AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

ELARA HOLDINGS, INC.

ELARA MERGER CORPORATION

AND

DIRECT GENERAL CORPORATION

Dated as of December 4, 2006

TABLE OF CONTENTS

     WHEREAS, the board of directors of the Company has established a special committee, the members of which are not affiliated with Parent or Merger Sub and are not members of the Company's management, which has reviewed this Agreement and the transactions contemplated hereby (the "Special Committee"); and

1.1    The Merger .   At the Effective Time and subject to and upon the terms and conditions of this Agreement and the applicable provisions of Tennessee Law, Merger Sub shall be merged with and into the Company, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation and as a wholly owned subsidiary of Parent. The surviving corporation after the Merger is hereinafter sometimes referred to as the "Surviving Corporation."

1.2    Effective Time; Closing.

(a)    Subject to the provisions of this Agreement, Parent, Merger Sub and the Company shall cause the Merger to be consummated by filing as soon as practicable on the Closing Date Articles of Merger (the "Articles of Merger") with the Secretary of State of the State of Tennessee in accordance with the provisions of Tennessee Law. The Merger shall become effective upon the filing of Articles of Merger with the Secretary of State of the State of Tennessee (the time of such filing being the "Effective Time").

(b)    The closing of the Merger (the "Closing") shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, located at 525 University Avenue, Suite 1100, Palo Alto, California, at the earlier of (i) 6:00 am Palo Alto, California time on the End Date and (ii) a time and date to be specified by Parent, which shall be no earlier than the third (3rd) Business Day after the satisfaction or waiver of the conditions set forth in Article VII (other than those that by their terms are to be satisfied or waived at the Closing), or at such other time, date and location as the parties hereto agree in writing. The date on which the Closing occurs is referred to herein as the "Closing Date." "Business Day" shall mean each day that is not a Saturday, Sunday or other day on which Parent is closed for business or banking institutions located in New York, New York, are authorized or obligated by Law to close.

1.3    Effect of the Merger .  At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Articles of Merger and the applicable provisions of Tennessee Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

1.4    Charter; Bylaws .

(a)    Charter .   At the Effective Time, the charter of the Company shall be amended and restated in its entirety to be identical to the charter of Merger Sub, as in effect immediately prior to the Effective Time, and subject to Section 6.10(a), until thereafter amended in accordance with Tennessee Law and as provided in such charter, except that the name of the Surviving Corporation as stated in such charter shall be "Direct General Corporation." 

(b)    Bylaws .   At the Effective Time, the bylaws of the Company shall be amended and restated in their entirety to be identical to the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, and subject to Section 6.10(a), until thereafter amended in accordance with Tennessee Law and such bylaws, except that the name of the Surviving Corporation on the face of such bylaws shall be "Direct General Corporation."

1.5    Directors and Officers .  Unless otherwise determined by Parent prior to the Effective Time, or unless otherwise required by state insurance or premium finance regulatory Laws, the directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the charter and bylaws of the Surviving Corporation, and the officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified, or their earlier death, resignation or removal. In addition, unless otherwise determined by Parent prior to the Effective Time, Parent, the Company and the Surviving Corporation shall cause the directors and officers of Merger Sub immediately prior to the Effective Time to be the directors and officers, respectively, of each of the Company's Subsidiaries immediately after the Effective Time, each to hold office of each such Subsidiary in accordance with the provisions of the Laws of the respective jurisdiction of organization and the respective charters, bylaws or equivalent organizational documents of each such Subsidiary.

2.1    Effect of Merger on Capital Stock .  At the Effective Time and upon the terms and subject to the conditions of this Agreement, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of any shares of capital stock of the Company:

(a)    Company Common Stock .   Each share of the common stock, no par value per share, of the Company ("Company Common Stock") issued and outstanding immediately prior to the Effective Time, other than any shares of Company Common Stock to be canceled pursuant to Section 2.1(b), will be canceled and extinguished and automatically converted into the right to receive an amount of cash equal to twenty-one dollars and twenty-five cents ($21.25), without interest (such amount of cash hereinafter referred to as the "Merger Consideration") upon surrender of the certificate representing such share of Company Common Stock in the manner provided in Section 2.2 (or in the case of a lost, stolen or destroyed certificate, upon delivery of an affidavit (and bond, if required) in the manner provided in Section 2.2(e)).

(b)    Cancellation .   Each share of Company Common Stock owned by Parent or Merger Sub or any direct or indirect wholly owned subsidiary of Parent immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, cease to be outstanding, be canceled and retired without payment of any consideration therefor and cease to exist.

(c)    Capital Stock of Merger Sub .   Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become, and shall represent, one fully paid and nonassessable share of common stock of the Surviving Corporation with the same rights, powers and privileges as the shares so converted and shall constitute the only outstanding shares of capital stock of the Surviving Corporation.

(d)    Adjustments to Merger Consideration .   The Merger Consideration shall be adjusted to reflect fully the appropriate effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Company Common Stock), reorganization, recapitalization, reclassification or other like change with respect to Company Common Stock having a record date on or after the date hereof and prior to the Effective Time.

2.2    Surrender of Certificates .

(a)    Paying Agent .   Parent shall designate a bank or trust company reasonably satisfactory to the Company to act as the paying agent (the "Paying Agent") in the Merger. Upon the Effective Time, Parent shall, or shall cause the Surviving Corporation to, make available to the Paying Agent for exchange in accordance with this Article II, the Merger Consideration payable pursuant to Section 2.1(a) in exchange for outstanding shares of Company Common Stock. Any cash deposited with the Paying Agent ("Exchange Fund") shall be held for the benefit of the Company's shareholders as of immediately prior to the Effective Time. The Paying Agent shall invest the cash included in the Exchange Fund on a daily basis as directed by Parent pending payment thereof by the Paying Agent to the Company shareholders. Earnings from such investments shall become part of the Exchange Fund, and any amounts in excess of the amounts payable to Company shareholders pursuant to this Article II shall be promptly paid to Parent. 

(b)    Surrender Procedures .   As soon as reasonably practicable following the Effective Time, Parent shall instruct the Paying Agent to mail to each holder of record (as of the Effective Time) of a certificate or certificates (the "Certificates") which immediately prior to the Effective Time represented outstanding shares of Company Common Stock whose shares were converted into the right to receive the cash constituting the Merger Consideration pursuant to Section 2.1(a): (i) a letter of transmittal in customary form (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in such form and have such other provisions as Parent may reasonably specify) and (ii) customary instructions for use in effecting the surrender of the Certificates in exchange for cash constituting the Merger Consideration. Upon surrender of Certificates for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto and such other documents as may reasonably be required by the Paying Agent, the holder of record of such Certificates shall be entitled to receive in exchange therefor the cash constituting the Merger Consideration, and the Certificates so surrendered shall forthwith be canceled. Until so surrendered, outstanding Certificates will be deemed from and after the Effective Time, for all corporate purposes, to evidence the ownership of the Merger Consideration into which such shares of Company Common Stock shall have been so converted.

(c)    Transfer Books; No Further Ownership Rights in Company Common Stock .   At the Effective Time, the stock transfer books of the Company shall be closed, and thereafter there shall be no further registration of transfers of the shares of Company Common Stock on the records of the Company. All Merger Consideration paid upon the surrender of Certificates representing shares of Company Common Stock in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such shares of Company Common Stock. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article II, subject to Section 2.2(d).

(d)    Termination of Exchange Fund; No Liability .   Any portion of the Exchange Fund which remains undistributed to the holders of Certificates twelve (12) months after the Effective Time shall, at the request of Parent, be delivered to Parent or otherwise according to the instruction of Parent, and any holders of the Certificates who have not surrendered such Certificates in compliance with this Section 2.2 shall after such delivery to Parent look only to the Parent (subject to abandoned property, escheat or other similar Laws) solely as general creditors for the cash constituting the Merger Consideration (which shall not accrue interest) pursuant to Section 2.1(a) with respect to the shares of Company Common Stock formerly represented thereby. Notwithstanding anything to the contrary in this Section 2.2, none of Parent, the Surviving Corporation or the Paying Agent shall be liable to any holder of shares of Company Stock for any amounts delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. Any amounts remaining unclaimed by Company shareholders two (2) years after the Effective Time (or such earlier date, immediately prior to such time when the amounts would otherwise escheat to or become the property of any Governmental Entity) shall become, to the extent permitted by Law, the property of Parent, free and clear of any claims or interest of any Person previously entitled thereto. For purposes of this Agreement, "Laws" shall mean any law (including common law), statute, ordinance, code, regulation, rule, judgment, order, decree, injunction, arbitration award, decision, ruling or other pronouncement, of any Governmental Entity.

(e)    Withholding Rights .   Each of the Paying Agent and the Surviving Corporation shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable pursuant to this Agreement to any holder or former holder of Company Common Stock or Company Options such amounts as may be required to be deducted or withheld therefrom under the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder (the "Code") or under any provision of state, local or foreign Tax Law or under any other applicable Law. To the extent such amounts are so deducted or withheld, the amount of such consideration shall be treated for all purposes under this Agreement as having been paid to the Person to whom such consideration would otherwise have been paid. 

(f)    Lost, Stolen or Destroyed Certificates .   In the event any Certificates shall have been lost, stolen or destroyed, the Paying Agent shall issue in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof, such cash constituting Merger Consideration; provided , however , that Parent may, in its sole discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificates to deliver a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against Parent, the Company or the Paying Agent with respect to the Certificates alleged to have been lost, stolen or destroyed.

2.3    Further Action .   At and after the Effective Time, the officers and directors of Parent and the Surviving Corporation will be authorized to execute and deliver, in the name and on behalf of the Company and Merger Sub, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of the Company and Merger Sub, any other actions and things to vest, perfect or confirm of record or otherwise in the Surviving Corporation any and all right, title and interest in, to and under any of the rights, properties or assets acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger.

3.1    Organization; Standing and Power; Governing Documents; Subsidiaries .

(a)    Organization; Standing and Power .   Each of the Company and its Subsidiaries is a corporation or other organization duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization and each has the requisite power and authority to own, lease and operate its properties and to carry on its business as currently conducted and as proposed to be conducted, except for such failures as could not reasonably be expected to be material to any of the Company or its Subsidiaries. Each of the Company and its Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing in every jurisdiction where the properties, owned, leased or operated, or the business conducted by it requires such qualification, except for such failures as could not reasonably be expected to be material to any of the Company or its Subsidiaries. For purposes of this Agreement, "Subsidiary," when used with respect to any party, shall mean any corporation, association, business entity, partnership, limited liability company or other Person of which such party, either alone or together with one or more Subsidiaries or by one or more Subsidiaries (i) directly or indirectly owns or controls securities or other interests representing more than fifty percent (50%) of the voting power of such Person or (ii) is entitled, by Contract or otherwise, to elect, appoint or designate directors constituting a majority of the members of such Person's board of directors or other governing body. For purposes of this Agreement, "Contract" shall mean any written, oral or other agreement, contract, subcontract, settlement agreement, lease, binding understanding, instrument, note, option, warranty, purchase order, license, sublicense, insurance policy, benefit plan or legally binding commitment, arrangement or undertaking of any nature, as in effect as of the date hereof or as may hereinafter be enforceable against the Company or its Subsidiaries.

(b)    Governing Documents .   The Company has delivered to Parent (i) a true and correct copy of the charter and bylaws of the Company, each as amended to date (collectively, the "Company Governing Documents") and (ii) the charter and bylaws, or like organizational documents (collectively, "Subsidiary Governing Documents"), of each of its Subsidiaries, and each such instrument is in full force and effect. The Company is not in violation of any of the provisions of the Company Governing Documents and each of its Subsidiaries is not in violation of its respective Subsidiary Governing Documents.

(c)    Subsidiaries .   Section 3.1(c) of the Company Disclosure Schedule sets forth the name of each Subsidiary of the Company. Except as set forth in Section 3.1(c) of the Company Disclosure Schedule, the Company is the direct or indirect owner of all of the outstanding shares of capital stock of, or other equity or voting interests in, each such Subsidiary and all such shares have been duly authorized, validly issued and are fully paid and nonassessable, free and clear of all pledges, claims, liens, charges, encumbrances, options and security interests of any kind or nature whatsoever (collectively, "Liens"), except for Permitted Liens and restrictions imposed by applicable securities Laws. Other than the Subsidiaries of the Company and securities in its investment portfolio, neither the Company nor any of its Subsidiaries owns any capital stock of, or other equity or voting interests of any nature in, or any interest convertible, exchangeable or exercisable for, capital stock of, or other equity or voting interests of any nature in, any other Person.

3.2    Capital Structure .

(a)    Capital Stock .   The authorized capital stock of the Company consists of: (i) 100,000,000 shares of Company Common Stock, no par value per share and (ii) 10,000,000 shares of undesignated preferred stock, no par value per share (the "Company Preferred Stock"). As of the close of business on the day immediately preceding the date hereof: (i) 20,347,675 shares of Company Common Stock were issued and outstanding and (ii) no shares of Company Preferred Stock were issued or outstanding. No shares of Company Common Stock are owned or held by any Subsidiary of the Company. All outstanding shares of Company Common Stock are duly authorized, validly issued, fully paid and non-assessable and are not subject to preemptive rights created by statute, the Company Governing Documents, or any agreement to which the Company is a party or by which it is bound.

(b)    Company Options .   As of the close of business on the date hereof: (i) 45,000 shares of Company Common Stock are issuable upon the exercise of outstanding options, vested and unvested, to purchase Company Common Stock under the Company's 1996 Employee Stock Incentive Plan (the "1996 Plan") and 907,200 shares of Company Common Stock are issuable upon the exercise of outstanding options, vested and unvested, to purchase Company Common Stock under the Company's 2003 Equity Incentive Plan (the "2003 Plan" and together with the 1996 Plan, the "Option Plans") (such options, whether payable in cash, shares or otherwise granted under or pursuant to the Option Plans are referred to in this Agreement as "Company Options"), the weighted average exercise price of such Company Options is nineteen dollars and ninety-one cents ($19.91), and 45,000 of such Company Options under the 1996 Plan and 484,700 of such Company Options under the 2003 Plan are vested and exercisable; (ii) no shares of Company Common Stock are available for future grant under the 1996 Plan and 744,000 shares of Company Common Stock are available for future grant under the 2003 Plan; and (iii) no shares of Company Common Stock were subject to issuance pursuant to outstanding Company Options outside of the Option Plans. Section 3.2(b)(i) of the Company Disclosure Schedule sets forth a list of each outstanding Company Option, including: (a) the number of shares of Company Common Stock subject to such Company Option, (b) the exercise price of such Company Option, (c) the date on which such Company Option was granted or issued, (d) the Option Plan under which such Company Option was issued and whether such Company Option is an "incentive stock option" (as defined in Section 422 of the Code) or a nonqualified stock option, (e) for each Company Option, whether such Company Option is held by a Person who is not an employee of the Company or any of its Subsidiaries, (f) the applicable vesting schedule, if any, and the extent to which such Company Option is vested and exercisable as of the date hereof; and (g) the date on which such Company Option expires. The Company has delivered to Parent a correlated list of names of the holders of such Company Options. All shares of Company Common Stock subject to issuance under the Option Plans, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, would be duly authorized, validly issued, fully paid and nonassessable. Except as set forth in Section 3.2(b)(iii) of the Company Disclosure Schedule, there are no commitments or agreements of any character to which the Company is bound obligating the Company to accelerate the vesting or exercisability of any Company Option as a result of the Merger (whether alone or upon the occurrence of any additional or subsequent events). There are no outstanding or authorized stock appreciation, phantom stock, profit participation or other similar rights with respect to the Company. The per share exercise price of each Company Option is not (and is not deemed to be) less than the fair market value of a share of Company Common Stock as of the date of grant of such Company Option. All grants of Company Options were properly approved by the board of directors of the Company (or a duly authorized committee or subcommittee thereof) in compliance with all Laws and recorded on the Company Financials in accordance with GAAP, and no such grants involved any "back dating", "forward dating" or similar practices that date any Company Option as of any date other that the date of its actual grant.

(c)    Voting Debt .   Except as set forth in Section 3.2(c) of the Company Disclosure Schedule, no bonds, debentures, notes or other indebtedness of the Company or any of its Subsidiaries (i) having the right to vote on any matters on which shareholders may vote (or which is convertible into, or exchangeable for, securities having such right) or (ii) the value of which is any way based upon or derived from capital or voting stock of the Company, are issued or outstanding as of the date hereof (collectively, "Voting Debt").

(d)    Other Securities .   Except as otherwise set forth in Section 3.2(b), Section 3.2(c) or Section 3.2(d) of the Company Disclosure Schedule, as of the date hereof, there are no securities, options, warrants, calls, rights, contracts, commitments, agreements, instruments, arrangements, understandings, obligations or undertakings of any kind to which the Company or any of its Subsidiaries is a party or by which any of them is bound obligating (or purporting to obligate) the Company or any of its Subsidiaries to (including on a deferred basis) issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock, Voting Debt, other voting securities or any securities convertible into shares of capital stock, Voting Debt or other voting securities of the Company or any of its Subsidiaries, or obligating the Company or any of its Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, instrument, arrangement, understanding, obligation or undertaking. There are no outstanding Contracts to which the Company or any of its Subsidiaries is a party or by which any of them is bound obligating (or purporting to obligate) the Company or any of its Subsidiaries to (i) repurchase, redeem or otherwise acquire any shares of capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries or (ii) dispose of any shares of the capital stock of, or other equity or voting interests in, any of its Subsidiaries. The Company is not a party to any voting agreement with respect to shares of the capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries and, to the Company's Knowledge, other than the Voting Agreement, there are no irrevocable proxies and no voting agreements, voting trusts, rights plans, anti-takeover plans or registration rights agreements with respect to any shares of the capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries to which the Company or any of its Subsidiaries is a party or by which any of them are bound. 

3.3    Authority; No Conflict; Necessary Consents .

(a)    Authority .   The Company has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby, subject, in the case of consummation of the Merger, to obtaining the approval of this Agreement by the Company's shareholders as contemplated in Section 6.2. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company and no further corporate action is required on the part of the Company to authorize the execution and delivery of this Agreement or to consummate the Merger and the other transactions contemplated hereby, subject only to the approval of this Agreement by the Company's shareholders as contemplated by Section 6.2 and the filing of the Articles of Merger pursuant to Tennessee Law. The affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock is the only vote of the holders of any class or series of Company capital stock necessary to approve this Agreement and consummate the Merger and the other transactions contemplated hereby. The board of directors of the Company has, by resolution adopted by unanimous vote at a meeting of all Directors duly called and held and not subsequently rescinded or modified in any way (except as is permitted pursuant to Section 6.3(d) hereof), duly (i) determined that the Merger is fair to, and in the best interests of, the Company and its shareholders, (ii) adopted this Agreement and approved the transactions contemplated hereby, including the Merger, and (iii) recommended that the shareholders of the Company approve this Agreement and directed that such matter be submitted to the Company's shareholders at the Shareholders' Meeting. This Agreement has been duly executed and delivered by the Company and assuming due authorization, execution and delivery by Parent and Merger Sub, constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other Laws relating to or affecting the rights and remedies of creditors generally and to general principles of equity.

(b)    No Conflict .   The negotiation, execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby, have not, do not and will not (i) conflict with or violate any provision of the Company Governing Documents or any Subsidiary Governing Documents of any Subsidiary of the Company, (ii) subject to obtaining the approval of this Agreement by the Company's shareholders as contemplated in Section 6.2 and compliance with the requirements set forth in Section 3.3(c), conflict with or violate any Law applicable to the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries or any of their respective properties or assets (whether tangible or intangible) is bound or affected or (iii) result in any material breach of or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, or materially impair the Company's rights or to the Company's Knowledge, alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of any Company Material Contract, or result in the creation of a Lien on any of the properties or assets of the Company or any of its Subsidiaries other than Permitted Liens. Section 3.3(b) of the Company Disclosure Schedule lists all consents, waivers and approvals required to be obtained in connection with the consummation of the transactions contemplated hereby under any Contract to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or any of their properties or assets is bound or affected, which, if not obtained, individually or in the aggregate, could reasonably be expected to be material to the Company and its Subsidiaries taken as a whole or result in the Company or any of its Subsidiaries incurring any material penalties or other financial obligations or to materially and adversely affect the ability of the parties hereto to consummate the Merger within the time frame in which the Merger would otherwise be consummated in the absence of the need for such consent, waiver or approval. 

(c)    Necessary Consents .   No consent, waiver, approval, order or authorization of, or registration, declaration or filing with any supranational, national, state, municipal, local or foreign government, any instrumentality, subdivision, court, arbitral body, administrative agency or commission or other governmental authority or instrumentality or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority, including, without limitation, any Insurance Department or Financing Department (each a "Governmental Entity") or any other Person is required to be obtained or made by the Company in connection with the execution and delivery of this Agreement or the consummation of the Merger and other transactions contemplated hereby, except for (i) the filing of the Articles of Merger pursuant to Tennessee Law and appropriate documents with the relevant authorities of other states in which the Company or Parent are qualified to do business, (ii) the filing of the Proxy Statement with the United States Securities and Exchange Commission (the "SEC") in accordance with the requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder, (iii) the filing of the Notification and Report Forms with the United States Federal Trade Commission ("FTC") and the Antitrust Division of the United States Department of Justice ("DOJ") required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act") and the expiration or termination of the applicable waiting period under the HSR Act, (iv) approval of the Company's shareholders as contemplated in Section 6.2, (v) the necessary filings, applications and notices to and approvals and consents, if any, of the departments of the states charged with the regulation of the business of insurance (the "Insurance Departments") and the financing or regulation of insurance premiums or the lending of money or regulation of deferred presentment transactions (the "Financing Departments") in the states in which the Company or its Subsidiaries are licensed or authorized or where the conduct of their business requires the approval by such departments (each of which is separately identified on Section 3.3(c) of the Company Disclosure Schedule) of the transactions contemplated hereby, (vi) such other filings and notifications as may be required to be made by the Company under federal, state or foreign securities Laws or the rules and regulations of the Nasdaq Global Select Market and (vii) such other consents, waivers, approvals, orders, authorizations, registrations, declarations and filings which if not obtained or made could not, individually or in the aggregate, reasonably be expected to materially affect the ability of the Company to consummate the Merger or have a Material Adverse Effect on the Company. The consents, approvals, orders, authorizations, registrations, declarations and filings set forth in (i) through (vii) are referred to herein as the "Necessary Consents."

3.4    SEC Filings; Financial Statements; Internal Controls .

(a)    SEC Filings .   The Company has timely filed all required registration statements, prospectuses, reports, schedules, forms, statements and other documents (including exhibits and all other information incorporated by reference) required to be filed by it with the SEC since August 12, 2003. All such required registration statements, prospectuses, reports, schedules, forms, statements and other documents, as each of the foregoing have been amended since the time of their filing, (including those that the Company may file subsequent to the date hereof) are referred to herein as the "Company SEC Reports." As of their respective dates of filing, the Company SEC Reports (i) were prepared in accordance with, and complied in all material respects with, the requirements of the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, as the case may be, and, in each case, the rules and regulations promulgated thereunder applicable to such Company SEC Reports and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. None of the Company's Subsidiaries is subject to the reporting requirements of Sections 13(a) or 15(d) of the Exchange Act. The Company has delivered to Parent complete and correct copies of all amendments and modifications to the Company SEC Reports drafted prior to the date of this Agreement that have not yet been filed by the Company with the SEC, but which are required to be filed and all Contracts and other documents that previously had been filed by the Company with the SEC and are currently in effect. The Company has delivered or provided access to Parent true, correct and complete copies of all correspondence between the SEC, on the one hand, and the Company and any of its Subsidiaries, on the other, since August 12, 2003, including all SEC comment letters and responses to such comment letters by or on behalf of the Company. To the Company's Knowledge, as of the date hereof and except as described in Section 3.4(a) of the Company's Disclosure Schedule, none of the Company SEC Reports is the subject of ongoing SEC review or outstanding SEC comment. Each of the principal executive officer of the Company and the principal financial officer of the Company (or each former principal executive officer of the Company and each former principal financial officer of the Company, as applicable) has made all certifications required by Rule 13a-14 or Rule 15d-14 under the Exchange Act or Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 with respect to the Company SEC Reports.

(b)    GAAP Financial Statements .   Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the Company SEC Reports (the "GAAP Financials"), including each Company SEC Report filed after the date hereof until the Closing: (i) complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, (ii) was prepared in accordance with United States generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited interim financial statements, as may be permitted by the SEC on Form 10-Q, 8-K or any successor form under the Exchange Act) and (iii) fairly and accurately presented in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as at the respective dates thereof and the consolidated results of the Company's operations and cash flows for the periods indicated (except that unaudited, interim financial statements were or will be subject to normal, recurring year end adjustments). The consolidated balance sheet of the Company and its consolidated Subsidiaries as of September 30, 2006 contained in the Company SEC Reports is hereinafter referred to as the "Company Balance Sheet." Except as disclosed in the Company Financials, since the date of the Company Balance Sheet, neither the Company nor any of its Subsidiaries has incurred any liabilities (absolute, accrued, contingent or otherwise) of a nature required to be disclosed on a consolidated balance sheet or in the related notes to the consolidated financial statement prepared in accordance with GAAP, except for (i) liabilities incurred since the date of the Company Balance Sheet in the ordinary course of business consistent with past practice and (ii) liabilities incurred in connection with this Agreement or the transactions contemplated hereby. The Company has not had any material dispute with any of its auditors regarding accounting matters or policies during any of its past three (3) full fiscal years or during the current fiscal year-to-date. The books and records of the Company and each Subsidiary have been, and are being, maintained in accordance with applicable legal and accounting requirements in all material respects, and the Company Financials are consistent with such books and records in all material respects. Neither the Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar off-balance sheet Contract relating to any transaction or relationship between or among the Company or any of its Subsidiaries, on the one hand, and any unconsolidated affiliate, including any structured finance, special purpose or limited purpose Person, on the other hand, or any "off-balance sheet arrangements" (as defined in Item 303(a) of Regulation S-K of the SEC).

(c)    Statutory Financial Statements

(i)    Except as described in Section 3.4(c)(i) of the Company Disclosure Schedule, the Company has delivered to Parent true, correct and complete copies of (i) the statutory financial statements (including the annual reports filed with the domiciliary states of each Insurance Subsidiary) for each Subsidiary of the Company that is licensed to or that conducts an insurance or reinsurance business (each an "Insurance Subsidiary") for the years ended December 31, 2002, 2003, 2004 and 2005 and (ii) the statutory financial statements (including quarterly reports filed with the domiciliary states of each Insurance Subsidiary) for each Insurance Subsidiary for the first three quarters in the year 2006, and the Company will deliver to Parent true, correct and complete copies of such statements for all quarters which are filed prior to the Effective Time (collectively, the "Statutory Statements").

(ii)    The Statutory Statements each present (or will present, with respect to the Statutory Statements which are filed following the date hereof and prior to the Effective Time) fairly and in accordance with the statutory accounting principles and practices prescribed or permitted by the appropriate regulatory agencies of each state in which the Statutory Statements have been or may be required to be filed ("SAP"), the financial position of the related Insurance Subsidiary at the date of each such statement and the results of the related Insurance Subsidiary's operations for each such referenced period.

(iii)    The amounts shown in the Statutory Statements as reserves and liabilities for past and future Insurance Contract claims and expenses under Insurance Contracts, were computed (i) in all material respects in accordance with generally accepted actuarial standards consistently applied as in effect on their respective dates, (ii) on the basis of actuarial assumptions that were in accordance with those called for in policy provisions, (iii) in compliance with applicable Law in all material respects; and (iv) on the basis of actuarial assumptions and methods consistent in all material respects with those used to compute the corresponding items in the Statutory Statements. Such amounts shown on Statutory Statements filed after the date hereof and on or prior to the Effective Time will be so computed and based on the same principles used in prior periods.

(d)    Company Financials .   The GAAP Financials and the Statutory Statements are collectively referred to as the "Company Financials".

(e)    Internal Controls .   The Company has established and maintains a system of internal controls over financial reporting required by Rules 13a-15(f) or 15d-15(f) of the Exchange Act regarding the reliability of financial reporting and the preparation of its consolidated financial statements in accordance with GAAP, including policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company and its Subsidiaries, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company and its Subsidiaries are being made only in accordance with appropriate authorizations of management and the board of directors of the Company and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets of the Company and its Subsidiaries. The Company has disclosed, based on its most recent evaluation of internal control over financial reporting prior to the date of this Agreement, to the Company’s independent auditors and the audit committee of the Company’s board of directors (x) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (y) any fraud, whether or not material, that involves the Company’s management or other employees who have a significant role in the Company’s internal control over financial reporting. There does not exist any fraud, whether or not material, that involved the Company’s management or other employees who have a significant role in the Company’s internal control over financial reporting..

(f)    The Company has established and maintains disclosure controls and procedures required by Rules 13a-15(f) or 15d-15(f) of the Exchange Act to ensure that all material information relating to the Company and its Subsidiaries required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and is accumulated and communicated to the Company's management to allow timely decisions regarding required disclosure.

3.5    Absence of Certain Changes or Events .   Since the date of the Company Balance Sheet through the date hereof and except as disclosed on Schedule 3.5 of the Company Disclosure Schedule, there has not been, accrued or arisen:

(a)    any Material Adverse Effect on the Company;

(b)    any acquisition of any business by the Company or any Subsidiary by merging or consolidating with, or by purchasing any assets for an amount in excess of $250,000 or equity securities of, or by any other manner, any corporation, partnership, association or other business organization or division thereof, whether by asset purchase, stock purchase, merger or otherwise;

(c)    any entry into, amendment or termination by the Company or any of its Subsidiaries of any Contract, agreement in principle, letter of intent, memorandum of understanding or similar agreement with respect to a joint venture or strategic partnership;

(d)    any declaration, setting aside or payment of any dividend on, or other distribution (whether in cash, stock or property) in respect of, any of the Company's or any of its Subsidiaries' capital stock, or any purchase, redemption or other acquisition by the Company or any of its Subsidiaries of any of the Company's or any of its Subsidiaries' capital stock or any other securities of the Company or any of its Subsidiaries or any options, warrants, calls or rights to acquire any such shares or other securities, except for any dividends received by the Company or any of its wholly-owned direct or indirect Subsidiaries;

(e)    any split, combination or reclassification of any of the Company's or any of its Subsidiaries' capital stock;

(f)    any granting by the Company, or any of its Subsidiaries or ERISA Affiliates, whether orally or in writing, of any increase in compensation or pension, welfare or fringe benefits payable or otherwise due (i) to current or former executive officers or directors of the Company or any Subsidiary, (ii) to any current or former employees of the Company whose annual base salary is in excess of $75,000 other than in the ordinary course of business consistent with past practice, or (iii) to any other employees other than as would not result in increases to such other employees that in the aggregate exceed five percent (5%) of the Company's payroll as of the date of this Agreement;

(g)    any change by the Company or any of its Subsidiaries of severance, termination or bonus policies and practices (excluding sales commissions) or any entry by the Company or any of its Subsidiaries into, or amendment of, any currently effective employment, severance, termination or indemnification agreement or any agreement the benefits of which are contingent or the terms of which are materially altered upon the occurrence of a transaction involving the Company of the nature contemplated hereby (either alone or upon the occurrence of additional or subsequent events);

(h)    any material amendment, termination or consent with respect to any Company Material Contract;

(i)    any Contract entered into by the Company or any Subsidiary relating to its assets or business (including the acquisition or disposition of any assets or property) or any relinquishment by the Company or any of its Subsidiaries of any Contract or other right, in each case having a stated contract amount or involving obligations or entitlements with a value of more than $100,000 in each individual case (other than Contracts with customers, distributors and representatives entered into in the ordinary course of business, consistent with past practice);

(j)    any change by the Company in its accounting or reserving methods, principles or practices, except as required by concurrent changes in GAAP or SAP;

(k)    any debt, capital lease or other debt or equity financing transaction by the Company or any of its Subsidiaries or entry into any agreement by the Company or any of its Subsidiaries in connection with any such transaction, except for (x) capital leases entered into in the ordinary course of business consistent with past practice which are not, individually or in the aggregate, material to the Company and its Subsidiaries taken as a whole and (y) borrowings by the Company under (1) the Eighth Amended and Restated Loan Agreement dated as of October 31, 2002 (the "Premium Facility"), by and among the Company, First Tennessee Bank, N.A. and the other parties thereto, as amended through the Eighth Amendment thereto, dated June 30, 2006 and (2) the Third Amended and Restated Loan Agreement dated as of October 31, 2002 (and together with the Premium Facility, the "Credit Facilities"), by and among the Company, First Tennessee Bank, N.A. and the other parties thereto, as amended through September 30, 2006;

(l)    any grants of any material refunds, credits, rebates or other allowances by the Company or any of its Subsidiaries to any end user, customer, reseller or distributor, in each case, other than in the ordinary course of business consistent with past practice;

(m)     any material change in the amount of, or the policies relating to, accounts receivable or reserves, bad debts or rights to accounts receivable experienced by the Company or any of its Subsidiaries;

(n)    any material restructuring activities by the Company or any of its Subsidiaries, including any material reductions in force or similar actions other than the opening and closing of sales offices in the ordinary course of business;

(o)    any sale, lease, license, encumbrance or other disposition of any properties or assets with a value of more than $100,000 excluding salvage sales of insured vehicles or the license of current Company Products, in each case, in the ordinary course of business and in a manner consistent with past practice;

(p)    any loan, extension of credit, advance or grant of extended payment terms by the Company or any of its Subsidiaries to, or investment in, any Person other than (A) loans or advances to Employees/Service Providers in connection with business related travel and expenses, in each case in the ordinary course of business consistent with past practice, (B) loans, advances or capital contributions or investments by the Company to or in any wholly-owned Subsidiary, by any wholly-owned Subsidiary in the Company, or by a wholly-owned Subsidiary of the Company in any other wholly-owned Subsidiary of the Company or (C) commercial loans or advances made in the ordinary course of business and consistent with past practice;

(q)    any material purchases of fixed assets or other long term assets for a purchase price of more than $100,000 other than as provided in the Company's budget, a complete copy of which has been provided to Parent before the date hereof (the "Budget"), and other than in the ordinary course of business and in a manner consistent with past practice;

(r)    any amendment of any material Tax Returns, any adoption of or change in any election in respect of Taxes, adoption or change in any accounting method in respect of Taxes, agreement or settlement of any claim or assessment in respect of Taxes or closing agreement relating to an Audit, or consent to any waiver or extension of the statutory period of limitations in respect of any Audit or any claim or assessment in respect of any Taxes;

(s)    any material revaluation, or any indication that such a revaluation is required under GAAP or SAP, by the Company or any of its Insurance Subsidiaries of any of their assets, including, without limitation, materially writing down the value of long term or short-term investments, fixed assets, goodwill, intangible assets, deferred tax assets, or writing off notes or accounts receivable other than in the ordinary course of business consistent with past practice;

(t)    to the Knowledge of the Company, any significant deficiency or material weakness identified in the system of internal controls utilized by the Company and its Subsidiaries;

(u)    any commencement or settlement of any material lawsuit, any threat of any material lawsuit or other material proceeding by or against the Company or any Subsidiary which could reasonably be expected to result in losses to the Company in excess of $50,000, other than defense of claims under insurance policies issued by the Company and its Subsidiaries;

(v)    any granting by the Company or any of its Subsidiaries of any material Lien with respect to any of its or their properties or assets except for Permitted Liens;

(w)    any granting by the Company or any of its Subsidiaries of forgiveness, cancellation or waiver under or in respect of any debts owed to or claims of or by any of them except for write-offs of accounts receivable from customers in the ordinary course of business provided that such accounts receivable are not material individually or in the aggregate;

(x)    any material claim or, to the Knowledge of the Company, any potential material claim of ownership, interest or right by any person other than the Company or any of its Subsidiaries of the Intellectual Property owned by or developed or created by it or them or of infringement by the Company or any of its Subsidiaries of any rights of any third Person in respect of any Intellectual Property;

(y)    any Contract with any union, labor organization or other organization representing any employee of the Company or any of its subsidiaries;

(z)    any material change in its underwriting (other than adjustments to underwriting policies made in light of loss experience in the ordinary course of business), reinsurance, marketing, claim processing and payment, except as required by concurrent changes in applicable Law, or reduced the amount of any reserves and other liability accruals held in respect of losses or loss adjustment expenses arising under or relating to Insurance Contracts, other than as required by concurrent changes in applicable Law;

(aa)    any abandonment, modification, waiver, termination or otherwise change to any insurance Permit, except (i) as is required in order to comply with concurrent changes in applicable Law, (ii) such modifications, changes or waivers of insurance Permits as would not, individually or in the aggregate, restrict the business or operations of the Company or any of its Subsidiaries in any material respect or (iii) such modifications or changes that would expand the insurance Permits in a way favorable to the Company;

(bb)    except in the ordinary course of business, or in connection with geographical or product expansion, or as required to comply with applicable Law, any material modifications to any Insurance Contract or form thereof;

(cc)    any failure to keep in full force and effect any of the Company's Insurance Policies (other than the Company's Insurance Policies that are replaced immediately by comparable insurance coverage), or reduce the amount of any insurance coverage provided by existing Company Insurance Policies; or

(dd)    any agreement, whether in writing or otherwise, to take any action described in this Section 3.5.

3.6    Taxes .

(a)    Definitions.    "Tax" or "Taxes" means all Federal, state, local and foreign taxes, and other assessments of a similar nature (whether imposed directly or through withholding), including any interest, additions to tax, or penalties applicable thereto, imposed by any taxing authority of any Governmental Entity. "Tax Authority" means the IRS and any other domestic or foreign governmental authority responsible for the administration of any Taxes. "Audit" means any audit, assessment, claim, examination or other inquiry relating to Taxes by any Tax Authority or any judicial or administrative proceeding relating to Taxes. "Tax Returns" mean all federal, state, local, and foreign tax returns, declarations, statements, reports, schedules, forms, and information returns and any amendments thereto. 

(b)    Tax Returns and Audits .

(i)    The Company and each of its Subsidiaries has timely filed (or has had timely filed on its behalf) with the appropriate Tax Authorities all material Tax Returns required to be filed by the Company and each of its Subsidiaries. Such filed Tax Returns are true, correct, and complete in all material respects.

(ii)    All material Taxes for which the Company or any of its Subsidiaries is or may be liable in respect of taxable periods (or portions thereof) ending on or before the Closing Date, whether or not shown (or required to be shown) on a Tax Return, have been timely paid, or in the case of Taxes not yet due and payable, an adequate accrual in accordance with GAAP specifically in respect of such Taxes has been established on the GAAP Financials. All liabilities for Taxes attributable to the period commencing on the date following the date of the Company Balance Sheet were incurred in the ordinary course of business and are consistent in type and amount with Taxes attributable to similar prior periods.

(iii)    Except for Permitted Liens, there are no liens for Taxes upon any property or assets of the Company or any of its Subsidiaries.

(iv)    Except as described in Section 3.6(b)(iv) of the Company Disclosure Schedule, no Federal, state, local or foreign Audits are presently pending with regard to any material Taxes or material Tax Returns of the Company and its Subsidiaries and to the Knowledge of the Company, no such Audit is threatened. No material issue has been raised by any Tax Authority in any completed Audit which, by application of the same or similar principles, could reasonably be expected to recur in a subsequent Tax period.

(v)    There are no outstanding requests, agreements, consents or waivers to extend the statutory period of limitations applicable to the assessment of any Taxes or deficiencies against the Company or any of its Subsidiaries, and no power of attorney granted by the Company or any of its Subsidiaries with respect to any Taxes is currently in force.

(vi)    Neither the Company nor any of its Subsidiaries is a party to any agreement providing for the allocation, indemnification or sharing of Taxes, other than the agreements described in Section 3.6(b)(vi) of the Company Disclosure Schedule.

(vii)    Except as described in Section 3.6(b)(vii) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has (i) been a member of an affiliated group (within the meaning of Section 1504 of the Code) or an affiliated, combined, consolidated, unitary, or similar group for state, local or foreign Tax purposes, other than the group of which the Company is the common parent or (ii) any liability for or in respect of the Taxes of, or determined by reference to the Tax liability of, another Person (other than the Company or any of its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law), as a transferee or successor, by Contract or otherwise.

(viii)    The Company has not received any claim from a Taxing Authority in any jurisdiction where the Company or its Subsidiaries does not file a Tax Return asserting that it is or may be subject to Taxation in that jurisdiction.

(ix)    None of the Company or any of its Subsidiaries has participated in any way (i) in any "tax shelter" within the meaning of Section 6111 (as in effect prior to the enactment of P.L. 108-357 or any comparable Laws of jurisdictions other than the United States) of the Code or (ii) in any "reportable transaction" within the meaning of Treasury Regulation Section 1.6011-4 (as in effect at the relevant time) (or any comparable regulations of jurisdictions other than the United States).

(x)    Each Insurance Contract complies with the requirements of section 72 of the Code, each Insurance Contract which was issued as a life insurance contract meets the requirements of section 7702(a) of the Code, and the Company does not issue any modified endowment contracts within the meaning of Section 7702A of the Code.

3.7    Real Properties .

(a)    Section 3.7(a) of the Company Disclosure Schedule contains a current, complete and correct list of all real property owned by the Company or any Subsidiary ("Owned Real Property"), and copies of all vesting deeds have been provided to Parent. Except as set forth in Section 3.7(a) of the Company Disclosure Schedule, the Company and/or its Subsidiaries have good, valid and marketable title to the Owned Real Property, free and clear of all Liens, tenancies, subtenancies, licenses, defects, restrictive covenants or other encumbrances other than the Permitted Liens.

(b)    Section 3.7(b) of the Company Disclosure Schedule sets forth a list of all material real property currently leased, licensed or subleased by the Company or any of its Subsidiaries or otherwise used or occupied by the Company or any of its Subsidiaries (the "Leased Real Property"), including all amendments, assignments and modifications thereto, whether as lessor or lessee. The Company has delivered or made available to Parent true, correct and complete copies of all material Contracts under which the Leased Real Property is currently leased, licensed, subleased, used or occupied by the Company or any of its Subsidiaries ("Lease Documents") and the Company has delivered or provided access to Parent a true, correct and complete list of all Contracts under which the Leased Real Property is currently leased, licensed, subleased or occupied. Except as set forth on Section 3.7(b) of the Company Disclosure Schedule, the Lease Documents for the Leased Real Property have not been modified, amended, changed or altered in any material way. All Lease Documents are in full force and effect, are valid, binding, enforceable and effective in accordance with their respective terms, and there is not, under any of the Lease Documents, any existing breach, default or event of default (or event which with notice or lapse of time, or both, would constitute a default) by the Company or its Subsidiaries or, to the Company's Knowledge, any third party under any of the Lease Documents.

(c)    Section 3.7(c) of the Company Disclosure Schedule sets forth a list of all real property affected by agreements ("Government Agreements") with Government Entities ("Development Bond Property" and together with the Owned Real Property and Leased Real Property, the "Real Property"). The Government Agreements are in full force and effect, and are valid, binding, enforceable and effective in accordance with their respective terms. The transactions contemplated by this Agreement will not result in a breach of or a default under any of the Government Agreements, and will not cause such agreements to cease to be legal, valid, binding, enforceable and in full force and effect following the Closing.

(d)    Except as set forth on Section 3.7(d) of the Company Disclosure Schedule:

(i)    no parties other than the Company or any of its Subsidiaries have a right to occupy, use or own any Real Property;

(ii)    the Real Property is used only for the current operation of the business of the Company and its Subsidiaries, and includes all real property necessary for the business of the Company and/or Subsidiaries as currently conducted;

(iii)    the Real Property and the physical assets of the Company and the Subsidiaries are, in all material respects, in good condition and repair and regularly maintained in accordance with standard industry practice;

(iv)    neither the Company nor any Subsidiary is currently or could in the future be obligated under any option, right of first refusal or other contractual right to sell, dispose of, lease or sublease its interest in any of the Real Properties or any material portion thereof or any material interest therein to any Person other than Merger Sub; and

(v)    with respect to the Leased Property and to the Development Bond Property, there are no superior interests to those of the Company or its Subsidiaries.

3.8    Intellectual Property .

(a)    Sufficiency of Intellectual Property .   Section 3.8(a) of the Company Disclosure Schedule identifies all of the following: (i) all trademarks, service marks, trade names, domain names, trade dress and the like which the Company or any of its Subsidiaries own or purport to own, including those registered with the United States Patent and Trademark Office (the "Trademarks"); (ii) all copyrights and all registrations of and applications to register copyrights which the Company or any Subsidiary own or purport to own; (iii) all licenses of rights in Trademarks, patents, copyrights and other intellectual property, whether to or by the Company or any of its Subsidiaries ("IP Contracts"); and (iv) all software developed by the Company that is currently in use or held for future use in its or its Subsidiaries' business. The rights required to be so identified, together with all licenses of rights in computer software and all proprietary know how and trade secrets which are material to the Company, any of its Subsidiaries or its or their business, are referred to herein collectively as the "Intellectual Property." The Intellectual Property and other licensed software of the type generally available to the public is all of the intellectual property used or held for use in, or necessary to conduct, the business. Neither the Company nor any of its Subsidiaries owns any patents or pending applications to patent any technology or design.

(b)    Ownership of Intellectual Property .   The Company or one of its Subsidiaries is the owner of, or duly licensed to use (and immediately following the Closing will continue to own or have a valid right to use), free and clear of all Liens, the Intellectual Property, and the Intellectual Property owned by the Company exists and has been maintained in good standing. Except as set forth on Section 3.8(b) of the Company Disclosure Schedule, no third party has asserted ownership rights in any of the intellectual property (except to the extent that such intellectual property has been properly licensed to or by the Company or one of its Subsidiaries). The conduct of the business of the Company and its Subsidiaries does not (and to the Company's Knowledge, the conduct of the business when conducted immediately following the Closing at such time will not) infringe, misappropriate or otherwise violate any right of any third party, and since January 1, 2004, neither the Company nor any of its Subsidiaries has received written notice (or, to the Company's Knowledge, any other notice) from any Person alleging such infringement, misappropriation, or other violation. To the Company's Knowledge, no third party is infringing, misappropriating or otherwise violating the Company's or its Subsidiaries' rights in the Intellectual Property and within the past three (3) years, except as set forth in Section 3.8(b) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries have asserted or threatened any claim against any Person alleging any such infringement, misappropriation or violation.

(c)    Computer Software .   The Company has heretofore furnished Parent with a list of all software. The Company or one of its Subsidiaries currently owns or licenses, or otherwise has the legal right to use, all of the software currently in use (and all software held for future use by the Company or its Subsidiaries (including any upgrade, alteration or enhancement with respect thereto), and to the Company's Knowledge, all of such software is being used in compliance with applicable licenses or other agreements.

(d)    Transaction .   Except as described in Section 3.8(d) of the Company Disclosure Schedule, the consummation of transactions will not result in the loss or impairment of or payment of any additional amounts with respect to, nor require the consent of any other Person in respect of, the Company's and its Subsidiaries' right to own, use, or hold for use any of the Intellectual Property as owned, used, or held for use in the conduct of the business as currently conducted.

(e)    Trade Secrets .   The Company and its Subsidiaries take reasonable measures under the circumstances to protect the confidentiality of their respective trade secrets.

(f)    Data Protection; Privacy .   The Company has a privacy policy (the "Privacy Policy") that discloses (i) the manner and methods by which the Company and each of its Subsidiaries collects information from its customers or other parties (the "Customer Information"), (ii) the manners in which they use such Customer Information and (iii) to whom and under what circumstances the Company or any of its Subsidiaries may disclose Customer Information to any third party. Neither the Company nor any of its Subsidiaries uses any of the Customer Information it receives through its web site or otherwise in an unlawful manner, or in a manner that in any way violates the Privacy Policy, any contractual obligations or the privacy rights of their customers or other third parties. The Company and each of its Subsidiaries have not collected any Customer Information in an unlawful manner or in violation of the Privacy Policy, any contractual obligations, or any applicable Laws relating to privacy, data protection, and the collection and use of personal information. The Company and each of its Subsidiaries have adequate security measures in place to (i) protect the Customer Information they receive and which they store in their computer systems from unauthorized or illegal use, access or modification by third parties or use by third parties in a manner violative of the rights of privacy of their customers and other third parties and (ii) restrict access to Customer Information to those employees who require such access to perform their primary job functions. The Company and each of its Subsidiaries conduct their business in material compliance with applicable Laws relating to privacy, data protection, and the collection and use of personal information.

3.9    Company Insurance .   To the Company’s Knowledge, each of the Company and its Subsidiaries has policies of insurance and bonds of the type and in amounts customarily carried by Persons conducting businesses or owning assets similar to those of the Company and its Subsidiaries. Except as set forth in Section 3.9(a) of the Company Disclosure Schedule, there is no claim pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. All premiums due and payable under all such policies and bonds have been paid and the Company and its Subsidiaries are otherwise in compliance in all material respects with the terms of such policies and bonds. To the Company's Knowledge, there is no threatened termination of, or material premium increase with respect to, any such policies and bonds. Section 3.9(b) of the Company Disclosure Schedule contains an accurate and complete description of all material policies of fire, liability, products liability, workers' compensation, and other forms of insurance owned or held by the Company and each subsidiary. Section 3.9(c) of the Company Disclosure Schedule identifies all risks that the Company and its Subsidiaries, and their respective board of directors or officers, have designated as being self-insured. The Company has delivered or made available to Parent the claims history for the Company during the past five (5) years and in the Company's possession, including with respect to insurance obtained but not currently maintained. Each insurance policy (or binder), fidelity or surety bond, and self-insurance arrangement in effect and maintained by or on behalf of the Company and any of its Subsidiaries and any of their respective properties, assets, employees, officers or directors is set forth in Section 3.9(d) of the Company Disclosure Schedule (including for each policy the policy number, insurer, policy period, limit and deductible). Except as described in Section 3.9(d) of the Company Disclosure Schedule, each such insurance policy, binder or bond is legally valid, binding and enforceable in accordance with its terms and in full force and effect, and will not terminate or lapse by reason of any of the transactions contemplated by this Agreement. The Company has provided or made available to Parent each expired or ineffective insurance policy (or binder), fidelity or surety bond and self-insurance arrangement in the Company's possession and maintained by or on behalf of the Company and any of its Subsidiaries and any of their respective properties, assets, employees, officers or directors since January 1, 2004. Except as set forth in Section 3.9(e) of the Company Disclosure Schedule, with respect to insurance policies covering the Business since January 1, 2001: (i) all occurrences, litigation and circumstances that could lead to a claim that would be covered by insurance policies have been properly reported to and accepted by the applicable insurer, (ii) no policy limits have been exhausted or materially eroded or reduced and there have been no gaps in the periods of coverage, and (iii) to the Knowledge of the Company, all insurance carriers with respect to each such policy are solvent and there are no open claims against any insolvent insurance carriers.

3.10    Litigation .   Except as set forth in Section 3.10 of the Company Disclosure Schedule and for claims under Insurance Contracts issued by the Company's Insurance Subsidiaries in the ordinary course of business, which claims are and are reasonably expected to remain for amounts less than $50,000, there is no action, suit, claim or proceeding pending or, to the Company's Knowledge, threatened or reasonably anticipated against the Company, any of its Subsidiaries or any of their respective properties (tangible or intangible). There is no material investigation or other material proceeding pending or, to the Company's Knowledge, threatened or reasonably anticipated against the Company, any of its Subsidiaries or any of their respective properties (tangible or intangible) by or before any Governmental Entity. There are not currently, nor, to the Company's Knowledge, have there been since January 1, 2003, any material internal investigations or inquiries being conducted by the Company, the Company's board of directors (or any committee thereof) or any third party at the request of any of the foregoing concerning any alleged financial, accounting, Tax, conflict of interest, illegal activity, fraudulent or deceptive conduct or other misfeasance or malfeasance issues. There is no action, suit, proceeding, arbitration or, to the Company's Knowledge, investigation involving the Company, which the Company presently intends to initiate.

3.11    Compliance with Law .

(a)    General .   Neither the Company nor any of its Subsidiaries since January 1, 2001, is or has been in violation or default in any material respect of any Laws applicable to the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries is bound or any of their respective properties is bound or affected. There is no agreement, judgment, injunction, order or decree binding upon the Company or any of its Subsidiaries which has or would reasonably be expected to have the effect of prohibiting or impairing any business practice of the Company or any of its Subsidiaries in such a way as to be material and adverse to the Company and its Subsidiaries, taken as a whole. Except as set forth in Section 3.11(a) of the Company Disclosure Schedule, the Company and its Subsidiaries and their respective employees, hold all permits, licenses, certificates, waivers, exemptions, grants, authorizations and approvals of all Governmental Entities, including, without limitation, those responsible for regulating insurance companies, insurance agencies, lenders and financers, necessary to own, lease or operate all of the assets and properties of the Company and its Subsidiaries, as appropriate, and to carry on the business of the Company and its Subsidiaries as presently and historically conducted (the "Permits"). All such Permits are in full force and effect and, except as set forth in Section 3.11(a) of the Company Disclosure Schedule, the Company and its Subsidiaries are not operating under any agreement, order or understanding with any Governmental Entity that restricts its authority to do business or requires the Company or any of its Subsidiaries to take, or refrain from taking, any action relating to the conduct of the business otherwise permitted by applicable Law, except as set forth in the written documentation evidencing such Permit. Except as set forth in Section 3.11(a) of the Company Disclosure Schedule, the Company and its Subsidiaries are in compliance in all material respects with (i) all applicable Laws, and regulations applicable to the business (including, without limitation, all usury and similar Laws), (ii) the terms of the Permits, and (iii) the applicable listing and corporate governance rules and regulations of the Nasdaq Global Select Market. Neither of the Company nor any of its Subsidiaries have received, at any time since January 1, 2003, any notice (written or otherwise) from any Governmental Entity regarding (i) any actual or alleged violation of, or failure on the part of the Company or any of its Subsidiaries to comply with, any material term or requirement of any Permit or applicable Law (including Finance and Banking Laws) or (ii) any actual or potential revocation, withdrawal, suspension, cancellation, termination, modification, qualification or impairment of any material Permit or (iii) material violation of Law. The Permits, and each jurisdiction in which the any of the Insurance Subsidiaries is licensed to write insurance, are listed in Section 3.11(b) of the Company Disclosure Schedule. True and complete copies of all Permits previously have been delivered to Parent.

(b)    Premium Finance .   Without limiting the scope of the representations and warranties made by the Company pursuant to Section 3.11(a), and except as set forth in Section 3.11(a) of the Company Disclosure Schedule, (i) the business and operations of the Company and/or its Subsidiaries in making insurance premium financing loans have been conducted in compliance in all material respects with all applicable statutes, laws and regulations of all states in which the Company and/or its Subsidiaries conduct such business, (ii) the business and operations of the Company and/or its Subsidiaries have been conducted in compliance in all material respects with all applicable Laws regulating the business of consumer lending and banking, including state usury and similar Laws, the Truth in Lending Act, the Real Estate Settlement Procedures Act, the Consumer Credit Protection Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Homeowners Ownership and Equity Protection Act, the Fair Debt Collection Practices Act and other federal, state, local and foreign Laws regulating lending and banking ("Finance and Banking Laws") and (iii) the business and operations of the Company and/or its Subsidiaries have complied in all material respects with all applicable collection practices in seeking payment under any loan or credit extension of such subsidiaries.

3.12    Environmental Matters .   Definitions. For all purposes of this Agreement, the following terms shall have the following respective meanings:

(a)    Environmental Compliance .   The Company and its Subsidiaries are in material compliance with the Environmental Laws, which compliance includes, but is not limited to, the possession by the Company and its Subsidiaries of all material Permits required under the Environmental Laws, and compliance with the terms and conditions thereof. Neither the Company nor any of its Subsidiaries has received any written communication, whether from a Governmental Entity, citizens group, employee or otherwise, that alleges that the Company or any of its Subsidiaries are not in such compliance.

(b)    Environmental Liabilities .   There is no material Environmental Claim pending or, to the Company's Knowledge, threatened against the Company, any of its Subsidiaries or against any Person whose liability for any Environmental Claim the Company or any of its Subsidiaries have contractually retained or assumed. In addition, there has been no past or present release, emission, discharge, presence or disposal of any Material of Environmental Concern, that would reasonably be expected to form the basis of any material Environmental Claim against the Company, any of its Subsidiaries or against any Person whose liability for any Environmental Claim the Company or any of its Subsidiaries have contractually retained or assumed, or otherwise result in any material costs or liabilities under Environmental Laws.

(c)    Environmental Information .   The Company has provided to Parent all material assessments, reports, data, results of investigations or audits that are in the possession or control of or reasonably available to the Company or its Subsidiaries regarding environmental matters pertaining to or the environmental condition of the business of the Company and its Subsidiaries, or the compliance (or noncompliance) by the Company and its Subsidiaries with any Environmental Laws.

(d)    Environmental Obligations .   Neither the Company nor any of its Subsidiaries is required under any Environmental Law by virtue of the transactions set forth herein and contemplated hereby or as a condition to the effectiveness of any transactions contemplated hereby, (i) to perform a site assessment for Materials of Environmental Concern, (ii) to remove or remediate Materials of Environmental Concern, (iii) to give notice to or receive approval from any Governmental Entity or (iv) to record or deliver to any Person any disclosure document or statement pertaining to environmental matters.

3.13    Brokers' and Finders' Fees .   Except for fees payable to SunTrust Robinson Humphrey pursuant to an engagement letter dated June 9, 2006, as amended on November 16, 2006 by that certain letter from SunTrust Robinson Humphrey dated November 15, 2006, a copy of which has been provided to Parent, neither the Company nor any of its Subsidiaries has incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions, fees related to investment banking or similar advisory services or any similar charges in connection with this Agreement or any transaction contemplated hereby. Except as set forth on Section 3.13(a) of the Company Disclosure Schedule, none of the Company or any of its Subsidiaries has entered into any indemnification agreement or arrangement with any Person specifically in connection with this Agreement and the transactions contemplated hereby except as provided for in the engagement letter described above. Section 3.13(b) of the Company Disclosure Schedule sets forth an itemized good faith estimate of the fees and expenses of any accountant, broker, financial advisor, consultant, legal counsel or other Person retained by the Company or any of its Subsidiaries expected to be incurred by the Company or any of its Subsidiaries in connection with the negotiation and effectuation of the terms and conditions of this Agreement and the transactions contemplated hereby.

3.14    Transactions with Affiliates .   Except as set forth in the Company SEC Reports, since the date of the Company's last proxy statement filed with the SEC, no event has occurred as of the date hereof that would be required to be reported by the Company pursuant to Item 404 (Certain Relationships and Related Transactions) of Regulation S-K promulgated by the SEC.

3.15    Employee Benefit Plans and Compensation .

(a)    Definitions .   For all purposes of this Agreement, the following terms shall have the following respective meanings: