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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
Check the appropriate box:
Preliminary Information Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14c-5(d)(2))
Definitive Information Statement
VERICITY, INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
No fee required.
Fee paid previously with preliminary materials.
Fee computed on table in exhibit required by Item 25(b) of Schedule 14A (17 CFR 240.14a-101) per Item 1 of this Schedule and Exchange Act Rules 14c-5(g) and 0-11.

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VERICITY, INC.
1350 E. Touhy Avenue, Suite 205W
Des Plaines, Illinois 60018

NOTICE OF WRITTEN CONSENT AND APPRAISAL RIGHTS
AND
INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.
To our Stockholders:
This notice of written consent and appraisal rights and information statement is being furnished to the holders of common stock, par value $0.001 per share (“Company Common Stock”), of Vericity, Inc. (the “Company”) in connection with the Agreement and Plan of Merger, dated as of October 3, 2023 (the “Merger Agreement”), a copy of which is attached as Annex A to this information statement, by and among the Company, iA American Holdings Inc. (“Parent”), Long Grove Acquisition Corp. (“Merger Sub”) and, solely for purposes of Section 6.03 and Article IX thereof, iA Financial Corporation Inc. (“Guarantor”). Upon the completion of the merger of Merger Sub with and into the Company (the “Merger”), each share of Company Common Stock, issued and outstanding immediately prior to the effective time of the Merger (the “Effective Time”) will be canceled and converted automatically into the right to receive $11.43 in cash, without interest and less any required withholding taxes (the “Merger Consideration”). However, the Merger Consideration will not be paid in respect of (i) any shares of Company Common Stock owned by the Company as treasury stock or by Parent, Merger Sub or any other subsidiary of Parent (which will be canceled and retired and cease to exist and no payment or distribution will be made thereto) and (ii) those shares of Company Common Stock with respect to which appraisal rights under Delaware law are properly exercised and not withdrawn.
On October 2, 2023, the board of directors of the Company (the “Board”) unanimously: (i) determined that the Merger Agreement, the Merger and the other transactions contemplated thereby are fair to, advisable and in the best interests of the Company and its stockholders; (ii) approved the Merger Agreement, the Merger and the other transactions contemplated thereby; (iii) approved the execution, delivery and performance by the Company of the Merger Agreement and, subject to obtaining the required approval of the Company’s stockholders, the consummation of the Merger and the other transactions contemplated thereby; (iv) directed that the adoption of the Merger Agreement be submitted to a vote of the holders of issued and outstanding shares of the Company Common Stock; and (v) recommended the adoption of the Merger Agreement by the holders of the Company Common Stock.
The adoption of the Merger Agreement by the Company stockholders required the affirmative vote or written consent of stockholders of the Company holding at least a majority of the outstanding shares of Company Common Stock. On October 3, 2023, Apex Holdco L.P. (“Apex”), an affiliate of J.C. Flowers & Co. (“JC Flowers”) and direct holder of 11,373,352 shares of Company Common Stock (representing approximately 76.5% of the outstanding shares of Company Common Stock), delivered a written consent adopting the Merger Agreement in all respects and voting all of the shares of Company Common Stock held by Apex in favor of the adoption of the Merger Agreement (the “Written Consent”). As a result, no further action by any stockholder of the Company is required under applicable law or the Merger Agreement (or otherwise) to adopt the Merger Agreement, and the Company will not be soliciting your vote to adopt the Merger Agreement and will not call a stockholders meeting for purposes of voting on the adoption of the Merger Agreement. This notice and the accompanying information statement shall constitute notice to you from the Company of the Written Consent contemplated by Section 228 of the General Corporation Law of the State of Delaware (the “DGCL”).
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
NO ACTION IN CONNECTION WITH THIS INFORMATION STATEMENT IS REQUIRED BY YOU.
Under Section 262 of the DGCL, if the Merger is completed, subject to compliance with the requirements of Section 262 of the DGCL, holders of shares of Company Common Stock who have not voted to adopt the Merger Agreement and who have not otherwise waived their rights under Section 262 of the DGCL will have the right to seek an appraisal for, and be paid the “fair value” of, their shares of Company Common Stock (as determined by the Court of Chancery of the State of Delaware) instead of receiving the Merger Consideration.

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As noted above, Apex delivered the Written Consent on October 3, 2023. In addition, following the execution of the Merger Agreement and the delivery of the Written Consent, certain directors and officers of the Company (the “Waiving Stockholders”) agreed to waive their rights to seek appraisal under Section 262 of the DGCL in connection with the Merger. For a stockholder other than Apex or the Waiving Stockholders to exercise appraisal rights, such stockholder must submit a written demand for an appraisal no later than 20 days after the mailing of this information statement, or December 4, 2023, and comply precisely with other procedures set forth in Section 262 of the DGCL, which are summarized in the accompanying information statement. The summary of Section 262 of the DGCL set forth in this information statement is qualified in its entirety by reference to the full text of Section 262 of the DGCL. You are encouraged to read the entirety of Section 262 of the DGCL, which is accessible, without subscription or cost, at: https://delcode.delaware.gov/title8/c001/sc09/index.html#262 and incorporated by reference herein. This notice and the accompanying information statement shall constitute notice to you from the Company of the availability of appraisal rights under Section 262 of the DGCL.
We urge you to read the entire information statement carefully. If the Merger is completed, you will receive instructions regarding how to exchange your Company Common Stock for the Merger Consideration.
 
BY ORDER OF THE BOARD OF DIRECTORS,
 
 
 
James E. Hohmann
 
Director and Chief Executive Officer
Neither the U.S. Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the Merger, passed upon the fairness of the Merger or passed upon the adequacy or accuracy of the disclosures in this notice or the accompanying information statement. Any representation to the contrary is a criminal offense.
This information statement is dated November 14, 2023 and is first being mailed to stockholders on or about November 14, 2023.

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SUMMARY TERM SHEET
This summary highlights selected information from this information statement and may not contain all of the information that is important to you. To understand the merger (the “Merger”) contemplated by the Agreement and Plan of Merger, dated as of October 3, 2023 (the “Merger Agreement”), by and among iA American Holdings Inc. (“Parent”), Long Grove Acquisition Corp., a wholly owned direct subsidiary of Parent (“Merger Sub”), and Vericity, Inc. (the “Company”), and, solely for purposes of Section 6.03 and Article IX thereof, iA Financial Corporation Inc. (“Guarantor”), and for a more complete description of the legal terms of the Merger, you should carefully read this entire information statement, the annexes attached to this information statement and the documents referred to or incorporated by reference in this information statement. Any document or agreement referred to in this information statement is qualified in its entirety by reference to the full text of such document or agreement. In this information statement, the terms “Company,” “we,” “us” and “our” refer to the Company. All references in this information statement to terms defined in the notice to which this information statement is attached have the meanings provided in that notice. All references to capitalized terms not defined herein or in the notice to which this information statement is attached have the meanings ascribed to them in the Merger Agreement, a copy of which is attached as Annex A to this information statement.
The Parties to the Merger Agreement (page 12)
The Company. The Company, incorporated in the state of Delaware, is a direct-to-consumer life insurance solutions company. Through its subsidiaries, the Company offers life insurance products, which are distributed by both the Company’s Efinancial business and by independent agents. The Company is headquartered in Des Plaines, Illinois and trades on the Nasdaq Capital Market under the ticker symbol “VERY.” Additional information regarding the Company is contained in our filings with the Securities and Exchange Commission (the “SEC”), copies of which may be obtained without charge by following the instructions in the section entitled “Where You Can Find More Information.”
Guarantor. Guarantor, incorporated in the province of Quebec, Canada, is one of the largest insurance and wealth management groups in Canada, with operations in the United States serving over four million clients. Guarantor is headquartered in Quebec City, Quebec, Canada and trades on the Toronto Stock Exchange under the ticker symbol “IAG”. Additional information regarding Guarantor is contained in its filings with Autorité des marchés financiers. This information is available on the website maintained by the Canadian Securities Administrators’ national system at www.sedarplus.ca.
Parent. Parent, incorporated in the state of Delaware, is an indirect, wholly-owned subsidiary of Guarantor that serves as a holding company for Guarantor’s United States life insurance business. Parent and its subsidiaries operate primarily in the simplified issue marketplace, with final expense life insurance and mortgage/family protection term life representing over 85% of new business sales. Parent and its subsidiaries market life insurance products through independent marketing organizations and collectively have approximately 27,000 independent agents under contract.
Merger Sub. Merger Sub is a Delaware corporation that is a direct wholly owned subsidiary of Parent. Merger Sub was formed on October 2, 2023, expressly for the Merger and conducts no other business. At the effective time of the Merger (the “Effective Time”), Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation.
The Merger (page 13)
On October 3, 2023, the Company entered into the Merger Agreement with Guarantor, Parent and Merger Sub. Upon the terms and subject to the conditions provided in the Merger Agreement, and in accordance with Delaware law, at the Effective Time, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation. As a result, the Company will become a direct, wholly owned subsidiary of Parent and an indirect, wholly owned subsidiary of Guarantor following the Effective Time. Because the Merger Consideration will be paid in cash, you will receive no equity interest in Parent, and after the Effective Time you will have no continuing equity interest in the Company.
The Merger Consideration (page 36)
Upon consummation of the Merger, each share of common stock of the Company, par value $0.001 per share (“Company Common Stock”), issued and outstanding immediately prior to the consummation of the
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Merger, other than appraisal shares, shares held in treasury and shares owned by Guarantor, Parent or Merger Sub, will automatically be converted into the right to receive $11.43 in cash, without interest and less any required withholding taxes, upon surrender of each respective share certificate and automatically in the case of book-entry shares.
We encourage you to read the Merger Agreement, which is attached as Annex A to this information statement, as it is the legal document that governs the Merger.
Recommendation of the Board; Reasons for the Merger (page 18)
After consideration of various factors as discussed in the section entitled “The Merger—Recommendation of the Board; Reasons for the Merger,” at a meeting on October 2, 2023, the board of directors of the Company (the “Board”) unanimously (i) determined that the Merger Agreement, the Merger and the other transactions contemplated thereby are fair to, advisable and in the best interests of the Company and its stockholders, (ii) approved the Merger Agreement, the Merger and the other transactions contemplated thereby, (iii) approved the execution, delivery and performance by the Company of the Merger Agreement and, subject to obtaining the required approval of the Company’s stockholders, the consummation of the Merger and the other transactions contemplated thereby, (iv) directed that the adoption of the Merger Agreement be submitted to a vote of the holders of issued and outstanding shares of the Company Common Stock and (v) recommended the adoption of the Merger Agreement by the holders of the Company Common Stock.
Required Stockholder Approval for the Merger (page 21)
Under Delaware law and the Company’s certificate of incorporation and bylaws, the adoption of the Merger Agreement required the affirmative vote or written consent of the holders of the Company Common Stock representing a majority of the aggregate voting power of the outstanding shares of Company Common Stock entitled to vote thereon. As of October 2, 2023, the record date for determining stockholders of the Company entitled to vote on the adoption of the Merger Agreement, there were 14,875,000 shares of Company Common Stock outstanding. Holders of Company Common Stock are entitled to one vote for each share held of record on all matters on which stockholders are entitled to vote generally, including adoption of the Merger Agreement.
On October 3, 2023, following the execution of the Merger Agreement, Apex Holdco L.P. (“Apex”), which held more than a majority of the Company’s outstanding shares of Company Common Stock as of such date and as of October 2, 2023, the record date for determining stockholders of the Company entitled to vote on the adoption of the Merger Agreement, delivered a written consent adopting the Merger Agreement in all respects and voting all of the shares of Company Common Stock held by Apex in favor of the adoption of the Merger Agreement (the “Written Consent”). No further action by any other Company stockholder is required under applicable law or the Merger Agreement (or otherwise) in connection with the adoption of the Merger Agreement. As a result, the Company is not soliciting your vote for the adoption of the Merger Agreement and will not call a stockholders’ meeting for purposes of voting on the adoption of the Merger Agreement. No action by the stockholders of Parent is required to complete the Merger and all requisite corporate action by and on behalf of Merger Sub required to complete the Merger has been taken.
When actions are taken by written consent of less than all of the stockholders entitled to vote on a matter, Delaware law requires notice of the action to those stockholders who did not consent in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting. This information statement and the notice attached hereto constitute notice to you of action by written consent as required by Delaware law.
Opinion of Raymond James (page 22 and Annex B)
The Company retained Raymond James Financial, Inc. (“Raymond James”) to act as its financial advisor in connection with the Merger. In connection with Raymond James’ engagement, the Board requested that Raymond James evaluate the fairness, based upon market, economic, financial and other circumstances and conditions existing and disclosed to Raymond James by the Company as of October 2, 2023, from a financial point of view, to the holders of Company Common Stock (other than treasury shares, shares held by Parent and Merger Sub, or shares for which appraisal rights are properly exercised (collectively, the “Excluded Shares”)), of the Merger Consideration to be received by such holders in the Merger pursuant to the Merger Agreement, based upon and subject to the qualifications, assumptions, limitations and other matters considered in connection with the
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preparation of Raymond James’s opinion. On October 2, 2023, at a meeting of the Board held to evaluate the Merger, Raymond James rendered to the Board an oral opinion, confirmed by delivery of a written opinion dated October 2, 2023, to the effect that, as of that date and based on and subject to the assumptions, procedures, factors, qualifications and limitations set forth in Raymond James’ written opinion, the Merger Consideration to be received by the holders of Company Common Stock (other than holders of Excluded Shares) in the Merger pursuant to the terms of the Merger Agreement was fair, from a financial point of view, to such stockholders.
The full text of Raymond James’ written opinion, dated October 2, 2023, to the Board, which sets forth, among other things, the assumptions, procedures, factors, qualifications and limitations on the review undertaken by Raymond James in connection with such opinion, is attached to this information statement as Annex B. The description of Raymond James’ opinion set forth in this information statement is qualified in its entirety by reference to the full text of Raymond James’ opinion. Raymond James’ opinion was provided to the Board for its information in connection with its evaluation of the fairness, from a financial point of view, to the holders of Company Common Stock (other than holders of Excluded Shares) of the Merger Consideration to be received by such stockholders in the Merger pursuant to the terms of the Merger Agreement and did not address any other aspect of the Merger, including the merits of the Merger as compared to alternative transactions or strategies that may be available to the Company or the underlying decision of the Company to proceed with the Merger. Raymond James’ opinion does not constitute advice or a recommendation to any stockholder as to how such stockholder should vote or act on any matter relating to the Merger or otherwise.
The Merger Agreement (page 36 and Annex A)
Conditions to Consummation of the Merger (page 49)
The obligations of the parties to consummate the Merger are subject to the satisfaction or waiver on or prior to the date of closing of the following conditions:
The Company’s stockholders adopting the Merger Agreement and this information statement having been cleared by the SEC and sent to stockholders of the Company at least 20 days prior to the date on which the closing of the Merger occurs (the “Closing Date”);
the absence of any applicable law or any order, writ, judgment, injunction, decree, stipulation, determination or award (whether temporary, preliminary or permanent) enacted, issued or enforced by any court or governmental authority and that prevents or prohibits consummation of the Merger;
approvals from the Illinois Department of Insurance, The Autorité des marchés financiers and the Texas Department of Insurance having been obtained and remaining in full force and effect, in each case, without the imposition of a burdensome condition (as defined in the Merger Agreement); and
the applicable waiting periods, together with any extensions, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 having expired or been terminated.
The obligations of Parent and Merger Sub to effect the Merger are also subject to satisfaction or waiver on or prior to the closing of the Merger of the following additional conditions:
the representations and warranties of the Company relating to (i) its organization and good standing, (ii) its authority to enter into the Merger Agreement, (iii) certain matters relating to the Company’s subsidiaries, (iv) the absence of any conflict between the Merger Agreement and the Company’s organizational documents, (v) the absence of any takeover statutes that would apply to the Merger and (vi) brokers’ and finders’ fees being true and correct in all material respects as of the Closing Date as though made as of the Closing Date;
the representations and warranties of the Company relating to the capitalization of the Company being true and correct in all respects (except for de minimis inaccuracies) as of the Closing Date as though made as of the Closing Date;
the representations and warranties of the Company relating to there having been no change, circumstance, effect, development, condition or occurrence that, individually or in the aggregate, has had, or would be reasonably expected to have, a Company Material Adverse Effect from December 31, 2022 through October 3, 2023, being true and correct in all respects as of the Closing Date as though made as of the Closing Date;
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other than the representations and warranties mentioned in the three bullets directly above, all of the Company’s other representations and warranties being true and correct (without giving effect to any materiality or Company Material Adverse Effect qualifiers) as of the Closing Date 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 earlier date) except where such failure to be true and correct would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect;
the Company having performed or complied in all material respects with all agreements and covenants required to be performed or complied with by it under the Merger Agreement on or prior to the Effective Time;
the Company having delivered to Parent a certificate, dated as of the Closing Date and executed by the Chief Executive Officer and the Chief Financial Officer of the Company to the effect that each of the conditions specified above has been satisfied; and
since the date of the Merger Agreement, there not having occurred any Company Material Adverse Effect which is continuing.
The obligations of the Company to effect the Merger are also subject to satisfaction or waiver on or prior to the closing of the Merger of, among other things, the following additional conditions:
Parent and Merger Sub’s representations and warranties are true and correct (without giving effect to any materiality or Parent Material Adverse Effect qualifiers) as of the Closing Date 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 earlier date) except where such failure to be true and correct would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect;
Parent and Merger Sub having performed or complied in all material respects with all agreements and covenants required to be performed or complied with by them under the Merger Agreement on or prior to the Effective Time; and Parent providing a certificate to such effect dated as of the Closing Date and executed by a duly authorized officer of Parent; and
Parent having delivered to the Company a certificate, dated as of the Closing Date and executed by a duly authorized officer of Parent to the effect that each of the conditions specified above has been satisfied.
Takeover Proposals (page 45)
The Merger Agreement provides that (i) the Company and its directors and officers will not, (ii) the Company’s subsidiaries and its subsidiaries’ directors and officers will not and (iii) the Company will use reasonable best efforts to ensure that its and its subsidiaries’ other representatives will not, directly or indirectly:
solicit, initiate, propose or knowingly encourage or facilitate any inquiry regarding or the making of any proposal that constitutes or is reasonably likely to lead to or result in a Takeover Proposal (as defined in the section entitled “The Merger Agreement—Takeover Proposals” and in the Merger Agreement);
enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person any confidential information with respect to, any Takeover Proposal;
provide access to the properties, assets or employees of the Company or its subsidiaries to any person with respect to or in response to any Takeover Proposal or any inquiry, proposal or offer that is reasonably likely to lead to or result in a Takeover Proposal;
enter into any agreement or agreement in principle requiring, directly or indirectly, the Company to abandon, terminate or fail to consummate the transactions contemplated by the Merger Agreement; or
resolve, propose or agree to do any of the foregoing.
Notwithstanding the foregoing, prior to Parent’s receipt of the Written Consent, in response to a bona fide Takeover Proposal, if the Board determined that the Takeover Proposal constituted or would reasonably have
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been expected to lead to a superior proposal and that the failure to take such action would be inconsistent with the fiduciary duties of directors under Delaware law, the Company was permitted to furnish information to, and participate in discussions and negotiations with, the party making such Takeover Proposal.
If the Board determined at any time prior to Parent’s receipt of the Written Consent, after consultation with its financial advisors and outside counsel, that the failure to take such action would be inconsistent with the fiduciary duties of directors under Delaware law, the Board was permitted to cause the Company to terminate the Merger Agreement in order to enter into a definitive agreement regarding a superior proposal, subject to certain notice provisions and Parent’s right to renegotiate the terms of the Merger Agreement such that the Takeover Proposal would no longer constitute a superior proposal and subject to the Company’s substantially concurrent payment to Parent of a termination fee of $5,100,000.
As a result of the execution and delivery of the Written Consent on October 3, 2023, the requisite stockholder approval has been obtained and, as of such date, the provisions discussed above that permit the Board to change its recommendation or to terminate the Merger Agreement (including to terminate the Merger Agreement to accept a superior proposal) are no longer applicable.
A more detailed description of the foregoing circumstances and other circumstances under which the Company or Parent may terminate the Merger Agreement is provided in the section entitled “The Merger Agreement—Takeover Proposals.”
Termination (page 50)
The Merger Agreement may be terminated at any time prior to the consummation of the Merger by the mutual written consent of the Company and Parent; provided that such termination will have been approved by their respective boards of directors.
In addition, the Merger Agreement may be terminated by either Parent or the Company if:
any governmental authority has issued a final and nonappealable order or there exists any law, in each case, permanently preventing or prohibiting the Merger; and
the Merger is not consummated prior to July 3, 2024, which date shall be extended until October 3, 2024, if on July 3, 2024 the only condition to the consummation of the Merger that has not been satisfied or waived is the condition to obtain the required regulatory approvals (such applicable date, the “Outside Termination Date”); provided that the right to terminate the Merger Agreement will not be available to any party whose failure to fulfill any obligation under the Merger Agreement has been the cause of, or results in, the failure of the Merger to occur on or before such date.
The Merger Agreement also may be terminated by Parent if there has been a breach by the Company of (i) any representation, warranty, covenant or agreement contained in the Merger Agreement that would, individually or in the aggregate, result in a failure by the Company to satisfy certain conditions to Parent’s obligations to consummate the Merger (as described under the section of this information statement entitled “Conditions to Consummation of the Merger”) and (ii) such breach has not been cured (or is not capable of being cured) before the earlier of (i) 30 days following Parent delivering written notice to the Company of such breach or (ii) the Outside Termination Date.
The Merger Agreement also may be terminated by the Company if there has been a breach by Parent of (i) any representation, warranty, covenant or agreement contained in the Merger Agreement that would, individually or in the aggregate, result in a failure by Parent to satisfy certain conditions to the Company’s obligations to consummate the Merger (as described under the section of this information statement entitled “Conditions to Consummation of the Merger”) and (ii) such breach has not been cured (or is not capable of being cured) before the earlier of (i) 30 days following the Company delivering written notice to Parent of such breach or (ii) the Outside Termination Date.
The Merger Agreement also contains certain other termination rights of the parties that could only be exercised prior to the receipt of the required approval of the Company’s stockholders for the Merger, including certain termination rights which would have required payment of a termination fee of $5,100,000 by the Company. Since the required stockholder approval was obtained by Apex delivering the Written Consent on October 3, 2023, these termination rights are no longer exercisable.
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Interests of Our Directors and Executive Officers in the Merger (page 30)
You should be aware that the Company’s directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of the Company stockholders generally. These interests are described in more detail in the section entitled “The Merger—Interests of Our Directors and Executive Officers in the Merger.” The Board was aware of these interests and considered them, among other matters, in evaluating and approving the Merger Agreement. These interests may include the following, among others:
each profits interest (Class B Unit and Class B Priority Unit) of Apex granted pursuant to the Apex 2019 Equity Incentive Plan (the “EI Plan”) that is outstanding immediately prior to the Effective Time will fully vest and the holder of such interest will be eligible to receive the amounts distributable with respect to such units;
to the extent there remains unallocated any portion of the profits interests reserved for issuance under the EI Plan immediately preceding a change in control of the Company, Apex will establish a cash bonus pool representing the amount that would have been paid pursuant to such outstanding profits interests, and Apex will allocate such cash bonus pool to participants in the EI Plan, including the Company’s directors and executive officers;
the payment of enhanced severance benefits under the Company’s severance plan upon a qualifying termination of employment occurring during a specified period before or following the completion of the Merger; and
continued indemnification and directors’ and officers’ liability insurance to be provided by the surviving corporation.
U.S. Federal Income Tax Consequences of the Merger (page 34)
The exchange of shares of Company Common Stock for cash pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. A U.S. Holder (as defined below) of Company Common Stock generally will recognize gain or loss equal to the difference between (i) the amount of cash received and (ii) such U.S. Holder’s adjusted tax basis in its shares of common stock. See the section entitled “U.S. Federal Income Tax Consequences of the Merger” for further details. You should consult your own tax advisor about the particular tax consequences of exchanging your shares of Company Common Stock for cash pursuant to the Merger.
Regulatory Approvals (page 35)
The insurance laws and regulations of the state of Illinois, where the Company’s insurance subsidiaries are domiciled, require that, prior to the acquisition of control of an insurance company domiciled in Illinois, the acquiring company must obtain the approval of the Illinois Department of Insurance.
The Merger will also require prior notification of the Merger to, and no opposition by, The Autorité des marchés financiers, approval of the change of ownership of one of the Company’s insurance intermediary subsidiaries by the Texas Department of Insurance and the expiration of the waiting period (and any extension thereof) applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
While we believe that the Company and Parent will receive the approvals, non-disapprovals and clearances from governmental authorities described above that are prerequisites to the consummation of the Merger under the Merger Agreement and applicable law, the Company and Parent may not obtain all such approvals.
Specific Performance (page 51)
The parties to the Merger Agreement are entitled to injunctive or other equitable relief to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement in any state court in the state of Delaware or any federal court sitting in the state of Delaware.
Appraisal Rights (page 53)
Pursuant to Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”), our stockholders (other than Apex and the Waiving Stockholders) have the right to dissent from the Merger and receive a cash payment for the judicially determined fair value of their shares of Company Common Stock. The
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judicially determined fair value under Section 262 could be greater than, equal to or less than the $11.43 per share that our stockholders are entitled to receive in the Merger. To qualify for these rights, you must make a written demand for appraisal on or prior to December 4, 2023, which is the date that is the 20th day following the mailing of this information statement, and otherwise comply precisely with the procedures set forth in Section 262 of the DGCL for exercising appraisal rights. If you validly exercise (and do not withdraw or fail to perfect) appraisal rights, the ultimate amount that you may be entitled to receive in an appraisal proceeding may be less than, equal to or more than the amount of Merger Consideration that you would have received under the Merger Agreement. For a summary of these procedures, see the section entitled “Appraisal Rights.” The foregoing and the summary of Section 262 of the DGCL set forth in this information statement is qualified in its entirety by reference to the full text of Section 262 of the DGCL.
Market Price of Our Stock (page 52)
Company Common Stock is listed on the Nasdaq Capital Market under the trading symbol “VERY.” The closing sale price of Company Common Stock on the Nasdaq Capital Market on October 2, 2023, which was the last full trading day before the announcement of the Merger, was $5.70. On November 13, 2023, the last practicable trading day before the date of this information statement, the closing price of Company Common Stock on the Nasdaq Capital Market was $11.05.
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QUESTIONS AND ANSWERS ABOUT THE MERGER
The following questions and answers are intended to briefly address commonly asked questions as they pertain to the Merger Agreement and the Merger. These questions and answers may not address all questions that may be important to you as a Company stockholder. Please refer to the section entitled “Summary Term Sheet” and the more detailed information contained elsewhere in this information statement, the annexes to this information statement and the documents referred to or incorporated by reference in this information statement, each of which you should read carefully. You may obtain information incorporated by reference in this information statement without charge by following the instructions in the section entitled “Where You Can Find More Information.”
Q:
What is the proposed transaction?
A:
The proposed transaction is the acquisition of the Company by Parent pursuant to the Merger Agreement. Once the closing conditions under the Merger Agreement have been satisfied or waived and subject to the other terms and conditions in the Merger Agreement, Merger Sub will merge with and into the Company, with the Company surviving the Merger as a wholly owned subsidiary of Parent.
Q:
What will I receive in the Merger?
A:
Upon completion of the Merger, you will receive $11.43 in cash, without interest and less any required withholding taxes, for each share of Company Common Stock that you own, unless you properly exercise, and do not withdraw or fail to perfect, appraisal rights under Section 262 of the DGCL. For example, if you own 100 shares of Company Common Stock, you will receive $1,143 in cash in exchange for your shares of Company Common Stock, less any required withholding taxes. You will not own shares in the surviving corporation.
Q:
When do you expect the Merger to be completed?
A:
We are working to complete the Merger as quickly as possible. We currently expect to complete the Merger promptly after all of the conditions to the Merger have been satisfied or waived and subject to the other terms and conditions in the Merger Agreement. Completion of the Merger is currently expected to occur in the first half of calendar year 2024, although the Company cannot assure completion by any particular date, if at all.
Q:
What happens if the Merger is not completed?
A:
If the Merger is not completed for any reason, stockholders will not receive any payment for their shares in connection with the Merger. Instead, the Company will remain a publicly traded company, and shares of Company Common Stock will continue to be quoted on the Nasdaq Capital Market.
Q:
Why am I not being asked to vote on the Merger?
A:
Applicable Delaware law and the Merger Agreement require the adoption of the Merger Agreement by the holders in the aggregate of a majority of the outstanding shares of Company Common Stock in order to effect the Merger. The requisite stockholder approval was obtained following the execution of the Merger Agreement on October 2, 2023, when the Written Consent was delivered by Apex, an affiliate of JC Flowers and direct holder of 11,373,352 shares of Company Common Stock, representing approximately 76.5% of the outstanding shares of Company Common Stock on that date. Therefore, your vote is not required and is not being sought. We are not asking you for a proxy, and you are requested not to send us a proxy.
Q:
Why did I receive this Information Statement?
A:
Applicable laws and securities regulations require us to provide you with notice of the Written Consent, as well as other information regarding the Merger, even though your vote or consent is neither required nor requested to adopt or authorize the Merger Agreement or complete the Merger. This information statement also constitutes notice to you of the availability of appraisal rights under Section 262 of the DGCL.
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Q:
Did the Board approve and recommend the Merger Agreement?
A:
Yes. The Board:
determined that the Merger Agreement, the Merger and the other transactions contemplated thereby are fair to, advisable and in the best interests of the Company and its stockholders;
approved the Merger Agreement, the Merger and the other transactions contemplated thereby;
approved the execution, delivery and performance by the Company of the Merger Agreement and, subject to obtaining the required approval of the Company’s stockholders, the consummation of the Merger and the other transactions contemplated thereby;
directed that the adoption of the Merger Agreement be submitted to a vote of the holders of issued and outstanding shares of the Company Common Stock; and
recommended the adoption of the Merger Agreement by the holders of the Company Common Stock.
Q:
What happens if I sell or otherwise transfer my shares before completion of the Merger?
A:
If you sell or otherwise transfer your shares of Company Common Stock, you will have transferred to the person that acquires your shares of Company Common Stock the right to receive the Merger Consideration to be received in the Merger. To receive the Merger Consideration, you must hold your shares through completion of the Merger.
Q:
Should I send in my Company Common Stock certificates or other evidence of ownership now?
A:
No. After the Merger is completed, you will be sent a letter of transmittal with detailed instructions for exchanging your shares of Company Common Stock for the Merger Consideration. Holders of uncertificated shares of Company Common Stock (i.e., holders whose shares are held in book-entry form) will automatically receive the Merger Consideration, without interest and less any required withholding taxes, as promptly as practicable after the Effective Time without any further action required on the part of those holders.
Do not send in your Company Common Stock certificate(s) now.
Q:
Is the Merger subject to the fulfillment of certain conditions?
A:
Yes. Before the Merger can be completed, the Company, Parent and Merger Sub must fulfill or, if permissible, waive several closing conditions. If these conditions are not satisfied or waived, the Merger will not be completed. See the section entitled “The Merger Agreement — Conditions to Consummation of the Merger.”
Q:
Am I entitled to exercise appraisal rights instead of receiving the Merger Consideration for my shares?
A:
Yes. As a holder of Company Common Stock, you are entitled to appraisal rights under Delaware law in connection with the Merger if you meet certain conditions, which conditions are described in this information statement in the section entitled “Appraisal Rights.”
Q:
What are the U.S. federal income tax consequences of exchanging my shares of Company Common Stock for cash pursuant to the Merger?
A:
Your exchange of shares of Company Common Stock for cash pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. Holder that exchanges shares of Company Common Stock for cash pursuant to the Merger will recognize gain or loss equal to the difference between (i) the amount of cash received and (ii) such U.S. Holder’s adjusted tax basis in its shares of common stock exchanged therefor. You are urged to consult your own tax advisor regarding the tax consequences to you of exchanging your shares of Company Common Stock for cash pursuant to the Merger in light of your own particular circumstances. See the section entitled “U.S. Federal Income Tax Consequences of the Merger” for more information.
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Q:
Do any of the Company’s directors or executive officers have interests in the Merger that may differ from those of Company stockholders generally?
A:
You should be aware that the Company’s directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of the Company stockholders generally. These interests are described in more detail in the section entitled “The Merger—Interests of Our Directors and Executive Officers in the Merger.” The Board was aware of these interests and considered them, among other matters, in evaluating and approving the Merger Agreement.
Q:
Where can I find more information about the Company?
A:
We file periodic reports and other information with the Securities and Exchange Commission (the “SEC”). You may read and copy this information at the SEC’s public reference facilities. Please call the SEC at (800) SEC-0330 for information about these facilities. This information is also available on the website maintained by the SEC at www.sec.gov. For a more detailed description of the available information, please refer to the section entitled “Where You Can Find More Information.”
Q:
Who can help answer my other questions?
A:
If you have more questions about the Merger, please contact our Investor Relations Department at https://www.vericity.com/shareholder-services/contact-ir.If your shares are held in street name through a broker, bank or other nominee, you should call the broker, bank or other nominee that is the record owner of your shares for additional information.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
To the extent that statements contained in this information statement are not descriptions of historical facts, they are forward-looking statements reflecting the current beliefs and expectations of the Company made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements include, but are not limited to, statements that represent the Company’s beliefs concerning future operations, strategies, financial results or other developments, and contain words and phrases such as “may,” “expects,” “should,” “believes,” “anticipates,” “estimates,” “intends” or similar expressions. Such forward-looking statements involve substantial risks and uncertainties that could cause the Company’s future results, performance or achievements to differ significantly from those expressed or implied by the forward-looking statements.
The proposed transaction is subject to risks and uncertainties and factors that could cause the Company’s actual results to differ, possibly materially, from those in the specific projections, goals, assumptions and statements herein which include, but are not limited to:
that the Company and Parent may be unable to complete the proposed transaction because, among other reasons, conditions to the closing of the proposed transaction may not be satisfied or waived, including that a governmental authority may prohibit, delay or refuse to grant approval for the consummation of the transaction;
uncertainty as to the timing of completion of the proposed transaction;
the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement;
risks related to disruption of management’s attention from the Company’s ongoing business operations due to the proposed transaction;
the effect of the announcement of the proposed transaction on the Company’s relationships with its clients, employees, operating results and business generally; and
the outcome of any legal proceedings to the extent initiated against the Company or others following the announcement of the proposed transaction, as well as Company management’s response to any of the aforementioned factors.
The Company undertakes no obligation to update or revise any forward-looking statements. Forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date hereof. For a further description of the risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to the Company’s business in general and ownership of shares of Company Common Stock, see the “Risk Factors” section of the Company’s Registration Statement on Form S-1 filed with the SEC on June 4, 2019, and the other reports the Company files with the SEC.
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THE PARTIES TO THE MERGER AGREEMENT
The Company
Vericity, Inc.
150 E. Touhy Avenue, Suite 205W
Des Plaines, Illinois 60018
Phone: 312-288-0073
The Company, incorporated in the state of Delaware, is a direct-to-consumer life insurance solutions company. Through its subsidiaries, the Company offers life insurance products, which are distributed by both the Company’s Efinancial business and by independent agents. The Company is headquartered in Des Plaines, Illinois and trades on the Nasdaq Capital Market under the ticker symbol “VERY.” Additional information regarding the Company is contained in our filings with the SEC, copies of which may be obtained without charge by following the instructions in the section entitled “Where You Can Find More Information.”
Guarantor
iA Financial Corporation Inc.
1080 Grande Allée West
Station Terminus, PO Box 1907
Quebec, Quebec G1K 7M3, Canada
Phone: 418-684-5000
Guarantor, incorporated in the province of Quebec, Canada, is one of the largest insurance and wealth management groups in Canada, with operations in the United States serving over four million clients. Guarantor is headquartered in Quebec City, Quebec, Canada and trades on the Toronto Stock Exchange under the ticker symbol “IAG”. Additional information regarding Guarantor is contained in its filings with Autorité des marchés financiers. This information is available on the website maintained by the Canadian Securities Administrators’ national system at www.sedarplus.ca.
Parent
iA American Holdings Inc.
425 Austin Avenue
Waco, Texas 76701
Phone: 254-297-2777
Parent, incorporated in the state of Delaware, is an indirect, wholly-owned subsidiary of Guarantor that serves as a holding company for Guarantor’s United States life insurance business. Parent and its subsidiaries operate primarily in the simplified issue marketplace, with final expense life insurance and mortgage/family protection term life representing over 85% of new business sales. Parent and its subsidiaries market life insurance products through independent marketing organizations and collectively have approximately 27,000 independent agents under contract.
Merger Sub
Long Grove Acquisition Corp.
c/o iA American Holdings Inc.
425 Austin Avenue
Waco, Texas 76701
Phone: 254-297-2777
Merger Sub is a Delaware corporation that is a direct wholly owned subsidiary of Parent. Merger Sub was formed on October 2, 2023, expressly for the Merger and conducts no other business. At the Closing, Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation.
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THE MERGER
Background of the Merger
The Board and the Company’s senior management periodically review the Company’s operations, financial condition, financial performance and long-term strategic plans and objectives, as well as industry conditions, regulatory developments and their impact on the Company’s long-term strategic plan and objectives. During the past several years, the Board has reviewed and considered the current and future industry trends and risks to the Company’s ability to execute its strategic plan as a stand-alone entity, including the impact of continuing consolidation in the insurance and reinsurance industry, losses incurred within the insurance and reinsurance industry, increasingly competitive pricing in many of the insurance and reinsurance markets in which the Company operates and challenges relating to the Company’s credit rating.
On September 1, 2021, the Company engaged Raymond James & Associates, Inc. (“Raymond James”), based on, among other things, Raymond James' qualifications, experience and reputation, to serve as its financial advisor in connection with the Company’s review of strategic alternatives, including the possible sale of all or a portion of the Company.
On November 9, 2022, the Board, with representatives of Raymond James in attendance, met to discuss, among other things, current market conditions, recent developments at the Company and historical interactions between the Company and third parties expressing interest regarding a potential strategic transaction involving the Company. Raymond James discussed the transaction process and potential timing to be followed and the Board agreed with continuing down the path to seek a transaction partner consistent with Raymond James recommendations.
On December 16, 2022, members of the Company’s senior management team met with representatives of Raymond James to discuss a potential strategic review process for the Company, including necessary preparation if the Company were to pursue a strategic transaction and a possible timeline for such a transaction.
During January 2023, the Company’s management worked with Raymond James to assemble necessary due diligence information in the event the Company determined to engage with potential counterparties regarding a strategic transaction. Raymond James also began preparing a confidential information memorandum that could be distributed to potential bidders in the event the Company determined to pursue a potential strategic transaction.
On January 26, 2023, members of the Company’s senior management met with representatives of Raymond James to discuss progress on assembling due diligence information and to discuss a list of potential counterparties for outreach in the event that the Company determined to pursue a potential strategic transaction.
From February through April 2023, members of the Company’s senior management had further discussions with representatives of Raymond James regarding a possible strategic review process and continued working with Raymond James to assemble necessary due diligence information and prepare the confidential information memorandum.
On April 17, 2023, members of the Company’s senior management met with the Chairman of the Board and certain representatives of JC Flowers and Raymond James to discuss the due diligence materials that had been assembled and a list of potential counterparties for outreach in the event that the Company determined to pursue a strategic transaction. At the meeting, the members of the Company’s senior management and the Chairman of the Board approved the list of potential counterparties for outreach, but did not make any decision regarding beginning outreach to the potential counterparties on the list and instructed Raymond James to refrain from contacting any of the counterparties until authorized by the Chairman of the Board and/or senior management of the Company.
On April 27, 2023, the Company engaged Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”) to serve as its legal counsel in connection with the Company’s review of strategic alternatives, including the possible sale of all or a portion of the Company.
On May 4, 2023, members of the Company’s senior management instructed Raymond James to begin outreach the following week to the agreed-upon list of counterparties regarding such counterparties’ interest in a potential strategic transaction involving the Company.
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On May 8, 2023, representatives of Raymond James, the Company’s financial advisor, acting at the direction of the Board, began outreach to a list of 112 potential counterparties approved by the Company, including sharing a form of confidentiality agreement with such potential counterparties.
From May 8, 2023 through June 23, 2023, the Company entered into customary confidentiality agreements with 43 counterparties, including an affiliate of Parent, in connection with its initial outreach process regarding a potential strategic transaction involving the Company (none of which included standstill provisions). During this period, Raymond James distributed a confidential information memorandum to counterparties that had entered into confidentiality agreements.
On May 10, 2023, the Board met, with representatives of the Company’s management, Raymond James and Skadden in attendance. Representatives of Raymond James updated the Board on the status of (i) its valuation analysis and (ii) Raymond James’ outreach to potential counterparties with respect to a potential strategic transaction involving the Company, including the status of negotiations of confidentiality agreements with such counterparties. Representatives of Raymond James also indicated that based on the Board’s request to maximize the number of potential interested counterparties, Raymond James had informed certain potential companies that the Board may be willing to consider alternative transaction structures, such as the sale of particular business units, in addition to an acquisition of the entire Company. Representatives of Skadden presented to the Board regarding directors’ fiduciary duties under Delaware law in connection with the Board’s consideration of a potential strategic transaction involving the Company.
Between May 31, 2023 and early June 2023, at the direction of the Company, representatives of Raymond James distributed a process letter to 40 of the counterparties that had entered into confidentiality agreements with the Company, including an affiliate of Parent, and requested that such counterparties submit initial indications of interest with respect to a potential strategic transaction involving the Company by June 29, 2023. During this period, representatives of Raymond James also provided periodic updates on the status of its outreach to the Company’s senior management and certain members of the Board.
On June 29, 2023, five counterparties, including Parent, submitted non-binding initial indications of interest to Raymond James with respect to a potential acquisition of all outstanding equity of the Company. Parent’s non-binding initial indication of interest proposed that Parent would acquire all of the outstanding shares of Company Common Stock for an amount of cash in the range of $175 million to $225 million. One counterparty, which we refer to as “Party A,” submitted a non-binding initial indication of interest proposing that Party A would acquire all of the outstanding shares of Company Common Stock for $203 million in cash. One counterparty, which we refer to as “Party B,” submitted a non-binding initial indication of interest proposing that Party B would acquire all of the outstanding shares of Company Common Stock for an amount of cash in the range of $130 million to $200 million or what Party B stated to be $8.47 to $13.45 per share. One counterparty, which we refer to as “Party C,” submitted a non-binding initial indication of interest proposing that Party C would acquire all of the outstanding shares of Company Common Stock for $250 million in cash, which was inclusive of a pre-closing cash dividend of $56 million. One counterparty, which we refer to as “Party D,” submitted a non-binding initial indication of interest proposing that Party D would acquire all of the outstanding shares of Company Common Stock for $175 million in cash or what Party D stated to be $11.76 per share. None of the indications of interests received on June 29, 2023, or later in the process included a discussion of post-transaction employment, directorships or benefits, and there were no other discussions with any of the counterparties, including Parent, relating to such matters prior to the parties signing the Merger Agreement.
On June 30, 2023, members of the Company’s senior management, the Chairman of the Board and certain representatives of JC Flowers and Raymond James met to review the five non-binding initial indications of interest. During the meeting, the members of the Company’s management directed Raymond James to arrange management presentations with all five counterparties that submitted initial indications of interest.
On July 17, 2023, Party D informed Raymond James that it was withdrawing its non-binding initial indication of interest and was no longer interested in pursuing a potential strategic transaction involving the Company.
Between July 17, 2023 and July 28, 2023, the Company held in-person management presentations with each of Parent, Party A, Party B and Party C (with certain representatives of the counterparties attending remotely by videoconference).
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On July 25, 2023, representatives of Raymond James, acting at the direction of the Board, distributed a second round process letter and draft Merger Agreement prepared by Skadden to Parent, Party A, Party B and Party C, and requested that such parties submit final proposals with respect to a strategic transaction involving the Company and any comments to the draft Merger Agreement to Raymond James by August 10, 2023.
On July 31, 2023, Party A informed Raymond James that it was withdrawing its non-binding initial indication of interest and was no longer interested in pursuing a potential strategic transaction involving the Company.
On August 2, 2023, the Board met, with representatives of the Company’s management, Raymond James and Skadden in attendance, to discuss the non-binding initial indications of interest received by the Company and other updates regarding the outreach process to potential counterparties, including Party A and Party D withdrawing from the process and the management presentations held with Parent, Party B and Party C from July 17 to July 28. Following discussion of these matters, the Board determined to extend the deadline for Parent, Party B and Party C to submit final proposals and comments to the draft Merger Agreement until August 24, 2023, so that the deadline would occur after the Company’s scheduled announcement of its financial results for the second quarter of fiscal year 2023 on August 15, 2023. The Board instructed Raymond James to distribute a supplemental process letter to Parent, Party B and Party C reflecting the new August 24, 2023 deadline for final proposals and indicating that the Company expected to finalize definitive transaction documents and announce a transaction by September 8, 2023.
Later on August 2, 2023, Raymond James distributed the supplemental process letter to Parent, Party B and Party C indicating the new August 24, 2023 deadline and the Company’s anticipated timeline for finalizing definitive transaction documents and announcing a transaction.
On August 14, 2023, the Company’s Chief Executive Officer, James Hohmann, held a one-on-one meeting with Parent’s Executive Vice-President, Chief Growth Officer US Operations, Co-Head of Acquisitions, Michael Stickney, to discuss certain due diligence and integration matters with respect to a potential strategic transaction between the Company and Parent. No discussions were had at this meeting regarding Mr. Hohmann’s or any other executive’s continued employment following a possible transaction.
On August 18, 2023, representatives of Raymond James had a call with members of the Company’s senior management and representatives of Skadden to provide an update on recent discussions with Parent, Party B and Party C with respect to a potential strategic transaction involving the Company, including with respect to the timing for submitting revised indications of interest.
On August 24, 2023, Parent submitted a revised indication of interest to Raymond James, pursuant to which it proposed to acquire all of the outstanding shares of Company Common Stock for $155 million ($10.42 per share) in cash. Parent’s revised indication of interest also indicated it expected to be able to finalize definitive transaction documents and announce a transaction on an agreed timeline with the Company in September 2023. Together with its revised proposal, Parent also submitted a revised draft of the Merger Agreement.
Also on August 24, 2023, Party C informed the Company that it was still completing its valuation work and financial due diligence of the Company, and would therefore need additional time before submitting a revised indication of interest. Party C indicated that it expected to provide a revised indication of interest on September 8, 2023.
On August 26, 2023, Party B’s financial advisor, on behalf of Party B, submitted a revised indication of interest to Raymond James, pursuant to which Party B proposed to acquire all of the outstanding shares of Company Common Stock for $165 million ($11.09 per share) in cash. Party B’s revised indication of interest also indicated that its proposal was conditioned on the Company granting Party B a 60-day exclusivity period to negotiate and finalize the terms of a potential transaction. Together with its revised proposal, Party B also submitted a revised draft of the Merger Agreement.
On August 28, 2023, the Board met, with representatives of the Company’s management, Raymond James and Skadden in attendance, to discuss the revised indications of interest received from Parent and Party B. Following discussion of the proposals, the Board instructed Raymond James to seek to have Parent and Party B improve the valuations reflected in their respective revised indications of interest and to finalize any open due diligence matters with both parties. The Board also instructed Raymond James that it would not agree to a 60-day exclusivity period with Party B based on the terms of its revised indication of interest.
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On August 30, 2023, representatives of Raymond James had separate discussions with representatives of each of Parent, Party B and Party C to discuss their revised indications of interest and to communicate the feedback received from the Board. Parent indicated that it would potentially be able to improve its valuation from what was reflected in its revised indication of interest, subject to addressing certain concerns identified in due diligence with respect to cyber security and data privacy matters. Party B indicated that its proposal would be conditioned on the Company granting an exclusivity period and that it would not be able to accelerate its timeline further. Party B also requested further due diligence regarding actuarial analyses and reinsurance matters. Party C indicated that it was still interested in pursuing a strategic transaction with the Company, subject to completion of its ongoing actuarial analyses, but also noted that it would also need to obtain certain additional internal approvals in order to enter into definitive transaction documents and announce a transaction.
On September 1, 2023, representatives of the Company’s management and Skadden held a call with representatives of Parent and Willkie Farr & Gallagher LLP (“Willkie”), Parent’s legal counsel, to discuss certain cyber security and data privacy due diligence matters.
On September 5, 2023, members of the Company’s senior management and representatives of Parent held a call to discuss due diligence matters related to the Company’s existing financing arrangements.
On September 7, 2023, Parent submitted a revised indication of interest to Raymond James, pursuant to which it proposed to acquire all of the outstanding shares of Company Common Stock for $170 million ($11.43 per share) in cash. Parent’s revised indication of interest also requested that the Company grant Parent a 30-day exclusivity period to negotiate and finalize the terms of a potential transaction.
Later on September 7, 2023, Party C informed Raymond James that it was withdrawing its non-binding initial indication of interest and was no longer interested in pursuing a potential strategic transaction involving the Company.
On September 8, 2023, the Board met, with representatives of the Company’s management, Raymond James and Skadden in attendance, to discuss the revised indication of interest received from Parent, including its request for a 30-day exclusivity period, and the recent communications between Raymond James and each of Party B and Party C. The Board then instructed Raymond James to reject Parent’s request for a 30-day exclusivity period, but to provide any necessary information to enable Parent to finalize its due diligence and enter into definitive transaction documents in an expedient manner.
Later on September 8, 2023, at the request of the Company, representatives of Raymond James and Parent had a call to discuss the timeline for Parent to complete its remaining due diligence and finalize and execute definitive transaction documentation.
From September 8, 2023 until October 2, 2023, representatives of the Company’s senior management, Skadden and Raymond James negotiated with representatives of Parent and its advisors to finalize the terms of a potential transaction and the Company’s management provided information to, and held discussions with, Parent to enable it to complete its due diligence. During this period, the Company’s management also provided information to Party B that it had requested in connection with its ongoing due diligence, including scheduling meetings with certain representatives of one of the Company’s reinsurance business partners on September 14, 2023.
On September 9, 2023, Skadden sent Willkie a revised draft of the Merger Agreement, which, among other things, noted that Parent’s request for a sign and consent structure was subject to further consideration and discussion by the Company and proposed certain changes with respect to (i) the obligations of the parties to obtain applicable regulatory approvals and the definition of “Burdensome Condition” that would excuse Parent from consummating the proposed transaction, (ii) the parties’ respective closing conditions and termination rights, (iii) the definition of “Company Material Adverse Effect,” (iv) the interim operating restrictions applicable to the Company and its subsidiaries between signing and closing of the proposed transaction and (v) the parties’ respective representations and warranties and covenants.
On September 13, 2023, Parent provided Raymond James with an indicative timeline for completion of all outstanding diligence procedures and final negotiation of the Merger Agreement by September 26, 2023.
On September 15, 2023, Willkie sent Skadden a revised draft of the Merger Agreement, which, among other things, reinstated its request for a sign and consent structure and proposed certain changes with respect to (i) the
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obligations of the parties to obtain applicable regulatory approvals and the definition of “Burdensome Condition” that would excuse Parent from consummating the proposed transaction, (ii) the parties’ respective closing conditions and termination rights, (iii) the definition of “Company Material Adverse Effect,” (iv) the interim operating restrictions applicable to the Company and its subsidiaries between signing and closing of the proposed transaction and (v) the parties’ respective representations and warranties and covenants.
On September 19, 2023, Skadden sent Willkie a revised draft of the Merger Agreement, which, among other things, proposed certain changes with respect to (i) the stockholders that would be signatories to the Written Consent, (ii) the obligations of the parties to obtain applicable regulatory approvals and the definition of “Burdensome Condition” that would excuse Parent from consummating the proposed transaction, (iii) the definition of “Company Material Adverse Effect,” (iv) the interim operating restrictions applicable to the Company and its subsidiaries between signing and closing of the proposed transaction and (v) the parties’ respective representations and warranties and covenants.
On September 20, 2023, Skadden sent Willkie an initial draft of the Company disclosure schedules to the Merger Agreement.
On September 20, 2023, at the request of the Company, representatives of Raymond James and Parent had a call to discuss open issues with respect to Parent’s due diligence and with respect to the transaction documents. During the call, Parent indicated that it would need additional time to work through the open issues with its financial and legal advisors prior to entering into definitive transaction documents and that its board of directors would not be able to hold a meeting to consider approval of a potential strategic transaction until October 2, 2023.
On September 21, 2023, at the request of the Company, representatives of Raymond James and Parent had a call to discuss potential resolutions of the remaining open due diligence items and the open issues with respect to the Merger Agreement and other ancillary transaction documents.
On September 22, 2023, Skadden and Willkie held a telephonic meeting to discuss the remaining open issues with respect to the Merger Agreement and other ancillary transaction documents, including (i) the stockholders that would be signatories to the Written Consent, (ii) the obligations of the parties to obtain applicable regulatory approvals and the definition of “Burdensome Condition” that would excuse Parent from consummating the proposed transaction, (iii) the definition of “Company Material Adverse Effect,” (iv) the interim operating restrictions applicable to the Company and its subsidiaries between signing and closing of the proposed transaction and (v) the parties’ respective representations and warranties and covenants.
On September 23, 2023, following a discussion between representatives of the Company’s senior management, Raymond James and Skadden, members of the Company’s senior management team determined to attempt to engage further with Party B to see if it would potentially be willing to improve its offer price and expedite its timeline for executing definitive transaction documents.
From September 24, 2023 until October 2, 2023, representatives of Skadden and Willkie exchanged drafts of the Merger Agreement and other ancillary transaction documents, and had discussions to attempt to resolve the remaining open issues with respect to these documents, including (i) the obligations of the parties to obtain applicable regulatory approvals and the definition of “Burdensome Condition” that would excuse Parent from consummating the proposed transaction, (ii) employee benefits matters during both the interim period between signing and closing of the proposed transaction and following the closing of the proposed transaction and (iii) the Company’s representations and warranties.
On September 26, 2023, Skadden sent a revised draft of the Merger Agreement to Party B’s legal counsel and offered to set up a call to discuss any open issues. Party B and its legal counsel did not send further comments on the Merger Agreement or request a call with the Company and Skadden to discuss any open issues.
On September 28, 2023, Mr. Stickney and Denis Ricard, Parent’s President and Chief Executive Officer, visited the Company’s offices and met with Mr. Hohmann and other members of the Company’s senior management team.
On September 30, 2023, representatives of Raymond James contacted Party B to discuss its continued interest in a potential strategic transaction with the Company and to request an updated on its anticipated timeline for submitting a revised proposal and finalizing definitive transaction documents. Representatives of
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Party B informed Raymond James that it would be five days before its board of directors could meet to consider submitting a revised proposal and that it would need another five days following that board meeting to finalize any updates to its proposal and provide comments on the draft Merger Agreement.
On October 2, 2023, the Chairman of the Board and representatives of the Company’s senior management, JC Flowers, Raymond James and Skadden had a call with representatives of Parent and Willkie to discuss the remaining open issues with respect to the Merger Agreement, including (i) the definition of “Burdensome Condition” that would excuse Parent from consummating the proposed transaction and (ii) certain employee benefits matters following the closing of the proposed transaction. Skadden and Willkie continued to exchange drafts of the Merger Agreement and other ancillary transaction documents throughout the day in order to resolve the remaining open issues.
On October 2, 2023, the Board met, with representatives of the Company’s management, Raymond James and Skadden in attendance. Representatives of Skadden discussed with the Board the legal principles and standards applicable to its consideration of the proposed transaction. Representatives of Skadden also reviewed the terms and conditions set forth in the draft Merger Agreement and other transaction documents, including, among other things, the structure of the potential transaction, the Merger Consideration of $11.43 per share in cash, the contemplated “sign and consent” approval structure by delivery of the Written Consent, including in relation to each party’s respective termination rights, stockholder appraisal rights, the obligations of the parties to obtain applicable regulatory approvals, the definition of a “Company Material Adverse Effect,” the conditions to closing of the transaction and the scope of the representations and warranties and interim operating restrictions applicable to the Company between signing and closing of the transaction. Representatives of Raymond James then joined the meeting and reviewed with the Board Raymond James’ financial analyses of the Merger Consideration, as more fully described below under the heading “The Merger — Opinion of Raymond James.” Thereafter, at the request of the Board, representatives of Raymond James rendered its oral opinion to the Board (which was subsequently confirmed in writing by delivery of Raymond James’ written opinion dated the same date) that, as of October 2, 2023 and based upon and subject to the factors and assumptions set forth therein, the $11.43 in cash per share of Company Common Stock to be paid to the holders (other than the holders of Excluded Shares) of Company Common Stock pursuant to the Merger Agreement was fair from a financial point of view to such holders of Company Common Stock. After discussion, and in light of the Board’s review and consideration of the factors described under “The Merger — Reasons for the Merger,” the Board unanimously (i) determined that the Merger Agreement, the Merger and the other transactions contemplated thereby are fair to, advisable and in the best interests of the Company and its stockholders, (ii) approved the Merger Agreement, the Merger and the other transactions contemplated thereby, (iii) approved the execution, delivery and performance by the Company of the Merger Agreement and, subject to obtaining the required approval of the Company’s stockholders, the consummation of the Merger and the other transactions contemplated thereby, (iv) directed that the adoption of the Merger Agreement be submitted to a vote of the holders of issued and outstanding shares of the Company Common Stock and (v) recommended the adoption of the Merger Agreement by the holders of the Company Common Stock.
Later on October 2, 2023, Skadden and Willkie exchanged drafts of the disclosure schedules and agreed upon the final form of the Merger Agreement and other ancillary transaction documents.
On October 3, 2023, the Company, Parent, Merger Sub and Guarantor executed the Merger Agreement. Shortly thereafter, Apex delivered the Written Consent. On that same day, the Company and Parent each issued separate press releases announcing the Merger and the Company filed a Current Report on Form 8-K with the SEC disclosing the execution of the Merger Agreement and attaching a copy of the definitive Merger Agreement as an exhibit. Later that day, the Waiving Stockholders executed and delivered to the Company and Parent waivers of their appraisal rights under Section 262 of the DGCL in connection with the Merger.
Recommendation of the Board; Reasons for the Merger
At a meeting on October 2, 2023, the Board unanimously (i) determined that the Merger Agreement, the Merger and the other transactions contemplated thereby are fair to, advisable and in the best interests of the Company and its stockholders, (ii) approved the Merger Agreement, the Merger and the other transactions contemplated thereby, (iii) approved the execution, delivery and performance by the Company of the Merger Agreement and, subject to obtaining the required approval of the Company’s stockholders, the consummation of the Merger and the other transactions contemplated thereby, (iv) directed that the adoption of the Merger Agreement be submitted to a vote of
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the holders of issued and outstanding shares of the Company Common Stock and (v) recommended the adoption of the Merger Agreement by the holders of the Company Common Stock.
As described in the section of this information statement titled “The Merger — Background of the Merger” the Board, prior to and in reaching its determination at its meeting on October 2, 2023 that the terms of the Merger Agreement are in the best interests of the Company and its stockholders, consulted with the Company’s management, financial advisor and outside legal counsel, and considered a variety of potentially positive factors relating to the Merger, including, but not limited to, the following (which are not intended to be exhaustive and are not presented in any relative order of importance):
the fact that the Board sought offers to purchase from a broad group of 112 potential bidders, including financial sponsors and strategic bidders, 43 of whom entered into confidentiality agreements with the Company and received information related to the Company, and the fact that the price of $11.43 per share plus other transaction terms proposed by Parent reflected extensive negotiations between the parties and their respective advisors, and such price and terms when taken together and compared to alternative proposals from other parties was viewed as the best available transaction to the Company and its stockholders;
the fact that the Merger Consideration of $11.43 per share to be received by the Company stockholders in the Merger represents a premium of approximately 101% over the closing price of shares of Company Common Stock on October 2, 2023, the last trading day before the announcement of the execution of the Merger Agreement;
the belief of the Board that, as a result of the negotiations between the parties, the Merger Consideration of $11.43 per share was the highest price per share for the Company Common Stock that Parent was willing to pay at the time of those negotiations and following completion of its due diligence;
the possibility that, if the Company did not enter into the Merger Agreement, it could take a considerable amount of time and involve a substantial amount of risk before the trading price of the Company Common Stock would reach and sustain the $11.43 per share value of the Merger Consideration, as adjusted for present value;
the fact that the Merger Consideration is all cash, which provides liquidity and certainty of value to the Company’s stockholders;
the Board’s understanding of the Company’s business, operations, current and historical financial condition, earnings, prospects, competitive position and the nature of the industry in which the Company competes, including the short and long term risks, uncertainties and challenges facing the Company and such industry;
the fact that representatives of Apex, which controlled approximately 76.5% of the aggregate outstanding shares of Company Common Stock as of the date of the Written Consent and will receive the same form and amount of Merger Consideration for its shares of Company Common Stock as all other stockholders, had indicated support for the Merger;
the terms of the Merger Agreement and the related agreements, including:
the fact that the Company’s senior management, with assistance from the Company’s legal and financial advisors, at the direction of the Board, negotiated the terms and conditions of the Merger Agreement on an arm’s-length basis with Parent and its legal and financial advisors;
the limited number and nature of the conditions to Parent’s obligation to consummate the Merger;
the belief of the Board that, based on consultation with the Company’s legal counsel, the conditions to the consummation of the Merger as set forth in the Merger Agreement are reasonable and customary;
the belief of the Board that the respective representations, warranties, covenants and other rights of the parties are reasonable and customary for a transaction of this nature;
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the absence of any financing condition or contingency for Parent to consummate the Merger and pay the Merger Consideration;
the fact that Guarantor, which is a strong, well-capitalized company with ample resources to consummate the Merger, irrevocably and unconditionally guaranteed the payment of any amounts owed by Parent and Merger Sub pursuant to the Merger Agreement, including the payment of the Merger Consideration by Parent and Merger Sub;
the provisions of the Merger Agreement that allow the outside date for completing the Merger to be extended to October 3, 2024, if the Merger has not been completed by the initial outside date of July 3, 2024 because the required regulatory approvals have not been obtained;
the termination fee of $5,100,000 (which is equal to 3% of the transaction equity value) is consistent with fees in comparable transactions and reasonable in amount in light of the very limited circumstances in which the termination fee could become payable to Parent;
the belief of the Board that Parent would be able to obtain required regulatory approvals on a reasonably prompt basis;
the belief of the Board that the terms of the Merger Agreement include the most favorable terms reasonably attainable from Parent; and
the ability of the Company to seek specific performance in the event that Guarantor, Parent or Merger Sub breaches the Merger Agreement;
the commitment made by Parent and Guarantor to use their reasonable best efforts to consummate the Merger (subject to the terms and conditions of the Merger Agreement);
the financial analyses presented by Raymond James, including Raymond James’ opinion to the effect that, as of October 2, 2023, and based on and subject to the assumptions, procedures, factors, qualifications and limitations set forth in Raymond James’ written opinion, dated the same date, the consideration to be received by the holders of Company Common Stock (other than the holders of certain excluded shares) in the Merger pursuant to the Merger Agreement was fair, from a financial point of view, to such stockholders (see the section entitled “The Merger — Opinion of Raymond James”); and
the availability of appraisal rights to the Company’s stockholders (other than Apex and the Waiving Stockholders) who properly exercise their statutory rights under Section 262 of the DGCL (see the section entitled “Appraisal Rights”).
The Board also considered and balanced against the potentially positive factors a number of potentially negative factors concerning the Merger, including the following factors:
the risk that the Merger might not be completed or that the completion of the Merger might be delayed;
the risk of diverting management focus and resources from other strategic opportunities and operational matters while implementing the Merger;
the fact that the Merger Consideration consists of cash and will therefore be taxable to the Company stockholders for U.S. federal income tax purposes;
the restrictions on the Company’s ability to solicit or engage in discussions or negotiations with a third party regarding a Takeover Proposal;
the risk that governmental authorities may oppose or refuse to approve the Merger or impose conditions on the Company, Parent, Guarantor or any of their respective affiliates prior to approving the Merger, which conditions may constitute a Burdensome Condition under the terms of the Merger Agreement that would excuse Parent from consummating the Merger;
the fact that the all-cash Merger Consideration, while providing certainty of value upon consummation, would not allow holders of Company Common Stock to participate in any future earnings growth of the Company or benefit from any future increase in its value;
the risk that legal proceedings could be initiated against the Company in connection with the Merger;
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the potential negative effect of the pendency of the Merger on the Company’s business and relationships with customers, vendors, business partners and employees, including the risk that key employees might not choose to remain employed with the Company prior to the consummation of the Merger, regardless of whether or not the Merger is consummated;
the fact that the Company has incurred and will incur substantial expenses related to the transactions contemplated by the Merger Agreement, regardless of whether the Merger is consummated; and
the fact that the Merger Agreement prohibits the Company from taking a number of actions relating to the conduct of its business prior to the closing without the prior written consent of Parent, which may delay or prevent the Company from undertaking business opportunities that may arise during the pendency of the Merger, whether or not the Merger is completed.
During its consideration of the transaction with Parent, the Board was also aware of and considered that the Company’s directors and executive officers may have interests in the Merger that differ from, or are in addition to, their interests as stockholders of the Company generally, as described in the section entitled “The Merger — Interests of Our Directors and Executive Officers in the Merger.”
After taking into account all of the factors set forth above, as well as others, the Board determined that the potentially positive factors outweighed the potentially negative factors. The foregoing discussion of the factors considered by the Board is not intended to be exhaustive, but summarizes the material information and factors considered by the Board in its consideration of the Merger. The Board reached the decision to recommend, adopt and approve the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, in light of the factors described above and other factors the Board felt were appropriate. In view of the variety of factors and the quality and amount of information considered, the Board did not find it practicable to and did not quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and individual members of the Board may have given different weights to different factors. The Board conducted an overall analysis of the factors described above, including thorough discussions with, and questioning of, management of the Company, Raymond James and Skadden, as financial and legal advisors respectively, and considered the factors overall to be favorable to, and to support, its determinations. It should be noted that this explanation of the reasoning of the Board and certain information presented in this section is forward-looking in nature and should be read in light of the factors set forth in the section entitled “Cautionary Statement Regarding Forward-Looking Statements.”
Required Stockholder Approval of the Merger
Under Delaware law and the Company’s certificate of incorporation and bylaws, the adoption of the Merger Agreement required the affirmative vote or written consent of the holders of the Company Common Stock representing a majority of the aggregate voting power of the outstanding shares of Company Common Stock entitled to vote thereon. As of October 2, 2023, the record date for determining stockholders of the Company entitled to vote on the adoption of the Merger Agreement, there were 14,875,000 shares of Company Common Stock outstanding. Holders of Company Common Stock are entitled to one vote for each share held of record on all matters on which stockholders are entitled to vote generally, including adoption of the Merger Agreement.
On October 3, 2023, following the execution of the Merger Agreement, Apex, which held more than a majority of the Company’s outstanding shares of Company Common Stock as of such date and as of October 2, 2023, the record date for determining stockholders of the Company entitled to vote on the adoption of the Merger Agreement, delivered the Written Consent adopting the Merger Agreement in all respects and voting all of the shares of Company Common Stock held by Apex in favor of the adoption of the Merger Agreement. No further action by any other Company stockholder is required under applicable law or the Merger Agreement (or otherwise) in connection with the adoption of the Merger Agreement. As a result, the Company is not soliciting your vote for the adoption of the Merger Agreement and will not call a stockholders’ meeting for purposes of voting on the adoption of the Merger Agreement. No action by the stockholders of Parent is required to complete the Merger and all requisite corporate action by and on behalf of Merger Sub required to complete the Merger has been taken.
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When actions are taken by written consent of less than all of the stockholders entitled to vote on a matter, Delaware law requires notice of the action to those stockholders who did not consent in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting. This information statement and the notice attached hereto constitute notice to you of action by written consent as required by Delaware law.
Opinion of Raymond James
The full text of the written opinion of Raymond James Financial, Inc. (“Raymond James”) is attached as Annex B to this information statement. The summary of the opinion of Raymond James set forth in this information statement is qualified in its entirety by reference to the full text of such written opinion. Company stockholders are urged to read this opinion in its entirety. The opinion of Raymond James speaks only as of the date of the opinion and does not reflect any developments that may occur or may have occurred after the date of such opinion and prior to the consummation of the Merger.
At the October 2, 2023 meeting of the Board, representatives of Raymond James rendered Raymond James’s verbal opinion, as to the fairness, based upon market, economic, financial and other circumstances and conditions existing and disclosed to Raymond James by the Company as of October 2, 2023, from a financial point of view, to the holders of Company Common Stock (other than treasury shares, shares held by Parent and Merger Sub, or shares for which appraisal rights are properly exercised (collectively, the “Excluded Shares”)), of the Merger Consideration to be received by such holders in the Merger pursuant to the Merger Agreement, based upon and subject to the qualifications, assumptions, limitations and other matters considered in connection with the preparation of Raymond James’s opinion. Subsequently, and on the same day, Raymond James confirmed Raymond James’s oral opinion by delivering to the Board its written opinion (the “Opinion”) dated October 2, 2023, which is attached as Annex B to this information statement and is incorporated herein by reference.
Raymond James provided its opinion for the information of the Board (solely in its capacity as such) in connection with, and for purposes of, its consideration of the Merger, and Raymond James’s opinion only addresses whether the Merger Consideration to be received by the holders of Company Common Stock (other than holders of Excluded Shares) in the Merger pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. The Opinion of Raymond James does not address any other term or aspect of the Merger Agreement or the Merger. The Opinion does not address the relative merits of the Merger as compared to another business or financial strategy which may be or may have been available to the Company nor did it constitute a recommendation to the Board, to any Company stockholder or any holder of other Company securities as to how the Board, such Company stockholder or other securities holder or any other person should vote or otherwise act with respect to the Merger or any other matter.
In connection with its review of the proposed Merger and the preparation of its Opinion, Raymond James, among other things:
reviewed the financial terms and conditions as stated in the draft of the Merger Agreement provided by or on behalf of the Company to Raymond James on October 2, 2023;
reviewed certain information related to the historical condition and prospects of the Company, as made available to Raymond James by or on behalf of the Company, including, but not limited to, financial projections prepared by the management of the Company (the “Projections”);
reviewed the Company’s audited financial statements for years ended December 31, 2021 and December 31, 2022 and unaudited financial statements for the six-month period ended June 30, 2023;
reviewed the Company’s recent public filings and certain other publicly available information regarding the Company and Parent;
reviewed the financial and operating performance of the Company and those of other selected public companies that Raymond James deemed to be relevant;
considered certain publicly available financial terms of certain transactions Raymond James deemed to be relevant;
conducted such other financial studies, analyses and inquiries and considered such other information and factors as Raymond James deemed appropriate;
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received a certificate addressed to Raymond James from a member of senior management of the Company regarding, among other things, the accuracy of the information, data and other materials (financial or otherwise) provided to, or discussed with, Raymond James by or on behalf of the Company; and
discussed with members of the senior management of the Company certain information relating to the aforementioned and any other matters which Raymond James has deemed relevant to its inquiry including, but not limited to, the past and current business operations of the Company and the financial condition and future prospects and operations of the Company.
With the Company’s consent, Raymond James assumed and relied upon the accuracy and completeness of all information supplied by or on behalf of the Company or otherwise reviewed by or discussed with Raymond James, and Raymond James did not undertake any duty or responsibility to, nor did it, independently verify any of such information. Furthermore, Raymond James did not undertake any independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which the Company or the Parent is a party or may be subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which the Company or the Parent is a party or may be subject. With the Company’s consent, the Opinion made no assumption concerning, and therefore did not consider, the potential effects of any such litigation, claims or investigations or possible assertions. Raymond James did not make or obtain an independent appraisal of the assets or liabilities (contingent or otherwise) of the Company. With respect to the Projections and any other information and data provided to or otherwise reviewed by or discussed with Raymond James, with the Company’s consent, Raymond James assumed that the Projections and such other information and data were reasonably prepared in good faith on bases reflecting the best available estimates and judgments of management of the Company, and Raymond James relied upon the Company to advise it promptly if any information previously provided became inaccurate or was required to be updated during the period of its review. Raymond James expressed no opinion with respect to the Projections or the assumptions on which they are based. Raymond James assumed that the final form of the Merger Agreement was substantially similar to the draft reviewed by it, and that the Merger will be consummated in accordance with the terms of the Merger Agreement without waiver or amendment of any conditions thereto. Furthermore, Raymond James assumed, in all respects material to its analysis, that the representations and warranties of each party contained in the Merger Agreement are true and correct and that each such party will perform all of the covenants and agreements required to be performed by it under the Merger Agreement without being waived. Raymond James relied upon and assumed, without independent verification, that (i) the Merger will be consummated in a manner that complies in all respects with all applicable international, federal and state statutes, rules and regulations, and (ii) all governmental, regulatory, and other consents and approvals necessary for the consummation of the Merger will be obtained and that no delay, limitations, restrictions or conditions will be imposed or amendments, modifications or waivers made that would have an effect on the Merger or the Company that would be material to Raymond James’ analyses or the Opinion.
Raymond James expressed no opinion as to the underlying business decision to effect the Merger, the structure or tax consequences of the Merger or the availability or advisability of any alternatives to the Merger. Raymond James provided advice to the Board with respect to the Merger. Raymond James did not, however, recommend any specific amount of consideration or that any specific consideration constituted the only appropriate consideration for the Merger. Raymond James’ Opinion was limited to the fairness, from a financial point of view, of the Merger Consideration to be received by the holders of the Company Common Stock (other than holders of Excluded Shares).
Raymond James expressed no opinion with respect to any other reasons, legal, business, or otherwise, that may have supported the decision of the Board to approve or consummate the Merger. Furthermore, no opinion, counsel or interpretation was intended by Raymond James on matters that require legal, accounting or tax advice. It is assumed that such opinions, counsel or interpretations were obtained from the appropriate professional sources. Furthermore, Raymond James relied, with the consent of the Board, on the fact that the Company was assisted by legal, accounting and tax advisors and Raymond James, with the consent of the Board, relied upon and assumed the accuracy and completeness of the assessments by the Company and its advisors as to all legal, accounting and tax matters with respect to the Company and the Merger.
In formulating Raymond James’ Opinion, Raymond James considered only what Raymond James understood to be the consideration to be received by the holders of Company Common Stock (other than holders
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of Excluded Shares) as is described above and Raymond James did not consider and Raymond James expressed no opinion on the fairness of the amount or nature of any compensation to be paid or payable to any of the Company’s officers, directors or employees, or class of such persons, whether relative to the compensation received by the holders of the Company Common Stock (other than holders of Excluded Shares) or otherwise. Raymond James has not been requested to opine as to, and the Opinion did not express an opinion as to or otherwise address, among other things: (i) the fairness of the Merger to the holders of any class of securities, creditors, or other constituencies of the Company, or to any other party, except to the extent expressly set forth in the last sentence of the Opinion or (ii) the fairness of the Merger to any one class or group of the Company’s or any other party’s security holders or other constituencies vis-à-vis any other class or group of the Company’s or such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration to be received in the Merger amongst or within such classes or groups of security holders or other constituents). Raymond James did not express any opinion as to the impact of the Merger on the solvency or viability of the Company or the Parent or Merger Sub or the ability of the Company, Parent or Merger Sub to pay their respective obligations when they come due.
Material Financial Analyses
The following summarizes the material financial analyses reviewed by Raymond James with the Board at its meeting on October 2, 2023, which material was considered by Raymond James in rendering its Opinion. No company or transaction used in the analyses described below is identical or directly comparable to the Company or the Merger. This summary does not purport to be a complete description of the analyses or data presented to Raymond James.
The following summary includes financial analysis summaries presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by Raymond James, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Raymond James’ analyses.
Selected Companies Analysis
Raymond James analyzed the relative valuation multiples of 13 publicly traded companies that it deemed relevant, including:
 
Price /
Price / earnings
Selected Metrics
Company name
GAAP
book
value
GAAP
book
value ex
AOCI
GAAP LTM
CY2023E
CY2024E
Total
Assets
(in millions)
Total
LTM
Revenue
(in millions)
Market
Capitalization
(in millions)
Corebridge Financial, Inc.
1.2x
0.5x
4.8x
4.8x
4.0x
$367,470
$23,278
$12,681
Globe Life Inc.
2.6x
1.5x
11.8x
10.4x
9.6x
$26,708
$5,268
$10,289
Equitable Holdings, Inc.
4.8x
1.1x
5.1x
5.6x
4.3x
$269,006
$11,113
$9,531
Primerica, Inc.
3.4x
3.1x
13.7x
12.1x
11.0x
$14,752
$2,804
$6,835
Voya Financial, Inc.
2.3x
1.2x
12.9x
8.3x
7.2x
$154,616
$6,598
$7,003
Lincoln National Corp.
0.8x
0.4x
NM
3.4x
3.1x
$348,612
$15,212
$4,107
Brighthouse Financial, Inc.
1.0x
0.4x
NM
3.2x
2.7x
$231,545
$4,138
$3,142
Jackson Financial Inc.
0.4x
0.2x
7.2x
2.7x
2.4x
$326,980
$5,297
$3,128
CNO Financial Group, Inc.
1.3x
0.7x
9.3x
8.9x
7.7x
$34,054
$3,908
$2,660
Kansas City Life Insurance Company
0.5x
0.3x
NM
NA
NA
$4,973
$493
$247
Security National Financial Corporation
0.6x
0.5x
6.5x
NA
NA
$1,404
$355
$169
Citizens, Inc.
1.0x
0.5x
5.1x
NA
NA
$1,624
$238
$144
UTG, Inc.
0.7x
0.7x
5.6x
NA
NA
$412
$49
$108
Note: Selected financial metrics as of June 30, 2023; Market data as of October 2, 2023; Earnings multiples exceeding 20.0x or negative are considered “NM.”
Sources: S&P Global Market Intelligence, Factset.
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Raymond James calculated various financial multiples for each company, including market value compared to GAAP (as defined below) book value, GAAP book value excluding accumulated other comprehensive income (“AOCI”) and GAAP last 12-month earnings, using publicly available consensus research earnings estimates for the selected companies for calendar years ending December 31, 2023 and 2024, referred to as CY2023E and CY2024E. The estimates published by research analysts were not prepared in connection with the merger or at the request of Raymond James and may or may not prove to be accurate. Raymond James reviewed the mean, median, 75th percentile and 25th percentile relative valuation multiples of the selected public companies and compared them to corresponding valuation multiples for the Company implied by the merger consideration. The results of the selected public companies analysis are summarized below:
 
Price /
Price / earnings
 
GAAP book
value
GAAP book
value ex
AOCI
GAAP LTM
CY2023E
CY2024E
75th percentile
2.4x
1.1x
12.1x
9.6x
8.7x
Mean
1.6x
0.9x
8.2x
6.6x
5.8x
Median
1.0x
0.5x
6.9x
5.6x
4.3x
25th percentile
0.6x
0.4x
5.1x
3.3x
2.9x
Merger consideration
1.5x
1.2x
NM
2,151.9x
430.4x
Note: Earnings multiples that are negative are considered “NM.”
Furthermore, Raymond James applied the mean, median, reference low and reference high relative valuation multiples for each of the metrics to the Company’s actual financial results and the Projections and determined the implied equity price per share of Company Common Stock and then compared those implied equity values per share to the Merger Consideration of $11.43 per share. The results of this are summarized below:
 
Price /
Price / earnings
 
GAAP book
value
GAAP book
value ex
AOCI
GAAP LTM
CY2023E
CY2024E
75th percentile
$18.95
$10.70
NM
$0.05
$0.23
Mean
$12.30
$8.16
NM
$0.04
$0.15
Median
$7.65
$5.14
NM
$0.03
$0.11
25th percentile
$4.96
$3.63
NM
$0.02
$0.08
Merger consideration
$11.43
$11.43
$11.43
$11.43
$11.43
Note: Share prices that are negative are considered “NM.”
Raymond James selected these 13 companies because Raymond James believed that, on balance, these companies, relative to other companies whose securities are listed on U.S. national securities exchanges, most closely approached the business conducted by the Company and were deemed sufficiently similar for purposes of Raymond James’s analysis. Raymond James’s selected company analysis necessarily involves complex considerations and judgments concerning differences in financial and operational characteristics of the companies compared and other factors that could affect the selected companies differently than they would affect the Company.
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Selected Transaction Analysis
Raymond James analyzed publicly available information relating to 11 selected acquisitions of companies that closed or are pending from January 1, 2017 to October 2, 2023 and prepared a summary of the relative valuation multiples paid in these transactions. The selected transactions used in the analysis were:
 
Deal value /
Deal value /
Selected Markets
Transaction
GAAP
book
value
GAAP
book
value ex
AOCI
GAAP
LTM
earnings
STAT
book
value(1)
STAT
NPW(1)
STAT
LTM
earnings(1)
Total
Asssets
(in
millions)
Total
LTM
Revenue
(in
millions)
Deal
Value
(in
millions)
Pending acquisition of American Equity Investment by Brookfield Reinsurance Ltd. (Pending; Announced Jun-2023)
1.6x
0.8x
8.5x
1.4x
NM
40.0x
$77,645
$2,658
$4,306
Pending acquisition of Midwest Holding Inc. by Antarctica Capital LLC (Pending; Announced May-2023)
4.0x
1.2x
9.3x
2.1x
0.3x
NM
$2,144
$66
$100
Acquisition of American National Group Inc. by Brookfield Asset Management Inc. (May-2022)
0.8x
0.8x
5.8x
0.9x
NA
NM
$30,873
$4,299
$5,111
Acquisition of Assurant’s Global Preneed Business by CUNA Mutual Holding Company (Aug-2021)
1.2x
2.8x
27.0x
NA
NA
NA
NA
NA
$1,250
Acquisition of Great American Life Insurance Co. by Massachusetts Mutual Life Insurance Co. (May-2021)
0.9x
1.2x
8.3x
1.2x
NM
19.0x
$48,571
$2,208
$3,500
Acquisition of FBL Financial Group, Inc. by Farm Bureau Property & Casualty (May-2021)
0.9x
1.4x
17.8x
NA
NA
NA
$10,901
$788
$1,488
Acquisition of Global Atlantic Financial Group by KKR & Co. (Feb-2021)
0.7x
1.0x
6.1x
1.4x
0.7x
19.0x
$125,768
$7,472
$4,354
Acquisition of FGL Holdings by Fidelity National Financial (Jun-2020)
1.0x
1.2x
8.9x
NA
NA
NA
$34,737
$1,178
$2,687
Acquisition of United Life Insurance Co. by Kuvare Holdings LP (Mar-2018)
1.4x
NA
NA
2.0x
NA
NM
NA
NA
$280
Acquisition of Pavonia Holdings (US) Inc. by GBIG Capital, LLC (Dec-2017)
1.3x
NA
NA
NA
NA
NA
$1,244
NA
$120
Acquisition of Fidelity & Guaranty Life by CF Corp. (Nov-2017)
1.0x
1.1x
10.8x
1.2x
0.7x
39.0x
$28,965
$1,530
$1,832
(1)
Based on statutory accounting principles – Book Value includes the capital and surplus of the consolidated insurance operations
Note: Net premiums written (“NPW”) and earnings multiples that are negative are considered “NM.” Items noted as “NA” are not publicly available / determinable.
Raymond James examined valuation multiples of transaction equity value compared to the target companies’ GAAP book value, GAAP book value excluding AOCI and GAAP earnings and transaction equity value plus target total debt compared to companies’ statutory (“STAT”) book value, STAT net premiums written and STAT earnings, in each case for the 12 months ended prior to closing of the transaction. Raymond James reviewed the mean, median, 75th percentile and 25th percentile relative valuation multiples of the selected transactions and compared them to corresponding valuation multiples for the Company implied by the Merger Consideration. Furthermore, Raymond James applied the mean, median, 75th percentile and 25th percentile relative valuation multiples to the Company’s GAAP book value, GAAP book value excluding AOCI, GAAP earnings, STAT book value, STAT net premiums written and STAT earnings to determine the implied equity price per share and then compared those implied equity values per share to the Merger Consideration of $11.43 per share. The results of the selected transactions analysis are summarized below:
 
Deal value /
Deal value /
 
GAAP
book
value
GAAP book
value ex
AOCI
GAAP
LTM
earnings
STAT book
value
STAT
NPW
STAT LTM
earnings
75th percentile
1.4x
1.3x
14.3x
2.0x
0.7x
39.7x
Mean
1.3x
1.3x
11.4x
1.5x
0.6x
29.3x
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Deal value /
Deal value /
 
GAAP
book
value
GAAP book
value ex
AOCI
GAAP
LTM
earnings
STAT book
value
STAT
NPW
STAT LTM
earnings
Median
1.0x
1.2x
8.9x
1.4x
0.7x
29.0x
25th percentile
0.9x
0.9x
7.2x
1.2x
0.3x
19.0x
Merger consideration
1.5x
1.2x
NM
1.7x
3.0x
NM
Note: Earnings multiples that are negative are considered “NM.”
 
Deal value /
Deal value /
 
GAAP
book
value
GAAP book
value ex
AOCI
GAAP
LTM
earnings
STAT book
value
STAT
NPW
STAT LTM
earnings
75th percentile
$10.86
$12.20
NM
$13.26
$2.78
NM
Mean
$10.41
$12.02
NM
$9.88
$2.19
NM
Median
$7.60
$11.00
NM
$9.32
$2.59
NM
25th percentile
$6.80
$8.43
NM
$8.11
$1.20
NM
Merger consideration
$11.43
$11.43
$11.43
$11.43
$11.43
$11.43
Note: Share prices that are negative are considered “NM.”
None of the selected transactions reviewed was identical to the Merger. However, Raymond James reviewed and analyzed certain transactions in the U.S. life insurance and annuities industry since 2017 for purposes of its analysis, which may be considered sufficiently similar to the Merger. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the transaction differently than they would affect the Merger.
Discounted Cash Flow Analysis
Raymond James analyzed the discounted present value of the Company’s projected free cash flows from September 30, 2023 through December 31, 2027 on a standalone basis using the Projections. Raymond James calculated levered free cash flows, defined as earnings plus incremental (decremental) net investment income from contributions and distributions from/to stockholders.
The discounted cash flow analysis was based on the Projections. Consistent with the periods included in the Projections, Raymond James used fiscal year 2027 as the final year for the analysis and applied multiples ranging from 9.0x to 13.0x fiscal year 2027 net income and 0.90x to 1.30x fiscal year 2027 book value, selected by Raymond James upon the application of its professional judgment and expertise, in order to derive a range of terminal values for the Company in 2027.
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The projected levered free cash flows and terminal values were discounted using rates ranging from 15.5% to 17.5%, which range was selected, upon the application of Raymond James’s professional judgment and expertise, to reflect the cost of equity capital associated with executing the Company’s business plan. This selected range reflects a 5.00% risk free rate for 20 year U.S. Treasury securities, which was then increased based upon a size premium of 6.37% and an equity risk premium of 5.50% for the Company, which were selected based on Raymond James’ professional expertise and judgment to reflect an estimate of the Company’s cost of equity capital. The resulting range of present equity values was divided by 14,875,000, the number of diluted shares outstanding, in order to arrive at a range of present values per share of Company Common Stock. Raymond James reviewed the range of per share prices derived in the discounted cash flow analysis and compared them to the price per share for Company Common Stock implied by the Merger Consideration. The results of the discounted cash flow analysis are summarized below:
Terminal value net income
multiple method
Equity value /
per share
Terminal value GAAP book
value multiple method
Equity value /
per share
Minimum (9.0x terminal multiple and 17.5% discount rate)
$2.72
Minimum (0.9x terminal multiple
and 17.5% discount rate)
$4.02
Maximum (13.0x terminal multiple and 15.5% discount rate)
$3.98
Maximum (1.30x terminal multiple
and 15.5% discount rate)
$6.00
Merger consideration
$11.43
Merger consideration
$11.43
Additional Considerations
The preparation of a fairness opinion is a complex process and is not susceptible to a partial analysis or summary description. Raymond James believes that its analyses must be considered as a whole and that selecting portions of its analyses, or applying undue weight to one valuation methodology over another, without considering the analyses taken as a whole, would create an incomplete view of the process underlying its opinion. In addition, Raymond James considered the results of all such analyses and did not assign relative weights to any of the analyses, but rather made qualitative judgments as to the significance and relevance of each analysis and factor, so the ranges of valuations resulting from any particular analysis described above should not be taken to be the view of Raymond James as to the actual value of the Company nor an opinion as to the price at which the Company’s common stock should trade or will trade in the future.
In performing its analyses, Raymond James made numerous assumptions with respect to industry performance, general business, economic and regulatory conditions and other matters, many of which are beyond the control of the Company. The analyses performed by Raymond James are not necessarily indicative of actual values, trading values or actual future results which might be achieved, all of which may be significantly more or less favorable than suggested by such analyses. Such analyses were provided to the Board (solely in its capacity as such) and were prepared solely as part of the analysis of Raymond James of the fairness, from a financial point of view, to the Company stockholders of the merger consideration to be received by such stockholders in connection with the proposed merger pursuant to the merger agreement. The analyses do not purport to be appraisals or to reflect the prices at which companies may actually be sold, and such estimates are inherently subject to uncertainty.
Neither Raymond James’s opinion nor the analyses described above should be viewed as determinative of the views of the Board or its management with respect to the Company, Guarantor and their respective affiliates, or the merger. Raymond James did not recommend any specific amount of consideration to the Board or that any specific merger consideration constituted the only appropriate consideration for the merger. The Company placed no limits on the scope of the analysis performed, or opinion expressed, by Raymond James.
The terms of the Merger Agreement, including the Merger Consideration, were determined through arm’s length negotiations among the parties to the Merger Agreement, and the Board’s decision to approve the Merger Agreement was solely that of the Board. Raymond James’s Opinion was only one of many factors considered by the Board in its evaluation of the proposed Merger, and Raymond James’s Opinion should not be viewed as determinative of the views of the Board or its management with respect to the proposed Merger or the Merger Consideration.
The Opinion was necessarily based upon market, economic, financial and other circumstances and conditions existing and disclosed to it on October 2, 2023, and any material change in such circumstances and
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conditions may affect the Opinion of Raymond James. Raymond James has no obligation to update, revise or reaffirm its opinion. Raymond James relied upon and assumed, without independent verification, that there had been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of the Company since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to Raymond James that would be material to its analyses or its Opinion, and that there was no information or any facts that would make any of the information reviewed by Raymond James incomplete or misleading in any material respect.
During the two years preceding the date of Raymond James’s written opinion, Raymond James has not been engaged by, performed services for or received any compensation from the Company except as set forth in Raymond James’s written opinion the full text of which is attached as Annex B. During the two years preceding the date of Raymond James’s opinion, Raymond James has not been engaged by, performed services for or received any compensation from Guarantor, Parent or their respective affiliates.
For services rendered in connection with the delivery of its opinion, the Company paid Raymond James a fee of $500,000 upon delivery of its opinion. The Company will also pay Raymond James a customary fee for advisory services in connection with the Merger of $1,530,000, all of which is contingent upon the closing of the Merger. The Company also agreed to reimburse Raymond James for its expenses incurred in connection with its services, including the fees and expenses of its counsel, and will indemnify Raymond James against certain liabilities arising out of its engagement.
The Company retained Raymond James to provide a fairness opinion in connection with the proposed merger based on Raymond James’s experience and reputation. Raymond James is actively involved in the investment banking business and regularly undertakes the valuation of investment securities in connection with public offerings, private placements, business combinations and similar transactions. In the ordinary course of business, Raymond James may trade in the securities of the Company and those of Guarantor and those of their respective affiliates for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities. Raymond James may provide investment banking, financial advisory and other financial services to the Company, Guarantor and their respective affiliates, or other participants in the Merger in the future, for which Raymond James may receive compensation.
Certain Company Forecasts
The Company does not, as a matter of general practice, develop or publicly disclose long-term forecasts or internal projections of its future performance, revenues, earnings, financial condition or other results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, certain financial projections (the “Projections”) were prepared by the Company’s management and made available to the Board and Raymond James in connection with the Board’s exploration of strategic alternatives. Certain of these Projections were also provided to Parent and its financial advisor.
The Projections reflect numerous estimates and assumptions with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to the Company’s business, all of which are difficult to predict and many of which are beyond the Company’s control. As a result, there can be no assurance that the projected results reflected in the Projections will be realized or that actual results will not be significantly higher or lower than what is projected in the Projections. Since the Projections cover multiple periods, such information by its nature becomes less reliable with each successive period. The Projections are subjective in many respects and thus are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. As such, the Projections constitute forward-looking information and are subject to risks and uncertainties, including the various risks set forth in the Company’s Form S-1 filed with the SEC on June 4, 2019, and the other reports the Company files with the SEC.
The Projections were prepared solely for internal use and not with a view toward public disclosure or toward complying with generally accepted accounting principles (“GAAP”), the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The Projections were prepared by the Company’s management. Neither the Company’s independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the Projections, nor have they expressed any opinion or any other form of assurance on such
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information or its achievability, and they assume no responsibility for, and disclaim any association with, the Projections. Furthermore, the Projections do not take into account any circumstances or events occurring after the date they were prepared. Except to the extent required by applicable federal securities laws, the Company does not intend, and expressly disclaims any responsibility, to update or otherwise revise the Projections to reflect (i) circumstances existing after the date when the Projections were prepared or (ii) the occurrence of future events or changes in general economic or industry conditions, even in the event that any of the assumptions underlying the Projections is shown to be inappropriate. By including a summary of the Projections in this information statement, none of the Company, Parent, Merger Sub or their respective affiliates, advisors or other representatives makes any representation to any person regarding the ultimate performance of the Company or the surviving corporation compared to the information contained in the Projections and should not be read to require such persons to do so.
Nonetheless, a summary of the Projections is provided in this information statement only because the Projections were made available to Parent and its financial advisor and also to the Board and Raymond James and the Board’s other advisors. The Projections are not fact and should not be relied upon as being necessarily indicative of future results, and readers of this information statement are cautioned not to place undue reliance on this information.
Unaudited Forecasted Consolidated Income Statement (Unaudited) ($m)(1)
 
2023E
2024E
2025E
2026E
2027E
Net insurance premiums
$100.2
$93.1
$91.4
$92.8
$96.6
Net investment income
17.0
17.6
17.9
17.6
17.5
Net realized investment (losses) gains
(0.9)
 
Other-than-temporary-impairment
 
 
Earned commissions
59.6
69.3
78.0
82.3
91.1
Other income
5.1
6.7
8.2
10.6
10.4
Total revenues
$181.0
$186.7
$195.5
$203.3
$215.6
Life, annuity and health claim benefits
69.6
69.1
70.0
70.8
73.1
Operating costs and expenses
94.9
101.7
107.0
111.1
115.9
Amortization of DAC
16.4
15.4
15.7
16.5
17.4
Total benefits and expenses
$180.9
$186.2
$192.7
$198.4
$206.4
Pre-tax income
0.1
0.5
2.8
4.9
9.2
Income tax expense
0.0
0.1
0.6
1.0
1.9
Net profit
$0.1
$0.4
$2.2
$3.9
$7.3
(1)
Forecasts utilize an income tax rate of 21% and exclude $3 million to $5 million in potential transaction costs.
Interests of Our Directors and Executive Officers in the Merger
The Company’s directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of the Company stockholders generally. The Board was aware of these interests and considered them, among other matters, in approving the Merger Agreement. These interests are described below.
For purposes of each of the Company and Apex plans and agreements described below, the completion of the Merger will constitute a “change in control”, “change of control” or term of similar meaning with respect to the Company or Apex, as applicable
Accelerated Vesting, Eligibility to Receive Amounts Distributable with respect to the Apex Profits Interests granted under the EI Plan, and Establishment and Allocation of an Equity-Based Bonus Pool
The Apex 2019 Equity Incentive Plan (the “EI Plan”), as amended, and corresponding award agreements provide that in connection with a change in control of the Company, including the Merger:
Each profits interest (Class B Unit and Class B Priority Unit) of Apex that is outstanding immediately prior to the Effective Time will fully vest and be eligible to receive the amounts distributable with respect to such units.
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To the extent there remains unallocated any portion of the profits interests reserved for issuance under the EI Plan immediately preceding a change in control of the Company, Apex will establish a cash bonus pool representing the amount that would have been paid pursuant to such unallocated profits interests, and Apex will allocate such cash bonus pool to participants in the EI Plan, including the Company’s directors and executive officers.
Quantification of Outstanding EI Plan Equity and Equity-Based Awards
The table below sets forth the estimated amounts that each director and executive officer of the Company would be eligible to receive (without subtraction of applicable withholding taxes, if any) in connection with the Merger with regard to Class B Units and Class B Priority Units of Apex held by the director or executive officer and allocation of the change in control cash bonus pool. Each outstanding, unvested Class B Unit or Class B Priority Unit award will become vested in accordance with its terms in connection with the completion of the Merger.
 
Apex Profits
Interests
Apex Change in
Control Award
Pool
Total
Value
($)
Name
Profits
Interests
(#)(1)
Value
($)
Value
($)
Executive Officers
 
 
 
 
Mr. Hohmann
146,146
800,000
100,000
900,000
Mr. Harkensee
51,151
280,000
35,000
315,000
Ms. Balsan
146,146
800,000
20,000
820,000
Mr. Buchanan
36,536
200,000
25,000
225,000
Mr. Drollette
116,920
640,000
30,000
670,000
Mr. Kim
29,229
160,000
20,000
180,000
Non-Employee Directors
 
 
 
 
Ms. Zimmerman
36,536
200,000
25,000
225,000
Mr. Ashe
29,229
160,000
20,000
180,000
Mr. Hemmings
23,383
128,000
16,000
144,000
Mr. Perry
7,307
40,000
5,000
45,000
Mr. Rahe
(1)
Represents Apex profits interests for which vesting will be accelerated in connection with the Merger.
Payments to Executives upon Termination Following Change in Control
Executive Officer Severance
Each of the Company’s current executive officers is eligible to receive severance payments and benefits upon a qualifying termination of employment that occurs during a specified period before or after the completion of the Merger in accordance with the terms of the Company’s Change in Control Severance Benefits Plan (the “CIC Severance Plan”), as applicable. The receipt of such severance payments and benefits is conditioned upon the executive officer’s execution of a separation agreement and general release of claims in favor of the Company.
Pursuant to the CIC Severance Plan, each of the Company’s current executive officers is eligible to receive severance payments and benefits in connection with a change in control of the Company, if their employment is terminated due to an Involuntary Termination or a Constructive Termination (as each is defined below) that occurs within 12 months following the effective date of a change in control, or an Involuntary Termination that occurs within 12 months prior to a change in control. If the executive experiences such a termination of employment, then such executive will be eligible to receive the following payments and benefits:
1.
an amount equal to two times the executive’s annual base salary immediately preceding the change in control (or as increased thereafter), payable in substantially equal installments over 24 months commencing 60 days following the date of termination of employment;
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2.
an amount equal to two times the product of the executive’s average annual cash bonus percentage from the last three fiscal years multiplied by his or her annual base salary immediately preceding the change in control (or as increased thereafter), payable in a lump sum 60 days following the date of termination of employment;
3.
if such executive elects continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), payment of the Company’s portion of the premium payments for such executive officer’s medical, dental and vision coverage that the Company paid prior to the termination of employment for a period of up to 12 months following such termination, or until such executive receives coverage by a medical, dental or vision plan of a subsequent employer;
4.
reimbursement of the cost of obtaining comparable life and long-term disability insurance coverage that the employee was provided before the termination for a period up to 24 months; and
5.
the immediate vesting of all accrued benefits under the Company’s incentive and bonus plans, including the annual bonus program.
The CIC Severance Plan further provides that payments made to an executive will be reduced by any other severance received by such executive pursuant to any other policy, plan program or arrangement, including any statutory entitlements to advance notice or payment. In addition, if any executive would be subject to the excise tax imposed on “parachute payments” in accordance with Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), then those payments will be reduced to the extent necessary such that no portion of the payments is subject to the excise tax. The Company may, however, following its further analysis on the economic impact and with Parent’s prior written consent, amend the CIC Severance Plan to provide that such reduction for purposes of Section 280G of the Code will only apply to the extent that the net-after-tax amount reflecting such reduction would be greater than the amount the executive would be entitled to absent such reduction on an after-tax basis (including the excise tax imposed on the executive).
The CIC Severance Plan generally defines “Involuntary Termination” as an involuntary termination of an eligible employee’s employment by the Company that constitutes a “separation from service” within the meaning of Section 409A of the Code other than for one of the following reasons: (i) a refusal or failure to follow the lawful and reasonable directions of the Board or individual to whom the eligible employee reports, which refusal or failure is not cured within 30 days following delivery of written notice of such conduct to the eligible employee; (ii) a material failure by the eligible employee to perform his or her duties in a manner reasonably satisfactory to the Board that is not cured 30 days following delivery of written notice of such failure to the eligible employee; or (iii) a conviction of a felony involving moral turpitude that is likely to inflict or has inflicted material injury on the business of the Company.
The CIC Severance Plan generally defines “Constructive Termination” as a voluntary termination of employment by an eligible employee that constitutes a “separation from service” within the meaning of Section 409A of the Code after one of the following is undertaken without the eligible employee’s express written consent: (i) the assignment to the eligible employee of duties or responsibilities that results in a material diminution in the eligible employee’s authority, duties or responsibilities as in effect immediately prior to the change in control; provided, however, that (a) a change in the Eligible Employee’s title or reporting relationships by itself shall not provide the basis for a Constructive Termination and (b) a change in the Eligible Employee’s authority, duties or responsibilities occurring automatically due to the Company ceasing to be a publicly-traded company shall not provide the basis for a Constructive Termination; (ii) any decrease in base salary, as in effect immediately prior to the change in control (or as increased thereafter); (iii) a change in the eligible employee’s business location of more than five miles from the business location immediately prior to the change in control; or (iv) a material breach by the Company of any provisions of the CIC Severance Plan or any enforceable written agreement between the Company and the eligible employee; or the failure of the Company to arrange for the assumption of the CIC Severance Plan by its successor or assign.
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Quantification of Severance Payments to Executive Officers
The following table summarizes the payments and benefits that each executive officer would be entitled to receive under the CIC Severance Plan described in this “Payments to Executives upon Termination Following Change in Control” section, assuming that each executive officer experiences a simultaneous qualifying termination of employment on the date that the Merger occurs. For purposes of the following table, it is assumed that the Merger will occur in the first half of calendar year 2024. The following table does not replicate information already disclosed in the table above under the heading “Quantification of Outstanding EI Plan Equity and Equity-Based Awards.”
Name
2x Base
Salary
($)(1)
Bonus-
Related
Payment
($)(2)
COBRA
Premiums(3)
Life and
Long-Term
Disability
Insurance(4)
Acceleration
and
Payment of
Outstanding
Awards(5)
Total
($)
Executive Officers
 
 
 
 
 
 
Mr. Hohmann
1,534,700
916,037
12,053
1,320
2,464,110
Mr. Harkensee
900,000
381,451
12,053
1,320
1,294,824
Ms. Balsan
1,010,000
765,000
11,896
1,320
112,500
1,900,716
Mr. Buchanan
700,000
279,181
18,735
1,320
999,236
Mr. Drollette
700,000
193,537
18,735
1,320
913,592
Mr. Kim
760,000
306,379
18,735
1,320
1,086,434
(1)
Represents an amount equal to two times the executive officer’s annual base salary immediately preceding the change in control (or as increased thereafter) payable to the executive officer under the terms of the CIC Severance Plan, as described in more detail under the section entitled “Executive Officer Severance.”
(2)
Represents an amount equal to two times the product of the executive officer’s average annual bonus percentage over the last three years multiplied by the executive officer’s annual base salary immediately preceding the change in control (or as increased thereafter), payable to the executive officer under the terms of the CIC Severance Plan, as described in more detail under the section entitled “Executive Officer Severance.”
(3)
Represents the estimated value of subsidized COBRA coverage for each of the executive officers for a period of 12 months following the date of such executive officer’s qualifying termination, as described in more detail under the section entitled “Executive Officer Severance.”
(4)
Represents the estimated value of reimbursements of the cost of obtaining life and long-term disability insurance comparable to the life and long-term disability benefits provided by the Company’s plans in which the executive officer participated immediately prior to the termination, as described in more detail under the section entitled “Executive Officer Severance.”
(5)
Represents the value of accelerated vesting and payment of benefits under the Company’s incentive and bonus plans, in which the executive officer participated immediately prior to the termination that have not yet vested, as described in more detail under the section entitled “Executive Officer Severance.” The amount shown for Ms. Balsan will be accelerated and paid upon the closing of the Merger, regardless of whether she experiences a qualifying termination of employment.
2023 Executive Short-Term Incentive Plan Guarantee in Connection with a Change in Control
Pursuant to the Company’s 2023 Executive Short-Term Incentive Plan, if a change in control transaction occurs, officers and employees eligible to participate in such plan will receive no less than the target level bonus available pursuant to the plan, regardless of actual performance.
Directors’ and Officers’ Indemnification and Insurance
The Merger Agreement provides that, from and after the Effective Time, the surviving corporation will, and Parent will cause the surviving corporation to, indemnify, defend and hold harmless to the fullest extent permitted by Delaware law or provided under the Company’s certificate of incorporation and bylaws in effect on the date of the Merger Agreement and permitted by the DGCL all directors and officers of the Company and its current subsidiaries at or prior to the Effective Time (the “Indemnified Parties”) for any acts or omissions occurring at or prior to the Effective Time.
In addition, for a period of six years after the Effective Time, Parent and the surviving corporation will maintain directors’ and officers’ liability insurance covering acts or omissions occurring at or prior to the Effective Time with respect to the Indemnified Parties with terms, conditions, retentions and levels of coverage at least as favorable as the coverage provided under the Company’s current directors’ and officers’ insurance policy; provided, however, that in no event will Parent or the surviving corporation be required to expend in any
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one year an amount in excess of 200% of the current annual premiums paid by the Company for such insurance (the “Maximum Premium”). If the annual premiums for such insurance coverage exceed the Maximum Premium, Parent and the surviving corporation will only be obligated to obtain a policy with the greatest coverage available at an annual premium not exceeding the Maximum Premium. In lieu of the foregoing insurance coverage, the Company may purchase, or if requested by Parent, the Company will purchase, prior to the Effective Time, a six year “tail” insurance policy that provides coverage identical in all material respects to the coverage described above; provided that the Company does not pay more than the Maximum Premium for the coverage period for such tail insurance policy.
Delisting and Deregistration of Company Common Stock
If the Merger is completed, the shares of Company Common Stock will be delisted from the Nasdaq Capital Market and deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we will no longer file periodic reports with the SEC on account of the Company Common Stock.
U.S. Federal Income Tax Consequences of the Merger
The following is a general summary of the anticipated U.S. federal income tax consequences to U.S. Holders of the exchange of shares of Company Common Stock for cash pursuant to the Merger. This discussion is based on the Code, final and temporary Treasury Regulations promulgated thereunder, administrative pronouncements or practices and judicial decisions, all as in effect as of the date hereof. Future legislative, judicial or administrative modifications, revocations or interpretations, which may or may not be retroactive, may result in U.S. federal income tax consequences significantly different from those summarized herein. We have not sought, and do not intend to seek, any ruling from the Internal Revenue Service (the “IRS”) or any other taxing authority with respect to any of the U.S. federal income tax consequences summarized herein, and there can be no assurance that the IRS will not challenge any of the consequences summarized herein, or that a court will not sustain any such challenge by the IRS.
For purposes of this discussion, the term “U.S. Holder” means a beneficial owner of shares of Company Common Stock that is, for U.S. federal income tax purposes (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity taxable as a corporation) created or organized under the laws of the United States, any state thereof or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source or (iv) a trust which is subject to the primary jurisdiction of a court within the United States and for which one or more U.S. persons have authority to control all substantial decisions, or has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.
If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of Company Common Stock, the tax treatment of a partner in such partnership generally will depend on the status of the partner and the activities of the partnership. If you are a partner in a partnership that holds shares of Company Common Stock, you should consult your own tax advisor regarding the tax consequences of the exchange of shares of Company Common Stock for cash pursuant to the Merger.
This summary is for general information only and does not constitute tax advice. This summary does not address all aspects of U.S. federal income taxation that may be relevant to holders in light of their particular circumstances. In addition, this discussion does not apply to certain categories of holders that are subject to special treatment under the U.S. federal income tax laws, such as (i) banks, financial institutions or insurance companies, (ii) regulated investment companies or real estate investment trusts, (iii) brokers or dealers in securities or currencies or traders in securities that elect mark-to-market treatment, (iv) tax-exempt organizations, qualified retirement plans, individual retirement accounts or other tax-deferred accounts, (v) holders that exercise appraisal rights in connection with the Merger, (vi) holders that acquired shares of common stock in connection with the exercise of employee stock options or otherwise as compensation for services, (vii) holders that own shares of common stock as part of a straddle, hedge, constructive sale, conversion transaction or other integrated investment, (viii) holders that are liable for the “alternative minimum tax” under the Code, (ix) U.S. Holders whose functional currency is not the United States dollar or (x) holders who are not U.S. Holders. This discussion does not address any tax consequences arising under any state, local or non-U.S. tax laws or U.S. federal estate or gift tax laws. In addition, this discussion applies only to holders that hold their shares of Company Common Stock as capital assets (generally, property held for investment).
STOCKHOLDERS OF THE COMPANY ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF U.S. FEDERAL TAX LAWS TO THEM IN LIGHT OF THEIR OWN
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PARTICULAR CIRCUMSTANCES AND ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL, NON-U.S. OR OTHER TAXING JURISDICTION.
The exchange of shares of Company Common Stock for cash pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. Holder will recognize gain or loss equal to the difference between (i) the amount of cash received and (ii) such U.S. Holder’s adjusted tax basis in its shares of Company Common Stock. Generally, such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the shares of common stock exchanged were held for more than one year as of the date of exchange. Long-term capital gains of non-corporate U.S. Holders generally are subject to U.S. federal income tax at preferential rates. The deduction of capital losses is subject to limitations. Gain or loss must be calculated separately for each block of shares of Company Common Stock (i.e., shares of common stock acquired for the same cost in the same transaction) exchanged for cash pursuant to the Merger.
Regulatory Approvals
The insurance laws and regulations of the state of Illinois, where the Company’s insurance company subsidiaries are domiciled, require that, prior to the acquisition of control of an insurance company domiciled in Illinois, the acquiring company must obtain the approval of the Illinois Department of Insurance.
The Merger will also require prior notification of the Merger to, and no opposition by, The Autorité des marchés financiers, approval of the change of ownership of one of the Company’s insurance intermediary subsidiaries by the Texas Department of Insurance and the expiration of the waiting period (and any extension thereof) applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”).
While we believe that the Company and Parent will receive the approvals, non-disapprovals and clearances from governmental authorities described above that are prerequisites to the consummation of the Merger under the Merger Agreement and applicable law, the Company and Parent may not obtain all such approvals.
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THE MERGER AGREEMENT
This section describes the material terms of the Merger Agreement. The description in this section and elsewhere in this information statement is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy of which is attached as Annex A and is incorporated by reference into this information statement. This summary does not purport to be complete and may not contain all of the information about the Merger Agreement that is important to you. We encourage you to read the Merger Agreement carefully and in its entirety. Such information can be found elsewhere in this information statement and in the public filings we make with the SEC, as described in the section entitled, “Where You Can Find More Information.”
Explanatory Note Regarding the Merger Agreement
The Merger Agreement has been included to provide investors and security holders with information regarding its terms. The representations, warranties and covenants contained in the Merger Agreement were made by the parties thereto only for purposes of that agreement and as of specific dates; were made solely for the benefit of the parties to the Merger Agreement; may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Merger Agreement (such disclosures include information that has been included in the Company’s public disclosures, as well as additional non-public information); may have been made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts; and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company, Parent, Guarantor or any of their respective subsidiaries or affiliates. Additionally, the representations, warranties, covenants, conditions and other terms of the Merger Agreement may be subject to subsequent waiver or modification. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
Form of Merger
Upon the terms and subject to the conditions of the Merger Agreement and in accordance with the DGCL, at the Effective Time, Merger Sub will be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub will cease and the Company will continue as the surviving corporation and a wholly owned subsidiary of Parent.
Consummation and Effectiveness of the Merger
The Merger will become effective upon Parent filing the certificate of merger with the Delaware Secretary of State. The closing of the Merger will occur on the date that is the fifth business day after the satisfaction or waiver of the conditions to consummation of the Merger set forth in the Merger Agreement (other than those conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or waiver of those conditions).
Consideration to be Received in the Merger
Upon consummation of the Merger, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time, other than appraisal shares, shares held by the Company as treasury or shares owned by Parent, Merger Sub, or the Company (which will be canceled and retired and cease to exist and no payment or distribution will be made with respect thereto), will automatically be canceled and converted into the right to receive the Merger Consideration, upon surrender of each respective share certificate to the paying agent engaged in connection with the Merger (the “Paying Agent”) (and automatically in the case of book-entry shares, subject to compliance with the Paying Agent’s customary procedures with respect to book-entry securities).
Appraisal Shares
Appraisal shares will not be converted into the right to receive the Merger Consideration, but, instead, holders of appraisal shares will be entitled to payment of the fair value of such shares in accordance with Section 262 of the DGCL. If any such holder of appraisal shares fails to perfect or otherwise waives, withdraws
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or loses the right to appraisal under Section 262 of the DGCL or a court of competent jurisdiction determines that such holder is not entitled to the relief provided by Section 262 of the DGCL, then the right of such holder to be paid the fair value of such holder’s appraisal shares under the DGCL will cease and such appraisal shares will be deemed to have been converted at the Effective Time into, and will have become, the right to receive the Merger Consideration without interest or any other payments. The Company will serve prompt notice to Parent of any demands for appraisal, attempted withdrawals of such demands and any other instruments served pursuant to the DGCL received by the Company, and Parent will have the right to direct all negotiations and proceedings with respect to such demands; provided that Parent shall not be permitted to require any payment to be made with respect, or any settlement of, such demands prior to the closing of the Merger. The Company will not, without the prior written consent of Parent (which consent will not be unreasonably withheld, conditioned or delayed) or as otherwise required under the DGCL, make any payment with respect to, or settle or offer to settle, any such demands, or agree to do or commit to do any of the foregoing.
Exchange Procedures
As promptly as practicable and in any event within two business days after the Effective Time, the Paying Agent will mail to each holder of record of a share certificate or share certificates that, immediately prior to the Effective Time, represented outstanding shares of Company Common Stock subsequently converted into the right to receive the Merger Consideration, a letter of transmittal that (i) specifies that delivery will be effected and risk of loss and title to the certificates will pass only upon proper delivery of the certificates to the Paying Agent (or an affidavit of loss in lieu thereof, together with any bond or indemnity agreement), (ii) will be in such form and have such other provisions as the surviving corporation may specify, subject to the Company’s reasonable approval (to be sought prior to the Effective Time) and instructions for use in effecting the surrender of the certificates in exchange for the applicable Merger Consideration payable in accordance with the Merger Agreement.
Upon surrender to the Paying Agent of a share certificate for cancellation, together with a duly completed and executed letter of transmittal and any other documents reasonably required by the Paying Agent or the surviving corporation, (i) the holder of such share certificate will be entitled to receive, in exchange for such share certificate, the Merger Consideration that such holder has the right to receive and (ii) the surrendered share certificate will be canceled. No interest will be paid or accrued on the cash payable upon surrender of the certificates. Until surrendered as contemplated by the Merger Agreement, each such certificate will be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the applicable Merger Consideration.
Any holder of uncertificated shares in book-entry form will not be required to deliver a certificate or an executed letter of transmittal to the Paying Agent to receive the Merger Consideration that such holder is entitled to receive. In lieu thereof, each holder of record of one or more book-entry shares of Company Common Stock whose shares were converted into the right to receive the Merger Consideration will automatically upon the Effective Time (or, at any later time at which such book-entry shares would be so converted) be entitled to receive, and Parent will cause the Paying Agent to pay and deliver as promptly as practicable (and in any event within three business days after the Effective Time), the Merger Consideration to which such holder is entitled to receive. Notwithstanding the foregoing, surrender of any book-entry shares of Company Common Stock must be effected in accordance with the Paying Agent’s customary procedures with respect to book-entry securities.
In the event of a transfer of ownership of shares of Company Common Stock that is not registered in the transfer records of the Company, the appropriate amount of the Merger Consideration may be paid to a transferee if the share certificate representing such shares of Company Common Stock is presented to the Paying Agent properly endorsed or accompanied by appropriate stock powers and otherwise in proper form for transfer and accompanied by all documents reasonably required by the Paying Agent to evidence and effect such transfer and to evidence that any applicable taxes have been paid.
Parent, the surviving corporation, any affiliates of the foregoing, or the Paying Agent will be entitled to deduct and withhold from amounts otherwise payable pursuant to the Merger Agreement to any holder of shares of Company Common Stock or appraisal shares such amounts as are required to be deducted and withheld pursuant to any applicable tax laws. Prior to any such deduction or withholding, Parent will, and will cause the applicable withholding agent to, provide the applicable holder of Company Common Stock a reasonable opportunity to provide any required certifications or other documentation to reduce or eliminate any such deduction or withholding.
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Representations and Warranties
The Merger Agreement contains customary representations and warranties of Parent, Merger Sub and the Company, including representations and warranties relating to, among other things:
organization and good standing;
due authorization, execution, delivery and enforceability of the Merger Agreement;
absence of conflicts with the parties’ governing documents, applicable laws and contracts;
absence of pending or, to the knowledge of the respective parties, overtly threatened litigation that would reasonably be expected to have a material adverse effect on the respective parties;
matters relating to brokers and finders’ fees;
accuracy of information supplied by each of Parent and the Company in connection with this information statement; and
compliance with laws.
In addition, the Merger Agreement contains the following customary representations and warranties of the Company:
capitalization;
ownership of the Company’s subsidiaries;
documents filed with the SEC, compliance with applicable SEC filing requirements and accuracy of information contained in such documents;
compliance of financial statements with applicable accounting requirements and SEC rules and regulations and preparation in accordance with GAAP, and the absence of certain undisclosed liabilities;
absence of any change or events that has had or would reasonably be expected to have a Company Material Adverse Effect since December 31, 2021 and conduct of business in the ordinary course since December 31, 2021;
matters related to the Company’s insurance subsidiaries;
matters related to the Company’s statutory statements and examination reports by any governmental authority;
matters related to insurance business and regulation;
matters related to reinsurance;
matters related to investment assets;
filing of tax returns, payment of taxes and other tax matters;
ownership and use of real property;
employee benefit plans and matters relating to ERISA;
labor and employment matters;
ownership and use of intellectual property;
insurance matters;
the receipt of a fairness opinions from Raymond James;
compliance with environmental laws and regulations;
material contracts; and
Board approval of the Merger Agreement and the Merger, including the determination that the Merger is advisable and that the terms are fair to, and in the best interest of, the Company stockholders, as well as a Board resolution to recommend that the Company stockholders approve and adopt the Merger Agreement and the Merger.
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The Merger Agreement also contains the following customary representations and warranties of Parent and Merger Sub:
the existence of sufficient funds to consummate the Merger;
formation of Merger Sub solely for the purpose of the transactions contemplated in the Merger Agreement and the interim operations of Merger Sub; and
matters related to required votes and approvals.
Certain of the representations and warranties in the Merger Agreement are qualified as to “materiality,” “Company Material Adverse Effect” or “Parent Material Adverse Effect.”
The Merger Agreement provides that a “Company Material Adverse Effect” means, with respect to the Company, state of facts, change, development, event, effect, condition or occurrence that, individually or in the aggregate, would reasonably be expected to (i) prevent, materially impair or materially delay the Company’s ability to consummate the transactions contemplated by the Merger Agreement or the performance by the Company of any of its material obligations under the Merger Agreement or (ii) result in a material adverse effect on the financial condition, business, operations, assets and liabilities (considered together) or continuing results of operations of the Company and its subsidiaries, taken as a whole. With respect to clause (ii) of the prior sentence, none of the following, either alone or in combination, will constitute, or be taken into account in determining whether there has been or will be, a Company Material Adverse Effect:
changes or conditions generally affecting the insurance or reinsurance industries in which the Company and its subsidiaries operate;
general economic or regulatory or legislative conditions or securities, credit, financial or other capital markets conditions, including any changes in the value of the investment assets owned by an insurance subsidiary of the Company resulting therefrom;
changes or proposed changes in applicable law, GAAP or statutory accounting principles (“SAP”) or other applicable accounting rules, or the interpretation or enforcement of any of the foregoing, including any changes in capital requirements for insurance companies required by applicable law or mandated by any governmental authority, but not including any prescribed or permitted practices specific to Fidelity Life Association;
any changes in global or national political conditions (including the outbreak or escalation of war, military action, sabotage or acts of terrorism) or changes due to any pandemic, cyberattack, natural disaster or other act of nature;
any failure by the Company to meet any published analyst estimates or expectations of the Company’s revenue, premiums written, earnings or other financial performance or results of operations for any period, in and of itself (but not the underlying cause thereof), or any failure by the Company to meet its internal or published projections, budgets, plans or forecasts of its revenues, premiums written, earnings or other financial performance or results of operations or any change in the price or trading volume of the Company Common Stock, in and of itself (but not the underlying cause thereof);
the announcement of the Merger Agreement and the transactions contemplated by the Merger Agreement or the pendency of the Merger or the identity of the parties to the Merger Agreement, including any termination of, reduction in or similar negative impact on relationships, contractual or otherwise, with any policyholders, customers, suppliers, reinsurers, agents, brokers, partners, officers or employees of the Company and its subsidiaries;
any actions taken or omitted to be taken in accordance with the express terms of the Merger Agreement to obtain any consent, approval, authorization or waiver under applicable law in connection with the Merger and the other transactions contemplated by the Merger Agreement;
the entering into and performance of the Merger Agreement and the transactions contemplated hereby, including compliance with the covenants set forth herein, or any action taken or omitted to be taken by the Company at the request or with the prior consent of Parent or Merger Sub;
the effects of any breach, violation or non-performance of any provision of the Merger Agreement by Parent or any of its affiliates; or
any downgrade or potential downgrade of the credit, financial strength, claims paying ability or other ratings of the Company, any of its subsidiaries or its outstanding debt (but not the underlying cause thereof).
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Certain effects, changes, events, circumstances or developments listed in each of the first, second, third and fourth bullets above may be taken into account in determining whether a Company Material Adverse Effect has occurred, but only to the extent any such effect, change or event has a disproportionate adverse effect on the Company and its subsidiaries, taken as a whole, relative to other participants engaged primarily in the industries or markets in which the Company and its subsidiaries operate. In such case, only the incremental disproportionate effect or effects may be taken into account when determining whether a Company Material Adverse Effect has occurred.
The Merger Agreement also provides that a “Parent Material Adverse Effect” means, with respect to Parent or Merger Sub, any state of facts, change, development, event, effect, condition or occurrence that would reasonably be expected to, individually or in the aggregate, cause a failure of, or a material impairment or delay in, the ability of Parent to perform its material obligations under the Merger Agreement.
Conduct of Business by the Company Prior to Consummation of the Merger
The Company agrees that during the period from the date of the Merger Agreement until the closing or earlier termination of the Merger Agreement, except as otherwise expressly contemplated by the Merger Agreement, as set forth in the confidential disclosures the Company delivered in connection therewith, as required in connection with any contagion event, as required by law or order, or with the prior written consent of Parent (which consent will not be unreasonably withheld, delayed or conditioned) (i) the Company will and will cause each of its subsidiaries to conduct their respective businesses and operations in the ordinary course of business consistent with past practices in all material respects, (ii) subject to the limitations, restrictions and prohibitions set forth in the Merger Agreement, the Company will use its reasonable best efforts to preserve intact its business organization, goodwill and assets, and to preserve its present relationships with governmental authorities and other key third parties, including customers, reinsurers, producers, distributors, suppliers and other persons with whom the Company and its subsidiaries have business relationships and (iii) the Company will not and will cause its subsidiaries not to:
declare, set aside, make or pay any dividends or other distributions (whether in cash, stock or property) in respect of any of its or its subsidiaries’ capital stock, other than any dividends or distributions by a subsidiary of the Company to the Company or to any other subsidiary of the Company;
adjust, split, combine, subdivide or reclassify any of its capital stock or that of its subsidiaries or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for, shares of its capital stock or that of its subsidiaries;
repurchase, redeem or otherwise acquire or offer to repurchase, redeem or otherwise acquire, directly or indirectly, any shares of its capital stock or any right to acquire such capital stock (including securities convertible for shares of such capital stock);
issue, grant, deliver, offer, sell, pledge, dispose of or encumber any shares of, or securities convertible into or exchangeable for, or option, warrants, calls, commitments or rights of any kind to acquire, any shares of its capital stock or other voting or equity interests of any class or series of the Company or its subsidiaries;
amend the Company’s certificate of incorporation or bylaws or the equivalent organizational documents of the Company’s subsidiaries;
purchase an equity interest in, or a substantial portion of the assets of, any person or any division or business thereof, if the amount of the consideration paid or transferred by the Company and its subsidiaries would exceed $500,000 for any individual transaction or $1,500,000 in the aggregate for all such transactions, or merge or consolidate with any person, in each case, other than (i) any such action solely between or among the Company and its subsidiaries, (ii) pursuant to the investment policies and guidelines of the Company or any of its subsidiaries or (iii) the acquisition of investment assets in the ordinary course of business consistent with past practice;
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sell, lease, transfer, license, encumber or otherwise dispose of any of its properties or assets (including capital stock of any subsidiary of the Company, but excluding intellectual property) other than (i) sales or other dispositions of assets in the ordinary course of business consistent with past practice, (ii) solely of assets pursuant to the investment policies and guidelines of the Company or any of its subsidiaries, (iii) sales or other dispositions of assets utilized in the operations of the Company or its subsidiaries the total value of which does not exceed $500,000 for any single transaction or $1,500,000 in the aggregate for all such transactions, (iv) sales or other dispositions of obsolete assets that are no longer used or useful in the conduct of the business of the Company or any of its subsidiaries or (v) pursuant to contracts in effect on the date of the Merger Agreement (or entered into after the date of the Merger Agreement in compliance with the Merger Agreement);
sell, assign, transfer, license, abandon, cancel, permit to lapse, pledge, encumber, fail to renew, maintain or pursue filed applications for or otherwise dispose of any material intellectual property, other than the grant of non-exclusive licenses in the ordinary course of business consistent with past practice, or disclose to any person any non-public material intellectual property, except in the ordinary course of business consistent with past practice pursuant to written obligations of non-disclosure and non-use;
incur, create or assume any indebtedness for borrowed money, issue or sell any debt securities or warrants or other rights to acquire any 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, other than (i) borrowings under the Company’s existing facility not in excess of $3,000,000, (ii) indebtedness incurred in connection with the refinancing of any indebtedness existing on the date of the Merger Agreement, (iii) indebtedness incurred solely between the Company and any of its subsidiaries or solely between the Company’s subsidiaries or (iv) any additional indebtedness the total value of which does not exceed $250,000 in the aggregate;
make any loans, advance or capital contributions to, or investments in, any person, other than (i) the Company or any of its wholly owned subsidiaries, or (ii) pursuant to the investment policies and guidelines of the Company or any of its subsidiaries as of the date of the Merger Agreement in the ordinary course of business consistent with past practice;
other than in connection with claims under insurance or reinsurance contracts, settle, commence or discharge any material action made or pending against the Company or any of its subsidiaries, or any of their respective directors or officers in their capacities as such, other than any settlements (i) in the ordinary course of business consistent with past practices or (ii) (A) for amounts not to exceed, for any such settlement individually, $500,000, and for all such settlements in the aggregate, $1,500,000 and (B) that would not reasonably be likely to prohibit or materially restrict the Company and its subsidiaries from operating their business following the closing of the Merger;
make any material change (i) in any accounting methods, principles or practices (including such methods, principles or practices relating to the estimation of reserves), (ii) to the investment policies and guidelines of the Company or any of its subsidiaries in effect on the date of the Merger Agreement or (iii) to any of the actuarial, underwriting, claims administration or reinsurance policies, practices or principles of any Company insurance subsidiary, in each case, except as required by GAAP or SAP;
except as required by a Company benefit plan existing and in effect as of the date of the Merger Agreement, (i) grant any equity or equity-based awards in respect of the capital stock or other securities of the Company or any of its subsidiaries to any current or former director, officer, employee or other service provider of the Company or any of its subsidiaries, (ii) grant any increases in the compensation or benefits payable or available to any current or former director, officer, employee or other service provider of the Company or any of its subsidiaries, (iii) make any grant of, or increase, any severance, retention, change in control, termination or similar compensation or benefits payable to any current or former director, officer, employee or other service provider of the Company or any of its subsidiaries, (iv) accelerate the time of payment or vesting of, or the lapsing of material restrictions with respect to, or fund or otherwise secure the payment of, any compensation or benefits under any Company benefit plan, (v) establish, adopt, enter into, terminate or amend any Company benefit plan or establish, adopt or enter into any plan, agreement, program, policy or other arrangement that would be
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a Company benefit plan if it were in existence as of the date hereof, (vi) loan or advance any money or other property to any current or former director, officer, employee or other service provider of the Company or any of its subsidiaries (other than routine advancement of business expenses in the ordinary course of business), or (vii) materially amend or modify any performance criteria, metrics or targets under any Company benefit plan such that, as compared to those criteria, metrics or targets under any Company benefit plan in effect as of the date of the Merger Agreement, the performance criteria, metrics or targets would reasonably be expected to be more likely to be achieved than in the absence of such amendment or modification;
(i) hire or make an offer to hire any person to be an officer or employee of the Company or any of its subsidiaries or engage or make an offer to engage any other service provider to provide services to any Company or any of its subsidiaries, other than the hiring of employees or engagement of service providers with annual base pay or fee not in excess of $200,000 in the ordinary course of business consistent with past practice and on the same or substantially similar terms and conditions of employment as similarly-situated employees of the Company and its subsidiaries and not otherwise in contravention of the Merger Agreement, including the provision described above, (ii) promote or terminate (other than for cause) the employment or engagement of, any employee or other service provider (retroactively or otherwise), in each case, with annual base pay or fee in excess of $200,000 or (iii) affirmatively waive the restrictive covenant obligations of any current or former employee of the Company or any of its subsidiaries;
(i) enter into any collective bargaining agreement or other agreement with any labor union, works council, trade union, labor association or other employee representative organization, or (ii) recognize or certify any labor union, works council, trade union, labor association other employee representative organization, or group of employees of the Company or any of its subsidiaries as the bargaining representative for any employees of the Company or any of its subsidiaries;
make or change any material tax election, obtain or request any tax ruling, settle or compromise any material tax liability, change its method of accounting, file any material amended tax return, fail to file any material tax return when due, surrender any right to claim a tax refund, offset or other material reduction in tax liability or enter into any tax sharing, closing or similar agreement in respect of taxes, in each case, to the extent that doing so would reasonably be likely to result in a material incremental cost to Parent, the Company or any of its subsidiaries after the closing of the Merger;
(i) commute, materially amend or assign or waive any material rights under any material contract or reinsurance contract, other than in the ordinary course of business consistent with past practice or (ii) enter into any contract that if in effect as of the date of the Merger Agreement would be a material contract or reinsurance contract if the Company or any of its subsidiaries would be required to post collateral to secure its liabilities under such contract in excess of the amount required by applicable law for the ceding company to receive full credit for the reserves ceded thereunder;
authorize, recommend, propose, enter into or adopt any plan or agreement of complete or partial liquidation, dissolution, restructuring, recapitalization, merger, consolidation or other reorganization of the Company or any of its subsidiaries;
make, commit to make or authorize any capital expenditures that are in excess of (i) 110% of the individual line items of, or (ii) 105% of the aggregate amount of capital expenditures scheduled to be made in, the capital expenditure budget provided to Parent by the Company for the period indicated therein, other than emergency capital expenditures in the event that the Company determines in its reasonable judgment, after consultation with Parent, that such capital expenditures are necessary to maintain its ability to operate its businesses in the ordinary course or for the safety of individuals, assets or the environment;
(i) modify, amend, terminate, assign or waive any material rights of the Company or any of its subsidiaries under any related party transaction or (ii) enter into any related party transaction;
enter into a new business outside of (i) the existing business of the Company and its subsidiaries or (ii) any new business that is complementary to the existing business of the Company and its subsidiaries;
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enter into any agreement or commitment with any insurance regulatory authority other than in the ordinary course of business consistent with past practice;
modify, waive, terminate or voluntarily abandon, fail to renew, let lapse or otherwise change, any material permit or any material insurance licenses of the Company’s insurance subsidiaries;
(i) enter into any agreement or commitment for the purchase, acquisition, sale, lease, sublease, license, sublicense, occupancy or other direct or indirect transfer of any real property or any interest therein (other than in the ordinary course of business consistent with past practice), (ii) acquire any fee simple title to, or interest in, real property or (iii) materially amend or modify, voluntarily terminate or rescind, exercise or decline any material option, or request or grant any material waiver under any Company lease; or
authorize, agree or commit to taking any action described in the above bullet points.
Regulatory Filings; Best Efforts
The Company, Guarantor, Parent and Merger Sub will use reasonable best efforts to:
(i) obtain all necessary consents, approvals, authorizations or waivers from governmental authorities and making all necessary registrations, filings and notices with any governmental authority (including under insurance laws and the HSR Act) and (ii) execute and deliver any additional agreements, documents or instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, the Merger Agreement, in each case, except as would, or would reasonably be expected to, constitute or result in a Burdensome Condition (as defined below);
take any and all actions necessary to avoid each and every impediment under any applicable law that may be asserted by, or any order that may be entered by, any governmental authority with respect to the Merger Agreement, the Merger or any other transaction contemplated thereby so as to enable the closing to occur as promptly as practicable, including using reasonable best efforts in (A) taking all actions otherwise necessary, proper or appropriate to (i) obtain all consents, approvals, authorizations or waivers of governmental authorities required to consummate the transactions contemplated by the Merger Agreement and secure the expiration or termination of any applicable waiting period under the HSR Act, (ii) resolve any objections that may be asserted by any governmental authority with respect to the Merger or any other transaction contemplated by the Merger Agreement and (iii) prevent the entry of, and have vacated, lifted, reversed or overturned, any order that would prevent, prohibit, restrict or delay the consummation of the Merger or any other transaction contemplated by the Merger Agreement and (B) proffering to governmental authorities to take such actions, in each case, except as would constitute or result in a Burdensome Condition;
within 20 business days of the date of the Merger Agreement, Parent and Guarantor will: (i) file, or cause to be filed, a “Form A” Acquisition of Control Statement, together with all exhibits, affidavits and certificates, with the Illinois Department of Insurance;
within 20 business days of the date of the Merger Agreement, Guarantor will file a notification of the Merger with The Autorité des marchés financiers (the “AMF Filing”); and
within 20 business days of the date of the Merger Agreement, the Company and Parent will file a notification and report form pursuant to the HSR Act with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice with respect to the Merger and the other transactions contemplated by the Merger Agreement and requesting early termination of the waiting period under the HSR Act.
Each of Guarantor, Parent, Merger Sub and the Company have agreed:
to consult and cooperate with one another with respect to the obtaining of all consents, approvals, authorizations or waivers of governmental authorities necessary to consummate the transactions contemplated by the Merger Agreement, and each of the Company, Parent and Merger Sub shall keep the others apprised on a prompt basis of the status of matters relating to such consents, approvals, authorizations or waivers;
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that Parent and the Company will have the right to review in advance, subject to redaction of personally identifiable information, and, to the extent practicable, and subject to any restrictions under applicable law each will consult the other on, any filing made with, or written materials submitted to, any governmental authority or any third party in connection with the transactions contemplated by the Merger Agreement and each party agrees to in good faith consider and reasonably accept comments of the other parties thereon;
Parent and the Company will promptly furnish to each other copies of all such filings and written materials after their filing or submission, in each case subject to applicable laws and subject to redaction of personally identifiable information;
to promptly advise each other upon receiving any communication from any governmental authority whose consent, approval, authorization, waiver or exemption is required for consummation of the transactions contemplated by the Merger Agreement, including promptly furnishing each other copies of any written or electronic communications, and promptly advising each other when any such communication causes such party to believe that there is a reasonable likelihood that any such consent, approval, authorization, waiver or exemption will not be obtained or that the receipt of any such consent, approval, authorization, waiver or exemption will be materially delayed or conditioned;
not to permit any of their respective directors, officers, employees, partners, members, shareholders or any other representatives to participate in any live or telephonic meeting (other than non-substantive scheduling or administrative calls) with any governmental authority in respect of any filings, investigation or other inquiry relating to the transactions contemplated by the Merger Agreement unless it consults with the other in advance and, to the extent permitted by applicable law and by such governmental authority, gives the other party the opportunity to attend and participate in such meeting, except to the extent related to any filings with the Toronto Stock Exchange or the AMF Filing;
that Parent and Merger Sub will not amend, revoke or refile any filing, submission, application, notification or report form or extend any applicable waiting or review periods or enter into any agreement with a governmental authority to delay or not to consummate the transactions contemplated hereby, except as required by applicable law or with the prior written consent of the Company, which shall not be unreasonably withheld, conditioned or delayed;
to not disclose any sensitive, personal or privileged information in connection with obtaining all necessary approvals, authorizations or waivers from governmental authorities for the Merger and the other transactions contemplated by the Merger Agreement; and
that Parent and Guarantor shall promptly provide, or cause to be provided, all copies of existing agreements and documents, instruments, affidavits, statements or information that may be required or requested by any governmental authority relating to Parent and its affiliates or any persons who are deemed or may be deemed to “control” Parent within the meaning of applicable insurance laws (including Guarantor), including its or their structure, ownership, businesses, operations, jurisdiction of domicile, regulatory and legal compliance, assets, liabilities, financing, financial condition or results of operations, or any of its or their directors, officers, employees, general or limited partners, members or shareholders and the transactions contemplated by the Merger Agreement and such other matters as may be required or requested by such governmental authority, in each case, in connection with obtaining all necessary approvals, authorizations or waivers from governmental authorities for the Merger and the other transactions contemplated by the Merger Agreement.
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Burdensome Condition
The obligations of the parties described above in the section “Regulatory Filings; Best Efforts” will not require Parent or Guarantor to be obligated by a governmental authority in connection with obtaining a required regulatory approval to take or refrain from taking or to agree to Parent, Guarantor, their respective subsidiaries and affiliates or the Company or its subsidiaries taking or refraining from taking any action or to suffer to exist any limitation, action, restriction, condition, requirement or arrangement, which, individually or together with all other such limitations, actions, restrictions, conditions, requirements or arrangements, would, or would reasonably be expected to:
result in a Company Material Adverse Effect or materially change the manner in which the Company has conducted its business in the ordinary course, including any change to its place of operations; or
(A) be material and adverse to Guarantor and its subsidiaries (other than the Company and its subsidiaries), taken as a whole, or (B) change the manner in which Guarantor or any of its subsidiaries (other than the Company and its subsidiaries) has conducted its business operations in the ordinary course in a manner that, individually or in the aggregate, is material and adverse to Guarantor and its subsidiaries (other than the Company and its subsidiaries), taken as a whole, in each case, assuming that Guarantor and its subsidiaries are deemed a consolidated group of entities the same size and scale (financially and otherwise) as Parent and its subsidiaries, taken as a whole (each, a “Burdensome Condition”).
Written Consent
Immediately after the execution of the Merger Agreement, the Company was required to take all actions necessary to seek and obtain the irrevocable Written Consent of Apex in accordance with the DGCL and the Company’s certificate of incorporation and bylaws. As promptly as practicable after receipt of the Written Consent, (i) the Company was required deliver to Parent a copy (including by facsimile or other electronic image scan) of the executed Written Consent and (ii) use reasonable best efforts to cause each of the Waiving Stockholders to execute and deliver to the Company and Parent an irrevocable waiver of all rights of such Waiving Stockholder to demand of appraisal of his shares of Company Common Stock pursuant to Section 262 of the DGCL in connection with the Merger (the “Appraisal Waivers”) promptly following delivery of the Written Consent. On October 3, 2023, following the execution of the Merger Agreement, the Written Consent was delivered and the Waiving Stockholders subsequently delivered the Appraisal Waivers.
Takeover Proposals
The Company agrees that (i) it and its directors and officers will not, (ii) its subsidiaries and its subsidiaries’ directors and officers will not and (iii) it will use reasonable best efforts to ensure that its and its subsidiaries’ other representatives will not, directly or indirectly:
solicit, initiate, propose or knowingly encourage or facilitate any inquiry or the making of any proposal or offer that constitutes or is reasonably likely to lead to or result in a Takeover Proposal (other than contacting or engaging in discussions with the person making a Takeover Proposal or its representatives for the sole purpose of clarifying such Takeover Proposal to determine whether it constitutes a superior proposal);
enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person any material, non-public information in furtherance of, any Takeover Proposal or any inquiry, proposal or offer that is reasonably likely to lead to or result in a Takeover Proposal;
provide access to the properties, assets or employees of the Company or its subsidiaries to any person with respect to or in response to any Takeover Proposal or any inquiry, proposal or offer that is reasonably likely to lead to or result in a Takeover Proposal;
enter into any letter of intent, agreement in principle, merger agreement, share purchase agreement, asset purchase agreement, acquisition agreement, option agreement or similar agreement relating to a Takeover Proposal; or
resolve, propose or agree to do any of the foregoing.
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The Company will, and will cause its subsidiaries and direct its representatives to, immediately cease and cause to be terminated all existing discussions and negotiations with any person conducted prior to the date of the Merger Agreement with respect to any Takeover Proposal.
The Merger Agreement provides that the term “Takeover Proposal” means any inquiry, proposal or offer from any third party relating to:
any direct or indirect acquisition or purchase, in a single transaction or a series of transactions, of (i) 15% or more of the outstanding shares of Company Common Stock or (ii) 15% or more (based on the fair market value thereof, as determined by the Board) of the assets (including capital stock of the subsidiaries of the Company) of the Company and its subsidiaries, taken as a whole;
any tender offer or exchange offer that, if consummated, would result in any third party owning, directly or indirectly, 15% or more of the outstanding shares of Company Common Stock; or
any merger, consolidation, business combination, recapitalization, liquidation, dissolution, binding share exchange or similar transaction involving the Company whose business constitutes 15% or more of the net revenues, net income or assets of the Company and its subsidiaries, taken as a whole or pursuant to which any third party (or the shareholders of any third party) would own, directly or indirectly, 15% or more of any class of equity securities of the Company or of the surviving entity in a merger or the resulting direct or indirect parent of the Company or such surviving entity, other than, in each case, the transactions contemplated by the Merger Agreement.
With respect to the Company receiving a Takeover Proposal or any proposal that is reasonably likely to lead to or result in a Takeover Proposal, the Company will, promptly and in no event later than 48 hours following receipt thereof:
advise Parent of the receipt of any Takeover Proposal after the date of the Merger Agreement, the material terms of any such Takeover Proposal and the identity of the person making any such Takeover Proposal;
keep Parent reasonably informed on a prompt basis with respect to any such Takeover Proposal (including any material changes thereto); and
promptly provide to Parent unredacted copies of material correspondence describing the material terms of any Takeover Proposal and written summaries of any material oral communications related thereto.
Adverse Recommendation Change
The Board and any committee thereof cannot:
withdraw, withhold, qualify or modify in a manner adverse to Parent, or publicly propose to withdraw, withhold, qualify or modify in a manner adverse to Parent, the approval, recommendation or declaration of advisability by the Board or any such committee of the Merger Agreement or the Merger (the “Company Recommendation”);
recommend or endorse the adoption of, or approve, or publicly propose to recommend, endorse or approve, any Takeover Proposal;
approve, endorse or recommend the adoption of, or publicly propose to approve, endorse or recommend the adoption of, any Takeover Proposal;
fail to publicly reaffirm the Company Recommendation upon Parent’s written request in certain circumstances;
fail to include or adequately defend the Company Recommendation in certain of the Company’s securities filings;
publicly declare advisable or publicly propose to enter into, any document or agreement relating to a Takeover Proposal (an “Alternative Acquisition Agreement”); or
cause or permit the Company to enter into an Alternative Acquisition Agreement.
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Notwithstanding the foregoing or anything else in the Merger Agreement to the contrary, at any time prior to Parent’s receipt of the Written Consent, the Board was permitted to, if, after consultation with its financial advisors and outside counsel, it determined that the failure to take such action would be inconsistent with the fiduciary duties of directors under Delaware law, (i) make an adverse recommendation change or (ii) cause or permit the Company to terminate the Merger Agreement in order to enter into an agreement regarding a superior proposal, but only if:
the Company complied in all material respects with the Takeover Proposals provisions of the Merger Agreement and gave Parent at least four business days’ prior written notice that the Board intends to take such action in response to a superior proposal and specifying the reasons therefor, including the most current version of any proposed agreement and any subsequent amendments thereto.
Superior Proposal
Notwithstanding the restrictions described above, at any time prior to Parent’s receipt of the Written Consent in response to a Takeover Proposal received after the date of the Merger Agreement that did not result from a material breach of the Takeover Proposals provisions, if the Board determined after consultation with its financial advisor and outside counsel, that such Takeover Proposal constituted, or could reasonably have been expected to lead to, a superior proposal and that failure to take such action would be inconsistent with the fiduciary duties of directors under Delaware law, the Company was permitted to, and could authorize and permit its subsidiaries and representatives to, (i) furnish information with respect to the Company and its subsidiaries to the person making such Takeover Proposal pursuant to a confidentiality agreement; provided that all such information was previously provided to Parent or was provided to Parent prior to or substantially concurrently with the time it is provided to such person and (ii) participate in discussions and negotiations with the person making such Takeover Proposal (and its representatives) regarding such Takeover Proposal if and only if that in connection with the foregoing clauses (i) and (ii) the Board determined in good faith, after consultation with its financial advisors and outside counsel, that the failure to take such action would be inconsistent with the fiduciary duties of directors under Delaware law.
The Merger Agreement provides that the term “superior proposal” means any Takeover Proposal (with all references to 15% or more instead being deemed to be “more than 50%”) not solicited following the date of the Merger Agreement in violation of the Takeover Proposal provisions of the Merger Agreement and made after the date of the Merger Agreement by any third party that the Board determines in good faith (after consultation with its financial advisor and outside counsel), considering such factors as the Board considers appropriate, (i) would, if consummated, be more favorable from a financial standpoint to the Company’s stockholders than the Merger, (ii) is reasonably likely to be consummated on the terms proposed, taking into account any legal, financial, regulatory and stockholder approval requirements, any required third-party consents, the sources of availability and terms of any financing, financing market conditions and the existing of a financing contingency, the likelihood of termination, the timing of closing, the identity of the person or persons making the proposal and any other relevant aspects, and (iii) for which, if applicable, financing is fully committed or reasonably determined to be available by the Board.
Nothing in the Merger Agreement prohibits the Company from taking and disclosing to its stockholders a position pursuant to SEC rules with respect to a tender or exchange offer by a third party or any similar disclosure to its stockholders if the Board determines (after consultation with its financial advisors and outside counsel) that failure to do so would be inconsistent with the fiduciary duties of directors under Delaware law, subject to compliance with the procedures set forth above in connection with an adverse recommendation change.
Employee Matters
For a period of not less than 12 months following the completion of the Merger, Parent will provide each individual who is an employee of the Company or its subsidiaries at the completion of the Merger and who remains an employee of the Company or its subsidiaries (each, a “Company Employee”) with:
a base salary or wage rate that is no less than the base salary or wage rate than those provided to such Company Employee immediately prior to the completion of the Merger;
annual cash incentive bonus opportunities that are no less favorable in the aggregate than those provided to each such Company Employee immediately prior to the completion of the Merger; and
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retirement, health and welfare benefits (excluding severance benefits, defined benefit pension plans, post-employment health and welfare benefit plans, nonqualified deferred compensation plans, and equity or equity-based and long-term compensation benefits) that are substantially comparable, in the aggregate, to those retirement, health and welfare benefits (excluding severance benefits, defined benefit pension plans, post-employment health and welfare benefit plans, nonqualified deferred compensation plans, and equity or equity-based and long-term compensation benefits) provided to such Company Employee immediately prior to the completion of the Merger.
Any Company Employee who incurs a termination of employment by Parent (other than for cause or on account of death or disability) during the 12-month period following the completion of the Merger will receive severance payments and benefits that are no less favorable than those to which the employee would have been entitled with respect to such termination under the Company’s severance policies as in effect as of the date of the Merger Agreement, subject to such Company Employee timely executing and not revoking a waiver and general release agreement in the form customarily used by Parent.
Parent will cause each Company Employee to generally be provided with credit for such employee’s service with the Company and its subsidiaries under any benefit plans maintained by Parent, the surviving corporation or any of their respective subsidiaries in which such employee participates following the completion of the Merger to the same extent recognized by the Company immediately prior to the completion of the Merger, except such service will not be recognized with respect to benefit accruals under any defined benefit pension plan, for purposes of any post-employment health or welfare benefit plan, or to the extent that it would result in a duplication of benefits with respect to the same period of service.
With respect to each Company Employee, Parent will use commercially reasonable efforts to: (i) waive any preexisting condition limitations otherwise applicable to such employee under any health benefit plan of Parent or any subsidiary of Parent in which such employee may be eligible to participate following the completion of the Merger, other than any limitations that were in effect with respect to such employee as of the completion of the Merger under the analogous Company benefit plan; (ii) honor any deductible, co-payment and out-of-pocket maximums incurred by such employee under the health plans in which the employee participated immediately prior to the completion of the Merger during the portion of the calendar year prior to the completion of the Merger in satisfying any deductibles, co-payments or out-of-pocket maximums under health plans of Parent, the surviving corporation or any of their respective subsidiaries in which they are eligible to participate after the completion of the Merger in the same plan year in which such deductibles, co-payments or out-of-pocket maximums were incurred; and (iii) waive any waiting period limitation or evidence of insurability requirement that would otherwise be applicable to such employee on or after the completion of the Merger, in each case to the extent such employee or eligible dependent had satisfied any similar limitation or requirement under an analogous Company benefit plan prior to the completion of the Merger.
Indemnification and Insurance
The Merger Agreement provides that, from and after the Effective Time, the surviving corporation will, and Parent will cause the surviving corporation to, indemnify, defend and hold harmless to the fullest extent permitted by Delaware law or provided under the Company’s certificate of incorporation and bylaws in effect on the date of the Merger Agreement and permitted by the DGCL the Indemnified Parties for any acts or omissions occurring at or prior to the Effective Time.
In addition, for a period of six years after the Effective Time, Parent and the surviving corporation will maintain directors’ and officers’ liability insurance covering acts or omissions occurring at or prior to the Effective Time with respect to the Indemnified Parties with terms, conditions, retentions and levels of coverage at least as favorable as the coverage provided under the Company’s current directors’ and officers’ insurance policy; provided, however, that in no event will Parent or the surviving corporation be required to expend in any one year an amount in excess of the Maximum Premium. If the annual premiums for such insurance coverage exceed the Maximum Premium, Parent and the surviving corporation will only be obligated to obtain a policy with the greatest coverage available at an annual premium not exceeding the Maximum Premium. In lieu of the foregoing insurance coverage, the Company may purchase, or if requested by Parent, the Company will purchase, prior to the Effective Time, a six year “tail” insurance policy that provides coverage identical in all material respects to the coverage described above; provided that the Company does not pay more than the Maximum Premium for the coverage period for such tail insurance policy.
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Other Covenants and Agreements
The Merger Agreement contains other covenants and agreements, including relating to, among other things:
preparation by the Company of this information statement;
confidentiality and access by Parent and Merger Sub to certain information about the Company;
consultation between Parent and the Company in connection with public statements with respect to the transactions contemplated by the Merger Agreement;
causing any dispositions of Company equity securities resulting from the transactions contemplated by the Merger Agreement 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;
the delisting of the Company Common Stock from the Nasdaq Capital Market and the deregistration under the Exchange Act;
each party notifying the other party of any stockholder litigation relating to the transactions contemplated by the Merger Agreement, and each party giving the other party the opportunity to participate in the defense and settlement of any shareholder litigation against the Company or its directors or officers relating to the Merger Agreement or the Merger;
Parent and the Company notifying each other of certain events, including the occurrence of any event that has had or would reasonably be expected to have a Company Material Adverse Effect or Parent Material Adverse Effect (as applicable); and
the Company delivering to Parent, on a regular basis between the date of the Merger Agreement and the closing of the Merger, a summary report of certain investment assets.
Conditions to Consummation of the Merger
The obligations of the parties to consummate the Merger are subject to the satisfaction or waiver on or prior to the date of closing of the following conditions:
The Company’s stockholders adopting the Merger Agreement and this information statement having been cleared by the SEC and sent to stockholders of the Company at least 20 days prior to the date on which the closing of the Merger occurs (the “Closing Date”);
the absence of any applicable law or any order, writ, judgment, injunction, decree, stipulation, determination or award (whether temporary, preliminary or permanent) enacted, issued or enforced by any court or governmental authority and that prevents or prohibits consummation of the Merger;
approvals from the Illinois Department of Insurance, The Autorité des marchés financiers and the Texas Department of Insurance having been obtained and remaining in full force and effect, in each case, without the imposition of a Burdensome Condition; and
the applicable waiting periods, together with any extensions, under the HSR Act having expired or been terminated.
The obligations of Parent and Merger Sub to effect the Merger are also subject to satisfaction or waiver on or prior to the closing of the Merger of the following additional conditions:
the representations and warranties of the Company relating to (i) its organization and good standing, (ii) its authority to enter into the Merger Agreement, (iii) certain matters relating to the Company’s subsidiaries, (iv) the absence of any conflict between the Merger Agreement and the Company’s organizational documents, (v) the absence of any takeover statutes that would apply to the Merger and (vi) brokers’ and finders’ fees being true and correct in all material respects as of the Closing Date as though made as of the Closing Date;
the representations and warranties of the Company relating to the capitalization of the Company being true and correct in all respects (except for de minimis inaccuracies) as of the Closing Date as though made as of the Closing Date;
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the representations and warranties of the Company relating to there having been no change, circumstance, effect, development, condition or occurrence that, individually or in the aggregate, has had, or would be reasonably expected to have, a Company Material Adverse Effect from December 31, 2022 through October 3, 2023, being true and correct in all respects as of the Closing Date as though made as of the Closing Date;
other than the representations and warranties mentioned in the three bullets directly above, all of the Company’s other representations and warranties being true and correct (without giving effect to any materiality or Company Material Adverse Effect qualifiers) as of the Closing Date 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 earlier date) except where such failure to be true and correct would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect;
the Company having performed or complied in all material respects with all agreements and covenants required to be performed or complied with by it under the Merger Agreement on or prior to the Effective Time;
the Company having delivered to Parent a certificate, dated as of the Closing Date and executed by the Chief Executive Officer and the Chief Financial Officer of the Company to the effect that each of the conditions specified above has been satisfied; and
since the date of the Merger Agreement, there not having occurred any Company Material Adverse Effect which is continuing.
The obligations of the Company to effect the Merger are also subject to satisfaction or waiver on or prior to the closing of the Merger of, among other things, the following additional conditions:
Parent and Merger Sub’s representations and warranties are true and correct (without giving effect to any materiality or Parent Material Adverse Effect qualifiers) as of the Closing Date 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 earlier date) except where such failure to be true and correct would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect;
Parent and Merger Sub having performed or complied in all material respects with all agreements and covenants required to be performed or complied with by them under the Merger Agreement on or prior to the Effective Time; and Parent providing a certificate to such effect dated as of the Closing Date and executed by a duly authorized officer of Parent; and
Parent having delivered to the Company a certificate, dated as of the Closing Date and executed by a duly authorized officer of Parent to the effect that each of the conditions specified above has been satisfied.
Termination of the Merger Agreement
The Merger Agreement may be terminated at any time prior to the consummation of the Merger by the mutual written consent of the Company and Parent; provided that such termination will have been approved by their respective boards of directors.
In addition, the Merger Agreement may be terminated by either Parent or the Company if:
any governmental authority has issued a final and nonappealable order or there exists any law, in each case, permanently preventing or prohibiting the Merger; and
the Merger is not consummated prior to July 3, 2024, which date shall be extended until October 3, 2024, if on July 3, 2024 the only condition to the consummation of the Merger that has not been satisfied or waived is the condition to obtain the required regulatory approvals (such applicable date, the “Outside Termination Date”); provided that the right to terminate the Merger Agreement will not be available to any party whose failure to fulfill any obligation under the Merger Agreement has been the cause of, or results in, the failure of the Merger to occur on or before such date.
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The Merger Agreement also may be terminated by Parent if there has been a breach by the Company of (i) any representation, warranty, covenant or agreement contained in the Merger Agreement that would, individually or in the aggregate, result in a failure by the Company to satisfy certain conditions to Parent’s obligations to consummate the Merger (as described under the section of this information statement entitled “Conditions to Consummation of the Merger”) and (ii) such breach has not been cured (or is not capable of being cured) before the earlier of (i) 30 days following Parent delivering written notice to the Company of such breach or (ii) the Outside Termination Date.
The Merger Agreement also may be terminated by the Company if there has been a breach by Parent of (i) any representation, warranty, covenant or agreement contained in the Merger Agreement that would, individually or in the aggregate, result in a failure by Parent to satisfy certain conditions to the Company’s obligations to consummate the Merger (as described under the section of this information statement entitled “Conditions to Consummation of the Merger”) and (ii) such breach has not been cured (or is not capable of being cured) before the earlier of (i) 30 days following the Company delivering written notice to Parent of such breach or (ii) the Outside Termination Date.
The Merger Agreement also contains certain other termination rights of the parties that could only be exercised prior to the receipt of the required approval of the Company’s stockholders for the Merger, including certain termination rights which would have required payment of a termination fee of $5,100,000 by the Company. Since the required stockholder approval was obtained by Apex delivering the Written Consent on October 3, 2023, these termination rights are no longer exercisable.
Amendment and Waiver
The Merger Agreement may be amended by the parties in writing by action of their respective boards of directors; provided that after the approval of the Merger by the Company stockholders, no amendment, modification or supplement may be made which changes the amount or the form of the Merger Consideration delivered to the Company stockholders, or alters or changes any terms or conditions of the Merger Agreement that would materially and adversely affect the Company or the Company’s stockholders.
Prior to the Effective Time, any of Parent or Merger Sub, on the one hand, or the Company, on the other hand, may in writing:
extend the time for the performance of any of the obligations or other acts of the other party;
waive any inaccuracies in the representations and warranties of the other party contained in the Merger Agreement or in any document delivered pursuant to the Merger Agreement; or
waive compliance with any of the agreements or conditions of the other parties contained in the Merger Agreement.
The failure of any party to the Merger Agreement to assert any of its rights under the Merger Agreement or otherwise will not constitute a waiver of those rights.
Specific Performance
The parties to the Merger Agreement are entitled to injunctive or other equitable relief to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement in any state court in the state of Delaware or any federal court sitting in the state of Delaware, with the parties committing to waive the defense that any such action has a remedy at law.
Governing Law
The Merger Agreement will be governed by and construed in accordance with the laws of the state of Delaware, without respect to its applicable principles of conflicts of laws that might require the application of the laws of another jurisdiction the conflicts of laws principles of Delaware.
Guaranty
In order to induce the Company to enter into the Merger Agreement, Guarantor agreed, pursuant to the Merger Agreement, to irrevocably and unconditionally guarantee the payment of any amounts owed by Parent or Merger Sub pursuant to the Merger Agreement, including the payment of the Merger Consideration, subject to and in accordance with the terms and conditions of the Merger Agreement.
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MARKET PRICE OF OUR STOCK
Shares of Company Common Stock are listed for trading on the Nasdaq Capital Market under the symbol “VERY.” The following table sets forth, for the fiscal quarters indicated, on a per share basis, the high and low closing prices for Company Common Stock for the periods indicated as reported on the Nasdaq Capital Market composite transactions reporting system.
 
High
Low
Fiscal Year Ended December 31, 2021
 
 
First Quarter
$11.72
$8.40
Second Quarter
$14.55
$7.44
Third Quarter
$10.28
$7.66
Fourth Quarter
$9.26
$6.59
Fiscal Year Ended December 31, 2022
 
 
First Quarter
$7.01
$4.85
Second Quarter
$7.39
$5.80
Third Quarter
$7.50
$6.60
Fourth Quarter
$8.02
$6.55
Fiscal Year Ended December 31, 2023
 
 
First Quarter
$8.35
$6.73
Second Quarter
$7.89
$5.58
Third Quarter
$7.49
$4.70
The closing price of the shares of Company Common Stock on the Nasdaq Capital Market on October 2, 2023, the last full trading day prior to the announcement of the Merger, was $5.70 per share. On November 13, 2023, the most recent practicable date before this information statement was printed, the closing price for the shares of Company Common Stock on the Nasdaq Capital Market was $11.05 per share.
In connection with the Merger, the Company agreed not to declare or pay any dividend or other distribution with respect to its capital stock.
Following the Merger, there will be no further market for the Company Common Stock.
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APPRAISAL RIGHTS
The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 of the DGCL that is accessible, without subscription or cost, at the following publicly available website: https://delcode.delaware.gov/title8/c001/sc09/index.html#262 and incorporated by reference herein. The following summary does not constitute any legal or other advice and does not constitute a recommendation that stockholders exercise their appraisal rights under Section 262. Stockholders intending to exercise appraisal rights should carefully review Section 262 of the DGCL in its entirety. Failure to follow precisely any of the statutory procedures set forth in Section 262 of the DGCL may result in a termination or waiver of these rights.
If the Merger is completed and you are a stockholder of the Company (other than Apex and the Waiving Stockholders) and comply with the applicable statutory procedures of Section 262 of the DGCL, you may be entitled to appraisal rights under Section 262 of the DGCL. To exercise and perfect appraisal rights, a record holder of shares of Company Common Stock must follow precisely the statutory procedures pursuant to Section 262 of the DGCL required to be followed by a stockholder to perfect appraisal rights.
Set forth below is a summary description of Section 262 of the DGCL. The following is intended as a brief summary of the material provisions of statutory procedures pursuant to Section 262 of the DGCL required to be followed by a stockholder to perfect appraisal rights. The summary does not purport to be a complete statement of, and is qualified in its entirety by reference to, Section 262 and to any amendments to such section after the date of this information statement (please note that the 20-day period described below for a beneficial holder or holder of record of Company Common Stock to demand appraisal will begin to run on the date of mailing this information statement, as described more fully below). Holders of Company Common Stock should assume that the Company will take no action to perfect any appraisal rights of any holder of Company Common Stock. Any beneficial holder or holder of record of Company Common Stock who desires to exercise such holder’s appraisal rights should review carefully Section 262 and is urged to consult such holder’s legal advisor before electing or attempting to exercise such rights. A beneficial holder or holder of record of Company Common Stock who loses, waives or otherwise fails to properly exercise such holder’s appraisal rights will be entitled to receive the applicable portion of the Merger Consideration under the Merger Agreement.
Either a beneficial holder or holder of record of Company Common Stock who (i) continuously holds such Company Common Stock through the Effective Time, (ii) has not consented to or otherwise voted in favor of the Merger or otherwise withdrawn, lost or waived such holder’s appraisal rights, (iii) strictly complies with the applicable statutory procedures under Section 262 and (iv) does not thereafter withdraw such holder’s demand for appraisal of such Company Common Stock will be entitled to receive the fair value of such holder’s shares of Company Common Stock exclusive of any element of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court of Chancery, together with interest, if any, to be paid upon the amount determined to be the fair value. In addition to the foregoing requirements, a demand made by such beneficial holder must reasonably identify the holder of record of the shares for which the demand is made, and must be accompanied by documentary evidence of such beneficial holder’s beneficial ownership of stock and a statement that such documentary evidence is a true and correct copy of what it purports to be, and provides an address at which such beneficial holder consents to receive notices given by the surviving corporation hereunder and to be set forth on the verified list required by Section 262(f) of the DGCL.
When a merger agreement is approved by written consent without a meeting pursuant to Section 228 of the DGCL, as is the case with the Merger Agreement, Section 262 requires that either a constituent corporation before, or the surviving corporation within 10 days after, the effective date of the merger notify each of its stockholders who is entitled to appraisal rights, that appraisal righ