for computing the
percentage ownership of any other person.
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(2)
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Based solely on information contained in a report on
Schedule 13G filed jointly on February 9, 2007 by
Welsh, Carson, Anderson & Stowe VII, L.P., a Delaware
limited partnership (WCAS VII) and WCAS Healthcare
Partners, L.P., a Delaware limited partnership (WCAS
Healthcare) (together the Welsh Carson
entities), the number of shares beneficially owned
consists of (a) 1,367,065 shares of common stock held
by WCAS VII and (b) 24,566 shares of common stock held
by WCAS Healthcare. WCAS VIIs sole general partner is WCAS
VII Partners, L.P., a Delaware limited partnership, and WCAS
Healthcares sole general partner is WCAS HP Partners, a
Delaware general partnership. The address for these Welsh Carson
entities is 320 Park Avenue, Suite 2500, New York, New York
10022.
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(3)
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Based solely on information contained in a report on
Schedule 13G filed on February 14, 2007 by Credit
Suisse, a Swiss bank, on behalf of its subsidiaries to the
extent that they constitute the Investment Banking
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64
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division, the Alternative Investments business within the Asset
Management division and the United States private client
services business within the Private Banking division (together
the Credit Suisse entities). The ultimate parent
company of the Bank is Credit Suisse Group (CSG), a
corporation formed under the laws of Switzerland. CSG, for
purposes of the federal securities laws, may be deemed
ultimately to control the Credit Suisse entities. CSG, its
executive officers and directors, and its direct and indirect
subsidiaries (including those subsidiaries that constitute the
Asset Management division (other than the Alternative Investment
business) (the Traditional AM Business) and the
Private Banking division (other than the United States private
client services business) (the
Non-U.S.
PB Business) may beneficially own securities to which the
Schedule 13G relates and such shares were not reported in
the Schedule 13G. CSG disclaims beneficial ownership of
shares beneficially owned by its direct and indirect
subsidiaries, including the Credit Suisse entities. Each of the
Traditional AM Business and the
Non-U.S.
PB
Business disclaims beneficial ownership of shares beneficially
owned by the Credit Suisse entities. The Credit Suisse entities
disclaim beneficial ownership of shares beneficially owned by
CSG, the Traditional AM Business and the
Non-U.S.
PB
Business. The address of Credit Suisse is Uetlibergstrasse 231,
P.O. Box 900, CH 8070 Zurich, Switzerland.
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(4)
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Based solely on information contained in a report on
Schedule 13G filed on February 11, 2008 by TCW Group,
Inc., a Nevada corporation (TCW), on behalf of
itself and its direct and indirect subsidiaries, which
collectively constitute The TCW Group, Inc. business unit (the
TCW Business Unit). The ultimate parent company of
TCW is Societe Generale, S.A., a corporation formed under the
laws of France (SG). SG, for purpose of the federal
securities laws, may be deemed ultimately to control TCW and the
TCW Business Unit. SG, its executive officers and directors, and
its direct and indirect subsidiaries (including all business
units except the TCW Business Unit), may beneficially own shares
of the securities of the issuer to which the Schedule 13G
relates and such shares were not reported in the
Schedule 13G. SG disclaims beneficial ownership of shares
beneficially owned by TCW and the TCW Business Unit. TCW and the
TCW Business Unit disclaim beneficial ownership of shares
beneficially owned by SG and any of SGs other business
units. The address of TCW is 865 South Figueroa Street, Los
Angeles, California 90017.
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(5)
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Based solely on information contained in a report on
Schedule 13G filed on January 25, 2008 by
Royce & Associates, LLC. The address of
Royce & Associates, LLC is 1414 Avenue of the
Americas, New York, New York 10019.
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(6)
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Based solely on information contained in a report on
Schedule 13G filed on February 14, 2008 by SuNOVA
Partners, L.P., a Delaware limited partnership (SuNOVA
Partners), with respect to shares of common stock directly
owned by it; by SuNOVA Long-Term Opportunity Fund, L.P., a
Delaware limited partnership (SuNOVA Long-Term),
with respect to shares of common stock directly owned by it; by
SuNOVA Holdings, LLC, a Delaware limited liability company (the
General Partner), which serves as the general
partner of SuNOVA Partners and SuNOVA Long-Term (together, the
Partnerships), with respect to shares of common
stock directly owned by the Partnerships; by SuNOVA Capital, LP,
a Delaware limited partnership (the Investment
Manager), which serves as investment manager to and has
investment discretion over the securities owned by SuNOVA
Offshore Ltd., a Cayman Islands corporation (SuNOVA
Offshore), with respect to shares of common stock directly
owned by SuNOVA Offshore; by SuNOVA, LLC, a Delaware limited
liability company, which serves as the general partner of the
Investment Manager, with respect to shares of common stock
directly owned by SuNOVA Offshore; by Mr. Matthew Byrnes,
who serves as the
co-managing
member (together with Felice Gelman) of each of the General
Partner and the general partner of the Investment Manager, with
respect to shares of common stock directly owned by the
Partnerships and SuNOVA Offshore; and by Ms. Felice Gelman,
who serves as the co-managing member(together with
Mr. Byrnes) of each of the General Partner and the general
partner of the Investment Manager, with respect to shares of
common stock directly owned by the Partnerships and SuNOVA
Offshore. The address of the business office of each of these
SuNOVA entities is 780 Third Avenue, 5th Floor, New York, NY
10017.
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(7)
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Based solely on information contained in a report on
Schedule 13G filed on February 13, 2008 by Newcastle
Partners, L.P., a Texas limited partnership (NP),
Newcastle Capital Management, L.P., a Texas limited partnership
(NCM), Newcastle Capital Group, L.L.C., a Texas
limited liability company (NCG) and Mark E. Schwarz.
Because Mark E. Schwarz is the managing member of NCG, which is
the general partner of NCM, which in turn is the general partner
of NP, each of NCM, NCG and Mr. Schwarz may be deemed to be
the beneficial owners of all the shares of common stock of
AmCOMP held by NP. The address of the business office of each of
these Newcastle entities is 200 Crescent Court, Suite 1400,
Dallas, Texas 75201.
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65
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(8)
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Based solely on information contained in a report on
Schedule 13G filed on February 6, 2008 by Dimensional
Fund Advisors LP (formerly, Dimensional Fund Advisors
Inc.), an investment advisor registered under Section 203
of the Investment Advisors Act of 1940. Dimensional
Fund Advisors LP furnishes investment advice to four
investment companies registered under the Investment Company Act
of 1940, and serves as investment manager to certain other
commingled group trusts and separate accounts (collectively, the
Funds). In its role as investment advisor or
manager, Dimensional Fund Advisors LP possesses investment
and/or voting power over shares of our common stock that are
owned by the Funds, and may be deemed to be the beneficial owner
of the shares of our common stock held by the Funds. However,
all such shares are owned by the Funds. Dimensional
Fund Advisors LP disclaims beneficial ownership of such
shares. The address of the business office of Dimensional Fund
Advisors LP is 1299 Ocean Avenue, Santa Monica, CA 90401.
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(9)
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Includes 145,534 shares of common stock issuable upon
exercise of options held by Mr. Lowe.
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(10)
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Includes 133,235 shares of common stock issuable upon
exercise of options held by Ms. Cerre-Ruedisili. Also
includes 200 shares of common stock that
Ms. Cerre-Ruedisili holds as custodian for her children.
Ms. Cerre-Ruedisili disclaims beneficial ownership of these
200 shares.
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(11)
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Includes 63,415 shares of common stock issuable upon
exercise of options held by Mr. Gursahaney.
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(12)
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Includes 10,000 shares of common stock issuable upon
exercise of options held by Mr. Harris.
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(13)
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Effective as of April 1, 2008, Mr. Williams resigned
from his position as President of the Texas Region.
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(14)
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Based solely on information contained in a report on
Schedule 13D filed on January 11, 2008 by
Mr. Stephens and includes 5,288 shares of common stock
issuable upon exercise of options held by Mr. Stephens.
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(15)
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The number of shares beneficially owned consists of
(a) 1,229 shares of common stock held by
Mr. Queally, (b) 5,288 shares of common stock
issuable upon exercise of options held by Mr. Queally and
(c) 1,367,065 shares of common stock held by WCAS VII.
Mr. Queally is a general partner of the sole general
partner of WCAS VII. Mr. Queally may be deemed to have
shared investment and voting power with respect to the
securities held by WCAS VII. Mr. Queally disclaims
beneficial ownership of the securities held by WCAS VII, except
to the extent of his equity interest therein.
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(16)
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Represents 5,288 shares of common stock issuable upon
exercise of options held by Mr. Stewart.
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(17)
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Represents 5,288 shares of common stock issuable upon
exercise of options held by Mr. Cullen.
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(18)
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Includes (a) 6,987 shares of common stock and
45,296 shares of common stock issuable upon exercise of
options held by three executive officers not specifically
identified in the table and (b) an aggregate of
373,336 shares of common stock issuable upon exercise of
options held by directors and named executive officers.
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FORWARD
LOOKING STATEMENTS
This proxy statement includes and incorporates by reference
statements that are not historical facts. These forward-looking
statements are based on our and/or, where applicable,
Parents current estimates and assumptions and, as such,
involve uncertainty and risk. Forward-looking statements include
the information concerning possible or assumed future results of
operations and also include those preceded or followed by words
such as anticipates, believes,
thinks, could, estimates,
expects, intends, may,
should, plans, targets
and/or
similar expressions. There may be events in the future that
cannot be accurately predicted or over which there is no
control. Stockholders should be aware that the occurrence of the
events described in this proxy statement or in the documents
incorporated herein by reference could have a material adverse
effect on our business, operating results and financial
condition or ability to consummate the transactions contemplated
by the Merger Agreement. Examples of these risks include without
limitation:
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risk factors disclosed in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006 incorporated by
reference in this proxy statement;
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the risk that the Merger Agreement could be terminated,
including under circumstances that would require us to reimburse
expenses up to $2.0 million or pay a termination fee of up
to $8.0 million and
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costs and charges related to the merger.
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66
The forward-looking statements are not guarantees of future
performance, events or circumstances, and actual results may
differ materially from those contemplated by the forward-looking
statements.
The forward-looking statements contained in this proxy statement
are excluded from the safe harbor protection provided by the
Private Securities Litigation Reform Act of 1995 and
Section 27A of the Securities Act of 1933, as amended.
WHERE YOU
CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements
and other information with the SEC. Our stockholders may read
and copy the documents incorporated by reference, and any
reports, statements or other information we have filed at the
SECs public reference room located at
100 F Street, N.E., Washington, D.C. 20549. You
may also obtain copies of the documents at prescribed rates by
writing to the Public Reference Section of the SEC at
100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330
for further information on the public reference room. The SEC
also maintains an Internet site that contains reports and other
information regarding issuers that file electronically with the
SEC. Our filings with the SEC are also available to the public
through this web site at www.sec.gov.
If you have questions about the special meeting or the merger
after reading this proxy statement, you may contact our proxy
solicitor, MacKenzie Partners, Inc., at
(212) 929-5500
(call collect) or toll-free at
(800) 322-2885
or via email at proxy@mackenziepartners.com.
We have not authorized anyone to give you any information or to
make any representation about the merger or any of the parties
involved that differs from or adds to the information contained
in this proxy statement or in the documents we have publicly
filed with the SEC. Therefore, if anyone should give you any
different or additional information, you should not rely
on it.
The information contained in this proxy statement speaks only as
of the date indicated on the cover of this proxy statement
unless the information specifically indicates that another date
applies.
INCORPORATION
BY REFERENCE
The SEC allows us to incorporate by reference
information filed with it, which means that we can disclose
important information to you by referring you to the documents
containing such information. The information incorporated by
reference is an important part of this proxy statement, and
information filed later by us with the SEC will automatically
update and supersede this information.
We incorporate by reference the documents listed below and, with
respect to this proxy statement, any future filings made with
the SEC by us under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act:
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our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2007, as amended by
the Form 10-K/A, as filed with the SEC on April 28,
2008;
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our Current Report on
Form 8-K,
as filed with the SEC on March 19, 2008; and
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our Current Report on
Form 8-K,
as filed with the SEC on April 2, 2008.
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All documents and reports filed by us pursuant to
Section 13(a), 13(c), 14, or 15(d) of the Exchange Act
after the date of this proxy statement and on or prior to the
date of the special meeting are deemed to be incorporated by
reference in this proxy statement, and only for the purpose of
this proxy statement, from the date of filing of such documents
or reports, except as to any portion of any future annual or
quarterly reports or proxy statements which is not deemed to be
filed under those sections. Any statement contained in a
document incorporated or deemed to be incorporated by reference
in this proxy statement will be deemed to be modified or
superseded for purposes of this proxy statement, and only for
the purposes of this proxy statement, to the extent that any
statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by
reference in this proxy statement modifies or supersedes such
statement. Any statement so modified or superseded will not be
deemed, except as so modified or superseded, to constitute a
part of this proxy statement.
67
Any person receiving a copy of this proxy statement may obtain,
without charge, upon written or oral request, a copy of any of
the documents incorporated by reference except for the exhibits
to such documents. Requests should be directed to our proxy
solicitor, MacKenzie Partners, Inc., at
(212) 929-5500
(call collect) or toll-free
(800) 322-2885
or via email at proxy@mackenziepartners.com. A copy will be
provided by first class mail or other equally prompt means
within one business day after receipt of your request. To obtain
timely delivery of any of this information, you must make your
request at least five business days prior to the date of the
special meeting.
SUBMISSION
OF STOCKHOLDERS PROPOSALS
If the merger is completed, there will be no public
participation in any future meetings of stockholders of AmCOMP
Incorporated. If the merger is not completed, you will continue
to be entitled to attend and participate in our stockholder
meetings, and we will hold a 2008 annual meeting of stockholders.
If we hold a 2008 annual meeting of stockholders, the proxy
statement for such annual meeting will state the deadline
(a) that stockholder proposals can be made in accordance
with
Rule 14a-8
under the Exchange Act and (b) that stockholder proposals
must be submitted to us so that we are not permitted to use our
discretionary voting authority with respect to such proposal.
OTHER
MATTERS
Other
Business
As of this time, our Board knows of no other matters to be
brought before the meeting. However, if other matters properly
come before the meeting or any adjournment thereof, and if
discretionary authority to vote with respect thereto has been
conferred by the enclosed proxy, the persons named in the proxy
will vote the proxy in accordance with their best judgment as to
such matters.
Delivery
of Proxy Statement
Some banks, brokers and other record holders have begun the
practice of householding proxy statements and annual
reports. Householding is the term used to describe
the practice of delivering a single set of the proxy statement
and annual report to any household at which two or more
stockholders share an address. This procedure would reduce the
volume of duplicate information stockholders receive and would
also reduce our printing and mailing costs. We will deliver
promptly, upon written or oral request, a separate copy of this
proxy statement to a stockholder at a shared address to which a
single copy of this proxy statement was delivered. A stockholder
who wishes to receive a separate copy of our proxy statements
and annual reports, now or in the future, should submit this
request to our proxy solicitor, MacKenzie Partners, Inc., at
(212) 929-5500
(call collect) or toll-free at
(800) 322-2885
or via email at proxy@mackenziepartners.com. Beneficial owners
sharing an address who are receiving multiple copies of proxy
materials and annual reports and who wish to receive a single
copy of these materials in the future will need to contact their
broker, bank or other nominee to request that only a single copy
of each document be mailed to all shareowners at the shared
address in the future.
68
Other
Proxy Statement Matters
A form of proxy is enclosed for your use. Please sign, date and
return the proxy at your earliest convenience in the enclosed
postage-paid envelope or submit your proxy by telephone or over
the Internet following the instructions on the proxy card. A
prompt submission of your proxy will be appreciated.
This proxy statement does not constitute an offer to sell or to
buy, or a solicitation of an offer to sell or to buy, any
securities, or the solicitation of a proxy, in any jurisdiction
to or from any person to whom it is not lawful to make any offer
or solicitation in such jurisdiction.
By Order of the Board of Directors
Fred R. Lowe
Chairman, President and Chief Executive Officer
69
EXECUTION VERSION
AGREEMENT
AND PLAN OF MERGER
by and among
AMCOMP INCORPORATED,
EMPLOYERS HOLDINGS, INC.
and
SAPPHIRE ACQUISITION CORP.
Dated as of January 10, 2008
Table of
Contents
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ARTICLE I
TERMS OF THE MERGER
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1.1
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The Merger
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A-1
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1.2
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The Closing; Effective Time; Effect
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A-2
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1.3
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Conversion of Securities
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A-2
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1.4
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Tender of and Payment for Certificates
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A-2
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1.5
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Options
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A-4
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1.6
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Dissenting Shares
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A-5
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1.7
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Certificate of Incorporation and Bylaws
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A-5
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1.8
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Directors and Officers
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A-5
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1.9
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Other Effects of the Merger
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A-5
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1.10
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Additional Actions
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A-5
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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2.1
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Due Organization and Good Standing
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A-6
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2.2
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Capitalization
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A-7
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2.3
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Subsidiaries
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A-8
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2.4
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Authorization; Binding Agreement
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A-9
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2.5
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Governmental Approvals
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A-9
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2.6
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No Violations
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A-9
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2.7
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SEC Filings; Company Financial Statements
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A-10
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2.8
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Absence of Certain Changes
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A-12
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2.9
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Absence of Undisclosed Liabilities
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A-12
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2.10
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Compliance with Laws
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A-12
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2.11
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Regulatory Agreements; Permits
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A-13
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2.12
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Litigation
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A-13
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2.13
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Restrictions on Business Activities
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A-14
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2.14
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Material Contracts
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A-14
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2.15
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Intellectual Property
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A-15
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2.16
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Employee Benefit Plans
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A-16
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2.17
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Taxes and Returns
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A-17
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2.18
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Finders and Investment Bankers
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A-18
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2.19
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Fairness Opinion
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A-18
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2.20
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Vote Required; Board Action
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A-19
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2.21
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Title to Properties; Assets
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A-19
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2.22
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Employee Matters
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A-19
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2.23
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Environmental Matters
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A-20
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2.24
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Proxy Statement
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A-21
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2.25
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Transactions with Affiliates
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A-21
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2.26
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Insurance Matters
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A-21
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2.27
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Insurance
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A-23
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2.28
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Books and Records
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A-23
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A-i
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
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3.1
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Due Organization and Good Standing
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A-23
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3.2
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Authorization; Binding Agreement
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A-23
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3.3
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Governmental Approvals
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A-24
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3.4
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No Violations
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A-24
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3.5
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Finders and Investment Bankers
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A-24
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3.6
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Disclosures
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A-24
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3.7
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Sufficient Funds
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A-24
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3.8
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Litigation
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A-24
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3.9
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Ownership of Shares
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A-25
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3.10
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Management Arrangements
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A-25
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3.11
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Investigation by Parent and Merger Sub
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A-25
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ARTICLE IV
ADDITIONAL COVENANTS OF THE COMPANY
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4.1
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Conduct of Business of the Company
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A-25
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4.2
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Access and Information; Confidentiality
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A-27
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4.3
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Special Meeting; Proxy Statement
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A-28
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4.4
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No Solicitation
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A-29
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4.5
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Takeover Laws
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A-31
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4.6
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Stockholder Litigation
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A-31
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4.7
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SEC Reports
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A-31
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ARTICLE V
ADDITIONAL COVENANTS OF THE PARTIES
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5.1
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Notification of Certain Matters
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A-32
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5.2
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Reasonable Best Efforts
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A-32
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5.3
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Indemnification and Insurance
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A-34
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5.4
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Benefit Plans and Employee Matters
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A-35
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5.5
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Public Announcements
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A-36
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5.6
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Company Producers
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A-36
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5.7
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Financing
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A-36
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ARTICLE VI
CONDITIONS
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6.1
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Conditions to Each Partys Obligations
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A-37
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6.2
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Conditions to Obligations of Parent and Merger Sub
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A-37
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6.3
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Conditions to Obligations of the Company
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A-38
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6.4
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Frustration of Conditions
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A-38
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ARTICLE VII
TERMINATION AND ABANDONMENT
|
7.1
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Termination
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A-38
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7.2
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Effect of Termination
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A-39
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7.3
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Fees and Expenses
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A-39
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7.4
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Amendment
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A-41
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7.5
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Waiver
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A-41
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A-ii
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ARTICLE VIII
MISCELLANEOUS
|
8.1
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Survival
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A-41
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8.2
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Notices
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A-42
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8.3
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Binding Effect; Assignment
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A-42
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8.4
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Governing Law; Jurisdiction
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A-42
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8.5
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Waiver of Jury Trial
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A-43
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8.6
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Counterparts
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A-43
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8.7
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Interpretation
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A-43
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8.8
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Entire Agreement
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A-43
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8.9
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Severability
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A-44
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8.10
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Specific Performance
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A-44
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8.11
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Third Parties
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A-44
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A-iii
Index
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Defined Terms
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|
Page
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Action
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A-13
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Affiliate
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A-43
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Affiliate Transaction
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A-21
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Aggregate Consideration
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A-3
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Agreement
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A-1
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Antitrust Laws
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A-32
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Balance Sheet Date
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A-10
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Board
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A-1
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Burdensome Condition
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A-33
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Business Day
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A-43
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Bylaws
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A-6
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Cash Amount
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A-4
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Certificate of Incorporation
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A-6
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Certificate of Merger
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A-2
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Certificates
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A-3
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Change of Recommendation
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A-30
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Closing
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A-2
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Closing Date
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A-2
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Code
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A-4
|
|
Common Stock
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|
A-1
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|
Company
|
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A-1
|
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Company 401(k) Plan
|
|
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A-35
|
|
Company Actuarial Analyses
|
|
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A-22
|
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Company Balance Sheet
|
|
|
A-10
|
|
Company Capital Stock
|
|
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A-7
|
|
Company Damages
|
|
|
A-40
|
|
Company Disclosure Schedule
|
|
|
A-6
|
|
Company Employee Plans
|
|
|
A-16
|
|
Company Financials
|
|
|
A-10
|
|
Company Intellectual Property
|
|
|
A-15
|
|
Company Material Adverse Effect
|
|
|
A-6
|
|
Company Material Contract
|
|
|
A-14
|
|
Company Option Plans
|
|
|
A-4
|
|
Company Options
|
|
|
A-4
|
|
Company Permits
|
|
|
A-13
|
|
Company Producers
|
|
|
A-21
|
|
Company Real Property
|
|
|
A-19
|
|
Company Reinsurance Agreements
|
|
|
A-22
|
|
Company Representatives
|
|
|
A-29
|
|
Company SAP Statements
|
|
|
A-11
|
|
Company SEC Reports
|
|
|
A-10
|
|
Company Stockholder Approval
|
|
|
A-19
|
|
Company Subsidiaries
|
|
|
A-6
|
|
A-iv
|
|
|
|
|
Defined Terms
|
|
Page
|
|
|
Company Subsidiary
|
|
|
A-6
|
|
Company Superior Offer
|
|
|
A-29
|
|
Company Takeover Proposal
|
|
|
A-29
|
|
Confidentiality Agreement
|
|
|
A-28
|
|
Consent
|
|
|
A-9
|
|
Covered Proceeding
|
|
|
A-34
|
|
DGCL
|
|
|
A-1
|
|
Dissenting Shares
|
|
|
A-5
|
|
DOJ
|
|
|
A-32
|
|
DOL
|
|
|
A-16
|
|
Effective Time
|
|
|
A-2
|
|
Employee
|
|
|
A-35
|
|
Encumbrances
|
|
|
A-10
|
|
Enforceability Exceptions
|
|
|
A-9
|
|
Environmental Laws
|
|
|
A-20
|
|
ERISA
|
|
|
A-16
|
|
ERISA Affiliate
|
|
|
A-16
|
|
Exchange Act
|
|
|
A-4
|
|
Exchange Fund
|
|
|
A-3
|
|
Expenses
|
|
|
A-39
|
|
Financing
|
|
|
A-36
|
|
FTC
|
|
|
A-32
|
|
GAAP
|
|
|
A-6
|
|
Governmental Authority
|
|
|
A-9
|
|
Hazardous Substance
|
|
|
A-20
|
|
HSR Act
|
|
|
A-9
|
|
Indebtedness
|
|
|
A-7
|
|
Indemnified Parties
|
|
|
A-34
|
|
Intellectual Property
|
|
|
A-15
|
|
IRS
|
|
|
A-16
|
|
knowledge
|
|
|
A-43
|
|
Law
|
|
|
A-10
|
|
Laws
|
|
|
A-10
|
|
Licensed Intellectual Property
|
|
|
A-15
|
|
Merger
|
|
|
A-1
|
|
Merger Consideration
|
|
|
A-3
|
|
Merger Sub
|
|
|
A-1
|
|
Notice of Superior Offer
|
|
|
A-31
|
|
Off-the-Shelf
Software Agreements
|
|
|
A-15
|
|
Order
|
|
|
A-13
|
|
Outside Date
|
|
|
A-38
|
|
Parent
|
|
|
A-1
|
|
Parent Disclosure Schedule
|
|
|
A-23
|
|
Parent Material Adverse Effect
|
|
|
A-24
|
|
A-v
|
|
|
|
|
Defined Terms
|
|
Page
|
|
|
Parent Representatives
|
|
|
A-27
|
|
Parent Termination Fee
|
|
|
A-40
|
|
Parent Welfare Benefit Plans
|
|
|
A-35
|
|
Parties
|
|
|
A-1
|
|
Party
|
|
|
A-1
|
|
Paying Agent
|
|
|
A-2
|
|
Permitted Encumbrances
|
|
|
A-19
|
|
Person
|
|
|
A-43
|
|
Preferred Stock
|
|
|
A-7
|
|
Proxy Statement
|
|
|
A-28
|
|
Qualifying Transaction
|
|
|
A-40
|
|
Raymond James
|
|
|
A-18
|
|
Requisite Regulatory Approvals
|
|
|
A-37
|
|
SAP
|
|
|
A-6
|
|
SEC
|
|
|
A-9
|
|
Secretary of State
|
|
|
A-2
|
|
Securities Act
|
|
|
A-10
|
|
Shares
|
|
|
A-1
|
|
Special Meeting
|
|
|
A-28
|
|
SSAP No. 62
|
|
|
A-22
|
|
subsidiary
|
|
|
A-43
|
|
Surviving Corporation
|
|
|
A-1
|
|
Takeover Laws
|
|
|
A-19
|
|
Tax
|
|
|
A-18
|
|
Tax Returns
|
|
|
A-17
|
|
Taxes
|
|
|
A-18
|
|
Tenant Leases
|
|
|
A-19
|
|
Terminating Company Breach
|
|
|
A-38
|
|
Terminating Parent Breach
|
|
|
A-39
|
|
Termination Date
|
|
|
A-38
|
|
Termination Fee
|
|
|
A-40
|
|
Total Cash Amount
|
|
|
A-64
|
|
Total Merger Consideration
|
|
|
A-3
|
|
Voting Agreement
|
|
|
A-1
|
|
Voting Debt
|
|
|
A-7
|
|
Withdrawal of Recommendation
|
|
|
A-31
|
|
A-vi
AGREEMENT
AND PLAN OF MERGER
This Agreement and Plan of Merger (this
Agreement
) is made and entered into as of
January 10, 2008 by and among AmCOMP Incorporated, a
Delaware corporation (the
Company
), Employers
Holdings, Inc., a Nevada corporation
(Parent)
, and Sapphire Acquisition Corp., a
Delaware corporation and wholly owned subsidiary of Parent
(Merger Sub)
. Parent, Merger Sub and the
Company are sometimes referred to herein as a
Party
and collectively as the
Parties.
WITNESSETH:
A. The Boards of Directors of Parent, Merger Sub and the
Company each deem it advisable that Parent acquire the Company
upon the terms and subject to the conditions provided for in
this Agreement.
B. In furtherance thereof, it is proposed that the
acquisition be accomplished by means of the merger of Merger Sub
with and into the Company (the
Merger
), with
the Company continuing as the surviving corporation in the
Merger, as a result of which each issued and outstanding share
of common stock, par value $0.01 per share (the
Common
Stock
), of the Company (the shares of Common Stock
being hereinafter referred to as the
Shares
)
will automatically be converted into the right to receive $12.50
per Share in cash, without interest, upon the terms and subject
to the conditions set forth in this Agreement.
C. The Board of Directors of the Company (the
Board
) has unanimously approved (with any
interested directors abstaining from voting) this Agreement and
the Merger, and such approval is sufficient to render
inapplicable to this Agreement, the Merger and the other
transactions and agreements contemplated by this Agreement
(including the Voting Agreements) the restriction against the
parties hereto and thereto engaging in any business combination
as set forth in Section 203 of the General Corporation Law
of the State of Delaware (the
DGCL
) and the
Board has determined that this Agreement, the Merger and the
other transactions contemplated hereby are advisable and in the
best interests of the Company and its stockholders, and has
resolved to recommend that its stockholders adopt this Agreement.
D. The Board of Directors of Parent (on its own behalf and
as the sole stockholder of Merger Sub) and the respective Boards
of Directors of Merger Sub and the Company have each approved
this Agreement and the Merger.
E. Concurrently with the execution and delivery of this
Agreement, as a condition and inducement to Parents and
Merger Subs willingness to enter into this Agreement,
Parent and Merger Sub are entering into Voting Agreements with
certain stockholders of the Company (each, a
Voting
Agreement
) pursuant to which each of those
stockholders has agreed, upon the terms and subject to the
conditions set forth therein, to vote all Shares beneficially
owned by such stockholders in accordance with the terms of such
Voting Agreements.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement
and intending to be legally bound hereby, the Parties hereto
agree as follows:
ARTICLE I
TERMS OF
THE MERGER
1.1
The Merger
.
Upon the terms and subject to the conditions of this Agreement,
the Merger shall be consummated in accordance with the DGCL. At
the Effective Time, upon the terms and subject to the conditions
of this Agreement, Merger Sub shall be merged with and into the
Company in accordance with the DGCL and the separate existence
of Merger Sub shall thereupon cease, and the Company, as the
surviving corporation in the Merger (the
Surviving
Corporation
), shall continue its corporate existence
under the laws of the State of Delaware as a wholly owned
subsidiary of Parent. It is intended that the Merger shall
constitute a taxable purchase of the Shares by Parent for
foreign, federal, state and local tax purposes.
A-1
1.2
The Closing; Effective Time; Effect
.
(a) Subject to the satisfaction or, if permissible, waiver
by the Party entitled to the benefit thereof, of the conditions
set forth in Article VI hereof (other than those conditions
that by their nature are to be satisfied at the Closing, but
subject to the fulfillment or waiver of those conditions at the
Closing), the closing of the Merger (the
Closing
) shall take place at the offices of
Olshan Grundman Frome Rosenzweig & Wolosky LLP, Park
Avenue Tower, 65 East 55th Street, New York, New York
10022, at 10:00 a.m. local time on a date to be specified
by the Parties, which shall be no later than the third Business
Day after the date that all of the closing conditions set forth
in Article VI have been satisfied or waived (if waivable) ,
unless another time, date or place is agreed upon in writing by
the Parties hereto. The date on which the Closing occurs is
herein referred to as the
Closing Date.
(b) Subject to the terms and conditions hereof,
concurrently with the Closing, the Parties shall file with the
Secretary of State of the State of Delaware (the
Secretary of State
) a certificate of merger
in accordance with the DGCL (the
Certificate of
Merger
) executed in accordance with the relevant
provisions of the DGCL and shall make all other filings or
recordings required under the DGCL in order to effect the
Merger. The Merger shall become effective upon the filing of the
Certificate of Merger or at such other time as is agreed by the
Parties hereto and specified in the Certificate of Merger. The
time when the Merger shall become effective is herein referred
to as the
Effective Time.
(c) From and after the Effective Time, the Merger shall
have the effects set forth in Section 259 of the DGCL and,
except as otherwise expressly set forth herein, the Surviving
Corporation shall possess all properties, rights, privileges,
powers and franchises of the Company and Merger Sub, and all of
the claims, obligations, liabilities, debts and duties of the
Company and Merger Sub shall become the claims, obligations,
liabilities, debts and duties of the Surviving Corporation.
1.3
Conversion of Securities
.
At the Effective Time, by virtue of the Merger and without any
action on the part of the Company, Merger Sub or the holders of
any securities of Merger Sub or the Company:
(a) Each Share that is owned by Parent, Merger Sub or any
direct or indirect wholly owned subsidiary of Parent, or that is
owned by the Company as treasury stock, in each case immediately
before the Effective Time, shall automatically be canceled and
retired and shall cease to exist, and no consideration or
payment shall be delivered in exchange therefor.
(A) Each Share issued and outstanding immediately prior to
the Effective Time (other than Shares to be canceled in
accordance with Section 1.3(a) hereof and Dissenting Shares
(as defined in Section 1.6)) shall automatically be
converted into the right to receive $12.50 in cash (the
Merger Consideration
), payable, without
interest, to the holder of such Share upon surrender, in the
manner provided in Section 1.4 hereof, of the certificate
that formerly evidenced such Share. All such Shares shall, by
virtue of the Merger and without any action on the part of the
holders thereof, be automatically cancelled and shall cease to
exist, and each holder of a certificate representing any such
Shares shall cease to have any rights with respect thereto,
except the right to receive the Merger Consideration, without
interest thereon, upon the surrender of such certificate in
accordance with Section 1.4 hereof.
(b) Each issued and outstanding share of common stock, par
value $0.01 per share, of Merger Sub shall be converted into one
validly issued, fully paid and non-assessable share of common
stock, par value $0.01 per share, of the Surviving Corporation,
and all such shares shall constitute the only outstanding shares
of capital stock of the Surviving Corporation following the
Effective Time. From and after the Effective Time, any
certificate representing the common stock of Merger Sub shall be
deemed for all purposes to represent that number of shares of
common stock of the Surviving Corporation into which such shares
of common stock of Merger Sub represented thereby were converted
in accordance with the immediately preceding sentence.
1.4
Tender of and Payment for Certificates
.
(a)
Paying Agent; Deposit of Exchange
Fund
.
Prior to the Effective Time, Parent
shall designate a paying agent (the
Paying
Agent
) reasonably acceptable to the Company for the
payment of the Merger Consideration. No later than the Effective
Time, Parent shall deposit, or cause to be deposited with the
Paying Agent for the benefit
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of holders of Shares and Company Options, cash constituting an
amount equal to (i) the sum of the Total Merger
Consideration plus (ii) the Total Cash Amount (as defined
in Section 1.5) (such sum, the
Aggregate
Consideration,
and such Aggregate Consideration as
deposited with the Paying Agent, the
Exchange
Fund
). The Paying Agent shall cause the Exchange Fund
to be (i) held for the benefit of the holders of Shares and
Company Options and (ii) applied promptly to making the
payments pursuant to Section 1.3(b) hereof. Such aggregate
Merger Consideration shall be invested by the Paying Agent as
directed by Parent. For purposes of this Agreement,
Total Merger Consideration
means the product
of (x) the number of Shares issued and outstanding (other
than those shares retired pursuant to Section 1.3(a) hereof
and Dissenting Shares) immediately prior to the Effective Time
multiplied by (y) the Merger Consideration.
(b)
Exchange Procedures
.
Promptly
after the Effective Time, Parent and the Surviving Corporation
shall cause the Paying Agent to mail (i) to each holder of
record, as of the Effective Time, of a certificate or
certificates, which immediately prior to the Effective Time
represented outstanding Shares (the
Certificates
), which Shares were converted
pursuant to Section 1.3(b) hereof into the right to receive
the Merger Consideration, (x) a letter of transmittal
(which shall specify that delivery shall be effected, and risk
of loss and title to the Shares shall pass, only upon proper
delivery of the Certificates (or affidavits of loss in lieu
thereof) to the Paying Agent and shall be in such form and have
such other provisions as Parent may reasonably specify) and
(y) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration and
(ii) to each holder of a Company Option, a check in an
amount due and payable to such holder pursuant to
Section 1.5 hereof in respect of such Company Option. Upon
surrender of a Certificate (or affidavit of loss in lieu
thereof) for cancellation to the Paying Agent, together with a
letter of transmittal, properly completed and duly executed in
accordance with the instructions thereto, and such other
documents as may be reasonably required pursuant to such
instructions, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for
each Share formerly represented by such Certificate, to be
mailed promptly following the Paying Agents receipt of
such Certificate (or affidavit of loss in lieu thereof), and the
Certificate so surrendered shall forthwith be canceled. No
interest shall be paid or accrued for the benefit of holders of
the Certificates on the Merger Consideration payable upon the
surrender of the Certificates, or in respect of Company Options.
If payment of the Merger Consideration is to be made to a Person
(as defined in Section 8.7) other than the Person in whose
name the surrendered Certificate is registered, it shall be a
condition of payment that the Certificate so surrendered shall
be properly endorsed or shall be otherwise in proper form for
transfer and that the Person requesting such payment shall have
paid all transfer and other Taxes (as defined in
Section 2.17) required by reason of the issuance to a
Person other than the registered holder of the Certificate
surrendered or such Person shall have established to the
satisfaction of the Surviving Corporation that such Tax either
has been paid or is not applicable. Until surrendered as
contemplated by this Section 1.4, each Certificate shall be
deemed at all times after the Effective Time to represent only
the right to receive the Merger Consideration for each Share in
cash as contemplated by Section 1.3(b) hereof, without
interest thereon. The Paying Agent shall accept such
Certificates (or affidavits of loss in lieu thereof) upon
compliance with such reasonable terms and conditions as the
Paying Agent may impose to effect an orderly exchange thereof in
accordance with normal exchange practices.
(c)
Transfer Books; No Further Ownership Rights in
the Shares
.
At the Effective Time, the stock
transfer books of the Company shall be closed, and thereafter
there shall be no further registration of transfers of Shares on
the records of the Company or the Surviving Corporation. From
and after the Effective Time, the holders of Certificates
evidencing ownership of the Shares outstanding immediately prior
to the Effective Time shall cease to have any rights with
respect to such Shares, except as otherwise provided for herein
or by applicable Law (as defined in Section 2.6). If, after
the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled against
delivery of the Merger Consideration, as provided for in
Section 1.3(b) hereof, for each Share formerly represented
by such Certificates.
(d)
Termination of Exchange Fund; No
Liability
.
Any portion of the Exchange Fund
(including any interest received with respect thereto) that
remains undistributed to the holders of Shares or Company
Options following the six-month anniversary of the Effective
Time shall be delivered to the Surviving Corporation upon
demand, and any holders who have not theretofore complied with
this Article I shall thereafter be entitled to look only to
the Surviving Corporation (subject to abandoned property,
escheat or other similar Laws) only as general creditors thereof
with respect to the Merger Consideration, payable upon due
surrender of their Certificates without any
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interest thereon. Notwithstanding the foregoing, none of Parent,
Merger Sub, the Company, the Surviving Corporation or the Paying
Agent shall be liable to any Person in respect of any cash held
in the Exchange Fund delivered to a public official pursuant to
any applicable abandoned property, escheat or similar Law. If
any Certificates or Company Options shall not have been
surrendered prior to one year after the Effective Time (or
immediately prior to such earlier date on which any cash in
respect of such Certificate or Company Option would otherwise
escheat to or become the property of any Governmental
Authority), any such cash in respect of such Certificate or
Company Option shall, to the extent permitted by applicable Law,
become the property of Parent, free and clear of all claims or
interest of any Person previously entitled thereto.
(e)
Lost, Stolen or Destroyed
Certificates
.
In the event any Certificate(s)
shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such
Certificate(s) to be lost, stolen or destroyed and, if required
by Parent, the posting by such Person of a bond in such sum as
Parent may reasonably direct as indemnity against any claim that
may be made against any Party hereto or the Surviving
Corporation with respect to such Certificate(s), the Paying
Agent will disburse the Merger Consideration pursuant to
Section 1.3(b) payable in respect of the Shares represented
by such lost, stolen or destroyed Certificate(s).
(f)
Withholding Taxes
.
Parent and
the Surviving Corporation shall be entitled to deduct and
withhold, or cause the Paying Agent to deduct and withhold, from
the Merger Consideration payable to a holder of Shares pursuant
to the Merger any such amounts as are required under the
Internal Revenue Code of 1986, as amended (the
Code
), or any applicable provision of state,
local or foreign Tax Law. To the extent that amounts are so
withheld by Parent or the Surviving Corporation, or caused to be
withheld by the Paying Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid
to the holder of the Shares in respect of which such deduction
and withholding was made by Parent, the Surviving Corporation or
the Paying Agent, as the case may be.
1.5
Options
.
(a) As of the Effective Time, all outstanding options to
purchase Shares (the
Company Options
) granted
under the Companys 1996 Stock Option Plan, Amended and
Restated Directors Stock Option Plan, 2005 Stock Option
Plan or those certain stock option agreements between the
Company and those individuals listed on
Section 1.5(a)
of the Company Disclosure Schedule
(collectively, the
Company Option Plans
),
whether or not then vested, subject to the terms and conditions
set forth below in this Section 1.5(a), shall, by virtue of
the Merger and without any action on the part of any holder of
any Company Option, become fully vested and converted into the
right to receive, as promptly as reasonably practicable
following the Effective Time, the net amount of (A) the
product of (i) the excess, if any, of the Merger
Consideration over the exercise price per share of such Company
Option at the Effective Time, multiplied by (ii) the number
of shares subject to such Company Option, less (B) any
applicable withholdings for Taxes (such net amount, the
Cash Amount,
and the aggregate of all such
Cash Amounts, the
Total Cash Amount
). If the
exercise price per share of any Company Option equals or exceeds
the Merger Consideration, the Cash Amount therefor shall be
zero. Notwithstanding the foregoing, with respect to any Person
subject to Section 16(a) of the Securities Exchange Act of
1934, as amended (together with the rules and regulations
promulgated thereunder, the
Exchange Act
),
the Cash Amount, if any, to be paid to such Person in accordance
with this Section 1.5(a) shall be paid as soon as
practicable after the payment can be made without liability to
such Person under Section 16(b) of the Exchange Act.
(b) As of the Effective Time, except as provided in this
Section 1.5, all rights under any Company Option and any
provision of the Company Option Plans and any other plan,
program or arrangement providing for the issuance or grant of
any other interest in respect of the capital stock of the
Company shall be canceled, shall no longer be outstanding and
shall automatically cease to exist, and each holder of a Company
Option shall cease to have any rights with respect thereto,
except the right to receive a Cash Payment, if applicable. The
Company shall take all such actions as are necessary to ensure
that, as of and after the Effective Time, except as provided in
this Section 1.5, no Person shall have any right under the
Company Option Plans or any other plan, program, agreement or
arrangement with respect to securities of the Company, the
Surviving Corporation or any subsidiary thereof.
(c) At or before the Effective Time, the Company shall
cause to be effected any necessary amendments to the Company
Option Plans and any other resolutions, consents or notices, in
such form reasonably acceptable to Parent, required under the
Company Option Plans or any Company Options to give effect to
the foregoing provisions of this Section 1.5.
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1.6
Dissenting Shares
.
Notwithstanding any provision of this Agreement to the contrary,
to the extent that holders of Shares are entitled to appraisal
rights under Section 262 of the DGCL, Shares issued and
outstanding immediately prior to the Effective Time with respect
to which the holder thereof has properly exercised and perfected
the right to dissent from the Merger and to be paid fair value
in accordance with Section 262 of the DGCL and as to which,
as of the Effective Time, the holder thereof has not failed to
timely perfect or shall have not effectively withdrawn or lost
dissenters rights under Section 262 of the DGCL (the
Dissenting Shares
), shall not be converted
into or represent a right to receive the Merger Consideration
into which Shares are converted pursuant to Section 1.3(b)
hereof, but the holder thereof shall be entitled only to such
rights as are granted by the DGCL. Notwithstanding the
immediately preceding sentence, if any holder of Shares who
demands dissenters rights with respect to its Shares under
the DGCL effectively withdraws or loses (through failure to
perfect or otherwise) its dissenters rights, then as of
the Effective Time or the occurrence of such event, whichever
later occurs, such holders Shares shall thereupon be
deemed to have been converted as of the Effective Time into the
right to receive the Merger Consideration as provided in
Section 1.3(b) hereof, without interest thereon, upon
surrender of the Certificate or Certificates formerly
representing such Shares, and such Shares shall no longer be
Dissenting Shares. At the Effective Time, any holder of
Dissenting Shares shall cease to have any rights with respect
thereto, except the rights provided in Section 262 of
Delaware Law and as provided in this Section 1.6. The
Company shall give Parent (i) prompt written notice of any
notice of intent to demand fair value for any Shares,
withdrawals of such notices, and any other instruments served
pursuant to the DGCL and received by the Company, and
(ii) the opportunity to direct all negotiations and
proceedings with respect to demands for fair value of Shares
under the DGCL. The Company shall not, except with the prior
written consent of Parent, voluntarily make any payment with
respect to any demands for fair value of Shares or offer to
settle or settle any such demands.
1.7
Certificate of Incorporation and Bylaws
.
Subject to Section 5.3 hereof, at and after the Effective
Time and by virtue of the Merger, and until the same have been
duly amended, (i) the Certificate of Incorporation (as
defined in Section 2.1) shall be amended and restated in
its entirety to read as the certificate of incorporation of
Merger Sub in effect immediately prior to the Effective Time,
except in each case that references to Merger Subs name
shall be replaced by references to AmCOMP
Incorporated, and, as so amended, shall be the certificate
of incorporation of the Surviving Corporation and (ii) the
bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation.
1.8
Directors and Officers
.
At and after the Effective Time, the directors of Merger Sub
immediately prior to the Effective Time shall be the directors
of the Surviving Corporation, and the individuals set forth on
Schedule 1.8 of the Parent Disclosure Schedule (as defined
in Article III hereof) shall be the officers of the
Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualify. Each of
the Parties hereto shall take all necessary action to effectuate
the forgoing sentence. If, at the Effective Time, a vacancy
shall exist on the Board of Directors or in any office of the
Surviving Corporation, such vacancy may thereafter be filled in
the manner provided by Law.
1.9
Other Effects of the Merger
.
The Merger shall have all further effects as specified in the
applicable provisions of the DGCL.
1.10
Additional Actions
.
If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any deeds, bills
of sale, assignments, assurances or any other actions or things
are necessary or desirable to vest, perfect or confirm of record
or otherwise in the Surviving Corporation its right, title or
interest in, to or under any of the rights, properties or assets
of Merger Sub or the Company or otherwise carry out this
Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the
name and on behalf of Merger Sub or the Company, all such deeds,
bills of sale, assignments and assurances and to take and do, in
the name and on behalf of Merger Sub or the Company, all such
other actions and things as may be necessary or desirable to
vest, perfect or
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confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation
or otherwise to carry out this Agreement.
ARTICLE II
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The following representations and warranties by the Company to
Parent and Merger Sub are qualified by the Company Disclosure
Schedule, which sets forth certain disclosures concerning the
Company, its subsidiaries (each a
Company
Subsidiary
and collectively, the
Company
Subsidiaries
) and its business (the
Company
Disclosure Schedule
) (
provided
that any fact or
item disclosed with respect to one representation or warranty
shall be deemed to be disclosed with respect to each other
representation or warranty, but only to the extent that the
applicability of such fact or item with respect to such other
representation or warranty can reasonably be inferred from the
disclosure with respect to such fact or item contained in the
Company Disclosure Schedule). The Company hereby represents and
warrants to Parent and Merger Sub as follows:
2.1
Due Organization and Good Standing
.
Each of the Company and the Company Subsidiaries is a
corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its organization
and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as
now being conducted. Each of the Company and the Company
Subsidiaries is duly qualified or licensed and in good standing
to do business in each jurisdiction in which the character of
the property owned, leased or operated by it or the nature of
the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not reasonably
be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. The Company has heretofore made
available to Parent accurate and complete copies of the
Companys Amended and Restated Certificate of Incorporation
(the
Certificate of Incorporation
) and its
Amended and Restated Bylaws (the
Bylaws
) and
the equivalent organizational documents of each of the Company
Subsidiaries, each as currently in effect. None of the Company
or any Company Subsidiary is in violation of any provision of
the Certificate of Incorporation, the Bylaws or its equivalent
organizational documents.
For purposes of this Agreement, the term
Company
Material Adverse Effect
shall mean any occurrence,
state of facts, change, event, effect or circumstance that,
individually or in the aggregate, (a) has, or would
reasonably be expected to have, a material adverse effect on the
assets, liabilities, business, results of operations or
financial condition of the Company and the Company Subsidiaries
taken as a whole, other than any occurrence, state of facts,
change, event, effect or circumstance to the extent resulting
from (i) changes in general economic conditions or
financial, banking or securities markets in general;
(ii) changes in the workers compensation insurance
industry generally; (iii) any changes in statutes, rules,
or regulations applicable to the Company or any Company
Subsidiary or any of their respective properties or assets;
(iv) any outbreak or escalation of hostilities or war
(whether declared or not declared) or any act of terrorism
whether or not pursuant to the declaration of a national
emergency or war; (v) the announcement of this Agreement
and the transactions contemplated hereby (including the Merger);
(vi) changes in United States of America generally accepted
accounting principles
(GAAP)
or statutory
accounting principles
(SAP)
or any
authoritative interpretation thereof promulgated after the date
hereof by the Financial Accounting Standards Board or the
National Association of Insurance Commissioners, respectively;
(vii) the availability or cost of financing to Parent or
Merger Sub (for the avoidance of doubt, the exception in this
clause (vii) shall not prevent or otherwise affect a
determination that the underlying cause of such unavailability
or cost constitutes a Company Material Adverse Effect); or
(ix) changes in loss reserves occasioned by the report of
the Companys independent actuary as at December 31,
2007, if such changes, when aggregated with other changes in
loss reserves for the fiscal year 2007, are not less favorable
than changes in loss reserves for the fiscal year 2006, in the
aggregate;
provided
,
however
, that the exceptions
set forth in clauses (i), (ii), (iii) and (vi) shall
not be given effect to the extent that such occurrence, state of
facts, change, event, effect or circumstance has a
disproportionate adverse effect on the Company and the Company
Subsidiaries taken as a whole as compared to the effect on other
Persons operating in the industry generally, or (b) would,
or would reasonably be expected to, prevent or materially delay
or impair the ability of the Company or the Company Subsidiaries
to consummate the Merger and the other transactions contemplated
by this Agreement.
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2.2
Capitalization
.
(a) The authorized capital stock of the Company consists of
45,000,000 shares of Common Stock and 5,000,000 shares
of preferred stock, par value $.01 per share (the
Preferred Stock
and, together with the Common
Stock, the
Company Capital Stock
). As of the
date hereof, (i) 15,290,181 shares of Common Stock
were issued and outstanding, (ii) 613,895 shares of
Common Stock were held in treasury, (iii) no shares of
Common Stock were held by any Company Subsidiary and
(iv) no shares of Preferred Stock are issued or
outstanding. As of the date hereof, there were
386,010 shares of Common Stock authorized and reserved for
issuance pursuant to outstanding Company Options. All of the
outstanding shares of Company Capital Stock are, and all shares
of Company Capital Stock that may be issued pursuant to the
exercise of outstanding Company Options will be, when issued in
accordance with the respective terms thereof, duly authorized,
validly issued, fully paid and non-assessable and not subject to
any preemptive or similar rights. None of the outstanding
securities of the Company has been issued in violation of any
foreign, federal or state securities Laws. Except as set forth
above and in Section 2.2(f) below, no shares of Company
Capital Stock, or other equity or voting interests in the
Company, or options, warrants or other rights to acquire any
such stock or securities were issued, reserved for issuance or
outstanding. Since February 9, 2006, the Company has not
issued any Common Stock other than pursuant to the exercise of
Company Options outstanding on such date, has not granted any
restricted stock, warrants or other rights to purchase Company
Capital Stock or entered into any other agreements or
commitments to issue any Common Stock and has not split,
combined or reclassified any shares of Company Capital Stock.
(b) Except as set forth above or as set forth in
Section 2.2(b)
of the Company Disclosure Schedule,
(i) the Company directly or indirectly owns all of the
capital stock of, or other equity interests in, the Company
Subsidiaries, (ii) there are no (x) outstanding
options, warrants, puts, calls, convertible securities,
preemptive or similar rights, (y) bonds, debentures, notes
or other indebtedness having general voting rights or that are
convertible or exchangeable into securities having such rights
(collectively,
Voting Debt
) or
(z) subscriptions or other rights, agreements,
arrangements, contracts or commitments of any character,
relating to the issued or unissued capital stock of, or other
equity interests in, the Company or any of the Company
Subsidiaries or obligating the Company or any of the Company
Subsidiaries to issue, transfer, deliver or sell or cause to be
issued, transferred, delivered, sold or repurchased any options
or shares of capital stock or Voting Debt of, or other equity
interest in, the Company or any of the Company Subsidiaries or
securities convertible into or exchangeable for such shares or
equity interests, or obligating the Company or any of the
Company Subsidiaries to grant, extend or enter into any such
option, warrant, call, subscription or other right, agreement,
arrangement or commitment and (iii) there are no
outstanding obligations of the Company or any of the Company
Subsidiaries to repurchase, redeem or otherwise acquire any
Company Capital Stock, or other capital stock of, or equity
interests in, the Company or any of the Company Subsidiaries or
to provide funds to make any investment (in the form of a loan,
capital contribution or otherwise) in any other entity.
(c) There are no stockholders agreements, voting trusts or
other agreements or understandings to which the Company or any
Company Subsidiary is a party with respect to the voting of the
Company Capital Stock or the capital stock or equity interests
of any Company Subsidiary.
(d) Following the Effective Time, no holder of Company
Options will have any right to receive shares of common stock of
the Surviving Corporation upon exercise of Company Options.
(e) Except as disclosed in
Section 2.2(e)
of
the Company Disclosure Schedule, no Indebtedness of the Company
or any of the Company Subsidiaries contains any restriction upon
(i) the prepayment of any of such Indebtedness,
(ii) the incurrence of Indebtedness by the Company or any
of the Company Subsidiaries, or (iii) the ability of the
Company or any of the Company Subsidiaries to grant any
Encumbrance (as defined in Section 2.6) on its properties
or assets. As used in this Agreement,
Indebtedness
means (A) all indebtedness
for borrowed money or for the deferred purchase price of
property or services (other than current trade liabilities
incurred in the ordinary course of business and payable in
accordance with customary practices), (B) any other
indebtedness that is evidenced by a note, bond, debenture,
credit agreement or similar instrument, (C) all obligations
under financing leases, (D) all obligations in respect of
acceptances issued or created, (E) all liabilities secured
by an Encumbrance on any property and (F) all guarantee
obligations.
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(f)
Section 2.2(f)
of the Company Disclosure
Schedule lists (i) all Company Options outstanding as of
the date hereof, (ii) the name of the holder of each
Company Option, (iii) the number of shares of Common Stock
subject to such Company Options, (iv) the date of grant of
such Company Options, (v) the exercise price of such
Company Options, (vi) the expiration date of such Company
Options and the vesting schedule of such Company Options,
(vii) whether the holder is an employee of the Company,
(viii) the Company Stock Plan under which such Company
Option was granted, (ix) whether such Company Option is an
incentive stock option (as defined in
Section 422 of the Code) or a non-qualified stock option,
(x) the extent to which such Company Option was vested and
exercisable as of the date hereof, and (xi) whether such
Company Option was granted with a per share exercise price lower
than the fair market value of one Share on the date of grant as
determined in good faith by the administrator of the applicable
Company Stock Plan (as determined pursuant to the terms of each
such plan).
(g) No agreement or arrangement requires consent or
approval from the holder of any Company Option to effectuate the
terms of this Agreement.
(h) Since February 9, 2006, the Company has not
declared or paid any dividend or distribution in respect of the
Company Capital Stock and, other than as set forth on
Section 2.2(h)
of the Company Disclosure Schedule,
has not repurchased, redeemed or otherwise acquired any Company
Capital Stock, and the Board has not authorized any of the
foregoing.
2.3
Subsidiaries
.
(a)
Section 2.3(a)
of the Company Disclosure
Schedule contains a true, complete and correct list of all
Company Subsidiaries and their respective jurisdictions of
organization. Each Company Subsidiary is wholly owned, directly
or indirectly, by the Company, except as set forth in
Section 2.3(a)
of the Company Disclosure Schedule.
All of the capital stock and other equity interests of the
Company Subsidiaries are owned, directly or indirectly, by the
Company free and clear of any Encumbrance with respect thereto,
except as set forth in
Section 2.3(a)
of the Company
Disclosure Schedule. All of the outstanding shares of capital
stock or other equity interests in each of the Company
Subsidiaries are duly authorized, validly issued, fully paid and
non-assessable and were issued free of preemptive rights and in
compliance with applicable Laws. No equity securities or other
equity interests of any of the Company Subsidiaries are or may
become required to be issued or purchased by reason of any
options, warrants, rights to subscribe to, puts, calls or
commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for,
shares of any capital stock of, or other equity interests in,
any Company Subsidiary, and there are no contracts, commitments,
understandings or arrangements by which any Company Subsidiary
is bound to issue additional shares of its capital stock or
other equity interests, or options, warrants or rights to
purchase or acquire any additional shares of its capital stock
or other equity interests or securities convertible into or
exchangeable for such shares or interests. Neither the Company
nor any Company Subsidiary owns any shares of capital stock or
other equity or voting interests in (including any securities
exercisable or exchangeable for or convertible into capital
stock or other equity or voting interests in) any other Person,
other than capital stock of the Company Subsidiaries owned by
the Company or another Company Subsidiary.
(b) The Company conducts all of its insurance operations
through certain of the Company Subsidiaries.
Section 2.3(b)
of the Company Disclosure Schedule
lists the jurisdiction of domicile of each Company Subsidiary
conducting insurance operations and all jurisdictions in which
each such Company Subsidiary is licensed to write insurance
business. Neither the Company nor any Company Subsidiary is or
has been since January 1, 2005 commercially
domiciled in any jurisdiction other than its jurisdiction
of organization or is or since January 1, 2005 otherwise
has been treated as domiciled in a jurisdiction other than its
jurisdiction of organization. Except as set forth in
Section 2.3(b)
of the Company Disclosure Schedule,
each of the Company Subsidiaries conducting insurance operations
is (i) duly licensed or authorized as an insurance company
in its state of organization, (ii) duly licensed or
authorized as an insurance company in each other jurisdiction
where it is required to be so licensed or authorized and
(iii) duly authorized in its jurisdiction of incorporation
and each other applicable jurisdiction to write each line of
business reported as being written in the Company SAP Statements
(as defined in Section 2.7). All of the Company Permits of
such Company Subsidiaries conducting insurance operations are in
full force and effect and there is no proceeding or, to the
knowledge of the Company, investigation to which the Company or
any Company Subsidiary is subject before a Governmental
Authority that is pending or, to the knowledge of the
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Company, threatened that would reasonably be expected to lead to
the revocation, amendment, failure to renew, limitation,
suspension or restriction of any such Company Permits.
2.4
Authorization; Binding Agreement
.
The Company has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby, including the Merger, have been duly and
validly authorized and approved by the Board. The Board has
taken all action necessary to render inapplicable to this
Agreement, the Merger, the Voting Agreements and the other
transactions contemplated by this Agreement the provisions of
Section 203 of the DGCL such that said provisions will not
apply to this Agreement, the Merger, the Voting Agreements and
the other transactions contemplated by this Agreement and such
action is effective and in force, and no other corporate
proceedings on the part of the Company are necessary to
authorize the execution and delivery of this Agreement or to
consummate the transactions contemplated hereby, other than
receipt of the Company Stockholder Approval (as defined in
Section 2.20). This Agreement has been duly and validly
executed and delivered by the Company and (assuming the due
authorization, execution and delivery hereof by Parent and
Merger Sub) constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance
with its terms, except to the extent that enforceability thereof
may be limited by applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws of general
application affecting the enforcement of creditors rights
generally, and the fact that equitable remedies or relief
(including, but not limited to, the remedy of specific
performance) are subject to the discretion of the court from
which such relief may be sought (collectively, the
Enforceability Exceptions
).
2.5
Governmental Approvals
.
No consent, approval, waiver, authorization or permit of, or
notice to or declaration or filing with (each, a
Consent
), any nation or government, any state
or other political subdivision thereof, any entity, authority or
body exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government,
including any governmental or regulatory authority, agency,
department, board, commission, administration or
instrumentality, any court, tribunal or arbitrator or any
self-regulatory organization (each, a
Governmental
Authority
) on the part of the Company or any of the
Company Subsidiaries is required to be obtained or made in
connection with the execution, delivery or performance by the
Company of this Agreement or the consummation by the Company of
the transactions contemplated hereby (including the Merger),
other than (i) the filing of the Certificate of Merger with
the Secretary of State in accordance with the DGCL,
(ii) such filings as may be required with the Securities
and Exchange Commission (the
SEC
), foreign
and state securities Laws administrators and The Nasdaq Stock
Market, (iii) such filings as may be required in any
jurisdiction where the Company or any of its subsidiaries is
qualified or authorized to do business as a foreign corporation
in order to maintain such qualification or authorization,
(iv) pursuant to the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the
HSR
Act
), and other Antitrust Laws, (v) those
consents, approvals, authorizations, waivers, permits, filings
or notices set forth in
Section 2.5
of the Company
Disclosure Schedule, and (vi) those Consents that, if not
obtained or given, would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect.
2.6
No Violations
.
The execution and delivery by the Company of this Agreement, the
consummation by the Company of the Merger and the other
transactions contemplated hereby, and compliance by the Company
with any of the provisions hereof, will not (i) conflict
with or violate any provision of the Certificate of
Incorporation or Bylaws or equivalent organizational documents
of the Company or any of the Company Subsidiaries,
(ii) except as set forth in
Section 2.6
of the
Company Disclosure Schedule, require any Consent under or result
in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation, amendment or acceleration)
under, any Company Material Contract (as defined in
Section 2.14) to which the Company or any of the Company
Subsidiaries is a party or by which the Companys or any of
the Company Subsidiaries assets are bound,
(iii) result (immediately or with the passage of time or
otherwise) in the creation or imposition of any liens, claims,
mortgages, pledges, security interests, equities, options,
assignments, hypothecations, preferences, priorities, deposit
arrangements, easements, proxies, voting trusts or charges of
any kind or
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restrictions (whether on voting, sale, transfer, disposition or
otherwise) or other encumbrances or restrictions of any nature
whatsoever, whether imposed by agreement, Law or equity, or any
conditional sale contract, title retention contract or other
contract to give or refrain from giving any of the foregoing
(the
Encumbrances
) upon any of the
properties, rights or assets of the Company or any of the
Company Subsidiaries or (iv) subject to obtaining the
Consents from Governmental Authorities referred to in
Section 2.5 hereof, conflict with, contravene or violate in
any respect any foreign, federal, state or local Order, statute,
law, rule, regulation, ordinance, writ, injunction, arbitration
award, directive, judgment, decree, principle of common law,
constitution, treaty or any interpretation thereof enacted,
promulgated, issued, enforced or entered by any Governmental
Authority (each, a
Law
and collectively, the
Laws
) to which the Company or any of the
Company Subsidiaries or any of their respective assets or
properties is subject.
2.7
SEC Filings; Company Financial Statements
.
(a) The Company has filed all forms, reports, schedules,
statements and other documents required to be filed or furnished
by the Company with the SEC since February 1, 2006 under
the Exchange Act or the Securities Act of 1933, as amended (the
Securities Act
), together with any
amendments, restatements or supplements thereto, and will file
all such forms, reports, schedules, statements and other
documents required to be filed subsequent to the date of this
Agreement. All such required forms, reports and documents
(including those that the Company may file subsequent to the
date hereof) are referred to herein as the
Company SEC
Reports.
At the time when filed (or if amended or
superseded by a subsequent filing prior to the date hereof then
on the date of such later filing), the Company SEC Reports, as
amended to date, (i) complied, and each of the Company SEC
Reports to be filed subsequent to the date hereof will comply,
in all material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, the Sarbanes-Oxley
Act of 2002 and the rules and regulations of the SEC thereunder
applicable to such Company SEC Reports and (ii) did not at
the time they were filed, and will not at the time they will be
filed, as the case may be, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, or will be made, as the case may be, not misleading.
(b) The consolidated financial statements (including, in
each case, any related notes thereto) contained in the Company
SEC Reports as amended to date (the
Company
Financials
) and in each Company SEC Report filed after
the date hereof until the Effective Time, (i) was or will
be prepared from, in accordance with, and in all material
respects accurately reflects or will reflect the Companys
books and records as of the times and for the periods referred
to therein, (ii) complied or will comply in all material
respects with the published rules and regulations of the SEC
with respect thereto, (iii) was or will be prepared in
accordance with GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes
thereto or, in the case of unaudited interim financial
statements, as may be permitted by the SEC with respect to
Quarterly Reports on
Form 10-Q
under the Exchange Act), and (iv) fairly present or will
fairly present in all material respects the consolidated
financial position of the Company as of the respective dates
thereof and the consolidated results of the Companys
operations and cash flows for the periods indicated, except that
the unaudited interim financial statements may not contain
footnotes and were, are or will be subject to normal and
recurring year-end adjustments. The consolidated balance sheet
of the Company contained in the Company SEC Report as of
September 30, 2007 (the
Balance Sheet
Date
) as filed with the SEC before the date hereof is
hereinafter referred to as the
Company Balance
Sheet.
(c) The Company has established and maintains disclosure
controls and procedures and internal controls over financial
reporting (as such terms are defined in paragraphs (e) and
(f), respectively, of
Rule 13a-15
under the Exchange Act) as required by
Rule 13a-15
under the Exchange Act. The Companys disclosure controls
and procedures are designed to ensure that information required
to be disclosed in the Companys periodic reports filed or
furnished under the Exchange Act are recorded, processed,
summarized and reported within the required time periods and
that all such information is accumulated and communicated to the
Companys management as appropriate to allow timely
decisions regarding required disclosure and to make the
certifications required pursuant to Sections 302 and 906 of
the Sarbanes-Oxley Act of 2002. To the Companys knowledge
(as defined in Section 8.7), the Company has disclosed,
based on its most recent evaluation of internal controls over
financial reporting, to the Companys outside auditors and
the audit committee of the Board (i) all significant
deficiencies or material weaknesses in the design or operation
of the Companys internal controls over financial reporting
that are reasonably likely to adversely affect the
Companys ability to record, process, summarize and report
financial
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information and (ii) any fraud, whether or not material,
that involves management or other employees who have a
significant role in the Companys internal controls over
financial reporting.
(d) Except as set forth in
Section 2.7(d)
of
the Company Disclosure Schedule, since February 9, 2006,
(i) none of the Company, any Company Subsidiary, or any
director, officer, auditor or accountant of the Company or any
Company Subsidiary or any employee of the Company or Company
Subsidiary whose position includes monitoring the Companys
audit committee complaint reporting procedures has received any
complaint, allegation, assertion or claim, whether or not in
writing, regarding the accounting or auditing practices,
procedures, methodologies or methods of the Company or any
Company Subsidiary or their respective internal accounting
controls, including any complaint, allegation, assertion or
claim that the Company or any Company Subsidiary has engaged in
questionable accounting or auditing practices, and (ii) no
attorney representing the Company or any Company Subsidiary,
whether or not employed by the Company or any Company
Subsidiary, has reported evidence of any violation of securities
Laws, breach of fiduciary duty or similar violation by the
Company or any of its officers, directors, employees or agents
to the Board or any committee thereof or to any director or
executive officer of the Company.
(e) As used herein, the term
Company SAP
Statements
means the statutory statements of each of
the Company Subsidiaries as filed with the Florida Office of
Insurance Regulation for the years ended December 31, 2005
and December 31, 2006 and the quarterly period ended
September 30, 2007 and any such annual and quarterly
statutory statements filed subsequent to the date hereof. The
Company has made available to Parent true and complete copies of
the Company SAP Statements filed as of the date of this
Agreement with respect to the Company Subsidiaries required to
file such Company SAP Statements. Each of the Company
Subsidiaries has filed or submitted, or will file or submit, all
Company SAP Statements required to be filed with or submitted to
the Florida Office of Insurance Regulation on forms prescribed
or permitted by the Florida Office of Insurance Regulation. The
Company SAP Statements were, and any Company SAP Statements
filed after the date hereof will be, prepared in all material
respects in conformity with SAP consistently applied for the
periods covered thereby (except as may be indicated in the notes
thereto), and the Company SAP Statements present, and any
Company SAP Statements filed after the date hereof will present,
in all material respects the statutory financial position of
such Company Subsidiaries as at the respective dates thereof and
the results of operations of such Company Subsidiaries for the
respective periods then ended. The Company SAP Statements
complied, and the Company SAP Statements filed after the date
hereof will comply, in all material respects with all applicable
Laws when filed, and no deficiency has been asserted with
respect to any Company SAP Statements filed prior to the date
hereof by the Florida Office of Insurance Regulation or any
other Governmental Authority. The annual statutory balance
sheets and income statements included in the Company SAP
Statements as of the date hereof have been, where required by
applicable Law, audited by an independent accounting firm of
recognized national or international reputation, and the Company
has made available to Parent true and complete copies of all
audit opinions related thereto. Except as indicated therein, all
assets that are reflected as admitted assets on the Company SAP
Statements comply in all material respects with all applicable
Laws. There are no permitted practices utilized by the Company
or any Company Subsidiary in the preparation of the Company SAP
Statements.
(f) The policy reserves and other actuarial amounts carried
on the Company SAP Statements of each Company Subsidiary, as of
the respective dates of such Company SAP Statements,
(i) were in compliance in all material respects with the
requirements for reserves established by the Florida Office of
Insurance Regulation, (ii) have been computed in all
material respects in accordance with the requirements for
reserves established by the Florida Office of Insurance
Regulation, (iii) were determined in all material respects
in accordance with generally accepted actuarial principles in
effect at such time, consistently applied and prepared in
accordance with applicable SAP, (iv) were computed on the
basis of methodologies consistent in all material respects with
those used in computing the corresponding reserves in prior
fiscal years, except as otherwise noted in the Company SAP
Statements, (v) have been computed on the basis of
assumptions consistent with those used to compute the
corresponding items in such financial statements, (vi) were
fairly stated in all material respects in accordance with sound
actuarial principles, and (vii) include provisions for all
actuarial reserves and related items which ought to be
established in accordance with applicable Laws and in
accordance, in all material respects, with prudent insurance
practices generally followed in the insurance industry. To the
knowledge of the Company, there are no facts or circumstances
that could reasonably necessitate any material change in such
reserves above those reflected in the
A-11
Company SAP Statements (other than increases consistent with
past experience resulting from the ordinary course of business).
(g) Except (i) as disclosed in
Section 2.7(g)
of the Company Disclosure Schedule,
(ii) for assessments of residual or state mandated funds
and associations and (iii) workers compensation claims made
in the ordinary course of business under insurance policies
issued by the Company, no claim or assessment is pending or, to
the knowledge of the Company, threatened against any Company
Subsidiary.
2.8
Absence of Certain Changes
.
(a) Except as disclosed in
Section 2.8
of the
Company Disclosure Schedule, since the Balance Sheet Date, the
Company and the Company Subsidiaries have conducted their
respective businesses in the ordinary course of business
consistent with past practice and there has not occurred any
action that would constitute a breach of Section 4.1 if
such action were to occur or be taken after the date of this
Agreement.
(b) Since the Balance Sheet Date, there has not been any
fact, change, effect, occurrence, event, development or state of
circumstances that has had or would reasonably be expected to
have, individually or in the aggregate, a Company Material
Adverse Effect.
2.9
Absence of Undisclosed Liabilities
.
Except (a) as adequately reflected or reserved against in
the Company Balance Sheet, (b) for liabilities and
obligations incurred in the ordinary course of business
consistent with past practice since the Balance Sheet Date or
(c) as set forth on
Section 2.9
of the Company
Disclosure Schedule, neither the Company nor any of the Company
Subsidiaries has incurred any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, and
whether or not required by GAAP to be recognized, reflected or
disclosed on a consolidated balance sheet of the Company or in
the notes thereto.
2.10
Compliance with Laws
.
Neither the Company nor any of the Company Subsidiaries is in
conflict with, or in default or violation of, nor since
January 1, 2005 has it received any written notice of any
conflict with, or default or violation of, (A) any
applicable Law by which it or any property or asset of the
Company or any Company Subsidiary is bound or affected, or
(B) any contract (including any Company Material Contract),
agreement, lease, license, permit, franchise or other instrument
or obligation to which the Company or any Company Subsidiary is
a party or by which the Company or any Company Subsidiary or any
property, asset or right of the Company or any Company
Subsidiary is bound or affected, except, in each case, for any
such conflicts, defaults or violations that would not reasonably
be expected to be material to the Company or any of its
Subsidiaries. Notwithstanding the generality of the foregoing,
(x) each Company Subsidiary and, to the knowledge of the
Company, its agents, have marketed, sold and issued insurance
products in compliance in all material respects with all Laws
applicable to the business of such Company Subsidiary and in the
respective jurisdictions in which such products have been sold,
(y) since January 1, 2005, the Company and each
Company Subsidiary have given or made all required notices,
submissions, reports or other filings under applicable Law,
including insurance holding company statutes, and (z) all
contracts, agreements, arrangements and transactions in effect
between any Company Subsidiary and any affiliate are in
compliance in all material respects with the requirements of all
applicable insurance holding company statutes. In addition,
except as disclosed in
Section 2.10
of the Company
Disclosure Schedule, (i) there is no pending or, to the
knowledge of the Company, threatened proceeding or investigation
to which the Company or a Company Subsidiary is subject before
any Governmental Authority regarding whether any of the Company
Subsidiaries has violated, and none of the Company or any
Company Subsidiary has received written or, to the knowledge
(without the need for due inquiry) of the Company, oral (or
otherwise has any knowledge of any) notice since January 1,
2005, of any material violation of or noncompliance with, any
Law applicable to the Company or any Company Subsidiary, or
directing the Company or any Company Subsidiary to take any
remedial action with respect to such applicable Law or
otherwise, and no material deficiencies of the Company or any
Company Subsidiary have been asserted to the Company or any
Company Subsidiary in writing or, to the knowledge (without the
need for due inquiry) of the Company, orally, by any
Governmental Authority with respect to possible violations of,
any applicable Laws; and (ii) since January 1, 2005,
the Company and the Company Subsidiaries have filed all material
reports, statements, documents, registrations, filings or
submissions required to be filed with any insurance regulatory
authority or
A-12
Governmental Authority, and all such reports, registrations,
filings and submissions are in compliance (and complied at the
relevant time) with applicable Law and no material deficiencies
have been asserted by any such Governmental Authority since
January 1, 2005 with respect to any reports, statements,
documents, registrations, filings or submissions required to be
filed with respect to the Company or the Company Subsidiaries
with any Governmental Authority that have not been remedied.
Since January 1, 2005, the businesses of the Company and
each Company Subsidiary are and have been conducted in
compliance in all material respects with any applicable Laws.
2.11
Regulatory Agreements; Permits
.
(a) Except as disclosed in
Section 2.11
of the
Company Disclosure Schedule, there are no (1) written
agreements, consent agreements, memoranda of understanding,
commitment letters, cease and desist orders, or similar
undertakings binding on the Company Subsidiaries to which the
Company or any Company Subsidiary is a party, on the one hand,
and any Governmental Authority is a party or addressee, on the
other hand, (2) Orders or directives of or supervisory
letters from a Governmental Authority specifically with respect
to the Company or any Company Subsidiary, or
(3) resolutions or policies or procedures adopted by the
Company or a Company Subsidiary at the request of a Governmental
Authority, that (A) limit in any respect the ability of the
Company or any of the Company Subsidiaries to issue insurance
policies, (B) in any manner impose any requirements on the
Company or any of the Company Subsidiaries in respect of
risk-based capital requirements that add to or otherwise modify
in any respect the risk-based capital requirements imposed under
applicable Laws, (C) require the Company or any of its
affiliates to make capital contributions, purchase surplus notes
or make loans to a Company Subsidiary, or (D) in any manner
relate to the ability of the Company or any of the Company
Subsidiaries to pay dividends or otherwise restrict the conduct
of business of the Company or any of the Company Subsidiaries in
any respect.
(b) The Company and the Company Subsidiaries hold all
permits, licenses, franchises, grants, authorizations, consents,
exceptions, variances, exemptions, orders and other governmental
authorizations, certificates, consents and approvals necessary
to lawfully conduct their businesses as presently conducted and
contemplated to be conducted, and to own, lease and operate
their assets and properties (collectively, the
Company
Permits
), all of which are in full force and effect,
and no suspension or cancellation of any of the Company Permits
is pending or, to the knowledge of the Company, threatened,
except where the failure of any Company Permits to have been in
full force and effect, or the suspension or cancellation of any
of the Company Permits, would not reasonably be expected to
have, individually or in the aggregate, a Company Material
Adverse Effect. The Company and the Company Subsidiaries are not
in violation in any material respect of the terms of any Company
Permit.
(c) Except as disclosed in
Section 2.11(c)
of
the Company Disclosure Schedule, no investigation, review or
market conduct examination by any Governmental Authority with
respect to the Company or any Company Subsidiary is pending or,
to the knowledge of the Company, threatened, nor has any
Governmental Authority indicated an intention to conduct any
such investigation or review.
2.12
Litigation
.
Except as disclosed in Section 2.12 of the Company
Disclosure Schedule, there is no private or governmental action,
suit, proceeding, litigation, claim, arbitration or
investigation (each, an
Action
) pending
before any arbitrator, agency, court or tribunal, foreign or
domestic, or, to the knowledge of the Company, threatened
against the Company, any of the Company Subsidiaries or any of
their respective properties, rights or assets or any of their
respective officers or directors (in their capacities as such)
that would reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect. There is no
decree, directive, order, writ, judgment, stipulation,
determination, decision, award, injunction, temporary
restraining order, cease and desist order or other order by, or
any capital plan, supervisory agreement or memorandum of
understanding with any Governmental Authority (each, an
Order
) binding against the Company, any of
the Company Subsidiaries or any of their respective properties,
rights or assets or any of their respective officers or
directors (in their capacities as such) that would prohibit,
prevent, enjoin, restrict or materially alter or delay any of
the transactions contemplated by this Agreement (including the
Merger), or that would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect. The Company and the Company Subsidiaries are in material
compliance with all Orders, if any, set forth in
Section 2.12 of the Company Disclosure Schedule. Except as
disclosed in Section 2.12
A-13
of the Company Disclosure Schedule, there is no material Action
that the Company or any of the Company Subsidiaries has pending
against other parties.
2.13
Restrictions on Business Activities
.
There is no agreement or Order binding upon the Company or any
of the Company Subsidiaries that has or could reasonably be
expected to have the effect of prohibiting, preventing,
restricting or impairing in any respect any business practice of
the Company or any of the Company Subsidiaries, any acquisition
of property by the Company or any of the Company Subsidiaries,
the conduct of business by the Company or any of the Company
Subsidiaries, or restricting in any respect the ability of the
Company or any of the Company Subsidiaries from engaging in
business or from competing with other parties.
2.14
Material Contracts
.
(a)
Section 2.14
of the Company Disclosure
Schedule sets forth a list of, and the Company has made
available to Parent true, correct and complete copies of, each
written contract, agreement, commitment, arrangement, lease or
plan and each other instrument to which the Company or any
Company Subsidiary is a party or by which the Company or any
Company Subsidiary is bound as of the date hereof (each, a
Company Material Contract
) that:
(i) constitutes a material contract (as such
term is defined in Item 601(b)(10) of
Regulation S-K
of the SEC) or is described in the Company SAP Statements for
the year ended December 31, 2006;
(ii) contains covenants that materially limit the ability
of the Company (or which, following the consummation of the
Merger, could materially restrict the ability of the Surviving
Corporation or any of its affiliates) (A) to compete in any
line of business or with any Person or in any geographic area or
to sell, supply, price, develop or distribute any service,
product or asset, including any non-competition covenants,
exclusivity restrictions, rights of first refusal or
most-favored pricing clauses or (B) to purchase or acquire
an interest in any other entity, except, in each case, for any
such contract that may be canceled without any penalty or other
liability to the Company or any Company Subsidiary upon notice
of 60 days or less;
(iii) with respect to a joint venture, partnership, limited
liability or other similar agreement or arrangement relating to
the formation, creation, operation, management or control of any
partnership or joint venture that is material to the business of
the Company and the Company Subsidiaries, taken as a whole;
(iv) involves any exchange traded,
over-the-counter
or other swap, cap, floor, collar, futures contract, forward
contract, option or other derivative financial instrument or
contract, based on any commodity, security, instrument, asset,
rate or index of any kind or nature whatsoever, whether tangible
or intangible, including currencies, interest rates, foreign
currency and indices;
(v) relates to indebtedness (whether incurred, assumed,
guaranteed or secured by any asset) having an outstanding
principal amount in excess of $1.0 million;
(vi) was entered into after January 1, 2005 or has not
yet been consummated, and involves the acquisition or
disposition, directly or indirectly (by merger or otherwise), of
assets or capital stock or other equity interests of another
Person;
(vii) by its terms calls for aggregate payments by the
Company and the Company Subsidiaries under such contract of more
than $250,000 per year;
(viii) with respect to any material acquisition, pursuant
to which the Company or any Company Subsidiary has (A) any
continuing indemnification obligations or (B) any
earn-out or other contingent payment obligations;
(ix) involves any directors or executive officers of the
Company that cannot be cancelled by the Company (or the
applicable Company Subsidiary) within 60 days notice
without liability, penalty or premium;
(x) obligates the Company or any of its subsidiaries to
provide indemnification or a guarantee in excess of $100,000;
A-14
(xi) obligates the Company to make any capital commitment
or expenditure (including pursuant to any joint venture);
(xii) relates to the development, ownership, licensing or
use of any Intellectual Property material to the business of the
Company or any of its subsidiaries, other than shrink
wrap, click wrap, and off the
shelf software agreements and other agreements for
software commercially available on reasonable terms to the
public generally with license, maintenance, support and other
fees of less than $50,000 per year (collectively,
Off-the-Shelf
Software Agreements
); or
(xiii) provides for any confidentiality or standstill
arrangements.
(b) With respect to each Company Material Contract, except
as set forth in
Section 2.14
of the Company
Disclosure Schedule: (i) the Company Material Contract is
legal, valid, binding and enforceable against the Company or the
Company Subsidiary party thereto and, to the Companys
knowledge, the other party thereto, and in full force and
effect; (ii) the Company Material Contract will continue to
be legal, valid, binding and enforceable against the Surviving
Corporation or such Company Subsidiary and, to the
Companys knowledge, the other party thereto, and in full
force and effect on identical terms following the Effective
Time; (iii) neither the Company nor any of the Company
Subsidiaries is in breach or default in any material respect,
and no event has occurred that with the passage of time or
giving of notice or both would constitute such a breach or
default by the Company or any of the Company Subsidiaries, or
permit termination or acceleration by the other party, under the
Company Material Contract; and (iv) to the Companys
knowledge, no other party to the Company Material Contract is in
breach or default in any material respect, and no event has
occurred that with the passage of time or giving of notice or
both would constitute such a breach or default by such other
party, or permit termination or acceleration by the Company or
any of the Company Subsidiaries, under such Company Material
Contract.
2.15
Intellectual Property
.
(a)
Section 2.15(a)
of the Company Disclosure
Schedule contains a list of (A) all registered Intellectual
Property, Intellectual Property that is the subject of a pending
application for registration, and material unregistered
Intellectual Property, in each case that is, owned by the
Company or any of the Company Subsidiaries and (B) all
material Intellectual Property, other than
Off-the-Shelf
Software Agreements, licensed, used or held for use by the
Company or any of the Company Subsidiaries in the conduct of its
business
(Licensed Intellectual Property)
.
Each of the Company and the Company Subsidiaries has
(i) all right, title and interest in and to all Company
Intellectual Property owned by it, (the
Company
Intellectual Property
) free and clear of all
Encumbrances, other than Permitted Encumbrances (as defined in
Section 2.21) and (ii) all necessary proprietary
rights in and to all of its Licensed Intellectual Property, free
and clear of all Encumbrances, other than Permitted
Encumbrances. Neither the Company nor any of the Company
Subsidiaries has received any written communication alleging
that it has infringed, diluted or misappropriated, or, by
conducting its business as proposed, would infringe, dilute or
misappropriate, the Intellectual Property rights of any Person
and there is no valid basis for any such allegation. Neither the
execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will impair or materially
alter the Companys or any Company Subsidiarys rights
to any Company Intellectual Property or Licensed Intellectual
Property. To the knowledge of the Company, there is no
unauthorized use, infringement or misappropriation of the
Company Intellectual Property or Licensed Intellectual Property
by any third party. All of the rights within the Company
Intellectual Property and Licensed Intellectual Property are
valid, enforceable and subsisting, and there is no Action that
is pending or, to the Companys knowledge, threatened that
challenges the rights of the Company or any of the Company
Subsidiaries in respect of any Company Intellectual Property or
Licensed Intellectual Property or the validity, enforceability
or effectiveness thereof. The Company Intellectual Property and
the Licensed Intellectual Property constitute all material
Intellectual Property used in or necessary for the operation by
the Company and the Company Subsidiaries of their respective
businesses as currently conducted. Neither the Company nor any
of the Company Subsidiaries is in breach or default in any
material respect (or would with the giving of notice or lapse of
time or both be in such breach or default) under any license to
use any of the Licensed Intellectual Property.
(b) For purposes of this Agreement,
Intellectual
Property
means (A) United States, international
and foreign patents and patent applications, including
divisionals, continuations,
continuations-in-part,
reissues, reexaminations and extensions thereof and counterparts
claiming priority therefrom; utility models; invention
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disclosures; and statutory invention registrations and
certificates; (B) United States and foreign registered,
pending and unregistered trademarks, service marks, trade dress,
logos, trade names, corporate names and other source
identifiers, domain names, Internet sites and web pages; and
registrations and applications for registration for any of the
foregoing, together with all of the goodwill associated
therewith; (C) United States and foreign registered and
unregistered copyrights, and registrations and applications for
registration thereof; rights of publicity; and copyrightable
works; (D) all inventions and design rights (whether
patentable or unpatentable) and all categories of trade secrets
as defined in the Uniform Trade Secrets Act, including business,
technical and financial information; and (E) confidential
and proprietary information, including know-how.
2.16
Employee Benefit Plans
.
(a)
Section 2.16(a)
of the Company Disclosure
Schedule lists, with respect to the Company and the Company
Subsidiaries and any trade or business (whether or not
incorporated) that is treated as a single employer with the
Company and the Company Subsidiaries within the meaning of
Section 414(b), (c), (m) or (o) of the Code (an
ERISA Affiliate
), (i) all employee
benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended
(ERISA)
), (ii) loans to officers and
directors other than advances for expense reimbursements
incurred in the ordinary course of business and any stock
option, stock purchase, phantom stock, stock appreciation right,
equity-related, supplemental retirement, severance, sabbatical,
medical, dental, vision care, disability, employee relocation,
cafeteria benefit (Code Section 125) or dependent care
(Code Section 129), life insurance or accident insurance
plans, programs, agreements or arrangements, (iii) all
bonus, pension, retirement, profit sharing, savings, deferred
compensation or incentive plans, programs, policies, agreements
or arrangements, (iv) other fringe, perquisite, or employee
benefit plans, programs, policies, agreements or arrangements of
the Company and the Company Subsidiaries and (v) any
current or former employment, consulting, change of control,
retention or executive compensation, termination or severance
plans, programs, policies, agreements or arrangements, written
or otherwise, as to which unsatisfied liabilities or obligations
(contingent or otherwise) of the Company or any of the Company
Subsidiaries remain for the benefit of, or relating to, any
present or former employee, consultant or director of the
Company or any of the Company Subsidiaries, or with respect to
which the Company or any of the Company Subsidiaries could
reasonably be expected to have any liabilities or obligations
(together, the
Company Employee Plans
).
(b) Any Company Employee Plan intended to be qualified
under Section 401(a) of the Code has either obtained from
the Internal Revenue Service
(IRS)
a current
favorable determination letter as to its qualified status under
the Code, including all amendments to the Code effected by the
Tax Reform Act of 1986, or has applied to the IRS for such a
determination letter prior to the expiration of the requisite
period under applicable Treasury Regulations or IRS
pronouncements in which to apply for such determination letter
and to make any amendments necessary to obtain a favorable
determination or has been established under a standardized
prototype plan for which an IRS opinion letter has been obtained
by the plan sponsor and is valid as to the adopting employer.
(c) There has been no prohibited transaction,
as such term is defined in Section 406 of ERISA and
Section 4975 of the Code, by the Company or, to the
knowledge of the Company, by any trusts created thereunder, any
trustee or administrator thereof or any other Person, with
respect to any Company Employee Plan. Each Company Employee Plan
has been administered in accordance with its terms and in
material compliance with the requirements prescribed by any and
all applicable Laws (including ERISA and the Code), and the
Company and each ERISA Affiliate have performed all obligations
required to be performed by them under, are not in any respect
in default under or violation of, and have no knowledge of any
default or violation by any other party to, any of the Company
Employee Plans. All contributions and premiums required to be
made by the Company or any ERISA Affiliate to any Company
Employee Plan have been made on or before their due dates,
including any legally permitted extensions. No Action has been
brought, or to the knowledge of the Company is threatened,
against or with respect to any such Company Employee Plan,
including any audit or inquiry by the IRS, United States
Department of Labor (the
DOL
), the SEC or
other Governmental Authority, other than routine claims for
benefits. To the knowledge of the Company, each Company Employee
Plan that is a nonqualified deferred compensation
plan within the meaning of Section 409A of the Code
and any awards thereunder, in each case that is subject to
Section 409A of the Code, has been operated in good faith
compliance, in all material respects, with Section 409A of
the Code since January 1, 2005.
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(d) Except as disclosed in
Section 2.16(d)
of
the Company Disclosure Schedule or as otherwise provided in this
Agreement, the consummation of the transactions contemplated by
this Agreement will not, either alone or in combination with any
other event or events, (i) entitle any current or former
employee, director or consultant of the Company or any of the
Company Subsidiaries to any payment (whether of severance pay,
unemployment compensation, golden parachute, bonus or
otherwise), (ii) accelerate, forgive indebtedness, vest,
distribute, or increase benefits or obligation to fund benefits
with respect to any employee or director of the Company or any
of the Company Subsidiaries, or (iii) accelerate the time
of payment or vesting of Company Options, or increase the amount
of compensation due any such employee, director or consultant.
(e) No amounts payable under any of the Company Employee
Plans or any other contract, agreement or arrangement with
respect to which the Company or any of the Company Subsidiaries
may have any liability will not be deductible for federal income
tax purposes by virtue of Section 162(m) or
Section 280G of the Code. None of the Company Employee
Plans contains any provision requiring a
gross-up
pursuant to Section 280G or 409A of the Code or similar tax
provisions.
(f) No Company Employee Plan maintained by the Company or
any of the Company Subsidiaries provides benefits, including
death or medical benefits (whether or not insured), with respect
to current or former employees of the Company or any of the
Company Subsidiaries after retirement or other termination of
service (other than (i) coverage mandated by applicable
Laws, (ii) death benefits or retirement benefits under any
employee pension benefit plan, as that term is
defined in Section 3(2) of ERISA, or (iii) benefits,
the full direct cost of which is borne by the current or former
employee (or beneficiary thereof)).
(g) Neither the Company nor any ERISA Affiliate has any
liability with respect to any (i) employee pension benefit
plan (within the meaning of Section 3(2) of ERISA) which is
subject to Part 3 of Subtitle B of Title I of ERISA,
Title IV of ERISA or Section 412 of the Code ,
(ii) multiemployer plan as defined in
Section 3(37) of ERISA or (iii) multiple
employer plan within the meaning of Sections 4063 and
4064 of ERISA or Section 413(c) of the Code.
(h) To the knowledge of the Company, all Company Options
have been properly approved by the Companys Board of
Directors (or a duly authorized committee or subcommittee
thereof) in compliance with all applicable Law, and otherwise
granted in compliance with the terms of the applicable Company
Employee Plan, with applicable Law, and with the applicable
provisions of the Certificate of Incorporation and Bylaws as in
effect at the applicable time. All such Company Options have
been appropriately accounted for in accordance with GAAP and
disclosed in accordance with applicable Law, accounting rules
and stock exchange requirements, and no such grants involved any
back dating, forward dating or similar
practices with respect to such grants.
(i) Neither the Company nor any of its ERISA Affiliates has
(i) used the services or workers provided by third party
contract labor suppliers, temporary employees, leased
employees (as that term is defined in Section 414(n)
of the Code), or individuals who have provided services as
independent contractors to an extent that would reasonably be
expected to result in the disqualification of any of the Company
Employee Plans or the imposition of penalties or excise taxes
with respect to the Company Employee Plans by the IRS or the DOL.
2.17
Taxes and Returns
.
(a) The Company has timely filed, or caused to be timely
filed, all material federal, state, local and foreign Tax
returns and reports required to be filed by it or the Company
Subsidiaries (collectively,
Tax Returns
), and
has paid, collected or withheld, or caused to be paid, collected
or withheld, all material Taxes required to be paid, collected
or withheld, other than such Taxes for which adequate reserves
in the Company Financials have been established in accordance
with GAAP. There are no claims, assessments, audits,
examinations, investigations or other proceedings pending
against the Company or any of the Company Subsidiaries in
respect of any Tax, and neither the Company nor any of the
Company Subsidiaries has been notified in writing of any
proposed Tax claims or assessments against the Company or any of
the Company Subsidiaries (other than, in each case, claims or
assessments for which adequate reserves in the Company
Financials have been established in accordance with GAAP or are
immaterial in amount). Neither the Company nor any of the
Company Subsidiaries has any outstanding waivers or extensions
of any applicable statute of limitations to assess any material
amount of Taxes. There are no outstanding requests by the
Company or any of the Company Subsidiaries for any extension of
time
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within which to file any Tax Return or within which to pay any
Taxes shown to be due on any Tax Return. There are no
Encumbrances for material amounts of Taxes on the assets of the
Company or any of the Company Subsidiaries, except for statutory
liens for current Taxes not yet due and payable or that are
being contested in good faith and for which adequate reserves in
the Company Financials have been established in accordance with
GAAP.
(b) Neither the Company nor any of the Company Subsidiaries
has constituted either a distributing corporation or
a controlled corporation (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of
stock (to any Person or entity that is not a member of the
consolidated group of which the Company is the common parent
corporation) qualifying for, or intended to qualify for,
tax-free treatment under Section 355 of the Code
(i) within the two-year period ending on the date hereof or
(ii) in a distribution which could otherwise constitute
part of a plan or series of related
transactions (within the meaning of Section 355(e) of
the Code) in conjunction with the Merger.
(c) Neither the Company nor any of the Company Subsidiaries
is or (i) has been at any time within the five-year period
ending on the date hereof a United States real property holding
corporation within the meaning of Section 897(c)(2) of the
Code and (ii) has ever been a member of any consolidated,
combined, unitary or affiliated group of corporations for any
Tax purposes other than a group of which the Company is or was
the common parent corporation.
(d) Neither the Company nor any of the Company Subsidiaries
has made any change in accounting method or received a ruling
from, or signed an agreement with, any taxing authority that
would reasonably be expected to have a Company Material Adverse
Effect following the Closing.
(e) As of the date hereof, neither the Company nor any of
the Company Subsidiaries is being audited by any taxing
authority or has been notified by any tax authority that any
such audit is contemplated or pending.
(f) Neither the Company nor any of the Company Subsidiaries
participated in, or sold, distributed or otherwise promoted, any
reportable transaction, as defined in Treasury
Regulation
section 1.6011-4.
(g) Neither the Company nor any of the Company Subsidiaries
has taken any action that would reasonably be expected to give
rise to (i) a deferred intercompany transaction
within the meaning of Treasury Regulation
section 1.1502-13
or an excess loss account within the meaning of
Treasury Regulation
section 1.1502-19,
or (ii) the recognition of a deferred intercompany
transaction.
(h) Except as set forth in
Section 2.17(h)
of
the Company Disclosure Schedule, since December 31, 2006,
neither the Company nor any of the Company Subsidiaries have
(i) changed any Tax accounting methods, policies or
procedures except as required by a change in Law,
(ii) made, revoked, or amended any material Tax election,
(iii) filed any amended Tax Returns or claim for refund, or
(iv) entered into any closing agreement affecting or
otherwise settled or compromised any material Tax liability or
refund.
(i) For purposes of this Agreement, the term
Tax
or
Taxes
shall mean
any tax, custom, duty, governmental fee or other like assessment
or charge of any kind whatsoever, imposed by any Governmental
Authority (including any federal, state, local, foreign or
provincial income, gross receipts, property, sales, use, net
worth, premium, license, excise, franchise, employment, payroll,
alternative or added minimum, ad valorem, transfer or excise
tax) together with any interest, addition or penalty imposed
thereon.
2.18
Finders and Investment Bankers
.
Except for Raymond James & Associates, Inc.
(Raymond James)
, the fees of which will be
borne by the Company, no broker, finder or investment banker is
entitled to any brokerage, finders or other fee or
commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of the
Company.
2.19
Fairness Opinion
.
On or prior to the date hereof, the Board has received from
Raymond James, its financial advisor, a written opinion
addressed to it for inclusion in the Proxy Statement (as defined
in Section 4.3) to the effect that the consideration to be
received in the Merger by the Companys stockholders is
fair to the Companys stockholders (other than Parent,
Merger Sub and their respective affiliates) from a financial
point of view.
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2.20
Vote Required; Board Action
.
(a) No fair price, business
combination, moratorium, control share
acquisition or other similar anti-takeover Law or
regulation (collectively,
Takeover Laws
) of
any jurisdiction is applicable or purports to be applicable to
the transactions contemplated by this Agreement. The affirmative
vote of the holders of a majority of the outstanding Shares (the
Company Stockholder Approval
) is the only
vote or consent of the holders of any class or series of the
Company Capital Stock that is necessary to approve and adopt
this Agreement and to consummate the transaction contemplated
hereby (including the Merger).
(b) The Board, by resolutions duly adopted by unanimous
vote at a meeting duly called and held, has duly
(i) determined that this Agreement and the Merger are
advisable and in the best interests of the Company and its
stockholders, (ii) approved the execution, delivery and
performance of this Agreement and the Merger,
(iii) recommended that the stockholders of the Company
adopt this Agreement and directed that this Agreement and the
Merger be submitted for adoption by the Companys
stockholders in accordance with Section 251 of the DGCL and
this Agreement, and (iv) has taken all action necessary to
cause dispositions of Shares and Company Options pursuant to the
transactions contemplated by this Agreement (including the
Merger) by each individual who is a director or officer of the
Company to be exempt under
Rule 16b-3
promulgated under the Exchange Act in accordance with that
certain No-Action Letter dated January 12, 1999 issued by
the SEC regarding such matters.
2.21
Title to Properties; Assets
.
(a)
Section 2.21(a
)
of the
Company Disclosure Schedule contains a correct and complete list
of all real property and interests in real property leased or
subleased by the Company or any of the Company Subsidiaries from
or to any Person (collectively, the
Company Real
Property
). The list set forth in
Section 2.21(a)
of the Company Disclosure Schedule
contains, with respect to each of the Company Real Properties,
all existing leases, subleases, licenses or other occupancy
contracts to which the Company or any of the Company
Subsidiaries is a party or by which the Company or any of the
Company Subsidiaries is bound, and all amendments,
modifications, extensions and supplements thereto (collectively,
the
Tenant Leases
), the terms of which have
been complied with by the Company and any Company Subsidiary in
all material respects. The Company Real Property set forth in
Section 2.21(a)
of the Company Disclosure Schedule
comprises all of the real property necessary
and/or
currently used in the operations of the business of the Company
and the Company Subsidiaries. The Company does not own any real
property. Except as would not have a Company Material Adverse
Effect, the Company or a Company Subsidiary has good and valid
title to all of its personal property, assets and rights, free
and clear of all Encumbrances other than Permitted Encumbrances.
(b) A correct and complete copy of each Tenant Lease has
been furnished to Parent prior to the date hereof. The Company
or the Company Subsidiary party thereto has a valid, binding and
enforceable leasehold interest under each of the Tenant Leases,
free and clear of all Encumbrances other than Permitted
Encumbrances, and each of the Tenant Leases is in full force and
effect. Neither the Company or any of the Company Subsidiaries
nor, to the knowledge of the Company, any other party to any
Tenant Lease is in breach of or in default under, in any
material respect, any of the Tenant Leases. The Company and the
Company Subsidiaries enjoy peaceful and undisturbed possession
under all such Tenant Leases, have not received notice of any
material default, delinquency or breach on the part of the
Company or any Company Subsidiary, and there are no existing
material defaults (with or without notice or lapse of time or
both) by the Company or any Company Subsidiary or, to the
knowledge of the Company, any other party thereto. For purposes
of this Agreement, the term
Permitted
Encumbrances
means (i) Encumbrances with respect
to Taxes either not yet due or being contested in good faith in
appropriate proceedings (and for which adequate reserves in the
Company Financials have been established in accordance with
GAAP); (ii) mechanics, materialmens or similar
statutory Encumbrances for amounts not yet due or being
contested in good faith in appropriate proceedings;
(iii) the terms and conditions of the lease creating the
leaseholds; and (iv) other exceptions with respect to the
Company Real Property (including easements of public record)
that do not and would not materially interfere with the current
and currently intended use of such Company Real Property.
2.22
Employee Matters
.
(a) Except as set forth in
Schedule 2.22(a)
of
the Company Disclosure Schedule, there are no Actions pending
or, to the knowledge of the Company, threatened involving the
Company or any of the Company Subsidiaries and
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any of their employees or former employees, including any
harassment, discrimination, retaliatory act or similar claim.
There has been: (i) to the knowledge of the Company, no
labor union organizing or attempting to organize any employee of
the Company or any of the Company Subsidiaries into one or more
collective bargaining units; and (ii) no labor dispute,
strike, work slowdown, work stoppage or lock out or other
collective labor action by or with respect to any employees of
the Company or any of the Company Subsidiaries pending or, to
the Companys knowledge, threatened against the Company or
any of the Company Subsidiaries. Neither the Company nor any of
the Company Subsidiaries is a party to, or bound by, any
collective bargaining agreement or other agreement with any
labor organization applicable to the employees of the Company or
any of the Company Subsidiaries and no such agreement is
currently being negotiated.
(b) The Company and the Company Subsidiaries (i) are
in compliance in all material respects with all applicable Laws
respecting employment and employment practices, terms and
conditions of employment, health and safety and wages and hours,
including Laws relating to discrimination, disability, labor
relations, hours of work, payment of wages and overtime wages,
pay equity, immigration, workers compensation, working
conditions, employee scheduling, occupational safety and health,
family and medical leave, and employee terminations,
(ii) are not engaged in any unfair labor practice,
(ii) are not liable for any material arrears of wages or
any material penalty for failure to comply with any of the
foregoing, and (iii) are not liable for any material
payment to any trust or other fund or to any Governmental
Authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for employees
(other than routine payments to be made in the ordinary course
of business and consistent with past practice). Except as would
not result in any material liability to the Company or any
Company Subsidiary, there are no complaints, lawsuits,
arbitrations, administrative proceedings, or other Actions
pending or, to the knowledge of the Company, threatened against
the Company or any Company Subsidiary brought by or on behalf of
any applicant for employment, any current or former employee,
any Person alleging to be a current or former employee, any
class of the foregoing, or any Governmental Authority, relating
to any such Law or regulation, or alleging breach of any express
or implied contract of employment, wrongful termination of
employment, or alleging any other discriminatory, wrongful or
tortious conduct in connection with the employment relationship.
2.23
Environmental Matters
.
Except as set forth in
Section 2.23
of the Company
Disclosure Schedule or as would not reasonably be expected to
have, individually or in the aggregate, a Company Material
Adverse Effect:
(a) Neither the Company nor any of the Company Subsidiaries
is the subject of any federal, state, local or foreign Order,
judgment or claim, and neither the Company nor any of the
Company Subsidiaries has received any written notice or claim,
or entered into any negotiations or agreements with any Person,
relating to any liability or remedial action under any
applicable Environmental Laws or alleging that the Company or
any of its subsidiaries is in violation of, or liable under, any
Environmental Law;
(b) The Company and the Company Subsidiaries are in
compliance with all applicable Environmental Laws;
(c) Neither the Company nor any of the Company Subsidiaries
has manufactured, treated, stored, disposed of, arranged for or
knowingly permitted the disposal of, generated, handled or
released any Hazardous Substance, or owned or operated any
property or facility, in a manner that has given or would
reasonably be expected to give rise to any liability under all
applicable Environmental Laws; and
(d) Each of the Company and the Company Subsidiaries holds
and is in compliance with all Company Permits required to
conduct its business and operations under all applicable
Environmental Laws.
(e) Neither the Company, any Company Subsidiary nor any of
their respective properties are subject to any Order, judgment
or written claim asserted or arising under any Environmental Law.
Environmental Laws
means any Law relating to
(a) the protection, preservation or restoration of the
environment (including air, water vapor, surface water,
groundwater, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource), or
(b) the exposure to, or the use, storage,
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recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous
Substances, in each case as in effect at the date hereof.
Hazardous Substance
means any substance
listed, defined, designated or classified as hazardous, toxic,
radioactive or dangerous or as a pollutant or contaminant under
any Environmental Law. Hazardous Substances include any
substance to which exposure is regulated by any Governmental
Authority or any Environmental Law, including (a) petroleum
or any derivative or byproduct thereof, toxic mold, asbestos or
asbestos containing material or polychlorinated biphenyls and
(b) all substances defined as Hazardous Substances, Oils,
Pollutants or Contaminants in the National and Hazardous
Substances Contingency Plan, 40 C.F.R. Section 300.5.
2.24
Proxy Statement
.
The Proxy Statement will not, on the date it (or any amendment
or supplement thereto) is first mailed to stockholders of the
Company, and at the time of the Special Meeting (as defined in
Section 4.3(a)), contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they are
made, not misleading. The Proxy Statement will, when filed by
the Company with the SEC, comply as to form in all material
respects with the applicable provisions of the Exchange Act and
the rules and regulations thereunder. Notwithstanding the
foregoing, the Company makes no representation or warranty with
respect to information supplied in writing or electronically by
or on behalf of Parent or Merger Sub expressly for inclusion in
the Proxy Statement.
2.25
Transactions with Affiliates
.
Section 2.25
of the Company Disclosure
Schedule sets forth a true, correct and complete list of the
contracts or arrangements that are in existence as of the date
of this Agreement under which there are any existing or future
liabilities or obligations between the Company or any of the
Company Subsidiaries, on the one hand, and, on the other hand,
any (a) present officer or director of either the Company
or any of its subsidiaries, or (b) record or beneficial
owner of more than 5% of the outstanding Company Capital Stock
as of the date hereof (each, an
Affiliate
Transaction
).
2.26
Insurance Matters
.
(a)
Examinations
.
The Company has
made available to Parent copies of all draft and final financial
examination reports and market conduct examination reports of
state insurance departments with respect to any Company
Subsidiary that have been issued since June 1, 2004.
(b)
Policy Materials
.
To the
extent required under applicable Laws, all policies, binders,
slips or other agreements of insurance and other agreements and
materials that are issued or used in connection with the Company
Subsidiaries business, including applications, brochures
and marketing materials, premium rates and reinsurance
agreements, are, in all material respects, on forms approved by
applicable insurance regulatory authorities or filed and not
objected to by such authorities within the period provided for
objection, and, in either case, not subsequently disapproved or
required to be withdrawn or retired from issuance or use which
have not been so withdrawn or retired. Any rates or rating plans
of the Company Subsidiaries required to be filed with or
approved by any applicable Governmental Authority have in all
material respects been so filed or approved and the rates
applied by each of the Company or the Company Subsidiaries to
the contracts of insurance conform in all material respects to
the relevant filed or approved rates.
(c)
Agents and Producers
.
To the
knowledge of the Company, no Person performing the duties of
insurance producer, reinsurance intermediary, agency, agent,
managing general agent, wholesaler or broker with respect to the
Company or any of the Company Subsidiaries (collectively,
Company Producers
) individually accounting
for 2% or more of the total gross premiums of all Company
Subsidiaries for the year ended December 31, 2006, has
indicated to the Company or any Company Subsidiary that such
Company Producer will be unable or unwilling to continue its
relationship as a Company Producer with the Company or any
Company Subsidiary within 12 months after the date hereof.
To the knowledge of the Company, at the time any Company
Producer wrote, sold, or produced business, or performed such
other act for or on behalf of the Company or any Company
Subsidiary that may require a license under applicable Insurance
Laws, such Company Producer was duly licensed and appointed as
required by applicable Insurance Law, in the particular
jurisdiction in which such Company Producer wrote, sold,
produced,
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solicited, or serviced such business, and each of the agency
agreements and appointments between the Company Producers,
including as subagents under the Companys affiliated
insurance agency, and the Company and any Company Subsidiary, is
valid, binding and in full force and effect in accordance with
its terms. To the knowledge of the Company, no Company Producer
has been since January 1, 2006, or is currently, in
violation (or with or without notice or lapse of time or both,
would be in violation) of any term or provision of any Law
applicable to the writing, sale or production of insurance or
other business of the Company or any Company Subsidiary. The
contracts and other agreements pursuant to which Company
Producers act on behalf of the Company or any Company Subsidiary
are valid, binding and in full force and effect in accordance
with their terms, and none of the parties to such contracts and
agreements are in default thereunder in any material respect.
The Company has made available to Parent a true and complete
copy of each standard form agency agreement used by the Company
or any Company Subsidiary.
(d)
Reinsurance
.
Section 2.26(d)
of the Company Disclosure Schedule sets forth a list of all
ceded reinsurance treaties and agreements, including
retrocessional agreements, to which the Company or any Company
Subsidiary is a party or under which the Company or any Company
Subsidiary has any material existing rights, obligations or
liabilities (the
Company Reinsurance
Agreements
). Copies of all Company Reinsurance
Agreements that are in effect on the date of this Agreement have
been made available to Parent. Neither the Company nor any
Company Subsidiary, nor, to the knowledge of the Company, any
other party to a reinsurance treaty, binder or other agreement
to which the Company or any Company Subsidiary is a party, is in
default in any material respect as to any provision thereof. The
Company has no knowledge that the financial condition of any
party to any Company Reinsurance Agreement is impaired to the
extent that a default thereunder may be reasonably anticipated.
Except as disclosed in
Section 2.26(d)
of the
Company Disclosure Schedule, the Company Subsidiaries are
entitled under applicable Law to take full credit on the
applicable Company SAP Statement with respect to any Company
Reinsurance Agreement pursuant to which such subsidiary has
ceded reinsurance. Except as set forth in
Section 2.26(d)
of the Company Disclosure Schedule,
neither the Company nor any Company Subsidiary have received any
notice from any party to any reinsurance agreement or treaty of
any dispute or default with respect to such reinsurance
agreement or treaty. Assuming no default by any party other than
any subsidiary of the Company, all such Company Reinsurance
Agreements are in full force and effect to the respective dates
noted thereon. There are no entities, other than the Company and
the Company Subsidiaries, that have rights to access coverage
under any such Company Reinsurance Agreements.
(e)
Finite Risk Insurance or
Reinsurance
.
Except as disclosed in
Section 2.26(e)
of the Company Disclosure Schedule,
with respect to any Company Reinsurance Agreement for which the
Company or any Company Subsidiary is taking credit on its most
recent statutory financial statements or has taken credit on any
statutory financial statements from and after January 1,
2005, (i) there has been no separate written or oral
agreement between the Company or any Company Subsidiary and the
assuming reinsurer that would under any circumstances reduce,
limit, mitigate or otherwise affect any actual or potential loss
to the parties under any such Company Reinsurance Agreement,
other than inuring contracts that are explicitly defined in any
such Company Reinsurance Agreement, (ii) for each such
Company Reinsurance Agreement under which the Company or any
Company Subsidiary has or may have recoverables, and for which
risk transfer is not reasonably considered to be self-evident,
documentation concerning the economic intent of the transaction
and the risk transfer analysis evidencing the proper accounting
treatment, as required by Statement of Statutory Accounting
Principles No. 62
(SSAP No. 62)
, is
available for review by the domiciliary state insurance
departments for the Company and the Company Subsidiaries,
(iii) each of the Company and the Company Subsidiaries
complies and has complied from and after January 1, 2005
with all of the requirements set forth in SSAP No. 62 and
(iv) each of the Company and the Company Subsidiaries has
and has had from and after January 1, 2001 appropriate
controls in place to monitor the use of reinsurance and comply
with the provisions of SSAP No. 62.
(f)
Actuarial Reports
.
Prior to
the date of this Agreement, the Company has made available to
Parent a true and complete copy of all actuarial reports
prepared by independent actuaries, with respect to the Company
or any Company Subsidiary since January 1, 2005, and all
attachments, addenda, supplements and modifications thereto (the
Company Actuarial Analyses
). There have been
no actuarial reports of a similar nature covering any of the
entities referred to in those reports in respect of any period
subsequent to the latest period covered in such actuarial
reports. To the knowledge of the Company, the information and
data furnished by the Company or any Company Subsidiary to its
independent actuaries in connection with the preparation of any
Company Actuarial Analysis was
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accurate in all material respects for the periods covered in
such reports. Each Company Actuarial Analysis was based upon an
accurate inventory of policies in force for the Company and the
Company Subsidiaries, as the case may be, at the relevant time
of preparation and was prepared in conformity with generally
accepted actuarial principles in effect at such time,
consistently applied (except as may be noted therein).
(g)
Policy Dividends
.
Except as
set forth in
Section 2.26(g)
of the Company
Disclosure Schedule, there are no insurance policies issued,
reinsured or assumed by the Company or any of the Company
Subsidiaries that are currently in force under which the Company
or any of the Company Subsidiaries may be required to pay
dividends to the holders thereof.
2.27
Insurance
.
The Company and each Company Subsidiary is covered by valid and
currently effective insurance policies issued in favor of the
Company or one or more of the Company Subsidiaries that are
customary for companies of similar size in the industry and
locales in which the Company and the Company Subsidiaries
operate.
Section 2.27
of the Company Disclosure
Schedule sets forth a true, correct and complete list of all
material insurance policies issued in favor of the Company or
any Company Subsidiary, or pursuant to which the Company or any
Company Subsidiary is a named insured or otherwise a
beneficiary, as well as any historic incurrence-based policies
still in force. With respect to each such insurance policy,
(i) the policy is in full force and effect and all premiums
due thereon have been paid, (ii) neither the Company nor
any Company Subsidiary is in any material respect, in breach of
or default under, and neither the Company nor any Company
Subsidiary have taken any action or failed to take any action
which, with notice or the lapse of time or both, would
constitute such a breach or default, or permit termination or
modification of, any such policy, and (iii) to the
knowledge of the Company, no insurer on any such policy has been
declared insolvent or placed in receivership, conservatorship or
liquidation, and no notice of cancellation or termination has
been received with respect to any such policy.
2.28
Books and Records
.
All of the books and records of the Company and the Company
Subsidiaries are complete and accurate in all material respects
and have been maintained in the ordinary course and in
accordance with applicable Laws and standard industry practices
with regard to the maintenance of such books and records.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
The following representations and warranties by Parent and
Merger Sub to the Company are qualified by the Parent Disclosure
Schedule, which sets forth certain disclosures concerning Parent
and Merger Sub (the
Parent Disclosure
Schedule
) (
provided
that any fact or item
disclosed with respect to one representation or warranty shall
be deemed to be disclosed with respect to each other
representation or warranty, but only to the extent that the
applicability of such fact or item with respect to such other
representation or warranty can reasonably be inferred from the
disclosure with respect to such fact or item contained in the
Parent Disclosure Schedule). Parent and Merger Sub hereby
jointly and severally represent and warrant to the Company as
follows:
3.1
Due Organization and Good Standing
.
Each of Parent and Merger Sub is a corporation duly organized,
validly existing and in good standing under the Laws of the
jurisdiction of its organization and has all requisite corporate
power and authority to own, lease and operate its properties and
to carry on its business as now being conducted.
3.2
Authorization; Binding Agreement
.
Parent and Merger Sub have all requisite corporate power and
authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby, including the Merger,
(a) have been duly and validly authorized by the Board of
Directors of Parent and Merger Sub, and (b) no other
corporate proceedings on the part of Parent or Merger Sub are
necessary to authorize the execution and delivery of this
Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered
by each of
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Parent and Merger Sub and (assuming the due authorization,
execution and delivery hereof by the Company) constitutes the
legal, valid and binding obligation of each of Parent and Merger
Sub, enforceable against each of Parent and Merger Sub in
accordance with its terms, subject to the Enforceability
Exceptions.
3.3
Governmental Approvals
.
No Consent of or with any Governmental Authority on the part of
Parent or Merger Sub is required to be obtained or made in
connection with the execution, delivery or performance by Parent
or Merger Sub of this Agreement or the consummation by Parent or
Merger Sub of the transactions contemplated hereby (including
the Merger) other than (i) the filing of the Certificate of
Merger with the Secretary of State in accordance with the DGCL,
(ii) such filings as may be required with the SEC and
foreign and state securities Laws administrators,
(iii) pursuant to the HSR Act and other Antitrust Laws
(iv) those consents, approvals, authorizations, waivers,
permits, filings or notices set forth in
Section 3.3
of the Parent Disclosure Schedule, which schedule includes all
such consents, approvals, authorizations, waivers, permits,
filings or notices with the Florida Office of Insurance
Regulation, and (v) those Consents that, if they were not
obtained or made, would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse
Effect. For purposes of this Agreement,
Parent Material
Adverse Effect
means any change, effect or
circumstance that, individually or in the aggregate, would
reasonably be expected to prevent the ability of Parent or
Merger Sub to consummate the transactions contemplated by this
Agreement (including the Merger).
3.4
No Violations
.
The execution and delivery by Parent and Merger Sub of this
Agreement and the consummation by Parent and Merger Sub of the
transactions contemplated hereby (including the Merger) and
compliance by Parent and Merger Sub with any of the provisions
hereof will not (i) conflict with or violate any provision
of the certificate of incorporation or bylaws or other governing
instruments of Parent or Merger Sub, (ii) require any
Consent under or result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination,
cancellation or acceleration) under, any note, bond, mortgage,
indenture, contract, lease, license, agreement or instrument to
which Parent or Merger Sub is a party or by which its assets are
bound, (iii) result in the creation or imposition of any
Encumbrance upon any of the properties, rights or assets of
Parent or Merger Sub or (iv) subject to obtaining the
Consents from Governmental Authorities referred to in
Section 3.3 hereof, and the waiting periods referred to
therein have expired, and any condition precedent to such
consent, approval, authorization or waiver has been satisfied,
conflict with, contravene or violate in any respect any Law to
which Parent or Merger Sub or any of their respective assets or
properties is subject, except, in the case of clauses (ii),
(iii) and (iv) above, for any deviations from the
foregoing that would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse
Effect.
3.5
Finders and Investment Bankers
.
Except for Morgan Stanley & Co. Incorporated, the fees
of which will be borne by Parent, no broker, finder or
investment banker is entitled to any brokerage, finders or
other fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf
of Parent or Merger Sub.
3.6
Disclosures
.
The information supplied by Parent or Merger Sub for inclusion
in the Proxy Statement will not, on the date the Proxy Statement
(or any amendment or supplement thereto) is first mailed to
stockholders of the Company, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are
made, not misleading.
3.7
Sufficient Funds
.
At the Effective Time, Parent and Merger Sub will have
sufficient cash and cash equivalent resources available to pay
the aggregate Merger Consideration.
3.8
Litigation
.
There is no Action pending before any arbitrator, agency, court
or tribunal, foreign or domestic, or, to the knowledge of
Parent, threatened against Parent, Merger Sub, any of their
respective subsidiaries or any of their
A-24
respective properties, rights or assets or, any of their
respective officers, directors, partners, managers or members
(in their capacities as such) that would reasonably be expected
to have, individually or in the aggregate, a Parent Material
Adverse Effect. There is no Order against Parent, Merger Sub,
any of their respective subsidiaries or any of their respective
properties, rights or assets or any of their respective
officers, directors, partners, managers or members (in their
capacities as such) that would prohibit, prevent, enjoin,
restrict or materially alter or delay any of the transactions
contemplated by this Agreement (including the Merger).
3.9
Ownership of Shares
.
As of the date hereof, neither Parent nor Merger Sub is the
record or beneficial owner of any Shares (except to the extent
that Parent may be deemed to be the beneficial owner of any
Shares that are the subject of any Voting Agreement).
3.10
Management Arrangements
.
As of the date hereof, none of Parent or Merger Sub, or any of
their respective affiliates, has entered into any contract,
agreement, arrangement or understanding with any of the officers
or directors of the Company, or any of their respective
affiliates, that is currently in effect or that would become
effective in the future (upon consummation of the Merger or
otherwise) and that has not been disclosed to the Company.
3.11
Investigation by Parent and Merger Sub
.
Each of Parent and Merger Sub acknowledges and agrees that,
other than as set forth in this Agreement, none of the Company,
the Company Subsidiaries or any of their respective directors,
officers, employees, stockholders, affiliates, agents or other
representatives makes any representation or warranty, either
express or implied, as to the accuracy or completeness of any of
the information provided or made available to Parent or Merger
Sub or its agents or other representatives prior to the
execution of this Agreement.
ARTICLE IV
ADDITIONAL
COVENANTS OF THE COMPANY
4.1
Conduct of Business of the Company
.
(a) Unless Parent shall otherwise agree in writing or
except as otherwise expressly provided for in this Agreement or
as set forth in
Section 4.1
of the Company
Disclosure Schedule, during the period from the date of this
Agreement to the Effective Time, (i) the Company and the
Company Subsidiaries shall conduct their business in, and shall
not take any action other than in, the ordinary course of
business consistent with past practice and (ii) the Company
shall use its reasonable best efforts to preserve intact its
business organization, to keep available the services of its and
the Company Subsidiaries officers, employees, Company
Producers and consultants, to maintain existing relationships
with all Persons with whom it and the Company Subsidiaries do
business, and to preserve the possession, control and condition
of its and the Company Subsidiaries assets.
(b) Without limiting the generality of the foregoing
clause (a) and except as otherwise expressly provided for
in this Agreement or as set forth in
Section 4.1
of
the Company Disclosure Schedule, during the period from the date
of this Agreement to the Effective Time, neither the Company nor
any of the Company Subsidiaries will, without the prior written
consent of Parent:
(A) amend, waive or otherwise change, in any respect, its
Certificate of Incorporation or Bylaws (or comparable governing
instruments);
(B) authorize for issuance, issue, grant, sell, pledge,
dispose of or propose to issue, grant, sell, pledge or dispose
of any shares of, or any options, warrants, commitments,
subscriptions or rights of any kind to acquire or sell any
shares of, its capital stock or other securities or equity
interests or any Voting Debt, including any securities
convertible into or exchangeable for shares of stock of any
class and any other equity-based awards, except for the issuance
of Shares pursuant to the exercise of Company Options
outstanding on the date of this Agreement and set forth on
Section 2.2(f)
of the Company Disclosure Schedule in
accordance with their present terms;
A-25
(C) split, combine, recapitalize or reclassify any shares
of its capital stock or equity interests or issue any other
securities in respect thereof, or declare, pay or set aside any
dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital
stock or equity interests, or directly or indirectly redeem,
purchase or otherwise acquire or offer to acquire any shares of
its capital stock or other securities or equity interests, other
than dividends and distributions paid by a Company Subsidiary to
the Company or to another Company Subsidiary;
(D) incur, create, assume, prepay or otherwise become
liable for any indebtedness (directly, contingently or
otherwise), make a loan or advance to or investment in any third
party, or guarantee or endorse any indebtedness, liability or
obligation of any Person, except for indebtedness incurred under
the Companys existing credit facilities described on
Section 4.1(d)
of the Company Disclosure Schedule in
the ordinary course of business consistent with past practice in
an aggregate principal amount not to exceed $250,000;
(E) increase the wages, salaries, bonus, compensation or
other benefits of any of its current or former consultants,
officers, directors or employees, or enter into, establish,
amend or terminate any Company Employee Plan or any other
employment, consulting, retention, change in control, collective
bargaining, bonus or other incentive compensation, profit
sharing, health or other welfare, stock option or other equity
or equity-related, pension, retirement, consulting, vacation,
severance, separation, termination, deferred compensation,
fringe, perquisite, or other compensation or benefit plan,
policy, program, agreement, trust, fund or other arrangement
with, for or in respect of any current or former consultant,
officer, director or employee, in each case other than as
required by applicable Law or pursuant to the terms of any
Company Employee Plan in effect on the date of this Agreement,
or, solely with respect to increases in wages or salaries of
employees who are not officers or directors, in the ordinary
course of business consistent with past practice;
(F) make or rescind any material election relating to
Taxes, settle any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to
Taxes, file any amended Tax Return or claim for refund, or make
any change in its accounting or Tax policies or procedures, in
each case except as required by applicable Law or GAAP;
(G) transfer or license to any Person or otherwise extend,
materially amend or modify, permit to lapse or fail to preserve
any of the Company Intellectual Property or Licensed
Intellectual Property, other than nonexclusive licenses in the
ordinary course of business consistent with past practice, or
disclose to any Person who has not entered into a
confidentiality agreement any trade secrets;
(H) modify or amend in any material manner, terminate or
waive or assign any material right under any Company Material
Contract or enter into any contract that would be a Company
Material Contract with a term longer than one year that cannot
be terminated without payment of a material penalty and upon
notice of 60 days or less, in each case other than in the
ordinary course of business consistent with past practice;
(I) fail to maintain its books, accounts and records in all
material respects in the ordinary course of business consistent
with past practice;
(J) establish any subsidiary or enter into any new line of
business;
(K) fail to keep in force insurance policies or replacement
or revised policies providing insurance coverage with respect to
the assets, operations and activities of the Company and the
Company Subsidiaries as are currently in effect;
(L) revalue any of its material assets or make any change
in accounting methods, principles or practices, except as
required by GAAP and approved by the Companys outside
auditors;
(M) other than in connection with the adjustment,
negotiation or settlement of workers compensation
insurance claims in the ordinary course of business consistent
with past practice, waive, release, assign, settle or compromise
any claim, action or proceeding (including any suit, action,
claim, proceeding or investigation relating to this Agreement or
the transactions contemplated hereby, including the Merger),
other than waivers, releases, assignments, settlements or
compromises that involve only the payment of monetary damages
(and not the imposition of equitable relief on, or the admission
of wrongdoing by, the Company or any of the Company
Subsidiaries) not in excess of $100,000 individually or in the
aggregate, or otherwise pay, discharge
A-26
or satisfy any claims, liabilities or obligations other than in
the ordinary course of business consistent with past practice;
(N) close or materially reduce the Companys or any
Company Subsidiarys activities, or effect any layoff or
other Company-initiated personnel reduction or change, at any of
the Companys or any Company Subsidiarys facilities;
(O) acquire, including by merger, consolidation,
acquisition of stock or assets, or any other form of business
combination, any corporation, partnership, limited liability
company, other business organization or any division thereof, or
any material amount of assets;
(P) make any capital expenditures;
(Q) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization;
(R) voluntarily incur any material liability or obligation
(whether absolute, accrued, contingent or otherwise) other than
in the ordinary course of business consistent with past practice;
(S) sell, lease, license, transfer, exchange or swap,
mortgage or otherwise pledge or encumber (including
securitizations), or otherwise dispose of any material portion
of its properties, assets or rights;
(T) enter into any agreement, understanding or arrangement
with respect to the voting or registration of the Company
Capital Stock or the capital stock of any Company Subsidiary;
(U) take any action that would reasonably be expected to
delay or impair the obtaining of any consents or approvals of
any Governmental Authority to be obtained in connection with
this Agreement;
(V) enter into, amend, waive or terminate (other than
terminations in accordance with their terms) any Affiliate
Transaction; or
(W) enter into any new reinsurance transaction as assuming
or ceding insurer (i) which does not contain market
cancellation, termination and commutation provisions or
(ii) which adversely changes the existing reinsurance
profile of the Company and the Company Subsidiaries on a
consolidated basis outside of the ordinary course of business
consistent with past practice;
(X) alter or amend in any material respect any existing
underwriting, claims handling, loss control, investment,
actuarial, financial reporting or accounting practices,
guidelines or policies (including compliance policies) or any
material assumption underlying an actuarial practice or policy,
except as may be required by GAAP, applicable SAP, any
Governmental Authority or applicable Law, or
(Y) authorize or agree to do any of the foregoing actions.
4.2
Access and Information; Confidentiality
.
(a) Between the date of this Agreement and the Effective
Time, the Company will give, and shall direct its accountants
and legal counsel to give, Parent (and its officers, directors,
employees, accountants, actuaries, legal counsel, financial
advisors, financing sources, agents and other representatives,
collectively,
Parent Representatives
), at
reasonable times and upon reasonable intervals and notice and
following advance consultation with the Companys Chief
Executive Officer or Chief Operating Officer, access to all
offices and other facilities and to all employees, properties,
contracts, agreements, commitments, books and records of or
pertaining to the Company and the Company Subsidiaries
(including Tax Returns, internal work papers, client files,
client contracts and director service agreements) and such
financial and operating data and other information, all of the
foregoing as Parent or the Parent Representatives may reasonably
request regarding the business, assets, liabilities, employees
and other aspects of the Company and the Company Subsidiaries
(including providing Parent and the Parent Representatives with
unaudited quarterly financial statements, including a
consolidated quarterly balance sheet and income statement, in
the form such financial statements have been delivered to Parent
prior to the date hereof, of the Company and providing Parent
and the Parent Representatives with the financial results of the
Company in advance of any filing by the Company with the SEC
containing such financial results) and instruct the officers,
directors, employees, accountants, consultants, legal counsel
and financial advisors of the Company and the Company
A-27
Subsidiaries to cooperate with Parent and the Parent
Representatives in their investigation of the Company and the
Company Subsidiaries (including by reading available independent
public accountants work papers), and a copy of each
material report, schedule and other document filed or received
by the Company pursuant to the requirements of applicable
securities Laws;
provided
that Parent and the Parent
Representatives shall conduct any such activities in such a
manner as not to interfere unreasonably with the business or
operations of the Company. No such access, inspections or
furnishing of information shall have any adverse effect on
Parent or Merger Subs ability to assert that conditions to
Closing or to the consummation of the Merger have not been
satisfied.
(b) All information obtained by Parent or Merger Sub
pursuant to this Section 4.2 shall be kept confidential in
accordance with the confidentiality agreement, dated
October 8, 2007 (the
Confidentiality
Agreement
), between Parent and the Company.
(c) Notwithstanding anything to the contrary contained in
this Agreement, the Company shall not take any action to waive
or release, or to exempt any third party from, any standstill
arrangements to which it is a party or the provisions of any
Takeover Laws;
provided
,
however
, that with
respect to such standstill arrangements, the Company may waive
appropriate provisions of such arrangements if requested to do
so by the other party or parties thereto, but solely to the
extent (i) necessary to permit such party or parties to
submit a Company Takeover Proposal to the Company or the
Companys stockholders, (ii) that following
consultation with outside legal counsel and its financial
advisors, the Board determines in good faith that the failure to
grant such waiver would violate the fiduciary duties of the
Board to the stockholders of the Company under all applicable
Law and (iii) the Company simultaneously, irrevocably and
permanently waives compliance by Parent with paragraph 10
of the Confidentiality Agreement.
4.3
Special Meeting; Proxy Statement
.
As promptly as practicable following the execution of this
Agreement, the Company, acting through its Board, shall, in
accordance with applicable Law:
(a) duly call, give notice of, convene and hold a special
meeting of its stockholders (the
Special
Meeting
) for the purposes of considering and taking
action upon the approval and adoption of this Agreement and the
Merger, including adjourning such meeting for up to 30 Business
Days to obtain such approval. Except to the extent that the
Board shall have withdrawn or modified its approval or
recommendation of this Agreement as permitted by
Section 4.4, the Company shall (i) use reasonable best
efforts to solicit the approval of this Agreement by the
stockholders of the Company and (ii) include in the Proxy
Statement the Boards declaration of the advisability of
this Agreement and its recommendation to the stockholders of the
Company that they adopt this Agreement and approve the Merger.
Notwithstanding the foregoing, the Company may adjourn or
postpone the Special Meeting as and to the extent required by
applicable Law. Unless this Agreement shall have been terminated
in accordance with Section 7.1, the Company shall submit
this Agreement to its stockholders at the Special Meeting even
if the Board shall have effected a Change of Recommendation or a
Withdrawal of Recommendation;
(b) prepare and, within 45 days after the date hereof,
file with the SEC a preliminary proxy statement relating to the
Merger and this Agreement and, after consultation with Parent,
respond as promptly as reasonably practicable to any comments
made by the SEC with respect to the preliminary proxy statement
(including filing as promptly as reasonably practicable any
amendments or supplements thereto necessary to be filed in
response to any such comments or as required by applicable Law),
use reasonable best efforts to have the SEC confirm that it has
no further comments and cause a definitive proxy statement,
including any amendments or supplements thereto (the
Proxy Statement
), to be mailed to its
stockholders at the earliest practicable date after the date
that the SEC confirms it has no further comments;
provided
,
however
, that no amendments or
supplements to the Proxy Statement will be made by the Company
without prior consultation with Parent and its counsel and after
providing Parent a reasonable opportunity to review and comment
on such amendments or supplements; and
(c) notify Parent promptly of the receipt of any comments
from the SEC or its staff and of any request by the SEC or its
staff for amendments or supplements to the proxy statement or
for additional information and supply Parent with copies of all
correspondence between the Company or any of the Company
Representatives
A-28
(as defined in Section 4.4(b)), on the one hand, and the
SEC or its staff, on the other hand, with respect to the proxy
statement. The Company shall give Parent a reasonable
opportunity to review and comment on the Proxy Statement
(including each amendment or supplement thereto), any
correspondence with the SEC or its staff or any other materials
proposed to be submitted to the SEC or its staff prior to
transmission to the SEC or its staff and shall not, unless
required by Law, transmit any such material to which Parent
reasonably objects. If at any time prior to the Special Meeting
there shall be discovered any information that should be set
forth in an amendment or supplement to the Proxy Statement,
after obtaining the consent of Parent to such amendment or
supplement (which consent shall not be unreasonably withheld or
delayed), the Company shall promptly transmit such amendment or
supplement to its stockholders.
4.4
No Solicitation
.
(a) For purposes of this Agreement,
Company
Takeover Proposal
means (other than the Merger) any
inquiry, proposal or offer, or any indication of interest in
making an offer or proposal, from any Person or group at any
time relating to (1) any direct or indirect acquisition or
purchase of assets of the Company and the Company Subsidiaries
representing 15% or more of the assets or business of the
Company and the Company Subsidiaries, including by way of the
purchase of stock of the Company Subsidiaries, (2) any
issuance, sale or other disposition of (including by way of
merger, recapitalization, consolidation, business combination,
share exchange, joint venture or any similar transaction)
securities (or options, rights or warrants to purchase, or
securities convertible into or exchangeable for, such
securities), including any single or multi-step transaction or
series of related transactions, representing 15% or more of the
voting power of the Company or any Company Subsidiary,
(3) any tender offer, exchange offer or other transaction
that, if consummated, would result in any Person or
group (as such term is defined under the Exchange
Act) having beneficial ownership (as such term is defined in
Rule 13d-3
under the Exchange Act), or the right to acquire beneficial
ownership, of 15% or more of the voting power or the capital
stock of the Company or any Company Subsidiary, or (4) any
merger, consolidation, share exchange, business combination,
recapitalization, liquidation or dissolution, including any
single or multi-step transaction or series of related
transactions, involving the Company or any Company Subsidiary.
For purposes of this Agreement, a
Company Superior
Offer
means an unsolicited, bona fide written Company
Takeover Proposal (except that the references to 15%
shall be replaced by 50%) on terms that the Board
determines, in good faith, based upon consultations with its
outside legal counsel and its financial advisors, (i) are
more favorable to the Companys stockholders, from a
financial point of view, than this Agreement and the Merger,
taken as a whole, after giving effect to any adjustments to the
terms and conditions of this Agreement proposed in writing by
Parent in response to such Company Takeover Proposal pursuant to
Section 4.4(e) or otherwise, and (ii) is reasonably
likely to be consummated on the terms so proposed, in each case
with respect to clauses (i) and (ii), taking into account,
among other things, all legal, financial, regulatory, timing and
other aspects of, and conditions to, the Company Superior Offer
and the Person or group making the Company Superior Offer
(including any financing required by such Person or group).
(b) From and after the date hereof, neither the Company nor
any Company Subsidiary shall, directly or indirectly, and shall
not, directly or indirectly, authorize or permit any officer,
director, employee, accountant, consultant, legal counsel,
financial advisor, agent or other representative of the Company
or any Company Subsidiary (collectively, the
Company
Representatives
) to, (i) solicit, encourage,
assist, initiate or facilitate the making, submission or
announcement of any Company Takeover Proposal, (ii) furnish
any non-public information regarding the Company or any Company
Subsidiary or the Merger to any Person or group (other than
Parent, Merger Sub or their representatives) in connection with
or in response to a Company Takeover Proposal, (iii) engage
or participate in discussions or negotiations with any Person or
group with respect to, or that could be expected to lead to, any
Company Takeover Proposal, (iv) withdraw, modify or
qualify, or propose publicly to withdraw, modify or qualify, in
a manner adverse to Parent, the approval of this Agreement or
the Merger or the Boards recommendation that holders of
Shares adopt this Agreement, (v) approve, endorse or
recommend, or publicly propose to approve, endorse or recommend,
any Company Takeover Proposal, (vi) cause the Company or
any Company Subsidiary to discuss, negotiate or enter into any
letter of intent, agreement in principle, acquisition agreement
or other similar agreement related to any Company Takeover
Proposal, or (vii) release any third party from, or waive
any provision of, any confidentiality or standstill agreement to
which the Company or any Company Subsidiary is a party (except
as permitted pursuant to Section 4.2(c) hereof). The
Company shall request the prompt return or destruction of any
A-29
confidential information provided to any Person or group prior
to the date hereof in connection with a possible Company
Takeover Proposal, including in accordance with any
confidentiality agreement entered into with such Person or
group, and shall deny access to any data room (virtual or
actual) containing any such information to any such Person or
group. Without limiting the foregoing, it is agreed that any
action by any Company Representatives that would constitute a
violation of the restrictions set forth in this Section 4.4
if done by the Company, whether or not such Company
Representative is purporting to act on behalf of the Company or
any Company Subsidiary, shall constitute a breach of this
Section 4.4 by the Company. The Company shall promptly
inform the Company Representatives of the obligations undertaken
in this Section 4.4.
(c) Notwithstanding the provisions of Section 4.4(b),
nothing in this Agreement shall prohibit or limit the Company,
or the Board, at any time prior to obtaining the Company
Stockholder Approval, and so long as the Company is in
compliance in all material respects with this Section 4.4,
from (i) furnishing non-public information regarding the
Company to, or (ii) entering into discussions or
negotiations with, any Person or group in response to an
unsolicited, bona fide written Company Takeover Proposal
received after the date of this Agreement that did not result
from a violation of this Section 4.4, if (A) the Board
determines in good faith, after consultation with its outside
legal and financial advisors, that (1) such Company
Takeover Proposal constitutes or could be expected to result in,
after the taking of any of the actions referred to in
clauses (i) or (ii) above, a Company Superior Offer,
and (2) such action with respect to such Company Takeover
Proposal is necessary for the Board to comply with its fiduciary
duties to the Companys stockholders under all applicable
Law; (B) the Company receives from such Person or group an
executed confidentiality agreement with provisions no less
favorable, in the aggregate, to the Company than, and with terms
at least as restrictive of such Person or group (including with
respect to the standstill provisions thereof), those contained
in the Confidentiality Agreement; and (C) contemporaneously
with furnishing any such information to such Person or group,
the Company furnishes such information to Parent to the extent
that such information has not been previously furnished to
Parent;
provided
,
however
, that prior to the
taking of any such actions by the Company or the Board as
described in clauses (i) or (ii) above, the Company
shall provide written notice to Parent of such determination of
the Board.
(d) The Company shall notify Parent as promptly as
practicable (and in any event within 48 hours) orally and
in writing of the receipt by the Company or any of the Company
Representatives of (i) any bona fide inquiries, proposals
or offers, requests for information or requests for discussions
or negotiations regarding or constituting any Company Takeover
Proposal or any bona fide inquiries, proposals or offers,
requests for information or requests for discussions or
negotiations that could be expected to result in a Company
Takeover Proposal, and (ii) any request for non-public
information relating to the Company or the Company Subsidiaries,
specifying in each case the material terms and conditions
thereof (including a copy thereof if in writing) and the
identity of the party making such inquiry, proposal, offer or
request for information. The Company shall keep Parent promptly
informed of the status of any such discussions or negotiations
and of any modifications to such inquiries, proposals, offers or
requests for information. From and after the date of this
Agreement, the Company shall, and shall cause each Company
Subsidiary to, immediately cease and cause to be terminated any
solicitations, discussions or negotiations with any parties with
respect to any Company Takeover Proposal and shall direct, and
use its reasonable best efforts to cause, the Company
Representatives to cease and terminate any such solicitations,
discussions or negotiations.
(e) Notwithstanding anything in this Agreement to the
contrary, including Section 4.4(b), the Board may, at any
time prior to obtaining the Company Stockholder Approval:
(A) withdraw or modify its recommendation that holders of
Shares adopt this Agreement and approve the Merger in connection
with a Company Takeover Proposal or (B) approve or
recommend a Company Superior Offer (each, a
Change of
Recommendation
) if, in the case of both
clause (A) and (B) above (w) an unsolicited, bona
fide written offer is made to the Company by a third party
representing a Company Takeover Proposal, (x) the Company
is in compliance in all material respects with its obligations
under this Section 4.4, (y) the Board determines in
good faith after consultation with the Companys outside
legal and financial advisors that such Company Takeover Proposal
constitutes a Company Superior Offer (after giving effect to all
adjustments to the terms of this Agreement which may be proposed
by Parent, including pursuant to clause (ii) below), and
(z) following consultation with outside legal counsel and
its financial advisors, the Board determines in good faith that
the withdrawal or modification of its recommendation that
holders of Shares adopt this Agreement and approve the Merger is
required to comply with the fiduciary duties of the Board to the
stockholders of the Company under applicable Law, but only, in
the case of both clause (A) and (B) above, if prior to
A-30
taking any such action (i) the Company provides written
notice to Parent (a
Notice of Superior Offer
)
advising Parent (1) that the Board has received a Company
Superior Offer and intends to make a Change of Recommendation in
accordance with this Section 4.4(e), (2) specifying
the material terms and conditions of such Company Superior
Offer(including a copy thereof if in writing) and identifying
the Person or group making such Company Superior Offer, and
(3) providing to Parent all materials and information
delivered or made available to the Person or group making such
proposed Company Superior Offer (it being understood and agreed
that any amendment to the financial or other material terms of
any such proposed Company Superior Offer shall require a new
Notice of Superior Offer and a new five Business Day period),
and (ii) during the five Business Days following
Parents receipt of the Notice of Superior Offer, the
Company shall, and shall direct the Company Representatives to,
cooperate and negotiate in good faith with Parent (to the extent
that Parent requests the same) to enable Parent to propose in
writing such adjustments to the terms of this Agreement so that
any Company Takeover Proposal ceases to constitute a Company
Superior Offer. Any Change of Recommendation shall not change
the approval of this Agreement or any other approval of the
Board in any respect that would have the effect of causing any
Takeover Law to be applicable to the transactions contemplated
hereby, including the Merger.
(f) Notwithstanding anything to the contrary contained in
this Section 4.4, the Board may, prior to obtaining the
Company Stockholder Approval and other than as a result of the
receipt of a Company Takeover Proposal, withdraw or modify its
approval of this Agreement or its recommendation that the
Companys stockholders adopt this Agreement and approve the
Merger (a
Withdrawal of Recommendation
), if
the Board determines in good faith (after consultation with its
outside legal and financial advisors) that the failure to take
such action would violate its fiduciary duties under applicable
Law. Any Withdrawal of Recommendation shall not change the
approval of this Agreement or any other approval of the Board in
any respect that would have the effect of causing any Takeover
Law to be applicable to the transactions contemplated hereby,
including the Merger.
(g) Nothing contained in this Section 4.4 shall
prohibit the Board from taking and disclosing to the
stockholders of the Company a position contemplated by
Rule 14d-9
and
Rule 14e-2(a)
promulgated under the Exchange Act;
provided
, that any
such disclosure other than (i) a
stop-look-and-listen communication to the
stockholders of the Company pursuant to
Rule 14d-9(f)
promulgated under the Exchange Act (or any similar
communications to the stockholders of the Company), (ii) an
express rejection of any applicable Company Takeover Proposal or
(iii) an express reaffirmation of its recommendation to the
stockholders of the Company in favor of the Merger shall be
deemed to be a Change of Recommendation;
provided
further
that the Board shall not be permitted to
recommend that the Companys stockholders tender any
securities in connection with any tender or exchange offer (or
otherwise approve, endorse or recommend any Company Takeover
Proposal or withhold, withdraw or modify the recommendation that
holders of Shares adopt this Agreement and approve the Merger),
unless in each case, in connection therewith, the Board effects
a Change of Recommendation in accordance with the terms of
Section 4.4(e).
4.5
Takeover Laws
.
Notwithstanding any other provision in this Agreement, if any
Takeover Law may become, or may purport to be, applicable to the
transactions contemplated by this Agreement, the Company and the
members of its Board will grant such approvals and take such
actions as are necessary so that the transactions contemplated
by this Agreement may be consummated as promptly as practicable
on the terms and conditions contemplated hereby and otherwise
act to eliminate the effect of any Takeover Law on any of the
transactions contemplated by this Agreement.
4.6
Stockholder Litigation
.
The Company shall give Parent the opportunity to participate in,
subject to a customary joint defense agreement, of any
stockholder litigation against the Company or its directors or
officers relating to the Merger or any other transactions
contemplated hereby;
provided
,
however
, that no
settlement of any such litigation shall be agreed to without
Parents consent.
4.7
SEC Reports
.
Between the date of this Agreement and the Effective Time, the
Company will timely file with the SEC all Company SEC Reports
required to be filed by it under the Exchange Act.
A-31
ARTICLE V
ADDITIONAL
COVENANTS OF THE PARTIES
5.1
Notification of Certain Matters
.
Each of Parent and the Company shall give prompt notice to the
other (and, if in writing, furnish copies of) if any of the
following occurs after the date of this Agreement:
(i) there has been a material failure on the part of the
Party providing the notice to comply with or satisfy any
covenant, condition or agreement to be complied with or
satisfied by it hereunder; (ii) receipt of any notice or
other communication in writing from any third party alleging
that the Consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement,
(including the Merger); (iii) receipt of any notice or
other communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement
(including the Merger); (iv) the discovery of any fact or
circumstance that, or the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which, would
reasonably be expected to cause or result in any of the
conditions to the Merger set forth in Article VI not being
satisfied or the satisfaction of those conditions being
materially delayed; or (v) the commencement or threat, in
writing, of any Action against any Party or any of its
affiliates, or any of their respective properties or assets, or,
to the knowledge of the Company or Parent, as applicable, any
officer, director, partner, member or manager, in his or her
capacity as such, of the Company or Parent, as applicable, or
any of their affiliates with respect to the consummation of the
Merger. No such notice to any Party shall constitute an
acknowledgement or admission by the Party providing notice
regarding whether or not any of the conditions to Closing or to
the consummation of the Merger have been satisfied or in
determining whether or not any of the representations,
warranties or covenants contained in this Agreement have been
breached.
5.2
Reasonable Best Efforts
.
(a) Subject to the terms and conditions of this Agreement,
prior to the Effective Time, each Party shall use its reasonable
best efforts, and shall cooperate fully with the other Parties,
to take, or cause to be taken, all actions and to do, or cause
to be done, all things necessary, proper or advisable under
applicable Laws and regulations to consummate the Merger and the
other transactions contemplated by this Agreement, including the
receipt of all Requisite Regulatory Approvals (as defined in
Section 6.1(c)), and to comply as promptly as practicable
with all requirements of Governmental Authorities applicable to
the transactions contemplated by this Agreement. In furtherance
and not in limitation of the foregoing, to the extent required
under the HSR Act or any other Laws that are designed to
prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade
(Antitrust Laws)
, each Party hereto agrees to
make an appropriate filing of a Notification and Report Form
pursuant to the HSR Act or other required filing or application
under Antitrust Laws, as applicable, with respect to the
transactions contemplated hereby as promptly as practicable, to
supply as promptly as reasonably practicable any additional
information and documentary material that may be requested
pursuant to the HSR Act or such Antitrust Laws, as applicable,
and to take all other actions necessary, proper or advisable to
cause the expiration or termination of the applicable waiting
periods under the HSR Act or to obtain consent, approvals or
authorizations under Antitrust Laws as soon as practicable,
including by requesting early termination of the waiting period
provided for in the HSR Act.
(b) Each of Parent and Merger Sub, on the one hand, and the
Company, on the other hand, shall, in connection with the
efforts referenced in Section 5.2(a) to obtain all
requisite approvals and authorizations for the transactions
contemplated by this Agreement under the HSR Act or any
Antitrust Law, use its reasonable best efforts to:
(i) cooperate in all respects with each other in connection
with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding
initiated by a private party; (ii) keep the other Party
reasonably informed of any communication received by such Party
from, or given by such Party to, the Federal Trade Commission
(the
FTC
), the Antitrust Division of the
Department of Justice (the
DOJ
) or any other
U.S. or foreign Governmental Authority and of any
communication received or given in connection with any
proceeding by a private party, in each case regarding any of the
transactions contemplated hereby; and (iii) permit the
other Party and its outside counsel to review any communication
given by it to, and consult with each other in advance of any
meeting or conference with, the FTC, the DOJ or any other
Governmental Authority or, in connection with any proceeding by
a private party, with any other Person, and to the extent
permitted by the FTC,
A-32
the DOJ or such other applicable Governmental Authority or other
Person, give the other Party the opportunity to attend and
participate in such meetings and conferences.
(c) In furtherance and not in limitation of the covenants
of the Parties contained in Section 5.2(a) and
Section 5.2(b), (i) as soon as reasonably practicable
following the date of this Agreement, the Company and Parent
shall cooperate in all respects with each other and use (and
shall cause their respective subsidiaries to use) their
respective reasonable best efforts to prepare and file with the
relevant insurance regulators requests for approval of the
transactions contemplated by this Agreement (including the
Merger) and shall use all reasonable efforts to have such
insurance regulators approve the transactions contemplated by
this Agreement, and (ii) each of Parent and Merger Sub, on
the one hand, and the Company, on the other hand, shall give
prompt written notice if such Party receives any notice from any
insurance regulator in connection with the transactions
contemplated by this Agreement, and, in the case of any such
written notice, shall promptly furnish the other Party with a
copy thereof. If an insurance regulator requires that a hearing
be held in connection with its approval of the transactions
contemplated hereby, each Party shall use its reasonable best
efforts to arrange for such hearing to be held promptly. At
Parents request, the Company shall obtain from applicable
regulatory authorities written assurances in form reasonably
satisfactory to Parent with respect to the applicability to the
Company
and/or
any
of the Company Subsidiaries of orders, decrees or pronouncements
of such regulatory authorities.
(d) In furtherance and not in limitation of the covenants
of the Parties contained in Section 5.2(a),
Section 5.2(b) and Section 5.2(c), if any objections
are asserted with respect to the transactions contemplated
hereby under the HSR Act, any Antitrust Law or any other
applicable Law or if any suit is instituted (or threatened to be
instituted) by the FTC, the DOJ or any other applicable
Governmental Authority or any private party challenging any of
the transactions contemplated hereby as violative of the HSR
Act, any Antitrust Law or any other applicable Law or which
would otherwise prevent, materially impede or materially delay
the consummation of the transactions contemplated hereby, each
of Parent, Merger Sub and the Company shall use its reasonable
best efforts to resolve any such objections or suits so as to
permit consummation of the transactions contemplated by this
Agreement, including in order to resolve such objections or
suits which, in any case if not resolved, could reasonably be
expected to prevent, materially impede or materially delay the
consummation of the transactions contemplated hereby (including
the Merger).
(e) In the event that any administrative or judicial action
or proceeding is instituted (or threatened to be instituted) by
a Governmental Authority or private party challenging the Merger
or any other transaction contemplated by this Agreement, or any
other agreement contemplated hereby, each of Parent, Merger Sub
and the Company shall cooperate in all respects with each other
and use its respective reasonable best efforts to contest and
resist any such action or proceeding and to have vacated,
lifted, reversed or overturned any decree, judgment, injunction
or other order, whether temporary, preliminary or permanent,
that is in effect and that prohibits, prevents or restricts
consummation of the transactions contemplated by this Agreement.
(f) Prior to the Effective Time, the Company shall use its
commercially reasonable efforts to obtain any Consents of third
parties with respect to any Contracts to which the Company or
any Company Subsidiary is a party as may be necessary or
appropriate for the consummation of the transactions
contemplated hereby or required by the terms of any Contract as
a result of the execution, performance or consummation of the
transactions contemplated hereby (including the Merger).
(g) Notwithstanding anything to the contrary contained in
this Agreement, nothing in this Agreement shall obligate Parent,
Merger Sub or any of their respective affiliates to take any
action or commit to take any action, or consent or agree to any
condition, restriction or undertaking requested or imposed by
any Governmental Authority, whether in connection with obtaining
any Requisite Regulatory Approval or otherwise, if, in the good
faith determination of Parent, such action, condition,
restriction or undertaking, individually or in the aggregate,
with all other such actions, conditions, restrictions or
undertakings, would materially adversely affect the benefits,
taken as a whole, that Parent reasonably expects to derive from
the transactions contemplated by this Agreement (a
Burdensome Condition
);
provided
,
however
, that any requirement that Parent, the Surviving
Corporation or any of its or their subsidiaries (i) provide
or commit to provide additional capital to the Company,
(ii) maintain operations or employees in the State of
Florida, or (iii) provide any surplus maintenance,
guarantee, keep-well or similar agreements or commitments shall
each be deemed to be a Burdensome Condition.
A-33
5.3
Indemnification and Insurance
.
(a) The Certificate of Incorporation and Bylaws of the
Surviving Corporation shall contain provisions no less favorable
with respect to indemnification than are set forth in the
Certificate of Incorporation and Bylaws, respectively, of the
Company, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective
Time in any manner that would affect adversely the rights
thereunder of individuals who, at or prior to the Effective
Time, were directors, officers, or employees, of the Company or
any of the Company Subsidiaries. During the period ending on the
sixth anniversary of the Effective Time, Parent and the
Surviving Corporation shall, jointly and severally, to the
fullest extent that the Company would have been permitted to do
so under applicable Law, indemnify and hold harmless each
present and former director and officer of the Company and each
of the Company Subsidiaries (collectively, the
Indemnified Parties
) against all costs and
expenses (including reasonable attorneys fees), judgments,
fines, losses, claims, damages, liabilities and settlement
amounts paid in connection with any claim, action, suit,
proceeding or investigation (whether arising before or after the
Effective Time), whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or
omission, in his or her capacity as an officer, director, or
employee of the Company, occurring on or before the Effective
Time (a
Covered Proceeding
). In the event of
any such claim, action, suit, proceeding or investigation,
Parent or the Surviving Corporation shall pay the reasonable
fees and expenses of counsel selected by the Indemnified
Parties, which counsel shall be reasonably satisfactory to the
Surviving Corporation, promptly after statements therefor are
received (
provided
the applicable Indemnified Party
provides an undertaking to repay all advanced expenses if it is
finally judicially determined that such Indemnified Party is not
entitled to indemnification);
provided
,
howeve
r,
that neither Parent nor the Surviving Corporation shall be
liable for any settlement effected without Parents or the
Surviving Corporations written consent (which consent
shall not be unreasonably withheld or delayed);
provided
,
further
, that Parent and the Surviving Corporation shall
not be required to agree to the entry of any judgment or
settlement that provides for injunctive or other non-monetary
relief affecting the Parent, the Surviving Corporation or any of
their respective subsidiaries. Neither Parent nor the Surviving
Corporation shall be obligated pursuant to this
Section 5.3(a) to pay the fees and expenses of more than
one counsel (selected by a plurality of the applicable
Indemnified Parties) for all Indemnified Parties with respect to
such Covered Proceeding unless there is, under applicable
standards of professional conduct, a conflict on any significant
issue between the positions of any two or more Indemnified
Parties, in which case Parent shall pay the fees of such
additional counsel required by such conflict;
provided
,
that, in the event that any claim for indemnification is
asserted or made within such six-year period, all rights to
indemnification in respect of such claim shall continue until
the disposition of such claim. Any Indemnified Party that
desires to claim indemnification under this Section 5.3(a)
upon becoming aware of any such Covered Proceeding shall
promptly notify Parent and the Surviving Corporation.
(b) Immediately after the Effective Time, Parent shall have
obtained and paid for, and there shall be in effect, a tail
policy of (i) directors and officers liability
insurance and (ii) corporate counsel liability insurance
covering the Companys Senior Vice President, General
Counsel and Secretary, in respect of acts or omissions occurring
prior to the Effective Time covering each of those Persons who
are covered by (x) the Companys and any Company
Subsidiarys directors and officers liability
insurance policy and (y) corporate counsel liability
insurance, as of the date hereof for a period of six years
commencing as of the Effective Time, it being understood that,
if requested in writing by Parent, the Company shall, prior to
the Effective Time, obtain such extended reporting period
coverage under its existing insurance programs (to be effective
as of the Effective Time).
(c) In the event Parent or the Surviving Corporation or any
of their respective successors or assigns (i) consolidates
with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers all or
substantially all of its properties and assets to any Person,
then, and in each such case, proper provision shall be made so
that the successors and assigns of Parent or the Surviving
Corporation, as the case may be, shall succeed to the
obligations set forth in this Section 5.3.
(d) Parent shall cause the Surviving Corporation to perform
all of the obligations of the Surviving Corporation under this
Section 5.3.
A-34
(e) The provisions of this Section 5.3 (i) are
intended to be for the benefit of, and shall be enforceable by,
each Indemnified Party, his or her heirs and representatives and
(ii) are in addition to, and not in substitution for, any
other rights to indemnification or contribution that any such
Person may have by contract or otherwise.
5.4
Benefit Plans and Employee Matters
.
(a) Parent hereby agrees that, for a period commencing on
the Effective Time and ending on the last day of the calendar
year that includes the first anniversary of the Effective Time,
it shall, or it shall cause the Surviving Corporation or its
subsidiaries to, (i) provide each employee of the Company
or the Company Subsidiaries as of the Effective Time (each, an
Employee
), while such Employee remains
employed with the Surviving Corporation or any of its
subsidiaries, with at least the same level of base salary or
wages, that was provided to each such Employee immediately prior
to the Effective Time, and (ii) provide the Employees with
base salary, wages, cash incentive compensation, other cash
variable compensation and other employee benefits (other than
equity-based compensation) that are, in the aggregate, no less
favorable than, at Parents election, (A) those
provided to such Employees immediately prior to the Effective
Time or (B) those provided to similarly situated employees
of Parent, or at Parents election, any subsidiary of
Parent.
(b) Each Employee shall receive credit for purposes of
eligibility to participate, vesting, and, solely with respect to
vacation, other paid time off and severance, benefit accrual
(but excluding benefit accruals under any defined benefit
pension plan or for any other purpose) under any employee
benefit plan, program or arrangement (including vacation plans,
programs and arrangements) established or maintained by Parent,
the Surviving Corporation or any of their respective
subsidiaries under which such Employee is eligible to
participate on or after the Effective Time for service with the
Company and the Company Subsidiaries through the Effective Time
to the same extent recognized for such purpose by the Company or
any of the Company Subsidiaries under comparable Company
Employee Plans immediately prior to the Effective Time;
provided
,
however
, that such crediting of service
shall not operate to duplicate any benefit or the funding of any
such benefit.
(c) With respect to the welfare benefit plans, programs and
arrangements maintained, sponsored or contributed to by Parent
or the Surviving Corporation
(Parent Welfare Benefit
Plans)
in which an Employee is or becomes eligible to
participate on or after the Effective Time, Parent shall
(a) waive, or cause its insurance carrier to waive, all
limitations as to preexisting and at-work conditions, if any,
with respect to participation and coverage requirements
applicable to each Employee under any Parent Welfare Benefit
Plan to the same extent waived under a comparable Company
Employee Plan (to the extent permitted by the applicable Parent
Welfare Benefit Plan), and (b) provide credit to each
Employee for any co-payments, deductibles and
out-of-pocket
expenses paid by such Employee under the Company Employee Plans
during the plan year that includes the Effective Time for the
plan year under the applicable Parent Welfare Benefit Plan that
includes the Effective Time.
(d) From and after the Effective Time, the Surviving
Corporation shall honor, in accordance with their terms, all
employment and severance agreements listed in
Section 5.4(d)
of the Company Disclosure Schedule in
effect immediately prior to the Effective Time that are
applicable to any current or former employees or directors of
the Company or any of the Company Subsidiaries.
(e) Nothing in this Section 5.4 shall amend, or be
deemed to amend, any Company Employee Plan, shall prevent the
amendment or termination of any Company Employee Plans by
Parent, the Surviving Corporation or their respective
subsidiaries, or shall limit the right of Parent, the Surviving
Corporation or any of their respective subsidiaries to terminate
the employment of any Employee at any time.
(f) Unless otherwise directed in writing by Parent at least
one Business Day prior to the Effective Time, the Company will
terminate the Companys 401(k) (the
Company 401(k)
Plan
), effective as of the day immediately preceding
the Effective Time. The Company shall provide Parent evidence
that such resolutions to terminate the Company 401(k) Plan have
been adopted by the Board. The form and substance of such
resolutions shall be subject to the reasonable approval of
Parent. The Company shall also take such other actions in
furtherance of terminating the Company 401(k) Plan as Parent may
reasonably request. Immediately prior to such termination, the
Company will make (or cause to be made) all necessary payments
to fund the contributions (i) necessary or required to
maintain the tax-qualified status of the Company 401(k) Plan,
(ii) for elective deferrals made pursuant to Company
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401(k) Plan for the period prior to termination, and
(iii) for employer matching contributions (if any) for the
period prior to termination.
5.5
Public Announcements
.
Parent and the Company agree that no public release or
announcement concerning this Agreement or the Merger shall be
issued by either Party or any of their affiliates without the
prior consent of the other Party (which consent shall not be
unreasonably withheld or delayed), except as such release or
announcement may be required by applicable Law or the rules or
regulations of any securities exchange, in which case the
applicable Party shall use reasonable best efforts to allow the
other Party reasonable time to comment on such release or
announcement in advance of such issuance;
provided
,
however
, that either Parent or the Company may make any
public statement in response to specific questions by the press,
analysts, investors or those attending industry conferences or
financial analyst conference calls, so long as any such
statements are not inconsistent with previous public releases or
announcements made by Parent or the Company in compliance with
this Agreement.
5.6
Company Producers
.
As promptly as practical following the date of this Agreement,
and in any event within 10 Business Days, and in compliance with
applicable Law, Parent and the Company shall develop a joint
plan for the communication by the Company regarding the
transactions contemplated by this Agreement (including the
Merger) with the Company Producers. The Company shall obtain the
written consent of Parent (such consent not to be unreasonably
withheld, conditioned or delayed) prior to initiating any
communication with any Company Producers regarding the
transactions contemplated by this Agreement (including the
Merger). Without the prior written consent of the Company (such
consent not to be unreasonably withheld, delayed or
conditioned), Parent shall not orally or in writing initiate any
communication with any Company Producer,
provided
,
however
, that the foregoing shall not prohibit Parent
from responding to inquiries initiated by Company Producers. For
purposes of this Section 5.6, Company Producers
shall not mean any insurance producer, reinsurance intermediary,
agency, agent, managing general agent, wholesaler, broker or
other Person with whom Parent or any subsidiary of Parent has an
existing relationship as of the date hereof.
5.7
Financing
.
The Company shall, and shall cause the Company Subsidiaries to,
reasonably cooperate in connection with the arrangement of any
financing by Parent or any of its subsidiaries in connection
with the transactions contemplated by this Agreement (the
Financing
) as may be reasonably requested by
Parent (provided that such requested cooperation does not
unreasonably interfere with the ongoing operations of the
Company and the Company Subsidiaries and;
provided
,
further
, that Parent reimburses the Company for any
reasonable costs or expenses incurred in connection with such
cooperation). Such cooperation by the Company shall include
(a) providing to the parties providing Financing all
financial statements and other information relating to the
Company and the Company Subsidiaries that are reasonably
required for financings similar to the Financing and using
reasonable best efforts to provide such other financial
information as Parent shall reasonably request in order to
consummate the Financing, (b) review for accuracy
(i) one or more offering documents or confidential
information memoranda for the Financing and (ii) materials
for rating agency presentations, (c) executing and
delivering and causing the Company Subsidiaries to execute and
deliver, customary certificates and similar items ancillary to
the Financing as may be reasonably requested by Parent in
connection with the Financing, and (d) assisting Parent in
requesting accounting comfort letters from the Companys
independent auditors. Notwithstanding anything in this Agreement
to the contrary, neither the Company nor any Company Subsidiary
shall be required to pay any commitment or other fee or incur
any other liability or obligation in connection with the
Financing (or any replacements thereof) prior to the Effective
Time.
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ARTICLE VI
CONDITIONS
6.1
Conditions to Each Partys
Obligations
.
The obligations of each Party to consummate the Merger shall be
subject to the satisfaction or waiver (where permissible), at or
prior to the Effective Time, of the following conditions:
(a)
Stockholder Approval
.
The
Company Stockholder Approval shall have been obtained in
accordance with the DGCL.
(b)
HSR Act
.
The applicable
waiting period (and any extension thereof) under the HSR Act
shall have expired or been terminated.
(c)
Requisite Regulatory
Approvals
.
All authorizations, approvals and
permits required to be obtained from or made with any
Governmental Authority in order to consummate the transactions
contemplated by this Agreement (the
Requisite
Regulatory Approvals
) shall have been obtained or made.
(d)
No Law
.
No Governmental
Authority shall have enacted, issued, promulgated, enforced or
entered any Law (whether temporary, preliminary or permanent) or
Order that is then in effect and has the effect of making the
Merger illegal or otherwise preventing or prohibiting
consummation of the Merger.
6.2
Conditions to Obligations of Parent and Merger
Sub
.
The obligations of Parent and Merger Sub to consummate the
Merger are subject to the satisfaction or waiver by Parent, at
or prior to the Effective Time, of the following additional
conditions:
(a)
Representations and Warranties
.
(i) Each of the representations and warranties of the
Company contained in Section 2.1, Section 2.2 (other
than subsections (e) and (h)), Section 2.3(a),
Section 2.4, Section 2.7(c), Section 2.8(b),
Section 2.18 and Section 2.20 shall be true and
correct in all respects as of the date of this Agreement and as
of the Effective Time as though made as of the Effective Time
(except to the extent that any of such representations and
warranties expressly speaks only as of an earlier date, in which
case such representation and warranty shall be true and correct
as of such earlier date); and
(ii) each of the other representations and warranties of
the Company set forth in this Agreement shall be true and
correct (disregarding all qualifications or limitations as to
materiality, Company Material Adverse
Effect and words of similar import set forth therein) as
of the date of this Agreement and as of the Effective Time as
though made at and as of the Effective Time (except to the
extent that any of such representations and warranties expressly
speaks only as of an earlier date, in which case such
representation and warranty shall be true and correct as of such
earlier date), except where the failure of such representations
and warranties to be so true and correct has not had and would
not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
(b)
Agreements and Covenants
.
The
Company shall have performed, in all material respects, all of
its obligations and complied with, in all material respects, all
of its agreements and covenants to be performed or complied with
by it under this Agreement at or prior to the Effective Time.
(c)
Officer Certificate
.
The
Company shall have delivered to Parent a certificate, dated the
Closing Date, signed by the chief executive officer or chief
financial officer of the Company, certifying in such capacity as
to the satisfaction of the conditions specified in
Sections 6.2(a), 6.2(b) and 6.2(d).
(d)
Company Material Adverse
Effect
.
No Company Material Adverse Effect
shall have occurred since the date of this Agreement.
(e)
Burdensome Condition
.
The
Requisite Regulatory Approvals shall not have included or
contained, or resulted in the imposition of, any Burdensome
Condition.
(f)
Dissenting Shares
.
No more
than 15% of the outstanding Shares shall constitute Dissenting
Shares.
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6.3
Conditions to Obligations of the Company
.
The obligations of the Company to consummate the Merger are
subject to the satisfaction or waiver by the Company, at or
prior to the Effective Time, of the following additional
conditions:
(a)
Representations and
Warranties
.
Each of the representations and
warranties of Parent and Merger Sub set forth in this Agreement
shall be true and correct as of the date of this Agreement and
as of the Effective Time as though made at and as of the
Effective Time (except to the extent such representations and
warranties expressly relate to an earlier date, in which case as
of such earlier date), except where the failure of such
representations and warranties to be so true and correct has not
had and would not reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse Effect.
(b)
Agreements and Covenants
.
Each
of Parent and Merger Sub shall have performed, in all material
respects, its obligations and complied with, in all material
respects, its agreements and covenants to be performed or
complied with by it under this Agreement at or prior to the
Effective Time.
(c)
Officer Certificate
.
Parent
shall have delivered to the Company a certificate, dated the
Closing Date, signed by the chief executive officer or chief
financial officer of Parent, certifying in such capacity as to
the satisfaction of the conditions specified in
Sections 6.3(a) and 6.3(b).
6.4
Frustration of Conditions
.
Neither Parent nor the Company may rely on the failure of any
condition set forth in this Article VI to be satisfied if
such failure was caused by such Partys failure to comply
with or perform any of its covenants or obligations set forth in
this Agreement.
ARTICLE VII
TERMINATION
AND ABANDONMENT
7.1
Termination
.
This Agreement may be terminated and the Merger and the other
transactions contemplated hereby may be abandoned at any time
prior to the Effective Time, notwithstanding any approval of the
matters presented in connection with the Merger by the
stockholders of the Company (the date of any such termination,
the
Termination Date
), as follows:
(a) by mutual written consent of each of the Company and
Parent, as duly authorized by the Board of Directors of each of
Parent the Company;
(b) by written notice by either Parent or the Company, if
the Effective Time shall not have occurred on or before
October 31, 2008 (the
Outside Date
);
provided
,
however
, that the right to terminate
this Agreement under this Section 7.1(b) shall not be
available to any Party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the
failure of the Merger to be consummated on or before the Outside
Date;
(c) by written notice by either Parent or the Company, if
any Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any Order or Law that is, in
each case, then in effect and is final and nonappealable and has
the effect of permanently restraining, enjoining or otherwise
preventing or prohibiting the transactions contemplated by this
Agreement (including the Merger);
provided
,
however
, that the right to terminate this Agreement under
this Section 7.1(c) shall not be available to any Party
whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, any such Order or Law to have
been enacted, issued, promulgated, enforced or entered;
(d) by written notice by Parent (if Parent is not in
material breach of any of its representations, warranties,
covenants or agreements under this Agreement), if there has been
a breach by the Company of any of its representations,
warranties, covenants or agreements contained in this Agreement,
or if any representation or warranty of the Company shall have
become untrue or inaccurate, in either case that would result in
a failure of a condition set forth in Section 6.2(a) or
6.2(b) (a
Terminating Company Breach
);
provided
, that if such
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Terminating Company Breach is reasonably curable by the Company,
within 20 days after the Company has received written
notice from Parent of such Terminating Company Breach, through
the exercise of commercially reasonable efforts and for as long
as the Company continues to exercise such commercially
reasonable efforts, Parent may not terminate this Agreement
under this Section 7.1(d) until the earlier of the
expiration of such
20-day
period and the Outside Date;
(e) by written notice by the Company (if the Company is not
in material breach of any of its representations, warranties,
covenants or agreements under this Agreement), if there has been
a breach by Parent or Merger Sub of any of its representations,
warranties, covenants or agreements contained in this Agreement,
or if any representation or warranty of Parent or Merger Sub
shall have become untrue or inaccurate, in either case that
would result in a failure of a condition set forth in
Section 6.3(a) or 6.3(b) (a
Terminating Parent
Breach
);
provided
, that if such Terminating
Parent Breach is reasonably curable by Parent or Merger Sub,
within 20 days after Parent has received written notice
from the Company of such Terminating Parent Breach, through the
exercise of commercially reasonable efforts and for as long as
Parent or Merger Sub, as the case may be, continues to exercise
such commercially reasonable efforts, the Company may not
terminate this Agreement under this Section 7.1(e) until
the earlier of the expiration of such
20-day
period and the Outside Date;
(f) by written notice by Parent, if the Board
(i) withdraws, modifies or qualifies in a manner adverse to
Parent or Merger Sub, or publicly proposes to withdraw, modify
or qualify in a manner adverse to parent or Merger Sub, its
recommendation that the holders of Shares adopt this Agreement;
(ii) fails to include in the Proxy Statement its
recommendation to the holders of Shares that they give the
Company Stockholder Approval; (iii) approves, endorses or
recommends, or publicly proposes to approve, endorse or
recommend, any Company Takeover Proposal, (iv) makes a
Change of Recommendation or a Withdrawal of Recommendation, or
(v) in the case of a Company Takeover Proposal made by way
of a tender offer or exchange offer, fails to recommend that the
Companys stockholders reject such tender offer or exchange
offer within the ten Business Day period specified in
Section 14e-2(a)
under the Exchange Act or (if later than the end of such ten
Business Day period) fails to reconfirm its recommendation that
the holders of Shares adopt this Agreement and approve the
Merger within five Business Days after a request by Parent to do
so; or
(g) by written notice by either Parent or the Company, if,
at the Special Meeting (including any adjournment or
postponement thereof at which this Agreement is voted upon), the
Company Stockholder Approval is not obtained;
provided
,
however
, that the right to terminate this Agreement under
this Section 7.1(g) shall not be available to the Company
where the failure to obtain the Company Stockholder Approval
shall have resulted from the Companys breach of this
Agreement.
7.2
Effect of Termination
.
In the event of the termination of this Agreement pursuant to
Section 7.1, this Agreement shall forthwith become void,
and there shall be no liability on the part of any Party hereto
or any of their respective affiliates or the directors,
officers, partners, members, managers, employees, agents or
other representatives of any of them, and all rights and
obligations of each Party hereto shall cease, except (i) as
set forth in this Section 7.2 and in Section 7.3 and
Article VIII and (ii) subject to Section 7.3(c),
nothing herein shall relieve any Party from liability for any
fraud or willful breach of this Agreement. Without limiting the
foregoing, Section 4.2(b), this Section 7.2,
Section 7.3 and Article VIII shall survive the
termination of this Agreement. Prior to the Effective Time, the
liability of Parent and Merger Sub to the Company under the
Agreement is specifically limited to the amount of the Parent
Termination Fee, if and as payable in accordance with
Section 7.3(c).
7.3
Fees and Expenses
.
(a) Except as otherwise set forth in this Section 7.3,
all Expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the Party
incurring such expenses, whether or not the Merger or any other
related transaction is consummated;
provided
,
however
, that the filing fee under the HSR Act shall be
borne equally by the Company and Parent. As used in this
Agreement,
Expenses
shall include all
out-of-pocket
expenses (including all fees and expenses of counsel,
accountants, investment bankers, financing sources, experts and
consultants to a Party hereto and its affiliates) incurred by a
Party or on its behalf in connection
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with or related to the authorization, preparation, negotiation,
execution or performance of this Agreement, the preparation,
printing, filing or mailing of the Proxy Statement, the
solicitation of stockholder approvals and all other matters
related to the consummation of the Merger and the other
transactions contemplated hereby
(b) If
(i) (x) at any time on or after the date of this
Agreement, a Company Takeover Proposal is made to the Board or
the Company or is publicly proposed or publicly disclosed or any
Person or group shall have publicly announced or disclosed an
intention to make a Company Takeover Proposal,
(y) thereafter, this Agreement is terminated by Parent or
the Company pursuant to Section 7.1(b) or
Section 7.1(g), or by Parent pursuant to
Section 7.1(d), and (z) on or within 12 months
after the date of such termination, any definitive agreement
providing for a Qualifying Transaction shall have been executed
or a Qualifying Transaction shall have been consummated with any
Person;
(ii) this Agreement is terminated by Parent pursuant to
Section 7.1(f); or,
(iii) this Agreement is terminated by the Company or Parent
pursuant to Section 7.1(g) and prior to such termination,
the Company shall have made a Change of Recommendation or a
Withdrawal of Recommendation,
then in any such event the Company shall pay to Parent a fee of
$8,000,000 in cash (the
Termination Fee
),
such payment to be made (1) in the case of termination
described in Section 7.3(b)(i), upon the earlier to occur
of execution of an agreement providing for a Qualifying
Transaction or consummation of such Qualifying Transaction, and
(2) in the case of a termination described in
Section 7.3(b)(ii) or Section 7.3(b)(iii), within two
Business Days after such termination. In addition, in the case
of any termination of this Agreement pursuant to
Section 7.1(g), (1) the Expenses of Parent shall be
paid by the Company to Parent in cash (A) concurrently with
and as a condition to any such termination effected by the
Company and (B) on the second Business Day following any
such termination effected by Parent, and (2) the amount of
such Expenses so paid shall not be in excess of $2,000,000 and
shall be credited against the Termination Fee that is or becomes
payable in connection with such termination pursuant to this
Section 7.3(b). For the avoidance of doubt, the Company
shall not be required to pay the Termination Fee or the Expenses
pursuant to more than one clause of this Section 7.3(b).
For the purposes of this Agreement, a
Qualifying
Transaction
means any Company Takeover Proposal
(substituting 50% for 15% in the
definition of Company Takeover Proposal).
(c) Parent agrees that (i) if this Agreement shall be
terminated by the Company pursuant to Section 7.1(e) as a
result of a breach by Parent of (x) Section 3.7 or
(y) its covenants and agreements contained in this
Agreement and (ii) the notice of termination includes a
demand, which demand shall be irrevocable, to receive the Parent
Termination Fee, Parent shall pay $8,000,000 (the
Parent Termination Fee
) to the Company no
later than two (2) Business Days after such termination,
provided
that the Companys right to receive the
Parent Termination Fee shall terminate and be of no further
force or effect (1) if the Company makes any demand or
claim for Company Damages (as defined below) in any Action,
other than for the payment of the Parent Termination Fee, or
(2) if any condition to the obligation of Parent or Merger
Sub to consummate the Merger set forth in Section 6.2
becomes incapable of being satisfied. Notwithstanding anything
in this Agreement to the contrary, the right to receive the
Parent Termination Fee in accordance with this
Section 7.3(c) shall be the sole and exclusive remedy
(whether at law, in equity, in contract, in tort or otherwise)
of the Company, the Company Subsidiaries, and its and their
affiliates against Parent, Merger Sub and any of their
respective current, former or future directors, officers,
employees, agents, partners, managers, members, affiliates,
stockholders, assignees or representatives for any loss, claim,
damage, liability or expense (x) suffered in connection
with this Agreement or the transactions contemplated hereby
(including any breach of this Agreement by Parent or Merger Sub)
or (y) as a result of the failure of the Merger or any of
the other transactions contemplated hereby to be consummated in
circumstances giving rise to the right to receive the Parent
Termination Fee
(Company Damages)
, and upon
payment of the Parent Termination Fee, none of Parent, Merger
Sub and any of their respective current, former or future
directors, officers, employees, agents, partners, managers,
members, affiliates, stockholders, assignees or representatives
shall have any further liability or obligation relating to or
arising out of this Agreement or the transactions contemplated
hereby. For the avoidance of doubt, in no event shall Parent or
Merger Sub have any liability under or in respect of this
Agreement
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or the transactions related hereto (including the Merger) in
excess of an aggregate amount equal to the Parent Termination
Fee and the Parent Termination Fee shall not be payable on more
than one instance.
(d) In the event that the Company shall fail to pay the
Termination Fee when due or Parent shall fail to pay the Parent
Termination Fee when due, the Company shall reimburse Parent or
Parent shall reimburse the Company, as the case may be, for all
reasonable costs and expenses actually incurred or accrued by
Parent or the Company, as the case may be(including reasonable
fees and expenses of counsel), in connection with the collection
under and enforcement of this Section 7.3 and such
Termination Fee or Parent Termination Fee, as the case may be,
shall accrue interest for the period commencing on the date such
Termination Fee or Parent Termination Fee, as the case may be,
first became due, at a rate of interest published from time to
time in
The Wall Street Journal
, Eastern Edition (or any
successor publication thereto), designated therein as the prime
rate on the date such Termination Fee or Parent Termination Fee,
as the case may be, was due.
(e) Each of the Parties hereto acknowledges that the
Termination Fee, the Parent Termination Fee and the other
provisions of this Section 7.3 are an integral part of the
transactions contemplated by this Agreement, that the
Termination Fee, the Parent Termination Fee and the other
provisions of this Section 7.3 are not subject to the
requirement that the Company Stockholder Approval be obtained
and that these provisions shall be effective without regard to
whether the Company Stockholder Approval is obtained. Each of
the Parties hereto further acknowledges that, without the
Termination Fee, the Parent Termination Fee and the other
provisions of this Section 7.3, neither Parent nor the
Company would not enter into this Agreement, and that neither
the Termination Fee nor the Parent Termination Fee is a penalty,
but rather is liquidated damages in a reasonable amount that
will compensate Parent or the Company, as the case may be, for
the efforts and resources expended and opportunities foregone
while negotiating this Agreement and in reliance on this
Agreement and on the expectation of the consummation of the
transactions contemplated hereby, which amount would otherwise
be impossible to calculate with precision.
7.4
Amendment
.
This Agreement may be amended by the Parties hereto by action
taken by or on behalf of their respective Boards of Directors at
any time prior to the Effective Time;
provided
, that,
after the adoption of this Agreement and approval of the Merger
by the stockholders of the Company, no amendment may be made
that would reduce the amount or change the type of consideration
into which each Share shall be converted upon consummation of
the Merger or that would otherwise by Law require approval of
the stockholders of the Company, without approval of such
stockholders. This Agreement may only be amended pursuant to a
written agreement signed by each of the Parties hereto.
7.5
Waiver
.
At any time prior to the Effective Time, subject to applicable
Law, any Party hereto may in its sole discretion (i) extend
the time for the performance of any obligation or other act of
any other Party hereto, (ii) waive any inaccuracy in the
representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive
compliance with any agreement or condition contained herein. Any
such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the Party or Parties to be bound
thereby. Notwithstanding the foregoing, no failure or delay by
the Company, Parent or Merger Sub in exercising any right
hereunder shall operate as a waiver thereof nor shall any single
or partial exercise thereof preclude any other or further
exercise of any other right hereunder.
ARTICLE VIII
MISCELLANEOUS
8.1
Survival
.
The respective representations and warranties of the Company and
Parent contained herein or in any certificates or other
documents delivered prior to or at the Closing shall terminate
at the Effective Time.
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8.2
Notices
.
All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when
delivered in person, by facsimile, receipt confirmed, or on the
next business day when sent by reliable overnight courier to the
respective Parties at the following addresses (or at such other
address for a Party as shall be specified by like notice):
(i) if to the Company, to:
AmCOMP Incorporated
701 U.S. Highway One
North Palm Beach, Florida 33408
Attention: Fred R. Lowe, Chairman and Chief Executive Officer
Facsimile:
561-863-2603
with a copy to (but which shall not constitute notice to the
Company):
Olshan Grundman Frome Rosenzweig & Wolosky LLP
Park Avenue Tower
65 East 55th Street
New York, New York 10022
Attention: David J. Adler, Esq.
Facsimile:
(212) 451-2222
(ii) if to Parent or Merger Sub, to:
Employers Holdings, Inc.
9790 Gateway Drive
Reno, Nevada 89521
Attention: Lenard T. Ormsby, Esq., General Counsel
Facsimile:
(775) 886-1854
with a copy to (but which shall not constitute notice to Parent
or Merger Sub):
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Attention: Robert J. Sullivan, Esq.
David
C. Ingles, Esq.
Facsimile:
(212) 735-2000
8.3
Binding Effect; Assignment
.
This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the Parties hereto and their
respective successors and permitted assigns. This Agreement
shall not be assigned by operation of law or otherwise without
the prior written consent of the other Parties, and any
assignment without such consent shall be null and void, except
that Parent and Merger Sub may assign any or all of their rights
and obligations hereunder to any direct or indirect wholly owned
subsidiary of Parent,
provided
that no such assignment
shall relieve the assigning Party of its obligations hereunder.
8.4
Governing Law; Jurisdiction
.
This Agreement shall be governed by, construed and enforced in
accordance with the Laws of the State of Delaware without regard
to the conflict of laws principles thereof. All Actions arising
out of or relating to this Agreement shall be heard and
determined exclusively in any Delaware state or federal court.
The Parties hereto hereby (A) submit to the exclusive
jurisdiction of any Delaware state or federal court for the
purpose of any Action arising out of or relating to this
Agreement brought by any Party hereto and (B) irrevocably
waive, and agree not to assert by way of motion, defense or
otherwise, in any such Action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution,
that the
A-42
Action is brought in an inconvenient forum, that the venue of
the Action is improper, or that this Agreement or the
transactions contemplated hereby may not be enforced in or by
any of the above-named courts;
provided
,
however
,
that such consent to jurisdiction is solely for the purpose
referred to in this Section 8.4 and shall not be deemed to
be a general submission to the jurisdiction of such court or in
the State of Delaware other than for such purposes. Each of
Parent, Merger Sub and the Company agrees that a final judgment
in any action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in
any other manner provided by Law. Each of Parent, Merger Sub and
the Company irrevocably consents to the service of the summons
and complaint and any other process in any other action or
proceeding relating to the transactions contemplated by this
Agreement, on behalf of itself or its property, by personal
delivery of copies of such process to such Party. Nothing in
this Section 8.4 shall affect the right of any Party to
serve legal process in any other manner permitted by Law.
8.5
Waiver of Jury Trial
.
Each of the Parties hereto hereby waives to the fullest extent
permitted by applicable Law any right it may have to a trial by
jury with respect to any Action directly or indirectly arising
out of, under or in connection with this Agreement or the
transactions contemplated hereby. Each of the Parties hereto
(A) certifies that no representative, agent or attorney of
any other party has represented, expressly or otherwise, that
such other party would not, in the event of any Action, seek to
enforce that foregoing waiver and (B) acknowledges that it
and the other Parties hereto have been induced to enter into
this Agreement by, among other things, the mutual waivers and
certifications in this Section 8.5.
8.6
Counterparts
.
This Agreement may be executed and delivered (including by
facsimile transmission) in one or more counterparts, and by the
different Parties hereto in separate counterparts, each of which
when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
8.7
Interpretation
.
The article and section headings contained in this Agreement are
solely for the purpose of reference, are not part of the
agreement of the Parties and shall not in any way affect the
meaning or interpretation of this Agreement. As used in this
Agreement, (i) the term
Person
shall
mean and include an individual, a partnership, a joint venture,
a corporation, a limited liability company, a trust, an
association, an unincorporated organization, a Governmental
Authority and any other entity, (ii) unless otherwise
specified herein, the term
affiliate,
with
respect to any Person, shall mean and include any Person,
directly or indirectly, through one or more intermediaries
controlling, controlled by or under common control with such
Person, (iii) the term
subsidiary
of any
specified Person shall mean any corporation a majority of the
outstanding voting power of which, or any partnership, joint
venture, limited liability company or other entity a majority of
the total equity interests of which, is directly or indirectly
(either alone or through or together with any other subsidiary)
owned by such specified Person, (iv) the term
knowledge,
when used with respect to the
Company, shall mean the knowledge of the executive officers and
other employees of the Company after due inquiry set forth on
Section 8.7
of the Company Disclosure Schedule and,
when used with respect to Parent, shall mean the knowledge of
the executive officers of Parent after due inquiry set forth on
Section 8.7
of the Parent Disclosure Schedule, and
(v) the term
Business Day
means any day
on which the principal offices of the SEC in
Washington, D.C. are open to accept filings, or, in the
case of determining a date when any payment is due, any day on
which banks are not required or authorized to close in the City
of New York. Whenever the words include,
includes or including are used in this
Agreement, they shall be deemed to be followed by the words
without limitation. The words hereof,
herein, hereby and hereunder
and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular
provision of this Agreement. The Parties have participated
jointly in the negotiation and drafting of this Agreement.
Consequently, in the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if
drafted jointly by the Parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provision of this Agreement.
8.8
Entire Agreement
.
This Agreement and the documents or instruments referred to
herein, including any exhibits attached hereto and the Company
Disclosure Schedule referred to herein, which exhibits and
Company Disclosure Schedule are
A-43
incorporated herein by reference, any Voting Agreement and the
Confidentiality Agreement embody the entire agreement and
understanding of the Parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises,
representations, warranties, covenants or undertakings, other
than those expressly set forth or referred to herein. This
Agreement and such other agreements supersede all prior
agreements and the understandings among the Parties with respect
to such subject matter.
8.9
Severability
.
In case any provision in this Agreement shall be held invalid,
illegal or unenforceable in a jurisdiction, such provision shall
be modified or deleted, as to the jurisdiction involved, only to
the extent necessary to render the same valid, legal and
enforceable, and the validity, legality and enforceability of
the remaining provisions hereof shall not in any way be affected
or impaired thereby nor shall the validity, legality or
enforceability of such provision be affected thereby in any
other jurisdiction. Upon such determination that any term or
other provision is invalid, illegal or incapable of being
enforced, the Parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the
Parties as closely as possible in a mutually acceptable manner
in order that the Merger be consummated as originally
contemplated to the fullest extent possible.
8.10
Specific Performance
.
The Parties hereto agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not
performed by the Company in accordance with their specific terms
or were otherwise breached. Accordingly, the Parties further
agree that prior to the termination of this Agreement pursuant
to Article VI, Parent and Merger Sub shall be entitled to
seek an injunction or restraining order to prevent breaches of
this Agreement and to seek to enforce specifically the terms and
provisions hereof, this being in addition to any other right or
remedy to which Parent and Merger Sub may be entitled under this
Agreement, at law or in equity. Notwithstanding anything to the
contrary in this Agreement, each of the Parties hereto agrees
that the Company shall not be entitled to an injunction,
restraining order or any other equitable remedies to prevent
breaches of this Agreement by Parent or Merger Sub or to enforce
specifically any term or provision of this Agreement and that
the sole and exclusive remedy available to the Company with
respect to any such breach shall be the remedy available to the
Company in accordance with Section 7.3(c).
8.11
Third Parties
.
Nothing contained in this Agreement or in any instrument or
document executed by any party in connection with the
transactions contemplated hereby shall create any rights in, or
be deemed to have been executed for the benefit of, any Person
that is not a party hereto or thereto or a successor or
permitted assign of such a party other than Section 5.3
hereof (which is intended to be for the benefit of the Persons
covered thereby and may be enforced by such Persons). Without
limiting the foregoing, the provisions of Section 5.4
hereof are for the sole benefit of the Parties to this Agreement
and nothing herein, expressed or implied, is intended, or shall
be construed, to confer upon or give to any Person (including
for the avoidance of doubt, any Employee), other than the
Parties hereto and their respective permitted successors and
assigns, any legal or equitable or other rights or remedies
(with respect to the matters provided for in Section 5.4)
under or by reason of any provision of this Agreement.
[SIGNATURE
PAGE FOLLOWS]
A-44
IN WITNESS WHEREOF, the Parties hereto have caused this
Agreement and Plan of Merger to be signed and delivered by their
respective duly authorized officers as of the date first above
written.
AMCOMP INCORPORATED
Name: Fred R. Lowe
|
|
|
|
Title:
|
Chairman, President and Chief
Executive Officer
|
EMPLOYERS HOLDINGS, INC.
Name: Douglas D. Dirks
|
|
|
|
Title:
|
Chief Executive Officer
|
SAPPHIRE ACQUISITION CORP.
Name: Douglas D. Dirks
|
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Title:
|
Chief Executive Officer
|
[SIGNATURE
PAGE TO AGREEMENT AND PLAN OF MERGER]
A-45
ANNEX B
AMENDMENT
NO. 1
TO THE
AGREEMENT AND PLAN OF MERGER
AMENDMENT NO. 1 (this
Amendment
), dated
April 28, 2008, to the Agreement and Plan of Merger, dated
as of January 10, 2008 (the
Merger
Agreement
), by and among AmCOMP Incorporated, a
Delaware corporation (the
Company
), Employers
Holdings, Inc., a Nevada corporation
(Parent
), and Sapphire Acquisition Corp., a
Delaware corporation and wholly-owned subsidiary of Parent
(Merger Sub)
. Parent, Merger Sub and the
Company are sometimes referred to herein as a
Party
and collectively as the
Parties
.
WHEREAS, Section 7.4 of the Merger Agreement provides for
the amendment of the Merger Agreement in accordance with the
terms set forth therein;
WHEREAS, the Parties desire to amend the Merger Agreement as set
forth below; and
WHEREAS, the Board of Directors of the Company has
(i) determined that it is in the best interests of the
Company and its stockholders, and declared it advisable, to
enter into this Amendment, (ii) approved the execution,
delivery and performance of this Amendment and the consummation
of the transactions contemplated hereby, and (iii) resolved
to recommend the approval and adoption of the Merger Agreement,
as amended by this Amendment, by the stockholders of the Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and for good and
valuable consideration, the receipt and adequacy of which is
hereby acknowledged, and intending to be legally bound hereby,
the parties hereto do hereby agree as follows:
Section 1.
Defined
Terms
.
Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to
such terms in the Merger Agreement.
Section 2.
Amendment
to Section 7.3(b)
.
Section 7.3(b)
of the Merger Agreement is hereby deleted and replaced in its
entirety with the following:
(b) If
(i) (x) at any time on or after the date of this
Agreement, a Company Takeover Proposal is made to the Board or
the Company or is publicly proposed or publicly disclosed or any
Person or group shall have publicly announced or disclosed an
intention to make a Company Takeover Proposal,
(y) thereafter, this Agreement is terminated by Parent or
the Company pursuant to Section 7.1(b) or
Section 7.1(g), or by Parent pursuant to
Section 7.1(d), and (z) on or within 12 months
after the date of such termination, any definitive agreement
providing for a Qualifying Transaction shall have been executed
or a Qualifying Transaction shall have been consummated with any
Person (any such event described in this clause (z), a
Triggering Event
);
(ii) this Agreement is terminated by Parent pursuant to
Section 7.1(f); or
(iii) this Agreement is terminated by the Company or Parent
pursuant to Section 7.1(g) and prior to such termination, the
Company shall have made a Change of Recommendation or a
Withdrawal of Recommendation,
then in any such event the Company shall pay to Parent a fee of
$8,000,000 in cash (subject to the proviso in the following
clause (1)) (the
Termination Fee
), such
payment to be made (1) in the case of termination described
in Section 7.3(b)(i), upon the earlier to occur of the
execution of an agreement providing for a Qualifying Transaction
or consummation of such Qualifying Transaction;
provided
that if no Triggering Event occurs on or within six months after
the date of termination of this Agreement but a Triggering Event
occurs thereafter but within twelve months after the date of
termination of this Agreement, the amount of the Termination Fee
shall instead be $5,000,000 in cash; and (2) in the case of
a termination described in Section 7.3(b)(ii) or
Section 7.3(b)(iii), within two Business Days after such
termination. In addition, in the case of any termination of this
Agreement pursuant to Section 7.1(g), (1) the Expenses
of Parent shall be paid by the Company to Parent in cash
(A) concurrently with and as a condition to any such
termination effected by the Company and (B) on the second
Business Day following any
B-1
such termination effected by Parent, and (2) the amount of
such Expenses so paid shall not be in excess of $2,000,000 and
shall be credited against the Termination Fee that is or becomes
payable in connection with such termination pursuant to this
Section 7.3(b). For the avoidance of doubt, the Company
shall not be required to pay the Termination Fee or the Expenses
pursuant to more than one clause of this Section 7.3(b).
For the purposes of this Agreement, a
Qualifying
Transaction
means any Company Takeover Proposal
(substituting 50% for 15% in the
definition of Company Takeover Proposal).
Section 3.
No
Other Amendments to Merger Agreement
.
3.1 On and after the date hereof, each reference in the
Merger Agreement to this Agreement,
herein, hereof, hereunder or
words of similar import shall mean and be a reference to the
Merger Agreement as amended hereby. Notwithstanding the
foregoing, references to the date of the Merger Agreement, as
amended hereby, shall in all instances continue to refer to
January 10, 2008, references to the date hereof
and the date of this Agreement shall continue to
refer to January 10, 2008, and references to the date of
the Amendment and as of the date of the Amendment
shall refer to April 28, 2008.
3.2 Except as otherwise expressly provided herein, all of
the terms and conditions of the Merger Agreement remain
unchanged and continue in full force and effect. This Amendment
is limited precisely as written and shall not be deemed to be an
amendment to any other term or condition of the Merger Agreement
or any of the documents referred to therein.
Section 4.
Effect
of Amendment
.
This Amendment shall form a
part of the Merger Agreement for all purposes, and each party
hereto and thereto shall be bound hereby. From and after the
execution of this Amendment by the Parties, any reference to the
Merger Agreement shall be deemed a reference to the Merger
Agreement as amended hereby. This Amendment shall be deemed to
be in full force and effect from and after the execution of this
Amendment by the Parties.
Section 5.
Governing
Law
.
This Amendment shall be governed by, and
construed in accordance with, the laws of the State of Delaware.
Section 6.
Counterparts
.
This
Amendment may be executed in counterparts (including by
facsimile), 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 Parties, it being understood that all
Parties need not sign the same counterpart.
Section 7.
Headings
.
The
descriptive headings of the several Sections of this Amendment
were formulated, used and inserted in this Amendment for
convenience only and shall not be deemed to affect the meaning
or construction of any of the provisions hereof.
[Execution
page follows.]
B-2
IN WITNESS WHEREOF, the Parties have signed or caused this
Amendment to be signed by their respective officers thereunto
duly authorized all as of the date first written above.
AMCOMP INCORPORATED
Name: Kumar Gursahaney
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Title:
|
Senior Vice President,
Chief Financial Officer
|
EMPLOYERS HOLDINGS, INC.
Name: Lenard T. Ormsby
|
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Title:
|
Executive Vice President, Chief Legal
|
Officer and General Counsel
SAPPHIRE ACQUISITION CORP.
Name: Lenard T. Ormsby
|
|
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Title:
|
Executive Vice President, Chief Legal
|
Officer and General Counsel
B-3
ANNEX C
January 10, 2008
Board of Directors
AmCOMP Incorporated
701 U.S. Highway One
Suite 200
North Palm Beach, FL 33408
Members of the Board:
You have requested our opinion as to the fairness, from a
financial point of view, to the Stockholders, other than
Employers Holdings, Inc (Employers) and its
subsidiaries and affiliates, (the Stockholders) of
the outstanding common stock, par value $0.01 (the Common
Stock) of AmCOMP Incorporated (the Company) of
the consideration to be received by such holders in connection
with the proposed merger (the Merger) of Sapphire
Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of Employers (Sapphire) into the Company
pursuant and subject to the Agreement and Plan of Merger by and
among the Company, Employers and Sapphire dated as of
January 10, 2008 (the Agreement). Under and
subject to the terms of the Agreement, the consideration to be
received by the Stockholders in exchange for each outstanding
share of Common Stock of the Company will be the right to
receive $12.50 in cash.
In connection with our review of the proposed Merger and the
preparation of our opinion herein, we have, among other things:
1. reviewed the financial terms and conditions as stated in
the Agreement;
2. reviewed the annual reports to Stockholders on
Form 10-K
of the Company for the two fiscal years ended December 31,
2005 and December 31, 2006;
3. reviewed the quarterly reports to Stockholders on
Form 10-Q
of the Company for the fiscal quarters ended March 31,
2007, June 30, 2007 and September 30, 2007;
4. reviewed other Company financial and operating
information requested from
and/or
provided by the Company;
5. reviewed the Annual Statements of AmCOMP Preferred
Insurance Company and AmCOMP Assurance Corporation (together the
Insurance Subsidiaries) as well as the combined
Annual Statements of the AmCOMP Incorporated Group filed with
the Florida Department of Financial Services for the years ended
December 31, 2004, 2005 and 2006;
6. reviewed the reports of the Companys independent
actuarial firm, dated December 31, 2006, June 30, 2007
and September 30, 2007
7. reviewed certain other publicly available information on
the Company;
8. discussed with members of the senior management of the
Company certain information relating to the aforementioned and
any other matters which we have deemed relevant to our inquiry;
9. reviewed and discussed with senior management of the
Company the historical and anticipated future financial
performance and prospects of the Company, including the review
of forecasts prepared by senior management of the Company;
10. reviewed the reported price and trading activity for
the shares of the Company Common Stock;
11. compared financial and stock market information for the
Company with similar information for comparable companies with
publicly traded securities;
12. reviewed the financial terms of recent business
combinations involving companies in comparable businesses;
C-1
13. performed a discounted cash flow analysis of the
Company on a stand-alone basis and performed other such analyses
and studies, and considered such other factors, as we considered
appropriate.
With your consent, we have assumed and relied upon the accuracy
and completeness of all information supplied or otherwise made
available to us by the Company, Employers or any other party,
and we have undertaken no duty or responsibility to verify
independently any of such information. We have not made or
obtained an independent appraisal of the assets or liabilities
(contingent or otherwise) of the Company. With respect to
financial forecasts and other information and data provided to
or otherwise reviewed by or discussed with us, we have, with
your consent, assumed that such forecasts and other information
and data have been reasonably prepared in good faith on bases
reflecting the best currently available estimates and judgments
of management, and we have relied upon each party to advise us
promptly if any information previously provided became
inaccurate or was required to be updated during the period of
our review. We have assumed that the final form of the Agreement
will be substantially similar to the draft reviewed by us, and
that the Merger will be consummated in accordance with the terms
of the Agreement without waiver of any conditions thereof.
Our opinion is based upon market, economic, financial and other
circumstances and conditions existing and disclosed to us as of
January 9, 2008 and any material change in such
circumstances and conditions would require a reevaluation of
this opinion, which we are under no obligation to undertake.
We express no opinion as to the underlying business decision to
effect the Merger, the structure or tax consequences of the
Agreement or the availability or advisability of any
alternatives to the Merger. We did not structure the Merger or
negotiate the final terms of the Merger. Our opinion is limited
to the fairness, from a financial point of view, of the Merger
to the Stockholders. We express no opinion with respect to any
other reasons, legal, business, or otherwise, that may support
the decision of the Board of Directors to approve or consummate
the Merger. In formulating our opinion, we have considered only
what we understand to be the consideration to be received by the
Stockholders as is described above, and we have not considered,
and this opinion does not address, any other payments that may
be made in connection to Company employees or other Stockholders
in connection with the Transaction.
In conducting our investigation and analyses and in arriving at
our opinion expressed herein, we have taken into account such
accepted financial and investment banking procedures and
considerations as we have deemed relevant, including the review
of (i) historical and projected revenues, net income and
capitalization of the Company and certain other publicly held
companies in businesses we believe to be comparable to the
Company; (ii) the current and projected financial position
and results of operations of the Company; (iii) the
historical market prices and trading activity of the Common
Stock of the Company; (iv) financial and operating
information concerning selected business combinations which we
deemed comparable in whole or in part; and (v) the general
condition of the securities markets. The delivery of this
opinion was approved by our fairness opinion committee.
In arriving at this opinion, Raymond James &
Associates, Inc. (Raymond James) did not attribute
any particular weight to any analysis or factor considered by
it, but rather made qualitative judgments as to the significance
and relevance of each analysis and factor. Accordingly, Raymond
James believes that its analyses must be considered as a whole
and that selecting portions of its analyses, without considering
all analyses, would create an incomplete view of the process
underlying this opinion.
Raymond James is actively engaged in the investment banking
business and regularly undertakes the valuation of investment
securities in connection with public offerings, private
placements, business combinations and similar transactions.
Raymond James has been engaged to render financial advisory
services to the Company in connection with the proposed Merger
and will receive a fee for such services, which fee is
contingent upon consummation of the Merger. Raymond James will
also receive a fee upon the delivery of this opinion. In
addition, the Company has agreed to indemnify us against certain
liabilities arising out of our engagement. Additionally, Raymond
James served as an underwriter of the Companys initial
public offering of shares in February 2006, and has served as
the Companys broker in connection with its share
repurchase plan, for which it has received a commission.
C-2
In the ordinary course of our business, Raymond James may trade
in the securities of the Company or Employers for our own
account or for the accounts of our customers and, accordingly,
may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the
Board of Directors of the Company in evaluating the proposed
Merger and does not constitute a recommendation to any
Stockholder of the Company regarding how said Stockholder should
vote on the proposed Merger. Furthermore, this letter should not
be construed as creating any fiduciary duty on the part of
Raymond James to any such party. This opinion is not to be
quoted or referred to, in whole or in part, without our prior
written consent, which will not be unreasonably withheld.
Based upon and subject to the foregoing, it is our opinion that,
as of January 10, 2008, the consideration to be received by
the Stockholders of the Company pursuant to the Agreement is
fair, from a financial point of view, to such holders of the
Companys outstanding Common Stock.
Very truly yours,
/s/ Raymond James & Associates, Inc.
RAYMOND JAMES & ASSOCIATES, INC.
C-3
ANNEX D
Section 262
of the Delaware General Corporation Law
§ 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholders shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
stockholder means a holder of record of stock in a
stock corporation and also a member of record of a nonstock
corporation; the words stock and share
mean and include what is ordinarily meant by those words and
also membership or membership interest of a member of a nonstock
corporation; and the words depository receipt mean a
receipt or other instrument issued by a depository representing
an interest in one or more shares, or fractions thereof, solely
of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 257, § 258,
§ 263 or § 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national
securities exchange or (ii) held of record by more than
2,000 holders; and further provided that no appraisal rights
shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for
its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of
§ 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 of
this title is not owned by the parent corporation immediately
prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of
incorporation contains such a provision, the
D-1
procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply
as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or
(c) hereof that appraisal rights are available for any or
all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholders
shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for
appraisal of such stockholders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholders
shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to
§ 228 or § 253 of this title, then either a
constituent corporation before the effective date of the merger
or consolidation or the surviving or resulting corporation
within 10 days thereafter shall notify each of the holders
of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation
the appraisal of such holders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holders shares. If
such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of
the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded
appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary
or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the
notice is given.
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections (a)
and (d) of this section hereof and who is otherwise
entitled to appraisal rights, may commence an appraisal
proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within
60 days after the effective date of the merger or
consolidation, any stockholder who has not commenced an
appraisal proceeding or joined that proceeding as a named party
shall have the right to withdraw such stockholders demand
for appraisal and to accept the terms offered upon the merger or
consolidation.
D-2
Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) of this
section hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholders
written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) of this section hereof, whichever is
later. Notwithstanding subsection (a) of this section, a
person who is the beneficial owner of shares of such stock held
either in a voting trust or by a nominee on behalf of such
person may, in such persons own name, file a petition or
request from the corporation the statement described in this
subsection.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After the Court determines the stockholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding the Court shall determine the fair value of the
shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. Upon application
by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal
prior to the final determination of the stockholders entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such
stockholders certificates of stock to the Register in
Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder
is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
D-3
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just;
provided, however that this provision shall not affect the right
of any stockholder who has not commenced an appraisal proceeding
or joined that proceeding as a named party to withdraw such
stockholders demand for appraisal and to accept the terms
offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set
forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
D-4
▼
Please
detach along perforated line and mail in the envelope
provided. ▼
AMCOMP
INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
SPECIAL
MEETING OF STOCKHOLDERS
The undersigned hereby appoints Fred R. Lowe, Debra
Cerre-Ruedisili, and Kumar Gursahaney, and each of them, as
proxies, each with the power to appoint his substitute, and
authorizes each of them to represent and to vote, as designated
on the reverse hereof, all of the shares of common stock, par
value $0.01 per share, of AmCOMP Incorporated (the
Company) held of record by the undersigned at the
close of business on April 23, 2008 at the special meeting
of stockholders of the Company to be held on May 29, 2008
at 9:00 a.m., Eastern Time, at Palm Beach Gardens Marriott,
4000 RCA Boulevard, Palm Beach Gardens, Florida 33410, or at any
adjournment or postponement thereof, on the matters described in
the Notice of Special Meeting of Stockholders and proxy
statement and upon such other business as may properly come
before such meeting or any adjournments or postponements
thereof, hereby revoking any proxies heretofore given.
(Continued,
and to be dated and signed on the other side.)
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VOTE BY TELEPHONE OR INTERNET
QUICK *** EASY *** IMMEDIATE
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SPECIAL
MEETING OF STOCKHOLDERS OF
AMCOMP INCORPORATED
Voting by telephone or Internet is quick, easy and immediate. As
a stockholder of the Company, you have the option of voting your
shares electronically through the Internet or on the telephone,
eliminating the need to return the proxy card. Your electronic
vote authorizes the named proxies to vote your shares in the
same manner as if you signed, dated and returned the proxy card.
Votes submitted electronically over the Internet or by telephone
must be received by 7:00 P.M., Eastern Time, on
May 27, 2008.
To
Vote Your Proxy by Internet
www.continentalstock.com
Have your proxy card available when you access the above
website. Follow the prompts to vote your shares.
To
Vote Your Proxy by Phone
1
(866) 894-0537
Use any touch-tone telephone to vote your proxy. Have your proxy
card available when you call. Follow the voting instructions to
vote your shares.
PLEASE DO
NOT RETURN THE CARD BELOW IF YOU ARE VOTING ELECTRONICALLY OR BY
PHONE.
To
Vote Your Proxy by Mail
Sign and date your proxy card below, detach it, and return it in
the postage-paid envelope provided.
▼
Please
detach along perforated line and mail in the envelope provided
IF ▼
you are not voting via telephone or the internet.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
PROPOSALS 1 AND 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
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PLEASE MARK
YOUR VOTE IN
BLUE OR BLACK INK
AS SHOWN HERE
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1. To
adopt the Agreement and Plan of Merger, dated
as of January 10, 2008 as amended on April 28,
2008 (the Merger Agreement), by and among
AmCOMP Incorporated (the Company),
Employers Holdings, Inc. and Sapphire Acquisition
Corp., pursuant to which, each share of the
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FOR
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AGAINST
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ABSTAIN
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2. To
approve the adjournment of the special
meeting, if necessary or appropriate, to solicit
additional proxies if there are insufficient votes at
the time of the special meeting to adopt the
Merger Agreement.
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FOR
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AGAINST
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ABSTAIN
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Companys
common stock, other than any such share held by Employers
Holdings, Inc. or Sapphire Acquisition Corp. or us, or by the
Companys stockholders who perfect appraisal rights under
Delaware law, will automatically be converted into the right to
receive merger consideration of $12.50 per share of common
stock, in cash, without interest.
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3. In
their discretion, the Proxies are authorized to consider and
take action upon such other matters as may properly come before
the meeting or any adjournment thereof.
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To change the address on your account, please check the box at
right and indicate your new address in the address space above.
Please note that changes to the registered name(s) on the
account may not be submitted via this method.
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PROPERLY EXECUTED PROXIES WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO SUCH DIRECTIONS ARE
GIVEN, SUCH PROXIES WILL BE VOTED FOR PROPOSALS 1 AND 2.
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The undersigned revokes any prior proxies to vote the shares
covered by this proxy.
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PLEASE SIGN, DATE AND MAIL THIS PROXY
PROMPTLY IN THE ENCLOSED REPLY ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
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Signature of
Stockholder
Date:
Signature of
Stockholder
Date:
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NOTE:
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Please sign exactly as your name or names appear on this
Proxy. When shares are held jointly, each holder should sign.
When signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.
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Amcomp Incorporated (MM) (NASDAQ:AMCP)
過去 株価チャート
から 5 2024 まで 6 2024
Amcomp Incorporated (MM) (NASDAQ:AMCP)
過去 株価チャート
から 6 2023 まで 6 2024