UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 22, 2018
THE NAVIGATORS GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 0-15886 | 13-3138397 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
400 Atlantic Street, 8th Floor
Stamford, Connecticut 06901
(Address of Principal Executive Offices) (Zip Code)
(203) 905-6090
(Registrant’s telephone number, including area code)
N/A
(Registrant’s former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☒ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01. Entry into a Material Definitive Agreement.
Agreement and Plan of Merger
On August 22, 2018, The Navigators Group, Inc., a Delaware corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, The Hartford Financial Services Group, Inc., a Delaware corporation (“Parent”) and Renato Acquisition Co., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”). The Merger Agreement and the consummation of the transactions contemplated thereby have been unanimously approved by the Company’s board of directors (the “Company Board”).
Merger. The Merger Agreement provides for the merger of Merger Sub with and into the Company, on the terms and subject to the conditions set forth in the Merger Agreement (the “Merger”), with the Company continuing as the surviving corporation in the Merger. As a result of the Merger, the Company will become a wholly owned subsidiary of Parent.
Merger Consideration. Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share (a “Share”) of common stock of the Company, par value $0.10 per Share, issued and outstanding immediately prior to the Effective Time (other than Shares held by stockholders who have not voted in favor of the Merger and who have properly and validly perfected their statutory rights of appraisal in respect of such Shares in accordance with Section 262 of the Delaware General Corporation Law) will be converted into the right to receive $70.00 in cash without interest thereon (the “Merger Consideration”), subject to applicable tax withholding.
Treatment of Outstanding Equity Awards. Awards granted under The Navigators Group, Inc. Second Amended and Restated 2005 Stock Incentive Plan (the “Company Stock Plan”) that are outstanding at the time of the Merger will be treated as follows, subject to applicable tax obligations and withholding:
| • | each performance unit award granted prior to January 1, 2017, and each tranche of a restricted stock unit award that vests prior to January 1, 2020, that was granted prior to January 1, 2019, and that is payable in Shares (together, the “2019 Vesting Company Awards”) will be converted into the right to receive an amount in cash equal to the product of (x) the Merger Consideration multiplied by (y) the number of restricted stock units in the applicable tranche or, in the case of performance unit awards, the target number of Shares, in each case subject to the 2019 Vesting Company Award immediately prior to the Merger; |
| • | each performance unit award granted on or after January 1, 2017 and prior to January 1, 2019, and each tranche of a restricted stock unit award that vests on or after January 1, 2020, that was granted prior to January 1, 2019, and that is payable in Shares (together, the “2020 Vesting Company Awards”) will be canceled and converted into the right to receive a cash payment equal to the product of (x) the Merger Consideration multiplied by (y) the number of restricted stock units in the applicable tranche or, in the case of performance units, the target number of Shares, in each case subject to the 2020 Vesting Company Award immediately prior to the Merger; provided that the right to a cash payment with respect to a 2020 Vesting Company Award shall be subject to the same vesting and payment schedules as the 2020 Vesting Company Award it replaces (other than performance-based vesting conditions); |
| • | each performance unit award granted on or after January 1, 2019 and each restricted stock unit award granted on or after January 1, 2019 that is payable in Shares (together, the “2019 New Company Awards”) will be canceled and converted into the right to receive a number of restricted stock units issued pursuant to The Hartford 2014 Incentive Stock Plan (each, a “Parent RSU”) in respect of shares of common stock, par value $0.01 per share, of Parent (“Parent Common Stock”) equal to (x) the Merger Consideration multiplied by the number of restricted stock units in the applicable tranche or, in the case of performance units, the target number of Shares, in each case subject to the 2019 New Company Award immediately prior to the Merger, divided by (y) the closing price of a share of Parent Common Stock on the New York Stock Exchange on the business day immediately prior to the closing of the merger; provided, that each Parent RSU will be subject to the same vesting and payment schedules as the 2019 New Company Award it replaces (other than performance-based vesting conditions); |
| • | each performance unit award and restricted stock unit award granted under the Company Stock Plan and that is payable in cash shall be settled in accordance with its terms; and |
| • | any restrictions on any restricted Shares granted under the Company Stock Plan will lapse immediately prior to (and conditioned upon) the Merger. |
Compensation and Benefit Plan Terminations. The Merger Agreement provides for the termination of certain compensation and benefits plans of the Company and its subsidiaries as of the Effective Time, including termination of the Company Stock Plan, The Navigators Group, Inc. Non-Qualified Deferred Compensation Plan and The Navigators Group, Inc. Amended and Restated Employee Stock Purchase Plan (with any outstanding purchase rights as of the Effective Time terminated in exchange for a cash payment equal to the excess of the Merger Consideration over 90% of the lesser of (x) the closing price of a Share on the NASDAQ Global Select Market on the last trading day before the commencement of the last offering period and (y) the closing price of a Share on the NASDAQ Global Select Market on the last trading day before the Effective Time).
Closing Conditions. The consummation of the Merger is subject to the satisfaction or waiver of specified closing conditions, including (i) the affirmative vote in favor of the adoption of the Merger Agreement by the holders of a majority of the outstanding Shares entitled to vote thereon, (ii) any applicable waiting periods (or extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 having expired or been terminated, (iii) required consents of, filings with, and other terminations or expirations of waiting periods from, other governmental authorities, including insurance regulatory authorities, having been filed, made or obtained without imposition of a Parent Burdensome Condition (generally defined in the Merger Agreement to include material adverse effects on Parent or the Company), (iv) the absence of injunctions or rulings enjoining, restraining or otherwise prohibiting consummation of the Merger, and (v) other customary closing conditions. The consummation of the Merger is not subject to a financing condition.
Covenants. The Merger Agreement contains various covenants of the Company, Parent and Merger Sub. These covenants include interim operating covenants that, subject to certain exceptions, (i) require the Company (and its subsidiaries) to (1) conduct its business in all material respects in the ordinary course of business consistent with past practice, (2) use reasonable best efforts to preserve substantially intact, consistent with past practice, the Company’s business organization and (3) preserve, consistent with past practice, existing relations and goodwill with customers, producers, reinsurance providers, governmental authorities and other persons with whom the Company or its subsidiaries have significant business relationships, and (ii) restrict the Company’s ability to take certain actions prior to the Effective Time without Parent’s consent (such consent, in certain cases, not to be unreasonably withheld, conditioned or delayed), which include, subject to certain exceptions, issuing additional Shares, incurring additional indebtedness, selling or purchasing material assets, making unbudgeted capital expenditures, making loans or investments (or disposing of investments) not permitted by the Company’s investment guidelines, increasing compensation, making material changes to accounting, underwriting, or reserving practices, making material tax elections, settling material litigation, or entering into, modifying or terminating material contracts.
Go-Shop. The Merger Agreement contains a “go-shop” provision pursuant to which the Company has the right to solicit and engage in discussions and negotiations with respect to competing proposals until 12:01 a.m. (New York City time) on September 21, 2018 (the “Go-Shop Period”), subject to a 10-day extension to consider a proposal received during the Go-Shop Period that would reasonably be expected to result in a “superior proposal” (as defined in the Merger Agreement), and further extensions to allow bidding between Parent and a party who has submitted a superior proposal during the Go-Shop Period (an “Excluded Party”). No confidential information concerning the Company may be disclosed to potential bidders until the potential bidders execute a confidentiality agreement containing provisions that are not materially less favorable in the aggregate to the Company than those contained in the confidentiality agreement executed by Parent. The Company must notify Parent within 24 hours after entering into any such confidentiality agreement with a potential bidder (which notice need not identify the name of the potential bidder).
Non-Solicitation. Except with respect to the specified extensions described above for Excluded Parties, after the Go-Shop Period, the Company is subject to “no-shop” restrictions pursuant to which the Company and its subsidiaries must immediately cease and terminate any solicitation, encouragement, discussions or negotiations with any person with respect to any third-party proposals relating to the acquisition of 15% or more of the Company and its subsidiaries (an “Acquisition Proposal”), and are prohibited from furnishing non-public information to, or engaging in any discussions with, any third party with respect to any Acquisition Proposal. The no-shop provision is subject to a “fiduciary-out” provision that allows the Company to provide information and participate in discussions with respect to unsolicited Acquisition Proposals if the Company Board determines in good faith after consultation with outside counsel and financial advisors that such unsolicited Acquisition Proposal would reasonably be expected to lead to a superior proposal.
The Company must provide, within 24 hours after receipt, written notice to Parent of the receipt of any Acquisition Proposal and disclose to Parent the material terms and conditions of such Acquisition Proposal, the identity of the person making the Acquisition Proposal and unredacted copies of all material correspondence or other material written documentation with respect thereto.
Board Recommendation; Adverse Recommendation Change. The Merger Agreement contains covenants that require, subject to certain limited exceptions, (i) the Company to file a proxy statement with the SEC and call and hold a special meeting of the Company’s stockholders to vote on the Merger Agreement and (ii) the Company Board to recommend that the Company’s stockholders adopt the Merger Agreement at such special meeting. However, at any time prior to the receipt of the requisite stockholder approval, the Company Board is permitted to change its recommendation to the Company’s stockholders in response to an unsolicited superior proposal or in response to an intervening event if the Company Board determines in good faith, after consultation with its outside counsel and, in the case of an unsolicited superior proposal, financial advisors, that the failure to do so would violate the Company Board’s fiduciary duties. In addition, at any time prior to the receipt of the requisite stockholder approval, in response to a superior proposal and after following certain procedures set forth in the Merger Agreement, the Company Board may terminate the Merger Agreement, pay the reduced termination fee described below and cause the Company to enter into a definitive written agreement with respect to such superior proposal if the Company Board determines in good faith, after consultation with its financial advisors and outside counsel, that the failure to do so would violate the Company Board’s fiduciary duties. In any such case, the Company must first give Parent at least four business days’ prior written notice (or two business days in the case of any material changes made to an existing superior proposal) of its intention to take any such action. During such period, the Company must negotiate in good faith with Parent to make such commercially reasonable adjustments to the Merger Agreement as would enable the Company Board to no longer change its recommendation or determine that the Acquisition Proposal constitutes a superior proposal.
Termination; Termination Fees and Expense Reimbursement. The Merger Agreement provides for certain termination rights for both the Company and Parent. The Company may terminate the Merger Agreement prior to receipt of stockholder approval to, among other reasons, accept an Acquisition Proposal that is a superior proposal if the Company Board determines in good faith after consultation with its financial advisors and outside counsel that the failure to do so would violate the Company Board’s fiduciary duties.
The Company is obligated to pay Parent a $68.25 million termination fee if:
| • | the Company terminates the Merger Agreement to enter into an agreement for an Acquisition Proposal (unless such termination is during the Go-Shop Period or in connection with the entry into a definitive agreement with an Excluded Party, in which case the termination fee will be $42 million); |
| • | Parent terminates the Merger Agreement after the Company Board withdraws its recommendation to stockholders to adopt the Merger Agreement (unless the Company Board withdraws its recommendation in response to a superior proposal and such termination is during the Go-Shop Period or in connection with the entry into a definitive agreement with an Excluded Party, in which case the termination fee will be $42 million); |
| • | the Merger Agreement is terminated due to (i) (A) the Merger not being consummated by May 1, 2019 (the “Walk-Away Date”) (subject to extension to July 1, 2019) (at a time when required regulatory approvals have been obtained but the Company stockholder approval has not been obtained), (B) the Company’s stockholders failing to adopt the Merger Agreement or (C) the Company’s material breach of the Merger Agreement, (ii) a bona fide Acquisition Proposal shall have been publicly made or proposed after the date of the Merger Agreement and not withdrawn at least three (3) business days prior to the Company Stockholders Meeting or such termination, as applicable, and (iii) within 12 months after the termination of the Merger Agreement, the Company consummates any Acquisition Proposal, or enters into a definitive agreement with respect to any Acquisition Proposal that is subsequently consummated, in each case that would result in any person or group owning 50% or more of the Company; or |
| • | if Parent terminates the Merger Agreement due to the Company willfully and materially breaching its covenants in the Merger Agreement with respect to soliciting competing offers, or preparing the proxy statement or holding the Company stockholder meeting. |
Further, the Company is obligated to reimburse Parent for its transaction-related expenses, up to $7,000,000, if the Merger Agreement is terminated due to the Company’s stockholders failing to adopt the Merger Agreement, provided that any such transaction-related expenses reimbursed by the Company would be credited toward any termination fee.
The foregoing description of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is filed as Exhibit 2.1 hereto and incorporated by reference herein.
The Merger Agreement and the above description of the Merger Agreement have been included to provide investors and security holders with information regarding the terms of the Merger Agreement and are not intended to provide any other factual information about the Company, Parent or their respective subsidiaries or affiliates. The representations and warranties contained in the Merger Agreement were made only for purposes of the Merger Agreement and as of specific dates and are solely for the benefit of the parties to the Merger Agreement. In addition, certain representations and warranties were used for the purpose of allocating risk between the parties to the Merger Agreement, rather than establishing matters of fact. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC, and in some cases were qualified by disclosures that were made by each party to the others, which disclosures are not reflected in the Merger Agreement.
Voting Agreements
On August 22, 2018, in connection with the execution of the Merger Agreement, (i) Terence N. Deeks, Monica J. Deeks, the Deeks Family Foundation, certain trusts for the benefit of members of the Deeks family and (ii) Stanley A. Galanski (collectively, the “Stockholders”), who collectively beneficially own, as of August 22, 2018, approximately 22% of the outstanding Shares, entered into voting agreements (the “Voting Agreements”) with Parent. Pursuant to the Voting Agreements, the Stockholders agreed, among other things, to vote or cause to be voted any issued and outstanding Shares beneficially owned by them, or that may otherwise become beneficially owned by them during the term of the Voting Agreements, in favor of adopting the Merger Agreement.
The Voting Agreements will automatically terminate upon the earliest of (i) the Walk-Away Date, (ii) the effective time of the Merger, (iii) the termination of the Merger Agreement in accordance with its terms, (iv) an adverse change of recommendation of the Company Board pursuant to and in accordance with the Merger Agreement, (v) with respect to any Stockholder, in the event that the Merger Agreement is amended or modified in a manner that (x) decreases the Merger Consideration or changes the type of Merger Consideration or (y) otherwise causes a change that is adverse to such Stockholder in any material respect and (vi) with respect to any Stockholder, by the mutual written agreement of such Stockholder and Parent.
The foregoing summary of the Voting Agreements and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Voting Agreements, which are filed as Exhibit 99.1 and Exhibit 99.2 hereto and incorporated by reference herein.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Employment Agreements
On August 21, 2018, the Compensation Committee of the Company Board (the “Committee”) and the Company Board approved the terms of the employment agreement with Stanley A. Galanski, President and Chief Executive Officer, and Ciro M. DeFalco, Executive Vice President and Chief Financial Officer (each, an “Executive”), pursuant to which the Company and Navigators Management Company, Inc., a New York corporation and wholly owned subsidiary of the Company entered into an employment agreement (each, an “Employment Agreement”) with each Executive on such date.
The Employment Agreement with Mr. Galanski superseded his existing employment agreement. Mr. DeFalco did not have an employment agreement with the Company or its subsidiaries prior to entering into the Employment Agreement described herein.
The Employment Agreements each have an initial term expiring on December 31, 2019, and automatically continue for subsequent one-year periods (the “Term”), unless either party elects to terminate the Employment Agreement. Each Employment Agreement also provides that in the event of a “change in control” (as defined in the Employment Agreements), the Term will not terminate prior to the later of (i) the one-year anniversary of the change in control or (ii) the date that is 120 days after written notice is provided to the other party.
During the Term, Mr. Galanski will serve as President and Chief Executive Officer and Mr. DeFalco will serve as Executive Vice President and Chief Financial Officer.
The Employment Agreements provide that Mr. Galanski has an initial annual base salary of $1,000,000, and Mr. DeFalco has an initial annual base salary of $575,000. The base salaries will be subject to annual review by the Committee each March in accordance with the Company’s regular practice, or otherwise as the Committee deems advisable, but will not be decreased to an amount less than the amount described above.
In addition, each Executive is eligible for an annual performance bonus based upon the Company’s actual performance as compared to performance targets pre-established by the Committee. Under the Employment Agreements, each Executive’s initial annual performance bonus target amount is 100% of base salary, with a maximum annual performance bonus amount equal to 150% of his bonus target amount. These target amounts and maximum bonus amounts will be subject to periodic review by the Compensation Committee but will not be decreased to amounts less than the amounts described above.
The Employment Agreements also entitle the Executives to other benefits, such as equity and other long-term incentive awards that may be extended generally from time to time to senior officers of the Company and its subsidiaries, as approved by the Committee, all benefit plans made available to senior officers of Company and its subsidiaries, such vacation, holidays and sick leave as the Company may reasonably determine, and reimbursement of reasonable expenses. Mr. Galanski is also entitled to a monthly automobile expense allowance of $1,000.
Mr. DeFalco is also eligible for a cash retention award equal to $575,000, payable on January 1, 2020 (or as soon as administratively practicable thereafter), if he remains employed by the Company or its subsidiaries through December 31, 2019, or if his employment is terminated by the Company or its subsidiaries other than for “cause” or if he resigns for “good reason”, in each case, during the 12-month period following a change in control.
Under the Employment Agreements, each Executive will receive certain compensation in the event that his employment is terminated by the Company or its subsidiaries for any reason other than for cause, or if the Executive resigns for good reason (each, a “Qualifying Termination”). If the Executive’s employment is terminated by reason of a Qualifying Termination, the Executive will be entitled to receive continued payment of his base salary for 12 months, an amount equal to 100% of his target annual bonus for the year in which the employment terminates (payable within 60 days after the Qualifying Termination), any annual bonus earned in the year prior to the year in which the employment terminates and not yet paid and, for 18 months following the Qualifying Termination (or 12 months for Mr. DeFalco), subsidized (at active employee rates) continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA).
For purposes of the Employment Agreements, “cause” is generally defined to include the Executive’s: (i) commission of a felony; (ii) engagement in conduct involving fraud, moral turpitude, dishonesty, gross misconduct, embezzlement, or theft; (iii) failure to perform material duties assigned to him (subject to a 30-day cure period); or (iv) material breach of the Employment Agreement or any Company policy (subject to a 5-day cure period, to the extent the breach is curable).
For purposes of the Employment Agreements, “good reason” generally occurs if the Company: (i) materially reduces or alters the rights, responsibilities, duties or authority of the Executive, including demoting the Executive to a lower-level position; (ii) materially reduces the Executive’s base salary, annual performance bonus target or long-term incentive target; (iii) changes the Executive’s principal location of work by more than 50 miles; (iv) requires the Executive to take any action which would violate any federal, state or local criminal law; or (v) materially breaches the Employment Agreement, in each case, subject to a 30-day cure period.
Each Executive is subject to non-solicitation obligations in the Employment Agreements. Mr. Galanski is also subject to non-competition obligations in his Employment Agreement.
The foregoing description of the Employment Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of each of the Employment Agreements, which are filed as Exhibits 10.1 and 10.2 hereto and incorporated by reference herein.
President’s Award Agreements
The Company Board approved, on August 21, 2018, the granting of certain performance-based cash bonuses to certain named executive officers of the Company and certain other key employees (the “President’s Award Recipients”) pursuant to a President’s Award Agreement (each a “President’s Award Agreement”) entered into between the Company and each President’s Award Recipient. These performance-based cash bonuses are intended to secure the continued service of each President’s Award Recipient whether or not the Merger ultimately closes and to ensure each President’s Award Recipient’s continued dedication to the Company.
Pursuant to the President’s Award Agreements, each President’s Award Recipient will be entitled to a lump-sum cash bonus (the “President’s Award”) of a specified minimum target vesting amount if: (i) the President’s Award Recipient remains in continuous employment with the Company through June 30, 2022 (the “Payment Date”); (ii) the President’s Award Recipient’s employment with the Company terminates prior to the Payment Date due to the President’s Award Recipient’s death or “disability” (as defined in the President’s Award Agreement); (iii) the Company terminates the President’s Award Recipient’s employment without “cause” after a “change in control” (as defined in the President’s Award Agreement) but prior to the date that is one year from such change in control; or (iv) the President’s Award Recipient resigns from employment with the Company for “good reason” after a change in control but prior to the date that is one year from such change in control. The minimum target vesting amount specified in each President’s Award Agreement is subject to upward adjustment based on satisfaction of certain “performance goals” during the 36 month period from January 1, 2019 through December 31, 2021 (or, if a change in control occurs between January 1, 2020 and December 31, 2021, from January 1, 2019 through the date of such change in control); provided that if a change in control occurs prior to January 1, 2020, the lump-sum cash bonus will be payable in the minimum target vesting amount without adjustment.
The President’s Award is payable within 30 days after the Payment Date, provided that in the event of a change in control prior to the Payment Date, the Payment Date shall be one year from the date of the change in control.
A President’s Award Recipient will not be entitled to the cash bonus associated with the President’s Award Agreement if the President’s Award Recipient’s employment with the Company terminates prior to the Payment Date for any reason other than due to the President’s Award Recipient’s death, Disability or, in each case after a Change in Control, a termination by the Company without cause or a resignation by the President’s Award Recipient for good reason.
For purposes of the President’s Award Agreements, “cause” is generally defined to include: (i) any act of dishonesty, willful misconduct, gross negligence, intentional or conscious abandonment or neglect of duty; (ii) commission of a criminal activity, fraud, embezzlement or any act of moral turpitude (including but not limited to violations of the Company’s sexual harassment or discrimination policies); (iii) a failure to reasonably cooperate in any investigation or proceeding concerning the Company; (iv) any unauthorized disclosure or use of confidential information or trade secrets; or (v) any violation of any restrictive covenant, such as a non-compete, non-solicit or non-disclosure agreement, between the President’s Award Recipient and the Company or its affiliates.
For purposes of the President’s Award Agreements, “good reason” generally occurs if the Company: (i) materially reduces the President’s Award Recipient’s base compensation or short-term incentive target; (ii) changes the President’s Award Recipient’s principal place of employment by more than 50 miles; (iii) materially breaches an agreement under which the President’s Award Recipient provides services to the Company; or (iv) fails to obtain an assumption of and agreement to perform the President’s Award Agreement by any successor, in each case, subject to a 30-day cure period.
Each President’s Award Recipient is subject to non-solicitation obligations in the President’s Award Agreements.
The President’s Awards payable to the Company’s named executive officers pursuant to the President’s Award Agreements are as follows:
| Name |
Title |
President’s Award | ||||
| H. Clay Bassett, Jr. |
Senior Vice President and Chief Underwriting Officer and President of Assumed Reinsurance | $ | 862,500 | |||
| Michael J. Casella |
President of International Insurance | $ | 870,000 | |||
| Vincent C. Tizzio |
President of U.S. Insurance | $ | 900,000 | |||
The foregoing description of the President’s Award Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the form of President’s Award Agreement, which is filed as Exhibit 10.3 hereto and incorporated by reference herein.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On August 21, 2018, the Company Board adopted and approved, effective immediately, the Amended and Restated By-Laws of the Company (the “Amended and Restated By-Laws”), which provide, among other things:
| • | that the Company Board may postpone a stockholder meeting and reset the record date for such postponed meeting; |
| • | that the Company Board may appoint a “chairman of a meeting” to preside over stockholder meetings and may establish certain rules of conduct for stockholder meetings; |
| • | that the chairman of a meeting or a majority in interest of the stockholders entitled to vote at a stockholder meeting may adjourn such meeting regardless of the presence of quorum; and |
| • | that derivative actions, actions for breach of fiduciary duties, claims against the Company’s officers, directors, employees or agents and intra-corporate disputes involving the Company are litigated exclusively in the state or federal courts of Delaware. |
The foregoing description of the Amended and Restated By-Laws does not purport to be complete and is qualified in its entirety by reference to the full text of the Amended and Restated By-Laws of the Company, which is filed as Exhibit 3.1 hereto and is incorporated herein by reference.
Additional Information Regarding the Merger and Where to Find It
This communication does not constitute an offer to sell or the solicitation of an offer to buy the securities of The Navigators Group, Inc. (the “Company”) or the solicitation of any vote or approval. This communication relates to the proposed merger involving the Company, The Hartford Financial Services Group, Inc. (“The Hartford”) and Renato Acquisition Co., whereby the Company will become a wholly-owned subsidiary of The Hartford (the “proposed merger”). The proposed merger will be submitted to the stockholders of the Company for their consideration at a special meeting of the stockholders. In connection therewith, the Company intends to file relevant materials with the SEC, including a definitive proxy statement on Schedule 14A (the “definitive proxy statement”) which will be mailed or otherwise disseminated to the Company’s stockholders when it becomes available. The Company may also file other relevant documents with the SEC regarding the proposed merger. STOCKHOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Stockholders may obtain free copies of the definitive proxy statement, any amendments or supplements thereto and other documents containing important information about the Company, once such documents are filed with the SEC, through the website maintained by the SEC at www.sec.gov. Free copies of the definitive proxy statement and any other documents filed with the SEC can also be obtained on the Company’s website at www.navg.com under the heading “SEC Filings” within the “Investor Relations” section of the Company’s website or by contacting the Company’s Investor Relations Department at investorrelations@navg.com.
Certain Information Regarding Participants in the Solicitation
The Company and certain of its directors and executive officers may be deemed to be participants in the solicitation of proxies in connection with the proposed merger. Information regarding the Company’s directors and executive officers is contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on February 22, 2018, and its definitive proxy statement on Schedule 14A for the 2018 annual meeting of stockholders, filed with the SEC on March 29, 2018, as modified or supplemented by any Form 3 or Form 4 filed with the SEC since the date of such definitive proxy statement. Additional information regarding the participants in the proxy solicitation and a description of their direct or indirect interests, by security holdings or otherwise, will be included in the definitive proxy statement and other relevant documents filed with the SEC regarding the proposed merger, if and when they become available. Free copies of these materials may be obtained as described in the preceding paragraph.
Forward Looking Statements
Certain information in this communication constitutes “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “seeks” or words of similar meaning, or future or conditional verbs, such as “will,” “should,” “could,” “may,” “aims,” “intends,” or “projects.” However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. These statements may relate to risks or uncertainties associated with:
| • | the satisfaction of the conditions precedent to the consummation of the proposed merger, including, without limitation, the timely receipt of stockholder and regulatory approvals (or any conditions, limitations or restrictions placed on such approvals); |
| • | unanticipated difficulties or expenditures relating to the proposed merger; |
| • | the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement, including in circumstances which would require the Company to pay a termination fee or reimburse The Hartford for certain of its expenses; |
| • | legal proceedings, judgments or settlements, including those that may be instituted against the Company, its board of directors, executive officers and others following the announcement of the proposed merger; |
| • | disruptions of current plans and operations caused by the announcement and pendency of the proposed merger; |
| • | potential difficulties in employee retention due to the announcement and pendency of the proposed merger; |
| • | the response of customers, policyholders, brokers, service providers, business partners and regulators to the announcement of the proposed merger; and |
| • | other factors described in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2017 filed with the SEC on February 22, 2018. |
The Company can give no assurance that the expectations expressed or implied in the forward-looking statements contained herein will be attained. The forward-looking statements are made as of the date of this communication, and the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.
Item 9.01 Financial Statements and Exhibits.
| (d) | Exhibits: |
| Exhibit No. |
Description | |
| 2.1 |
Agreement and Plan of Merger, dated as of August 22, 2018, by and among The Navigators Group, Inc., The Hartford Financial Services Group, Inc., and Renato Acquisition Co.* | |
| 3.1 |
Amended and Restated By-Laws of The Navigators Group, Inc., as amended and restated on August 21, 2018 | |
| 10.1 |
Employment Agreement, dated August 21 2018, by and among The Navigators Group, Inc., Navigators Management Company, Inc. and Stanley A. Galanski | |
| 10.2 |
Employment Agreement, dated August 21, 2018, by and among The Navigators Group, Inc., Navigators Management Company, Inc. and Ciro M. DeFalco | |
| 10.3 |
Form of President’s Award Agreement | |
| 99.1 |
Voting Agreement, dated as of August 22, 2018, by and among The Hartford Financial Services Group, Inc. and the stockholders party thereto | |
| 99.2 |
Voting Agreement, dated as of August 22, 2018, by and between The Hartford Financial Services Group, Inc. and Stanley A. Galanski | |
| * | The Company agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted exhibit or schedule upon request. |
EXHIBIT INDEX
| * | The Company agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted exhibit or schedule upon request. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| THE NAVIGATORS GROUP, INC. (Registrant) | ||||||
| Date: August 22, 2018 | By: | /s/ Emily B. Miner | ||||
| Name: | Emily B. Miner | |||||
| Title: | Senior Vice President and General Counsel | |||||
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
By and Among
THE NAVIGATORS GROUP, INC.,
THE HARTFORD FINANCIAL SERVICES GROUP, INC.,
and
RENATO ACQUISITION CO.
Dated as of August 22, 2018
TABLE OF CONTENTS
| Page | ||||||
| ARTICLE I THE MERGER |
1 | |||||
| Section 1.01 |
Merger | 1 | ||||
| Section 1.02 |
Merger Effective Time | 2 | ||||
| Section 1.03 |
Effects of Merger | 2 | ||||
| Section 1.04 |
Certificate of Incorporation and By-Laws of the Surviving Company | 2 | ||||
| Section 1.05 |
Board of Directors and Officers of Surviving Company | 2 | ||||
| Section 1.06 |
Closing | 2 | ||||
| ARTICLE II EFFECT ON THE SHARE CAPITAL OF THE CONSTITUENT ENTITIES; PAYMENT OF CONSIDERATION |
3 | |||||
| Section 2.01 |
Effect of Merger on the Share Capital of Merger Sub and the Company | 3 | ||||
| Section 2.02 |
Exchange Fund | 3 | ||||
| Section 2.03 |
Company Equity Awards | 6 | ||||
| Section 2.04 |
Payments with Respect to Company Equity Awards | 8 | ||||
| Section 2.05 |
Appraisal Shares | 8 | ||||
| Section 2.06 |
Adjustments | 9 | ||||
| ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
9 | |||||
| Section 3.01 |
Organization; Standing | 9 | ||||
| Section 3.02 |
Capitalization | 10 | ||||
| Section 3.03 |
Authority; Noncontravention; Voting Requirements | 11 | ||||
| Section 3.04 |
Governmental Approvals | 13 | ||||
| Section 3.05 |
Company SEC Documents; Undisclosed Liabilities | 13 | ||||
| Section 3.06 |
Absence of Certain Changes | 15 | ||||
| Section 3.07 |
Legal Proceedings | 15 | ||||
| Section 3.08 |
Compliance with Laws; Permits | 15 | ||||
| Section 3.09 |
Tax Matters | 16 | ||||
| Section 3.10 |
Employee Benefits | 18 | ||||
| Section 3.11 |
Labor Matters | 20 | ||||
| Section 3.12 |
Investments | 21 | ||||
| Section 3.13 |
Intellectual Property; Privacy and Data Security | 22 | ||||
| Section 3.14 |
Anti-Takeover Provisions | 23 | ||||
| Section 3.15 |
Real Property | 23 | ||||
| Section 3.16 |
Contracts | 24 | ||||
| Section 3.17 |
Insurance Subsidiaries | 26 | ||||
| Section 3.18 |
Statutory Statements; Examinations | 27 | ||||
| Section 3.19 |
Agreements with Insurance Regulators | 29 | ||||
| Section 3.20 |
Reinsurance and Retrocession | 29 | ||||
| Section 3.21 |
Reserves | 30 | ||||
| Section 3.22 |
Insurance Policies | 30 | ||||
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| Section 3.23 |
Opinion of Financial Advisors | 30 | ||||
| Section 3.24 |
Brokers and Other Advisors | 31 | ||||
| Section 3.25 |
Related Party Transactions | 31 | ||||
| Section 3.26 |
Environmental Matters | 31 | ||||
| Section 3.27 |
No Other Representations or Warranties | 31 | ||||
| ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB |
32 | |||||
| Section 4.01 |
Organization; Standing | 32 | ||||
| Section 4.02 |
Authority; Noncontravention | 33 | ||||
| Section 4.03 |
Governmental Approvals | 33 | ||||
| Section 4.04 |
Ownership and Operations of Merger Sub | 34 | ||||
| Section 4.05 |
Financing | 34 | ||||
| Section 4.06 |
Certain Arrangements | 34 | ||||
| Section 4.07 |
Brokers and Other Advisors | 35 | ||||
| Section 4.08 |
Information Supplied | 35 | ||||
| Section 4.09 |
Legal Proceedings | 35 | ||||
| Section 4.10 |
Ownership of Company Shares | 35 | ||||
| Section 4.11 |
No Other Representations or Warranties | 35 | ||||
| ARTICLE V ADDITIONAL COVENANTS AND AGREEMENTS |
36 | |||||
| Section 5.01 |
Conduct of Business | 36 | ||||
| Section 5.02 |
Acquisition Proposals; Change in Recommendation | 41 | ||||
| Section 5.03 |
Preparation of the Proxy Statement; Stockholders Meeting | 47 | ||||
| Section 5.04 |
Reasonable Best Efforts | 49 | ||||
| Section 5.05 |
Transfer Taxes | 51 | ||||
| Section 5.06 |
Public Announcements; Other Communications | 51 | ||||
| Section 5.07 |
Access to Information; Confidentiality | 52 | ||||
| Section 5.08 |
Indemnification and Insurance | 52 | ||||
| Section 5.09 |
Rule 16b-3 | 54 | ||||
| Section 5.10 |
Employee Matters | 55 | ||||
| Section 5.11 |
Notification of Certain Matters; Stockholder Litigation | 57 | ||||
| Section 5.12 |
Stock Exchange De-listing | 58 | ||||
| Section 5.13 |
Delivery of Fairness Opinions | 58 | ||||
| ARTICLE VI CONDITIONS PRECEDENT |
58 | |||||
| Section 6.01 |
Conditions to Each Party’s Obligation To Effect the Merger | 58 | ||||
| Section 6.02 |
Conditions to Obligations of Parent and Merger Sub | 59 | ||||
| Section 6.03 |
Conditions to Obligations of the Company | 59 | ||||
| Section 6.04 |
Frustration of Closing Conditions | 60 | ||||
| ARTICLE VII TERMINATION |
60 | |||||
| Section 7.01 |
Termination | 60 | ||||
| Section 7.02 |
Effect of Termination | 62 | ||||
| Section 7.03 |
Termination Fee | 62 | ||||
iii
| ARTICLE VIII MISCELLANEOUS |
64 | |||||
| Section 8.01 |
No Survival of Representations and Warranties | 64 | ||||
| Section 8.02 |
Amendment or Supplement | 64 | ||||
| Section 8.03 |
Extension of Time, Waiver, Etc. | 64 | ||||
| Section 8.04 |
Assignment | 64 | ||||
| Section 8.05 |
Counterparts | 64 | ||||
| Section 8.06 |
Entire Agreement; No Third-Party Beneficiaries | 65 | ||||
| Section 8.07 |
Governing Law; Jurisdiction | 65 | ||||
| Section 8.08 |
Specific Enforcement | 66 | ||||
| Section 8.09 |
WAIVER OF JURY TRIAL | 66 | ||||
| Section 8.10 |
Remedies | 67 | ||||
| Section 8.11 |
Notices | 67 | ||||
| Section 8.12 |
Severability | 68 | ||||
| Section 8.13 |
Definitions | 68 | ||||
| Section 8.14 |
Fees and Expenses | 79 | ||||
| Section 8.15 |
Interpretation | 79 | ||||
EXHIBIT A – Form of Amended Certificate of Incorporation of the Surviving Company
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This AGREEMENT AND PLAN OF MERGER (this “Agreement”) dated as of August 22, 2018, by and among THE NAVIGATORS GROUP, INC., a Delaware corporation (the “Company”), THE HARTFORD FINANCIAL SERVICES GROUP, INC., a Delaware corporation (“Parent”) and RENATO ACQUISITION CO., a Delaware corporation and a direct wholly owned Subsidiary of Parent (“Merger Sub”).
WHEREAS the Board of Directors of the Company (the “Company Board”), Parent (the “Parent Board”) and Merger Sub (the “Merger Sub Board”) (a) have each unanimously approved the business combination transaction provided for herein in which Merger Sub will, subject to the terms and conditions set forth herein, merge with and into the Company, with the Company surviving such merger (the “Merger”), so that immediately following the Merger, the Company will be a direct wholly owned Subsidiary of Parent, (b) have each determined that the terms of this Agreement are in the best interests of and fair to the Company, Parent or Merger Sub and their respective stockholders, as applicable, and (c) have declared the advisability of this Agreement and the Merger;
WHEREAS the Company Board has unanimously recommended the adoption of this Agreement by the holders of Company Shares;
WHEREAS concurrently with the execution and delivery of this Agreement and as a condition and inducement to the willingness of Parent and Merger Sub to enter into this Agreement, Parent and certain holders of Company Shares (such stockholders, together with their Affiliates, the “Existing Stockholder Group”) are entering into an agreement (the “Voting Agreement”), pursuant to which such stockholders have agreed, subject to the terms and conditions set forth in the Voting Agreement, to vote or cause to be voted any Company Shares beneficially owned by them in favor of adopting this Agreement and any other actions contemplated hereby in respect of which approval of holders of Company Shares is requested; and
WHEREAS the Company, Parent and Merger Sub desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.01 Merger. On the terms and subject to the conditions set forth in this Agreement, and in accordance with the Delaware General Corporation Law (the “DGCL”), Merger Sub shall be merged with and into the Company at the Effective Time. At the Effective Time, the separate corporate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation (the “Surviving Company”). The Merger and the other transactions contemplated by this Agreement are referred to herein as the “Transactions”.
Section 1.02 Merger Effective Time. On the terms and subject to the conditions set forth in this Agreement, before the Closing, the Company shall prepare, and on the Closing Date the Company shall file with the Secretary of State of the State of Delaware, a certificate of merger or other appropriate documents (in any such case, 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. The Merger shall become effective at such time as the Certificate of Merger is duly filed with such Secretary of State, or at such other time as Parent and the Company shall agree and specify in the Certificate of Merger (the time the Merger becomes effective being the “Effective Time”).
Section 1.03 Effects of Merger. From and after the Effective Time, the Merger shall have the effects set forth in this Agreement and Section 259 of the DGCL.
Section 1.04 Certificate of Incorporation and By-Laws of the Surviving Company. At the Effective Time, (a) the certificate of incorporation of the Surviving Company shall be amended at the Effective Time to read in the form of Exhibit A, and, as so amended, such certificate of incorporation shall be the certificate of incorporation of the Surviving Company and (b) the by-laws of Merger Sub as in effect immediately prior to the Effective Time shall be the by-laws of the Surviving Company (in each case until thereafter changed or amended as provided therein or pursuant to applicable Law and subject to Section 5.08).
Section 1.05 Board of Directors and Officers of Surviving Company. The directors of Merger Sub in office immediately prior to the Effective Time shall be the directors of the Surviving Company until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. The officers of the Company in office immediately prior to the Effective Time shall be the officers of the Surviving Company until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified, as the case may be.
Section 1.06 Closing. The closing (the “Closing”) of the Merger shall take place at the offices of Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019 at 10:00 a.m., local time, on a date to be specified by the Company and Parent, which date shall be as soon as reasonably practicable (but in any event no later than the fifth (5th) business day) following the satisfaction or (to the extent permitted herein and by applicable Law) waiver by the party or parties entitled to the benefits thereof of the conditions set forth in ARTICLE VI (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or (to the extent permitted herein and by applicable Law) waiver of those conditions at such time), or at such other place, time and date as shall be agreed to in writing by the Company and Parent. The date on which the Closing occurs is referred to in this Agreement as the “Closing Date”.
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ARTICLE II
EFFECT ON THE SHARE CAPITAL OF THE CONSTITUENT ENTITIES; PAYMENT OF CONSIDERATION
Section 2.01 Effect of Merger on the Share Capital of Merger Sub and the Company. At the Effective Time, by virtue of the occurrence of the Merger, and without any action on the part of the Company, Parent, Merger Sub or any holder of any common stock, par value $0.10 per share, of the Company (“Company Common Stock”) or any shares of capital stock of Merger Sub:
(a) Conversion of Share Capital of Merger Sub. Each share of capital stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall automatically be converted into and become one fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Company.
(b) Cancelation of Treasury Stock and Parent-Owned Stock. Each share of Company Common Stock that is owned by the Company, Parent or Merger Sub or any of their respective wholly owned Subsidiaries shall no longer be outstanding and shall automatically be canceled and shall cease to exist and be outstanding and no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Shares. Subject to Section 2.01(b) and Section 2.05, each share of Company Common Stock that is issued and outstanding immediately prior to the Effective Time (the “Company Shares”) shall automatically as a result of the Merger be converted into the right to receive an amount in cash equal to $70.00, without interest (the “Merger Consideration”). Subject to Section 2.05, as of the Effective Time, each holder of a certificate that immediately prior to the Effective Time evidenced any Company Shares (each, a “Certificate”) or uncertificated Company Shares represented by book-entry immediately prior to the Effective Time (each, a “Book-Entry Share”) shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration pertaining to the Company Shares represented by such Certificate or Book-Entry Share, as applicable, to be paid in consideration therefor, in accordance with Section 2.02(b) and the right to receive dividends and other distributions in accordance with this ARTICLE II, in each case without interest.
Section 2.02 Exchange Fund.
(a) Paying Agent. Not less than three (3) business days prior to the anticipated Closing Date, Parent shall designate a bank or trust company reasonably acceptable to the Company to act as agent (the “Paying Agent”) for the payment and delivery of the aggregate Merger Consideration payable to holders of Company Shares in accordance with this ARTICLE II and, in connection therewith, shall enter into an agreement with the Paying Agent prior to the Closing Date in a form reasonably acceptable to the Company. Prior to the Effective Time, Parent shall deposit or cause to be deposited an amount in cash sufficient to pay the aggregate amount payable to holders of Company Shares pursuant to Section 2.01(c) with the Paying Agent (such cash, and the cash referred to in the immediately following sentence, being hereinafter referred to as the “Exchange Fund”). From time to time as necessary, Parent shall promptly deposit with the Paying Agent additional cash sufficient to pay any dividends and other distributions payable to holders of Company Shares pursuant to Section 2.02(f). Pending its disbursement in accordance with this Section 2.02, the Exchange Fund shall be invested by the Paying Agent as directed by Parent in (i) short-term direct obligations of the United States of America, (ii) short-term obligations for which the full faith and credit of the United States of
3
America is pledged to provide for the payment of principal and interest, (iii) short-term commercial paper rated the highest quality by either Moody’s Investors Service, Inc. or Standard and Poor’s Ratings Services or (iv) certificates of deposit, bank repurchase agreements or banker’s acceptances of commercial banks with capital exceeding $5 billion. Any and all interest earned on the Exchange Fund shall be paid by the Paying Agent to Parent. Parent shall promptly replace or restore the cash in the Exchange Fund so as to ensure that the Exchange Fund is at all times maintained at a level sufficient for the Paying Agent to make all payments to former holders of Company Shares of the Merger Consideration and any dividends and other distributions payable pursuant to Section 2.02(f). No investment losses resulting from investment of the funds deposited with the Paying Agent shall diminish the rights of any former holder of Company Shares to receive the Merger Consideration or any dividends or other distributions payable pursuant to Section 2.02(f) pertaining thereto as provided herein. The Exchange Fund shall not be used for any purpose other than the payment to holders of Company Shares of the Merger Consideration and of any dividends and other distributions payable pursuant to Section 2.02(f).
(b) Letter of Transmittal; Exchange of Company Shares. As soon as practicable after the Effective Time (but in no event later than three (3) business days after the Effective Time), the Surviving Company or Parent shall cause the Paying Agent to mail to each holder of record of a Certificate a form of letter of transmittal (which shall be in such form and have such other customary provisions as the Surviving Company may specify, subject to the Company’s reasonable approval (to be obtained prior to the Effective Time)), together with instructions thereto, setting forth, inter alia, the procedures by which holders of Certificates may receive the Merger Consideration and any dividends or other distributions to which they are entitled pursuant to this ARTICLE II. Holders of Book-Entry Shares shall not be required to deliver a Certificate but shall, if required by the Paying Agent, be required to deliver an executed letter of transmittal to the Paying Agent in order to receive the Merger Consideration such holder is entitled to pursuant to this ARTICLE II. Upon the completion of such applicable procedures by a holder and the surrender of such holder’s Certificates, and, except as contemplated by the previous sentence, without any action by any holder of record of Book-Entry Shares, the Paying Agent shall deliver to such holder (other than any holder of Company Shares representing Appraisal Shares), (i) in the case of Book-Entry Shares, a notice of the effectiveness of the Merger and (ii) cash in an amount (subject to Section 2.02(g)) equal to the number of Company Shares represented by such Certificate or Book-Entry Shares immediately prior to the Effective Time multiplied by the Merger Consideration, and such Certificates or Book-Entry Shares shall forthwith be canceled. If payment of the Merger Consideration is to be made to a Person other than the Person in whose name a Certificate surrendered is registered, it shall be a condition of payment that (A) the Certificate so surrendered shall be properly endorsed or shall otherwise be in proper form for transfer and (B) the Person requesting such payment shall have established to the reasonable satisfaction of the Surviving Company that any transfer and other Taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder either has been paid or is not applicable. Until satisfaction of the applicable procedures contemplated by this Section 2.02 and subject to Section 2.05, each Certificate or Book-Entry Share shall be deemed at any time after the Effective Time to represent only the right to receive the Merger Consideration and any dividends or other distributions pertaining to Company Shares formerly represented by such Certificate or Book-Entry Share as contemplated by Section 2.02(f). No interest shall be paid or shall accrue on the cash payable with respect to Company Shares pursuant to this ARTICLE II.
4
(c) Lost, Stolen or Destroyed Certificates. If any Certificate (other than Certificates representing Appraisal Shares) shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Company, the posting by such Person of a bond, in such reasonable amount as Parent may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Surviving Company shall cause the Paying Agent to pay, in exchange for such lost, stolen or destroyed Certificate, the applicable Merger Consideration and any dividends or other distributions to be paid in respect of Company Shares formerly represented by such Certificate as contemplated by this ARTICLE II.
(d) Termination of Exchange Fund. At any time following the one hundred and eightieth (180th) day after the Closing Date, the Surviving Company shall be entitled to require the Paying Agent to deliver to it any portion of the Exchange Fund (including any interest received with respect thereto) that had been delivered to the Paying Agent and which has not been disbursed to former holders of Company Shares, and thereafter such former holders shall be entitled to look only to Parent and the Surviving Company for, and Parent and the Surviving Company shall remain liable for, payment of their claims of the Merger Consideration and any dividends or other distributions pertaining to their former Company Shares that such former holders have the right to receive pursuant to the provisions of this ARTICLE II. Any amounts remaining unclaimed by such holders at such time at which such amounts would otherwise escheat to or become property of any Governmental Authority shall become, to the extent permitted by applicable Law, the property of Parent or its designee, free and clear of all claims or interest of any Person previously entitled thereto.
(e) No Liability. Notwithstanding any provision of this Agreement to the contrary, none of the parties hereto, the Surviving Company or the Paying Agent shall be liable to any Person for the Merger Consideration delivered to a public official pursuant to any applicable state, federal or other abandoned property, escheat or similar Law.
(f) Transfer Books; No Further Ownership Rights in Company Shares. The Merger Consideration paid in respect of each Company Share in accordance with the terms of this ARTICLE II shall be deemed to have been paid in full satisfaction of all rights pertaining to such Company Shares previously represented by such Certificates or Book-Entry Shares, subject, however, to (i) Section 2.05 and (ii) the Surviving Company’s obligation to pay any dividends or make any other distributions with a record date prior to the Effective Time that have been declared by the Company on Company Shares not in violation of the terms of this Agreement or prior to the date of this Agreement and which remain unpaid at the Effective Time. At the Effective Time, the share transfer books of the Surviving Company shall be updated to reflect the transfer of Company Shares to Parent in accordance with the terms herein. From and after the Effective Time, the holders of Company Shares formerly represented by Certificates or Book-Entry Shares immediately prior to the Effective Time shall cease to have any rights with respect to such underlying Company Shares, except as otherwise provided for herein or by applicable Law. Subject to the last sentence of Section 2.02(d), if, at any time after the Effective Time, Certificates or Book-Entry Shares are presented to the Surviving Company for any reason, they shall be canceled and exchanged as provided in this ARTICLE II.
5
(g) Withholding Taxes. Parent, the Surviving Company and the Paying Agent (without duplication) shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement such amounts as are required to be deducted and withheld with respect to the making of such payment under the U.S. Internal Revenue Code of 1986, as amended (the “Code”), or under any provision of other applicable Tax Law. To the extent amounts are so withheld and paid over to the appropriate Governmental Authority, the withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.
Section 2.03 Company Equity Awards.
(a) Treatment of Restricted Stock Units and Performance Units. Prior to the Effective Time, the Company Board (or, if appropriate, any duly authorized committee thereof administering the Company Stock Plan) shall adopt such resolutions and take such other actions as may be required to provide that, effective immediately prior to or upon the Effective Time:
(i) Each performance unit award granted prior to January 1, 2017, and each tranche of a restricted stock unit award that vests prior to January 1, 2020, that was granted under the Company Stock Plan prior to January 1, 2019, and that is outstanding immediately prior to the Effective Time and is payable in Company Shares (together, the “2019 Vesting Company Awards”) shall be converted into the right to receive an amount in cash, without interest, equal to the product of (A) the Merger Consideration multiplied by (B) the number of restricted stock units in the applicable tranche or, in the case of performance units, the target number of Company Shares, in each case subject to the 2019 Vesting Company Award immediately prior to the Effective Time.
(ii) Each performance unit award granted on or after January 1, 2017, and prior to January 1, 2019, and each tranche of a restricted stock unit award that vests on or after January 1, 2020, but that was granted prior to January 1, 2019, that was granted under the Company Stock Plan and that is outstanding immediately prior to the Effective Time and is payable in Company Shares (together, the “2020 Vesting Company Awards”) shall be canceled and converted into the right to receive a cash payment equal to the product of (A) the Merger Consideration multiplied by (B) the number of restricted stock units in the applicable tranche or, in the case of performance units, the target number of Company Shares, in each case subject to the 2020 Vesting Company Awards immediately prior to the Effective Time; provided, that such right to a cash payment shall be subject to the same vesting and payment schedules as the 2020 Vesting Company Award it replaces (other than performance-based vesting conditions).
(iii) Each performance unit award granted on or after January 1, 2019, and each restricted stock unit award granted on or after January 1, 2019, that is outstanding immediately prior to the Effective Time and is payable in Company Shares (together, the “2019 New Company Awards”), shall be canceled and converted into the right to receive a number of restricted stock units issued pursuant to The Hartford 2014
6
Incentive Stock Plan (each, a “Parent RSU”) in respect of shares of common stock, par value $0.01 per share, of Parent (“Parent Common Stock”) equal to (A) the Merger Consideration multiplied by the number of restricted stock units in the applicable tranche or, in the case of performance units, the target number of Company Shares, in each case subject to the 2019 New Company Award immediately prior to the Effective Time, divided by (B) the closing price of a share of Parent Common Stock on the New York Stock Exchange on the business day immediately prior to the Closing Date; provided, that each Parent RSU shall be subject to the same vesting and payment schedules as the 2019 New Company Award it replaces (other than performance-based vesting conditions).
(iv) Each performance unit award and restricted stock unit award that was granted under the Company Stock Plan and that is outstanding immediately prior to the Effective Time and is payable in cash (together, the “Cash Awards”) shall be settled in accordance with its terms.
(v) Notwithstanding the foregoing, the parties hereto shall collaborate to determine a method to convert and/or settle, as applicable Company Awards held by a Company Employee based outside the United States in a manner that is consistent with the Company Stock Plan and designed to preserve the intended economic treatment and ameliorate issues (if any) posed by applicable Law.
(b) Treatment of Restricted Shares. Prior to the Effective Time, the Company Board (or, if appropriate, any duly authorized committee thereof administering the Company Stock Plan) shall adopt such resolutions and take such other actions as may be required to provide that, effective immediately prior to or upon the Effective Time, any restrictions on any restricted Company Share granted under the Company Stock Plan (the “Company Restricted Shares”) shall lapse.
(c) Termination of the Company Stock Plan. As of the Effective Time, the Company Stock Plan shall terminate, and no further rights with respect to Company Shares shall be granted thereunder.
(d) Treatment of Company Stock Purchase Plan. Prior to the Effective Time, the Company Board (or, if appropriate, any duly authorized committee thereof administering the Company Stock Purchase Plan) shall adopt such resolutions and take such other actions as may be required to provide the following, effective upon the Effective Time: (i) participation in the Company Stock Purchase Plan shall be limited to those employees who are participants on the date of this Agreement, (ii) except to the extent necessary to maintain the status of the Company Stock Purchase Plan as an “employee stock purchase plan” within the meaning of Section 423 of the Code and the Treasury Regulations thereunder, participants may not increase their payroll deduction elections or rate of contributions from those in effect on the date of this Agreement, (iii) no Company Shares may be purchased under the Company Stock Purchase Plan with respect to offering periods beginning on or after the date of this Agreement, (iv) as of immediately prior to the Effective Time, the Company Stock Purchase Plan shall terminate, and (v) if the Effective Time occurs prior to the last day of the offering period in effect as of the date of this Agreement, each purchase right under the Company Stock Purchase Plan shall be terminated in exchange for
7
a cash payment equal to the excess of (A) the Merger Consideration over (B) 90% of the lesser of (x) the closing price of a share of Company Common Stock on the NASDAQ Global Select Market on the last trading day before the commencement of the last offering period and (y) the closing price of a share of Company Common Stock on the NASDAQ Global Select Market on the last trading day before the Effective Time; provided, that the number of purchase rights with respect to which clause (v) shall be applicable shall be subject to the limitations under the Company Stock Purchase Plan regarding the maximum number of shares of Company Common Stock that may be purchased by a participant.
Section 2.04 Payments with Respect to Company Equity Awards. As soon as administratively practicable after the Effective Time (but, in any event, not later than thirty (30) days after the Effective Time), the Surviving Company shall pay, or shall cause to be paid, through its or its Affiliate’s payroll agent, the payments required under Section 2.03(a)(i) and Section 2.03(d). Notwithstanding the foregoing, in the case of any Company Award that is subject to Section 409A of the Code, all payments with respect to such Company Award shall be made in accordance with and at the earliest time as is consistent with the requirements of Section 409A of the Code and nothing herein is intended, or shall be construed, to change the payment timing with respect to any such Company Award in violation of Section 409A of the Code.
Section 2.05 Appraisal Shares.
(a) Notwithstanding anything in this Agreement to the contrary, Appraisal Shares that are outstanding immediately before the Effective Time and that are held by any Person who is entitled to demand and properly demands appraisal of such Appraisal Shares pursuant to, and who complies in all respects with, Section 262 of the DGCL (“Section 262”) shall not be converted into Merger Consideration as provided in Section 2.01(c), but rather the holders of Appraisal Shares shall be entitled to payment of the fair value of such Appraisal Shares in accordance with Section 262 (and, at the Effective Time, such Appraisal Shares shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and such holders shall cease to have any right with respect thereto, except the right to receive the fair value of such Appraisal Shares); provided, that if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 262 (each, an “Appraisal Withdrawal”), then the right of such holder to be paid the fair value of such holder’s Appraisal Shares shall cease and such Appraisal Shares shall be deemed to have been converted as of the Effective Time into, and to have become exchangeable solely for, the right to receive Merger Consideration as provided in Section 2.01(c), less any applicable Taxes required to be withheld in accordance with Section 2.02(g) with respect to such payment.
(b) The Company shall give Parent (i) written notice of (A) any demands for appraisal or payment of the fair value of any Company Shares, Appraisal Withdrawals and any other written instruments, notices, petitions or other communication received by the Company prior to the Effective Time in connection with the foregoing, in each case, pursuant to the provisions of the DGCL concerning the rights of holders of Company Shares to require appraisal of such Company Shares in accordance with this Section 2.05 and (B) to the extent that the Company has Knowledge thereof, any applications to the Delaware Court of Chancery for appraisal of the fair value of the Appraisal Shares and (ii) to the extent permitted by applicable Law, the opportunity to participate with the Company in any settlement negotiations and
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proceedings with respect to any demands for appraisal under the DGCL. The Company shall not, without the prior written consent of Parent, voluntarily make any payment with respect to, offer to settle or settle any such demands or applications, or waive any failure to timely deliver a written demand for appraisal or to timely take any other action to exercise appraisal rights in accordance with the DGCL. Payment of any amount payable to holders of Appraisal Shares shall be the obligation of the Surviving Company.
Section 2.06 Adjustments. Notwithstanding any provision of this ARTICLE II to the contrary, if between the date of this Agreement and the Effective Time the issued and outstanding Company Shares shall have been changed into a different number of shares or a different class by reason of the occurrence or record date of any share dividend, subdivision, reclassification, recapitalization, split, combination, exchange of shares or similar transaction, the Merger Consideration shall be appropriately adjusted to reflect such share dividend, subdivision, reclassification, recapitalization, split, combination, exchange of shares or similar transaction.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that, except as (x) set forth in the disclosure letter delivered by the Company to Parent and Merger Sub on the date of this Agreement (the “Company Disclosure Letter”) (it being understood that any information set forth on one section or subsection of the Company Disclosure Letter shall be deemed to apply to and qualify the section or subsection of this Agreement to which it corresponds in number and each other section or subsection of this Agreement to the extent that it is reasonably apparent on the face of such disclosure that such information is relevant to such other section or subsection) or (y) disclosed in any report, schedule, form, statement or other document filed with the SEC since January 1, 2017, by the Company and publicly available at least two (2) business days prior to the date of this Agreement (the “Filed SEC Documents”), other than disclosures contained in the “Risk Factors” or “Forward-Looking Statements” sections of such Filed SEC Documents or that otherwise constitute risk factors or forward-looking statements, or of any risks generally faced by participants in the industries in which the Company operates, in each case, to the extent such sections, statements or risks do not disclose specific facts and circumstances:
Section 3.01 Organization; Standing.
(a) The Company is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware. The Company has all requisite power and authority necessary to carry on its business as it is now being conducted and to own, lease and operate its assets and properties in all material respects. The Company is duly licensed or qualified to do business and is in good standing (where such concept is recognized under applicable Law) in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing has not had or would not reasonably be expected to have a Material Adverse Effect. A true and complete copy of each of the Company Organizational Documents is included in the Filed SEC Documents. The Company is not in violation of the Company Organizational Documents and no Subsidiary of the Company is in violation of any of its organizational documents, except, in each case, as would not be material to the Company and its Subsidiaries, taken as a whole.
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(b) Section 3.01(b) of the Company Disclosure Letter sets forth a complete list of the Company’s Subsidiaries, the jurisdiction of incorporation or organization of each such Subsidiary, and any other jurisdiction where each such Subsidiary is licensed or specifically authorized to do business, including under applicable Insurance Laws. Each of the Company’s Subsidiaries is duly incorporated or organized, validly existing and in good standing (where such concept is recognized under applicable Law) under the Laws of the jurisdiction of its incorporation or organization, except where the failure to be so incorporated or organized, existing and in good standing has not had or would not reasonably be expected to have a Material Adverse Effect. No Insurance Regulator has notified the Company or any of its Subsidiaries, orally or in writing, that the Company or any of its Subsidiaries is commercially domiciled in any jurisdiction.
Section 3.02 Capitalization.
(a) The authorized share capital of the Company consists of 50,000,000 shares of Company Common Stock and 1,000,000 shares of Preferred Stock, par value $0.10 per share, (“Company Preferred Stock”). At the close of business on August 14, 2018 (the “Capitalization Date”), (i) 29,766,719 shares of Company Common Stock were issued and outstanding, (ii) no shares of Company Preferred Stock were issued and outstanding, (iii) 7,022,760 shares of Company Common Stock were held by the Company as treasury shares, (iv) 107,163 shares of Company Common Stock were issuable with respect to outstanding restricted stock unit awards and (v) 847,533 shares of Company Common Stock were issuable with respect to outstanding performance unit awards. Since the Capitalization Date through the date of this Agreement, other than in connection with the vesting or settlement of Company Awards in accordance with their terms, neither the Company nor any of its Subsidiaries has issued any Company Securities.
(b) Except as described in Section 3.02(a), as of the Capitalization Date, there were (i) no outstanding Company Shares, or other equity or voting interests in, the Company, (ii) no outstanding securities of the Company convertible into or exchangeable for Company Shares, or other equity or voting interests in, the Company, (iii) no outstanding options, warrants, rights or other commitments or agreements to acquire from the Company, or that obligate the Company to issue, any Company Shares, or other equity or voting interests in, or any securities convertible into or exchangeable for Company Shares, or other equity or voting interests in, the Company, (iv) no obligations of the Company to grant, extend or enter into any subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment relating to any Company Shares, or other equity or voting interests in, the Company (collectively, “Company Rights”, and the items in clauses (i), (ii), (iii) and (iv) being referred to collectively as “Company Securities”) and (v) no other obligations by the Company or any of its Subsidiaries to make any payments based on the price or value of any Company Securities or dividends paid thereon. Other than in connection with the Company Awards, there are no outstanding agreements or instruments of any kind that obligate the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Company Securities (or obligate the Company to grant, extend or enter into any such agreements relating to any Company Securities)
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or that grant from the Company or any of its Subsidiaries any preemptive rights, subscription rights, anti-dilutive rights, rights of first refusal or similar rights with respect to any Company Securities. Except as described in Section 3.02(a), no direct or indirect Subsidiary of the Company owns any Company Shares. None of the Company or any Subsidiary of the Company is a party to any stockholders’ agreement, voting trust agreement, registration rights agreement or other similar agreement or understanding relating to any Company Securities or any other agreement relating to the disposition, voting or dividends with respect to any Company Securities. All issued and outstanding Company Shares have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. The Company Common Stock and the Senior Notes constitute the only outstanding classes of securities of the Company or its Subsidiaries registered pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (collectively, the “Exchange Act”). The Company Common Stock is the only outstanding class of securities of the Company or its Subsidiaries registered pursuant to Section 12(b) or Section 12(g) of the Exchange Act.
(c) All of the issued and outstanding share capital or shares of capital stock of, or other equity or voting interests in, each Subsidiary of the Company (except for directors’ qualifying shares or the like) are owned, directly or indirectly, beneficially and of record, by the Company free and clear of all Liens, except for such Liens as may be provided under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (collectively, the “Securities Act”) or other applicable securities Laws (including any restriction on the right to vote, sell or otherwise dispose of such share capital, shares of capital stock or other equity or voting interests). Each issued and outstanding share capital or share of capital stock of each Subsidiary of the Company that is held, directly or indirectly, by the Company, is duly authorized, validly issued, fully paid, nonassessable (where such concept is recognized under applicable Law) and free of preemptive rights, and there are no subscriptions, options, warrants, rights, calls, contracts or other commitments that obligate the Company or Subsidiary of the Company to issue (other than to the Company or any Subsidiary of the Company) any share capital or shares of capital stock or other equity or voting interests of any Subsidiary of the Company, including any right of conversion or exchange under any outstanding security, instrument or agreement, any agreements granting any preemptive rights, subscription rights, anti-dilutive rights (other than as generally provided by applicable Law), rights of first refusal or similar rights (to Persons other than the Company or any Subsidiary of the Company) with respect to any securities of any Subsidiary of the Company. None of the Subsidiaries of the Company has any outstanding equity compensation plans relating to the share capital or capital stock of, or other equity or voting interests in, any Subsidiary of the Company. There are no restrictions on the ability of any Subsidiary of the Company to pay dividends or distributions except as required by applicable Law and, in the case of a Subsidiary of the Company that is a regulated entity, for restrictions on dividends or distributions generally applicable to all such regulated entities.
Section 3.03 Authority; Noncontravention; Voting Requirements.
(a) The Company has all necessary power and authority to execute and deliver this Agreement and, subject to obtaining the Company Stockholder Approval, to perform its obligations hereunder and to consummate the Transactions. The execution and delivery by the Company hereof, the performance and compliance by the Company with each of its
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obligations herein and the consummation by the Company of the Transactions have been duly authorized by all necessary corporate action on the part of the Company, subject to receipt of the Company Stockholder Approval. This Agreement has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery hereof by the other parties hereto, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, rehabilitation, conservatorship, liquidation, receivership and other similar Laws of general application affecting or relating to the enforcement of creditors’ rights generally and (ii) is subject to general principles of equity, whether considered in a proceeding at law or in equity (the “Bankruptcy and Equity Exception”).
(b) The Company Board, at a meeting duly called and held, has unanimously (i) determined that the Merger, on the terms and subject to the conditions set forth herein, and the other Transactions are fair to and in the best interests of the Company and its stockholders, (ii) approved this Agreement, the Merger and the other Transactions, (iii) resolved, subject to Section 5.02, to recommend that the Company’s stockholders adopt this Agreement (such recommendation, the “Company Board Recommendation”) and (iv) declared that this Agreement is advisable, and, as of the date of this Agreement, such resolutions have not been subsequently rescinded, modified or withdrawn in any way.
(c) Neither the execution and delivery of this Agreement by the Company, nor the consummation by the Company of the Transactions, nor performance or compliance by the Company with any of the terms or provisions hereof, will (i) contravene, conflict with or violate any provision of (A) the Company Organizational Documents or (B) the similar organizational documents of any of the Company’s Subsidiaries or (ii) assuming (A) compliance with the matters set forth in Section 4.02(c) (other than Section 4.02(c)(ii)(A)) (and assuming the accuracy of the representations and warranties made in such Section 4.02(c)), (B) that the actions described in Section 3.04 have been completed, (C) that the Consents referred to in Section 3.04 and the Company Stockholder Approval is obtained and (D) that the filings referred to in Section 3.04 are made and any waiting periods thereunder have terminated or expired, in the case of each of the foregoing clauses (ii)(A) through (D), prior to the Effective Time, (x) violate any Law applicable to the Company or any of its Subsidiaries, (y) violate or constitute a breach of or default (with or without notice or lapse of time or both) under any of the terms, conditions or provisions of any Material Contract, Permit or Company Reinsurance Contract or accelerate, vest or trigger the Company’s or, if applicable, any of its Subsidiaries’, obligations or rights of any other Person under any such Material Contract, Permit or Company Reinsurance Contract or (z) result in the creation of any Lien on any properties or assets of the Company or any of its Subsidiaries (or of Parent or any of its Subsidiaries following the Effective Time), except, in the case of clauses (i)(B) and (ii), as has not had or would not reasonably be expected to have a Material Adverse Effect.
(d) The affirmative vote (in person or by proxy) of the holders of a majority of the outstanding shares of Company Common Stock, to adopt this Agreement (the “Company Stockholder Approval”) is the only vote or approval of the holders of any class or series of share capital or capital stock of the Company or any of its Subsidiaries that are necessary to approve this Agreement and the Merger.
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Section 3.04 Governmental Approvals. Except for (a) compliance with the applicable requirements of the Exchange Act, including the filing with the Securities and Exchange Commission (the “SEC”) of a proxy statement relating to the Company Stockholders Meeting (as amended or supplemented from time to time, the “Proxy Statement”), (b) compliance with the rules and regulations of the NASDAQ Global Select Market, (c) such filings and Consents as may be required in connection with the Taxes described in Section 5.05, (d) filings required under, and compliance with other applicable requirements of, the HSR Act, and such other Consents, filings, declarations or registrations as are required to be made or obtained under any other Antitrust Laws, (e) compliance with any applicable state securities or blue sky Laws, (f) approvals, filings and notices under all applicable Insurance Laws as set forth in Section 3.04 of the Company Disclosure Letter (the “Company Insurance Approvals”) and (g) the Parent Insurance Approvals (assuming the accuracy of the representations and warranties made in Section 4.03(g) and the completeness of Section 4.03 of the Parent Disclosure Letter), no Consent of, or filing, declaration or registration with or notification to, any Governmental Authority is necessary for the execution and delivery of this Agreement by the Company, the performance by the Company of its obligations hereunder and the consummation by the Company of the Transactions, other than such other Consents, filings, declarations, registrations or notifications that, if not obtained, made or given, would not reasonably be expected to have a Material Adverse Effect.
Section 3.05 Company SEC Documents; Undisclosed Liabilities.
(a) The Company has timely filed with the SEC all material reports, schedules, forms, statements and other documents required to be filed by the Company with the SEC, in each case, pursuant to the Securities Act or the Exchange Act since January 1, 2016 (collectively, the “Company SEC Documents”). As of their respective effective dates (in the case of Company SEC Documents that are registration statements filed pursuant to the requirements of the Securities Act) or their respective SEC filing dates (in the case of all other Company SEC Documents), the Company SEC Documents complied as to form in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, applicable to such Company SEC Documents, and none of the Company SEC Documents as of such respective dates (or, if amended prior to the date of this Agreement, the date of the filing of such amendment, with respect to the disclosures that are amended) contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of the date hereof, there are no unresolved written comments from the SEC with respect to Company SEC Documents.
(b) The consolidated financial statements of the Company (including all related notes or schedules) included or incorporated by reference in the Company SEC Documents complied as to form, as of their respective dates of filing with the SEC, in all material respects with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP consistently applied for the applicable period (except, in the case of unaudited quarterly statements, as permitted by Form 10-Q of the SEC or other rules and regulations of the SEC) applied on a consistent basis during the periods involved (except (i) as may be indicated in the notes thereto or (ii) as permitted by Regulation S-X) and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations, changes in stockholders’ equity and cash flows for the periods shown (subject, in the case of unaudited quarterly financial statements, to normal year-end adjustments).
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(c) Neither the Company nor any of its Subsidiaries has any liabilities of any nature (whether accrued, absolute, contingent or otherwise) that would be required under GAAP, as in effect on the date of this Agreement, to be reflected on a consolidated balance sheet of the Company (including the notes thereto) except liabilities (i) reflected or reserved against in the balance sheet (or the notes thereto) of the Company and its Subsidiaries as of December 31, 2017, included in the Filed SEC Documents, (ii) incurred after December 31, 2017, in the ordinary course of business consistent with past practice, (iii) as contemplated by this Agreement or otherwise incurred in connection with the Transactions or (iv) that are not material to the Company and its Subsidiaries taken as a whole.
(d) The Company is in compliance in all material respects with the provisions of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations of the SEC promulgated thereunder (the “Sarbanes-Oxley Act”) and the rules and regulations of the NASDAQ Global Select Market, in each case, that are applicable to the Company. With respect to each Company SEC Document on Form 10-K or 10-Q, each of the principal executive officer and the principal financial officer of the Company has made all certifications required by Rule 13a-14 or 15(d) under the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act with respect to such Company SEC Documents.
(e) The Company makes no representation or warranty with respect to statements made or incorporated by reference therein based on information supplied by or on behalf of Parent or Merger Sub or any Affiliates thereof for inclusion or incorporation by reference in the Proxy Statement.
(f) No material weaknesses exist with respect to the internal control over financial reporting of the Company that would be required to be disclosed by the Company pursuant to Item 308(a)(3) of Regulation S-K promulgated by the SEC that has not been disclosed in the Company SEC Documents as filed with or furnished to the SEC prior to the date hereof. The Company has established and maintains “disclosure controls and procedures” and “internal control 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, designed to ensure that information required to be disclosed by the Company in the reports that it files and submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including that information required to be disclosed by the Company in the reports that it files and submits under the Exchange Act is accumulated and communicated to management of the Company, as appropriate, to allow timely decisions regarding required disclosure. The Company has disclosed, based on its most recent evaluation, to the Company’s outside auditors and the audit committee of the Company Board, (i) all significant deficiencies and material weaknesses in the design and operation of internal control over financial reporting which are reasonably likely to adversely affect in any material respect the Company’s ability to record, process, summarize and report financial data and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial
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reporting. The Company has provided or made available to Parent correct and complete copies of any such disclosure contemplated by clauses (i) and (ii) of the immediately preceding sentence made by management to the Company’s independent auditors and the audit committee of the Company Board since December 31, 2017.
Section 3.06 Absence of Certain Changes. (a) Since December 31, 2017 through the date of this Agreement, (i) except for the execution, delivery and performance of this Agreement and the discussions, negotiations and transactions related thereto, the business of the Company and its Subsidiaries has been conducted in all material respects in the ordinary course of business and (ii) neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would have resulted in a breach of Section 5.01(a) had the restrictions thereunder been in effect since December 31, 2017, and (b) since December 31, 2017, there has not been any effect, change, event, circumstance, development or occurrence that, individually or in the aggregate with all other effects, changes, events, circumstances, developments, and occurrences, has had or would reasonably be expected to have a Material Adverse Effect.
Section 3.07 Legal Proceedings. There is no material (a) pending or, to the Knowledge of the Company, threatened Action against the Company or any of its Subsidiaries (other than ordinary course claims made under or in connection with Contracts of insurance issued by the Company or any of its Subsidiaries) or (b) outstanding injunction, order, judgment, ruling, decree or writ imposed upon the Company or any of its Subsidiaries or any director or officer of the Company or any of its Subsidiaries or, to the Knowledge of the Company, any other Person for whom the Company or any of its Subsidiaries may be liable as an indemnifying party or otherwise, in each case, by or before any Governmental Authority.
Section 3.08 Compliance with Laws; Permits.
(a) The Company and each of its Subsidiaries are, and since January 1, 2016, have been, in compliance in all material respects with all federal, national, provincial, state, local or multinational laws, statutes, common laws, ordinances, codes, rules, orders, judgments, injunctions, writs, governmental guidelines or interpretations having the force of law, Permits, regulations, decrees or executive orders enacted, issued, adopted, promulgated or applied by or on behalf of any Governmental Authorities (collectively, “Laws”), in each case, applicable to the Company or any of its Subsidiaries. The Company and each of its Subsidiaries hold, and since January 1, 2016, have held, and are in material compliance with, all licenses, franchises, permits, certificates, approvals, authorizations and registrations from Governmental Authorities necessary for the lawful conduct of their respective businesses (collectively, “Permits”), except where the failure to hold the same has not had or would not reasonably be expected to have a Material Adverse Effect.
(b) The Company and each of its Subsidiaries are in compliance in all material respects with (i) the Foreign Corrupt Practices Act of 1977, as amended, and any rules and regulations promulgated thereunder, (ii) the United Kingdom Bribery Act of 2010, as amended, and any rules and regulations promulgated thereunder and (iii) any other Laws regarding the use of funds for political activity or commercial bribery, in each case, if and to the extent applicable to the Company and the relevant Subsidiary. To the Knowledge of the Company, there are no situations with respect to the business of the Company of any of its
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Subsidiaries which involved or involves (A) the use of any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity; or (B) the making of any direct or indirect unlawful payments to government officials or others from corporate funds or the establishment or maintenance of any unlawful or unrecorded funds.
(c) The Company and its Subsidiaries are, and have been, conducting operations at all times in compliance in all material respects with applicable financial recordkeeping and reporting requirements of all money laundering Laws in jurisdictions where the Company and its Subsidiaries conduct business (collectively, the “Anti-Money Laundering Laws”). The Company and its Subsidiaries have established and maintain a system of internal controls designed to ensure compliance by the Company and its Subsidiaries with applicable financial recordkeeping and reporting requirements of the Anti-Money Laundering Laws.
(d) Neither the Company, nor any of its Subsidiaries, nor any director, officer or employee of the Company or any of the Company Subsidiaries, nor, to the Knowledge of the Company, any agent or other Person acting on behalf of the Company or any of its Subsidiaries, is currently the target of any applicable economic sanctions administered or enforced by any Governmental Authority (collectively, “Sanctions”), nor is the Company or any of its Subsidiaries located, organized or resident in a country or territory that is the target of comprehensive Sanctions, including Cuba, Iran, North Korea, Syria, or the Crimea region of Ukraine (each, a “Sanctioned Country”). For the past three (3) years, the Company and its Subsidiaries have not knowingly engaged in any dealings or transactions with any Person that at the time of the dealing or transaction is or was the target of Sanctions or with any Sanctioned Country, in each case, in violation of applicable Sanctions. The Company and its Subsidiaries have established and maintain a system of internal controls designed to provide reasonable assurances regarding compliance by the Company and its Subsidiaries with all applicable Sanctions.
Section 3.09 Tax Matters. Except as has not had or would not reasonably be expected to have a Material Adverse Effect:
(a) The Company and each of its Subsidiaries has prepared (or caused to be prepared) and duly and timely filed (taking into account valid extensions of time within which to file) all Tax Returns required to be filed by any of them. All such filed Tax Returns (taking into account all amendments thereto) are true, complete and accurate in all respects, and have been prepared in compliance with applicable Laws, and all Taxes owed by the Company and each of its Subsidiaries that are due (whether or not shown on any Tax Return) have been timely paid or are being contested in good faith and by appropriate proceedings and have been adequately reserved against in accordance with GAAP and Applicable SAP.
(b) The Company and each of its Subsidiaries have withheld all material amounts required to have been withheld by them in connection with amounts paid or owed to any employee, independent contractor, creditor, stockholder or any other third party and such withheld amounts were duly paid to the appropriate Governmental Authority in the manner required by applicable Laws.
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(c) As of the date of this Agreement, the Company has not received written notice of any pending or threatened audits, examinations, investigations, claims, actions, suits or other proceedings in respect of any Taxes of the Company or any of its Subsidiaries.
(d) There are no Liens for Taxes on any of the assets of the Company or any of its Subsidiaries other than Permitted Liens.
(e) Neither the Company nor any of its Subsidiaries has been a “controlled corporation” or a “distributing corporation” in any distribution occurring during the two (2) year period ending on the date of this Agreement that was purported or intended to be governed by Section 355 of the Code (or any similar provision of applicable Law).
(f) No deficiency for any Tax has been asserted or assessed by any Governmental Authority in writing against the Company or any of its Subsidiaries, except for deficiencies that have been satisfied by payment in full, settled or withdrawn, or that have been adequately reserved against in accordance with GAAP and Applicable SAP. Since January 1, 2012, neither the Company nor any of its Subsidiaries has received any written claim from any Governmental Authority in a jurisdiction where the Company or any of its Subsidiaries does not file a Tax Return that the Company or any of its Subsidiaries is, or may be, subject to Tax by or required to file or be included in a Tax Return in that jurisdiction.
(g) Neither the Company nor any of its Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to an assessment or deficiency for Taxes, which waiver or agreement, as applicable, remains in effect (other than pursuant to extensions of time to file Tax Returns obtained in the ordinary course).
(h) Neither the Company nor any of its Subsidiaries has any liability for Taxes of another Person (other than the Company or any of its current or former Subsidiaries) under U.S. Treasury Regulation Section 1.1502-6 (or any similar provision of applicable Law), as a transferee or as a successor. Neither the Company nor any of its Subsidiaries is a party to a Tax allocation, sharing, indemnity or similar agreement (other than any commercial Contract entered into in the ordinary course of business that does not relate principally to Taxes) that will require any payment by the Company or any of its Subsidiaries of any Tax of another Person after the Closing Date.
(i) Neither the Company nor any of its Subsidiaries has participated in any “listed transaction” within the meaning of U.S. Treasury Regulation Section 1.6011-4(b)(2), if and to the extent applicable to the Company and the relevant Subsidiary.
(j) Neither the Company nor any of its Subsidiaries has ever been a member of an affiliated, combined, consolidated, or unitary Tax group for purposes of filing any Tax Return (other than a group the common parent of which is the Company or any of its Subsidiaries).
(k) The Company and each of its Subsidiaries has conducted all intercompany transactions in substantial compliance with the principles of Sections 482 and 845 of the Code (or any similar provisions of state, local or foreign Tax law).
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(l) Neither the Company nor any of its Subsidiaries will be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date or pay Tax in a later period as a result of any (i) change in method of accounting (including under Section 481 of the Code but excluding any change made in connection with Public Law 115-97) or use of an improper method for a taxable period ending on or prior to the Closing Date, (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local, or non-U.S. income Tax Law) executed on or prior to the Closing Date, (iii) installment sale or open transaction disposition made on or prior to the Closing Date, (iv) prepaid amount received on or prior to the Closing Date, (v) election under Section 108(i) of the Code, or (vi) election to defer payment of Tax under Section 965 of the Code, in each case, if and to the extent applicable to the Company and the relevant Subsidiary.
Section 3.10 Employee Benefits.
(a) Section 3.10(a) of the Company Disclosure Letter contains a true and complete list, as of the date of this Agreement, of each material Company Plan and each material Foreign Plan. With respect to each material Company Plan, the Company has made available to Parent true and complete copies (to the extent applicable and to the extent permitted by applicable Law) of (i) the plan document, including any amendments thereto, (ii) the most recent summary plan description for each such Company Plan for which such summary plan description is required by applicable Law, (iii) each insurance Contract, trust agreement or other funding vehicle, (iv) the most recent annual report on Form 5500 required to be filed with the IRS with respect thereto (if any) and the applicable financial statements for the most recent completed fiscal year of the plan, (v) each administration agreement and payroll Contract, and (vi) the most recent determination or opinion letter.
(b) Each Company Plan and each Foreign Plan has been established, operated and administered in compliance with its terms and applicable Laws, other than instances of noncompliance that has not had or would not reasonably be expected to have a Material Adverse Effect. Each Company Pension Plan that is intended to be “qualified” within the meaning of Section 401(a) of the Code (a “Qualified Plan”) has received a favorable determination letter from the IRS or is entitled to rely upon a favorable opinion issued by the IRS, and to the Knowledge of the Company, there are no existing circumstances or any events that have occurred that could reasonably be expected to cause the loss of any such qualification status of any such Company Pension Plan, except where such loss of qualification status has not had or would not reasonably be expected to have a Material Adverse Effect. Each Foreign Plan, where applicable, complies with legal requirements for preferential tax and social security treatment, except where failure to do so has not had or would not reasonably be expected to have a Material Adverse Effect.
(c) The Company does not maintain or contribute or have any liability under or with respect to a plan subject to Title IV of ERISA or Section 412 of the Code, including any “single employer” defined benefit plan or any “multiemployer plan” (each, as defined in Section 4001 of ERISA). Except as had not had or would not reasonably be expected to have a Material Adverse Effect, (i) no liability under Title IV or Section 302 of ERISA has been incurred by the Company or any trade or business, whether or not incorporated, that together
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with the Company would be deemed a single employer within the meaning of Section 4001(b) of ERISA (an “ERISA Affiliate”) that has not been satisfied in full, and (ii) no condition exists that could reasonably be expected to present a risk to the Company or any ERISA Affiliate of incurring any such liability.
(d) With respect to each (i) Company Plan, as applicable, the Company and its Subsidiaries have not engaged in, and to the Knowledge of the Company no other Person has engaged in, any non-exempt “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) that would reasonably be expected to result in a liability to the Company or any of its Subsidiaries that has had or would reasonably be expected to have a Material Adverse Effect, (ii) Company Plan, as applicable, none of the Company or any of its Subsidiaries or, to the Knowledge of the Company, any other “fiduciary” (as defined in Section 3(21) of ERISA) has any liability for breach of fiduciary duty or any other failure to act or comply in connection with the administration or investment of the assets of such Company Plan that has had or would reasonably be expected to have a Material Adverse Effect, and (iii) Company Plan or Foreign Plan, as applicable, no Action, audit, investigation, suit, proceeding, hearing or claim is pending or, to the Knowledge of the Company, threatened, that has had or would reasonably be expected to have a Material Adverse Effect.
(e) Except as required under applicable Law, no Company Plan provides health, medical, dental or life insurance benefits following retirement or other termination of employment.
(f) Except as otherwise contemplated under this Agreement, neither the execution nor delivery of this Agreement, stockholder approval of this Agreement, nor the consummation of the Transactions contemplated by this Agreement will, whether alone or in combination with any other event, (i) accelerate the time of payment or vesting, or materially increase the amount of compensation due to any director, officer or employee of the Company or any of its Subsidiaries (whether by virtue of any termination, severance, change of control or similar benefit or otherwise), (ii) cause the Company to transfer or set aside any assets to fund any benefits under any Company Plan or (iii) limit or restrict the right to amend, terminate or transfer the assets of any Company Plan before, on or following the Effective Time.
(g) The consummation of the Transactions contemplated by this Agreement will not cause any amounts payable under the Company Plans to fail to be deductible for U.S. federal income Tax purposes by virtue of Section 280G of the Code. No Company Plan provides for a Tax gross up, make whole or similar payment with respect to the Taxes imposed under Sections 409A or 4999 of the Code.
(h) The Company, and each Company Plan that is a “group health plan” as defined in Section 733(a)(1) of ERISA (a “Health Plan”) (i) is currently in compliance with the HealthCare Reform Laws and (ii) has been in compliance with all applicable HealthCare Reform Laws since January 1, 2015, except where such noncompliance has not had or would not reasonably be expected to have a Material Adverse Effect. No event has occurred, and no conditions or circumstance exists, that would reasonably be expected to subject the Company, or any Health Plan, to penalties or excise taxes under Sections 4980D, 4980H, or 4980I of the Code or any other provision of the HealthCare Reform Laws that has had or would reasonably be expected to have a Material Adverse Effect.
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(i) Each Foreign Plan or Company Plan that is required to be registered under the Laws of a jurisdiction outside the United States has been registered and has been maintained in good standing with the appropriate regulatory authorities, except where such failure has not had or would not reasonably be expected to have a Material Adverse Effect.
(j) All benefits under a UK Pension Plan are money purchase benefits as defined in Section 181 of the UK Pension Schemes Act 1993. Neither the Company nor any of its Subsidiaries have at any time within the last six (6) years been “connected” with or an “associate” of any employer which is or has been participating in a pension arrangement to which Sections 32, 38, 43, 47 or 58 of the UK Pensions Act 2004 applies. For these purposes “connected” and “associate” have the meanings given to them in Sections 435 and 249 of the UK Insolvency Act 1986 respectively. No employee of the Company or its Subsidiaries has the right to enhanced pension benefits on redundancy or early retirement as a result of a transfer of an undertaking or part of an undertaking to which either the UK Transfer of Undertakings (Protection of Employment) Regulations 1981 or the UK Transfer of Undertakings (Protection of Employment) Regulations 2006 applied that, in any case, has had or would reasonably be expected to have a Material Adverse Effect. The Company and its Subsidiaries comply with their automatic enrolment duties under Chapter 1 of Part 1 of the UK Pensions Act 2008, in respect of UK employees, except where such failure to comply has not had or would not reasonably be expected to have a Material Adverse Effect.
Section 3.11 Labor Matters.
(a) Neither the Company nor any of its Subsidiaries is a party to any company level collective bargaining agreement or other agreement with a labor union or similar organization and, to the Knowledge of the Company, no employee of the Company or any of its Subsidiaries is represented by a labor union or similar organization, other than, in each case, with respect to national or industry-wide unions and related collective bargaining agreements outside the United States, and the Company has made available to Parent true and complete copies of any such documents listed in Section 3.11(a) of the Company Disclosure Letter. To the Knowledge of the Company, there are no activities or proceedings of any labor union or other employee representative organization to organize any employees of the Company or any of its Subsidiaries and no demand for recognition as the exclusive bargaining representative of any employees has been made by or on behalf of any labor or similar organization, other than with respect to national or industry-wide unions organized outside the United States. Since January 1, 2016, there have been no actual or, to the Knowledge of the Company, threatened unfair labor practice charges, grievances, material arbitrations, strike, lockout, material slowdown, or material work stoppage by or with respect to the employees of the Company or any of its Subsidiaries, in any case that has had or would reasonably be expected to have a Material Adverse Effect.
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(b) To the Knowledge of the Company, no employee of the Company or any of its Subsidiaries is in any respect in violation of any term of any employment agreement, nondisclosure agreement, common law nondisclosure obligation, fiduciary duty, non-competition agreement, restrictive covenant or other legally binding obligation: (i) to the Company or its Subsidiaries or (ii) to a former employer of any such employee relating (A) to the right of any such employee to be employed by the Company or its Subsidiaries or (B) to the use of trade secrets or proprietary information belonging to such former employer, in any case that has had or would reasonably be expected to have a Material Adverse Effect.
(c) To the Knowledge of the Company, none of the Chief Executive Officer of the Company, any Executive Vice President of the Company or any head of any reporting segment of the Company, or any individual who reports to the Chief Executive Officer of the Company, intends to terminate his or her employment.
(d) The Company has made available to Parent true and complete copies of certain Foreign Employment Contracts. All other Foreign Employment Contracts are on substantially similar terms, other than base salary and bonus, to such Foreign Employment Contracts that have been made available.
(e) To the extent permitted by applicable Law, the Company has made available to Parent a true and complete list of employees of the Company and its Affiliates as of a date within ten (10) days of the date hereof, together with such employees’ (i) current base salary (or wages), (ii) current target incentive compensation opportunities by component, (iii) date of hire, (iv) current work address, (v) exempt or non-exempt status, (vi) hourly or salaried status, (vii) current job title and career level, (viii) status as active or on leave and, if known, expected date of return, (ix) status as full-time, part-time or temporary, (x) retirement eligibility under the Company Stock Plan, (xi) annual paid time off accrual rate, and (xii) function or division. The Company will cooperate with Parent to provide Parent with, to the extent permitted by applicable Law, an updated version of such list from time to time and again no later than the Closing Date to reflect new hires, transfers, terminations of employment, and other changes to the information reflected herein.
(f) There is not currently pending, and to the Knowledge of the Company, in the last five (5) years, there have not been any allegations of sexual harassment or other sexual misconduct made against any individual in his or her capacity as an officer or executive of the Company or any of its Subsidiaries.
Section 3.12 Investments.
(a) The Company has made available to Parent a correct and complete list of all bonds, stocks, mortgage loans and other investment assets that were carried on the books and records of the Company and its Subsidiaries as of June 30, 2018, (such bonds, stocks, mortgage loans and other investment assets, together with all bonds, stocks, mortgage loans and other investments acquired by the Company and its Subsidiaries between such date and the date of this Agreement, the “Investment Assets”). Except for Investment Assets that matured or were sold, redeemed or otherwise disposed of after June 30, 2018, in the ordinary course of business, each of the Company and its Subsidiaries, as applicable, has good and marketable title to all of the Investment Assets it purports to own, free and clear of all Liens except Permitted Liens. The Company and its Subsidiaries employ, to the extent applicable, investment, securities, risk management and other policies, practices and procedures that the Company believes are prudent and reasonable in the context of their respective businesses, and the Company and its Subsidiaries have, since January 1, 2016, been in compliance with such policies, practices and procedures in all material respects. Copies of the Company’s policies with respect to the investment of the Investment Assets (the “Investment Guidelines”) have been made available to Parent, and the composition of the Investment Assets complies in all material respects with the Investment Guidelines.
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(b) To the Knowledge of the Company, the Investment Assets comply in all material respects with, and the acquisition thereof complied in all material respects with, any and all investment restrictions under applicable Law. The Investment Assets held by each Company Insurance Subsidiary that are included as admitted assets in any such Company Insurance Subsidiary’s latest statutory financial statements were qualified or eligible to be admitted assets of such Company Insurance Subsidiary under applicable Insurance Laws.
(c) To the Knowledge of the Company, as of the date hereof, none of the Investment Assets are subject to any capital calls or similar liabilities, or any restrictions or suspensions on redemptions, “lock-ups”, “gates”, “side pockets”, stepped-up fee provisions or other penalties or restrictions relating to withdrawals or redemptions, except as has not had or would not reasonably be expected to have a Material Adverse Effect.
(d) Each agreement with each investment manager or investment advisor providing services to the Company or any of its Subsidiaries that is not an Affiliate of the Company was entered into, and the performance of each investment manager, is evaluated in a commercially reasonable, arms-length manner.
Section 3.13 Intellectual Property; Privacy and Data Security.
(a) Except as has not had or would not reasonably be expected to have a Material Adverse Effect, the Company and its Subsidiaries have sufficient rights to use all Intellectual Property and material Personal Information used in the conduct of the business of the Company and its Subsidiaries as currently conducted.
(b) Except as has not had or would not reasonably be expected to have a Material Adverse Effect, no claims are pending or, to the Knowledge of the Company, threatened (i) challenging the ownership, enforceability, scope, validity or use by the Company or any of its Subsidiaries of any Intellectual Property owned or used by the Company or any of its Subsidiaries, (ii) alleging that the Company or any of its Subsidiaries is violating, misappropriating or infringing the Intellectual Property rights of any Person, or (iii) alleging that the Company or any of its Subsidiaries is violating any privacy Laws, Privacy Policies, or any Person’s privacy or confidentiality rights.
(c) Except as has not had or would not reasonably be expected to have a Material Adverse Effect, (i) to the Knowledge of the Company, no Person is misappropriating, violating or infringing the rights of the Company or any of its Subsidiaries with respect to any Intellectual Property owned by the Company or a Subsidiary of the Company and (ii) to the Knowledge of the Company, the operation of the business of the Company and its Subsidiaries as currently conducted does not violate, misappropriate or infringe the Intellectual Property rights of any other Person.
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(d) Except as has not had or would not reasonably be expected to have a Material Adverse Effect, (i) the Company and each of its Subsidiaries have taken commercially reasonable measures to protect the material (A) information technology systems owned or operated by the Company or such Subsidiary and used in the operations of its business, and (B) Company Sensitive Information (including Personal Information) gathered, used, held for use or accessed in the operation of its business, and (ii) to the Knowledge of the Company, there has not been any material unauthorized disclosure, loss, destruction, or acquisition, or access to, any such Company Sensitive Information or information technology systems.
(e) The Company and each of its Subsidiaries maintain, and comply with, a written information security program (“Security Program”) that (i) complies in all material respects with all applicable privacy Laws, and (ii) includes administrative, technical, organization, and physical security procedures and measures that are, considering the costs of implementation and the nature, scope, context and purposes of the processing, reasonable and appropriate to materially preserve the security, integrity and confidentiality of all Personal Information and any other sensitive or confidential information of the Company and its Subsidiaries (collectively, “Company Sensitive Information”).
(f) The Company and each of its Subsidiaries are, and since January 1, 2016, have been, in compliance in all material respects with all applicable then-current public-facing privacy policies and notices of the Company regarding the collection, retention, use and disclosure of Personal Information by the Company or its Subsidiaries or their respective agents (collectively, the “Privacy Policies”). The Privacy Policies have been maintained, since the date of any applicable privacy Laws, to be reasonably consistent in all material respects with the actual practices of the Company and its Subsidiaries and comply in all material respects with applicable privacy Laws.
(g) The Company and its Subsidiaries are compliant in all material respects with all applicable requirements of the European Union’s General Data Protection Regulation (“GDPR”) with respect to EU Personal Data.
Section 3.14 Anti-Takeover Provisions. No “fair price”, “moratorium”, “supermajority”, “affiliate transactions”, “business combination statute or regulation”, “control share acquisition” or other similar anti-takeover statute or similar statute or regulation (each, a “Takeover Law”) applies to the Company with respect to this Agreement or the Merger.
Section 3.15 Real Property. Except as has not had or would not reasonably be expected to have a Material Adverse Effect, (a) the Company or one of its Subsidiaries has a good and valid leasehold interest in each material Company Lease, free and clear of all Liens (other than Permitted Liens) and (b) none of the Company or any of its Subsidiaries has received written notice of any material default under any agreement evidencing any Lien or other agreement affecting any material Company Lease, which default continues on the date of this Agreement. Neither the Company nor any of its Subsidiaries owns, or, since January 1, 2013, has owned, any real property, other than any Investment Assets comprised, in whole or in part, of real property or interests therein.
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Section 3.16 Contracts.
(a) Except for (A) this Agreement, (B) each Company Plan (C) each Foreign Plan and (D) each Contract filed as an exhibit to the Filed SEC Documents, Section 3.16(a) of the Company Disclosure Letter sets forth a list of all Material Contracts as of the date of this Agreement. For purposes of this Agreement, “Material Contract” means all Contracts to which the Company or any of its Subsidiaries is a party or by which the Company, any of its Subsidiaries or any of their respective properties or assets is bound (other than Company Plans) that:
(i) are or would be required to be filed by the Company as a “material contract” pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act;
(ii) relate to the formation or management of any joint venture, partnership or other similar agreement that is material to the business of the Company and its Subsidiaries, taken as a whole;
(iii) provide for Indebtedness of the Company or any of its Subsidiaries, or pursuant to which the Company or any of its Subsidiaries guarantees Indebtedness of another Person, having an outstanding or committed amount in excess of $5 million, other than any Indebtedness between or among any of the Company and any of its Subsidiaries and other than any letters of credit;
(iv) have been entered into since January 1, 2013, and involve the acquisition from another Person or disposition to another Person of capital stock or other equity interests of another Person or of assets of a business, in each case, for aggregate consideration under such Contract in excess of $5 million (excluding, for the avoidance of doubt, acquisitions or dispositions of investments made pursuant to the Investment Guidelines, or of supplies, products, properties or other assets in the ordinary course of business or of supplies, products, properties or other assets that are obsolete, worn out, surplus or no longer used or useful in the conduct of business of the Company or any of its Subsidiaries under which the Company or its Subsidiaries have material surviving obligations);
(v) contain provisions that (A)(1) prohibit the payment of dividends or distributions in respect of the share capital or capital stock of the Company or any of its wholly owned Subsidiaries, (2) prohibit the pledging of the share capital or capital stock of the Company or any wholly owned Subsidiary of the Company or (3) prohibit the issuance of any guarantee by the Company or any wholly owned Subsidiary of the Company or (B) restrict the ability of the Company or any of its Subsidiaries to incur or guarantee Indebtedness;
(vi) contain provisions that (A) prohibit the Company or any of its Subsidiaries, or which, following the Closing, would prohibit Parent or any of its Subsidiaries from competing in any material line of business, or (B) grant a right of exclusivity to any Person which prevents the Company or any Subsidiary of the Company, or, following the Closing, Parent or any of its Subsidiaries, from entering any material territory, market or field or freely engaging in business anywhere in the world, in each case, other than Contracts that can be terminated (including such restrictive provisions) by the Company or any of its Subsidiaries on less than ninety (90) days’ notice without payment by the Company or any Subsidiary of the Company of any material penalty;
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(vii) pursuant to which the Company or any Subsidiary (A) is granted or obtains any right to use any material Intellectual Property (other than standard form Contracts granting rights to use readily available shrink wrap or click wrap software), or (B) has granted any other Person a right to use any Intellectual Property owned by the Company or any Subsidiary;
(viii) pursuant to which the Company or any of its Subsidiaries (A) is granted or obtains any right to use any material Intellectual Property (other than Contracts granting rights to use commercially available software having a replacement cost and annual license of less than $250,000 (e.g., database, enterprise resource planning, business management planning, desktop and similar software) and commercially available, off-the-shelf software (including “shrink-wrap” or “click-wrap” software)), and (B) is restricted in its right to assert, use or register any Intellectual Property owned by the Company or any of its Subsidiaries that is material to the conduct of the businesses of the Company and its Subsidiaries as currently conducted (excluding licenses granted to third parties in the ordinary course of business);
(ix) involve or could reasonably be expected to involve aggregate payments or receipts by or to the Company and/or its Subsidiaries in excess of $1 million in any twelve (12) month period, other than (A) Contracts terminable on less than ninety (90) days’ notice without payment by the Company or any Subsidiary of the Company of any material penalty, (B) insurance policies and reinsurance and retrocession agreements and treaties entered into in the ordinary course of business and (C) Contracts relating to investments made pursuant to the Investment Guidelines;
(x) that outsources any material function or part of the business of the Company or any of its Subsidiaries, other than managing general agency agreements or managing general underwriting agreements; or
(xi) would reasonably be expected to, individually or in the aggregate, prevent, materially delay or materially impede the Company’s ability to consummate the Transactions or Parent’s ability to own and/or conduct the business of the Company or any of its Subsidiaries after the Effective Time.
(b) (i) The Company has previously made available to Parent true and complete copies of each Material Contract, (ii) each Material Contract is valid and binding on the Company and/or any of its Subsidiaries to the extent such Person is a party thereto, as applicable, and to the Knowledge of the Company, each other party thereto, and is in full force and effect, except where the failure to be valid, binding or in full force and effect has not had or would not reasonably be expected to have a Material Adverse Effect, (iii) the Company and each of its Subsidiaries, and, to the Knowledge of the Company, any other party thereto, has performed all obligations required to be performed by it under each Material Contract, except where such noncompliance has not had or would not reasonably be expected to have a Material Adverse
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Effect, (iv) neither the Company nor any of its Subsidiaries has received written notice, or, to the Knowledge of the Company, verbal notice, of the existence of any event or condition which constitutes, or, after notice or lapse of time or both, will constitute, a default on the part of the Company or any of its Subsidiaries under any Material Contract, except where such default has not had or would not reasonably be expected to have a Material Adverse Effect and (v) there are no events or conditions which constitute, or, after notice or lapse of time or both, will constitute a default on the part of any counterparty under such Material Contract, except as has not had or would not reasonably be expected to have a Material Adverse Effect.
Section 3.17 Insurance Subsidiaries. Except as has not had or would not reasonably be expected to have a Material Adverse Effect:
(a) Each Subsidiary of the Company that conducts the business of insurance or reinsurance or is a Lloyd’s corporate member or Lloyd’s managing agent (each, a “Company Insurance Subsidiary”) is (i) duly licensed or authorized as an insurance company, reinsurance company, Lloyd’s corporate member or Lloyd’s managing agent, insurance producer (or its local equivalent), insurance intermediary or reinsurance intermediary, as applicable, in its jurisdiction of incorporation or organization and (ii) duly licensed, authorized or otherwise eligible to transact the business of insurance or reinsurance, as applicable, in each other jurisdiction where it is required to be so licensed, authorized or otherwise eligible in order to conduct its business as currently conducted.
(b) Since January 1, 2016, each Subsidiary of the Company that participates in Lloyd’s: (i) has not participated as a member of any Lloyd’s syndicate other than Syndicate 1221; (ii) has not agreed to sell or transfer any of its rights to participate as a member of a Lloyd’s syndicate or offered to acquire rights to participate in any Lloyd’s syndicate and (iii) has complied with the franchise standards (including principles and minimum standards, guidance and advice) issued by Lloyd’s.
(c) No Person is, or has the right to participate as, a member of Syndicate 1221, other than Navigators Corporate Underwriters Ltd. and Millennium Underwriting Ltd.
(d) Since January 1, 2016, (i) all funds held on behalf of Lloyd’s Syndicate 1221 have been held in accordance with the terms of the relevant premiums trust deed or other deposit arrangement, as required by the by-laws, regulations, codes of practice, and mandatory directions and requirements governing the conduct and management of underwriting business at Lloyd’s from time to time and the provisions of any deed, agreement, or undertaking executed, made, or given for compliance with Lloyd’s requirements from time to time (“Lloyd’s Regulations”), and (ii) the Company or any of its Subsidiaries required to do so have complied in all material respects with all relevant regulations, directions, notices, and requirements in relation to the maintenance of Funds at Lloyd’s (as defined in the Lloyd’s Membership Byelaw (No. 5 of 2005)) in accordance with Lloyd’s Regulations and any directions imposed on the Company or any of its Subsidiaries by Lloyd’s.
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(e) To the Knowledge of the Company, since January 1, 2016, at the time each agent, representative, producer, reinsurance intermediary, wholesaler, third-party administrator, distributor, broker, employee, managing general agent, managing general underwriter or other Person authorized to sell, produce, manage or administer products on behalf of any Company Insurance Subsidiary (“Company Agent”) wrote, sold, produced, managed, administered or procured business for a Company Insurance Subsidiary, except as would not be material to the Company, such Company Agent was, at the time the Company Agent wrote or sold business, duly licensed for the type of activity and business written, sold, produced, managed, administered or produced. Each of the contracts, agreements or arrangements between a Company Insurance Subsidiary and any Company Agent who has sold, underwritten, produced, managed, administered or issued business for or on behalf of such Company Insurance Subsidiary is, except as would not be material to the Company, valid and binding on such Company Insurance Subsidiary and, to the Knowledge of the Company, on such Company Agent, and is in full force and effect in accordance with its terms. As of the date of this Agreement, no Company Agent individually accounting for 5% or more of the total gross GAAP premiums of all Company Insurance Subsidiaries for the year ended December 31, 2016 has indicated to the Company or any Company Insurance Subsidiary in writing that such Company Agent will be unable or unwilling to continue its relationship as a Company Agent with any Company Insurance Subsidiary within twelve (12) months after the date of this Agreement. To the Knowledge of the Company, as of the date of this Agreement, no Company Agent has been since January 1, 2016, or is currently, in violation (or with or without notice or lapse of time or both, would be in violation), in any material respect, of any term or provision of any law, rule or regulation applicable to such Company Agent’s writing, sale, management, administration or production of insurance or other business for any Company Insurance Subsidiary, that is reasonably likely to be material to the Company. To the Knowledge of the Company, each Company Agent was appointed by the Company or Company Insurance Subsidiary in compliance in all material respects with applicable Insurance Laws and all processes and procedures undertaken with respect to such Company Agent were undertaken in compliance, in all material respects, with applicable Insurance Laws.
(f) Since January 1, 2016, each Company Insurance Subsidiary and, to the Knowledge of the Company, and except as has not had or would not reasonably be expected to have a Material Adverse Effect on the Company, its Company Agents have marketed, sold and issued insurance products in compliance in all material respects with Insurance Laws applicable to the business of such Company Insurance Subsidiary and in the respective jurisdictions in which such products have been marketed, sold and issued. Except as has not had or would not reasonably be expected to have a Material Adverse Effect on the Company, to the Knowledge of the Company, the Company and the Company Insurance Subsidiaries have not received, since January 1, 2016, any written notice or communication of any instance of non-compliance with any such law, or any rule, regulation, agency requirement or published interpretation of any Governmental Authority that has not been cured as of the date of this Agreement.
Section 3.18 Statutory Statements; Examinations.
(a) Except for any failure to file or submit the same that has been cured or resolved to the satisfaction of the applicable Insurance Regulator, since January 1, 2016, each of the Company Insurance Subsidiaries has filed or submitted all material annual and quarterly statutory financial statements (including exhibits, schedules and interrogatories related thereto), in each case, required by applicable Insurance Law to be filed with or submitted to the appropriate Insurance Regulator of each jurisdiction in which it is licensed, authorized or otherwise eligible with respect to the conduct of the business of insurance or reinsurance, as applicable (collectively, the “Company Statutory Statements”).
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(b) The Company has made available to Parent true and complete copies of all Company Statutory Statements as of December 31, 2016 and December 31, 2017, and for the annual periods then ended, each in the form filed with the applicable Insurance Regulator. The financial statements included in such Company Statutory Statements were prepared in accordance with Applicable SAP, applied on a consistent basis, except as noted therein, during the periods involved, and fairly present in all material respects, to the extent required by and in conformity with Applicable SAP, the statutory financial position of the relevant Company Insurance Subsidiary as of the respective dates thereof and the results of operations and changes in capital and surplus and cash flow (or stockholders’ equity, as applicable) of such Company Insurance Subsidiary for the respective periods then ended. The Company Statutory Statements complied in all material respects with all applicable Insurance Laws when filed or submitted and no material violation or deficiency has been asserted in writing by any Insurance Regulator with respect to any of such Company Statutory Statements that has not been cured or otherwise resolved to the satisfaction of such Insurance Regulator.
(c) Section 3.18(c) of the Company Disclosure Letter sets forth a true and complete list, as of the date hereof, of all accounting practices used by the U.S.-domiciled Company Insurance Subsidiaries in connection with their Company Statutory Statements that depart from the National Association of Insurance Commissioners’ Accounting Practices and Procedures Manual (each such departure, a “Permitted Accounting Practice”). All Permitted Accounting Practices have been approved by the applicable Insurance Regulators in writing at or prior to the time used by such Company Insurance Subsidiaries in connection with the applicable Company Statutory Statements.
(d) The Company has provided or otherwise made available to Parent (i) true, complete and correct copies of all material submissions by the Company or any of the Company Insurance Subsidiaries to any Insurance Regulator since January 1, 2016, relating to the risk-based capital or solvency of such Company Insurance Subsidiary together with true, accurate and complete copies of all substantive responses from the relevant Insurance Regulator to such submissions and (ii) all material annual registration statements, periodic reports and other submissions and filings with respect to the Company or any of the Company Insurance Subsidiary provided to any Insurance Regulator under applicable insurance holding company Laws, in each case since January 1, 2016.
(e) The Company has made available to Parent, to the extent permitted by applicable Law, true and complete copies of all material examination reports of any Insurance Regulators received by it on or after January 1, 2016, through the date of this Agreement, relating to the Company Insurance Subsidiaries. To the extent required by the applicable Insurance Regulator, a corrective plan has been submitted to and accepted by such Insurance Regulator with respect to all material deficiencies or violations noted in such examination reports and a copy of each such plan submitted on or after January 1, 2016, through the date of this Agreement, has been made available to Parent. As of the date hereof, there are no unpaid claims or assessments made in writing or, to the Knowledge of the Company, as of the date hereof, threatened in writing against the Company or any of its Subsidiaries by any insurance guaranty
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associations or similar organizations in connection with such association’s or other organization’s insurance guaranty fund, other than unpaid claims or assessments (i) disclosed, provided for, reflected in, reserved against or otherwise described in the Company Statutory Statements provided or made available to Parent or (ii) that are not material to the Company and its Subsidiaries, taken as a whole.
(f) Since January 1, 2016, no fine or penalty in excess of $1 million has been imposed on any Company Insurance Subsidiary by any Insurance Regulator.
(g) Since January 1, 2016, each of the Company’s Subsidiaries that is a Lloyd’s managing agent has prepared audited accounts for each syndicate managed by it for all applicable years ended December 31 in all material respects in accordance with the requirements of the Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and the Syndicate Accounting Byelaw (No. 8 of 2005).
Section 3.19 Agreements with Insurance Regulators. (a) Except as required by applicable Insurance Laws and the insurance and reinsurance Permits maintained by the Company Insurance Subsidiaries, there is no (i) written agreement, memorandum of understanding, commitment letter or similar written undertaking with any Insurance Regulator that is binding on the Company or any Company Insurance Subsidiary or (ii) order or directive by, or supervisory letter or cease-and-desist order from (other than those that are generally applicable to the insurance industry), any Insurance Regulator that is binding on the Company or any Company Insurance Subsidiary and (b) neither the Company nor any of the Company Insurance Subsidiaries has adopted any board resolution at the request of any Insurance Regulator, in the case of each of clauses (a) and (b), that (A) limits in any material respect the ability of any Company Insurance Subsidiary to conduct its business, (B) requires the divestiture of any material investment of any Company Insurance Subsidiary, (C) limits in any material respect the ability of any Company Insurance Subsidiary to pay dividends or (D) requires any material investment of any Company Insurance Subsidiary to be treated as a non-admitted asset (or the local equivalent).
Section 3.20 Reinsurance and Retrocession. As of the date of this Agreement, (a) each reinsurance or retrocession treaty or agreement, slip, binder, cover note or other similar arrangement pursuant to which any Company Insurance Subsidiary is the cedent involving at least $2 million in annual premium or $2 million in ceded liabilities (the “Company Reinsurance Contracts”) is valid and binding on the applicable Company Insurance Subsidiary, and to the Knowledge of the Company, each other party thereto, and is in full force and effect, except where the failure to be valid, binding or in full force and effect has not had or would not reasonably be expected to have a Material Adverse Effect, (b) the applicable Company Insurance Subsidiary, and, to the Knowledge of the Company, any other party thereto, has performed all obligations required to be performed by it under each Company Reinsurance Contract, except where such noncompliance has not had or would not reasonably be expected to have a Material Adverse Effect, (c) none of the Company Insurance Subsidiaries has received written notice of the existence of any event or condition which constitutes, or, after notice or lapse of time or both, will constitute, a default on the part of such Company Insurance Subsidiary under any Company Reinsurance Contract, except where such default has not had or would not reasonably be expected to have a Material Adverse Effect, (d) to the Knowledge of the Company, there are no
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events or conditions which constitute, or, after notice or lapse of time or both, will constitute, a default on the part of any counterparty under such Company Reinsurance Contract, except as has not had or would not reasonably be expected to have a Material Adverse Effect, (e) none of the Company Insurance Subsidiaries is and, to the Knowledge of the Company, no party to a Company Reinsurance Contract is insolvent or the subject of a rehabilitation, liquidation, conservatorship, receivership, bankruptcy or similar proceeding and (f) there are no disputes under any Company Reinsurance Contract, except as has not had or would not reasonably be expected to have a Material Adverse Effect.
Section 3.21 Reserves.
(a) The reserves for claims, losses (including incurred but not reported losses), loss adjustment expenses (whether allocated or unallocated) and unearned premiums of each Company Insurance Subsidiary contained in the Company Statutory Statements (i) were, except as otherwise noted in the applicable Company Statutory Statement, determined in all material respects in accordance with applicable generally accepted actuarial standards; (ii) were computed on the basis of methodologies consistent with those used in computing the corresponding reserves in prior fiscal years, except as otherwise noted in the financial statements and the notes thereto included in such Company Statutory Statements; and (iii) satisfied the requirements of all applicable Insurance Laws with respect to the establishment of reserves in all material respects.
(b) As of the date of this Agreement, with respect to the Company Insurance Subsidiaries, the Company has made available to Parent true and complete copies of all actuarial reports in the Company’s possession and prepared by actuaries, independent or otherwise, that cover periods beginning on or after January 1, 2016. The information and data used in connection with the preparation of such actuarial reports were accurate in all material respects for the periods covered in such reports.
Section 3.22 Insurance Policies. Except as has not had or would not reasonably be expected to have a Material Adverse Effect, (a) all insurance policies maintained by the Company and its Subsidiaries of which the Company or any of its Subsidiaries is the beneficiary are in full force and effect and all premiums due and payable thereon have been paid and (b) neither the Company nor any of its Subsidiaries is in breach or default of any of the insurance policies or has taken any action or failed to take any action which, with notice or lapse of time, would constitute such a breach or default or permit termination or modification of any of the insurance policies. This Section 3.22 does not relate to Company Reinsurance Contracts, which are the subject of Section 3.20.
Section 3.23 Opinion of Financial Advisors. The Company Board has received the opinions of Goldman Sachs & Co., LLC (“Goldman Sachs”) and Moelis & Company LLC (“Moelis”), to the effect that, as of the date of each such opinion, and based upon and subject to the various assumptions, qualifications and limitations set forth therein, the Merger Consideration to be received by holders of Company Shares (other than, in the case of the opinion of Moelis, holders who are members of the Existing Stockholder Group) is fair, from a financial point of view, to such holders. As of the date of this Agreement, each such opinion has not been rescinded, repudiated or, except as set forth therein, qualified.
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Section 3.24 Brokers and Other Advisors. Except for Goldman Sachs and Moelis, the fees and expenses of which will be paid by the Company, no broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company or any of its Subsidiaries. The Company has made available to Parent a true and correct copy of (a) the engagement letter between the Company and Goldman Sachs, dated May 8, 2018 and (b) the engagement letter between the Company and Moelis, dated June 27, 2018.
Section 3.25 Related Party Transactions. Since January 1, 2016, there are no undisclosed transactions, Contracts, arrangements or understandings between: (i) the Company and any of its Subsidiaries, on the one hand, and (ii) any director, officer or employee of the Company or any of its Subsidiaries or any Person (other than it or its Subsidiaries) which owns of record or beneficially any equity interest in the Company or any of its Subsidiaries, on the other hand, of the type that would be required to be disclosed under Item 404 of Regulation S-K of the SEC (each, a “Related Party Transaction”).
Section 3.26 Environmental Matters. Except as arising from or relating to any liability, obligation or cost (including for losses or loss adjustment expenses) arising under Contracts for insurance or reinsurance written or assumed by the Company or its Subsidiaries or as has not had or would not reasonably be expected to have a Material Adverse Effect, (a)(i) neither the Company nor any of its Subsidiaries has received any written notice, demand, request for information, citation, summons or order, and (ii) to the Knowledge of the Company, no complaint has been filed, no penalty has been assessed, and no investigation, Action, claim, suit or proceeding is pending or threatened in writing by any Governmental Authority or other Person against the Company or any of its Subsidiaries, in each case, with respect to or arising out of any applicable Environmental Law and (b) to the Knowledge of the Company, no “release” of a “hazardous substance” (as those terms are defined in the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq., as amended (“CERCLA”)) or any petroleum has occurred at, on, above, under or from any Real Property owned, operated or leased by the Company or its Subsidiaries, if and to the extent applicable to the Company and the relevant Subsidiary.
Section 3.27 No Other Representations or Warranties.
(a) Except for the representations and warranties made by the Company in this ARTICLE III, neither the Company nor any other Person makes any other express or implied representation or warranty with respect to the Company or any of its Subsidiaries or their respective businesses, operations, assets, liabilities, condition (financial or otherwise) or prospects, notwithstanding the delivery or disclosure to Parent, Merger Sub or any of their respective Representatives or Affiliates of any documentation, forecasts or other information with respect to any one or more of the foregoing, and each of Parent and Merger Sub acknowledge the foregoing. In particular, and without limiting the generality of the foregoing, except for the representations and warranties made by the Company in this ARTICLE III, neither the Company nor any other Person makes or has made any express or implied representation or warranty to Parent, Merger Sub or any of their respective Representatives or Affiliates with respect to (i) any financial projection, forecast, estimate, budget or prospective information
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relating to the Company, any of its Subsidiaries or their respective businesses, (ii) any judgment based on actuarial principles, practices or analyses by any Person or as to the future satisfaction or outcome of any assumption, (iii) whether (A) reserves for losses (including incurred but not reported losses, loss adjustment expenses whether allocated or unallocated, unearned premium or uncollectible reinsurance) (x) are or will be sufficient or adequate for the purposes for which they were established or (y) may not develop adversely or (B) the reinsurance recoverables taken into account in determining the amount of such reserves for losses are or will be collectible, or (iv) any oral or written information presented to Parent, Merger Sub or any of their respective Representatives or Affiliates in the course of their due diligence investigation of the Company, the negotiation of this Agreement or the course of the Transactions.
(b) Except for the representations and warranties expressly set forth in ARTICLE IV, the Company hereby agrees and acknowledges that neither Parent, Merger Sub nor any of their respective Subsidiaries, nor any other Person, has made or is making, and the Company is not relying on, any other express or implied representation or warranty with respect to Parent or any of its Subsidiaries or their respective businesses, operations, assets, liabilities, condition (financial or otherwise) or prospects, including with respect to any information made available to the Company or any of its Representatives or Affiliates (including with respect to any judgment based on actuarial principles, practices or analyses by any Person or as to the future satisfaction or outcome of any assumption) or any information developed by the Company or any of its Representatives or Affiliates.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to the Company that:
Section 4.01 Organization; Standing. Parent is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware and Merger Sub is a corporation organized, validly existing and in good standing under the Laws of the State of Delaware. Each of Parent and Merger Sub has all requisite power and authority necessary to carry on its business as it is now being conducted and to own, lease and operate its assets and properties in all material respects. Each of Parent and Merger Sub is duly licensed or qualified to do business and is in good standing (where such concept is recognized under applicable Law) in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing has not had or would not reasonably be expected to have a Parent Material Adverse Effect. Parent has made available to the Company true and complete copies of Parent’s, and Merger Sub’s certificates of incorporation and by-laws, each as amended to the date of this Agreement. Neither Parent nor Merger Sub is in violation of any of its respective organizational documents, except as has not had or would not reasonably be expected to have a Parent Material Adverse Effect.
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Section 4.02 Authority; Noncontravention.
(a) Each of Parent and Merger Sub has all necessary power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the Transactions. The execution and delivery by Parent and Merger Sub of this Agreement, the performance and compliance by Parent and Merger Sub with each of its obligations herein and the consummation by Parent and Merger Sub of the Transactions, have been duly authorized by all necessary corporate action on the part of Parent or Merger Sub. This Agreement has been duly executed and delivered by Parent and Merger Sub and, assuming due authorization, execution and delivery hereof by the Company, constitutes a legal, valid and binding obligation of each of Parent and Merger Sub, enforceable against each of them in accordance with its terms, except that such enforceability may be limited by and is subject to the Bankruptcy and Equity Exception.
(b) Each of the Parent Board and the Merger Sub Board, at a meeting duly called and held, have unanimously, as applicable, (i) determined that the Merger, on the terms and subject to the conditions set forth herein, and the other Transactions are fair to and in the best interests of Parent and Merger Sub and their respective stockholders, (ii) approved this Agreement, the Merger and the other Transactions and (iii) resolved that Parent, as the sole stockholder of Merger Sub, adopt this Agreement, such resolutions have not been subsequently rescinded, modified or withdrawn in any way.
(c) Neither the execution and delivery of this Agreement by Parent and Merger Sub, nor the consummation by Parent or Merger Sub of the Transactions, nor performance or compliance by Parent or Merger Sub with any of the terms or provisions hereof, will (i) contravene, conflict with or violate any provision of the certificates or articles of incorporation, memorandum of association, by-laws or other comparable charter or organizational documents of (A) Parent or Merger Sub or (B) any of Parent’s other Subsidiaries or (ii) assuming (A) compliance with the matters set forth in Section 3.03(c) (other than Section 3.03(c)(ii)(A)) (and assuming the accuracy of the representations and warranties made in such Section 3.03(c)), (B) that the actions described in Section 4.02(a) have been completed, (C) that the Consents referred to in Section 4.03 are obtained and (D) that the filings referred to in Section 4.03 are made and any waiting periods thereunder have terminated or expired, in the case of each of the foregoing clauses (A) through (D), prior to the Effective Time, (x) violate any Law applicable to Parent or any of its Subsidiaries, (y) violate or constitute a breach of or default (with or without notice or lapse of time or both) under any of the terms, conditions or provisions of any material Contract to which Parent or any of its Subsidiaries is a party or accelerate, vest or trigger Parent’s or, if applicable, any of its Subsidiaries’, obligations or rights of any other Person under any such material Contract or (z) result in the creation of any Lien on any properties or assets of Parent or any of its Subsidiaries, except, in the case of clauses (i)(B) and (ii), as has not had or would not reasonably be expected to have a Parent Material Adverse Effect.
Section 4.03 Governmental Approvals. Except for (a) compliance with the applicable requirements of the Exchange Act, including the filing with the SEC of the Proxy Statement, (b) compliance with the rules and regulations of the NASDAQ Global Select Market, (c) the filing of the Certificate of Merger, as required by the DGCL, (d) such filings and Consents as may be required in connection with the Taxes described in Section 5.05, (e) filings required under, and compliance with other applicable requirements of, the HSR Act, and such other
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Consents, filings, declarations or registrations as are required to be made or obtained under any other Antitrust Laws, (f) compliance with any applicable state securities or blue sky Laws, (g) approvals, filings and notices under all applicable Insurance Laws as set forth in Section 4.03 of the Parent Disclosure Letter (the “Parent Insurance Approvals”) and (h) the Company Insurance Approvals (assuming the accuracy of the representations and warranties made in Section 3.04(g) and the completeness of Section 3.04 of the Company Disclosure Letter), no Consent of, or filing, declaration or registration with or notification to, any Governmental Authority is necessary for the execution and delivery of this Agreement by Parent and Merger Sub, the performance by Parent and Merger Sub of their obligations hereunder and the consummation by Parent and Merger Sub of the Transactions, other than such other Consents, filings, declarations, registrations or notifications that, if not obtained, made or given, has not had or would not reasonably be expected to have a Parent Material Adverse Effect. As of the date of this Agreement, Parent has a reasonable basis to believe that the Required Regulatory Approvals set forth on Section 6.01(b) of the Company Disclosure Letter will be obtained prior to the Walk-Away Date.
Section 4.04 Ownership and Operations of Merger Sub. Parent owns beneficially and of record, directly or indirectly, all of the issued and outstanding shares of Merger Sub, free and clear of all Liens. Merger Sub was formed solely for the purpose of engaging in the Transactions, has no assets, liabilities or obligations of any nature other than those incident to its formation and pursuant to the Transactions, and prior to the Effective Time, will not have engaged in any business activities other than those relating to the Transactions.
Section 4.05 Financing. Parent and Merger Sub collectively will have at the Effective Time sufficient funds to pay the aggregate Merger Consideration, consideration payable to holders of Company Awards pursuant to Section 2.03 and any other amount required to be paid in connection with the consummation of the Transactions and to pay all related fees and expenses of Parent and Merger Sub. For the avoidance of doubt, in no event shall the receipt or availability of any funds or financing by or to Parent or any Affiliate of Parent be a condition to any of Parent’s or Merger Sub’s obligations hereunder.
Section 4.06 Certain Arrangements. Other than the Voting Agreement, as of the date of this Agreement, there are no Contracts or other arrangements or understandings (whether oral or written) or commitments to enter into Contracts or other arrangements or understandings (whether oral or written) (a) between Parent, Merger Sub or any of their Affiliates, on the one hand, and any member of the Company’s management or the Company Board, on the other hand, that relate in any way to the Company or any of its Subsidiaries or the Transactions, (b) pursuant to which any stockholder of the Company would be entitled to receive consideration of a different amount or nature than the Merger Consideration or pursuant to which any stockholder of the Company agrees to vote to approve the Merger and this Agreement or agrees to vote against any Superior Proposal or (c) between Parent, Merger Sub or any of their Affiliates, on the one hand, and any holder of Company Awards, on the other hand, pursuant to which such holder would be entitled to receive consideration of a different amount or nature than the consideration payable pursuant to Section 2.03.
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Section 4.07 Brokers and Other Advisors. No broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the Transactions based upon arrangements made by or on behalf of Parent or any of its Subsidiaries, except for Persons, if any, whose fees and expenses will be paid by Parent.
Section 4.08 Information Supplied. None of the information supplied or to be supplied by or on behalf of Parent or Merger Sub in writing for inclusion or incorporation by reference in the Proxy Statement to be sent to the holders of Company Shares in connection with the Company Stockholders Meeting (including any amendment or supplement thereto or document incorporated by reference therein) shall, on the date the Proxy Statement is first mailed to the holders of Company Shares, at the time of any amendment thereof or supplement thereto and at the time of the Company Stockholders Meeting, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading or omit to state a material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Company Stockholders Meeting which has become false or misleading.
Section 4.09 Legal Proceedings. Except as has not had or would not reasonably be expected to have a Parent Material Adverse Effect, there is no (a) pending or, to the Knowledge of Parent and Merger Sub, threatened Action against Parent or any of its Subsidiaries or (b) outstanding injunction, order, judgment, ruling, decree or writ imposed upon Parent or any of its Subsidiaries, in each case, by or before any Governmental Authority.
Section 4.10 Ownership of Company Shares. None of Parent, Merger Sub or any of their Affiliates beneficially owns (within the meaning of Section 13 of the Exchange Act) any Company Shares, or is a party, or will prior to the Closing Date become a party, to any Contract, other arrangement or understanding (whether written or oral) (other than this Agreement and the Voting Agreement) for the purpose of acquiring, holding, voting or disposing of any Company Shares, except for such holdings as may arise in the ordinary course of the investment activities of the Parent and its Affiliates.
Section 4.11 No Other Representations or Warranties.
(a) Except for the representations and warranties made by Parent and Merger Sub in this ARTICLE IV, neither Parent, Merger Sub nor any other Person makes any other express or implied representation or warranty with respect to Parent or Merger Sub or any of their Subsidiaries or their respective businesses, operations, assets, liabilities, condition (financial or otherwise) or prospects, notwithstanding the delivery or disclosure to the Company or any of its Representatives or Affiliates of any documentation, forecasts or other information with respect to any one or more of the foregoing, and the Company acknowledges the foregoing.
(b) Except for the representations and warranties expressly set forth in ARTICLE III, Parent and Merger Sub hereby agree and acknowledge that neither the Company nor any of its Subsidiaries, nor any other Person, has made or is making, and Parent and Merger Sub are not relying on, any other express or implied representation or warranty with respect to the Company or any of its Subsidiaries or their respective businesses, operations, assets, liabilities, condition (financial or otherwise) or prospects, including with respect to any
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information made available to Parent, Merger Sub or any of their respective Representatives or Affiliates (including with respect to any judgment based on actuarial principles, practices or analyses by any Person or as to the future satisfaction or outcome of any assumption) or any information developed by Parent, Merger Sub or any of their respective Representatives or Affiliates.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
Section 5.01 Conduct of Business.
(a) Except as required by applicable Law, as expressly contemplated or required by this Agreement or as described in Section 5.01(a) of the Company Disclosure Letter, during the period from the date of this Agreement until the Effective Time (or such earlier date on which this Agreement may be terminated pursuant to Section 7.01), unless Parent otherwise consents in writing (such consent not to be unreasonably withheld, conditioned or delayed), the Company shall, and shall cause each of its Subsidiaries to, carry on its business in all material respects in the ordinary course of business consistent with past practice. To the extent consistent with the foregoing, the Company shall, and shall cause its Subsidiaries to, use its and their reasonable best efforts to preserve its and each of its Subsidiaries’ business organizations substantially intact and preserve existing relations and goodwill with customers, producers, reinsurance providers, Governmental Authorities and other Persons with whom the Company or its Subsidiaries have significant business relationships, in each case, consistent with past practice. Without limiting the generality of the foregoing, and except as required by applicable Law, as contemplated, required or permitted by this Agreement or as described in the corresponding subsection of Section 5.01(a) of the Company Disclosure Letter, during such period, unless Parent otherwise consents in writing (such consent not to be unreasonably withheld, conditioned or delayed with respect to the matters set forth in clauses (ii), (iv), (vi), (viii), (xiv), (xv), (xvii) and (xix) of this Section 5.01(a)), the Company shall not, and shall not permit any of its Subsidiaries to:
(i) (A) issue, sell or grant any Company Shares or other equity or voting interests of the Company, or any securities or rights convertible into, exchangeable or exercisable for, or evidencing the right to subscribe for any Company Shares or other equity or voting interests of the Company or any of its Subsidiaries, or any options, rights, warrants or other commitments or agreements to acquire from the Company or any of its Subsidiaries, or that obligate the Company or any of its Subsidiaries to issue, any share capital of, or other equity or voting interests in, or any securities convertible into or exchangeable for shares of, or other equity or voting interests in, the Company or any of its Subsidiaries; provided, however, that the Company may issue Company Shares or other securities (1) under the Company Stock Plan in accordance with the provisions of Section 5.01(a)(i) of the Company Disclosure Letter, or (2) as required pursuant to the vesting, settlement or exercise of Company Awards or other equity awards or Company Rights (x) outstanding as of the date of this Agreement in accordance with the terms of the applicable Company Award, other equity award or Company Right in effect on the date of this Agreement or (y) granted after the date of this Agreement in accordance with
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this Agreement; provided, further that, the Subsidiaries of the Company may make any such issuances, sales or grants to the Company or a direct or indirect wholly owned Subsidiary of the Company, (B) redeem, purchase or otherwise acquire any outstanding Company Shares or other equity or voting interests of the Company or any rights, warrants or options to acquire any Company Shares or other equity or voting interests of the Company, except (1) as required pursuant to the terms of Company Awards or other equity awards or Company Rights (x) outstanding on the date of this Agreement in accordance with the terms of the applicable Company Award, other equity award or Company Right in effect on the date of this Agreement or (y) granted after the date of this Agreement in accordance with this Agreement, or (2) in connection with the satisfaction of Tax withholding obligations with respect to Company Awards or other equity awards outstanding as of the date of this Agreement or granted after the date of this Agreement in accordance with this Agreement, (C) establish a record date for, declare, set aside for payment or pay any dividend on, or make any other distribution in respect of, any Company Shares or other equity or voting interests, other than (1) dividends or distributions made by a wholly owned Subsidiary of the Company to the Company or another wholly owned Subsidiary of the Company and (2), in the case of the Company, distributions not to exceed $0.07 per Company Share per quarter as of the record dates and on the payment dates consistent with past practice or (D) split, combine, subdivide or reclassify any Company Shares or other equity or voting interests of the Company;
(ii) (A) incur any indebtedness for borrowed money, issue or sell any bonds, debentures or other debt securities or warrants or other rights to acquire any bonds, debentures or other debt securities of the Company or any of its Subsidiaries, guarantee any such indebtedness or any debt securities of another Person or enter into any “keep well” or other agreement to maintain any financial statement condition of another Person (collectively, “Indebtedness”), except for (1) intercompany guarantees or intercompany “keep well” or other agreements to maintain any financial statement condition of the Company or any of its wholly owned Subsidiaries, (2) letters of credit issued in the ordinary course of business consistent with past practice, (3) borrowings as needed in the ordinary course of business under (w) the Australian Credit Facility not in excess of AU$30 million, (x) the Bilateral Facility not in excess of $25 million, and (y) the Club Facility not in excess of $250 million and (z) the Bail Bond Facility not in excess of $10 million, (4) any other Indebtedness having an aggregate principal amount outstanding that is not in excess of $15 million and (5) Indebtedness incurred in connection with the refinancing of any Indebtedness existing on the date of this Agreement or permitted to be incurred, assumed or otherwise entered into hereunder or (B) enter into any swap or hedging transaction or other derivative agreements other than in the ordinary course of business consistent with past practice and in compliance with the Investment Guidelines;
(iii) sell or lease to any Person, in a single transaction or series of related transactions, any of its owned properties or assets whose fair market value or purchase price exceeds $2 million, except (A) dispositions of obsolete, surplus or worn out assets or assets that are no longer used or useful in the conduct of the business of the Company or any of its Subsidiaries, (B) transfers among the Company and its wholly owned Subsidiaries, (C) leases and subleases of Real Property owned by the Company or its Subsidiaries, (D) as permitted by Section 5.01(a)(xix), or (E) transactions in compliance with the Investment Guidelines;
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(iv) (A) make or authorize capital expenditures outside the ordinary course of business consistent with past practice, except as budgeted in the Company’s current plan presented to the Company Board that was made available to Parent or (B) make any loans or advances to, or, except as permitted by the Investment Guidelines, any investments in, any other Person other than a wholly owned Subsidiary of the Company in a manner that complies with clause (A) above;
(v) except as permitted under Section 5.01(a)(iv) or Section 5.01(a)(xix), make any acquisition (including by merger or amalgamation) of the share capital or capital stock or, except in the ordinary course of business consistent with past practice, a material portion of the assets of any other Person, in each case for consideration in excess of $5 million;
(vi) except as required pursuant to the terms of any Company Plan or Contract, in each case, in effect on the date of this Agreement and made available to Parent prior to the execution of this Agreement, (A) grant to any director or officer of the Company or any of its Subsidiaries or any employee of the Company or any of its Subsidiaries whose annual base salary rate exceeds $200,000 (each such director, officer or employee a “Participant”) any increase in salary or bonus compensation opportunity other than in the ordinary course of business, (B) grant to any Participant any material increase in severance, retention or termination pay, (C) establish, adopt, enter into or amend any Company Plan, Foreign Plan or collective bargaining agreement or (D) enter into any employment, consulting, severance or termination agreement with any Person for the position of Chief Executive Officer of the Company or Executive Vice President of the Company, any direct report to the Chief Executive Officer or any Executive Vice President, or any head of any reporting segment of the Company; provided, that the foregoing shall not restrict the Company or any of its Subsidiaries from (1) entering into or making available to newly hired employees or to employees in the context of promotions based on job performance or workplace requirements, in each case, in the ordinary course of business consistent with past practice, plans, agreements, benefits and compensation arrangements (including equity-based and cash-based incentive grants) that have a value that is consistent with the past practice of making compensation and benefits available to newly hired or promoted employees in similar positions, or consistent with the compensation and benefits of the then-current employee whom such newly hired or promoted employee is engaged to replace or succeed, (2) establishing or adopting a severance and/or retention plan or arrangement in accordance with the terms set forth in Section 5.01(a)(vi) of the Company Disclosure Letter, (3) taking any of the foregoing actions to comply with, satisfy Tax-qualification requirements under, or avoid the imposition of Tax under, the Code and any applicable guidance thereunder, or other applicable Law, (4) making immaterial changes in the ordinary course of business to nondiscriminatory Company Plans that are medical, health or welfare plans available to all employees generally (other than any changes that would provide for benefits that continue following retirement or termination of employment) (provided that in no event
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shall any such change materially increase the employer or employee cost for such benefits), or (5) to the extent the Effective Time occurs after January 1, 2019, adopting and maintaining the Company Annual Incentive Plan for the 2019 fiscal year on substantially the same terms and conditions as the Company Annual Incentive Plan for the 2018 fiscal year;
(vii) make any material changes in financial accounting methods, principles or practices materially affecting the consolidated assets, liabilities or results of operations of the Company and its Subsidiaries, except insofar as may be required by (A) GAAP (or any interpretation thereof), including pursuant to standards, guidelines and interpretations of the FASB or any similar organization, (B) Applicable SAP (or any interpretation thereof), including pursuant to standards, guidelines and interpretations of the National Association of Insurance Commissioners or any similar organization or (C) any applicable Laws, including Regulation S-X under the Securities Act;
(viii) except as may be required by (or, in the reasonable good faith judgment of the Company, advisable under) (A) GAAP (or any interpretation thereof), including pursuant to standards, guidelines and interpretations of the FASB or any similar organization, (B) Applicable SAP (or any interpretation thereof), including pursuant to standards, guidelines and interpretations of the National Association of Insurance Commissioners or any similar organization or (C) any applicable Laws, alter or amend in any material respect any existing underwriting, reserving, claim handling, loss control or actuarial practice guideline or policy of the Company or any Company Insurance Subsidiary or any material assumption underlying any reserves or actuarial practice or policy;
(ix) reduce or strengthen any reserves, provisions for losses or other liability amounts in respect of insurance Contracts and assumed reinsurance Contracts except (A) as may be required by (or, in the reasonable good faith judgment of the Company, advisable under) Applicable SAP (disregarding any changes to Applicable SAP that are not yet required to be implemented) or GAAP, as applicable or (B) as a result of loss or exposure payments to other parties in accordance with the terms of insurance Contracts and assumed reinsurance Contracts;
(x) (A) amend the Company Organizational Documents, (B) amend in any material respect the comparable organizational documents of any of the Subsidiaries of the Company, in the case of clauses (A) or (B), in a manner that would reasonably be expected to prevent or to impede, interfere with, hinder or delay in any material respect the consummation of the Transactions or (C) adopt or implement any stockholder rights plan or similar arrangement;
(xi) adopt a plan or agreement of complete or partial liquidation or dissolution, merger, amalgamation, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its Subsidiaries (other than dormant Subsidiaries or, with respect to any merger, amalgamation or consolidation, other than among the Company and any wholly owned Subsidiary of the Company or among wholly owned Subsidiaries of the Company);
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(xii) grant any Lien (other than Permitted Liens) in any of its material assets other than to secure Indebtedness permitted under Section 5.01(a)(ii);
(xiii) (A) make any material Tax election, other than in the ordinary course of business consistent with past practice (except when the filing of the election would directly and materially increase the amount of Tax payable), (B) settle or compromise any audit or other proceeding relating to a material amount of Tax, (C) file any material amended Tax Return, (D) extend or waive the application of any statute of limitations regarding the assessment or collection of any material Tax, other than in the ordinary course of business consistent with past practice, (E) enter into any Tax indemnification, sharing, allocation or reimbursement agreement or similar agreements, arrangements or understandings (other than any commercial Contract entered into in the ordinary course of business that does not relate principally to Taxes) or (F) except as required by GAAP, make any material change to any Tax accounting principles, methods or practices;
(xiv) (A) settle or compromise any Action, in each case threatened, made or pending against the Company or any of its Subsidiaries, or any of their officers and directors in their capacities as such, other than the settlement of Actions (1) solely for monetary damages for an amount net to the Company or any of its Subsidiaries after the application of applicable insurance coverage not to exceed $1 million for any such settlement individually or $3 million in the aggregate, or (2) for claims under Contracts of insurance issued by the Company or any of its Subsidiaries within applicable policy or contractual limits in the ordinary course consistent with past practice or (B) cancel any material Indebtedness or waive any material claims or rights under any Material Contract;
(xv) enter into, materially modify or terminate any Material Contract in such a way as to materially reduce the expected business or economic benefits thereof or enter into any Contract that would constitute a Material Contract or Company Reinsurance Contract if in effect as of the date hereof, in each case, other than in the ordinary course of business consistent with past practice or materially modify any Contract constituting a Related Party Transaction;
(xvi) in relation to the Company and its Subsidiaries, redomesticate to a jurisdiction other than that in which the Company or such Subsidiary is organized on the date hereof;
(xvii) voluntarily abandon, dispose of, or permit to lapse any right to Intellectual Property material to the Company and its Subsidiaries, taken as a whole, that is owned by the Company or its Subsidiaries, other than in the ordinary course of business consistent with past practice;
(xviii) voluntarily abandon, dispose of, or permit to lapse any Permit material to the business of the Company and of its Subsidiaries, taken as a whole, other than (A) in the ordinary course of business consistent with past practice or (B) as required by applicable Law;
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(xix) (A) acquire or dispose of any Investment Assets in any manner not in material compliance with the Investment Guidelines (provided, that in no event shall the Company acquire any interest in any limited partnership, hedge fund, private equity fund or debt issuances (other than debt securities registered in accordance with the Securities Act and debt securities offered pursuant to Rule 144A promulgated under the Securities Act), or any equity securities of any Person not listed on a United States national securities exchange, the London Stock Exchange or the Alternative Investment Market; provided, that investments in investment affiliates investing in Investment Assets in compliance with the above clause (A) in the ordinary course shall be permitted), or (B) retain or engage any external investment manager that had not been retained or engaged prior to the date of this Agreement;
(xx) amend, modify or otherwise change the Investment Guidelines in any material respect;
(xxi) enter into any new lines of business or withdraw from, or put into “run off”, any existing lines of business;
(xxii) voluntarily terminate or allow to lapse any existing material policy of insurance under which the Company or any of its Subsidiaries is a beneficiary unless replaced by similar coverage; or
(xxiii) authorize any of, or commit or agree, in writing or otherwise, to take any of, the foregoing actions.
(b) Neither Parent nor Merger Sub shall knowingly take or permit any of their respective Affiliates to take any action that could reasonably be expected to result in any of the conditions precedent to the consummation of the Merger and the other Transactions contemplated hereby not being satisfied.
(c) Nothing contained in this Agreement is intended to give Parent, directly or indirectly, the right to control or direct the Company’s or its Subsidiaries’ operations prior to the Effective Time, and nothing contained in this Agreement is intended to give the Company, directly or indirectly, the right to control or direct Parent’s or its Subsidiaries’ operations. Prior to the Effective Time, each of Parent and the Company shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and its Subsidiaries’ respective operations.
Section 5.02 Acquisition Proposals; Change in Recommendation.
(a) Go-Shop Period. During the period beginning on the date of this Agreement and continuing until 12:01 a.m. (New York City time) on the thirtieth (30th) day after the date of this Agreement (the “No-Shop Period Start Date” and the period starting from the date of this Agreement until the No-Shop Period Start Date, the “Go-Shop Period”), the Company and its Subsidiaries and their respective Representatives shall have the right to:
(i) initiate, solicit or knowingly facilitate or encourage any inquiry or the making of any proposal or offer that constitutes or would be reasonably be expected
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to lead to an Acquisition Proposal, including by providing information, whether orally or in writing (including non-public information and data) regarding the business, properties, assets, books, records and personnel of the Company and its Subsidiaries to any Person if the Company receives from such Person (or has received from such Person) an executed Acceptable Confidentiality Agreement; provided, that the Company shall promptly (and in any event within twenty-four (24) hours) make available to Parent and Merger Sub any material non-public information concerning the Company or its Subsidiaries that is provided to any Person given such access that was not previously made available to Parent or Merger Sub; and
(ii) engage in, enter into, continue or otherwise participate in any discussions or negotiations with, or otherwise cooperate with, assist, participate in, facilitate or encourage efforts by, any Persons or groups of Persons (or Representatives of Persons) that have made, are seeking to make, have informed the Company of an intention to make, or have publicly announced an intention to make, any proposal that constitutes, or would reasonably be expected to lead to, an Acquisition Proposal;
provided, that during the Go-Shop Period, the Company shall not disclose any material non-public information regarding the Company pursuant to the foregoing clauses (i) and (ii) without first entering into an Acceptable Confidentiality Agreement with the intended recipient thereof (but for the avoidance of doubt, the Company shall not be required to enter into an Acceptable Confidentiality Agreement with any Representatives of such intended recipient) and shall promptly (and in any event within twenty-four (24) hours) provide written notice to Parent and Merger Sub of the execution of an Acceptable Confidentiality Agreement with any Person during the Go-Shop Period (which notice shall not be required to identify the Person entering into such Acceptable Confidentiality Agreement). No later than twenty-four (24) hours after the No-Shop Period Start Date, the Company shall provide a written notice to Parent and Merger Sub stating whether the Company Board has determined that any Person submitting an Acquisition Proposal prior to the No-Shop Period Start Date is an Excluded Party and identifying each such Excluded Party.
(b) Prohibited Solicitation Activities. Except as expressly permitted by this Section 5.02, from and after the No-Shop Period Start Date until the Effective Time or, if earlier, the termination of this Agreement in accordance with ARTICLE VII, the Company and its Subsidiaries:
(i) (A) shall immediately cease and cause to be terminated, and the Company shall instruct its Representatives to terminate, any solicitation, encouragement, discussions or negotiations with any Person or its Representatives (other than Parent and Merger Sub and their Representatives) conducted prior to the No-Shop Period Start Date with respect to any Acquisition Proposal and (B) shall prohibit any Person other than Parent and Merger Sub and their Representatives from having access to any physical or electronic data rooms relating to any possible Acquisition Proposal; and
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(ii) shall not, and the Company shall cause its and its Subsidiaries’ respective officers, directors and employees, and shall use its reasonable best efforts to cause its and its Subsidiaries’ other Representatives not to, directly or indirectly (A) initiate, solicit or knowingly facilitate or encourage any inquiry or the making of any proposal or offer that constitutes or would be reasonably be expected to lead to an Acquisition Proposal, (B) engage in, enter into, continue or otherwise participate in any discussions or negotiations with, or otherwise cooperate with, assist, participate in, facilitate or encourage efforts by, any Person or groups of Persons (or Representatives of Persons) that have made, are seeking to make, have informed the Company of an intention to make, or have publicly announced an intention to make, any proposal that constitutes, or could reasonably be expected to lead to, an Acquisition Proposal, (C) enter into any acquisition agreement, merger agreement or similar definitive agreement, or any letter of intent, memorandum of understanding or agreement in principle relating to an Acquisition Proposal, (D) take any action to make the provisions of any “fair price,” “moratorium,” “control share acquisition,” “business combination” or similar anti-takeover Law, or any restrictive provision of any applicable anti-takeover provision in the Company Charter or Company By-Laws, inapplicable to any transactions contemplated by an Acquisition Proposal (and, to the extent permitted thereunder, the Company shall promptly take all steps necessary to terminate any waiver that may have been heretofore granted to any Person other than Parent and Merger Sub under any such provisions) or (E) resolve, propose or agree to do any of the foregoing.
(iii) The parties agree that for all purposes of this Agreement any violation of the provisions of this Section 5.02(b) by any Representative of the Company or any Representative of any of the Company’s Subsidiaries shall be deemed to be a breach of this Section 5.02(b) by the Company. No later than twenty-four (24) hours after the No-Shop Period Start Date, the Company shall, to the extent it had not previously done so, deliver a request to each Person who executed a confidentiality or similar agreement with the Company prior to the No-Shop Period Start Date in connection with considering or making an Acquisition Proposal (other than any such Person that the Company is permitted to continue discussions or negotiations with pursuant to Section 5.02(c)) to promptly return or destroy any non-public information previously furnished or made available to such Person or any of its Representatives on behalf of the Company or any of its Representatives.
(c) Permitted Discussions. Notwithstanding anything contained in Section 5.02(b), in response to an Acquisition Proposal received prior to obtaining the Company Stockholder Approval, which Acquisition Proposal did not result from any breach of this Section 5.02 and, with respect to clause (ii) of this sentence, shall be a written Acquisition Proposal, (i) the Company and its Representatives may contact such Person or group of Persons making the Acquisition Proposal solely to clarify the terms and conditions thereof or to request that any Acquisition Proposal made orally be made in writing and (ii) if the Company Board determines in good faith after consultation with the Company’s financial advisors and outside legal counsel that such Acquisition Proposal constitutes or would reasonably be expected to lead to a Superior Proposal, then the Company and its Representatives may (A) negotiate and enter into an Acceptable Confidentiality Agreement with the Person or group of Persons making the Acquisition Proposal and furnish pursuant thereto information (including non-public information) with respect to the Company and its Subsidiaries to the Person or group of Persons who has made such Acquisition Proposal; provided, that the Company shall promptly provide to Parent copies of such Acceptable Confidentiality Agreement; provided, further that the Company
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shall promptly provide to Parent any material non-public information concerning the Company or any of its Subsidiaries that is provided to any Person given such access that was not previously provided to Parent or its Representatives and (B) after entering into an Acceptable Confidentiality Agreement, engage in or otherwise participate in discussions or negotiations with the Person or group of Persons making such Acquisition Proposal. The parties agree that, notwithstanding the commencement of the obligations of the Company under Section 5.02(b) on the No-Shop Period Start Date, the Company, its Subsidiaries and their Representatives may continue to engage in the activities described in Section 5.02(a) with respect to any Excluded Party on or after the No-Shop Period Start Date so long as such Excluded Party remains an Excluded Party, including with respect to any amended or modified Acquisition Proposal submitted by any Excluded Party on or after the No-Shop Period Start Date, and Section 5.02(b) and this Section 5.02(c) shall not apply with respect thereto.
(d) Required Notices. The Company shall promptly (and in any event within twenty-four (24) hours after receipt) notify Parent in the event that the Company or any of its Subsidiaries or its or their Representatives receives an Acquisition Proposal and shall disclose to Parent the material terms and conditions of any such Acquisition Proposal and the identity of the Person or group of Persons making such Acquisition Proposal and unredacted copies of all material correspondence or other material written documentation with respect thereto (and written summaries of any material oral communications); provided, that if the Company is specifically prohibited from disclosing the identity of any Person making an Acquisition Proposal, the Company may redact that identity and any other identifying information but shall otherwise provide all such information relating to the Acquisition Proposal. The Company shall keep Parent reasonably informed on a prompt basis of any material developments with respect to any such Acquisition Proposal (including any material changes thereto and provide copies of material correspondence and summaries of material oral communications as contemplated above). The Company agrees that it and its Subsidiaries will not enter into any confidentiality agreement with any Person subsequent to the date of this Agreement that prohibits the Company from providing any information to Parent in accordance with this Section 5.02(d). For the avoidance of doubt, all information provided to Parent pursuant to this Section 5.02 will be subject to the terms of the Confidentiality Agreement.
(e) Company Board Recommendation. Except as provided in Section 5.02(f), neither the Company Board nor any committee thereof shall (i)(A) withhold or withdraw the Company Board Recommendation, (B) modify, qualify or amend the Company Board Recommendation in a manner adverse to Parent, (C) fail to include the Company Board Recommendation in the Proxy Statement, (D) approve or publicly endorse or recommend any Acquisition Proposal, or refrain from recommending against any Acquisition Proposal that is a tender offer or exchange offer, within ten (10) business days after the commencement of such tender offer or exchange offer pursuant to Rule 14d-2 under the Exchange Act, or (E) fail to publicly reaffirm the Company Board Recommendation within ten (10) business days after receipt of a written request by Parent to make such public reaffirmation following the receipt by the Company of a public Acquisition Proposal (other than in the case of an Acquisition Proposal in the form of a tender offer or exchange offer covered by clause (D)) that has not been withdrawn; provided, that Parent may make any such request only once in any ten (10) business day period and only once for each such public Acquisition Proposal and once for each public material amendment to such Acquisition Proposal (any action described in this clause (i) being
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referred to as an “Adverse Recommendation Change”, it being understood that a customary “stop, look or listen” communication pursuant to Rule 14d-9(f) promulgated under the Exchange Act shall not be prohibited and shall not, in and of itself, constitute an Adverse Recommendation Change) or (ii) authorize, cause or permit the Company or any of its Subsidiaries to execute or enter into any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement, amalgamation agreement or other similar agreement related to any Acquisition Proposal, other than any Acceptable Confidentiality Agreement pursuant to Section 5.02(a) (each, a “Company Acquisition Agreement”).
(f) Permitted Change in Recommendation. Notwithstanding anything in Section 5.02(e), prior to the time the Company Stockholder Approval is obtained, the Company Board may, so long as the Company and its Subsidiaries and Representatives have not breached this Section 5.02:
(i) in response to an Intervening Event, if the Company Board has determined in good faith, after consultation with the Company’s outside legal counsel, that failure to do so would violate the directors’ fiduciary duties under applicable Law, make an Adverse Recommendation Change; and
(ii) in response to a Superior Proposal, if the Company Board has determined in good faith, after consultation with the Company’s financial advisors and outside legal counsel, that failure to do so would violate the directors’ fiduciary duties under applicable Law, (A) make an Adverse Recommendation Change or (B) cause the Company to terminate this Agreement pursuant to Section 7.01(d)(ii), pay the Company Termination Fee and enter into a Company Acquisition Agreement with respect to such Superior Proposal;
provided, that the Company and the Company Board shall not take any such action unless the Company has given Parent at least four (4) business days’ (subject to clause (y) of this sentence) prior written notice (a “Company Notice”) of its intention to take any such action, which notice (A) in the case of an Intervening Event, specifies material changes, developments, effects, circumstances, states of facts or events comprising such Intervening Event and (B) in the case of a Superior Proposal, discloses (1) the material terms and conditions of such Superior Proposal and the identity of the Person or group of Persons making such Superior Proposal and its or their financing sources (if applicable), and (2) a copy of the most current version of the Company Acquisition Agreement (if any) with respect to such Superior Proposal and any agreement in the Company’s possession relating to the financing of such Superior Proposal; provided, further, that during such four (4) business day period (it being understood and agreed that (x) any change to the financial or other material terms and conditions of a Superior Proposal shall require an additional Company Notice to Parent of two (2) business days running from the date of such notice (provided, that in no event shall the giving of such additional Company Notice shorten the four (4) business day period under the initial Company Notice) and (y) with respect to any Person or group, the notice period for the first Company Notice given to Parent shall be four (4) business days and the notice period for any Company Notice given following the expiration of such four (4) business day period with respect to any Superior Proposal (or change thereto) made by such Person or group shall be two (2) business days), (I) the Company shall have, and shall have caused its Representatives to, negotiate with Parent in good faith (to the extent Parent
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desires to negotiate) to make such commercially reasonable adjustments to the terms and conditions of this Agreement as would enable the Company Board to no longer make an Adverse Recommendation Change or determination that an Acquisition Proposal constitutes a Superior Proposal and (II) the Company Board shall have determined following the end of such period, after considering the results of such negotiations and the revised proposals made by Parent, if any, after consultation with the Company’s financial advisors and outside legal counsel, (a) that the Superior Proposal giving rise to such Company Notice continues to be a Superior Proposal or (b) that failure to make an Adverse Recommendation Change in respect of the applicable Intervening Event would violate the directors’ fiduciary duties under applicable Law.
(g) Disclosures Under Law. Nothing contained in this Section 5.02 or elsewhere in this Agreement shall prohibit the Company or the Company Board or any committee thereof from (i) taking and disclosing to stockholders of the Company a position or communication contemplated by Rule 14e-2(a), Rule 14d-9 or Item 1012(a) of Regulation M-A promulgated under the Exchange Act or (ii) making any disclosure or communication to stockholders of the Company that the Company Board determines in good faith, after consultation with the Company’s financial advisors and outside legal counsel, is required by the directors’ fiduciary duties or applicable Law; provided that if any such public disclosure by the Company or the Company Board contemplated by clause (i) or (ii) above relating to an Acquisition Proposal has the substantive effect of withdrawing, withholding or adversely modifying, qualifying or amending the Company Board Recommendation or approving or endorsing an Acquisition Proposal and meets the requirements set forth in Section 5.02(e)(i), such disclosure shall be deemed to be an Adverse Recommendation Change unless the Company Board reaffirms the Company Board Recommendation in such disclosure (it being understood that any “stop, look or listen” communication pursuant to Rule 14d-9(f) shall not, in and of itself, be deemed to be an Adverse Recommendation Change).
(h) Certain Definitions.
(i) As used in this Agreement, “Acceptable Confidentiality Agreement” shall mean any confidentiality agreement entered into by the Company that contains provisions that are not materially less favorable in the aggregate to the Company than those contained in the Confidentiality Agreement.
(ii) As used in this Agreement, “Acquisition Proposal” shall mean any inquiry, proposal (whether or not in writing) or offer from any Person or group (other than Parent and its Subsidiaries) relating to, in a single transaction or series of related transactions, any direct or indirect (A) acquisition, including by means of bulk (or similar non-ordinary course) reinsurance of in-force business consisting of a single transaction or a series of related transactions, that if consummated would result in any Person or group owning 15% or more of the consolidated assets (based on the fair market value thereof, as determined in good faith by the Company Board), revenues or net income of the Company and its Subsidiaries, or, solely with respect to any such bulk (or similar non-ordinary course) reinsurance transaction, net exposure to insured liabilities, (B) acquisition of Company Shares representing 15% or more of the outstanding Company Shares, (C) tender offer or exchange offer that if consummated would result in any Person or group having beneficial ownership of Company Shares representing 15%
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or more of the outstanding Company Shares, (D) merger, amalgamation, consolidation, share exchange, business combination, reorganization, recapitalization, liquidation, dissolution or similar transaction involving the Company pursuant to which such Person or group (or the stockholders of any Person) would acquire, directly or indirectly, 15% or more of the aggregate voting power of the Company (without taking into account the voting cutback provisions in the Company By-Laws) or of the surviving entity in a merger or amalgamation involving the Company or the resulting direct or indirect parent of the Company or such surviving entity or (E) combination of the foregoing, in each case, other than the Transactions; provided that the ownership of the Company Shares by the Existing Stockholder Group shall not constitute an Acquisition Proposal under any of the foregoing clauses (A) to (E); provided further, that neither (I) the renewal or amendment of any currently in-force reinsurance arrangement or any replacement thereof, nor (II) any reinsurance arrangement entered into in the ordinary course of business shall constitute an Acquisition Proposal.
(iii) As used in this Agreement, “Superior Proposal” shall mean any bona fide written Acquisition Proposal received after the date of this Agreement which did not result from any breach of this Section 5.02 that the Company Board has determined in its good faith judgment, after consultation with the Company’s financial advisors and outside legal counsel, (A) is reasonably likely to be consummated in accordance with its terms, taking into account all legal, financial and regulatory aspects of the proposal and the identity of the Person making the proposal (including any conditions relating to financing, regulatory approvals or other events or circumstances beyond the control of the party invoking the condition), and (B) if consummated, would be more favorable from a financial point of view to the stockholders of the Company than the Merger; provided that for purposes of the definition of “Superior Proposal”, the references to “15%” in the definition of Acquisition Proposal shall be deemed to be references to “50%”.
(iv) As used in this Section 5.02 and in Section 8.13, “group” has the meaning ascribed to it in Rule 13d-5 promulgated under the Exchange Act.
(v) As used in this Agreement, “Intervening Event” shall mean a material event, change, development, effect, occurrence or state of facts relating to the Company and its Subsidiaries (A) that was not known to the Company Board on the date of this Agreement, or (B) arising or occurring after the date of this Agreement, in the case of (A) and (B), that is not related to the receipt, existence of or terms of an Acquisition Proposal or any inquiry relating thereto.
Section 5.03 Preparation of the Proxy Statement; Stockholders Meeting.
(a) As promptly as reasonably practicable after the execution of this Agreement, the Company (with the assistance and cooperation of Parent as reasonably requested by the Company) shall prepare the Proxy Statement and file it with the SEC. The Company shall use its reasonable best efforts to make such filing no later than fifteen (15) business days following the date of this Agreement. Subject to Section 5.02, the Company Board shall make the Company Board Recommendation to the holders of Company Shares and shall include such
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recommendation in the Proxy Statement and shall use reasonable best efforts to secure the Company Stockholder Approval. The Company shall cause the Proxy Statement to comply in all material respects with the applicable provisions of the Exchange Act. Parent shall provide to the Company all information concerning Parent and Merger Sub as may be reasonably requested by the Company in connection with the Proxy Statement and shall otherwise assist and cooperate with the Company in the preparation of the Proxy Statement and the resolution of any comments thereto received from the SEC. The Company and Parent each agrees, as to itself and its Subsidiaries, that none of the information supplied or to be supplied by it or its Subsidiaries for inclusion or incorporation by reference in the Proxy Statement or any amendment or supplement thereto will, at the date of mailing to stockholders and at the time of the meeting of stockholders of the Company to be held in connection with the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If, at any time prior to receipt of the Company Stockholders Approval, any event occurs with respect to the Company, any of its Subsidiaries, Parent or Merger Sub, or any change occurs with respect to other information to be included in the Proxy Statement, which is required to be described in an amendment of, or a supplement to, the Proxy Statement, the Company or Parent, as the case may be, shall promptly notify the other party of such event and the Company shall promptly file, with Parent’s cooperation, any necessary amendment or supplement to the Proxy Statement. The Company shall notify Parent promptly in writing upon the receipt of any comments from the SEC and of any request by the SEC for amendments or supplements to the Proxy Statement or for additional information and shall supply Parent with copies of all written correspondence between the Company or any of its Representatives, on the one hand, and the SEC, on the other hand, with respect to the Proxy Statement. The Company shall (and Parent shall assist and cooperate with the Company to) promptly respond to any comments received from the SEC concerning the Proxy Statement and to resolve such comments with the SEC, and the Company shall use its reasonable best efforts to cause the Proxy Statement to be disseminated to its stockholders as promptly as reasonably practicable (and in any event within ten (10) business days) after the resolution of any such comments. To the extent required by applicable Law, the Company shall promptly file and disseminate to the Company stockholders any supplement or amendment to the Proxy Statement. Prior to the filing of the Proxy Statement (or any amendment or supplement thereto) or any dissemination thereof to the holders of Company Shares, or responding to any comments from the SEC with respect thereto, the Company shall provide Parent with a reasonable opportunity to review and to propose comments on such document or response, which the Company shall consider in good faith.
(b) The Company shall take all necessary actions to duly call, give notice of, convene and hold a meeting of its stockholders for the purpose of obtaining the Company Stockholder Approval (the “Company Stockholders Meeting”) as promptly as reasonably practicable, and in any event within forty-five (45) days following the date the SEC confirms that it has no further comments on the Proxy Statement. Subject to Section 5.02, the Company shall use its reasonable best efforts to solicit and secure the Company Stockholder Approval. Without limiting the generality of the foregoing, unless this Agreement has been terminated, the Company shall submit the Merger and this Agreement for the Company Stockholder Approval at the Company Stockholders Meeting whether or not an Adverse Recommendation Change shall have occurred or an Acquisition Proposal shall have been publicly announced or otherwise made known to the Company Board, the Company, its Representatives or its stockholders. The
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Company Stockholders Meeting and the record date therefor shall be set in consultation with Parent and shall be reasonably satisfactory to Parent. The Company shall not postpone or adjourn the Company Stockholders Meeting except to the extent any such postponement or adjournment is (i) required by Law or a court or other Governmental Authority of competent jurisdiction in connection with any Actions in connection with this Agreement or the Transactions or has been requested by the SEC or its staff or (ii) requested by Parent (in Parent’s sole discretion) to permit additional time to solicit the Company Stockholder Approval. The Company shall keep Parent updated with respect to proxy solicitation results as reasonably requested by Parent or Merger Sub.
(c) The Company agrees not to recognize, register or give effect to any transfer of Company Shares made in violation of Section 4.02 of the Voting Agreement.
Section 5.04 Reasonable Best Efforts.
(a) Subject to the terms and conditions of this Agreement, each of the parties hereto shall cooperate with the other parties and use (and shall cause their respective Subsidiaries to use) their respective reasonable best efforts (unless, with respect to any action, another standard of performance is expressly provided for herein) to promptly (i) take, or cause to be taken, all actions, and do, or cause to be done, and assist and cooperate with the other parties hereto in doing, all things necessary, proper or advisable to cause the conditions to Closing to be satisfied as promptly as reasonably practicable and to consummate and make effective, in the most expeditious manner reasonably practicable, the Transactions, including (A) taking all such actions contemplated by the terms of this Agreement, (B) otherwise preparing and filing promptly and fully all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents and (C) executing and delivering any additional instruments necessary to consummate the Transactions, (ii) obtain all Consents from any Governmental Authority or third party (assuming the accuracy of the representations and warranties made in Section 3.04(g)) necessary, proper or advisable to consummate the Transactions, including any such Consents required with respect to the Company Insurance Approvals, the Parent Insurance Approvals and under applicable Antitrust Laws, (iii) take all steps that are necessary, proper or advisable to avoid any Actions by any Governmental Authorities with respect to this Agreement or the Transactions and (iv) defend or contest in good faith any Action by any third party, whether judicial or administrative, challenging this Agreement or that could otherwise prevent or impede, interfere with, hinder or delay in any material respect the consummation of the Transactions; provided that in no event shall Parent or Merger Sub be required to commence any litigation against any Governmental Authority.
(b) Subject to the terms and conditions of this Agreement, the Company and Parent shall each use its reasonable best efforts to (i) take all action necessary to ensure that no Takeover Law is or becomes applicable to any of the Transactions and refrain from taking any actions that would cause the applicability of such Laws and (ii) if the restrictions of any Takeover Law become applicable to any of the Transactions, take all action necessary to ensure that the Transactions may be consummated as promptly as reasonably practicable on the terms contemplated by this Agreement and otherwise lawfully minimize the effect of such Takeover Law on the Transactions.
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(c) Without limiting the general applicability of Section 5.04(a), each of the Company and Parent shall, and shall cause its applicable Affiliates to in consultation and cooperation with the other and as promptly as practicable and in no event later than fifteen (15) business days following the date of this Agreement, file (i) with the United States Federal Trade Commission and the Antitrust Division of the United States Department of Justice the notification and report form, if any, required under the HSR Act with respect to the Transactions, (ii) all appropriate documents, forms, filings or submissions required under any non-U.S. Antitrust Laws and (iii) with applicable Insurance Regulators, all documents, forms, filings or other submissions required under applicable Insurance Laws with respect to the Transactions. Any such filings shall be in material compliance with the requirements of applicable Law. If any of the approvals with respect to which any of the preceding clauses (i), (ii) or (iii) relate would require similar filings to be made by control persons of the Parent or the Company under applicable Law, each of the Parent and the Company shall cause each of their respective such control persons to make such filings and use reasonable best efforts to obtain such approvals. Each of the parties shall, in connection with the efforts referenced in Section 5.04(a), (w) furnish to the other party such necessary information and reasonable assistance as the other party may request in connection with its preparation of any documents, forms, filings or submissions contemplated by the first sentence of this Section 5.04(c), (x) give the other party reasonable prior notice of any such filings or submissions and, to the extent reasonably practicable, of any communication with, and any inquiries or requests for additional information from, any Governmental Authority regarding the Transactions, and provide the other party with a reasonable opportunity to review, comment on and discuss in advance, and consider in good faith the views of, and secure the participation of, the other party in connection with, any such filings, submissions, communications, inquiries or requests, (y) unless prohibited by applicable Law or by the applicable Governmental Authority, (A) not participate in or attend any meeting, or engage in any substantive conversation, with any Governmental Authority in respect of the Transactions without the other party (other than telephone calls regarding routine administrative matters), (B) give the other party reasonable prior notice of any such meeting or substantive conversation, (C) in the event one party is prohibited by applicable Law or by the applicable Governmental Authority from participating in or attending any such meeting or engaging in any such substantive conversation, to the extent permitted by applicable Law or such Governmental Authority, keep such party apprised with respect thereto, (D) cooperate in the filing of any substantive memoranda, white papers, filings, correspondence or other written communications explaining or defending this Agreement or any of the Transactions, articulating any regulatory or competitive argument or responding to requests or objections made by any Governmental Authority and (E) furnish the other party with copies of all filings, submissions, substantive correspondence and substantive communications (and memoranda setting forth the substance thereof) between it and its Affiliates and their respective Representatives, on the one hand, and any Governmental Authority or members of any Governmental Authority’s staff, on the other hand, with respect to this Agreement and the Transactions (excluding any personally sensitive information) and (z) comply with any inquiry or request from any Governmental Authority as promptly as reasonably practicable with respect to this Agreement and the Transactions. Without limiting the foregoing, each of the Company and Parent shall give to the other prompt written notice if it, or any of its Affiliates, receives any notice or other communication from any Governmental Authority in connection with the Transactions contemplated hereby and, in the case of any such notice or communication that is in writing, shall promptly furnish the other
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party with a copy thereof. The parties agree not to extend, directly or indirectly, any waiting period under any applicable Antitrust Law or enter into any agreement with a Governmental Authority to materially delay or not to consummate the Merger or any of the other Transactions, except with the prior written consent of the other parties hereto, which shall not be unreasonably withheld, conditioned or delayed in the context of seeking such a delay.
(d) Notwithstanding anything herein to the contrary, Parent shall not be obligated to take or refrain from taking, or to agree to it or its Affiliates taking or refraining from taking, any action, or to permit or suffer to exist any condition, limitation, restriction or requirement imposed by a Governmental Authority that, individually or in the aggregate with any other actions, conditions, limitations, restrictions or requirements, would or would reasonably be likely to have a material adverse effect on the business, condition (financial or otherwise), operations or results of operations of (i) Parent and its Subsidiaries, taken as a whole, or (ii) the Company and its Subsidiaries, taken as a whole (any such action, condition, limitation, restriction or requirement, a “Parent Burdensome Condition”), including, without limiting the foregoing, a Governmental Authority imposing Solvency II capital requirements on any United States Subsidiary of Parent that is not otherwise already subject to Solvency II capital requirements. Without the prior written consent of Parent, the Company shall not, and shall cause the Company Insurance Subsidiaries and its other Affiliates not to, take or refrain from or to agree to the taking or refraining from any action or to permit or suffer to exist any restriction, condition, limitation or requirement that would or would reasonably be expected to result, individually or in the aggregate, in a Parent Burdensome Condition being imposed by a Governmental Authority. Notwithstanding the foregoing, prior to Parent being entitled to invoke a Parent Burdensome Condition, the parties and their respective Representatives shall meet and confer in good faith in order to (A) exchange and review their respective views and positions as to such Parent Burdensome Condition and (B) discuss and present to, and engage with, the applicable Governmental Authority regarding any potential approaches or workarounds that would avoid such Parent Burdensome Condition or mitigate its impact so it is no longer a Parent Burdensome Condition.
Section 5.05 Transfer Taxes. All share transfer, real estate transfer, documentary, stamp, recording and other similar Taxes (including interest, penalties and additions to any such Taxes) (“Transfer Taxes”) incurred in connection with the Transactions shall be paid by Parent or the Surviving Company, and, prior to the Effective Time, the Company shall cooperate with Parent in preparing, executing and filing any applicable Tax Returns with respect to such Transfer Taxes.
Section 5.06 Public Announcements; Other Communications. Parent and the Company shall consult with each other before issuing, and give each other the reasonable opportunity to review and comment upon, any press release or other public statements with respect to the Transactions, and shall not (and shall not cause or permit their respective Subsidiaries or Representatives to) issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable Law, court process or the rules and regulations of any national securities exchange or national securities quotation system and in connection with any Adverse Recommendation Change in accordance with Section 5.02. The parties hereto agree that the initial press releases to be issued with respect to the Transactions following execution of this Agreement shall be in the form heretofore agreed to by the parties
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hereto. Notwithstanding the foregoing, the parties shall have no consultation or other obligation pursuant to this Section 5.06 with respect to any press release or other public statements related to any actual or contemplated litigation between or among the parties to this Agreement. The Company will consult with Parent prior to making any substantive internal announcements or other substantive communications to its employees or other constituents with respect to this Agreement or the Transactions and will give good faith consideration to reasonable comments proposed by Parent; provided that the Company shall not be required to consult with Parent prior to making any such announcements or communications if the substance thereof was publicly disclosed by Parent or previously subject to the foregoing requirements.
Section 5.07 Access to Information; Confidentiality. Subject to applicable Law, upon reasonable notice, the Company shall afford to Parent and Parent’s Representatives reasonable access during normal business hours to the Company’s officers, employees, agents, properties, books, Contracts and records and the Company shall furnish promptly to Parent and Parent’s Representatives such information concerning its business, personnel, assets, liabilities and properties as Parent may reasonably request; provided that Parent and its Representatives shall conduct any such activities in such a manner as not to interfere unreasonably with the business or operations of the Company; provided further, however, that the Company shall not be obligated to provide such access or information if the Company determines, in its reasonable judgment, that doing so would violate applicable Law or a Contract or obligation of confidentiality owing to a third party, waive the protection of an attorney-client privilege or other legal privilege or expose the Company to risk of liability for disclosure of sensitive or Personal Information. Without limiting the foregoing, in the event that the Company does not provide access or information in reliance on the immediately preceding sentence, it shall provide notice to Parent that it is withholding such access or information and shall use its reasonable best efforts to communicate, to the extent feasible, the applicable information in a way that would not violate the applicable Law, Contract or obligation or risk waiver of such privilege. All requests for information made pursuant to this Section 5.07 shall be directed to the Person designated by the Company. Until the Effective Time, the information provided will be subject to the terms of the confidentiality agreement dated as of May 30, 2018, by and between the Company and Parent (as may in the future be amended from time to time, the “Confidentiality Agreement”).
Section 5.08 Indemnification and Insurance.
(a) From and after the Effective Time, the Surviving Company shall, and Parent shall cause the Surviving Company to, (i) indemnify and hold harmless each individual who at the Effective Time is, or at any time prior to the Effective Time was, a director or officer of the Company or of a Subsidiary of the Company (each, together with such Person’s heirs, executors and administrators, an “Indemnitee” and, collectively, the “Indemnitees”) with respect to all claims, liabilities, losses, damages, judgments, fines, penalties, costs (including amounts paid in settlement or compromise) and expenses (including fees and expenses of legal counsel) in connection with any Action (whether civil, criminal, administrative or investigative), whenever asserted, based on or arising out of, in whole or in part, (A) the fact that an Indemnitee was a director or officer of the Company or such Subsidiary or (B) acts or omissions by an Indemnitee in the Indemnitee’s capacity as a director, officer, employee or agent of the Company or such Subsidiary or taken at the request of the Company or such Subsidiary (including in connection with serving at the request of the Company or such Subsidiary as a director, officer, employee,
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agent, trustee or fiduciary of another Person (including any employee benefit plan)), in each case under clause (A) or (B), at, or at any time prior to, the Effective Time (including any Action relating in whole or in part to the Transactions or relating to the enforcement of this provision or any other indemnification or advancement right of any Indemnitee), to the fullest extent permitted under applicable Law and (ii) assume all obligations of the Company and such Subsidiaries to the Indemnitees in respect of indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time as provided in the Company Organizational Documents and the organizational documents of such Subsidiaries as in effect on the date of this Agreement or in any agreement in existence as of the date of this Agreement providing for indemnification between the Company and any Indemnitee. Without limiting the foregoing, Parent, from and after the Effective Time, shall cause, unless otherwise required by applicable Law, the certificate of incorporation and by-laws of the Surviving Company to contain provisions no less favorable to the Indemnitees with respect to limitation of liabilities of directors and officers and indemnification than are set forth as of the date of this Agreement in the Company Organizational Documents, which provisions shall not be amended, repealed or otherwise modified in a manner that would adversely affect the rights thereunder of the Indemnitees. In addition, from the Effective Time, Parent shall cause the Surviving Company to, advance any expenses (including fees and expenses of legal counsel) of any Indemnitee under this Section 5.08 (including in connection with enforcing the indemnity and other obligations referred to in this Section 5.08) as incurred to the fullest extent permitted under applicable Law; provided that the individual to whom expenses are advanced provides an undertaking to repay such advances if it shall be finally determined by a court of competent jurisdiction that such Person is not entitled to be indemnified pursuant to this Section 5.08(a).
(b) None of Parent or the Surviving Company shall settle, compromise or consent to the entry of any judgment in any threatened or actual litigation, claim or proceeding relating to any acts or omissions covered under this Section 5.08 (each, a “Claim”) for which indemnification has been sought by an Indemnitee hereunder, unless such settlement, compromise or consent includes an unconditional release of such Indemnitee from all liability arising out of such Claim or such Indemnitee otherwise consents in writing to such settlement, compromise or consent. Each of Parent, the Surviving Company and the Indemnitees shall cooperate in the defense of any Claim and shall provide access to properties and individuals as reasonably requested and furnish or cause to be furnished records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials or appeals, as may be reasonably requested in connection therewith.
(c) For the six (6)-year period commencing immediately after the Effective Time, the Surviving Company shall substitute the current directors’ and officers’ liability insurance of the Company and its Subsidiaries covering acts or omissions occurring at or prior to the Effective Time with respect to those individuals who are currently (and any additional individuals who prior to the Effective Time become) covered by the directors’ and officers’ liability insurance policies of the Company and its Subsidiaries with a “tail” policy, issued by reputable insurers, on terms and scope with respect to such coverage, and in amount, no less favorable to such individuals than those of such policies in effect on the date of this Agreement; provided, that, if the annual premium for such insurance shall exceed 300% of the current annual premium (such 300% threshold, the “Maximum Premium”), then Parent shall provide or cause to be provided a policy for the applicable individuals with the best coverage as shall then be
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available at an annual premium not in excess of the Maximum Premium. The Company may with the consent of Parent (not to be unreasonably withheld), and at the request of Parent shall (in which case, at Parent’s expense), prior to the Effective Time purchase, for an aggregate amount not to exceed the aggregate Maximum Premium for six (6) years, a six-year prepaid “tail” policy on terms and conditions providing at least substantially equivalent benefits as the current policies of directors’ and officers’ liability insurance maintained by the Company and its Subsidiaries with respect to matters existing or occurring prior to the Effective Time, covering without limitation the Transactions. If such prepaid “tail” policy has been obtained by the Company, it shall be deemed to satisfy all obligations to obtain insurance pursuant to this Section 5.08(c) and the Surviving Company shall use its reasonable best efforts to cause such policy to be maintained in full force and effect, for its full term, and to honor all of its obligations thereunder.
(d) The provisions of this Section 5.08 are (i) intended to be for the benefit of, and shall be enforceable by, each Indemnitee, his or her heirs and his or her Representatives and (ii) in addition to, and not in substitution for, any other rights to indemnification or contribution that any such individual may have under the Company Organizational Documents, by Contract or otherwise. The obligations of Parent and the Surviving Company under this Section 5.08 shall not be terminated or modified in such a manner as to adversely affect the rights of any Indemnitee to whom this Section 5.08 applies unless (x) such termination or modification is required by applicable Law or (y) the affected Indemnitee shall have consented in writing to such termination or modification (it being expressly agreed that the Indemnitees to whom this Section 5.08 applies shall be third-party beneficiaries of this Section 5.08).
(e) In the event that Parent, the Surviving Company or any of their respective successors or assigns (i) consolidates or amalgamates with or merges into any other Person and is not the continuing or surviving company or entity of such consolidation, amalgamation or merger or (ii) transfers or conveys 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 Company shall assume all of the obligations thereof set forth in this Section 5.08.
(f) Nothing in this Agreement is intended to, shall be construed to or shall release, waive or impair any rights to directors’ and officers’ insurance claims under any policy that is or has been in existence with respect to the Company or any of its Subsidiaries for any of their respective directors, officers or other employees, it being understood and agreed that the indemnification provided for in this Section 5.08 is not prior to or in substitution for any such claims under such policies.
Section 5.09 Rule 16b-3. Prior to the Effective Time, the Company shall be permitted to take such steps as may be reasonably necessary or advisable to cause dispositions of Company equity securities (including derivative securities) pursuant to the Transactions by each individual who is a director or officer of the Company subject to Section 16 of the Exchange Act to be exempt under Rule 16b-3 promulgated under the Exchange Act.
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Section 5.10 Employee Matters.
(a) For a period beginning at the Effective Time (or, for individuals who are not actively employed as of immediately prior to the Effective Time due to disability or other approved leave, the date such individual presents for active employment) and ending on the one (1) year anniversary thereof (the “Continuation Period”), Parent shall provide, or shall cause its applicable Subsidiaries to provide, each individual who continues to be employed by the Company or any of its Affiliates (including Parent and any of its Subsidiaries) following the Effective Time (each, a “Company Employee”) with (i) base salary, wages and target annual or quarterly cash incentive opportunities that are each no less favorable than the base salary, wages and target annual or quarterly cash incentive opportunities provided to such Company Employee by the Company and any of its Subsidiaries immediately prior to the Effective Time, (ii) long-term incentive opportunities for Company Employees who were eligible for a long-term incentive opportunity under a Company Plan immediately prior to the Effective Time, (iii) employee benefits (other than long-term incentive opportunities) that are substantially comparable in the aggregate to those provided to similarly situated employees of Parent and its Subsidiaries (other than the Company and any of its Subsidiaries) from time to time, and (iv) severance benefits determined using a formula that is no less favorable than the greater of (A) the severance formula applicable to such Company Employee by the Company or any of its Subsidiaries immediately prior to the Effective Time and (B) the severance formula applicable to similarly situated employee of Parent and its Subsidiaries. For a period beginning at the Effective Time and ending on December 31, 2019, Parent shall, or its applicable Subsidiaries shall, ensure that the premium cost for Company Employees in the aggregate of Company sponsored medical, dental and vision coverage is not materially greater than the premium cost for Company Employees in the aggregate of employer-sponsored medical, dental and vision immediately prior to the Effective Time. Prior to the Effective Time, the Company shall, and shall cause all of its Affiliates to, adopt such resolutions and amendments, and use commercially reasonable efforts to take all such other actions as may be required or desirable, to provide that each Company Plan and any other employee benefit plan, program, policy or arrangement (other than any Foreign Plans and except as provided in Section 5.10(b)) shall terminate effective as of immediately prior to the Effective Time and in each case, conditioned upon the Closing; provided, however, that, notwithstanding the foregoing, the Company shall, irrevocably take all actions required to terminate and liquidate The Navigators Group, Inc. Non-Qualified Deferred Compensation Plan in accordance with the terms of the Plan and the provisions of Treas. Reg. § 1.409A-3(j)(4)(ix) immediately prior to the Effective Time and to terminate each Qualified Plan effective as of the day immediately prior to the Closing Date, in each case conditioned upon the Closing.
(b) Without limiting the generality of Section 5.10(a), from and after the Effective Time, Parent shall, or shall cause its Subsidiaries to, assume and honor in accordance with their terms (including any amendment and termination provisions thereof), any Company Plan that is an employment agreement or a retention plan or program maintained by the Company or any of its Subsidiaries, in each case, as in effect as of the date of this Agreement and listed on Section 5.10(b) of the Company Disclosure Letter.
(c) With respect to any accrued but unused paid time off to which any Company Employee is entitled pursuant to the paid time off policy or individual agreement or other arrangement applicable to such Company Employee immediately prior to the Effective Time (the “PTO Policy”), and as made available to Parent pursuant to Section 5.10(h), Parent
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shall, or shall cause its Subsidiaries to, (i) allow such Company Employee to use such accrued paid time off consistent with the PTO Policy for use of paid time off, (ii) if any Company Employee’s employment involuntarily terminates or the Company Employee retires during the Continuation Period, pay the Company Employee, in cash, an amount equal to the value of the accrued unused paid time off, to the same extent that the Company Employee would have received a cash payment therefor under the PTO Policy immediately prior to the Effective Time had his or her employment terminated immediately prior to the Effective Time, and (iii) if any Company Employee voluntarily terminates employment or is terminated for Cause (as that term is defined in the Hartford Severance Pay Plan) during the Continuation Period, pay the Company Employee in cash, an amount equal to no greater than the value of up to forty (40) hours of accrued but unused paid time off (except to the extent required by applicable law).
(d) With respect to all employee benefit plans of Parent and its Subsidiaries providing any benefits to any Company Employee after the Effective Time, including any “employee benefit plan” (as defined in Section 3(3) of ERISA) (including any paid time off and severance plans), for purposes of determining eligibility to participate, level of benefits, and vesting (and excluding benefit accruals and early retirement subsidies under any defined benefit pension plan and eligibility for post-retirement welfare benefits), each Company Employee’s service with the Company or any of its Subsidiaries (as well as service with any predecessor employer of the Company or any such Subsidiary, to the extent service with the predecessor employer was recognized by the Company or such Subsidiary for a similar purpose) as made available to Parent pursuant to Section 3.11(e) shall be treated as service with the Parent and its Subsidiaries; provided, that such service need not be recognized to the extent that such recognition would result in any duplication of benefits or compensation for the same period of service.
(e) Parent shall, or shall cause its Subsidiaries to, use reasonable best efforts to, waive, or cause to be waived, any pre-existing condition limitations, exclusions, “actively at work” requirements and waiting periods under any welfare benefit plan maintained by Parent or any of its Subsidiaries in which Company Employees (and their eligible dependents) will be eligible to participate from and after the Effective Time, except to the extent that such pre-existing condition limitations, exclusions, “actively at work” requirements and waiting periods would not have been satisfied or waived under the comparable Company Plan immediately prior to the Effective Time. Parent shall, or shall cause its Subsidiaries to, use reasonable best efforts to, recognize the dollar amount of all co-payments, deductibles and similar expenses incurred by each Company Employee (and his or her eligible dependents) during the calendar year in which the Effective Time occurs for purposes of satisfying such year’s deductible and co-payment limitations under the relevant welfare benefit plans in which they will be eligible to participate from and after the Effective Time and to credit each Company Employee under a cafeteria plan (within the meaning of section 125 of the Code) maintained by Parent or its Subsidiaries with an amount equal to such Company Employee’s balance (positive or negative) under the health care flexible spending account and/or dependent care spending account under the cafeteria plan maintained by the Company immediately prior to the Effective Time; provided that, in each case, the Company provides Parent with all information reasonably requested by Parent, in the electronic format reasonably requested by Parent, in order for Parent to comply with the foregoing.
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(f) Each Company Employee who participates in the Company Annual Incentive Plan in respect of the Company’s fiscal year 2018 shall be eligible for a payment no less than that due with respect to such Company Employee’s annual bonus under such plan in accordance with the terms thereof calculated based on actual performance for such period (or, if the Effective Time occurs prior to the end of such period, based on actual performance from January 1, 2018 through the Effective Time, without proration for the portion of the period after the Effective Time), provided and to the extent that the Company shall have fully accrued therefor as of the Effective Time. If the Effective Time occurs on or after January 1, 2019, each Company Employee who, immediately prior to the Effective Time, participates in the Company Annual Incentive Plan in respect of the Company’s fiscal year 2019, shall (i) be eligible for a payment no less than that due with respect to such Company Employee’s annual bonus under such plan in accordance with the terms thereof calculated based on actual performance as of the Effective Time and prorated for the portion for the period of time from the beginning of the performance period to the Effective Time, provided and to the extent that the Company shall have fully accrued therefor as of the Effective Time, and (ii) after the Effective Time, participate in an annual incentive plan maintained by Parent, subject to the terms of Section 5.10(a).
(g) The provisions of this Section 5.10 are solely for the benefit of the parties to this Agreement, and no provision of this Section 5.10 is intended to, or shall, (i) constitute the establishment or adoption of or an amendment to any employee benefit plan for purposes of ERISA or otherwise, (ii) require Parent, the Surviving Company or any of their respective Subsidiaries to continue any Company Plan beyond the time when it otherwise lawfully could be terminated or modified, (iii) restrict Parent, the Surviving Company or any of their respective Subsidiaries from amending or modifying any Company Plan in accordance with its terms and applicable Law, or (iv) provide any employee with any rights to continued employment. No current or former employee or any other individual associated therewith shall be regarded for any purpose as a third party beneficiary of this Agreement or have the right to enforce the provisions hereof.
(h) Between the date of this Agreement and prior to the Effective Time, the Company shall use reasonable best efforts to provide Parent with information and access to information as reasonably requested by Parent to enable Parent and its Affiliates to onboard each Company Employee for purposes of payroll and benefits in accordance with the provisions of this Section 5.10.
(i) All references in this Section 5.10 to the Effective Time shall be deemed to refer to 12:01 a.m. as of the day on which the Effective Time occurs.
Section 5.11 Notification of Certain Matters; Stockholder Litigation. Prior to the Effective Time, Parent shall give prompt notice to the Company, and the Company shall give prompt notice to Parent, of any Actions commenced or, to such party’s Knowledge, threatened against such party which relates to this Agreement or the Transactions. Subject to applicable Law, each party shall give the other party the opportunity to participate, at such other party’s sole cost and expense, in the defense and settlement of any litigation by any stockholder of the Company against the first party or its directors relating to this Agreement or the Transactions, and no such settlement shall be agreed to without the prior written consent of Parent (which consent shall be subject to Parent’s sole discretion).
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Section 5.12 Stock Exchange De-listing. Parent and the Company shall use their respective reasonable best efforts to cause the Company’s securities to be de-listed from the NASDAQ Global Select Market and de-registered under the Exchange Act as soon as reasonably practicable following the Effective Time.
Section 5.13 Delivery of Fairness Opinions.
(a) As promptly as practicable after the date of this Agreement (but, in any event, no later than two (2) business days after the date hereof), the Company shall furnish to Parent, for informational purposes only, a true and complete copy of the opinion of Moelis described in Section 3.23.
(b) As promptly as practicable after the date of this Agreement (but, in any event, no later than the date that the section of the preliminary Proxy Statement describing the opinion of Goldman Sachs described in Section 3.23 is provided to Parent for its review pursuant to the last sentence of Section 5.03(a)), the Company shall furnish to Parent, for informational purposes only, a true and complete copy of the opinion of Goldman Sachs described in Section 3.23.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Conditions to Each Party’s Obligation To Effect the Merger. The respective obligations of the Company, Parent and Merger Sub to effect the Merger shall be subject to the satisfaction (or waiver, if permissible under applicable Law) at or prior to the Closing of the following conditions:
(a) Company Stockholder Approval. The Company Stockholder Approval shall have been obtained.
(b) Other Approvals. (i) Any waiting period (or extension thereof) applicable to the Transactions under the HSR Act shall have been terminated or shall have expired and (ii) the Consents of, or declarations, notifications or filings with, and the other terminations or expirations of waiting periods required from, the Governmental Authorities set forth in Section 6.01(b) of the Company Disclosure Letter shall have been filed, have occurred or been obtained (with respect to Parent’s and Merger Sub’s obligations only, without imposition of a Parent Burdensome Condition) (clauses (i) and (ii), collectively, the “Required Regulatory Approvals”), and all such Required Regulatory Approvals shall be in full force and effect.
(c) No Injunctions or Restraints. No injunction, judgment or ruling enacted, promulgated, issued, entered, amended or enforced by any Governmental Authority (collectively, “Restraints”) shall be in effect enjoining, restraining or otherwise making illegal or prohibiting consummation of the Merger.
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Section 6.02 Conditions to Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to effect the Merger are further subject to the satisfaction (or waiver, if permissible under applicable Law) on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and warranties of the Company (i) set forth in Section 3.06(b) shall be true and correct in all respects as of the date of this Agreement and as of the Closing Date as though made as of the Closing Date, (ii) set forth in Section 3.02(a) shall be true and correct in all respects other than de minimis inaccuracies therein, (iii) set forth in Section 3.02(b), Section 3.03(a), Section 3.03(b), Section 3.03(d), Section 3.14 and Section 3.24 shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date with the same effect as though made as of the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such date) and (iv) set forth in this Agreement, other than those Sections specifically identified in clause (i), (ii) or (iii) of this Section 6.02(a), shall be true and correct (disregarding all qualifications or limitations as to “materiality”, “Material Adverse Effect” and words of similar import set forth therein) as of the date of this Agreement and as of the Closing Date with the same effect as though made as of the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such date), except, in the case of this clause (iv), where the failure to be true and correct has not had or would not reasonably be expected to have a Material Adverse Effect. Parent shall have received a certificate signed on behalf of the Company by an executive officer of the Company to such effect.
(b) Performance of Obligations and Agreements of the Company. The Company shall have performed or complied in all material respects with the obligations and agreements required to be performed or complied with by it under this Agreement at or prior to the Effective Time, and Parent shall have received a certificate signed on behalf of the Company by an executive officer of the Company to such effect.
Section 6.03 Conditions to Obligations of the Company. The obligations of the Company to effect the Merger are further subject to the satisfaction (or waiver, if permissible under applicable Law) on or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and warranties of Parent and Merger Sub (i) set forth in Section 4.02(a), Section 4.02(b) and Section 4.07 shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date with the same effect as though made as of the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such date) and (ii) set forth in this Agreement, other than those Sections specifically identified in clause (i) of this Section 6.03(a), shall be true and correct (disregarding all qualifications or limitations as to “materiality”, “Parent Material Adverse Effect” and words of similar import set forth therein) as of the date of this Agreement and as of the Closing Date with the same effect as though made as of the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such date), except, in the case of this clause (ii), where the failure to be true and correct has not had or would not reasonably be expected to have a Parent Material Adverse Effect. The Company shall have received a certificate signed on behalf of Parent and Merger Sub by an executive officer of Parent to such effect.
(b) Performance of Obligations and Agreements of Parent and Merger Sub. Parent and Merger Sub shall have performed or complied in all material respects with the obligations and agreements required to be performed or complied with by them under this Agreement at or prior to the Effective Time, and the Company shall have received a certificate signed on behalf of Parent and Merger Sub by an executive officer of Parent to such effect.
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Section 6.04 Frustration of Closing Conditions. The Company may not rely on the failure of any condition set forth in Section 6.01 or Section 6.03 to be satisfied if the failure of the Company to perform in all material respects any of its obligations under this Agreement, including to use its reasonable best efforts to consummate the Transactions as required by and subject to the terms and conditions of this Agreement, was a principal cause of or resulted in the failure of such condition to be satisfied. Neither Parent nor Merger Sub may rely on the failure of any condition set forth in Section 6.01 or Section 6.02 to be satisfied if the failure of Parent or Merger Sub to perform in all material respects any of its obligations under this Agreement, including to use its reasonable best efforts to consummate the Transactions as required by and subject to the terms and conditions of this Agreement, was a principal cause of or resulted in the failure of such condition to be satisfied.
ARTICLE VII
TERMINATION
Section 7.01 Termination. This Agreement may be terminated and the Transactions abandoned at any time prior to the Effective Time, whether before or after receipt of the Company Stockholder Approval (except as otherwise expressly noted):
(a) by the mutual written consent of the Company and Parent duly authorized by each of the Company Board and the Parent Board;
(b) by either of the Company or Parent:
(i) if the Merger shall not have been consummated on or before May 1, 2019 (as such date may be extended pursuant the first proviso to this Section 7.01(b)(i) and, if applicable, Section 8.08, the “Walk-Away Date”); provided, that if on such date the condition precedent to the consummation of the Merger and the other Transactions contemplated hereby set forth in Section 6.01(b) shall not have been satisfied but all other conditions precedent to the consummation of the Merger and the other Transactions contemplated hereby have been satisfied (or in the case of conditions that by their terms are to be satisfied at the Closing are capable of being satisfied on that date), then the Walk-Away Date shall automatically be extended to July 1, 2019; provided, further, that the right to terminate this Agreement pursuant to this Section 7.01(b)(i) shall not be available to any party if the breach in any material respect by such party of its representations and warranties set forth in this Agreement or the failure in any material respect of such party to perform any of its obligations under this Agreement, including to use its reasonable best efforts to consummate the Transactions as required by and subject to the terms and conditions of this Agreement, has been a principal cause of or resulted in the failure of the Merger to be consummated on or before such date (it being understood that Parent and Merger Sub shall be deemed a single party for purposes of the foregoing proviso);
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(ii) if any Restraint having the effect set forth in Section 6.01(c) shall be in effect and shall have become final and nonappealable; provided that the party seeking to terminate this Agreement pursuant to this Section 7.01(b)(ii) shall have performed in all material respects its obligations under this Agreement, including to use its reasonable best efforts to prevent the entry of and to remove such Restraint in accordance with its obligations under this Agreement; or
(iii) if the Company Stockholder Approval shall not have been obtained at the Company Stockholders Meeting duly convened therefor or at any adjournment or postponement thereof;
(c) by Parent:
(i) if the Company shall have breached any of its representations or warranties or failed to perform any of its covenants or agreements set forth in this Agreement (other than as addressed in Section 7.01(c)(ii)), which breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 6.02(a) or Section 6.02(b) and (B) is incapable of being cured prior to the Walk-Away Date, or if capable of being cured, has not been cured by the Company within thirty (30) days after the Company’s receipt of written notice of such breach or failure to perform from Parent stating Parent’s intention to terminate this Agreement pursuant to this Section 7.01(c)(i) and the basis for such termination (or in any event has not been cured by the Walk-Away Date); provided that Parent shall not have the right to terminate this Agreement pursuant to this Section 7.01(c)(i) if Parent or Merger Sub is then in material breach of any of its representations, warranties, covenants or agreements hereunder; or
(ii) prior to receipt of the Company Stockholder Approval, if (A) the Company Board makes or publicly proposes to make an Adverse Recommendation Change or (B) there shall have occurred any material Willful Breach of Section 5.02 or Section 5.03; or
(d) by the Company:
(i) if Parent or Merger Sub shall have breached any of its representations or warranties or failed to perform any of its covenants or agreements set forth in this Agreement, which breach or failure to perform (A) would give rise to the failure of a condition set forth in Section 6.03(a) or Section 6.03(b) and (B) is incapable of being cured prior to the Walk-Away Date, or if capable of being cured, has not been cured by Parent or Merger Sub within thirty (30) days after Parent’s receipt of written notice of such breach or failure to perform from the Company stating the Company’s intention to terminate this Agreement pursuant to this Section 7.01(d)(i) and the basis for such termination (or in any event has not been cured by the Walk-Away Date); provided that the Company shall not have the right to terminate this Agreement pursuant to this Section 7.01(d)(i) if the Company is then in material breach of any of its representations, warranties, covenants or agreements hereunder; or
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(ii) prior to receipt of the Company Stockholder Approval in connection with entering into a Company Acquisition Agreement in accordance with clause (ii)(B) of Section 5.02(f); provided that prior to or simultaneously with such termination the Company pays the amounts due under Section 7.03 in accordance with the terms thereof.
Section 7.02 Effect of Termination. In the event of the termination of this Agreement as provided in Section 7.01, written notice thereof shall be given to the other party or parties hereto, specifying the provision hereof pursuant to which such termination is made, and this Agreement shall forthwith become null and void (other than this Section 7.02, Section 7.03, ARTICLE VIII, the Confidentiality Agreement and the last sentence of Section 5.07, all of which shall survive termination of this Agreement), and there shall be no liability on the part of Parent, Merger Sub, the Company or their respective directors, officers and Affiliates, except (a) as liability may exist pursuant to the provisions specified in the immediately preceding parenthetical that survive such termination and (b) that no such termination shall relieve any party from liability for any Willful Breach by such party of any representation, warranty, covenant or agreement set forth in this Agreement or fraud; provided that if either party receives any payments for damages pursuant to this Section 7.02 from another party in respect of any such Willful Breach and also receives any payment pursuant to Section 7.03, the amount of such payments for damages made by the applicable party in respect of any such Willful Breach shall be reduced by the amount of such payment pursuant to Section 7.03.
Section 7.03 Termination Fee.
(a) The Company shall pay to Parent a nonrefundable fee of $68,250,000 in the event that:
(i) (A)(1) a bona fide Acquisition Proposal shall have been publicly made or proposed after the date of this Agreement and not withdrawn at least three (3) business days prior to the Company Stockholders Meeting in the case of a termination pursuant to Section 7.01(b)(iii) or (2) a bona fide Acquisition Proposal shall have been publicly made or proposed or otherwise made to the Company or the Company Board after the date of this Agreement and not withdrawn at least three (3) business days prior to the termination date in the case of a termination pursuant to Section 7.01(b)(i) or Section 7.01(c)(i), (B) following the occurrence of an event described in the preceding clause (A), this Agreement is terminated by the Company or Parent pursuant to Section 7.01(b)(i) (at a time when the conditions set forth in Section 6.01(b) have been satisfied but the Company Stockholder Approval has not been obtained) or Section 7.01(b)(iii) or by Parent pursuant to Section 7.01(c)(i) and (C) within twelve (12) months of the date this Agreement is terminated, the Company consummates any Acquisition Proposal or enters into a definitive agreement with respect to any Acquisition Proposal that is thereafter consummated; provided that for purposes of clause (C) of this Section 7.03(a)(i), the references to “15%” in the definition of Acquisition Proposal shall be deemed to be references to “50%”;
(ii) this Agreement is terminated by the Company pursuant to Section 7.01(d)(ii); or
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(iii) this Agreement is terminated by Parent pursuant to Section 7.01(c)(ii);
provided, that in the event this Agreement is terminated by either Parent under Section 7.01(c)(ii)(A) following an Adverse Recommendation Change in response to a Superior Proposal or the Company under Section 7.01(d)(ii), in either case, prior to the end of the Go-Shop Period or in connection with entering into a Company Acquisition Agreement with an Excluded Party, the nonrefundable fee payable by the Company pursuant to this Section 7.03(a) shall instead be an amount equal to $42,000,000. The Company shall pay any fee due under this Section 7.03(a) (the “Company Termination Fee”) to Parent or its designee by wire transfer of same-day funds (x) in the case of Section 7.03(a)(iii), within two (2) business days after such termination, (y) in the case of Section 7.03(a)(ii), prior to or simultaneously with such termination or (z) in the case of Section 7.03(a)(i), two (2) business days after the consummation of such Acquisition Proposal; it being understood that in no event shall the Company be required to pay the Company Termination Fee more than once.
(b) In the event that this Agreement is terminated by the Company or Parent pursuant to Section 7.01(b)(iii), then the Company shall pay to Parent Parent’s Expenses by wire transfer of same-day funds within two (2) business days after such termination, it being understood that in no event shall the payment for Expenses under this Section 7.03(b) exceed $7,000,000 (the “Expense Cap Amount”); provided that in the event that the Company Termination Fee shall become payable pursuant to Section 7.03(a), any amount previously paid by the Company pursuant to this Section 7.03(b) shall be credited against the amount of the Company Termination Fee due pursuant to Section 7.03(a).
(c) In the event that Parent or its designee shall receive full payment of the Company Termination Fee pursuant to Section 7.01(a), together with any reimbursement of applicable expenses pursuant to Section 7.03(b), the receipt of the Company Termination Fee and the expenses referred to in Section 7.03(b) shall be, except as provided in Section 7.02, the sole and exclusive remedy for any and all losses or damages suffered or incurred by Parent, Merger Sub, any of their respective Affiliates or any other Person in connection with this Agreement (and the termination hereof), the Transactions (and the abandonment thereof) or any matter forming the basis for such termination. Except as provided in Section 7.02, upon payment by the Company of the Company Termination Fee and, if applicable, the reimbursement of such expenses, neither the Company nor any of its Affiliates shall have any further liability or obligation (under this Agreement or otherwise) relating to or arising out of this Agreement or any of the Transactions, and none of Parent, Merger Sub, any of their respective Affiliates or any other Person shall be entitled to bring or maintain any Action against the Company or any of its Subsidiaries or any of their respective former, current or future officers, directors, partners, stockholders, managers, members or Affiliates arising out of or in connection with this Agreement, any of the Transactions or any matters forming the basis for such termination.
(d) Each of the parties hereto acknowledges that the agreements contained in this Section 7.03 are an integral part of the Transactions, and that without these agreements, the other parties hereto would not enter into this Agreement; accordingly, if the Company or Parent, as applicable fails to timely pay any amount due pursuant to this Section 7.03, and, in order to obtain the payment, the other party commences an Action which results in a judgment against the
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first party for the payment set forth in this Section 7.03, the first party shall pay the other party for its reasonable and documented costs and expenses (including reasonable and documented attorneys’ fees) in connection with such Action, together with interest on such amount at the prime rate as published in The Wall Street Journal in effect on the date such payment was required to be made through the date such payment was actually received.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 No Survival of Representations and Warranties. This ARTICLE VIII and the agreements of the Company, Parent and Merger Sub contained in ARTICLE II and in Section 5.08 and Section 5.10 shall survive the Effective Time. No other representations, warranties, obligations or agreements in this Agreement shall survive the Effective Time.
Section 8.02 Amendment or Supplement. At any time prior to the Effective Time, this Agreement may be amended or supplemented in any and all respects, whether before or after receipt of the Company Stockholder Approval, only by written agreement of the parties hereto, approved by the Parent Board and the Company Board; provided, that following receipt of the Company Stockholder Approval, there shall be no amendment or change to the provisions hereof which by applicable Law would require further approval by the holders of Company Shares without such approval.
Section 8.03 Extension of Time, Waiver, Etc.. At any time prior to the Effective Time, Parent and the Company may, subject to applicable Law, (a) waive any inaccuracies in the representations and warranties of the other party, (b) extend the time for the performance of any of the obligations or acts of the other party or (c) subject to the requirements of applicable Law, waive compliance by the other party with any of the agreements contained herein or, except as otherwise provided herein, waive any of such party’s conditions (it being understood that Parent and Merger Sub shall be deemed a single party for purposes of the foregoing). Notwithstanding the immediately preceding sentence, no failure or delay by the Company, Parent or Merger Sub in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.
Section 8.04 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of Law or otherwise, by any of the parties hereto without the prior written consent of the other parties hereto. No assignment by any party shall relieve such party of any of its obligations hereunder. Subject to the immediately preceding two sentences, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns. Any purported assignment not permitted under this Section 8.04 shall be null and void.
Section 8.05 Counterparts. This Agreement may be executed in one or more counterparts (including by facsimile or electronic mail), each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties hereto.
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Section 8.06 Entire Agreement; No Third-Party Beneficiaries. This Agreement, together with any Exhibits and Schedules attached hereto, the Company Disclosure Letter, the Parent Disclosure Letter, the Confidentiality Agreement and the Voting Agreement (a) constitute the entire agreement, and supersede all other prior agreements and understandings, both written and oral, among the parties hereto and their Affiliates, or any of them, with respect to the subject matter hereof and thereof, and (b) are not intended to and shall not confer upon any Person other than the parties hereto any rights or remedies hereunder, except for: (i) if the Effective Time occurs, (A) the right of the holders of Company Shares to receive the Merger Consideration payable in accordance with Section 2.01 and Section 2.02 and (B) the right of the holders of Company Awards as set forth in Section 2.03 and Section 2.04, and (ii) the provisions set forth in Section 5.08 of this Agreement. Notwithstanding the foregoing, the Company shall have the right to seek on behalf of the holders of Company Shares and Company Awards, through an Action brought by the Company, damages from Parent in the event of a breach of this Agreement by Parent in respect of amounts that would have been recoverable by such holders under the circumstances of the applicable breach if all such holders brought an action against Parent and were recognized as third party beneficiaries hereunder. The representations and warranties in this Agreement are the product of negotiations among the parties. Any inaccuracies in such representations and warranties are subject to waiver by the parties in accordance with Section 8.03 without notice or liability to any other Person. Persons other than the parties may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.
Section 8.07 Governing Law; Jurisdiction.
(a) This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware applicable to Contracts executed in and to be performed entirely within that state, regardless of the Laws that might otherwise govern under any applicable conflict of Laws principles.
(b) All Actions arising out of or relating to the interpretation and enforcement of the provisions of this Agreement and in respect of the Transactions shall be heard and determined in the Delaware Court of Chancery, or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any federal court within the State of Delaware, or, if both the Delaware Court of Chancery and the federal courts within the State of Delaware decline to accept jurisdiction over a particular matter, any other state court within the State of Delaware, and, in each case, any appellate court therefrom. The parties hereto hereby irrevocably submit to the exclusive jurisdiction and venue of such courts in any such Actions and irrevocably waive the defense of an inconvenient forum or lack of jurisdiction to the maintenance of any such Action. The consents to jurisdiction and venue set forth in this Section 8.07(b) shall not constitute general consents to service of process in the State of Delaware and shall have no effect for any purpose except as provided in this paragraph and shall not be deemed to confer rights on any Person other than the parties hereto. Each party hereto agrees that service of process upon such party in any Action arising out of or relating to this Agreement shall be
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effective if notice is given by overnight courier at the address set forth in Section 8.11 of this Agreement. The parties hereto agree that a final judgment in any such Action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Law; provided, that nothing contained in the foregoing shall restrict any party’s rights to seek any post-judgment relief regarding, or any appeal from, a final trial court judgment.
Section 8.08 Specific Enforcement. The parties hereto agree that irreparable damage for which monetary relief, even if available, would not be an adequate remedy, would occur in the event that any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached, including if the parties hereto fail to take any action required of them hereunder to consummate this Agreement, subject to the terms and conditions of this Agreement. The parties acknowledge and agree that (a) the parties shall be entitled to an injunction or injunctions, specific performance or other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof (including, for the avoidance of doubt, the right of the Company to cause the Merger to be consummated on the terms and subject to the conditions set forth in this Agreement) in the courts described in Section 8.07(b) without proof of damages or otherwise, this being in addition to any other remedy to which they are entitled under this Agreement and (b) the right of specific enforcement is an integral part of the Transactions and without that right, neither the Company nor Parent would have entered into this Agreement. The parties hereto agree not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to Law or inequitable for any reason, and not to assert that a remedy of monetary damages would provide an adequate remedy or that the parties otherwise have an adequate remedy at law. The parties hereto acknowledge and agree that any party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Section 8.08 shall not be required to provide any bond or other security in connection with any such order or injunction. If, prior to the Walk-Away Date, any party hereto brings any Action, in each case, in accordance with this Section 8.08, to enforce specifically the performance of the terms and provisions hereof by any other party, the Walk-Away Date shall automatically be extended (x) for the period during which such Action is pending, plus ten (10) business days or (y) by such other time period established by the court presiding over such Action, as the case may be.
Section 8.09 WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (C) IT MAKES SUCH WAIVER VOLUNTARILY AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 8.09.
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Section 8.10 Remedies. Except as otherwise provided in this Agreement, any and all remedies expressly conferred upon a party to this Agreement shall be cumulative with, and not exclusive of, any other remedy contained in this Agreement, at law or in equity. The exercise by a party to this Agreement of any one remedy shall not preclude the exercise by it of any other remedy.
Section 8.11 Notices. All notices, requests and other communications to any party hereunder shall be in writing and shall be deemed given if delivered personally, facsimiled (which is confirmed), emailed (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses:
| If to Parent or Merger Sub, to: | ||||
| The Hartford Financial Services Group, Inc. | ||||
| One Hartford Plaza | ||||
| Hartford, CT 06155 | ||||
| Attention: |
Chief Financial Officer, General Counsel | |||
| Facsimile: |
855-388-6397 | |||
| Email: |
beth.bombara@thehartford.com david.robinson@thehartford.com mergers@thehartford.com | |||
| with a copy (which shall not constitute notice) to: | ||||
| Mayer Brown LLP | ||||
| 1221 Avenue of the Americas | ||||
| New York, NY 10020 | ||||
| Attention: |
Stephen G. Rooney | |||
| Andrew J. Noreuil | ||||
| Facsimile: |
212-849-5632 | |||
| 312-706-8183 | ||||
| Email: |
srooney@mayerbrown.com | |||
| anoreuil@mayerbrown.com | ||||
| If to the Company, to: | ||||
| The Navigators Group, Inc. | ||||
| 400 Atlantic Street, 8th Floor | ||||
| Stamford, CT 06901 | ||||
| Attention: |
Emily B. Miner | |||
| SVP & General Counsel | ||||
| Facsimile: |
203-658-1825 | |||
| Email: |
eminer@navg.com | |||
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| with copies (which shall not constitute notice) to: | ||||
| Sidley Austin LLP | ||||
| 787 Seventh Avenue | ||||
| New York, NY 10019 | ||||
| Attention: |
Michael A. Gordon | |||
| Kirk Lipsey | ||||
| Gabriel Saltarelli | ||||
| Facsimile: |
212-839-5599 | |||
| Email: |
mgordon@sidley.com klipsey@sidley.com gsaltarelli@sidley.com | |||
or such other address, email address or facsimile number as such party may hereafter specify by like notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of actual receipt by the recipient thereof if received prior to 5:00 p.m. local time in the place of receipt and such day is a business day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding business day in the place of receipt.
Section 8.12 Severability. If any term, condition or other provision of this Agreement is finally determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any applicable Law or public policy, all other terms, provisions and conditions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party or such party waives its rights under this Section 8.12 with respect thereto. Upon such determination that any term, condition or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate to attempt to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable manner to the end that the Transactions are fulfilled to the extent possible.
Section 8.13 Definitions.
(a) As used in this Agreement, the following terms have the meanings ascribed thereto below:
“Action” means legal actions, causes of action, claims, demands, controversies, disputes, arbitrations, hearings, charges, complaints, investigations, examinations, indictments, litigations, suits or other civil, criminal, administrative or investigative proceedings.
“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, or is controlled by, or is under common control with, such Person. For this purpose, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by Contract or otherwise.
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“Antitrust Laws” means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, all applicable non-U.S. antitrust or competition Laws and all other applicable Laws issued by a Governmental Authority that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition.
“Applicable SAP” means, with respect to any Company Insurance Subsidiary, the applicable statutory accounting principles (or local equivalents in the applicable jurisdiction) prescribed or permitted by the applicable Insurance Regulator under the Insurance Law of such Company Insurance Subsidiary’s domiciliary jurisdiction, including, where applicable, the requirements of the Insurance Accounts Directive (Lloyd’s Syndicate and Aggregate Accounts) Regulations 2008 and the Syndicate Accounting Byelaw (No. 8 of 2005).
“Appraisal Shares” means Company Shares held by a holder of Company Shares who (a) did not vote in favor of the Merger, (b) complied with all of the provisions of the DGCL concerning the right of holders of Company Shares to require appraisal of their Company Shares pursuant to the DGCL and (c) did not fail to exercise such right to appraisal or deliver an Appraisal Withdrawal.
“Australian Credit Facility” means the Letter of Credit Facility, dated November 2, 2016, as amended, by and between Navigators Underwriting Agency Limited and Barclays Bank PLC.
“Bail Bond Facility” means the Bail Bond Facility, dated February 22, 2012, as amended, by and between Navigators Insurance Company and ING Bank N.V., London Branch.
“Bilateral Facility” means the Funds at Lloyd’s Letter of Credit Agreement, dated as of November 20, 2015, as amended on November 7, 2016, by and between the Company and ING Bank N.V., London Branch.
“business day” means a day except a Saturday, a Sunday or other day on which the SEC or banks in the City of New York are authorized or required by Law to be closed.
“Club Facility” means the Third Amended and Restated Funds at Lloyd’s Letter of Credit Agreement, dated as of November 7, 2016, by and among the Company, the lenders named therein and ING Bank N.V., London Branch, as Administrative Agent and Letter of Credit Agent.
“Company Annual Incentive Plan” means the Company’s Annual Incentive Plan.
“Company Award” means each 2019 Vesting Company Award, each 2020 Vesting Company Award, each 2019 Company New Award, each Company Restricted Share, and each Cash Award that was granted under the Company Stock Plan and that is outstanding immediately prior to the Effective Time.
“Company By-Laws” means the Company’s Amended and Restated By-Laws, as amended to the date of this Agreement.
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“Company Charter” means the Company’s Certificate of Incorporation, as amended to the date of this Agreement.
“Company Lease” means any lease, sublease, sub-sublease, license and other agreement under which the Company or any of its Subsidiaries leases, subleases, licenses, uses or occupies (in each case whether as landlord, tenant, sublandlord, subtenant or by other occupancy arrangement), or has the right to use or occupy, now or in the future, any Real Property.
“Company Organizational Documents” means the Company Charter and the Company By-Laws.
“Company Pension Plan” means a Company Plan that is an employee pension benefit plan within the meaning of Section 3(2) of ERISA.
“Company Plan” means each plan, program, policy, agreement or other arrangement that is (i) an employee welfare plan within the meaning of Section 3(1) of ERISA, (ii) an employee pension benefit plan within the meaning of Section 3(2) of ERISA, (iii) a share option, share purchase, share appreciation right or other share-based compensation agreement, program or plan, (iv) an individual employment, consulting, severance, retention, change-in-control or other similar agreement between such Person and the Company or any of its Subsidiaries or (v) a bonus, incentive, deferred compensation, profit-sharing, retirement, post-retirement, paid time off, severance or termination pay, benefit or fringe-benefit plan, program, policy, agreement or other arrangement, in each case, that is (A) sponsored, maintained or contributed to by the Company or any of its Subsidiaries (or to which the Company or any of its Subsidiaries is obligated to contribute to) and (B) for the benefit of current or former directors, officers, employees or independent contractors of the Company or any of its Subsidiaries, but excluding in each case, any such plan, program, policy, agreement or other arrangement required by applicable Law, sponsored by a Governmental Authority, that is a Foreign Plan or that is a “multiemployer plan” (within the meaning of Section 3(37) of ERISA).
“Company Stock Plan” means The Navigators Group, Inc. Second Amended and Restated 2005 Stock Incentive Plan, as may be amended or restated from time to time.
“Company Stock Purchase Plan” means The Navigators Group, Inc. Amended and Restated Employee Stock Purchase Plan.
“Consent” means any consent, waiver, approval, license, Permit, order, non-objection or authorization.
“Contract” means any loan or credit agreement, debenture, note, bond, mortgage, indenture, deed of trust, lease, sublease, license, contract or other agreement.
“Council” means the Council of Lloyd’s as constituted by the Lloyd’s Act 1982, including its delegates and persons by whom it acts.
“Environmental Law” means any Law regulating or relating to the protection of human health from exposure to any chemical substance, natural resource damages or the protection of the environment, including Laws relating to the protection of wetlands, pollution or the use, generation, management, handling, “transport”, “treatment”, “disposal”, “storage”, or “release” of “hazardous substances” (as those terms are defined in CERCLA).
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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“EU Personal Data” means personal data that is subject to the GDPR.
“Excluded Party” means any Person or group from which the Company has received, after the execution of this Agreement and prior to the No-Shop Period Start Date, a written Acquisition Proposal that (a) the Company Board determines, prior to the No-Shop Period Start Date, in good faith, after consultation with its outside legal counsel and a financial advisor of internationally recognized reputation, that such Acquisition Proposal either constitutes a Superior Proposal or would reasonably be expected to result in a Superior Proposal and (b) remains pending as of, and shall not have been withdrawn or otherwise abandoned prior to, the No-Shop Period Start Date; provided, that any such Person or group shall cease to be an Excluded Party (i) immediately upon the withdrawal or termination of the Acquisition Proposal submitted by such Excluded Party (unless, prior to or concurrently with such withdrawal or termination, such Person or group has made another Acquisition Proposal that has not been withdrawn or terminated) or (ii) provided that a withdrawal or termination described in the preceding clause (i) has not earlier occurred, then immediately upon the later to occur of (A) 5:00 p.m. (New York City time) on the tenth (10th) day immediately following the No-Shop Period Start Date (the “Scheduled Cut-off Time”) and (B) in the event that the Company shall have given Parent a Company Notice prior to the Scheduled Cut-off Time with respect to a Superior Proposal from such Person or group and the Scheduled Cut-off Time is earlier than 5:00 p.m. (New York City time) on the second (2nd) business day immediately following expiration of the notice period required under Section 5.02(f) with respect to such Company Notice (the “Extended Cut-off Time”), the Extended Cut-off Time; provided, further, that in the event that, after the expiration of the notice period required under Section 5.02(f) with respect to such Company Notice and before the Extended Cut-off Time, the Company gives Parent an additional Company Notice with respect to a Superior Proposal from such Person or group, the Extended Cut-off Time will be extended to 5:00 p.m. (New York City time) on the second (2nd) business day immediately following expiration of the notice period required under Section 5.02(f) with respect to such additional Company Notice, it being understood that the Extended Cut-off Time may be so extended multiple times and will be so extended in response to each such additional Company Notice so given by the Company.
“Expenses” means, with respect to any Person, all reasonable and documented out-of-pocket expenses (including fees and expenses of counsel, accountants, investment bankers, experts and consultants to such Person and its Affiliates) incurred by such Person or on its behalf in connection with or related to the evaluation, authorization, preparation, negotiation, execution and performance of this Agreement, the preparation, printing, filing and mailing of the Proxy Statement and all SEC and other regulatory filing fees incurred in connection with the Merger, the solicitation of shareholder approvals, the filing of any required notices under the HSR Act or other Antitrust Laws or Insurance Laws, any filing with, and obtaining of any necessary action or non-action, consent or approval from any Governmental Authority, engaging the services of the Paying Agent, obtaining third party consents, any other filings with the SEC and all other matters, in each case, in connection with the Merger and the other Transactions.
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“FASB” means the Financial Accounting Standards Board.
“Foreign Employment Contract” means (i) an individual employment consulting, severance, retention, change-in-control or other similar agreement or (ii) a bonus, incentive, deferred compensation, profit-sharing, retirement, post-retirement, paid time off, severance or termination pay, or benefit plan, program, policy, agreement or other arrangement, in each case, that is operated by the Company or any of its Subsidiaries for the benefit of current officers, employees or independent contractors of the Company or any of its Subsidiaries whose primary place of employment is outside of the United States.
“Foreign Plan” means employee benefit plan, policy, agreement or arrangement, in each case, that is (i) sponsored, maintained or contributed to by the Company or any of its Subsidiaries (or to which the Company or any of its Subsidiaries is obligated to contribute to or has a contingent liability to contribute to) and (ii) for the benefit of current or former directors, officers, employees or independent contractors of the Company or any of its Subsidiaries whose primary place of employment is or was outside of the United States, but excluding in each case, any such plan, program, policy, agreement or other arrangement required by applicable Law (other than a pension arrangement used for the purpose of auto-enrollment in the United Kingdom), that is sponsored by a Governmental Authority. For the avoidance of doubt, (A) collective bargaining agreements with national or industry-wide unions outside the United States, and arrangements related thereto or arising therefrom, shall not be considered Foreign Plans or Company Plans and (B) any employee benefit plan, policy, agreement or arrangement that covers both (I) current and/or former employees or other service providers whose primary place of employment is in the United States and (II) current and/or former employees or other service providers whose primary place of employment is outside the United States shall be considered a Company Plan and shall not be considered a Foreign Plan.
“Franchise Board” means the Franchise Board established by the Council or any subcommittee or officer or employee of Lloyd’s authorized by the Council or Franchise Board to discharge the duties and functions or to exercise the powers and discretions specified in such authorization.
“GAAP” means generally accepted accounting principles in the United States, consistently applied.
“Governmental Authority” means any government, court, regulatory or administrative agency, arbitral body or self-regulated entity, tribunal, commission or authority or other legislative, executive or judicial governmental entity, whether federal, national, provincial, state, local, foreign or multinational, including Lloyd’s.
“HealthCare Reform Laws” means, collectively, the Patient Protection and Affordable Care Act, Pub. L. No. 111-148 and the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, and the regulations and guidance issued thereunder.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
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“Insurance Law” means all Laws applicable to the business of insurance or reinsurance or the regulation of insurance or reinsurance companies, whether federal, national, provincial, state, local, foreign or multinational, and all applicable orders, directives of, and market conduct recommendations resulting from market conduct examinations of, Insurance Regulators.
“Insurance Regulators” means all Governmental Authorities regulating the business of insurance or reinsurance, or regulating insurance or reinsurance companies, under Insurance Laws.
“Intellectual Property” means all intellectual property and other similar rights in any jurisdiction, whether registered or unregistered, including such rights in and to any: (i) patent (including all reissues, divisions, continuations, continuations-in-part, re-examinations, substitutions and extensions thereof) and invention disclosure; (ii) trademark, servicemark, trade name, business name, brand name, domain name, social media identifier or account, logo, slogan, trade dress, design right and other similar designations of source or origin, including any and all goodwill associated therewith; (iii) copyright and copyrightable subject matter and database rights, including in software; and (iv) trade secret, know-how and other information of a confidential nature, in each case, together with any registrations or applications to register any of the foregoing.
“IRS” means the U.S. Internal Revenue Service.
“Knowledge” means, (i) with respect to the Company, the actual knowledge, as of the date of this Agreement, of the individuals listed on Section 8.13 of the Company Disclosure Letter and (ii) with respect to Parent or Merger Sub, the actual knowledge, as of the date of this Agreement, of the individuals listed on Section 8.13 of the Parent Disclosure Letter.
“Liens” means any pledges, liens, claims, options, charges, mortgages, encumbrances, leases, licenses, hypothecations, conditions, covenants, restrictions, option to purchase or lease or otherwise acquire any interest, right of first refusal or offer, conditional sales or other title retention agreement, adverse claim of ownership or use, easement, encroachment, right of way or other title defect, transfer restrictions or security interests of any kind or nature.
“Lloyd’s” means the Council and Society and Corporation of Lloyd’s created and governed by the Lloyd’s Act 1871 to 1982 of England and Wales, including for the avoidance of doubt the Franchise Board.
“Material Adverse Effect” means any effect, change, event, circumstance, development or occurrence that, individually or in the aggregate with all other events, circumstances, developments, changes and effects, (a) has a material adverse effect on the business, operations, results of operations, assets, liabilities or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, or (b) would prevent or materially impair or delay the ability of the Company to consummate the Merger or perform its obligations hereunder; provided, that, for purposes of clause (a) only, none of the following, and no effect, change, event, circumstance, development or occurrence arising out of, or resulting from, the following, shall constitute or be taken into account, individually or in the aggregate, in determining whether a Material Adverse Effect has occurred or may occur: any effect, change, event, circumstance,
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development or occurrence that results from (i) changes, events or conditions generally affecting the insurance or risk management industries in the geographic regions or product markets in which the Company and its Subsidiaries operate or underwrite insurance or reinsurance or manage risk, (ii) general economic or regulatory, legislative or political conditions or securities, credit, financial or other capital markets conditions in any jurisdiction, (iii) any failure, in and of itself, by the Company to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics for any period, (iv) geopolitical conditions, the outbreak or escalation of hostilities, any acts of war (whether or not declared), sabotage, terrorism (including cyber-terrorism) or man-made disaster, or any escalation or worsening of any such hostilities, acts of war (whether or not declared), sabotage, terrorism or man-made disaster, (v) any volcano, tsunami, pandemic, hurricane, tornado, windstorm, flood, earthquake or other natural disaster or any conditions resulting from such natural disasters, (vi) the execution and delivery of this Agreement or the public announcement, pendency or performance of the Transactions, including any action with respect to the Transactions and including the impact thereof on the relationships of the Company or any of its Subsidiaries with employees, customers, insureds, policyholders, brokers, agents, financing sources, business partners, service providers, or reinsurance providers (but taking into account any action by any such Person not arising from such execution, delivery, announcement, pendency or performance), (vii) any change or announcement of a potential change, in and of itself, in the Company’s or any of its Subsidiaries’ credit, financial strength or claims paying ratings or the ratings of any of the Company’s or its Subsidiaries’ businesses, (viii) any change, in and of itself, in the market price, credit ratings or trading volume of the Company’s or any of its Subsidiaries’ securities, (ix) any change in applicable Law, regulation, GAAP (or authoritative interpretation thereof) or Applicable SAP, including accounting and financial reporting pronouncements by the SEC, the National Association of Insurance Commissioners, any Insurance Regulator and the FASB or (x) any action expressly required to be taken by the Company, or that the Company is expressly required to cause one of its Subsidiaries to take, pursuant to, or any failure of the Company or any of its Subsidiaries to take an action expressly prohibited by, the terms of this Agreement (but only if Parent has refused, after a timely request by the Company, to provide a waiver to the applicable prohibition or requirement in this Agreement) (it being understood that the exceptions in clauses (iii), (vii) and (viii) shall not prevent or otherwise affect a determination that the underlying cause of any such failure or change referred to therein (to the extent not otherwise falling within any of the exceptions provided by clauses (i) through (x) hereof) is a Material Adverse Effect); provided further, however, that any effect, change, event, circumstance, development or occurrence referred to in clauses (i), (ii), (iv), (v) or (ix) may be taken into account in determining whether or not there has been a Material Adverse Effect to the extent such effect, change, event, circumstance, development or occurrence has a materially disproportionate adverse effect on the Company and its Subsidiaries, taken as a whole, relative to other participants engaged primarily in the insurance or risk management industries in the geographic regions or product markets in which the Company and its Subsidiaries operate or underwrite insurance or reinsurance or manage risk (in which case the disproportionate effect or effects may be taken into account in determining whether or not a Material Adverse Effect has occurred).
“Parent Disclosure Letter” means the disclosure letter delivered by Parent and Merger Sub to the Company on the date of this Agreement.
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“Parent Material Adverse Effect” means any effect, change, event, circumstance, development or occurrence that would, individually or in the aggregate, prevent or materially impair or delay the ability of Parent or Merger Sub to consummate the Merger or perform its obligations hereunder.
“Permitted Liens” means (i) statutory Liens for Taxes, assessments or other charges by Governmental Authorities not yet due and payable or the amount or validity of which is being contested in good faith and by appropriate proceedings and in either case for which adequate reserves have been maintained in accordance with GAAP and Applicable SAP, (ii) mechanics’, materialmen’s, carriers’, workmen’s, warehouseman’s, repairmen’s, landlords’ and similar Liens granted or which arise in the ordinary course of business, (iii) Liens securing payment, or any obligation, of the Company or its Subsidiaries with respect to outstanding Indebtedness so long as there is no default under such Indebtedness, (iv) Liens granted in the ordinary course of the insurance or reinsurance business of the Company or its Subsidiaries on cash and cash equivalent instruments or other investments, including Liens granted (A) in connection with (1) pledges of such instruments or investments to collateralize letters of credit delivered by the Company or its Subsidiaries, (2) the creation of trust funds for the benefit of ceding companies, (3) underwriting activities of the Company or its Subsidiaries, (4) deposit liabilities, (5) statutory deposits, (6) ordinary-course securities lending and short-sale transactions and (B) with respect to investment securities held in the name of a nominee, custodian or other record owner, (v) pledges or deposits by the Company or any of its Subsidiaries under workmen’s compensation Laws, unemployment insurance Laws or similar legislation, or good faith deposits in connection with bids, tenders, Contracts (other than for the payment of Indebtedness) or leases to which such entity is a party, or deposits to secure public or statutory obligations of such entity or to secure surety or appeal bonds to which such entity is a party, or deposits as security for contested Taxes, in each case incurred or made in the ordinary course of business, (vi) gaps in the chain of title evident from the records of the relevant Governmental Authority maintaining such records, (vii) licenses granted to third parties in the ordinary course of business by the Company or its Subsidiaries, (viii) Liens created by or through the actions of Parent or any of its Affiliates, (ix) Liens discharged at or prior to the Effective Time, (x) transfer restrictions imposed by Law and (xi) such other Liens or imperfections that are not material in amount or do not materially detract from the value of or materially impair the existing use of the property affected by such Lien or imperfection.
“Person” means an individual, corporation, limited liability company, partnership, joint venture, association, trust, unincorporated organization or any other entity, including a Governmental Authority.
“Personal Information” means any information or data that, alone or together with any other information or data (a) can be used to identify, directly or indirectly, an individual, or (b) can be used to authenticate such individual.
“Real Property” means all land, buildings, improvements and fixtures erected thereon and all appurtenances related thereto.
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“Representatives” means, with respect to any Person, its officers, directors, employees, consultants, agents, financial advisors, investment bankers, attorneys, accountants and other advisors, and other representatives.
“Senior Notes” means the 5.75% Senior Notes due October 15, 2023 as governed by the Second Supplemental Indenture, dated as of October 4, 2013, between the Company and The Bank of New York Mellon, as Trustee (as successor to JPMorgan Chase Bank, N.A.) under the Indenture, dated as of April 17, 2006 between the Company and JPMorgan Chase Bank, N.A.
“Subsidiary” when used with respect to any party, means any corporation, limited liability company, partnership, association, trust or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power (or, in the case of a partnership, more than 50% of the general partnership interests) are, as of such date, owned by such party or one or more Subsidiaries of such party or by such party and one or more Subsidiaries of such party.
“UK Pension Plan” means a Foreign Plan that is a pension scheme (as that term is defined in Section 1 of the UK Pension Schemes Act 1993) and which is subject to the Laws of the United Kingdom.
“Tax” means all U.S. and non-U.S. federal, national, provincial, state or local taxes, charges, fees, levies, duties, customs, tariffs, imposts, or other similar assessments or liabilities in the nature of taxes, including income, gross receipts, premium, capital, ad valorem, value-added, excise, Real Property, personal property, sales, use, severance, stamp, transfer, withholding, employment, payroll, occupation, social security, unemployment, inventory, capital stock, license, estimated and franchise taxes imposed by a Governmental Authority, together with any interest, penalties, fines, assessments or additions to tax imposed with respect to such amounts.
“Tax Returns” means all reports, returns, declarations, statements, questionnaire, certificate, report, bill, claim for refund or other information supplied or required to be supplied to a Governmental Authority relating to Taxes or any election, declaration, schedule or attachment thereto, or any amendment thereof.
“Willful Breach” shall mean a material breach that is caused by an action or omission to act where both of the following conditions exist: (a) the action or omission to act was itself deliberate; and (b) such deliberate Action or omission to act was taken or omitted to be taken by a Person with knowledge that such act or omission to act would constitute a breach of this Agreement.
(b) The following terms are defined in the section of this Agreement set forth after such term below:
| Terms Not Defined in Section 8.13(a) |
Section | |
| 2019 New Company Awards | Section 2.03(a)(iii) | |
| 2019 Vesting Company Awards | Section 2.03(a)(i) | |
| 2020 Vesting Company Awards | Section 2.03(a)(ii) | |
| Acceptable Confidentiality Agreement | Section 5.02(h)(i) |
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| Acquisition Proposal | Section 5.02(h)(ii) | |
| Adverse Recommendation Change | Section 5.02(e) | |
| Agreement | Preamble | |
| Anti-Money Laundering Laws | Section 3.08(c) | |
| Appraisal Withdrawal | Section 2.05(a) | |
| Bankruptcy and Equity Exception | Section 3.03(a) | |
| Book-Entry Share | Section 2.01(c) | |
| Capitalization Date | Section 3.02(a) | |
| Cash Award | Section 2.03(a)(iv) | |
| CERCLA | Section 3.26 | |
| Certificate | Section 2.01(c) | |
| Certificate of Merger | Section 1.02 | |
| Claim | Section 5.08(b) | |
| Closing | Section 1.06 | |
| Closing Date | Section 1.06 | |
| Code | Section 2.02(g) | |
| Company | Preamble | |
| Company Acquisition Agreement | Section 5.02(e) | |
| Company Agent | Section 3.17(e) | |
| Company Board | Recitals | |
| Company Board Recommendation | Section 3.03(b) | |
| Company Common Stock | Section 2.01 | |
| Company Disclosure Letter | Article III | |
| Company Employee | Section 5.10(a) | |
| Company Insurance Approvals | Section 3.04 | |
| Company Insurance Subsidiary | Section 3.17(a) | |
| Company Notice | Section 5.02(f) | |
| Company Preferred Stock | Section 3.02(a) | |
| Company Reinsurance Contracts | Section 3.20 | |
| Company Restricted Shares | Section 2.03(b) | |
| Company Rights | Section 3.02(b) | |
| Company SEC Documents | Section 3.05(a) | |
| Company Securities | Section 3.02(b) | |
| Company Sensitive Information | Section 3.13(e) | |
| Company Shares | Section 2.01(c) | |
| Company Statutory Statements | Section 3.18(a) | |
| Company Stockholder Approval | Section 3.03(d) | |
| Company Stockholders Meeting | Section 5.03(b) | |
| Company Termination Fee | Section 7.03(a) | |
| Confidentiality Agreement | Section 5.07 | |
| Continuation Period | Section 5.10(a) | |
| DGCL | Section 1.01 | |
| Effective Time | Section 1.02 | |
| ERISA Affiliate | Section 3.10(c) | |
| Exchange Act | Section 3.02(b) | |
| Exchange Fund | Section 2.02(a) |
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| Existing Stockholder Group | Recitals | |
| Expense Cap Amount | Section 7.03(b) | |
| Extended Cut-off Time | Section 8.13 | |
| Filed SEC Documents | Article III | |
| GDPR | Section 3.13(g) | |
| Go-Shop Period | Section 5.02(a) | |
| Goldman Sachs | Section 3.23 | |
| Health Plan | Section 3.10(h) | |
| Indebtedness | Section 5.01(a)(ii) | |
| Indemnitee | Section 5.08(a) | |
| Indemnitees | Section 5.08(a) | |
| Intervening Event | Section 5.02(h)(v) | |
| Investment Assets | Section 3.12(a) | |
| Investment Guidelines | Section 3.12(a) | |
| Laws | Section 3.08(a) | |
| Lloyd’s Regulations | Section 3.17(d) | |
| Material Contract | Section 3.16(a) | |
| Maximum Premium | Section 5.08(c) | |
| Merger | Recitals | |
| Merger Consideration | Section 2.01(c) | |
| Merger Sub | Preamble | |
| Merger Sub Board | Recitals | |
| Moelis | Section 3.23 | |
| No-Shop Period Start Date | Section 5.02(a) | |
| Parent | Preamble | |
| Parent Burdensome Condition | Section 5.04(d) | |
| Parent Board | Recitals | |
| Parent Common Stock | Section 2.03(a)(iii) | |
| Parent Insurance Approvals | Section 4.03 | |
| Parent RSU | Section 2.03(a)(iii) | |
| Participant | Section 5.01(a)(vi) | |
| Paying Agent | Section 2.02(a) | |
| Permits | Section 3.08(a) | |
| Permitted Accounting Practice | Section 3.18(c) | |
| Privacy Policies | Section 3.13(f) | |
| Proxy Statement | Section 3.04 | |
| PTO Policy | Section 5.10(c) | |
| Qualified Plan | Section 3.10(b) | |
| Related Party Transaction | Section 3.25 | |
| Required Regulatory Approvals | Section 6.01(b) | |
| Restraints | Section 6.01(c) | |
| Sanctioned Country | Section 3.08(d) | |
| Sanctions | Section 3.08(d) | |
| Sarbanes-Oxley Act | Section 3.05(d) | |
| Scheduled Cut-off Time | Section 8.13 | |
| SEC | Section 3.04 |
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| Section 262 | Section 2.05(a) | |
| Securities Act | Section 3.02(c) | |
| Security Program | Section 3.13(e) | |
| Superior Proposal | Section 5.02(h)(iii) | |
| Surviving Company | Section 1.01 | |
| Takeover Law | Section 3.14 | |
| Transactions | Section 1.01 | |
| Transfer Taxes | Section 5.05 | |
| Voting Agreement | Recitals | |
| Walk-Away Date | Section 7.01(b)(i) |
Section 8.14 Fees and Expenses. Whether or not the Merger is consummated, all fees and expenses incurred in connection with the Merger, this Agreement, the Voting Agreement and the other Transactions shall be paid by the party incurring or required to incur such fees or expense, except as otherwise set forth in this Agreement.
Section 8.15 Interpretation.
(a) When a reference is made in this Agreement to an Article, a Section, Exhibit or Schedule, such reference shall be to an Article of, a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”. The words “hereof”, “herein”, “hereto” 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 terms “or”, “any” and “either” are not exclusive. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. All terms defined in this Agreement shall have the defined meanings when used in any document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. Unless otherwise specifically indicated, all references to “dollars” or “$” shall refer to the lawful money of the United States. References to a Person are also to its permitted assigns and successors.
(b) The parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party hereto by virtue of the authorship of any provision of this Agreement.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written.
| THE HARTFORD FINANCIAL SERVICES GROUP, INC. | ||
| By: | /s/ Christopher J. Swift | |
| Name: Christopher J. Swift | ||
| Title: Chief Executive Officer | ||
| RENATO ACQUISITION CO. | ||
| By: | /s/ Douglas G. Elliot | |
| Name: Douglas G. Elliot | ||
| Title: President | ||
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
| THE NAVIGATORS GROUP, INC. | ||
| By: | /s/ Stanley A. Galanski | |
| Name: Stanley Adam Galanski | ||
| Title: President and Chief Executive Officer | ||
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
EXHIBIT A
Amended Certificate of Incorporation of the Surviving Company
See attached.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
THE NAVIGATORS GROUP, INC.
ARTICLE 1
The name of the corporation is: The Navigators Group, Inc.
ARTICLE 2
The address of the corporation’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name of the corporation’s registered agent at such address is The Corporation Trust Company.
ARTICLE 3
The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware unless the bylaws of the corporation provide otherwise.
ARTICLE 4
(a) The total number of shares of stock which the corporation shall have authority to issue is 5,000, all of which shall be common stock, and the par value of each such share shall be $0.01.
(b) In addition to any and all powers conferred upon the Board of Directors by the laws of the State of Delaware, the Board of Directors shall have the authority to establish by resolution more than one class or series of shares, either preferred or common, and to fix the relative rights, restrictions and preferences of any such different classes or series, and the authority to issue shares of a class or series to another class or series to effectuate share dividends, splits or conversions of the corporation’s outstanding shares.
ARTICLE 5
Meetings of stockholders may be held within or outside the State of Delaware, as the bylaws of the corporation may provide. The books of the corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the bylaws of the corporation. Elections of directors need not be by written ballot unless the bylaws of the corporation so provide.
ARTICLE 6
No director shall be personally liable to the corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law (i) for breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit.
ARTICLE 7
Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation.
ARTICLE 8
The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation in the manner now or hereafter prescribed by applicable law, and all rights and powers conferred upon stockholders herein are granted subject to this reservation.
Exhibit 3.1
AMENDED AND RESTATED BY-LAWS
OF
THE NAVIGATORS GROUP, INC.
(As amended and restated on August 21, 2018)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office shall be established and maintained at the office of the United States Corporation Company, in the City of Dover, in the County of Kent, in the State of Delaware, and said corporation shall be the registered agent of this corporation in charge thereof.
SECTION 2. OTHER OFFICES. The corporation may have other offices, either within or without the State of Delaware, at such place or places as the Board of Directors may from time to time appoint or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDER
SECTION 1. ANNUAL MEETINGS. Annual meetings of stockholders for the election of directors and for such other business as may be stated in the notice of the meeting shall be held at such place, either within or without the State of Delaware, and at such time and date during the month of May in each year as shall be determined by the Board of Directors or the President of the corporation.
If the date of the annual meeting shall fall upon a legal holiday, the meeting shall be held on the next succeeding business day. At each annual meeting, the stockholders entitled to vote shall elect a Board of Directors and they may transact such other corporate business as shall be stated in the notice of the meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders for any purpose or purposes may be called by the President or Secretary, or by resolution of the directors.
SECTION 3. VOTING. Each stockholder entitled to vote in accordance with the terms of the Certificate of Incorporation and in accordance with the provisions of these By-Laws shall be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholder, but no proxy shall be voted after three years from its date unless such proxy provides for a longer period. Upon the demand of any stockholder, the vote for directors and the vote upon any question before the meeting shall be by ballot. All elections for directors shall be decided by plurality vote; all other questions shall be decided by majority vote except as otherwise provided by the Certificate of Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the ensuing election, arranged in alphabetical order, with the address of each, and the number of shares held by each, Shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
SECTION 4. QUORUM. Except as otherwise required by law, by the Certificate of Incorporation or by these By-Laws, the presence, in person or by proxy, of stockholders holding a majority of the issued and outstanding capital stock of the corporation entitled to vote shall constitute a quorum for the transaction of all business at any duly called meeting of the stockholders.
SECTION 5. ADJOURNMENT AND POSTPONEMENT OF MEETINGS. The chairman of the meeting or a majority in interest of the stockholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time whether or not a quorum is present, without notice other than announcement at the meeting, unless the directors fix a new record date for the adjourned meeting. If a quorum is present at the meeting as originally called, it shall also be deemed present at an adjourned or recessed session of such meeting. At any such adjourned meeting at which a quorum is present, in person or by proxy, any business may be transacted which might have been transacted at the meeting as originally noticed. The Board of Directors may, at any time prior to the holding of meeting of the stockholders, and for any reason, postpone, reschedule or cancel such previously-scheduled meeting. The meeting may be postponed or rescheduled to such time and place as specified in a notice of postponement or rescheduling of such meeting.
SECTION 6. NOTICE OF MEETINGS. Written notice, stating the place, date and time of the meeting, and the general nature of the business to be considered, shall be given to each stockholder entitled to vote thereat at his address as it appears on the records of the corporation, not less than ten nor more than fifty days before the date of such meeting. No business other than that stated in the notice shall be transacted at any meeting without the unanimous consent of all the stockholders entitled to vote thereat.
SECTION 7. CONDUCT OF MEETINGS. The Chairman of the Board of Directors, or in his or her absence the Vice Chairman, or any director or officer designated by the Chairman of the Board of Directors, shall preside as the chairman of the meeting at all annual or special meetings of stockholders. To the maximum extent permitted by law, the chairman of the meeting will have the power to set procedural rules, including without limitation: (a) restricting admission to the time set for the commencement of the meeting; (b) limiting attendance at the meeting to stockholders of record, their duly authorized proxies and such other individuals as the chairman of the meeting may determine; (c) limiting participation at the meeting on any matter to stockholders of record entitled to vote on such matter, their duly authorized proxies and other such
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individuals as the chairman of the meeting may determine; (d) limiting the time allotted to questions or comments; (e) determining when and for how long the polls should be opened and when the polls should be closed; (f) maintaining order and security at the meeting; (g) removing any stockholder or any other individual who refuses to comply with meeting procedures, rules or guidelines as set forth by the chairman of the meeting; (h) concluding the meeting or recessing or adjourning the meeting, whether or not a quorum is present, to a later date and time and at a place announced at the meeting; (i) restricting the use of audio/video recording devices and cell phones; and (j) complying with any state and local laws and regulations concerning safety and security. The Secretary will act as secretary of each meeting. In the absence of the Secretary, the chairman of the meeting will appoint any person to act as secretary of the meeting. Unless otherwise determined by the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
SECTION 8. ACTION WITHOUT MEETING. Unless otherwise provided by the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM. The business and property of the Company shall be conducted and managed by a Board of Directors consisting of not less than three nor more than twenty-one directors. The number of directors shall be determined by vote of the stockholders at the annual meeting and may be increased or decreased within the limits provided in this section by vote of the stockholders or the Board of Directors. The directors shall be elected at the annual meeting of the stockholders and each director shall be elected to serve until his successor shall be elected and shall qualify. Directors need not be stockholders.
SECTION 2. RESIGNATIONS. Any director, member of a committee or other officer may resign at any time. Such resignation shall be made in writing, and shall take effect at the time specified therein, and if no time be specified, at the time of its receipt by the President or Secretary. The acceptance of a resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES. If the office of any director or member of a committee becomes vacant for any reason, including but not limited to newly created directorships resulting from any increase in the number of directors within the limits provided for by Section 1 of this Article III, the remaining directors in office, though less than a quorum, by a majority vote may appoint any qualified person to fill such vacancy, who shall hold office for the unexpired term and until his successor shall be duly chosen.
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SECTION 4. REMOVAL. Any director or directors may be removed either for or without cause at any time by the affirmative vote of the holders of a majority of all the shares of stock outstanding and entitled to vote, at a special meeting of the stockholders called for the purpose and the vacancies thus created may be filled, at the meeting held for the purpose of removal, by the affirmative vote of a majority in interest of the stockholders entitled to vote.
SECTION 5. INCREASE OF NUMBER. The number of authorized directors may be increased by amendment of these By-Laws by the affirmative vote of a majority of the directors, though less than a quorum, or, by the affirmative vote of a majority in interest of the stockholders, at the annual meeting or at a special meeting called for that purpose, and by like vote the additional directors may be chosen at such meeting to hold office until the next annual election and until their successors are elected and qualify.
SECTION 6. POWERS. The Board of Directors shall exercise all of the powers of the corporation except such as are by law, or by the Certificate of Incorporation of the corporation or by these By-Laws conferred upon or reserved to the stockholders.
SECTION 7. COMMITTEES. The Board of Directors may, by resolution or resolutions passed by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the Board of Directors, or in these By-Laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation’s property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the By-Laws of the corporation; and, unless the resolution, these By-Laws, or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock.
SECTION 8. MEETINGS. The newly elected directors may hold their first meeting for the purpose of organization and the transaction of business, if a quorum be present, immediately after the annual meeting of the stockholders; or the time and place of such meeting may be fixed by consent in writing of all the directors.
Regular meetings of the directors may be held without notice at such places and times as shall be determined from time to time by resolution of the directors.
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Special meetings of the board may be called by the President or by the Secretary on the written request of any two directors on at least two days’ notice to each director and shall be held at such place or places as may be determined by the directors, or as shall be stated in the call of the meeting.
SECTION 9. QUORUM. A majority of the total number of directors shall constitute a quorum for the transaction of business. If at any meeting of the board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained and no further notice thereof need be given other than by announcement at the meeting which shall be so adjourned.
SECTION 10. COMPENSATION. Directors shall not receive any stated salary for their services as directors or as members of committees, but by resolution of the board a fixed fee and expenses of attendance may be allowed for attendance at each meeting. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent or otherwise, and receiving compensation therefor.
SECTION 11. ACTION WITHOUT MEETING. Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the board, or of such committee as the case may be, and such written consent is filed with the minutes of proceedings of the board or committee.
SECTION 12. PARTICIPATION IN MEETING BY TELEPHONE. Any one or more members of the Board of Directors or any committee thereof may participate in a meeting of the Board or of such committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at such meeting.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be a President, a Treasurer, and a Secretary, all of whom shall be elected by the Board of Directors and who shall hold office until their successors are elected and qualified. In addition, the Board of Directors may elect a Chairman, one or more Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as they may deem proper. None of the officers of the corporation need be directors. The officers shall be elected at the first meeting of the Board of Directors after each annual meeting. More than two offices may be held by the same person. The Board of Directors may fill any vacancy which may occur in any office.
SECTION 2. OTHER OFFICERS AND AGENTS. The Board of Directors may appoint such other officers and agents as it may deem advisable, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors.
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SECTION 3. CHAIRMAN. The Chairman of the Board of Directors, if one be elected, shall preside at all meetings of the Board of Directors and he shall have and perform such other duties as from time to time may be assigned to him by the Board of Directors.
SECTION 4. PRESIDENT. The President shall be the chief executive officer of the corporation and shall have the general powers and duties of supervision and management usually vested in the office of President of a corporation. He shall preside at all meetings of the stockholders if present thereat, and in the absence or non-election of the Chairman of the Board of Directors, at all meetings of the Board of Directors, and shall have general supervision, direction and control of the business of the corporation. Except as the Board of Directors shall authorize the execution thereof in some other manner, he shall execute bonds, mortgages and other contracts in behalf of the corporation, and shall cause the seal to be affixed to any instrument requiring it and when so affixed the seal shall be attested by the signature of the Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer.
SECTION 5. VICE-PRESIDENT. Each Vice-President shall have such powers and shall perform such duties as shall be assigned to him by the directors.
SECTION 6. TREASURER. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to the corporation. He shall deposit all moneys and other valuables in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, or the President, taking proper vouchers for such disbursements. He shall render to the President and Board of Directors at the regular meetings of the Board of Directors, or whenever they may request it, an account of all his transactions as Treasurer and of the financial condition of the corporation. If required by the Board of Directors, he shall give the corporation a bond for the faithful discharge of his duties in such amount and with such surety as the board shall prescribe.
SECTION 7. SECRETARY. The Secretary shall give, or cause to be given, notice of all meetings of stockholders and directors, and all other notices required by law or by these By-Laws, and in case of his absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the President, or by the directors, or stockholders, upon whose requisition the meeting is called as provided in these By-Laws. He shall record all the proceedings of the meetings of the corporation and of the directors in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him by the directors or the President. He shall have the custody of the seal of the corporation and shall affix the same to all instruments requiring it, when authorized by the directors or the President, and attest the same.
SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. Assistant Treasurers and Assistant Secretaries, if any, shall be elected and shall have such powers and shall perform such duties as shall be assigned to them, respectively, by the directors.
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ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK. Certificates of stock, signed by the Chairman or Vice Chairman of the Board of Directors, if they be elected, President or Vice-President, and the Treasurer or an Assistant Treasurer, or Secretary or an Assistant Secretary, shall be issued to each stockholder certifying the number of shares owned by him in the corporation. When such certificates are countersigned (1) by a transfer agent other than the corporation or its employee, or, (2) by a registrar other than the corporation or its employee, the signatures of such officers may be facsimiles.
SECTION 2. LOST CERTIFICATES. A new certificate of stock may be issued in the place of any certificate theretofore issued by the corporation, alleged to have been lost or destroyed, and the directors may, in their discretion, require the owner of the lost or destroyed certificate, or his legal representatives, to give the corporation a bond, in such sum as they may direct, not exceeding double the value of the stock, to indemnify the corporation against any claim that may be made against it on account of the alleged loss of any such certificate, or the issuance of any such new certificate.
SECTION 3. TRANSFER OF SHARES. The shares of stock of the corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificates shall be surrendered to the corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers, or to such other person as the directors may designate, by whom they shall be cancelled, and new certificates shall thereupon be issued. A record shall be made of each transfer and whenever a transfer shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any postponement or adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any postponement or adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for such postponed or adjourned meeting.
SECTION 5. DIVIDENDS. Subject to the provisions of the Certificate of Incorporation, the Board of Directors may, out of funds legally available therefor at any regular or special meeting, declare dividends upon the capital stock of the corporation as and when they deem expedient. Before declaring any dividend there may be set apart out of any funds, of the corporation available for dividends, such sum or sums as the directors from time to time in their discretion deem proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends or for such other purposes as the directors shall deem conducive to the interests of the corporation.
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SECTION 6. SEAL. The corporate seal shall be circular in form and shall contain the name of the corporation, the year of its creation and the words “CORPORATE SEAL DELAWARE”. Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
SECTION 7. FISCAL YEAR. The fiscal year of the corporation shall be determined by resolution of the Board of Directors.
SECTION 8. CHECKS. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner as shall be determined from time to time by resolution of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE. Whenever any notice is required by these By-Laws to be given, personal notice is not meant unless expressly so stated, and any notice so required shall be deemed to be sufficient if given by depositing the same in the United States mail, postage prepaid, addressed to the person entitled thereto at his address as it appears on the records of the corporation, and such notice shall be deemed to have been given on the day of such mailing. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by Statute.
Whenever any notice whatever is required to be given under the provisions of any law, or under the provisions of the Certificate of Incorporation of the corporation or these By-Laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.
SECTION 10. INTERESTS OF DIRECTORS. Any person made a party to any action, suit or proceeding by reason of the fact that he, his testator or intestate, is or was a director, officer or employee of the corporation or of any corporation which he served as such at the request of the corporation, shall be indemnified by the corporation against the reasonable expenses, including attorneys’ fees, actually and necessarily incurred by him in connection with the defense of such action, suit or proceeding, or in connection with any appeal thereof, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such officer, director or employee is liable for negligence or misconduct in the performance of his duties. Such right of indemnification shall not be deemed exclusive of any other rights to which such director, officer or employee may be entitled by law.
ARTICLE VI
FORUM FOR ADJUDICATION OF CERTAIN DISPUTES
Unless the corporation consents in writing to the selection of an alternative forum (an “Alternative Forum Consent”), the Delaware Court of Chancery shall be the sole and exclusive forum for, and shall have exclusive jurisdiction with respect to, (a) any derivative action or proceeding brought on behalf of the corporation, (b) any action asserting a claim of breach of a
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fiduciary duty owed by any current or former director, officer, stockholder, employee or agent of the corporation to the corporation or the corporation’s stockholders, including a claim alleging the aiding and abetting of such a breach of fiduciary duty, (c) any action asserting a claim against the corporation or any current or former director, officer, stockholder, employee or agent of the corporation arising out of or relating to any provision of the General Corporation Law of the State of Delaware or the corporation’s Certificate of Incorporation or these By-Laws, (d) any action asserting a claim related to or involving the corporation or any director, officer, stockholder, employee or agent of the corporation that is governed by the internal affairs doctrine of the State of Delaware, or (e) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the General Corporation Law of the State of Delaware; provided, however, that, in the event that the Delaware Court of Chancery lacks subject matter jurisdiction over any such action or proceeding, the sole and exclusive forum for such action or proceeding shall be another state or federal court located within the State of Delaware. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the corporation shall be deemed to have notice of and consented to the provisions of this Article VI. If any action the subject matter of which is within the scope of this Article VI is filed in a court other than the Delaware Court of Chancery (or any other state or federal court located within the State of Delaware, as applicable) (a “Foreign Action”) by or in the name of any stockholder, such stockholder shall be deemed to have notice of and consented to (i) the exclusive personal jurisdiction of the Delaware Court of Chancery (or such other state or federal court located within the State of Delaware, as applicable) in connection with any action brought in any such court to enforce this Article VI and (ii) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder. The existence of any prior Alternative Forum Consent shall not act as a waiver of the corporation’s ongoing consent right as set forth above in this Article VI with respect to any current or future actions or claims. Failure to enforce the foregoing provisions would cause the corporation irreparable harm and the corporation shall be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions.
ARTICLE VII
AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be made at any annual meeting of the stockholders or at any special meeting thereof if notice of the proposed alteration or repeal or By-Law or By-Laws to be made be contained in the notice of such special meeting, by the affirmative vote of a majority of the stock issued and out-standing and entitled to vote thereat, or by the affirmative vote of a majority of the Board of Directors, at any regular meeting of the Board of Directors, or at any special meeting of the Board of Directors, if notice of the proposed alteration or repeal, or By-Law or By-Laws to be made, be contained in the notice of such special meeting.
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Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made the 21st day of August 2018 (the “Effective Date”), by and among THE NAVIGATORS GROUP, INC., a Delaware corporation (“Navigators Group”), NAVIGATORS MANAGEMENT COMPANY, INC., a New York corporation and wholly owned subsidiary of Navigators Group (“Navigators Management” and, unless otherwise specified herein, together with Navigators Group, “Navigators” or the “Company”) and Stanley A. Galanski (the “Executive”). This Employment is an amendment and restatement of, and replaces in its entirety, the Employment Agreement between Navigators Group and the Executive, dated March 25, 2001.
WHEREAS, Navigators Management desires to continue to employ the Executive, and the Executive wishes to remain employed by Navigators Management, and to serve as President and Chief Executive Officer of Navigators Group, subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and conditions contained herein, Navigators and the Executive covenant and agree as follows:
1. Employment. Navigators Management hereby continues to employ Executive, and Executive hereby agrees to continue such employment and, during the term of this Agreement, to serve as President and Chief Executive Officer of Navigators Group.
2. Responsibility. Executive shall devote his full working time and best efforts to further the interests of Navigators. Executive will report to the Board of Directors of Navigators Group (the “Board”), and shall perform all duties commensurate with the position set forth in Section 1, as well as such other related duties as may be assigned to him from time to time by the Board. During the term of this Agreement, the Board shall nominate Executive for re-election as a member of the Board at the expiration of each current term.
3. Location. During the term of this Agreement, Executive’s position will be based in the Stamford, Connecticut office of Navigators, subject to any required business travel relating to Executive’s employment.
4. Term. The initial term of this Agreement and Executive’s employment hereunder will continue through December 31, 2019, and will continue for subsequent one-year periods, unless either party elects to terminate this Agreement by written notice to the other party at least 120 days prior to the end of the term as then in effect; provided that if a Change in Control, as defined in Section 6(c)(ii), occurs during the term of this Agreement, the term of this Agreement shall not terminate prior to the later of (A) the one-year anniversary of such Change of Control and (B) the date that is 120 days after written notice is provided to the other party. If Executive terminates this Agreement pursuant to this Section 4, then (a) Executive’s continued employment with Navigators after the termination of this Agreement, if any, will be at-will and may be terminated by Navigators or Executive for any reason or no reason at any time with any rights or entitlements of the employee with respect to such continued employment or termination thereof to be solely determined by the Company’s policies then in effect, and (b) Sections 8 through 12 of this Agreement shall remain in full force and effect for the 12-month period following the end of the term of this Agreement, assuming solely for purposes of the covenants set forth in Sections 9 and 10 of this Agreement that the termination of this Agreement was a termination of Executive’s employment with Navigators. For the avoidance of doubt, although this Section 4 governs the term of this Agreement, the Executive’s employment hereunder may be terminated at any time in accordance with the provisions of Section 6 hereof.
5. Compensation. For the services described in Section 2 above to be rendered by Executive hereunder, Navigators agrees as follows:
(a) Base Salary. As of the Effective Date, Executive’s annual base salary shall be $1,000,000, subject to applicable withholdings. Executive’s base salary shall be subject to annual review by the Compensation Committee of the Board each March in accordance with Navigators’ regular practice, or otherwise as the Compensation Committee deems advisable, but not be decreased to an amount less than the amount set forth in this Section 5(a).
(b) Bonus. Executive will be eligible for an annual performance bonus based upon Navigators’ actual performance as compared to performance targets pre-established by the Compensation Committee of the Board. As of the Effective Date, Executive’s annual performance bonus target amount shall be 100% of Executive’s base salary, with a maximum annual performance bonus amount equal to 150% of Executive’s bonus target amount. This target amount and maximum bonus amount shall be subject to periodic review by the Compensation Committee of the Board but shall not be decreased to amounts less than the amounts set forth in this Section 5(b).
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(c) Long-Term Incentive Compensation. Executive shall be entitled to equity and other long-term incentive awards that may be extended generally from time to time to senior officers of Navigators, as approved by the Compensation Committee of the Board, subject to the terms and conditions of the respective equity and long-term incentive compensation plans and award agreements and the provisions of this Agreement. As of the Effective Date, Executive’s annual long-term incentive compensation target amount shall be 200% of Executive’s base salary.
(d) Executive Benefits. Executive shall be eligible to participate in all Navigators benefit plans made available to senior officers of Navigators.
(e) Vacation; Time Off. Executive shall be entitled to take such vacation, holidays and sick leave as Navigators may reasonably determine, consistent with the performance of his duties hereunder and the then current policies of Navigators in respect to such matters. In no event shall Executive receive less than twenty-two (22) days paid vacation during each fiscal year.
(f) Expenses. Navigators agrees to pay, or reimburse Executive for, reasonable expenses incurred in connection with Executive’s performance of his duties hereunder, upon presentation of appropriate receipts or other documentation of such expense in accordance with Navigators’ published policies pertaining to business expenses.
(g) Automobile. Executive shall receive a monthly automobile expense allowance in the amount of $1,000.
6. TERMINATION OF EMPLOYMENT.
In the event Executive’s employment is terminated during the term of this Agreement, the following provisions will govern such termination.
(a) Termination for Cause; Resignation. Navigators may terminate Executive’s employment at any time for Cause, as defined herein, in which case Executive will not be entitled to any compensation beyond the date of the termination of Executive’s employment. If Executive resigns his employment for a reason other than Good Reason, Executive will not be entitled to any compensation beyond the date of the termination of Executive’s employment.
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(b) Termination Without Cause; Resignation for Good Reason. If Executive’s employment is terminated by Navigators during the term of this Agreement for a reason other than Cause, or if Executive resigns for Good Reason, then subject to Executive’s execution and non-revocation of a General Release in accordance with Section 7 of this Agreement, Executive will be entitled to (i) continued payment of his base salary for a period of 12 months, payable on each of Navigators’ regularly scheduled payroll dates (“Severance Pay”); (ii) payment of an amount equal to 100% of Executive’s target annual bonus for the year in which Executive’s employment terminates, payable within 60 days after the date of termination; (iii) payment of any annual bonus earned in the year prior to the year in which Executive’s employment terminates, to the extent not paid and without regard to Executive’s continued employment through the date of payment, payable when otherwise paid to similarly situated senior officers of Navigators; and (iv) subject to Executive’s timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) for the Executive and his or her eligible dependents, and Executive’s continued payment of premiums associated with such coverage, the Company shall pay or reimburse Executive, on a monthly basis, for the portion of the costs of continued health benefits for Executive and Executive’s covered dependents equal to the amount that the Company was paying immediately prior to such termination, with such reimbursement to continue for 18 months following such termination, or such earlier date on which COBRA coverage for the Executive and his or her covered dependents terminates in accordance with COBRA. Any such payments scheduled to be paid prior to the effective date of the General Release shall be delayed until the General Release becomes effective in accordance with Section 7 of this Agreement. In the event that such termination or resignation occurs during the 12-month period following a Change in Control, then in addition to the payments and benefits described in clauses (i) through (iv) above, any outstanding stock grants will immediately vest, with outstanding performance-based awards vesting at 100% of the target level of performance. Notwithstanding the foregoing, in the event that Executive breaches any of the covenants set forth in Sections 8, 9 and 10, all payments of Severance Pay shall thereupon cease and no further payments to Executive shall be made by Navigators.
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(c) Definitions.
(i) Cause. Navigators shall be entitled to terminate the employment of Executive for Cause if any of the following shall occur during the term of this Agreement:
(A) the commission by Executive of a felony;
(B) Executive engages in conduct involving fraud, moral turpitude, dishonesty, gross misconduct, embezzlement, or theft;
(C) the failure of Executive to perform material duties assigned to him by Navigators, insofar as such duties are consistent with Executive’s position, after written notice to Executive of such failure specifying in detail the circumstances constituting such failure, and the expiration of a 30-day period following Executive’s receipt of such written notice, during which Executive has failed to reasonably cure such failure to perform; and
(D) Executive’s material breach of any of the terms of this Agreement or of any written, lawful directive of Navigators or of any Navigators policy set forth in Navigators’ Employee Policy Manual and, to the extent such breach is curable, failure to reasonably cure said breach with five days of Executive’s receipt of such written notice.
(ii) Change in Control. As used herein, the term “Change in Control” shall mean the occurrence of one or more of the following:
(A) A Change in the Ownership of Navigators Group. A change in ownership of Navigators Group shall occur on the date that any one person or entity (a “Person”), or more than one Person acting as a “Group” (within the meaning of regulations under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)), acquires ownership of stock of Navigators Group that, together with stock held by such Person or Group, constitutes more than 50% of the total fair market value or total voting power of the stock of Navigators Group; provided, however, that, if any one
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Person, or more than one Person acting as a Group, is considered to own more than 50% of the total fair market value or total voting power of the stock of Navigators Group, the acquisition of additional stock by the same Person or Persons is not considered to cause a change in the ownership of Navigators Group.
(B) A Change in the Effective Control of Navigators Group. A change in the effective control of Navigators Group occurs on the date that either:
(1) any one Person, or more than one Person acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) ownership of stock of Navigators Group possessing 35% or more of the total voting power of the stock of Navigators Group; provided, however, that, if any one Person, or more than one Person acting as a Group, is considered to effectively control Navigators Group, the acquisition of additional control of Navigators Group by the same Person or Persons is not considered a change in the effective control of Navigators Group; or
(2) a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election; provided, however, that, if one Person, or more than one Person acting as a Group, is considered to effectively control Navigators Group, the acquisition of additional control of Navigators Group by the same Person or Persons is not considered a change in the effective control of Navigators Group.
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(C) A Change in the Ownership of a Substantial Portion of Navigators’ Assets. A change in the ownership of a substantial portion of Navigators’ assets occurs on the date that any one Person, or more than one Person acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) assets from Navigators that have a total gross fair market value equal to all or substantially all of the total gross fair market value of all of the assets of Navigators immediately prior to such acquisition or acquisitions; provided, however, that, a transfer of assets by Navigators is not treated as a change in the ownership of such assets if the assets are transferred to:
(1) a stockholder of Navigators Group (immediately before the asset transfer) in exchange for or with respect to its stock;
(2) an entity, 50% or more of the total fair market value or voting power of which is owned, directly or indirectly, by Navigators Group;
(3) a Person, or more than one Person acting as a Group, that owns, directly or indirectly, 50% or more of the total fair market value or voting power of all the outstanding stock of Navigators Group; or
(4) an entity, at least 50% of the total fair market value or voting power of which is owned, directly or indirectly, by a Person described in clause (3) of this subsection (C).
(iii) Good Reason. “Good Reason” shall occur if:
(A) Navigators shall, without the prior written consent of Executive, materially reduce or alter the rights, responsibilities, duties or authority of Executive, including, without limitation, demoting Executive from the position referred to in Sections 1 and 2 to a lower level position; or
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(B) Navigators materially reduces Executive’s base salary, Executive’s annual performance bonus target or Executive’s long term incentive target; or
(C) Navigators changes the principal location at which Executive is required to conduct his employment duties by more than fifty (50) miles; or
(D) Navigators requires Employee to take any action which would be a violation of federal, state or local criminal law; or
(E) Navigators materially breaches this Agreement;
provided, however, that none of such events shall constitute Good Reason unless Executive provides written notice containing the details of such event to Navigators within 15 days after its initial occurrence, and Navigators fails to cure such event within 30 days after its receipt of such notice.
7. WAIVER AND RELEASE. Any and all amounts payable and benefits provided pursuant to Section 6 shall be payable only if the Executive delivers to Navigators and does not revoke a general release of claims in favor of Navigators and its affiliates in substantially the form prescribed by Navigators (the “General Release”). Such release must be executed and delivered (and no longer subject to revocation, if applicable) within 60 days following termination. Failure to timely execute the General Release, or the Executive’s revocation of the General Release, shall result in the forfeiture of any such payments or benefits.
8. CONFIDENTIALITY. For purposes of this Section 8, and Sections 9, 10, 12 and 13 of this Agreement, the term “Navigators” shall include Navigators Management, Navigators Group and all related or affiliated entities. Executive covenants and agrees that, from and after the date hereof, Executive shall not, directly or indirectly disclose any Confidential Information, as hereinafter defined, to any party whatsoever, except to the extent required in the performance of his duties for Navigators or as otherwise permitted in this Agreement, or use any Confidential Information for the benefit of himself or any other person, firm, corporation or other
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entity. The term “Confidential Information” shall mean any information related to Navigators’ business including, without limitation, policy forms, agency and subproducer relationships, product and financial plans, information on pricing and customers, fees and services provided therefor, technical information and data, financial reserves, other financial information, business or product plans or costs, existing or prospective customers or customer lists, pricing data or other terms of sales, customer requirements, buying history or underwriting or risk assessment information, the identity of agents or customers or prospective agents or customers, products, coverages, the terms of any reinsurance, fronting or other agreements of Navigators, and all information to which Executive has access during his employment with Navigators which belongs or relates to a third party and which would constitute Confidential Information if it belonged to or related to Navigators. Confidential Information shall also include knowledge that is specific to Navigators and is gained by Executive through his employment by Navigators. Executive shall not be required to maintain the confidentiality of any information, which is or becomes part of the public domain through no act or omission attributable to Executive.
All Confidential Information and all other data, whether written or electronically stored, computer printouts and other records and written material prepared or compiled by Executive or furnished to Executive while in the employ of Navigators and which relates to the business of Navigators, is the property of Navigators. Upon the termination of Executive’s employment with Navigators, Executive shall return to Navigators, all documents, files, diskettes and other information storage media containing all such Confidential Information and other data, and shall not retain copies thereof.
Nothing in this Agreement prohibits Executive from confidentially or otherwise communicating or filing a charge or complaint with a governmental or regulatory entity, participating in a governmental or regulatory entity investigation, or giving truthful testimony or making other disclosures to a governmental or regulatory entity (in each case, without having to disclose any such conduct to Navigators), or from responding if properly subpoenaed or otherwise required to do so under applicable law. In addition, nothing in this Agreement limits Executive’s right to receive an award from a governmental or regulatory entity for information provided to such an entity (and not as compensation for actual or alleged personal injury or damages to Executive). In addition, nothing in this Agreement shall limit Executive’s ability under applicable United States federal law to (i) disclose in confidence trade secrets to federal, state, and local government officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law or (ii) disclose trade secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure.
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9. NON-SOLICITATION AND NON-HIRING OF NAVIGATORS’ EMPLOYEES. Executive covenants and agrees that, while employed by Navigators and for a period of one year thereafter, Executive will not, directly or indirectly, solicit, hire, or assist any other party in soliciting or hiring, any employee of Navigators, or otherwise seeking to influence any employee of Navigators to terminate employment with Navigators or to become employed by any other party.
10. NON-COMPETITION AND NON-SOLICITATION OF CUSTOMERS, AGENTS AND OTHERS. Executive covenants and agrees that, for a period of one year following the termination of his employment with Navigators (the “Restricted Period”), Executive shall not:
(a) directly or indirectly become employed by, own an interest in, manage, operate, control, provide services to, or become associated with as an officer, director, partner, agent, consultant, stockholder, or otherwise any individual, firm, partnership, corporation, proprietorship or other business entity which competes with the business of Navigators, as conducted by, or contemplated by, Navigators at the time of the termination of Executive’s employment with Navigators, or
(b) solicit or call upon any person, entity or business which was an existing or prospective customer, agent, insured, client, broker or agent of Navigators at any time during the period commencing thirty-six (36) months prior to the termination of Executive’s employment with Navigators for the purpose of selling to or through such parties any insurance coverage which has been offered for sale by Navigators during Executive’s employment with Navigators. The restrictions herein shall extend to any persons, corporations, partnerships, firms, businesses or entities for whom or through whom Navigators engages in the business of providing insurance or conducting related business or for whom or through whom Navigators actively sought or seeks to engage in such business during the period commencing thirty-six (36) months prior to the termination of Executive’s employment with Navigators through the end of the Restricted Period and shall include agents and subagents of Navigators notwithstanding that such persons or entities may have been induced to enter into a business relationship with Navigators by the efforts of Executive or someone on his behalf.
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The restrictions in this Section 10 shall be limited to any county of any state or any comparable jurisdiction of any foreign country in which Navigators, directly or through subsidiaries or affiliates, during the period of Executive’s employment with Navigators or during the Restricted Period, has been or is engaged in the business of providing insurance or conducting related business. Notwithstanding the foregoing, the restrictions set forth in this Section 10 shall not apply to any jurisdiction whose laws prohibit enforcement of such restrictions.
11. JUDICIAL MODIFICATION. The parties hereby agree that the covenants set forth in Sections 9 and 10 hereof are severable and that if the scope or enforceability of any such covenant(s) is adjudged to be overbroad in any manner, a court or other trier of fact of competent jurisdiction may modify and enforce said covenant to give it the maximum scope permitted by applicable law.
12. INJUNCTIVE RELIEF. Executive acknowledges that compliance with the restrictive covenants herein is necessary to protect the business and good will of Navigators, and that a breach of these restrictions will cause irreparable damage to Navigators for which monetary damages may not be adequate. Consequently, Executive agrees that in the event that he breaches or threatens to breach any of the restrictive covenants contained herein, Navigators may be entitled, upon compliance with applicable requirements of law, to both (i) a temporary, preliminary and/or permanent injunction in order to prevent the continuation of such harm, and (ii) money damages insofar as they can be determined. Notwithstanding any of the foregoing, and subject to the requirements of law, nothing in this Agreement shall be construed to prohibit Navigators from also pursuing any other remedy, the parties having agreed that all remedies are to be cumulative to the extent permitted by law. Similarly, nothing herein shall be construed to prohibit Executive to assert all available and appropriate defenses and claims in response to any legal claim asserted by Navigators.
13. LITIGATION EXPENSE. In the event that Executive brings an action in any court of competent jurisdiction seeking to enforce the terms of this Agreement and Executive is the prevailing party in any such court proceeding, Executive shall be reimbursed by Navigators for Executive’s legal fees and expenses incurred in connection with such litigation. Any recovery of legal fees and expenses hereunder shall be in addition to any other recovery or remedy directed by the court.
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14. PARACHUTE PAYMENT MATTERS. Notwithstanding any other provision of this Agreement, if by reason of Section 280G of the Code any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive’s employment (whether payable pursuant to the terms of this Agreement (“Contract Payments”) or any other plan, arrangements or agreement with Navigators or an Affiliate (as defined below) (collectively with the Contract Payments, “Total Payments”)) would not be deductible (in whole or part) by Navigators, an Affiliate or other person making such payment or providing such benefit, then the Contract Payments shall be reduced and, if Contract Payments are reduced to zero, other Total Payments shall be reduced (in the reverse order in which they are due to be paid) until no portion of the Total Payments is not deductible by reason of Section 280G of the Code, provided, however, that no such reduction shall be made unless the net after-tax benefit received by the Executive after such reduction would exceed the net after-tax benefit received by the Executive if no such reduction was made. The foregoing determination and all determinations under this Section 14 shall be made by the Accountants (as defined below). For purposes of this Section 14, “net after-tax benefit” shall mean (i) the Total Payments that would constitute “parachute payments” within the meaning of Section 280G of the Code, less (ii) the amount of all federal, state and local income taxes payable with respect to such payments calculated at the maximum marginal income tax rate for each year in which the foregoing shall be paid to the Executive (based on the rate in effect for such year as set forth in the Code as in effect at the time of the first payment of the foregoing), less (iii) the amount of excise taxes imposed with respect to the payments and benefits described in (i) above by Section 4999 of the Code. For purposes of the foregoing determinations, (a) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have effectively waived in writing prior to the date of payment of any Contract Payment shall be taken into account; (b) no portion of the Total Payments shall be taken into account which in the opinion of the Accountants does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (without regard to subsection (A)(ii) thereof); (c) the Contract Payments (and, thereafter, other Total Payments) shall be reduced only to the extent necessary so that the Total Payments in their entirety constitute reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code, in the opinion of the Accountants; and (d) the value of any non-cash benefit or any deferred payment or benefit
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included in the Total Payments shall be determined by the Accountants in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of this Section 14, the term “Affiliate” means Navigators’ successors, any Person whose actions result in a Change in Control or any company affiliated (or which, as a result of the completion of the transactions causing a Change in Control shall become affiliated) with Navigators within the meaning of Section 1504 of the Code and “Accountants” shall mean Navigators’ independent certified public accountants serving immediately prior to the Change in Control, unless the Accountants are also serving as accountant or auditor for the individual, entity or group effecting the Change in Control, in which case Navigators shall appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accountants hereunder). For purposes of making the determinations and calculations required herein, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. All fees and expenses of the Accountants shall be borne solely by Navigators.
15. COMPLIANCE WITH IRC SECTION 409A. This Agreement is intended to comply with the requirements of Section 409A of the Code, and shall be interpreted and construed consistently with such intent. The payments to the Executive pursuant to this Agreement are also intended to be exempt from Section 409A of the Code to the maximum extent possible, under either the separation pay exemption pursuant to Treasury regulation §1.409A-1(b)(9)(iii) or as short-term deferrals pursuant to Treasury regulation §1.409A-1(b)(4), and for this purpose each payment shall constitute a “separately identified” amount within the meaning of Treasury Regulation §1.409A-2(b)(2). In the event the terms of this Agreement would subject the Executive to taxes or penalties under Section 409A of the Code (“409A Penalties”), the Company and the Executive shall cooperate diligently to amend the terms of this Agreement to avoid such 409A Penalties, to the extent possible; provided that in no event shall the Company be responsible for any 409A Penalties that arise in connection with any amounts payable under this Agreement. To the extent any amounts under this Agreement are payable by reference to the Executive’s “termination of employment,” such term shall be deemed to refer to Executive’s “separation from service,” within the meaning of Section 409A of the Code. Notwithstanding any other provision in this Agreement, if the Executive is a “specified employee,” as defined in Section 409A of the Code, as of the date of Executive’s separation from service, then to the extent any amount payable to the Executive (i) constitutes the payment of
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nonqualified deferred compensation, within the meaning of Section 409A of the Code, (ii) is payable upon the Executive’s separation from service and (iii) under the terms of this Agreement would be payable prior to the six-month anniversary of the Executive’s separation from service, such payment shall be delayed until the earlier to occur of (a) the first business day following the six-month anniversary of the separation from service and (b) the date of Executive’s death. Any reimbursement or advancement payable to the Executive pursuant to this Agreement or otherwise shall be conditioned on the submission by the Executive of all expense reports reasonably required by the Company under any applicable expense reimbursement policy, and shall be paid to the Executive as soon as practicable following receipt of such expense reports, but in no event later than the last day of the calendar year following the calendar year in which the Executive incurred the reimbursable expense. Any amount of expenses eligible for reimbursement, or in-kind benefit provided, during a calendar year shall not affect the amount of expenses eligible for reimbursement, or in-kind benefit to be provided, during any other calendar year. The right to any reimbursement or in-kind benefit pursuant to this Agreement or otherwise shall not be subject to liquidation or exchange for any other benefit.
16. NOTICES. Any and all notices required or permitted to be given under this Agreement will be sufficient if furnished in writing, sent by personal delivery, confirmed facsimile or electronic mail, or certified mail, return receipt requested, to each of the applicable addresses set forth below (or such other address as may from time to time be designated by notice by any party hereto for such purpose):
| To Executive: | Stanley A. Galanski 36 Oak Knoll Road Ridgefield, Connecticut 06877 |
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| To: Navigators: | The Navigators Group, Inc. 400 Atlantic Street, 8th Floor Stamford, Connecticut 06901 Attn: General Counsel |
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Notice shall be deemed given, if by personal delivery, on the date of such delivery or, if by facsimile or electronic mail, on the day of confirmation or, if by certified mail, on the date shown on the applicable return receipt.
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17. MISCELLANEOUS.
(a) Except for other documents referenced in this Agreement, this written Agreement contains the sole and entire Agreement between the parties, and supersedes any and all other agreements between them, including without limitation the Employment Agreement between Navigators Group and Executive, dated March 25, 2001.
(b) The waiver by either party of a breach of any provision of this Agreement shall not operate as, or be construed a waiver of any subsequent breach thereof. No waiver or modification of this Agreement or of any covenant, condition or limitation herein contained shall be valid unless in writing and duly executed by the party to be charged therewith.
(c) In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision thereof and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.
(d) In any action, special proceedings or other proceedings that may be brought arising out of, in connection with, or by reason of this Agreement, the laws of the State of Connecticut shall be applicable and shall govern to the exclusion of the law of any other forum, without regard to the jurisdiction in which the action or special proceeding may be instituted.
(e) The section headings contained herein are inserted for ease of reference only and shall not control or affect the meaning or construction of the provisions hereof.
(f) This Agreement shall be binding on and inure to the benefit of the respective parties and their respective heirs, legal representatives, successors and assigns.
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IN WITNESS WHEREOF, Navigators has hereunto caused this Agreement to be executed by its duly authorized officer and the Executive has hereunto set his hand, all being done in duplicate originals as of the Effective Date.
| THE NAVIGATORS GROUP, INC. | EXECUTIVE | |||
| /s/ Emily B. Miner | /s/ Stanley A. Galanski | |||
| Emily B. Miner, SVP & General Counsel | ||||
| NAVIGATORS MANAGEMENT COMPANY, INC. | ||||
| /s/ Emily B. Miner | ||||
| Emily B. Miner, SVP & General Counsel | ||||
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Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made the 21st day of August, 2018 (the “Effective Date”), by and among THE NAVIGATORS GROUP, INC., a Delaware corporation (“Navigators Group”), NAVIGATORS MANAGEMENT COMPANY, INC., a New York corporation and wholly owned subsidiary of Navigators Group (“Navigators Management” and, unless otherwise specified herein, together with Navigators Group, “Navigators” or the “Company”) and Ciro M. DeFalco (the “Executive”).
WHEREAS, Navigators Management desires to continue to employ the Executive, and the Executive wishes to remain employed by Navigators Management, and to serve as Executive Vice President and Chief Financial Officer of Navigators Group, subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and conditions contained herein, Navigators and the Executive covenant and agree as follows:
1. Employment. Navigators Management hereby continues to employ Executive, and Executive hereby agrees to continue such employment and, during the term of this Agreement, to serve as Executive Vice President and Chief Financial Officer of Navigators Group.
2. Responsibility. Executive shall devote his full working time and best efforts to further the interests of Navigators. During the term of this Agreement, Executive shall perform all duties commensurate with the position set forth in Section 1, as well as such other related duties as may be assigned to him from time to time.
3. Location. During the term of this Agreement, Executive’s position will be based in the Stamford, Connecticut office of Navigators, subject to any required business travel relating to Executive’s employment.
4. Term. The initial term of this Agreement and Executive’s employment hereunder will continue through December 31, 2019, and will continue for subsequent one-year periods, unless either party elects to terminate this Agreement by written notice to the other party at least 120 days prior to the end of the term as then in effect; provided that if a Change in Control, as defined in Section 6(c)(ii), occurs during the term of this Agreement, the term of this Agreement
shall not terminate prior to the later of (A) the one-year anniversary of such Change of Control and (B) the date that is 120 days after written notice is provided to the other party. If Executive terminates this Agreement pursuant to this Section 4, then (a) Executive’s continued employment with Navigators after the termination of this Agreement, if any, will be at-will and may be terminated by Navigators or Executive for any reason or no reason at any time with any rights or entitlements of the employee with respect to such continued employment or termination thereof to be solely determined by the Company’s policies then in effect, and (b) Sections 8 through 12 of this Agreement shall remain in full force and effect for the 12-month period following the end of the term of this Agreement, assuming solely for purposes of the covenants set forth in Sections 9 and 10 of this Agreement that the termination of this Agreement was a termination of Executive’s employment with Navigators. For the avoidance of doubt, although this Section 4 governs the term of this Agreement, either the Executive or Navigators may terminate Executive’s employment hereunder at any time in accordance with the provisions of Section 6 hereof.
5. Compensation. For the services described in Section 2 above to be rendered by Executive hereunder, Navigators agrees as follows:
(a) Base Salary. As of the Effective Date, Executive’s annual base salary shall be $575,000, subject to applicable withholdings. Executive’s base salary shall be subject to annual review by the Compensation Committee of the Board each March in accordance with Navigators’ regular practice, or otherwise as the Compensation Committee deems advisable, but not be decreased to an amount less than the amount set forth in this Section 5(a).
(b) Bonus. Executive will be eligible for an annual performance bonus based upon Navigators’ actual performance as compared to performance targets pre-established by the Compensation Committee of the Board. As of the Effective Date, Executive’s annual performance bonus target amount shall be 100% of Executive’s base salary, with a maximum annual performance bonus amount equal to 150% of Executive’s bonus target amount. This target amount and maximum bonus amount shall be subject to periodic review by the Compensation Committee of the Board but shall not be decreased to amounts less than the amounts set forth in this Section 5(b).
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(c) Long-Term Incentive Compensation. Executive shall be entitled to equity and other long-term incentive awards that may be extended generally from time to time to senior officers of Navigators, as approved by the Compensation Committee of the Board, subject to the terms and conditions of the respective equity and long-term incentive compensation plans and award agreements and the provisions of this Agreement. As of the Effective Date, Executive’s annual long-term incentive compensation target amount shall be 100% of Executive’s base salary.
(d) Executive Benefits. Executive shall be eligible to participate in all Navigators benefit plans made available to senior officers of Navigators.
(e) Vacation; Time Off. Executive shall be entitled to take such vacation, holidays and sick leave as Navigators may reasonably determine, consistent with the performance of his duties hereunder and the then current policies of Navigators in respect to such matters. In no event shall Executive receive less than twenty-two (22) days paid vacation during each fiscal year.
(f) Expenses. Navigators agrees to pay, or reimburse Executive for, reasonable expenses incurred in connection with Executive’s performance of his duties hereunder, upon presentation of appropriate receipts or other documentation of such expense in accordance with Navigators’ published policies pertaining to business expenses.
(g) Retention Award. In consideration of entering into this Agreement and subject to continued employment through December 31, 2019, Employee shall be entitled to a cash award in the amount of $575,000 (the “Retention Award”), payable on January 1, 2020 or as soon as administratively possible thereafter.
6. TERMINATION OF EMPLOYMENT.
In the event Executive’s employment is terminated during the term of this Agreement, the following provisions will govern such termination.
(a) Termination for Cause; Resignation. Navigators may terminate Executive’s employment at any time for Cause, as defined herein, in which case Executive will not be entitled to any compensation beyond the date of the termination of Executive’s employment. If Executive resigns his employment for a reason other than Good Reason, Executive will not be entitled to any compensation beyond the date of the termination of Executive’s employment.
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(b) Termination Without Cause; Resignation for Good Reason. If Executive’s employment is terminated by Navigators during the term of this Agreement for a reason other than Cause, or if Executive resigns for Good Reason, then subject to Executive’s execution and non-revocation of a General Release in accordance with Section 7 of this Agreement, Executive will be entitled to (i) continued payment of his base salary for a period of 12 months, payable on each of Navigators’ regularly scheduled payroll dates (“Severance Pay”); (ii) payment of an amount equal to 100% of Executive’s target annual bonus for the year in which Executive’s employment terminates, payable within 60 days after the date of termination; (iii) payment of any annual bonus earned in the year prior to the year in which Executive’s employment terminates, to the extent not paid and without regard to Executive’s continued employment through the date of payment, payable when otherwise paid to similarly situated senior officers of Navigators; and (iv) subject to Executive’s timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) for the Executive and his or her eligible dependents, and Executive’s continued payment of premiums associated with such coverage, the Company shall pay or reimburse Executive, on a monthly basis, for the portion of the costs of continued health benefits for Executive and Executive’s covered dependents equal to the amount that the Company was paying immediately prior to such termination, with such reimbursement to continue for 12 months following such termination, or such earlier date on which COBRA coverage for the Executive and his or her covered dependents terminates in accordance with COBRA. Any such payments scheduled to be paid prior to the effective date of the General Release shall be delayed until the General Release becomes effective in accordance with Section 7 of this Agreement. In the event that such termination or resignation occurs during the 12-month period following a Change in Control, then in addition to the payments and benefits described in clauses (i) through (iv) above, (A) any outstanding stock grants will immediately vest, with outstanding performance-based awards vesting at 100% of the target level of performance and (B) any unpaid amounts of the Retention Award shall be paid. Notwithstanding the foregoing, in the event that Executive breaches any of the covenants set forth in Sections 8, 9 and 10, all payments of Severance Pay shall thereupon cease and no further payments to Executive shall be made by Navigators.
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(c) Definitions.
(i) Cause. Navigators shall be entitled to terminate the employment of Executive for Cause if any of the following shall occur during the term of this Agreement:
(A) the commission by Executive of a felony;
(B) Executive engages in conduct involving fraud, moral turpitude, dishonesty, gross misconduct, embezzlement, or theft;
(C) the failure of Executive to perform material duties assigned to him by Navigators, insofar as such duties are consistent with Executive’s position, after written notice to Executive of such failure specifying in detail the circumstances constituting such failure, and the expiration of a 30-day period following Executive’s receipt of such written notice, during which Executive has failed to reasonably cure such failure to perform; and
(D) Executive’s material breach of any of the terms of this Agreement or of any written, lawful directive of Navigators or of any Navigators policy set forth in Navigators’ Employee Policy Manual and, to the extent such breach is curable, failure to reasonably cure said breach with five days of Executive’s receipt of such written notice.
(ii) Change in Control. As used herein, the term “Change in Control” shall mean the occurrence of one or more of the following:
(A) A Change in the Ownership of Navigators Group. A change in ownership of Navigators Group shall occur on the date that any one person or entity (a “Person”), or more than one Person acting as a “Group” (within the meaning of regulations under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)), acquires ownership of stock of Navigators Group that, together with stock held by such Person or Group, constitutes more than 50% of the total fair market value or total voting power of the
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stock of Navigators Group; provided, however, that, if any one Person, or more than one Person acting as a Group, is considered to own more than 50% of the total fair market value or total voting power of the stock of Navigators Group, the acquisition of additional stock by the same Person or Persons is not considered to cause a change in the ownership of Navigators Group.
(B) A Change in the Effective Control of Navigators Group. A change in the effective control of Navigators Group occurs on the date that either:
(1) any one Person, or more than one Person acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) ownership of stock of Navigators Group possessing 35% or more of the total voting power of the stock of Navigators Group; provided, however, that, if any one Person, or more than one Person acting as a Group, is considered to effectively control Navigators Group, the acquisition of additional control of Navigators Group by the same Person or Persons is not considered a change in the effective control of Navigators Group; or
(2) a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election; provided, however, that, if one Person, or more than one Person acting as a Group, is considered to effectively control Navigators Group, the acquisition of additional control of Navigators Group by the same Person or Persons is not considered a change in the effective control of Navigators Group.
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(C) A Change in the Ownership of a Substantial Portion of Navigators’ Assets. A change in the ownership of a substantial portion of Navigators’ assets occurs on the date that any one Person, or more than one Person acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) assets from Navigators that have a total gross fair market value equal to all or substantially all of the total gross fair market value of all of the assets of Navigators immediately prior to such acquisition or acquisitions; provided, however, that, a transfer of assets by Navigators is not treated as a change in the ownership of such assets if the assets are transferred to:
(1) a stockholder of Navigators Group (immediately before the asset transfer) in exchange for or with respect to its stock;
(2) an entity, 50% or more of the total fair market value or voting power of which is owned, directly or indirectly, by Navigators Group;
(3) a Person, or more than one Person acting as a Group, that owns, directly or indirectly, 50% or more of the total fair market value or voting power of all the outstanding stock of Navigators Group; or
(4) an entity, at least 50% of the total fair market value or voting power of which is owned, directly or indirectly, by a Person described in clause (3) of this subsection (C).
(iii) Good Reason. “Good Reason” shall occur if:
(A) Navigators shall, without the prior written consent of Executive, materially reduce or alter the rights, responsibilities, duties or authority of Executive, including, without limitation, demoting Executive from the position referred to in Sections 1 and 2 to a lower level position; or
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(B) Navigators materially reduces Executive’s base salary, Executive’s annual performance bonus target or Executive’s long term incentive target; or
(C) Navigators changes the principal location at which Executive is required to conduct his employment duties by more than fifty (50) miles; or
(D) Navigators requires Employee to take any action which would be a violation of federal, state or local criminal law; or
(E) Navigators materially breaches this Agreement;
provided, however, that none of such events shall constitute Good Reason unless Executive provides written notice containing the details of such event to Navigators within 15 days after its initial occurrence, and Navigators fails to cure such event within 30 days after its receipt of such notice.
7. WAIVER AND RELEASE. Any and all amounts payable and benefits provided pursuant to Section 6 shall be payable only if the Executive delivers to Navigators and does not revoke a general release of claims in favor of Navigators and its affiliates in substantially the form prescribed by Navigators (the “General Release”). Such release must be executed and delivered (and no longer subject to revocation, if applicable) within 60 days following termination. Failure to timely execute the General Release, or the Executive’s revocation of the General Release, shall result in the forfeiture of any such payments or benefits.
8. CONFIDENTIALITY. For purposes of this Section 8, and Sections 9, 10, 12 and 13 of this Agreement, the term “Navigators” shall include Navigators Management, Navigators Group and all related or affiliated entities. Executive covenants and agrees that, from and after the date hereof, Executive shall not, directly or indirectly disclose any Confidential Information, as hereinafter defined, to any party whatsoever, except to the extent required in the performance of his duties for Navigators or as otherwise permitted in this Agreement, or use any Confidential Information for the benefit of himself or any other person, firm, corporation or other
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entity. The term “Confidential Information” shall mean any information related to Navigators’ business including, without limitation, policy forms, agency and subproducer relationships, product and financial plans, information on pricing and customers, fees and services provided therefor, technical information and data, financial reserves, other financial information, business or product plans or costs, existing or prospective customers or customer lists, pricing data or other terms of sales, customer requirements, buying history or underwriting or risk assessment information, the identity of agents or customers or prospective agents or customers, products, coverages, the terms of any reinsurance, fronting or other agreements of Navigators, and all information to which Executive has access during his employment with Navigators which belongs or relates to a third party and which would constitute Confidential Information if it belonged to or related to Navigators. Confidential Information shall also include knowledge that is specific to Navigators and is gained by Executive through his employment by Navigators. Executive shall not be required to maintain the confidentiality of any information, which is or becomes part of the public domain through no act or omission attributable to Executive.
All Confidential Information and all other data, whether written or electronically stored, computer printouts and other records and written material prepared or compiled by Executive or furnished to Executive while in the employ of Navigators and which relates to the business of Navigators, is the property of Navigators. Upon the termination of Executive’s employment with Navigators, Executive shall return to Navigators, all documents, files, diskettes and other information storage media containing all such Confidential Information and other data, and shall not retain copies thereof.
Nothing in this Agreement prohibits Executive from confidentially or otherwise communicating or filing a charge or complaint with a governmental or regulatory entity, participating in a governmental or regulatory entity investigation, or giving truthful testimony or making other disclosures to a governmental or regulatory entity (in each case, without having to disclose any such conduct to Navigators), or from responding if properly subpoenaed or otherwise required to do so under applicable law. In addition, nothing in this Agreement limits Executive’s right to receive an award from a governmental or regulatory entity for information provided to such an entity (and not as compensation for actual or alleged personal injury or damages to Executive). In addition, nothing in this Agreement shall limit Executive’s ability under applicable United States federal law to (i) disclose in confidence trade secrets to federal, state, and local government officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law or (ii) disclose trade secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure.
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9. NON-SOLICITATION AND NON-HIRING OF NAVIGATORS’ EMPLOYEES. Executive covenants and agrees that, while employed by Navigators and for a period of one year thereafter, Executive will not, directly or indirectly, solicit, hire, or assist any other party in soliciting or hiring, any employee of Navigators, or otherwise seeking to influence any employee of Navigators to terminate employment with Navigators or to become employed by any other party.
10. NON-SOLICITATION OF CUSTOMERS, AGENTS AND OTHERS. Executive covenants and agrees that, for a period of one year following the termination of his employment with Navigators (the “Restricted Period”), Executive shall not solicit or call upon any person, entity or business which was an existing or prospective customer, agent, insured, client, broker or agent of Navigators at any time during the period commencing twelve (12) months prior to the termination of Executive’s employment with Navigators for the purpose of selling to or through such parties any insurance coverage which has been offered for sale by Navigators during Executive’s employment with Navigators. The restrictions herein shall extend to any persons, corporations, partnerships, firms, businesses or entities for whom or through whom Navigators engages in the business of providing insurance or conducting related business or for whom or through whom Navigators actively sought or seeks to engage in such business during the period commencing twelve (12) months prior to the termination of Executive’s employment with Navigators through the end of the Restricted Period and shall include agents and subagents of Navigators notwithstanding that such persons or entities may have been induced to enter into a business relationship with Navigators by the efforts of Executive or someone on his behalf.
The restrictions in this Section 10 shall be limited to any county of any state or any comparable jurisdiction of any foreign country in which Navigators, directly or through subsidiaries or affiliates, during the period of Executive’s employment with Navigators or during the Restricted Period, has been or is engaged in the business of providing insurance or conducting related business. Notwithstanding the foregoing, the restrictions set forth in this Section 10 shall not apply to any jurisdiction whose laws prohibit enforcement of such restrictions.
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11. JUDICIAL MODIFICATION. The parties hereby agree that the covenants set forth in Sections 9 and 10 hereof are severable and that if the scope or enforceability of any such covenant(s) is adjudged to be overbroad in any manner, a court or other trier of fact of competent jurisdiction may modify and enforce said covenant to give it the maximum scope permitted by applicable law.
12. INJUNCTIVE RELIEF. Executive acknowledges that compliance with the restrictive covenants herein is necessary to protect the business and good will of Navigators, and that a breach of these restrictions will cause irreparable damage to Navigators for which monetary damages may not be adequate. Consequently, Executive agrees that in the event that he breaches or threatens to breach any of the restrictive covenants contained herein, Navigators may be entitled, upon compliance with applicable requirements of law, to both (i) a temporary, preliminary and/or permanent injunction in order to prevent the continuation of such harm, and (ii) money damages insofar as they can be determined. Notwithstanding any of the foregoing, and subject to the requirements of law, nothing in this Agreement shall be construed to prohibit Navigators from also pursuing any other remedy, the parties having agreed that all remedies are to be cumulative to the extent permitted by law. Similarly, nothing herein shall be construed to prohibit Executive to assert all available and appropriate defenses and claims in response to any legal claim asserted by Navigators.
13. LITIGATION EXPENSE. In the event that Executive brings an action in any court of competent jurisdiction seeking to enforce the terms of this Agreement and Executive is the prevailing party in any such court proceeding, Executive shall be reimbursed by Navigators for Executive’s legal fees and expenses incurred in connection with such litigation. Any recovery of legal fees and expenses hereunder shall be in addition to any other recovery or remedy directed by the court.
14. PARACHUTE PAYMENT MATTERS. Notwithstanding any other provision of this Agreement, if by reason of Section 280G of the Code any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive’s employment (whether payable pursuant to the terms of this Agreement (“Contract Payments”) or any other plan, arrangements or agreement with Navigators or an Affiliate (as defined below) (collectively with the Contract Payments, “Total Payments”)) would not be deductible (in whole or part) by Navigators, an Affiliate or other person making such payment or providing such benefit, then the Contract Payments shall be reduced and, if Contract Payments
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are reduced to zero, other Total Payments shall be reduced (in the reverse order in which they are due to be paid) until no portion of the Total Payments is not deductible by reason of Section 280G of the Code, provided, however, that no such reduction shall be made unless the net after-tax benefit received by the Executive after such reduction would exceed the net after-tax benefit received by the Executive if no such reduction was made. The foregoing determination and all determinations under this Section 14 shall be made by the Accountants (as defined below). For purposes of this Section 14, “net after-tax benefit” shall mean (i) the Total Payments that would constitute “parachute payments” within the meaning of Section 280G of the Code, less (ii) the amount of all federal, state and local income taxes payable with respect to such payments calculated at the maximum marginal income tax rate for each year in which the foregoing shall be paid to the Executive (based on the rate in effect for such year as set forth in the Code as in effect at the time of the first payment of the foregoing), less (iii) the amount of excise taxes imposed with respect to the payments and benefits described in (i) above by Section 4999 of the Code. For purposes of the foregoing determinations, (a) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have effectively waived in writing prior to the date of payment of any Contract Payment shall be taken into account; (b) no portion of the Total Payments shall be taken into account which in the opinion of the Accountants does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (without regard to subsection (A)(ii) thereof); (c) the Contract Payments (and, thereafter, other Total Payments) shall be reduced only to the extent necessary so that the Total Payments in their entirety constitute reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code, in the opinion of the Accountants; and (d) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Accountants in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For purposes of this Section 14, the term “Affiliate” means Navigators’ successors, any Person whose actions result in a Change in Control or any company affiliated (or which, as a result of the completion of the transactions causing a Change in Control shall become affiliated) with Navigators within the meaning of Section 1504 of the Code and “Accountants” shall mean Navigators’ independent certified public accountants serving immediately prior to the Change in Control, unless the Accountants are also serving as accountant or auditor for the individual, entity or group effecting the Change in Control, in which case Navigators shall appoint another nationally recognized public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accountants hereunder). For purposes of making the determinations and
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calculations required herein, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. All fees and expenses of the Accountants shall be borne solely by Navigators.
15. COMPLIANCE WITH IRC SECTION 409A. This Agreement is intended to comply with the requirements of Section 409A of the Code, and shall be interpreted and construed consistently with such intent. The payments to the Executive pursuant to this Agreement are also intended to be exempt from Section 409A of the Code to the maximum extent possible, under either the separation pay exemption pursuant to Treasury regulation §1.409A-1(b)(9)(iii) or as short-term deferrals pursuant to Treasury regulation §1.409A-1(b)(4), and for this purpose each payment shall constitute a “separately identified” amount within the meaning of Treasury Regulation §1.409A-2(b)(2). In the event the terms of this Agreement would subject the Executive to taxes or penalties under Section 409A of the Code (“409A Penalties”), the Company and the Executive shall cooperate diligently to amend the terms of this Agreement to avoid such 409A Penalties, to the extent possible; provided that in no event shall the Company be responsible for any 409A Penalties that arise in connection with any amounts payable under this Agreement. To the extent any amounts under this Agreement are payable by reference to the Executive’s “termination of employment,” such term shall be deemed to refer to Executive’s “separation from service,” within the meaning of Section 409A of the Code. Notwithstanding any other provision in this Agreement, if the Executive is a “specified employee,” as defined in Section 409A of the Code, as of the date of Executive’s separation from service, then to the extent any amount payable to the Executive (i) constitutes the payment of nonqualified deferred compensation, within the meaning of Section 409A of the Code, (ii) is payable upon the Executive’s separation from service and (iii) under the terms of this Agreement would be payable prior to the six-month anniversary of the Executive’s separation from service, such payment shall be delayed until the earlier to occur of (a) the first business day following the six-month anniversary of the separation from service and (b) the date of Executive’s death. Any reimbursement or advancement payable to the Executive pursuant to this Agreement or otherwise shall be conditioned on the submission by the Executive of all expense reports reasonably required by the Company under any applicable expense reimbursement policy, and shall be paid to the Executive as soon as practicable following receipt of such expense reports, but in no event later than the last day of the calendar year following the calendar year in which the Executive incurred the reimbursable expense. Any amount of expenses eligible for
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reimbursement, or in-kind benefit provided, during a calendar year shall not affect the amount of expenses eligible for reimbursement, or in-kind benefit to be provided, during any other calendar year. The right to any reimbursement or in-kind benefit pursuant to this Agreement or otherwise shall not be subject to liquidation or exchange for any other benefit.
16. NOTICES. Any and all notices required or permitted to be given under this Agreement will be sufficient if furnished in writing, sent by personal delivery, confirmed facsimile or electronic mail, or certified mail, return receipt requested, to each of the applicable addresses set forth below (or such other address as may from time to time be designated by notice by any party hereto for such purpose):
| To Executive: | Ciro M. DeFalco 43 Hilltop Drive Manhasset, New York 11030 |
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| To: Navigators: | The Navigators Group, Inc. 400 Atlantic Street, 8th Floor Stamford, Connecticut 06901 Attn: General Counsel |
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Notice shall be deemed given, if by personal delivery, on the date of such delivery or, if by facsimile or electronic mail, on the day of confirmation or, if by certified mail, on the date shown on the applicable return receipt.
17. MISCELLANEOUS.
(a) Except for other documents referenced in this Agreement, this written Agreement contains the sole and entire Agreement between the parties, and supersedes any and all other agreements between them.
(b) The waiver by either party of a breach of any provision of this Agreement shall not operate as, or be construed a waiver of any subsequent breach thereof. No waiver or modification of this Agreement or of any covenant, condition or limitation herein contained shall be valid unless in writing and duly executed by the party to be charged therewith.
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(c) In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision thereof and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.
(d) In any action, special proceedings or other proceedings that may be brought arising out of, in connection with, or by reason of this Agreement, the laws of the State of Connecticut shall be applicable and shall govern to the exclusion of the law of any other forum, without regard to the jurisdiction in which the action or special proceeding may be instituted.
(e) The section headings contained herein are inserted for ease of reference only and shall not control or affect the meaning or construction of the provisions hereof.
(f) This Agreement shall be binding on and inure to the benefit of the respective parties and their respective heirs, legal representatives, successors and assigns.
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IN WITNESS WHEREOF, Navigators has hereunto caused this Agreement to be executed by its duly authorized officer and the Executive has hereunto set his hand, all being done in duplicate originals as of the Effective Date.
| THE NAVIGATORS GROUP, INC. | EXECUTIVE | |||
| /s/ Emily B. Miner | /s/ Ciro M. DeFalco | |||
| Emily B. Miner, SVP & General Counsel | ||||
| NAVIGATORS MANAGEMENT COMPANY, INC. | ||||
| /s/ Emily B. Miner | ||||
| Emily B. Miner, SVP & General Counsel | ||||
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Exhibit 10.3
PRESIDENT’S AWARD AGREEMENT
This PRESIDENT’S AWARD AGREEMENT (this “Agreement”) is entered into on this [•] day of [•], 2018 by and between The Navigators Group, Inc., a Delaware corporation (the “Company”), and [•] (“Employee”). Capitalized terms used but not otherwise defined herein have the meanings ascribed to such terms in Section 8 hereof.
WHEREAS, Employee is a key employee of the Company, and the Company has determined that it is in the best interest of the Company to secure Employee’s continued services and to ensure Employee’s continued dedication to the Company.
NOW, THEREFORE, in consideration of the mutual covenants and conditions contained in this Agreement, the Company and Employee hereby agree as follows:
1. President’s Award.
(a) In consideration of Employee’s continued employment and performance, Employee shall be entitled to a cash bonus in the minimum target vesting amount of $[•], subject to adjustment pursuant to the Performance Goals as described in Section 2 below (the “President’s Award”), if Employee remains in continuous employment with the Company during the period beginning on the date of this Agreement and ending on June 30, 2022 (the “Payment Date”).
(b) Except as otherwise determined by the Compensation Committee of the Board of Directors of the Company (the “Committee”), or as provided herein, if Employee’s termination of service with the Company and its affiliates occurs prior to the Payment Date, the President’s Award will be immediately forfeited.
2. Performance Goals.
(a) The amount of the President’s Award that shall become payable, if any, on the Payment Date will be based on the Growth and Profitability (the “Performance Goals”) of the [•] Division (the “Division”) over the thirty-six (36) month period from January 1, 2019 through December 31, 2021 (the “Performance Period”), as measured by the Committee, in accordance with the schedule listed below.
(b) Determination of the ultimate vesting amount of the Performance Award shall be based on Growth and Profitability as follows:
| Growth (Average GWP Growth) | ||||||
| Profitability (Average C/R) |
<5% | 5.01-9.9% | 10% and > | |||
| 100% and > |
100% | 100% | 100% | |||
| 95-99.9% |
115% | 125% | 135% | |||
| 94.9% and < |
120% | 135% | 150% | |||
i. For purposes of Section 2(a), “Growth” will be determined based on the average year over year growth in the Division’s Gross Written Premium (“GWP”) for each calendar year during the Performance Period, with the starting measurement being January 1, 2019. The measurement of GWP shall be based on the GAAP calendar year figures for the Division as reported by Finance.
ii. For purposes of Section 2(a), “Profitability” will be determined using the average Combined Ratio (“C/R”) for the Division as measured on the GAAP calendar year figures during the Performance Period as reported by Finance.
(c) In its sole discretion, the Committee may make adjustments in recognition of certain events affecting achievement of the Performance Goals or in response to changes in applicable laws, regulations or accounting principles.
(d) Subject to the terms of this Agreement, if the Committee determines that the conditions to payment of the President’s Award have been met, the Company shall issue to Employee an amount of cash payable according to the achievement of the Performance Goal as set forth above. The President’s Award is payable in a single cash payment as soon as administratively possible after the Payment Date (but in no event later than 30 days after the Payment Date).
(e) For purposes of this Agreement, employment with the Company shall be deemed to include employment with any of its affiliates.
3. Non-Solicitation and Non-Hiring of Company’s Employees. Employee covenants and agrees that, while employed by Company and for a period of one year thereafter (the “Restricted Period”), Employee will not, directly or indirectly, solicit, hire, or assist any other party in soliciting or hiring, any employee of the Company, or otherwise seeking to influence any employee of the Company to terminate employment with the Company or to become employed by any other party.
4. Non-Solicitation of Customers, Agents and Others.
(a) Employee covenants and agrees that, during the Restricted Period, Employee shall not solicit any Protected Person (as defined herein) for the purpose of selling to or through such Protected Person any insurance coverage which has been offered for sale by the Company during Employee’s employment with the Company. “Protected Person” for purposes of this Agreement, means any person, entity or business which was an existing or prospective customer, agent, insured, client, broker or agent of the Company at any time during the period commencing twelve (12) months prior to the termination of Employee’s employment with the Company, including any persons, corporations, partnerships, firms, businesses or entities for whom or through whom the Company engages in the business of providing insurance or conducting related business or for whom or through whom the Company actively sought or seeks to engage in such business during the period commencing twelve (12) months prior to the termination of Employee’s employment with the Company, and any agents and subagents of the Company, notwithstanding that such persons or entities may have been induced to enter into a business relationship with the Company by the efforts of Employee or someone on his behalf; provided, however, that “Protected Person” shall not include any person or entity as to whom Employee never dealt with (or otherwise solicited) while in the Company’s employ and never received confidential information from the Company concerning such person or entity.
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(b) The restrictions in this Section 4 shall be limited to any county of any state or any comparable jurisdiction of any foreign country in which the Company, directly or through subsidiaries or affiliates, during the period of Employee’s employment with the Company or during the Restricted Period, has been or is engaged in the business of providing insurance or conducting related business. Notwithstanding the foregoing, the restrictions set forth in this Section 4 shall not apply to any jurisdiction whose laws prohibit enforcement of such restrictions.
5. Change in Control.
(a) In the event of a Change in Control, the Payment Date hereunder shall be the date that is one year from the date of the Change in Control (the “CIC Payment Date”).
(b) If a Change in Control shall occur:
i. prior to January 1, 2020, the President’s Award hereunder will be the minimum target vesting amount set forth in Section 1(a), without adjustment under Section 2(b);
ii. on or after January 1, 2020, the President’s Award hereunder will be determined under Section 2(b) based on achievement of the Performance Goals through the date of the Change in Control and the Performance Period shall be modified accordingly.
(c) Notwithstanding anything else contained herein, Employee will be entitled to receive the President’s Award (as determined in accordance with Section 5(b) and payable within 60 days following Employee’s separation from service) if:
i. the Company terminates Employee’s employment without Cause after the Change in Control but prior to the CIC Payment Date; or
ii. Employee resigns from employment with the Company for Good Reason after the Change in Control but prior to the CIC Payment Date.
6. Death or Disability. Upon Employee’s death or Disability, the President’s Award shall vest immediately (a) at the minimum target vesting amount, if Employee’s death or Disability occurs on or prior to the end of the Performance Period, or (b) based on the achievement of the Performance Goals through the end of the Performance Period, if Employee’s death or Disability occurs after the end of the Performance Period, in each case, payable within 60 days following Employee’s death or Disability, as applicable.
7. Withholding Taxes. The Company shall withhold or arrange for one of its affiliates to withhold from the payment due to Employee (or Employee’s heirs or legal representative) hereunder all taxes which, by applicable federal, state, local or other law, are required to be withheld therefrom.
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8. Definitions. The terms used in this Agreement shall have the following meanings:
(a) “Cause” shall mean, as determined by the Company, the occurrence of any one of the following: (a) any act of dishonesty, willful misconduct, gross negligence, intentional or conscious abandonment or neglect of duty; (b) commission of a criminal activity, fraud, embezzlement or any act of moral turpitude (including but not limited to violations of the Company’s sexual harassment or discrimination policies); (c) a failure to reasonably cooperate in any investigation or proceeding concerning the Company; (d) any unauthorized disclosure or use of confidential information or trade secrets; or (e) any violation of any restrictive covenant, such as a non-compete, non-solicit or non-disclosure agreement, between Employee and the Company or its affiliates; provided, however, that in the event Employee is party to an employment agreement with the Company or its affiliates that contains a different definition of Cause, the definition of Cause contained in such employment agreement shall be controlling.
(b) “Change in Control” shall mean the occurrence of one or more of the following:
| i. | A Change in the Ownership of the Company. A change in ownership of the Company shall occur on the date that any one Person, or more than one Person acting as a “Group” (as defined below), acquires ownership of stock of the Company that, together with stock held by such Person or Group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company; provided, however, that, if any one Person, or more than one Person acting as a Group, is considered to own more than 50% of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same Person or Persons is not considered to cause a change in the ownership of the Company. |
| ii. | A Change in the Effective Control of the Company. A change in the effective control of the Company occurs on the date that either: (i) any one Person, or more than one Person acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) ownership of stock of the Company possessing 35% or more of the total voting power of the stock of the Company; provided, however, that, if any one Person, or more than one Person acting as a Group, is considered to effectively control the Company, the acquisition of additional control of the Company by the same Person or Persons is not considered a change in the effective control of the Company; or (ii) a majority of the members of the Company’s Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board prior to the date of the appointment or election; provided, however, that, if one Person, or more than one Person acting as a Group, is considered to effectively control the Company, the acquisition of additional control of the Company by the same Person or Persons is not considered a change in the effective control of the Company. |
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| iii. | A Change in the Ownership of a Substantial Portion of the Company’s Assets. A change in the ownership of a substantial portion of the Company’s assets occurs on the date that any one Person, or more than one Person acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) assets from the Company that have a total Gross Fair Market Value (as defined below) equal to all or substantially all of the total Gross Fair Market Value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that, a transfer of assets by the Company is not treated as a change in the ownership of such assets if the assets are transferred to: (i) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock; (ii) an entity, 50% or more of the total Fair Market Value or voting power of which is owned, directly or indirectly, by the Company; (iii) a Person, or more than one Person acting as a Group, that owns, directly or indirectly, 50% or more of the total Fair Market Value or voting power of all the outstanding stock of the Company; or (iv) an entity, at least 50% of the total Fair Market Value or voting power of which is owned, directly or indirectly, by a Person described in clause (iii) of this Section 8.3(b)(iii). |
For purposes of this definition, “Gross Fair Market Value” means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
For purposes of this definition, “Group” has the meaning ascribed to such term in Treas. Reg. Section 1.409A-3(i)(5)(v)(B), (vi)(D) or (vii)(C), as applicable.
For purposes of this definition, “Person” means any individual, sole proprietorship, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization, institution, public benefit corporation, entity or government instrumentality, division, agency, body or department.
To the extent this Agreement could be subject to Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance thereunder (“Section 409A”) and does not qualify for any exemption from the provision of Section 409A, stock ownership shall be determined under Section 409A.
(c) “Disability” shall mean, as determined by the Company, a mental or physical illness that entitles Employee to receive benefits under the long-term disability plan of the Company (or is affiliates), or if Employee is not covered by such a plan or Employee, a mental or physical illness that renders Employee totally and permanently incapable of performing Employee’s duties for the Company.
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(d) “Good Reason” shall mean shall mean any of the following actions taken by the Company, without the consent of Employee:
| i. | a material diminution in Employee’s base compensation or short-term incentive target; |
| ii. | a change in Employee’s principal place of employment by a distance in excess of fifty (50) miles from its location immediately prior to the Closing; |
| iii. | any other action or inaction that constitutes a material breach by the Company of an agreement under which Employee provides services to the Company; or |
| iv. | the failure by the Company to obtain the assumption of and agreement to perform this Agreement by any successor as contemplated in Section 10(d). |
In order to invoke a termination for Good Reason, Employee shall provide written notice to the Company of the existence of one or more of the conditions described in clauses (i) through (iv) within 15 days following Employee’s knowledge of the initial existence of such condition or conditions, specifying in reasonable detail the conditions constituting Good Reason, and the Company shall have 30 days following receipt of such written notice during which it may remedy the condition.
9. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below:
To the Company:
The Navigators Group, Inc.
400 Atlantic Street, 8th Floor
Stamford, Connecticut 06901
Attn: General Counsel
To Employee:
At the most recent address on file at the Company.
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10. Miscellaneous.
(a) Confidentiality. This Agreement and its terms shall be kept confidential by Employee, except that Employee may disclose the terms of this Agreement to Employee’s attorneys and accountants. Notwithstanding the foregoing, nothing in this Agreement shall prohibit Employee from confidentially or otherwise (without informing the Company) communicating or filing a charge or complaint with a governmental agency or regulatory entity, participating in a governmental agency or regulatory investigation, or giving truthful testimony or disclosures to a governmental agency or regulatory entity, or if properly subpoenaed or otherwise required to do so under applicable law.
(b) Entire Agreement. This Agreement embodies the entire understanding, and supersedes all other oral or written agreements or understandings, among the parties regarding the subject matter hereof. Nothing in this Agreement shall affect the other compensation and benefits to which Employee is eligible as an employee of the Company, including without limitation annual performance-based bonuses. The President’s Award shall not be considered compensation for purposes of any benefit plan, program, policy, or arrangement maintained or hereafter established by the Company or its affiliates except as expressly provided under such plan, program, policy or arrangement.
(c) Amendment; Waiver. This Agreement may not be amended, supplemented, cancelled or discharged, except by written instrument executed by both parties, except that this Agreement may be amended by the Company without Employee’s consent to the extent required or advisable by applicable law. No failure to exercise, and no delay in exercising, any right, power or privilege hereunder shall operate as a waiver thereof. No waiver of any breach of any provision of this Agreement shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision.
(d) Binding Effect; Assignment. The rights and obligations of this Agreement shall bind and inure to the benefit of any successor of the Company by reorganization, merger or consolidation, or any assignee of all or substantially all of the Company’s business and properties. The Company may assign its rights and obligations under this Agreement to any of its affiliated companies without the consent of Employee, but the Company shall remain liable for any payments provided hereunder not timely made by any assignee. Employee’s rights or obligations under this Agreement may not be assigned by Employee.
(e) Further Assurances. Both parties agree to execute, acknowledge, deliver and perform, and cause to be executed, acknowledged, delivered and performed, at any time and from time to time, as the case may be, all such further acts, deeds, assignments, transfers, conveyances, powers of attorney and assurances as may be reasonably necessary to carry out the provisions or intent of this Agreement.
(f) Section 409A. This Agreement is intended to comply with Section 409A or an exemption therefrom and shall be construed and administered in accordance with this intent. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service” under Section
7
409A. In the event the terms of this Agreement would subject Employee to taxes or penalties under Section 409A (“409A Penalties”), the Company may modify the terms of this Agreement to avoid such 409A Penalties, to the extent possible; provided that the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A and in no event shall the Company be responsible for any 409A Penalties that arise in connection with any amounts payable under this Agreement. Notwithstanding any other provision of this Agreement, if any payment provided to Employee in connection with Employee’s termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and Employee is determined to be a “specified employee” as defined in Section 409A(a)(2)(b)(i) who is subject to a six-month delay in payment, then such payment shall not be paid until the first payroll date to occur following the six-month anniversary of Employee’s termination of employment or, if earlier, on Employee’s death.
(g) Headings. The headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.
(h) Governing Law; Validity. The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of [•] without regard to the principle of conflicts of laws. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which other provisions shall remain in full force and effect.
(i) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.
* * * * * *
8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
| The Navigators Group, Inc. | ||
| By: | ||
| Name: | ||
| Title: | ||
| EMPLOYEE |
|
|
| [•] |
Exhibit 99.1
VOTING AGREEMENT
THIS VOTING AGREEMENT (this “Agreement”), dated as of August 22, 2018, among The Hartford Financial Services Group, Inc., a Delaware corporation (“Parent”), and the Persons executing this Agreement as “Stockholders” on the signature page hereto (each a “Stockholder” and collectively, the “Stockholders”).
WHEREAS, concurrently with the execution and delivery of this Agreement, Parent, Renato Acquisition Co., a Delaware corporation and wholly owned Subsidiary of Parent (“Merger Sub”), and The Navigators Group, Inc., a Delaware corporation (the “Company”), are entering into an Agreement and Plan of Merger (as the same may be amended or supplemented from time to time, the “Merger Agreement”), providing for, among other things, the merger of Merger Sub with and into the Company, with the Company surviving such merger (the “Merger”), so that immediately following the Merger, the Company will be a direct wholly owned Subsidiary of Parent;
WHEREAS, as of the date hereof, each Stockholder is the “beneficial owner” (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (collectively, the “Exchange Act”)) of and is entitled to dispose and vote the number of shares of Common Stock, par value $0.10 per share, of the Company (“Common Stock”) set forth on Schedule A hereto (with respect to such Stockholder, the “Owned Shares” and, together with any additional shares of Common Stock of which such Stockholder (a) is otherwise the “beneficial owner” of as of the date hereof or (b) becomes the “beneficial owner” after the date hereof and during the term of this Agreement, the “Subject Shares”); and
WHEREAS, in connection with the execution and delivery of the Merger Agreement, Parent and each Stockholder desire to enter into this Agreement.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
Definitions; Interpretation
Section 1.01 Definitions. Capitalized terms used but not defined herein shall have the meanings given to such terms in the Merger Agreement.
Section 1.02 Interpretation.
(a) When a reference is made in this Agreement to a Schedule, such reference shall be to a Schedule to this Agreement unless otherwise indicated. When a reference is made in this Agreement to a Section, such reference shall be to the corresponding Section of this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”. The words “hereof”, “herein”, “hereto” 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 terms “or”, “any” and “either” are not exclusive. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. All terms defined in this Agreement shall have the defined meanings when used in any document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. Unless otherwise specifically indicated, all references to “dollars” or “$” shall refer to the lawful money of the United States. References to a Person are also to its permitted assigns and successors.
(b) The parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party hereto by virtue of the authorship of any provision of this Agreement.
ARTICLE II
Representations and Warranties of Each Stockholder
Each Stockholder hereby represents and warrants, severally and not jointly, to Parent that:
Section 2.01 Organization. If such Stockholder is not an individual, such Stockholder is duly incorporated or organized, validly existing and in good standing (where such concept is recognized under applicable Law) under the Laws of the jurisdiction of its incorporation or organization.
Section 2.02 Ownership of Owned Shares. Such Stockholder is the beneficial owner of, and has good and marketable title to, the Owned Shares, free and clear of all Liens, except for any Liens created by this Agreement or those imposed by applicable securities Laws. Such Stockholder has the sole right to vote the Owned Shares, and, except as contemplated by this Agreement, none of the Owned Shares are subject to any voting trust or other agreement with respect to the voting of the Owned Shares. Such Stockholder has the sole right to dispose of the Owned Shares with no restrictions, subject to applicable securities Laws on its rights of disposition of the Owned Shares. Except as contemplated by this Agreement, (a) there are no agreements or arrangements of any kind, contingent or otherwise, obligating such Stockholder to sell, transfer, pledge, assign, exchange, lend, encumber or otherwise dispose of (collectively, “Transfer”) or cause to be Transferred any Owned Shares or otherwise relating to the Transfer of any Owned Shares and (b) no Person has any contractual or other right or obligation to purchase or otherwise acquire any of such Owned Shares.
Section 2.03 Authority; Execution and Delivery; Enforceability. If such Stockholder is not an individual, such Stockholder has all necessary power and authority to execute and deliver this Agreement and to perform its obligations hereunder and the execution and delivery by such Stockholder of this Agreement and the performance by such Stockholder of its obligations hereunder have been duly authorized and approved by all requisite action, and no other action on the part of such Stockholder is necessary to authorize the execution and delivery of this Agreement or the performance by such Stockholder of its obligations hereunder. If such Stockholder is an individual, such Stockholder has the requisite legal capacity to execute and deliver this Agreement and to perform such Stockholder’s obligations under this Agreement. This Agreement has been duly executed and delivered by such Stockholder and, assuming due authorization, execution and delivery hereof by Parent, constitutes a legal, valid and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with its terms, except that such enforceability (a) may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, rehabilitation, conservatorship, liquidation, receivership and other similar Laws of general application affecting or relating to the enforcement of creditors’ rights generally and (b) is subject to general principles of equity, whether considered in a proceeding at law or in equity (the “Bankruptcy and Equity Exception”).
Section 2.04 No Conflicts; Governmental Approvals.
(a) Neither the execution and delivery of this Agreement by such Stockholder, nor the performance or compliance by such Stockholder with any of the terms or provisions hereof, will (i) if such Stockholder is not an individual, conflict with or violate any provision of the organizational documents of such Stockholder or (ii)(A) assuming that the actions described in Section 2.04(b) have been completed prior to or promptly after the Effective Time, violate any Law applicable to such Stockholder, (B) violate or constitute a default (or an event which with notice or lapse of time or both would become a default) under any of the terms, conditions or provisions of any Contract to which such Stockholder is a party or accelerate such Stockholder’s obligations under any such Contract or (C) result in the creation of any Lien on any properties or assets of such Stockholder (including the Owned Shares).
(b) No Consent of, or filing, declaration or registration with, any Governmental Authority is necessary for the execution and delivery of this Agreement by such Stockholder or the performance by such Stockholder of its obligations hereunder, other than filings with the SEC under the Exchange Act and such reports under, and such other compliance with, the Exchange Act and other applicable securities Laws as may be required in connection with this Agreement and the transactions contemplated by this Agreement.
Section 2.05 Litigation. There is no pending or, to the knowledge of such Stockholder, threatened in writing, legal or administrative proceeding, suit, arbitration, action or, to the knowledge of such Stockholder, investigation against such Stockholder, that, individually or in the aggregate, has had or would reasonably be expected to prevent, impair or interfere with the ability of such Stockholder to perform its obligations hereunder. There is no outstanding injunction, order, judgment, ruling, decree or writ imposed upon such Stockholder that, individually or in the aggregate, has had or would reasonably be expected to prevent, impair or interfere with the ability of such Stockholder to perform its obligations hereunder.
ARTICLE III
Representations and Warranties of Parent
Parent hereby represents and warrants to the Stockholders that:
Section 3.01 Organization. Parent is a corporation duly organized, validly existing and in good standing under the Laws of Delaware.
Section 3.02 Authority; Execution and Delivery; Enforceability. Parent has all necessary power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by Parent of this Agreement and the performance by Parent of its obligations hereunder have been duly authorized and approved by all requisite action, and no other action on the part of Parent is necessary to authorize the execution and delivery of this Agreement or the performance by Parent of its obligations hereunder. This Agreement has been duly executed and delivered by Parent and, assuming due authorization, execution and delivery hereof by the Stockholders, constitutes a legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except that such enforceability may be limited by and is subject to the Bankruptcy and Equity Exception.
Section 3.03 No Conflicts; Governmental Approvals.
(a) Neither the execution and delivery of this Agreement by Parent, nor the performance or compliance by Parent with any of the terms or provisions hereof, will (i) conflict with or violate any provision of the organizational documents of Parent or (ii)(A) assuming that the actions described in Section 3.03(b) have been completed prior to or promptly after the Effective Time, violate any Law applicable to Parent, (B) violate or constitute a default (or an event which with notice or lapse of time or both would become a default) under any of the terms, conditions or provisions of any Contract to which Parent is a party or accelerate Parent’s obligations under any such Contract or (C) result in the creation of any Lien on any properties or assets of Parent.
(b) Except as set forth in Section 4.03 of the Merger Agreement, no Consent of, or filing, declaration or registration with, any Governmental Authority is necessary for the execution and delivery of this Agreement by Parent or the performance by Parent of its obligations hereunder.
ARTICLE IV
Covenants of Stockholders
Section 4.01 Agreement to Vote.
(a) Each Stockholder agrees that at the Company Stockholders Meeting or at any other meeting of the holders of shares of Common Stock at which a vote contemplated below is taken, and, with respect to the matters described below in clauses (ii)(A), (ii)(B) and (ii)(C), in connection with any action proposed to be taken by written consent of the stockholders of the Company, (i) when such meeting of the holders of shares of Common Stock is held, such Stockholder shall appear at such meeting or otherwise cause the Subject Shares to be counted as present thereat for the purpose of establishing a quorum and (ii) such Stockholder shall vote or cause to be voted at any such meeting, or deliver or cause to be delivered a written consent with respect to, all of such Stockholder’s Subject Shares (A) in favor of adopting the Merger Agreement and any other actions contemplated by the Merger Agreement in respect of which shareholder approval is requested; (B) at the request of Parent, in favor of adoption of any proposal in respect of which the Company Board has (1) determined is reasonably necessary to facilitate any of the Transactions, (2) disclosed the determination described in clause (1) in the Proxy Statement or other written materials disseminated to the stockholders of the Company and (3) recommended to be adopted or approved by the stockholders of the Company; and (C) against (1) any Acquisition Proposal, whether or not constituting a Superior Proposal and (2) any action, proposal, transaction or agreement that would reasonably be expected to prevent, impair, delay or otherwise interfere with the Merger or the other Transactions.
(b) For the avoidance of doubt, each Stockholder shall retain at all times the right to vote any Subject Shares in such Stockholder’s sole discretion, and without any other limitation, on any matters other than those explicitly set forth in this Section 4.01 that are at any time or from time to time presented for consideration to the holders of shares of Common Stock.
(c) Each Stockholder hereby covenants and agrees that it shall not enter into any agreement or undertaking, and shall not take any action or commit or agree to take any action, that would reasonably be expected to prevent, impair or interfere with such Stockholder’s ability to perform any of such Stockholder’s obligations pursuant to this Agreement.
(d) Nothing contained in this Agreement shall be deemed to vest in Parent any direct or indirect ownership or incidence of ownership of or with respect to any Subject Shares. All rights, ownership and economic benefits of and relating to the Subject Shares shall remain vested in and belong to the Stockholders.
Section 4.02 Transfer and Other Restrictions. Prior to obtaining the Company Stockholder Approval, the Stockholders shall not, directly or indirectly, (a) Transfer, or enter into any Contract, option or other arrangement or understanding with respect to the Transfer of, any Subject Shares to any Person or (b) enter into any voting arrangement, whether by proxy, voting agreement or otherwise, or grant a proxy or power of attorney with respect to any Subject Shares, or deposit any Subject Shares into a voting trust. Notwithstanding the foregoing, this Section 4.02 shall not prohibit a Transfer of any Subject Shares by a Stockholder (i) to any of such Stockholder’s immediate family members or lineal descendants, (ii) to a trust for the benefit of such Stockholder or any of such Stockholder’s immediate family members or lineal descendants, (iii) upon the death of a Stockholder or (iv) to the Deeks Family Foundation; provided, that a Transfer referred to in this sentence shall be permitted only if, as a condition to such Transfer, the transferee agrees in writing to be bound by all the terms of this Agreement applicable to the Stockholders. Any attempted Transfer of, or other action with respect to, Subject Shares or any interest therein in violation of this Section 4.02 shall be null and void.
Section 4.03 No-Solicitation. From the date hereof until the Effective Time or, if earlier, the termination of this Agreement or the Merger Agreement in accordance with their respective terms, the Stockholders shall not, and shall use their reasonable best efforts to cause their Representatives not to, directly or indirectly, (a) solicit, initiate or take any action to knowingly facilitate the making of any proposal that constitutes, or would reasonably be expected to lead to, an Acquisition Proposal, (b) engage in or otherwise participate in any discussions or negotiations regarding, or furnish to any other Person any material non-public information for the purpose of facilitating, an Acquisition Proposal or (c) enter into any letter of intent, agreement or agreement in principle with respect to an Acquisition Proposal. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, the Stockholders, their Affiliates and their respective Representatives may furnish information to, and engage and participate in discussions or negotiations with, a Person or group of Persons making an Acquisition Proposal to the same extent that the Company is permitted to do so pursuant to Section 5.02 of the Merger Agreement. If, prior to the Effective Time, any Stockholder receives any Acquisition Proposal, then such Stockholder will promptly (and in any event within 24 hours) notify Parent and the Company of the identity of the Person making, and the material terms of, such Acquisition Proposal, provided, that if such Stockholder is specifically prohibited from disclosing the identity of any Person making an Acquisition Proposal, such Stockholder may redact that identity and any other identifying information but shall otherwise provide all such information relating to the Acquisition Proposal.
Section 4.04 Stock Dividends, etc. If between the date of this Agreement and the Effective Time the issued and outstanding shares of Common Stock shall have been changed into a different number of shares or a different class by reason of the occurrence or record date of any stock dividend, subdivision, reclassification, recapitalization, split, combination, exchange of shares or similar transaction, the terms “Owned Shares” and “Subject Shares” shall be appropriately adjusted to reflect such stock dividend, subdivision, reclassification, recapitalization, split, combination, exchange of shares or similar transaction.
Section 4.05 Waiver of Appraisal Rights. Each Stockholder hereby waives, and shall cause to be waived, any and all rights of appraisal or rights to dissent from the Merger or the other Transactions that such Stockholder may have under applicable Law.
Section 4.06 Disclosure. The Stockholders hereby authorize the Company, Parent and Merger Sub to publish and disclose in any announcement or disclosure required by the SEC and in the Proxy Statement and the filings required for the Company Insurance Approvals and the Parent Insurance Approvals, each Stockholder’s identity and ownership of the Subject Shares and the nature of each Stockholder’s obligations under this Agreement. Parent hereby authorizes each Stockholder to disclose in any disclosure required by any Governmental Authority Parent’s identity and the nature of Parent’s obligations under this Agreement.
Section 4.07 Fiduciary Responsibilities. Notwithstanding any provision of this Agreement to the contrary, this Agreement shall apply to each Stockholder solely in its capacity as a holder of shares of Common Stock and not in any other capacity, and nothing in this Agreement shall limit, restrict or affect the rights and obligations of any Stockholder, officer or director or designee of the Stockholders or their Affiliates serving on the Company Board from taking any action in his or her capacity as a director of the Company or voting or providing written consent as a director of the Company in his or her sole discretion on any matter, whether in connection with the Merger Agreement or otherwise, and no action or omissions by any such Persons in his or her capacity as a director of the Company shall be deemed to constitute a breach of any provision of this Agreement.
Section 4.08 Additional Owned Shares. Each Stockholder shall provide as promptly as reasonably practicable written notice to Parent of additional shares of Common Stock of which such Stockholder becomes the “beneficial owner” after the date hereof and during the term of this Agreement.
ARTICLE V
General Provisions
Section 5.01 Notices. All notices, requests and other communications to any party hereunder shall be in writing and shall be deemed given if delivered personally, facsimiled (which is confirmed), emailed (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses:
| If to Parent, to:
|
||||
| The Hartford Financial Services Group, Inc. | ||||
| One Hartford Plaza Hartford, CT 06155 | ||||
| Attention: |
Chief Financial Officer, General Counsel | |||
| Facsimile: |
855-388-6397 | |||
| Email: |
beth.bombara@thehartford.com david.robinson@thehartford.com mergers@thehartford.com
| |||
| with a copy (which will not constitute notice) to: | ||||
|
Mayer Brown LLP 1221 Avenue of the Americas New York, NY 10020 | ||||
| Attention: |
Stephen G. Rooney Andrew J. Noreuil | |||
| Facsimile: |
212-849-5632 312-706-8183 | |||
| Email: |
srooney@mayerbrown.com anoreuil@mayerbrown.com | |||
If to the Stockholders, to:
Marc M. Tract
Katten Muchin Rosenman LLP
575 Madison Avenue
New York, NY 10022
Facsimile: 212-894-5760
Email: marc.tract@kattenlaw.com
with a copy (which will not constitute notice) to:
Ballard Spahr LLP
1675 Broadway, 19th Floor
New York, NY 10019
Attention: David H. Landau
Facsimile: 212-223-1942
Email: landaud@ballardspahr.com
Section 5.02 Severability. If any term or other provision of this Agreement is finally determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any applicable Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner adverse to any party or such party waives its rights under this Section 5.02 with respect thereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable manner to the end that the transactions contemplated by this Agreement are fulfilled to the extent possible.
Section 5.03 Counterparts. This Agreement may be executed in one or more counterparts (including by facsimile or electronic mail), each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties hereto.
Section 5.04 Entire Agreement; No Third Party Beneficiaries. This Agreement, together with the Schedule attached hereto and the Merger Agreement, constitutes the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and thereof. This Agreement is not intended to and shall not confer upon any Person other than the parties hereto any rights or remedies hereunder.
Section 5.05 Governing Law.
(a) This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed entirely within that state, regardless of the laws that might otherwise govern under any applicable conflict of laws principles. All Actions arising out of or relating to the interpretation and enforcement of the provisions of this Agreement and in respect of the transactions contemplated by this Agreement shall be heard and determined in the Delaware Court of Chancery, or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any Federal court within the State of Delaware, or, if both the Delaware Court of Chancery and the Federal courts within the State of Delaware decline to accept
jurisdiction over a particular matter, any other state court within the State of Delaware, and, in each case, any appellate court therefrom. The parties hereto hereby irrevocably submit to the exclusive jurisdiction and venue of such courts in any such Actions and irrevocably waive the defense of an inconvenient forum or lack of jurisdiction to the maintenance of any such Action. The consents to jurisdiction and venue set forth in this Section 5.05(a) shall not constitute general consents to service of process in the State of Delaware and shall have no effect for any purpose except as provided in this paragraph and shall not be deemed to confer rights on any Person other than the parties hereto. Each party hereto agrees that service of process upon such party in any Action arising out of or relating to this Agreement shall be effective if notice is given by overnight courier at the address set forth in Section 5.01. The parties hereto agree that a final judgment in any such Action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Law; provided, however, that nothing contained in the foregoing shall restrict any party’s rights to seek any post-judgment relief regarding, or any appeal from, a final trial court judgment.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 5.05(b).
Section 5.06 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of Law or otherwise, by (a) Parent without the prior written consent of a majority (in terms of aggregate voting power) of the Subject Shares or (b) any Stockholders without the prior written consent of Parent. Subject to the immediately preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns. Any purported assignment not permitted under this Section 5.06 shall be null and void.
Section 5.07 Specific Enforcement. The parties hereto agree that irreparable damage for which monetary relief, even if available, would not be an adequate remedy, would occur in the event that any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached. The parties acknowledge and agree that the parties shall be entitled to an injunction or injunctions, specific performance or other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in the courts described in Section 5.05(a) without proof of damages or otherwise, this being in addition to any other remedy to which they are entitled under this Agreement. The parties hereto agree not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to Law or inequitable for any reason, and not to assert that a remedy of monetary damages would provide an adequate remedy or that the parties otherwise have an adequate remedy at law. The parties hereto acknowledge and agree that any party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Section 5.07 shall not be required to provide any bond or other security in connection with any such order or injunction.
Section 5.08 Amendment; Waiver. At any time prior to the Effective Time, this Agreement may be amended or supplemented in any and all respects only by written agreement of the parties hereto. No failure or delay by the Stockholders or Parent in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.
Section 5.09 Expenses. Except as set forth herein, each of the parties shall be responsible for its own fees and expenses (including the fees and expenses of investment bankers and accountants) in connection with the entering into and performance under this Agreement and the consummation of the transactions contemplated hereby. Notwithstanding the foregoing, Parent acknowledges that the fees and expenses of counsel to the Stockholders in connection with the entry into and performance under this Agreement and the consummation of the transactions contemplated by hereby will be borne by the Company.
Section 5.10 Termination. This Agreement and all obligations of the parties hereto hereunder shall automatically terminate, without further action by any party hereto, upon the earliest of (a) the Walk Away Date (as defined in the Merger Agreement on the date hereof), (b) the Effective Time, (c) the termination of the Merger Agreement in accordance with its terms, (d) the occurrence of an Adverse Recommendation Change pursuant to and in accordance with the Merger Agreement, (e) with respect to any Stockholder, the entry without the prior written consent of such Stockholder into any amendment or modification to the Merger Agreement that results in a decrease in the Merger Consideration (as defined in the Merger Agreement on the date hereof) or a change in the type of consideration payable or that otherwise causes a change that is adverse in any material respect to such Stockholder, and (f) with respect to any Stockholder, the mutual written agreement of such Stockholder and Parent. In the event of any such termination of this Agreement, this Agreement shall forthwith become null and void and have no effect, without any liability or obligation on the part of Parent or the applicable Stockholders, other than liability for any willful and material breach of this Agreement prior to such termination; provided that the provisions set forth in this Article V shall survive the termination of this Agreement.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all as of the date first written above.
| THE HARTFORD FINANCIAL SERVICES GROUP, INC. | ||
| By | /s/ Christopher J. Swift | |
| Name: Christopher J. Swift | ||
| Title: Chief Executive Officer | ||
[Signature page to Voting Agreement]
| STOCKHOLDERS: |
| /s/ Terence N. Deeks |
| TERENCE N. DEEKS |
| /s/ Monica J. Deeks |
| MONICA J. DEEKS |
| DEEKS FAMILY FOUNDATION | ||
| By: | /s/ Terence N. Deeks | |
| Name: Terence N. Deeks | ||
| Title: Trustee and Manager | ||
| TERENCE N. DEEKS 2016 QUALIFIED THREE YEAR ANNUITY TRUST U/A/D APRIL 4, 2016 | ||
| By: | /s/ Monica J. Deeks | |
| Name: Monica J. Deeks | ||
| Title: Trustee | ||
| TERENCE N. DEEKS 2017 QUALIFIED THREE YEAR ANNUITY TRUST U/A/D APRIL 19, 2017 | ||
| By: | /s/ Monica J. Deeks | |
| Name: Monica J. Deeks | ||
| Title: Trustee | ||
| TERENCE N. DEEKS 2018 QUALIFIED THREE YEAR ANNUITY TRUST U/A/D FEBRUARY 1, 2018 | ||
| By: | /s/ Monica J. Deeks | |
| Name: Monica J. Deeks | ||
| Title: Trustee | ||
| CLAIRE E. DEEKS 1995 TRUST U/A/D AUGUST 10, 1995 | ||
| By: | /s/ Marc M. Tract | |
| Name: Marc M. Tract | ||
| Title: Trustee | ||
[Signature page to Voting Agreement]
| JANE DEEKS MCCARTHY 1995 TRUST U/A/D NOVEMBER 27, 1995 | ||
| By: | /s/ Marc M. Tract | |
| Name: Marc M. Tract | ||
| Title: Trustee | ||
| KAREN E. DEEKS 2001 TRUST U/A/D JANUARY 9, 2001 | ||
| By: | /s/ Marc M. Tract | |
| Name: Marc M. Tract | ||
| Title: Trustee | ||
| IAN E. DEEKS 2003 TRUST U/A/D APRIL 28, 2003 | ||
| By: | /s/ Marc M. Tract | |
| Name: Marc M. Tract | ||
| Title: Trustee | ||
| 2005 DEEKS DECLARATION CHILDREN’S TRUST U/A/D MARCH 23, 2005 | ||
| By: | /s/ Marc M. Tract | |
| Name: Marc M. Tract | ||
| Title: Trustee | ||
| KATELYN T. MCCARTHY ORIGINAL 1998 TRUST U/A/D AUGUST 13, 1998 | ||
| By: | /s/ Marc M. Tract | |
| Name: Marc M. Tract | ||
| Title: Trustee | ||
| COURTNEY J. MCCARTHY ORIGINAL 1998 TRUST U/A/D AUGUST 13, 1998 | ||
| By: | /s/ Marc M. Tract | |
| Name: Marc M. Tract | ||
| Title: Trustee | ||
[Signature page to Voting Agreement]
SCHEDULE A
| Stockholder |
Shares of Common Stock | |||
| Terence N. Deeks |
141,481 | |||
| Terence N. Deeks and Monica Deeks, jointly |
56,400 | |||
| Deeks Family Foundation |
41,000 | |||
| Terence N. Deeks 2016 Qualified Three Year Annuity Trust u/a/d April 4, 2016 |
772,364 | |||
| Terence N. Deeks 2017 Qualified Three Year Annuity Trust u/a/d April 19, 2017 |
758,180 | |||
| Terence N. Deeks 2018 Qualified Three Year Annuity Trust u/a/d February 1, 2018 |
882,612 | |||
| Claire E. Deeks 1995 Trust u/a/d August 10, 1995 |
338,884 | |||
| Jane Deeks McCarthy 1995 Trust u/a/d November 27, 1995 |
548,405 | |||
| Karen E. Deeks 2001 Trust u/a/d January 9, 2001 |
353,884 | |||
| Ian E. Deeks 2003 Trust u/a/d April 28, 2003 |
353,884 | |||
| 2005 Deeks Declaration Children’s Trust u/a/d March 23, 2005 |
2,098,711 | |||
| Katelyn T. McCarthy Original 1998 Trust u/a/d August 13, 1998 |
13,200 | |||
| Courtney J. McCarthy Original 1998 Trust u/a/d August 13, 1998 |
13,200 | |||
Exhibit 99.2
VOTING AGREEMENT
THIS VOTING AGREEMENT (this “Agreement”), dated as of August 22, 2018, among The Hartford Financial Services Group, Inc., a Delaware corporation (“Parent”), and Stanley A. Galanski (“Stockholder”).
WHEREAS, concurrently with the execution and delivery of this Agreement, Parent, Renato Acquisition Co., a Delaware corporation and wholly owned Subsidiary of Parent (“Merger Sub”), and The Navigators Group, Inc., a Delaware corporation (the “Company”), are entering into an Agreement and Plan of Merger (as the same may be amended or supplemented from time to time, the “Merger Agreement”), providing for, among other things, the merger of Merger Sub with and into the Company, with the Company surviving such merger (the “Merger”), so that immediately following the Merger, the Company will be a direct wholly owned Subsidiary of Parent;
WHEREAS, as of the date hereof, Stockholder is the “beneficial owner” (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (collectively, the “Exchange Act”)) of and is entitled to dispose and vote the number of shares of Common Stock, par value $0.10 per share, of the Company (“Common Stock”) set forth on Schedule A hereto (the “Owned Shares” and, together with any additional shares of Common Stock of which Stockholder (a) is otherwise the “beneficial owner” of as of the date hereof or (b) becomes the “beneficial owner” after the date hereof and during the term of this Agreement, the “Subject Shares”); and
WHEREAS, in connection with the execution and delivery of the Merger Agreement, Parent and Stockholder desire to enter into this Agreement.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
Definitions; Interpretation
Section 1.01 Definitions. Capitalized terms used but not defined herein shall have the meanings given to such terms in the Merger Agreement.
Section 1.02 Interpretation.
(a) When a reference is made in this Agreement to a Schedule, such reference shall be to a Schedule to this Agreement unless otherwise indicated. When a reference is made in this Agreement to a Section, such reference shall be to the corresponding Section of this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”. The words “hereof”, “herein”, “hereto” 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 terms “or”, “any” and “either” are not exclusive. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. All terms defined in this Agreement shall have the defined meanings when used in any document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is
referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. Unless otherwise specifically indicated, all references to “dollars” or “$” shall refer to the lawful money of the United States. References to a Person are also to its permitted assigns and successors.
(b) The parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party hereto by virtue of the authorship of any provision of this Agreement.
ARTICLE II
Representations and Warranties of Stockholder
Stockholder hereby represents and warrants to Parent that:
Section 2.01 Ownership of Owned Shares. Stockholder is the beneficial owner of, and has good and marketable title to, the Owned Shares, free and clear of all Liens, except for any Liens created by this Agreement or those imposed by applicable securities Laws. Stockholder does not beneficially own (within the meaning of Section 13 of the Exchange Act) any shares of Common Stock other than the Owned Shares. Stockholder has the sole right to vote the Owned Shares, and, except as contemplated by this Agreement, none of the Owned Shares are subject to any voting trust or other agreement with respect to the voting of the Owned Shares. Stockholder has the sole right to dispose of the Owned Shares with no restrictions, subject to applicable securities Laws on his rights of disposition of the Owned Shares. Except as contemplated by this Agreement, (a) there are no agreements or arrangements of any kind, contingent or otherwise, obligating Stockholder to sell, transfer, pledge, assign, exchange, lend, encumber or otherwise dispose of (collectively, “Transfer”) or cause to be Transferred any Owned Shares or otherwise relating to the Transfer of any Owned Shares and (b) no Person has any contractual or other right or obligation to purchase or otherwise acquire any of such Owned Shares.
Section 2.02 Capacity; Execution and Delivery; Enforceability. Stockholder has the requisite legal capacity to execute and deliver this Agreement and to perform Stockholder’s obligations under this Agreement. This Agreement has been duly executed and delivered by Stockholder and, assuming due authorization, execution and delivery hereof by Parent, constitutes a legal, valid and binding obligation of Stockholder, enforceable against Stockholder in accordance with its terms, except that such enforceability (a) may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium, rehabilitation, conservatorship, liquidation, receivership and other similar Laws of general application affecting or relating to the enforcement of creditors’ rights generally and (b) is subject to general principles of equity, whether considered in a proceeding at law or in equity (the “Bankruptcy and Equity Exception”).
Section 2.03 No Conflicts; Governmental Approvals.
(a) Neither the execution and delivery of this Agreement by Stockholder, nor the performance or compliance by Stockholder with any of the terms or provisions hereof, will (i) assuming that the actions described in Section 2.03(b) have been completed prior to or promptly after the Effective Time, violate any Law applicable to Stockholder, (ii) violate or constitute a default (or an event which with notice or lapse of time or both would become a default) under any of the terms, conditions or provisions of any Contract to which Stockholder is a party or accelerate Stockholder’s obligations under any such Contract or (iii) result in the creation of any Lien on any properties or assets of Stockholder (including the Owned Shares).
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(b) No Consent of, or filing, declaration or registration with, any Governmental Authority is necessary for the execution and delivery of this Agreement by Stockholder or the performance by Stockholder of his obligations hereunder, other than filings with the SEC under the Exchange Act and such reports under, and such other compliance with, the Exchange Act and other applicable securities Laws as may be required in connection with this Agreement and the transactions contemplated by this Agreement.
Section 2.04 Litigation. There is no pending or, to the knowledge of Stockholder, threatened in writing, legal or administrative proceeding, suit, arbitration, action or, to the knowledge of Stockholder, investigation against Stockholder, that, individually or in the aggregate, has had or would reasonably be expected to prevent, impair or interfere with the ability of Stockholder to perform his obligations hereunder. There is no outstanding injunction, order, judgment, ruling, decree or writ imposed upon Stockholder that, individually or in the aggregate, has had or would reasonably be expected to prevent, impair or interfere with the ability of Stockholder to perform his obligations hereunder.
ARTICLE III
Representations and Warranties of Parent
Parent hereby represents and warrants to Stockholder that:
Section 3.01 Organization. Parent is a corporation duly organized, validly existing and in good standing under the Laws of Delaware.
Section 3.02 Authority; Execution and Delivery; Enforceability. Parent has all necessary power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by Parent of this Agreement and the performance by Parent of its obligations hereunder have been duly authorized and approved by all requisite action, and no other action on the part of Parent is necessary to authorize the execution and delivery of this Agreement or the performance by Parent of its obligations hereunder. This Agreement has been duly executed and delivered by Parent and, assuming due authorization, execution and delivery hereof by Stockholder, constitutes a legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except that such enforceability may be limited by and is subject to the Bankruptcy and Equity Exception.
Section 3.03 No Conflicts; Governmental Approvals.
(a) Neither the execution and delivery of this Agreement by Parent, nor the performance or compliance by Parent with any of the terms or provisions hereof, will (i) conflict with or violate any provision of the organizational documents of Parent or (ii)(A) assuming that the actions described in Section 3.03(b) have been completed prior to or promptly after the Effective Time, violate any Law applicable to Parent, (B) violate or constitute a default (or an event which with notice or lapse of time or both would become a default) under any of the terms, conditions or provisions of any Contract to which Parent is a party or accelerate Parent’s obligations under any such Contract or (C) result in the creation of any Lien on any properties or assets of Parent.
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(b) Except as set forth in Section 4.03 of the Merger Agreement, no Consent of, or filing, declaration or registration with, any Governmental Authority is necessary for the execution and delivery of this Agreement by Parent or the performance by Parent of its obligations hereunder.
ARTICLE IV
Covenants of Stockholder
Section 4.01 Agreement to Vote.
(a) Stockholder agrees that at the Company Stockholders Meeting or at any other meeting of the holders of shares of Common Stock at which a vote contemplated below is taken, and, with respect to the matters described below in clauses (ii)(A), (ii)(B) and (ii)(C), in connection with any action proposed to be taken by written consent of the stockholders of the Company, (i) when such meeting of the holders of shares of Common Stock is held, Stockholder shall appear at such meeting or otherwise cause the Subject Shares to be counted as present thereat for the purpose of establishing a quorum and (ii) Stockholder shall vote or cause to be voted at any such meeting, or deliver or cause to be delivered a written consent with respect to, all of Stockholder’s Subject Shares (A) in favor of adopting the Merger Agreement and any other actions contemplated by the Merger Agreement in respect of which shareholder approval is requested; (B) at the request of Parent, in favor of adoption of any proposal in respect of which the Company Board has (1) determined is reasonably necessary to facilitate any of the Transactions, (2) disclosed the determination described in clause (1) in the Proxy Statement or other written materials disseminated to the stockholders of the Company and (3) recommended to be adopted or approved by the stockholders of the Company; and (C) against (1) any Acquisition Proposal, whether or not constituting a Superior Proposal and (2) any action, proposal, transaction or agreement that would reasonably be expected to prevent, impair, delay or otherwise interfere with the Merger or the other Transactions.
(b) For the avoidance of doubt, Stockholder shall retain at all times the right to vote any Subject Shares in Stockholder’s sole discretion, and without any other limitation, on any matters other than those explicitly set forth in this Section 4.01 that are at any time or from time to time presented for consideration to the holders of shares of Common Stock.
(c) Stockholder hereby covenants and agrees that it shall not enter into any agreement or undertaking, and shall not take any action or commit or agree to take any action, that would reasonably be expected to prevent, impair or interfere with Stockholder’s ability to perform any of Stockholder’s obligations pursuant to this Agreement.
(d) Nothing contained in this Agreement shall be deemed to vest in Parent any direct or indirect ownership or incidence of ownership of or with respect to any Subject Shares. All rights, ownership and economic benefits of and relating to the Subject Shares shall remain vested in and belong to Stockholder.
Section 4.02 Transfer and Other Restrictions. Prior to obtaining the Company Stockholder Approval, Stockholder shall not, directly or indirectly, (a) Transfer, or enter into any Contract, option or other arrangement or understanding with respect to the Transfer of, any Subject Shares to any Person or (b) enter into any voting arrangement, whether by proxy, voting agreement or otherwise, or grant a proxy or power of attorney with respect to any Subject Shares, or deposit any Subject Shares into a voting trust. Notwithstanding the foregoing, this Section 4.02 shall not prohibit a Transfer of any Subject Shares by Stockholder to any of Stockholder’s immediate family members or lineal descendants or to a trust for the
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benefit of Stockholder or any of Stockholder’s immediate family members or lineal descendants, or upon the death of Stockholder; provided, that a Transfer referred to in this sentence shall be permitted only if, as a condition to such Transfer, the transferee agrees in writing to be bound by all the terms of this Agreement applicable to Stockholder. Any attempted Transfer of, or other action with respect to, Subject Shares or any interest therein in violation of this Section 4.02 shall be null and void.
Section 4.03 No-Solicitation. From the date hereof until the Effective Time or, if earlier, the termination of this Agreement or the Merger Agreement in accordance with their respective terms, Stockholder shall not, and shall use his reasonable best efforts to cause his Representatives not to, directly or indirectly, (a) solicit, initiate or take any action to knowingly facilitate the making of any proposal that constitutes, or would reasonably be expected to lead to, an Acquisition Proposal, (b) engage in or otherwise participate in any discussions or negotiations regarding, or furnish to any other Person any material non-public information for the purpose of facilitating, an Acquisition Proposal or (c) enter into any letter of intent, agreement or agreement in principle with respect to an Acquisition Proposal. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, Stockholder, his Affiliates and their respective Representatives may furnish information to, and engage and participate in discussions or negotiations with, a Person or group of Persons making an Acquisition Proposal to the same extent that the Company is permitted to do so pursuant to Section 5.02 of the Merger Agreement. If, prior to the Effective Time, Stockholder receives any Acquisition Proposal, then Stockholder will promptly (and in any event within 24 hours) notify Parent and the Company of the identity of the Person making, and the material terms of, such Acquisition Proposal, provided, that if Stockholder is specifically prohibited from disclosing the identity of any Person making an Acquisition Proposal, Stockholder may redact that identity and any other identifying information but shall otherwise provide all such information relating to the Acquisition Proposal.
Section 4.04 Stock Dividends, etc. If between the date of this Agreement and the Effective Time the issued and outstanding shares of Common Stock shall have been changed into a different number of shares or a different class by reason of the occurrence or record date of any stock dividend, subdivision, reclassification, recapitalization, split, combination, exchange of shares or similar transaction, the terms “Owned Shares” and “Subject Shares” shall be appropriately adjusted to reflect such stock dividend, subdivision, reclassification, recapitalization, split, combination, exchange of shares or similar transaction.
Section 4.05 Waiver of Appraisal Rights. Stockholder hereby waives, and shall cause to be waived, any and all rights of appraisal or rights to dissent from the Merger or the other Transactions that Stockholder may have under applicable Law.
Section 4.06 Disclosure. Stockholder hereby authorizes the Company, Parent and Merger Sub to publish and disclose in any announcement or disclosure required by the SEC and in the Proxy Statement and the filings required for the Company Insurance Approvals and the Parent Insurance Approvals, Stockholder’s identity and ownership of the Subject Shares and the nature of Stockholder’s obligations under this Agreement. Parent hereby authorizes Stockholder to disclose in any disclosure required by any Governmental Authority Parent’s identity and the nature of Parent’s obligations under this Agreement.
Section 4.07 Fiduciary Responsibilities. Notwithstanding any provision of this Agreement to the contrary, this Agreement shall apply to Stockholder solely in his capacity as a holder of shares of Common Stock and not in any other capacity, and nothing in this Agreement shall limit, restrict or affect the rights and obligations of Stockholder, any designee of Stockholder or their Affiliates serving on the Company Board from taking any action in his or her capacity as a director of the Company or voting or providing written consent as a director of the Company in his or her sole discretion on any matter, whether in connection with the Merger Agreement or otherwise, and no action or omissions by any such Persons in his or her capacity as a director of the Company shall be deemed to constitute a breach of any provision of this Agreement.
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Section 4.08 Additional Owned Shares. Stockholder shall provide as promptly as reasonably practicable written notice to Parent of additional shares of Common Stock of which Stockholder becomes the “beneficial owner” after the date hereof and during the term of this Agreement.
ARTICLE V
General Provisions
Section 5.01 Notices. All notices, requests and other communications to any party hereunder shall be in writing and shall be deemed given if delivered personally, facsimiled (which is confirmed), emailed (which is confirmed) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses:
| If to Parent, to: | ||
| The Hartford Financial Services Group, Inc. | ||
| One Hartford Plaza | ||
| Hartford, CT 06155 | ||
| Attention: |
Chief Financial Officer, General Counsel | |
| Facsimile: |
855-388-6397 | |
| Email: |
beth.bombara@thehartford.com | |
| david.robinson@thehartford.com | ||
| mergers@thehartford.com | ||
| with a copy (which will not constitute notice) to: | ||
| Mayer Brown LLP | ||
| 1221 Avenue of the Americas | ||
| New York, NY 10020 | ||
| Attention: |
Stephen G. Rooney | |
| Andrew J. Noreuil | ||
| Facsimile: |
212-849-5632 | |
| 312-706-8183 | ||
| Email: |
srooney@mayerbrown.com | |
| anoreuil@mayerbrown.com | ||
| If to Stockholder, to: | ||
| Stanley A. Galanski | ||
| 400 Atlantic Street, 8th Floor | ||
| Stamford, CT 06901 | ||
| Email: |
sgalanski@navg.com | |
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| with a copy (which will not constitute notice) to: | ||
| Sidley Austin LLP | ||
| 787 Seventh Avenue | ||
| New York, NY 10019 | ||
| Attention: |
Michael A. Gordon Kirk Lipsey Gabriel Saltarelli | |
| Facsimile: |
212-839-5599 | |
| Email: |
mgordon@sidley.com | |
| klipsey@sidley.com | ||
| gsaltarelli@sidely.com | ||
Section 5.02 Severability. If any term or other provision of this Agreement is finally determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any applicable Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner adverse to any party or such party waives its rights under this Section 5.02 with respect thereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable manner to the end that the transactions contemplated by this Agreement are fulfilled to the extent possible.
Section 5.03 Counterparts. This Agreement may be executed in one or more counterparts (including by facsimile or electronic mail), each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other parties hereto.
Section 5.04 Entire Agreement; No Third Party Beneficiaries. This Agreement, together with the Schedule attached hereto and the Merger Agreement, constitutes the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and thereof. This Agreement is not intended to and shall not confer upon any Person other than the parties hereto any rights or remedies hereunder.
Section 5.05 Governing Law.
(a) This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed entirely within that state, regardless of the laws that might otherwise govern under any applicable conflict of laws principles. All Actions arising out of or relating to the interpretation and enforcement of the provisions of this Agreement and in respect of the transactions contemplated by this Agreement shall be heard and determined in the Delaware Court of Chancery, or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any Federal court within the State of Delaware, or, if both the Delaware Court of Chancery and the Federal courts within the State of Delaware decline to accept jurisdiction over a particular matter, any other state court within the State of Delaware, and, in each case, any appellate court therefrom. The parties hereto hereby irrevocably submit to the exclusive jurisdiction and venue of such courts in any such Actions and irrevocably waive the defense of an inconvenient forum or lack of jurisdiction to the maintenance of any such Action. The consents to jurisdiction and venue set forth in this Section 5.05(a) shall not constitute general consents to service of process in the State of Delaware and shall have no effect for any purpose except as provided in this paragraph and shall not be deemed to confer rights on any Person other than the parties hereto. Each party hereto agrees that service of process upon such party in any Action arising out of or relating to this Agreement shall be effective if notice is given by overnight courier at the address set forth in Section 5.01. The parties hereto agree that a final judgment in any such Action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Law; provided, however, that nothing contained in the foregoing shall restrict any party’s rights to seek any post-judgment relief regarding, or any appeal from, a final trial court judgment.
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(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 5.05(b).
Section 5.06 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of Law or otherwise, by (a) Parent without the prior written consent of a majority (in terms of aggregate voting power) of the Subject Shares or (b) Stockholder without the prior written consent of Parent. Subject to the immediately preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns. Any purported assignment not permitted under this Section 5.06 shall be null and void.
Section 5.07 Specific Enforcement. The parties hereto agree that irreparable damage for which monetary relief, even if available, would not be an adequate remedy, would occur in the event that any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached. The parties acknowledge and agree that the parties shall be entitled to an injunction or injunctions, specific performance or other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in the courts described in Section 5.05(a) without proof of damages or otherwise, this being in addition to any other remedy to which they are entitled under this Agreement. The parties hereto agree not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to Law or inequitable for any reason, and not to assert that a remedy of monetary damages would provide an adequate remedy or that the parties otherwise have an adequate remedy at law. The parties hereto acknowledge and agree that any party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in accordance with this Section 5.07 shall not be required to provide any bond or other security in connection with any such order or injunction.
Section 5.08 Amendment; Waiver. At any time prior to the Effective Time, this Agreement may be amended or supplemented in any and all respects only by written agreement of the parties hereto. No failure or delay by Stockholder or Parent in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party.
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Section 5.09 Expenses. Except as set forth herein, each of the parties shall be responsible for its own fees and expenses (including the fees and expenses of investment bankers and accountants) in connection with the entering into and performance under this Agreement and the consummation of the transactions contemplated hereby. Notwithstanding the foregoing, Parent acknowledges that the fees and expenses of counsel to Stockholder in connection with the entry into and performance under this Agreement and the consummation of the transactions contemplated by hereby will be borne by the Company.
Section 5.10 Termination. This Agreement and all obligations of the parties hereto hereunder shall automatically terminate, without further action by any party hereto, upon the earliest of (a) the Walk Away Date (as defined in the Merger Agreement on the date hereof), (b) the Effective Time, (c) the termination of the Merger Agreement in accordance with its terms, (d) the occurrence of an Adverse Recommendation Change pursuant to and in accordance with the Merger Agreement, (e) the entry without the prior written consent of Stockholder into any amendment or modification to the Merger Agreement that results in a decrease in the Merger Consideration (as defined in the Merger Agreement on the date hereof) or a change in the type of consideration payable or that otherwise causes a change that is adverse in any material respect to Stockholder, and (f) the mutual written agreement of Stosckholder and Parent. In the event of any such termination of this Agreement, this Agreement shall forthwith become null and void and have no effect, without any liability or obligation on the part of Parent or Stockholder, other than liability for any willful and material breach of this Agreement prior to such termination; provided that the provisions set forth in this Article V shall survive the termination of this Agreement.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement, all as of the date first written above.
| THE HARTFORD FINANCIAL SERVICES GROUP, INC. | ||
| By | /s/ Christopher J. Swift | |
| Name: Christopher J. Swift | ||
| Title: Chief Executive Officer | ||
| STOCKHOLDER: |
| /s/ Stanley A. Galanski |
| STANLEY A. GALANSKI |
[Signature page to Voting Agreement]
SCHEDULE A
| Stockholder |
Shares of Common Stock | |||
| Stanley A. Galanski |
345,945 | |||