AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

among

MUNICH-AMERICAN HOLDING CORPORATION,

MONUMENT CORPORATION

and

THE MIDLAND COMPANY

Dated as of October 16, 2007

ARTICLE I

THE MERGER

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TABLE OF CONTENTS

(continued)

ii

TABLE OF CONTENTS

(continued)

iii

TABLE OF CONTENTS

(continued)

iv

TABLE OF DEFINED TERMS

v

TABLE OF DEFINED TERMS

(continued)

vi

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made and entered into as of October 16, 2007, by and among Munich-American Holding Corporation, a Delaware corporation (“ Parent ”), Monument Corporation, an Ohio corporation and direct wholly owned subsidiary of Parent (“ Merger Sub ”), and The Midland Company, an Ohio corporation (the “ Company ”).

WHEREAS, it is proposed that Merger Sub will merge with and into the Company (the “ Merger ”) and each share (a “ Share ”) of the common stock, without par value, of the Company (“ Company Common Stock ”) that is issued and outstanding immediately prior to the Merger, other than Shares held by the Company or Parent or any direct or indirect Subsidiary of the Company or of Parent immediately prior to the Effective Time, and other than the Dissenting Shares (as defined in Section 1.6(d)), will thereupon be cancelled and converted into the right to receive cash in an amount equal to $65.00 per Share, without interest (the “ Merger Consideration ”), all upon the terms and subject to the conditions set forth herein;

WHEREAS, concurrently with the execution and delivery of this Agreement, as a condition and inducement to Parent’s and Merger Sub’s willingness to enter into this Agreement, Parent and Merger Sub are entering into a Voting Agreement with certain significant shareholders of the Company (the “ Voting Agreement ”) pursuant to which each of those shareholders has agreed, upon the terms and subject to the conditions thereof, to vote all shares of the Company owned by such shareholder in accordance with the terms of the Voting Agreement;

WHEREAS, the Board of Directors of the Company (the “ Company Board ”), acting upon the recommendation of a special committee of independent directors (the “ Special Committee ”) thereof has determined that this Agreement and the transactions contemplated hereby, including the Merger, are advisable, fair to and in the best interests of the Company and its shareholders;

WHEREAS, in furtherance thereof, (i) the Company Board, acting upon the recommendation of the Special Committee, and the Board of Directors of Merger Sub have approved this Agreement and the Merger and (ii) the management board of Munchener Ruckversicherungs-Gesellschaft, the parent company of Parent (“ Munich Parent ”), has authorized the Merger, each on the terms and subject to the conditions set forth in this Agreement; and

WHEREAS Parent, Merger Sub and the Company desire to make certain representations, warranties and agreements in connection with the Merger and also to prescribe certain conditions to the Merger;

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Merger Sub and the Company hereby agree as follows:

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ARTICLE I

THE MERGER

SECTION 1.1. The Merger . At the Effective Time (as defined in Section 1.2) and subject to and upon the terms and conditions of this Agreement and the applicable provisions of the Ohio Revised Code (the “ ORC ”), Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation (the “ Surviving Corporation ”). At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Certificate of Merger and the applicable provisions of the ORC, including Section 1701.82.

SECTION 1.2. Effective Time; Closing . Subject to the provisions of this Agreement, as soon as practicable on the Closing Date, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger, in such form as is required by, and executed in accordance with, the relevant provisions of, the ORC (the “ Certificate of Merger ”), together with any required related certificates, with the Secretary of State of the State of Ohio in accordance with the relevant provisions of the ORC (the time of such filing with the Secretary of State of the State of Ohio (or such later time as may be agreed by the Company and Parent and specified in the Certificate of Merger) being the “ Effective Time ”). The closing of the Merger (the “ Closing ”) shall take place at the offices of Cleary Gottlieb Steen & Hamilton LLP, located at One Liberty Plaza, New York, New York, at 10 a.m., New York City time, on the third Business Day after the satisfaction or waiver of the conditions set forth in Article V (other than those conditions that are to be satisfied only at the Closing), or at such other time, date and location as the parties hereto agree in writing (the actual date and time at which the Closing occurs, the “ Closing Date ”).

SECTION 1.3. Effect of the Merger . At the Effective Time, the effect of the Merger shall be as provided in this Agreement and Section 1701.82 of the ORC.

SECTION 1.4. Articles of Incorporation and Code of Regulations . At the Effective Time, the articles of incorporation of the Company shall be amended and restated in their entirety to be identical to the articles of incorporation of Merger Sub as in effect immediately prior to the Effective Time, until thereafter amended in accordance with the ORC and as provided in such articles of incorporation; provided , however , that at the Effective Time, Article I of the articles of incorporation of the Surviving Corporation shall be amended and restated in its entirety to read as follows: “The name of the corporation is The Midland Company.” At the Effective Time, the code of regulations of the Company shall be amended and restated in its entirety to be identical to the code of regulations of Merger Sub, as in effect immediately prior to the Effective Time, until thereafter amended in accordance with the ORC and as provided in such code of regulations.

SECTION 1.5. Directors and Officers . The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, until their respective successors are duly elected or appointed and qualified or until their earlier death, resignation or removal. The officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, until their respective successors are duly appointed or until their earlier death, resignation or removal.

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SECTION 1.6. Effect on Capital Stock . Subject to the terms and conditions of this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of any Shares, the following shall occur:

(a) Company Shares . Each Share issued and outstanding immediately prior to the Effective Time, other than any (i) Shares to be canceled pursuant to Section 1.6(b) and (ii) Dissenting Shares, will be canceled and extinguished and automatically converted into the right to receive cash in an amount equal to the Merger Consideration upon surrender of the certificate representing such Share in the manner provided in Section 1.8 (or in the case of a lost, stolen or destroyed certificate, upon delivery of an affidavit and bond or indemnity, if required, in the manner provided in Section 1.10). At the Effective Time, such Shares shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate that immediately prior to the Effective Time represented any such Shares (a “ Certificate ”) and each holder of non-certificated Shares represented by book-entry (“ Book-Entry Shares ”) shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration.

(b) Cancellation of Treasury and Parent Owned Stock . Each Share held by the Company or Parent or any direct or indirect Subsidiary of the Company or of Parent immediately prior to the Effective Time shall be canceled and extinguished without any conversion thereof or the payment of any consideration therefor.

(c) Capital Stock of Merger Sub . Each share of common stock, no par value, of Merger Sub (the “ Merger Sub Common Stock ”) issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and nonassessable share of common stock, no par value, of the Surviving Corporation, which shares of common stock shall constitute the only outstanding capital stock of the Surviving Corporation.

(d) Appraisal Rights . Notwithstanding anything in this Agreement to the contrary, Shares issued and outstanding immediately prior to the Effective Time that are held by any holder who is entitled to demand and properly demands appraisal of such shares (the “ Dissenting Shares ”) pursuant to, and who complies in all respects with, the provisions of Section 1701.85 of the ORC (“ Section 1701.85 ”) shall not be converted into the right to receive the Merger Consideration as provided in Section 1.6(a), but instead such holder shall be entitled to payment of the fair value of such Shares in accordance with, and only to the extent required by, the provisions of Section 1701.85. At the Effective Time, the Dissenting Shares shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of Dissenting Shares shall cease to have any rights with respect thereto, except the right to receive the fair value of such Shares in accordance with the provisions of Section 1701.85. Notwithstanding the foregoing, if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 1701.85, or a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Section 1701.85, then the right of such holder to be paid the fair value of such holder’s Dissenting Shares under Section 1701.85 shall cease and such Dissenting Shares shall be deemed

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to have been converted at the Effective Time into, and shall have become, the right to receive the Merger Consideration as provided in Section 1.6(a). The Company shall notify Parent of any demands for appraisal of any Shares, withdrawals of such demands and any other instruments served pursuant to the ORC received by the Company, and Parent shall have the right and opportunity reasonably to direct all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company shall not, without the prior written consent of Parent, 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.

(e) Adjustments . Notwithstanding the applicable restrictions contained in Section 4.1, if at any time between the date of this Agreement and the Effective Time the outstanding Shares shall have been changed into a different number of Shares or a different class, by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares or any similar event, the Merger Consideration shall be correspondingly adjusted to the extent appropriate to reflect such stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares or similar event.

SECTION 1.7. Treatment of Company Equity Awards .

(a) Company Options . At the Effective Time, the right to receive shares of Company Common Stock pursuant to the exercise of any stock options (each, a “ Company Option ”) granted pursuant to the Company stock plans listed in Section 1.7(a) of the Company Disclosure Schedule (the “ Company Stock Plans ”) that are outstanding immediately prior to the Effective Time, whether or not vested, shall be converted into the right to receive, as soon as reasonably practicable after the Effective Time (but in any event no later than three Business Days after the Effective Time), a cash payment from Parent or the Surviving Corporation equal to the product of (i) the excess, if any, of (A) the Merger Consideration over (B) the per share exercise price of such Company Option, multiplied by (ii) the number of shares covered by such Company Option, less any required withholding Taxes.

(b) Restricted Stock . At the Effective Time, each outstanding Share of restricted stock granted under the Company Stock Plans, vested or unvested (each a “ Restricted Share ”), shall as of the Effective Time become fully vested and free of any forfeiture restriction and converted into the right to receive from Parent or the Surviving Corporation, as soon as reasonably practicable after the Effective Time (but in any event no later than three Business Days after the Effective Time), an amount in cash equal to the Merger Consideration, plus any declared and unpaid dividends, less any required withholding Taxes.

(c) Performance-Based Awards . At the Effective Time, the right to receive shares of Company Common Stock or cash in respect of outstanding performance-based awards under the Company Stock Plans (each, a “ Performance-Based Award ”), whether or not vested, shall be cancelled and shall only entitle the holder of such Performance-Based Award to receive, as soon as reasonably practicable after the Effective Time (but in any event no later than three Business Days after the Effective Time), a cash payment from Parent or the Surviving Corporation equal to (i) the number of shares issuable pursuant to the Performance-Based Award calculated at 154% of the “target level” for 2007 and calculated at 100% of the “target level” for 2008 and 2009, multiplied by (ii) the per share Merger Consideration, less any required withholding Taxes.

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(d) Director Performance Share Equivalents . Immediately prior to the Effective Time, the Company shall make such additional contributions to the account of each non-employee director under the Company’s Non-Employee Director Deferred Compensation Plan (the “ Non-Employee Directors Plan ”) as are described in Section 11 of the Non-Employee Directors’ Plan. At the Effective Time, and after giving effect to the preceding sentence, each Company Common Share equivalent contained in each non-employee director’s deferred compensation account (each a “ Director Performance Share Equivalent ”) under the Non-Employee Directors’ Plan shall as of the Effective Time entitle the beneficiary thereto to receive, as soon as reasonably practicable after the Effective Time (but in any event no later than three business days after the Effective Time), an amount in cash equal to (i) the total number of Director Performance Share Equivalents, multiplied by (ii) the Merger Consideration, less any required withholding Taxes.

(e) ESPP . The Company shall take all actions necessary so that the Purchase Period (as that term is defined in the Company’s 2000 Associate Discount Stock Purchase Plan (the “ ESPP ”)) which ends on November 30, 2007 is the last Purchase Period under the ESPP. No further elections to purchase Shares may be made on or after the date hereof under the ESPP.

(f) ESSAP . The Company shall take all actions necessary so that no further awards shall be made on or after the date hereof under the Company’s 2006 Employee Stock Service Award Plan (the “ ESSAP ”).

(g) ASAP . The Company shall take all actions necessary so that no further Accounting Periods (as that term is defined in the Company’s Agent Stock Acquisition Program (the “ ASAP ”)) shall begin on or after the date hereof under the ASAP. No further elections to purchase Shares may be made on or after the date hereof under the ASAP.

(h) Further Actions . The Company shall take all steps reasonably necessary, including, after consultation with Parent, making any plan amendments, for the sole purpose of implementing the foregoing provisions of this Section 1.7.

SECTION 1.8. Surrender of Certificates and Book-Entry Shares .

(a) Paying Agent . Prior to the Effective Time, Parent shall appoint a commercial bank or trust company with the Company’s prior approval (such approval not to be unreasonably withheld or delayed) to act as the Paying Agent (the “ Paying Agent ”) in the Merger and shall enter into an agreement with the Paying Agent reasonably satisfactory to the Company.

(b) Parent to Provide Merger Consideration . At or prior to the Effective Time, Parent shall, or shall cause the Merger Sub to, deposit in trust with the Paying Agent, for payment in accordance with this Article I, the aggregate consideration to which the holders of Shares are entitled pursuant to this Article I. Any cash deposited with the Paying Agent shall hereinafter be referred to as the “ Exchange Fund ”.

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(c) Exchange Procedures . Promptly after the Effective Time, Parent shall cause the Paying Agent to mail to each holder of record (as of the Effective Time) of Book-Entry Shares or of a Certificate or Certificates which immediately prior to the Effective Time represented outstanding Shares that were converted into the right to receive the Merger Consideration pursuant to Section 1.6(a): (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates or Book-Entry Shares, as applicable, shall pass, only upon actual delivery of the Certificates or transfer of the Book-Entry Shares to the Paying Agent and shall be in such form and have such other provisions as Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates or Book-Entry Shares in exchange for the Merger Consideration. Upon surrender of Certificates or Book-Entry Shares for cancellation to the Paying Agent, 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 such Certificates shall be entitled to receive in exchange therefor the amount of cash (after taking into account all Certificates and Book-Entry Shares surrendered by such holder) to which such holder is entitled pursuant to Section 1.6(a) and the Certificates and Book-Entry Shares so surrendered shall forthwith be canceled. No interest will be paid or will accrue on the Merger Consideration payable upon the surrender of any Certificate or Book-Entry Share.

(d) Transfers of Ownership . If payment of the Merger Consideration is to be made to a Person other than a Person in whose name in which the Certificates surrendered in exchange therefor are registered, it will be a condition of the payment thereof that the Certificates so surrendered will be properly endorsed and otherwise in proper form for transfer and that the Persons requesting such exchange will have paid to Parent or any agent designated by it any transfer or other Taxes required by reason of the payment to a Person other than the registered holder of the Certificates surrendered, or established to the satisfaction of Parent or any agent designated by it that such Tax has been paid or is not payable. Until surrendered as contemplated by this Section 1.8, each Certificate or Book-Entry Share (other than Certificates and Book-Entry Shares representing Dissenting Shares and Certificates and Book-Entry Shares representing any Shares to be canceled pursuant to Section 1.6(b)) shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration, without any interest thereon.

(e) Withholding . Each of Parent, 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 Shares or other securities such amounts as may be required to be deducted or withheld therefrom under the Internal Revenue Code of 1986, as amended (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) Investment of Exchange Fund . The Paying Agent shall invest any cash included in the Exchange Fund as directed by Parent on a daily basis, provided that no such investment or loss thereon shall affect the amounts payable to the Company’s shareholders pursuant to this Article I. Any interest and other income resulting from such investment shall become a part of the Exchange Fund, and any amounts in excess of the amounts payable to the Company’s shareholders pursuant to this Article I shall promptly be paid to Parent.

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(g) Termination of Exchange Fund; No Liability . Any portion of the Exchange Fund which remains undistributed to the holders of Certificates nine months after the Effective Time shall be delivered to Parent or otherwise on the instruction of Parent, and any holders of the Certificates or Book-Entry Shares who have not surrendered such Certificates or Book-Entry Shares in compliance with this Section 1.8 shall after such delivery to Parent look only to Parent for the Merger Consideration pursuant to Section 1.6(a), with respect to the Shares formerly represented thereby. If any Certificate or Book-Entry Share shall not have been surrendered prior to five (5) years after the Effective Time (or immediately prior to such earlier date on which any Merger Consideration would otherwise escheat to or become the property of any Governmental Entity), any such Merger Consideration in respect thereof shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto. Notwithstanding anything to the contrary in this Section 1.8, neither Parent, Merger Sub, the Company, the Paying Agent nor the Surviving Corporation shall be liable to any Person for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar Law.

SECTION 1.9. No Further Ownership Rights in Company Common Stock . All Merger Consideration paid upon the surrender for exchange of Shares in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such Shares, and there shall be no further registration of transfers on the records of the Surviving Corporation of Shares which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates or Book-Entry Shares are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article I.

SECTION 1.10. Lost, Stolen or Destroyed Certificates . In the event any Certificates shall have been lost, stolen or destroyed, the Paying Agent shall deliver in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof, such Merger Consideration as may be required pursuant to Section 1.6(a); provided , however , that Parent may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificates to deliver such customary indemnities or bonds which the Paying Agent, Parent or the Surviving Corporation may reasonably require.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Subject to and as qualified by items (i) disclosed in the Company SEC Reports filed with the SEC between January 1, 2005 and the date of this Agreement (excluding disclosures in any such Company SEC Report under the heading “Risk Factors” or any disclaimers made in such Company SEC Reports as to the use of forward-looking or predictive statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995) or (ii) set forth in the disclosure schedule (the “ Company Disclosure Schedule ”)

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delivered by the Company to Parent and Merger Sub prior to the execution of this Agreement (it being agreed that a matter disclosed with respect to one representation or warranty shall also be deemed to be disclosed with respect to each other representation or warranty to the extent the applicability of such matter is reasonably apparent on the face of the disclosure contained in the Company Disclosure Schedule with respect to such matter), the Company hereby represents and warrants to Parent and Merger Sub as follows:

SECTION 2.1. Organization and Qualification; Subsidiaries . (a) The Company is a duly organized and validly existing corporation in good standing under the Laws of its jurisdiction of incorporation, with all corporate power and authority to own, lease and operate its properties and assets and to conduct its business as currently conducted. Each of the Company’s Subsidiaries is a duly organized and validly existing corporation or other entity in good standing (where applicable) under the Laws of its jurisdiction of incorporation or organization, with all corporate or other entity power and authority to own, lease and operate its properties and assets and to conduct its business as currently conducted, and each of the Company and each of its Subsidiaries is duly qualified and in good standing as a foreign corporation or entity authorized to do business in each of the jurisdictions in which the character of the properties and assets owned, leased or operated or the nature of the business transacted by it makes such qualification necessary, except as would not constitute, individually or in the aggregate, a Company Material Adverse Effect.

(b) (i) Section 2.1(b) of the Company Disclosure Schedule sets forth a list of each Subsidiary of the Company and the state or jurisdiction of its incorporation or organization. The Company, alone or together with one or more of its Subsidiaries, is the record and beneficial owner of all the equity and voting interests of each Subsidiary of the Company (collectively, “ Subsidiary Securities ”), free and clear of all security interests, liens, claims, pledges, agreements, mortgages, deeds of trust, hypothecations, encumbrances, title retention agreements, licenses, occupancy agreements, easements, encroachments, voting trust agreements, options, rights of first offer, negotiation or refusal, proxies, liens with respect to Taxes, limitations in voting rights, charges, adverse claims or other encumbrances of any nature whatsoever, including such liens as may arise under any written or oral contract, agreement, instrument, obligation, offer, commitment, arrangement or understanding (“ Liens ”), including any limitation or restriction on the right to vote, pledge or sell or otherwise dispose of such Subsidiary Securities, except immaterial Liens (if any) relating to the shares of Subsidiaries (provided that no shares of any Subsidiary are pledged to secure indebtedness for money borrowed of the Company or any other Person).

(ii) Neither the Company nor any of its Subsidiaries owns, directly or indirectly, beneficially or of record, any interest in any Person other than the Company’s Subsidiaries and other than investments in accordance with the Company’s investment guidelines. Except as disclosed in Section 2.1(b) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries directly or indirectly owns any equity or similar interest convertible into or exchangeable or exercisable for, any corporation, partnership, joint venture or other business association or entity (other than the Subsidiary Securities).

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(c) The Company has disclosed to Parent the name of each of the Company’s Subsidiaries that is an insurance company (collectively, the “ Company Insurance Subsidiaries ”) or an insurance agency (collectively, the “ Company Agency Subsidiaries ”) and the states in which the Company, the Company Insurance Subsidiaries and the Company Agency Subsidiaries are domiciled or, as applicable, “commercially domiciled” for insurance regulatory purposes. Neither the Company nor any of its Subsidiaries has been notified by any Governmental Entity that the Company or any of its Subsidiaries is or has been a “commercially domiciled insurer” under the laws of any jurisdiction or is or has been otherwise treated as domiciled in a jurisdiction other than its jurisdiction of organization or incorporation.

SECTION 2.2. Articles of Incorporation and Code of Regulations . The Company has delivered or made available to Parent: (i) a true and correct copy of the articles of incorporation and code of regulations of the Company, each as amended to date (respectively, the “ Articles of Incorporation ” and “ Code of Regulations ”) and (ii) the articles of incorporation and code of regulations, or like organizational documents, each as amended to date, of each of its Subsidiaries. The Articles of Incorporation and Code of Regulations are in full force and effect, and the Company is not in violation of any of the provisions of the Articles of Incorporation or the Code of Regulations.

SECTION 2.3. Capitalization . (a) The authorized capital stock of the Company consists of (i) 40,000,000 Shares and (ii) 1,000,000 shares of preferred stock, without par value (the “ Company Preferred Stock ”).

(b) At the close of business on October 12, 2007: (the “ Capitalization Date ”): (i) 19,392,257 Shares were issued and outstanding, all of which were duly authorized, validly issued, fully paid and nonassessable and were issued free of preemptive rights; (ii) an aggregate of 1,664,230 Shares were reserved for issuance upon or otherwise deliverable in connection with the grant of equity-based awards (as described in Section 1.7) or the exercise of outstanding Company Options issued pursuant to the Company Stock Plans; (iii) no shares of Company Preferred Stock were outstanding; (iv) 3,614,039 Shares and no shares of Company Preferred Stock were held in the treasury of the Company; and (v) no Shares were held by any of the Company’s Subsidiaries. From the close of business on the Capitalization Date through the date of this Agreement, no options or other rights to acquire Shares or shares of Company Preferred Stock have been granted and no Shares or shares of Company Preferred Stock have been issued or sold from treasury, except for Shares issued pursuant to the exercise of Company Options in accordance with their terms or rights and other than are expressly permitted by Section 1.7. Section 2.3(b) of the Company Disclosure Schedule sets forth, as of the Capitalization Date, each Company Option, Restricted Share, Performance-Based Award, Company Common Stock equivalents deliverable under the Non-Employee Directors Plan or other equity-based award outstanding under any Company Stock Plan, the number of Shares issuable thereunder, and the exercise or conversion price.

(c) All outstanding shares of capital stock of the Company and each of its Subsidiaries were duly authorized, validly issued, fully paid and non-assessable and are not subject to and were not issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the ORC, the Articles of Incorporation and Code of Regulations or the Subsidiary Charter Documents or any Contract to which the Company or any of its Subsidiaries is or was a party or otherwise bound. Except as set forth in clauses (a) and (b) of this Section 2.3 and for the Company’s

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obligations under this Agreement, (i) there are not outstanding or authorized any (A) shares of capital stock or other voting securities (including any bonds, debentures, notes or other obligations which have the right to vote or which are convertible into, or exercisable or exchangeable for, securities having the right to vote with the shareholders of the Company or any of its Subsidiaries on any matter) of the Company, (B) securities of the Company or any of its Subsidiaries convertible into or exchangeable for shares of capital stock or voting securities of the Company, or (C) options or other rights to acquire from the Company, or any obligation of the Company or any of its Subsidiaries, contingently or otherwise, to issue, deliver or sell, or cause to be issued, delivered or sold, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or other voting securities of or equity interests in the Company (collectively, “ Company Securities ”); (ii) there are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Company Securities and no proxies, voting trusts or other agreements or understandings to which the Company or any of its Subsidiaries is a party or is bound with respect to the Company Securities; and (iii) there are no other options, calls, warrants or other rights, agreements, arrangements or commitments of any character relating to any Company Securities to which the Company or any of its Subsidiaries is a party or is bound.

SECTION 2.4. Authority . (a) The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action, and no other corporate proceeding on the part of the Company is necessary to authorize this Agreement or to consummate the transactions so contemplated other than adoption of the “agreement of merger” (as such term is used in Section 1701.78 of the ORC) contained in this Agreement by the holders of at least a majority in combined voting power of the outstanding Shares (the “ Requisite Shareholder Approval ”), and the filing with the Secretary of State of the State of Ohio of the Certificate of Merger as required by the ORC. This Agreement has been duly and validly executed and delivered by the Company and, assuming receipt of the Requisite Shareholder Approval and the due authorization, execution and delivery hereof by Parent and Merger Sub, constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting enforcement of creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and any implied covenant of good faith and fair dealing.

(b) At a meeting duly called and held, the Company Board, acting upon and in accordance with the unanimous recommendation of the Special Committee, has (i) determined that the Merger and the other transactions contemplated hereby are advisable and fair to and in the best interests of the Company and its shareholders, (ii) approved this Agreement and the transactions contemplated hereby in accordance with the ORC, and (iii) unanimously resolved (subject to Section 4.3) to recommend adoption of this Agreement by its shareholders (the “ Company Board Recommendation ”).

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SECTION 2.5. No Conflict; Required Filings and Consents . (a) The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the Merger and the other transactions contemplated hereby, do not and will not, (i) conflict with or violate the Articles of Incorporation or Code of Regulations, (ii) assuming that all consents, approvals and authorizations contemplated by clauses (i) through (v) of subsection (b) below have been obtained, and all filings described in such clauses have been made, conflict with or violate any federal, state, local or foreign statute, law, ordinance, rule, regulation, order, judgment, decree, writ, injunction, directive, principle of common law, constitution, treaty, arbitration award, listing standard or legal requirement or any interpretation thereof (“ Law ”), any Permit (as hereinafter defined) or any Nasdaq rule or regulation applicable to the Company or any of its Subsidiaries or by which any of their respective properties are bound or (iii) (A) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both would become a default) or require the consent of any Person under, or (B) result in the loss of a material benefit under, or give rise to any right of termination, cancellation, amendment or acceleration of, or (C) result in the creation of any Lien on any of the properties or assets of the Company or any of its Subsidiaries under, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit or other instrument or obligation (each, a “ Contract ”) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties are bound, except, in the case of clauses (ii) and (iii), for any such conflict, violation, breach, default, loss, right or other occurrence, or consents not obtained (disregarding consents with respect to agreements with Bell & Clements), which would not constitute, individually or in the aggregate, a Company Material Adverse Effect.

(b) The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby, do not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to (any of the foregoing being a “ Consent ”), any federal, state, local or foreign governmental or regulatory (including stock exchange) authority, agency, court, commission, or other governmental authority or instrumentality, arbitral tribunal, or industry self-regulatory organization (each, a “ Governmental Entity ”), except for (i) applicable requirements of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and the rules and regulations promulgated thereunder (including the filing of the Proxy Statement with the Securities and Exchange Commission (“ SEC ”)), and state securities, takeover and “blue sky” laws, (ii) the applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”) or the applicable requirements of antitrust or other competition laws of jurisdictions other than the United States or investment laws relating to foreign ownership (“ Foreign Antitrust Laws ”), (iii) the applicable requirements of Nasdaq, (iv) the filing with the Secretary of State of the State of Ohio of the Certificate of Merger as required by the ORC, (v) approvals of or filings with insurance regulatory authorities under all applicable Laws regulating the business of insurance (collectively, “ Insurance Laws ”) as set forth in Section 2.5(b) of the Company Disclosure Schedule, and (vi) any such consent, approval, authorization, permit, action, filing or notification the failure of which to make or obtain would not constitute, individually or in the aggregate, a Company Material Adverse Effect.

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SECTION 2.6. Compliance With Law .

(a) The business and operations of the Company and the Company’s Subsidiaries are, and have been, conducted in compliance with all applicable Laws, except for such non-compliance as would not constitute, individually or in the aggregate, a Company Material Adverse Effect. Without limitation of the foregoing, the Company and each of its Subsidiaries is and has been marketing, selling and issuing insurance products in compliance with all applicable Laws and all applicable orders and directives of all insurance regulatory authorities, and all market conduct recommendations resulting from market conduct or other examinations of insurance regulatory authorities in the respective jurisdictions in which such products have been marketed, issued or sold, including in compliance with applicable Laws relating to (i) the disclosure of the nature of insurance products as policies of insurance, (ii) insurance product projections, (iii) the underwriting, marketing, sale and issuance of, or refusal to sell, any insurance product to insureds or potential insureds of any race, color, creed, national origin or other legally protected status and (iv) “replacement” or anti-churning restrictions in each case, except for such non-compliance that would not constitute, individually or in the aggregate, a Company Material Adverse Effect.

(b) There is no pending or, to the knowledge of the Company, threatened proceeding to which the Company or a Subsidiary of the Company is subject before any Governmental Entity or other Person regarding whether any of the Subsidiaries has violated any applicable Laws, nor is there any pending or, to the knowledge of the Company, threatened investigation by any Governmental Entity with respect to possible material violations of any applicable Laws, except for such violations or possible violations that would not constitute, individually or in the aggregate, a Company Material Adverse Effect. The Company has made available for inspection by Parent complete copies of all material registrations, filings and submissions (other than routine filings, such as for approval of policy forms and rates) made since January 1, 2004 (including financial and market conduct examination reports) by the Company or any of the Company’s Subsidiaries with any Governmental Entity and any reports of examinations relating to the Company or any of the Company’s Subsidiaries conducted by any Governmental Entity since January 1, 2004, together with all material related correspondence (including responses by or on behalf of the Company and the Company’s Subsidiaries), except as such disclosure may be prohibited by applicable Law. Except as would not constitute, individually or in the aggregate, a Company Material Adverse Effect, (x) since January 1, 2002, the Company and the Company’s Subsidiaries have filed all financial statements and reports, statements, documents, registrations, filings or submissions required to be filed by such entity with any Governmental Entity, (y) all such reports, registrations, filings and submissions are in compliance (and complied at the relevant time) with applicable Law and (z) no deficiencies have been asserted by any such Governmental Entity since January 1, 2002 with respect to any reports, statements, documents, registrations, filings or submissions required to be filed with respect to the Company or the Company’s Subsidiaries with any Governmental Entity that have not been remedied.

(c) Except as would not constitute, individually or in the aggregate, a Company Material Adverse Effect, the Company and its Subsidiaries (i) have all registrations, variances, orders, approvals, authorizations, franchises, grants, easements, consents, certificates, applications, licenses (including insurance licenses), exemptions, permits and other regulatory authorizations (“ Permits ”) from all Governmental Entities required to conduct their respective businesses, to own and operate the real property owned and leased by each of them and to own, charter, lease and operate the Vessels, and (ii) are in compliance with all such Permits.

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(d) No suspension, cancellation or non-renewal of any material Permit is pending or, to the knowledge of the Company, threatened. The Company and its Subsidiaries are not in violation or breach of, or default under, any Permit, except where such violation, breach or default would not constitute, individually or in the aggregate, a Company Material Adverse Effect. No event or condition has occurred or exists which would result in a violation or breach of, or a default or loss of a benefit under, or acceleration of an obligation of the Company or any of the Company’s Subsidiaries under, any Permit (in each case, with or without notice or lapse of time or both), except where such violation, breach, default, loss of benefit or acceleration would not constitute, individually or in the aggregate, a Company Material Adverse Effect.

(e) The Company and its Subsidiaries are and at all times since January 1, 1997, have each been a “citizen of the United States” within the meaning of Section 2 of the Shipping Act, 1916, as amended, for the purposes of owning and operating vessels in the United States coastwise trade.

SECTION 2.7. SEC Filings; Financial Statements . (a) The Company has filed or furnished or otherwise transmitted all forms, reports, statements, schedules, certifications and other documents (including all exhibits, amendments and supplements thereto) required to be filed, furnished or transmitted by it with or to the SEC since January 1, 2005 (such documents filed since January 1, 2005, the “ Company SEC Reports ”). As of their respective dates, each of the Company SEC Reports complied in all material respects with the applicable requirements of the Securities Act of 1933, as amended (the “ Securities Act ”) and the rules and regulations promulgated thereunder and the Exchange Act and the rules and regulations promulgated thereunder, each as in effect on the date so filed. Except to the extent amended or superseded by a subsequent filing with the SEC made prior to the date hereof, as of their respective dates (and if so amended or superseded, then on the date of such subsequent filing), none of the SEC Reports contained any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(b) Each of the audited and unaudited consolidated financial statements (including the related notes thereto) of the Company and its Subsidiaries included (or incorporated by reference) in the Company SEC Reports, as amended or supplemented prior to the date of this Agreement (collectively, the “ Financial Statements ”), comply in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and fairly present in accordance with GAAP the consolidated financial position of the Company and its consolidated Subsidiaries at the respective dates thereof and the consolidated statements of operations, cash flows and changes in shareholders’ equity for the periods indicated therein (subject, in the case of unaudited financial statements, to normal and recurring year-end audit adjustments which are not, individually or in the aggregate, material in amount or significance, in each case as permitted by GAAP and the applicable rules and regulations promulgated by the SEC). To the knowledge of the Company, none of the Company SEC Reports is the subject of any ongoing review or investigation by the SEC and there are no unresolved SEC comments with respect to any of such documents.

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(c) As used herein, the term “ Company SAP Statements ” means all annual and quarterly statutory statements, together with all exhibits, interrogatories, notes and schedules thereto and any actuarial opinions, affirmations or certifications or other supporting documents required in connection therewith, of each of the Company’s Subsidiaries as filed with the applicable insurance regulatory authorities in their respective jurisdictions of incorporation for the years ended December 31, 2006, 2005 and 2004 and the quarterly periods ended March 31, 2007 and June 30, 2007. Each of the Company’s Subsidiaries has filed or submitted all Company SAP Statements required to be filed with or submitted to the appropriate insurance regulatory authorities of the jurisdiction in which it is domiciled or commercially domiciled on forms prescribed or permitted by such authority, except for such failures to file that would not constitute, individually or in the aggregate, a Company Material Adverse Effect. The Company SAP Statements have each been delivered to Parent prior to the date hereof and were prepared in all material respects in accordance with SAP consistently applied for the periods covered thereby (except as may be indicated in the notes thereto), and the Company SAP Statements present fairly, in all material respects, the statutory financial position of such Subsidiaries of the Company as at the respective dates thereof and the results of operations of such Subsidiaries of the Company for the respective periods then ended. No material weakness has been asserted with respect to any Company SAP Statements filed prior to the date hereof by any Governmental Entity that has not been cured, waived or otherwise resolved to the satisfaction of such Governmental Entity, except for those deficiencies that would not constitute, individually or in the aggregate, a Company Material Adverse Effect. The statutory balance sheets and income statements included in the Company SAP Statements have been audited by the Company’s independent auditors, and the Company has delivered or made available to Parent true and complete copies of all audit opinions related thereto for periods beginning on or after January 1, 2004. Except as indicated therein, all assets that are reflected as admitted assets on the Company SAP Statements comply in all material respects with all applicable Laws with respect to admitted assets. There are no permitted practices utilized by the Company or its Subsidiaries in the preparation of the Company SAP Statements.

(d) The records, systems, controls, data and information of the Company and its Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of the Company or its Subsidiaries or its accountants (including all means of access thereto and therefrom), except for any nonexclusive ownership and nondirect control that would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the system of internal accounting controls described below in this Section 2.7(d). The Company has implemented and maintains a system of internal control over financial reporting (as required by Rule 13a-15(a) under the Exchange Act) that (i) was effective as of December 31, 2005 and (ii) with respect to subsequent periods was designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of its financial statements for external purposes in accordance with GAAP and such system of internal control over financial reporting is effective. To the knowledge of the Company, the Company has not identified any material weaknesses in its system of internal control over financial reporting and has no reason to believe that its officers will not be in a position to furnish the certifications and attestations required pursuant to the rules and regulations of the SEC under the Sarbanes-Oxley Act of 2002 and the related rules and regulations promulgated thereunder. The Company (i) has implemented and maintains

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disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time frames specified by the SEC’s rules and forms (and such disclosure controls and procedures are effective) and (ii) has disclosed, based on its most recent evaluation of its system of internal control over financial reporting prior to the date of this Agreement, to the Company’s outside auditors and the audit committee of the Company’s Board of Directors (A) any material weaknesses in the design or operation of its internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that would reasonably be expected to adversely affect the Company’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting. The Company has delivered to Parent a summary of any such disclosure made by the management of the Company since January 1, 2002. Since December 31, 2005, any material change in internal control over financial reporting required to be disclosed in any Company SEC Report has been so disclosed.

(e) Neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature, whether accrued, absolute, fixed, contingent or otherwise, whether due or to become due and whether or not required to be recorded or reflected on a balance sheet under GAAP, that would constitute, individually or in the aggregate, a Company Material Adverse Effect, other than liabilities, obligations or contingencies (i) reflected or reserved against on the December 31 Balance Sheet or in the notes thereto or (ii) incurred in the ordinary course of business consistent with past practice since December 31, 2006 (none of which, individually or in the aggregate, would constitute, or could reasonably be expected to constitute, a Company Material Adverse Effect). The “ December 31 Balance Sheet ” means the consolidated balance sheet of the Company dated as of December 31, 2006 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 filed with the SEC prior to the date hereof.

SECTION 2.8. Absence of Certain Changes or Events .

(a) Since December 31, 2006, the Company and its Subsidiaries have conducted their business only in the ordinary course consistent with past practice, and neither the Company nor any of its Subsidiaries has taken any action since December 31, 2006 that, if taken after the date of this Agreement without the prior written consent of Parent, would constitute a breach of Section 4.1(a), (b), (c) (other than quarterly dividends heretofore paid in 2007), (d), (j), (k), (l) or (u) .

(b) Since December 31, 2006, there has not been (and there is not) any change, condition, event, occurrence, fact, effect or development that has had, or, to the knowledge of the Company, could reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

SECTION 2.9. Absence of Litigation . There is no claim, litigation, action, suit, proceeding, arbitration, mediation or investigation (whether judicial, arbitral, administrative or other, whether at law or in equity) (each, a “ Proceeding ”) before any Governmental Entity pending or, to the knowledge of the Company, threatened against or relating to the Company or

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any of its Subsidiaries or any properties or assets of the Company or any of its Subsidiaries, other than any such Proceeding (i) that is ordinary course claims litigation related to policies or contracts of insurance written by any Company Insurance Subsidiary seeking benefits thereunder or (ii) that are not reasonably likely to constitute, individually or in the aggregate, a Company Material Adverse Effect. Neither the Company or any of its Subsidiaries nor any of their respective properties or assets is subject to any outstanding order, writ, injunction, judgment or decree of any Governmental Entity, except for those that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. No officer or director of the Company or any of its Subsidiaries is a defendant in any Proceeding before any federal, state, local or foreign court in connection with his or her status as an officer or director of the Company or any of its Subsidiaries, and to the knowledge of the Company, since January 1, 2005 no such Proceeding has been threatened. Section 2.9 of the Company Disclosure Schedule sets forth an accurate and complete list of each Proceeding before any federal, state, local or foreign court resolved or settled since January 1, 2006 and requiring payment by the Company or any of its Subsidiaries in excess of $250,000 or involving the imposition on the Company or any of its Subsidiaries of injunctive or other non-monetary relief.

SECTION 2.10. Employee Benefit Plans . (a) Section 2.10(a) of the Company Disclosure Schedule contains a true and complete list of each material “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)) and each other material written employment, bonus, vacation, stock option, stock purchase, restricted stock or other equity-based, incentive, deferred compensation, profit sharing, savings, retirement, retiree medical or life insurance, supplemental retirement, severance, fringe benefit, retention, change of control or other benefit plans, programs, agreements, contracts, policies or arrangements contributed to, sponsored or maintained by the Company or any of its Subsidiaries or with respect to which the Company or any of its Subsidiaries has any liability, contingent or otherwise, as of the date hereof for the benefit of any current, former or retired employee, officer, consultant, agent, independent contractor or director of the Company or its Affiliates (collectively, the “ Company Employees ”) (such plans, programs, policies, agreements and arrangements, including the Company Stock Plans, collectively, “ Company Plans ”).

(b) With respect to each Company Plan, the Company has provided or made available to Parent a current, accurate and complete copy of (i) such Company Plan, if written, or a description of such Company Plan if not written and (ii) to the extent applicable, with respect to Company Plans sponsored or maintained by the Company, (A) any related trust agreement or other funding instrument, (B) the most recent determination letter received from the Internal Revenue Service (the “ IRS ”) for each Company Plan that is intended to be qualified under Section 401(a) of the Code, (C) the most recent summary plan description and any summaries of any material modification of such Company Plan, (D) all prospectuses prepared in connection with any such Company Plan, (E) all material written communications received from the IRS, the Pension Benefit Guaranty Corporation (the “ PBGC ”) or the Department of Labor (the “DOL”) or other applicable Governmental Entity, (F) all amendments and modifications to any such document, and (G) the most recent (1) Form 5500 with all attachments required to have been filed with the IRS or the DOL or any similar report filed with any comparable Governmental Entity in any non-U.S. jurisdiction having jurisdiction over any Company Plan, and all schedules thereto, (2) interim financial statements, (3) audited financial statements, (4) actuarial valuation reports, if any, and (5) employee handbooks currently in effect.

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(c) Each Company Plan has been established, operated and administered in all material respects in accordance with its terms and in compliance with the applicable provisions of ERISA, the Code, and other applicable laws, rules and regulations.

(d) Section 2.10(d) of the Company Disclosure Schedule lists all (i) pension plans (within the meaning of Section 3(2) of ERISA) subject to Section 412 of the Code or Title IV of ERISA and (ii) single employer pension plans (within the meaning of Section 4001(a)(15) of ERISA) for which the Company or any of its Subsidiaries or any other Person that, together with the Company or any of its Subsidiaries, is or was treated as a single employer under Section 414(b), (c), (m) or (o) of the Code (each, together with the Company, an “ ERISA Affiliate ”) would reasonably be expected to incur liability under Section 4063 or 4064 of ERISA, each with respect to which the Company or any of its Subsidiaries maintains, contributes to or has any liability.

(e) None of the Company, its Subsidiaries, or any ERISA Affiliate contributes to, or has contributed to, a multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA).

(f) Since January 1, 2004, no Company Plan that is subject to Section 401(a) of the Code has been completely or partially terminated. To the knowledge of the Company, none of the Company Plans has been the subject of a reportable event (as defined in Section 4043 of ERISA) as to which a notice would be required (without regard to regulatory monetary thresholds) to be filed with the PBGC. To the knowledge of the Company, the Company or its ERISA Affiliates has paid in full all insurance premiums due to the PBGC with regard to the Company Plans for all applicable periods ending on or before the Effective Time.

(g) As of the date hereof, no Proceedings before a Governmental Entity (other than routine claims for benefits in the ordinary course) are pending or, to the knowledge of the Company, threatened with respect to any Company Plan that would reasonably be expected to result in any material liability to the Company.

(h) Each Company Plan which is intended to be qualified under Section 401(a) of the Code is so qualified and has received a favorable determination letter from the IRS and, to the knowledge of the Company, no event has occurred and no condition exists which would adversely affect such favorable determination.

(i) Neither the execution by the Company of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or upon occurrence of any additional or subsequent events) (i) constitute an event under any Company Plan or any trust or loan related to any of those plans or agreements that will or may result in any payment, acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any Company Employee or (ii) result in the triggering or imposition of any restrictions or limitations on the right of the Company to amend or terminate any Company Plan.

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(j) There have been no non-exempt “prohibited transactions,” as described in Section 4975 of the Code or Title I, Subtitle B of ERISA, involving any Company Plan which would reasonably be expected to give rise to any tax imposed by Section 4975 of the Code on the Company or any of its Subsidiaries.

(k) All Company Plans may be amended or terminated without material liability. Except pursuant to a Company Plan, no written or oral representations have been made to any present or former employee, consultant or director of the Company or its Subsidiaries promising or guaranteeing any employer payment or funding for the continuation of any material medical, dental, life or disability coverage for any period of time beyond the end of the current plan year (except pursuant to Part 6 of Subtitle B of Title 1 of ERISA or Section 4980B of the Code).

(l) No external investigation of the timing of option grants has been undertaken, nor is the Company aware of any facts which would result in such an investigation. The results of any internal investigation of the timing of option grants undertaken by the Company have not identified any problem with respect to the timing of the option grants.

SECTION 2.11. Labor and Employment Matters . (a) As of the date hereof, neither the Company nor any of its Subsidiaries is a party to or is bound by any collective bargaining agreement or any labor union contract, nor, to the knowledge of the Company, are there any activities or proceedings including but not limited to a demand for recognition or certification, whether before the National Labor Relations Board or any other labor relations tribunal or authority, of any labor union or group of employees to organize any employees of the Company or any of its Subsidiaries or compel the Company or any of its Subsidiaries to bargain with any labor union or labor organization. Since December 31, 2006, there has not been any, and there is no pending or, to the knowledge of the Company, threatened, labor strike, walkout, work stoppage, lockout, slow-down or other material labor dispute with respect to employees of the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has to its knowledge engaged in any unfair labor practice. No grievance or arbitration demand or proceeding, or unfair labor practice charge, complaint or proceeding before the National Labor Relations Board or any similar state or local labor agency or any other labor relations tribunal or authority, whether or not filed pursuant to a collective bargaining agreement, has been filed, is pending or, to the knowledge of the Company, has been threatened against the Company or any of its Subsidiaries that could reasonably be expected to result in any material liability to the Company or any of its Subsidiaries.

(b) The Company is in compliance in all material respects with all applicable Laws relating to labor, employment and employment practices, including Laws relating to non-discrimination in employment, disability, labor relations, terms and conditions of employment, hours of work, payment of wages and overtime wages, pay equity, immigration, workers compensation, working conditions, employee scheduling, collective bargaining, occupational safety and health, family and medical leave, notification, employee terminations and collection and payment of withholding or payroll Taxes and similar Taxes, including, to the extent applicable, but not limited to, the Civil Rights Act of 1964, ERISA, the Equal Pay Act, the National Labor Relations Act, the Americans with Disabilities Act of 1990, the Vietnam Era Veterans Reemployment Act, the Uniformed Services Employment and Reemployment Rights

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Act, the Family Medical Leave Act, all material applicable requirements of the Occupational Safety and Health Act of 1970 and any and all similar applicable state and local laws. Except as would not constitute a Company Material Adverse Effect, there are no complaints, lawsuits, arbitrations, administrative proceedings, or other Proceedings before any Governmental Entity pending or, to the knowledge of the Company, threatened against the Company brought by or on behalf of any applicant for employment, any current or former employee, any person alleging to be a current or former employee, any class of the foregoing, or any Governmental Entity, relating to any Law included in this subparagraph (b) or related regulation, or alleging breach of any express or implied contract of employment, wrongful termination of employment, or alleging any other discriminatory, wrongful or tortious conduct in connection with the employment relationship.

SECTION 2.12. Insurance . Section 2.12 of the Company Disclosure Schedule sets forth, as of the date hereof, a true, correct and complete list of all material insurance policies issued in favor of the Company or any of its Subsidiaries, or pursuant to which the Company or any of its Subsidiaries is a named insured or otherwise a beneficiary, as well as any historic incurrence-based policies still in force. With respect to each such insurance policy, (i) the policy is in full force and effect and was in full force and effect during the periods of time such insurance policies are purported to be in effect and all premiums due thereon have been paid and (ii) neither the Company nor any of its Subsidiaries is in breach or default, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action which with notice or the lapse of time or both, would constitute such a breach or default, or permit termination or modification of, any such policy. No notice of cancellation or termination of any such policy has been given to the Company or any of its Subsidiaries.

SECTION 2.13. Properties . Except as would not constitute, individually or in the aggregate, a Company Material Adverse Effect, the Company or a Subsidiary of the Company: (i) has good and marketable title to all of its owned real property (the “ Owned Real Property ”) and all tangible personal property reflected in the latest balance sheet included in the Company SEC Reports as being owned by the Company or one of its Subsidiaries or acquired after the date thereof (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business), in each case free and clear of all Liens, except (A) statutory Liens for current Taxes or other governmental charges not yet due and payable or the amount or validity of which is being contested in good faith by appropriate proceedings, (B) Liens arising under worker’s compensation, unemployment insurance, social security, retirement and similar legislation, (C) other statutory liens securing payments not yet due, (D) such imperfections or irregularities of title, claims, liens, charges, easements, covenants and other restrictions or encumbrances as do not materially affect the use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations at such properties and, in each case, as do not constitute and cannot reasonably be expected to constitute a Company Material Adverse Effect and (E) mortgages, or deeds of trust, security interests or other encumbrances on title related to indebtedness reflected on the December 31 Balance Sheet or the June 30, 2007 balance sheet ((A)-(E), “ Permitted Liens ”); and (ii) is the lessee of all leasehold estates reflected in the December 31 Balance Sheet or acquired after the date thereof (except for leases that have expired by their terms since the date thereof or been assigned, terminated or otherwise disposed of in the ordinary course of business) (“ Leased Real Property ”) and is in possession of the properties purported to be leased thereunder, and each such lease is valid without material default thereunder by the lessee or, to the Company’s knowledge, the lessor.

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SECTION 2.14. Tax Matters .

(a) The Company and its Subsidiaries have timely filed all material Tax returns required to be filed by applicable Law. All such returns are true, correct and complete in all material respects and accurately set forth all items required to be reflected or included in such returns by applicable Tax Laws. The Company and each of its Subsidiaries have timely paid all material Taxes that were due and payable within the time and manner prescribed by applicable Tax Law.

(b) The Company has made adequate provisions in accordance with GAAP, appropriately and consistently applied, in the Financial Statements for the payment of all Taxes for which the Company may be liable for the periods covered thereby that were not yet due and payable as of the dates thereof, regardless of whether the liability for such Taxes is disputed.

(c) All federal, state, local and foreign Tax returns of the Company and its Subsidiaries have been audited and settled, or are closed to assessment, for all years through 2003. There is no claim, audit, action, suit, proceeding or investigation now in process, pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries for any alleged deficiency in Taxes, and neither the Company nor its Subsidiaries have received any written notice of any threatened or proposed reassessments, audits, deficiencies or investigation with respect to any liability of the Company or its Subsidiaries for Taxes.

(d) There are no agreements in effect to extend the period of limitations for the assessment or collection of any Tax for which the Company or any of its Subsidiaries may be liable, and no closing agreement pursuant to Section 7121 of the Code or any predecessor provision thereof, or any similar provision of state or local Law is in effect.

(e) The Company and its Subsidiaries have withheld all material amounts required to have been withheld by them in connection with amounts paid or owed to any employee, independent contractor, creditor, shareholder or any other third party; such withheld amounts were either duly paid to the appropriate Tax authority or set aside in accounts for such purpose. The Company and its Subsidiaries have reported such withheld amounts, as required under Law.

(f) Except in connection with its acquisition of Southern Pioneer Life Insurance Company in 2007, the Company is the common parent of an affiliated group (as such term is defined under Section 1504(a) of the Code) that includes all of its Subsidiaries as members that has elected to file a consolidated United States federal income Tax return (the “Company Group”). None of the Company or its Subsidiaries has or will have as of the Effective Time any liability for a material amount of Taxes of any Person (other than the Company or its Subsidiaries) as a transferee or successor, by contract or applicable Tax law or otherwise. No claim that remains unresolved has been made by any authority in a jurisdiction where the Company or any of its Subsidiaries has not filed Tax returns that the Company or such Subsidiary is or may be subject to taxation by that jurisdiction.

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(g) There are no Liens with respect to Taxes (other than Permitted Liens) on any of the assets or properties of the Company or any of its Subsidiaries.

(h) None of the Company or any of its Subsidiaries has (i) entered into any transaction for which there is a “deferred intercompany gain” (within the meaning of Treasury Regulation Section 1.1502-13) equal to or greater than $5,000,000 as of the date hereof or (ii) an “excess loss account” less than $5,000,000 in respect of the stock of any of its Subsidiaries that is a member of the United States affiliated group (as that term is defined under Section 1504(a) of the Code and other similar provisions of state or local law) that includes the Company as a common parent (“ Parent Common Group ”) pursuant to Treasury Regulation Section 1.1502-19.

(i) None of the Company or any of its Subsidiaries have made, are required to make or have agreed to make, or have received notice from a Governmental Entity that proposes or threatens that it is required to make, any change in method of accounting previously used by it in its most recently filed income or franchise Tax return that has been provided to Parent prior to date hereof, which change in method would require an adjustment in income pursuant to Section 481(a) of the Code (or any similar provision under the laws of any other jurisdiction) on any income or franchise Tax returns to be filed by the Company or its Subsidiaries after the Effective Time; and there is no application pending with any Governmental Authority requesting permission by the Company or its Subsidiaries to make any change in any accounting method.

(j) None of the Company, any of its Subsidiaries or any predecessors of the Company or any of its Subsidiaries by merger or consolidation has since January 1, 2005 been a party to a transaction intended to qualify under Section 355 of the Code.

(k) Neither the Company nor any of its Subsidiaries is a United States Real Property Holding Corporation (“ USRPHC ”) within the meaning of Section 897 of the Code, and neither the Company nor any of its Subsidiaries was a USRPHC on any “determination date” (as defined in §1.897-2(c) of the United States Treasury Regulations promulgated under the Code) that occurred during the five years before the Closing Date.

(l) Neither the Company nor any of its Subsidiaries has engaged in a transaction that is reportable within the meaning of Section 6011 of the Code and Treasury Regulations promulgated thereunder.

(m) Tax reserves have been computed and maintained in the manner required under sections 807, 832, 954 and 846 of the Code by the Company and its Subsidiaries.

(n) Each of the Company and its Subsidiaries that issues, assumes, modifies, exchanges, administers, markets, reinsures or sells life insurance policies and other products intended to qualify as life insurance products satisfies the definition of a “life insurance company” for purposes of the Code.

For purposes of this Agreement, “ Tax ” shall mean all taxes, charges, fees, levies, imposts, duties, and other assessments, including any income, alternative minimum or add-on tax, estimated, gross income, gross receipts, sales, use, transfer, transactions, intangibles, ad valorem, value-added, escheat, franchise, registration, title, license, capital, paid-up capital, profits, withholding, employee withholding, payroll, worker’s compensation, unemployment insurance, social

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security, employment, excise, severance, stamp, transfer occupation, premium, retaliatory, commercial activity, margin, single business, business, recording, real property, personal property, federal highway use, commercial rent, environmental (including taxes under Section 59A of the Code), or windfall profit tax, custom, duty, amounts paid under a closing agreement as such term is defined pursuant to Section 7121 of the Code, charges levied in connection with guaranty fund or risk pool participation or other tax, fee or other like assessment or charge of any kind whatsoever, together with any interest, penalties, related liabilities, fines or additions to tax that