SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 25, 1995
Berkshire Hathaway Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-10125 04-2254452
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
1440 Kiewit Plaza, Omaha, Nebraska 68131
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (402) 346-1400
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
Berkshire Hathaway Inc. (the "registrant") and GEICO Corporation
("GEICO") have entered into an Agreement and Plan of Merger dated as of August
25, 1995 (the "Merger Agreement"), which is filed herewith as Exhibit 1 and is
incorporated herein by reference.
The registrant and GEICO have issued a joint press release
announcing the Merger Agreement, which is filed herewith as Exhibit 2 and is
incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) The following exhibits are filed with this report:
Exhibit Number Description
1 Agreement and Plan of Merger
dated as of August 25, 1995,
between the registrant and
GEICO Corporation.
2 Press Release of the
registrant and GEICO issued
August 25, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
BERKSHIRE HATHAWAY INC.
By: /s/ Marc D. Hamburg
Name: Marc D. Hamburg
Title: Vice President and
Chief Financial Officer
Dated: August 25, 1995
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
1 Agreement and Plan of Merger
dated as of August 25, 1995,
between the registrant and
GEICO Corporation.
2 Press Release of the
registrant and GEICO
Corporation issued August 25,
1995.
EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
Among
BERKSHIRE HATHAWAY INC.,
HPKF INC.
and
GEICO CORPORATION
Dated as of August 25, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
SECTION 1.01. Effective Time of the Merger. . . . . . . . . . .2
SECTION 1.02. Closing . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.03. Effect of the Merger. . . . . . . . . . . . . . .2
SECTION 1.04. Certificate of Incorporation and By-laws. . . . .3
SECTION 1.05. Directors . . . . . . . . . . . . . . . . . . . .3
SECTION 1.06. Officers. . . . . . . . . . . . . . . . . . . . .3
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01. Conversion of Capital Stock . . . . . . . . . . .3
SECTION 2.02. Exchange of Certificates. . . . . . . . . . . . .5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization. . . . . . . . . . . . . . . . . . .7
SECTION 3.02. Capitalization. . . . . . . . . . . . . . . . . .8
SECTION 3.03. Authority . . . . . . . . . . . . . . . . . . . .9
SECTION 3.04. Consents and Approvals; No Violations . . . . . .9
SECTION 3.05. SEC Reports and Financial Statements. . . . . . 10
SECTION 3.06. Absence of Certain Changes. . . . . . . . . . . 11
SECTION 3.07. No Undisclosed Liabilities. . . . . . . . . . . 11
SECTION 3.08. Benefit Plans . . . . . . . . . . . . . . . . . 11
SECTION 3.09. Other Benefit Plans . . . . . . . . . . . . . . 12
SECTION 3.10. Litigation. . . . . . . . . . . . . . . . . . . 13
SECTION 3.11. Compliance with Applicable Law. . . . . . . . . 13
SECTION 3.12. Opinion of Financial Advisor. . . . . . . . . . 14
SECTION 3.13. Vote Required . . . . . . . . . . . . . . . . . 14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
SECTION 4.01. Organization. . . . . . . . . . . . . . . . . . 14
SECTION 4.02. Authority . . . . . . . . . . . . . . . . . . . 15
SECTION 4.03. Consents and Approvals; No Violations . . . . . 15
SECTION 4.04. Information in Proxy Statement. . . . . . . . . 16
SECTION 4.05. Interim Operations of Sub . . . . . . . . . . . 16
ARTICLE V
COVENANTS
SECTION 5.01. Covenants of the Company. . . . . . . . . . . . 16
SECTION 5.02. No Solicitation; Fiduciary Out. . . . . . . . . 18
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Preparation of the Proxy Statement. . . . . . . 20
SECTION 6.02. Access to Information . . . . . . . . . . . . . 21
SECTION 6.03. Stockholders Meeting. . . . . . . . . . . . . . 21
SECTION 6.04. Legal Conditions to Merger. . . . . . . . . . . 21
SECTION 6.05. Employee Benefit Plans. . . . . . . . . . . . . 22
SECTION 6.06. Expenses. . . . . . . . . . . . . . . . . . . . 23
SECTION 6.07. Brokers or Finders. . . . . . . . . . . . . . . 23
SECTION 6.08. Indemnification; Insurance. . . . . . . . . . . 23
SECTION 6.09. Additional Agreements; Best Efforts . . . . . . 25
ARTICLE VII
CONDITIONS
SECTION 7.01. Conditions to Each Party's Obligation To
Effect the Merger . . . . . . . . . . . . . . . 26
SECTION 7.02. Conditions of Obligations of Parent and
Sub . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 7.03. Conditions of Obligations of the Company. . . . 27
ARTICLE VIII
TERMINATION AND AMENDMENT
SECTION 8.01. Termination . . . . . . . . . . . . . . . . . . 28
SECTION 8.02. Effect of Termination . . . . . . . . . . . . . 29
SECTION 8.03. Amendment . . . . . . . . . . . . . . . . . . . 29
SECTION 8.04. Extension; Waiver . . . . . . . . . . . . . . . 29
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Nonsurvival of Representations, Warranties
and Agreements. . . . . . . . . . . . . . . . . 30
SECTION 9.02. Notices . . . . . . . . . . . . . . . . . . . . 30
SECTION 9.03. Entire Agreement; No Third Party
Beneficiaries; Rights of Ownership. . . . . . . 31
SECTION 9.04. Governing Law . . . . . . . . . . . . . . . . . 31
SECTION 9.05. Publicity . . . . . . . . . . . . . . . . . . . 31
SECTION 9.06. Assignment. . . . . . . . . . . . . . . . . . . 32
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of August 25, 1995, by and among
BERKSHIRE HATHAWAY INC., a Delaware corporation ("Parent"), HPKF INC., a
Delaware corporation and an indirect subsidiary of Parent ("Sub"), and GEICO
CORPORATION, a Delaware corporation (the "Company").
WHEREAS the Board of Directors of each of Parent, Sub and the
Company deem it advisable and in the best interests of their respective stock-
holders to consummate, and have approved, the transaction provided for herein
in which Sub would merge with and into the Company and the Company would
become an indirect subsidiary of Parent;
WHEREAS the Board of Directors of the Company has (i) determined
that the consideration to be paid to the Independent Stockholders (as defined
below) of the Company for each share of Common Stock of the Company in the
Merger (as defined below) held by them is fair to and in the best interests of
such Independent Stockholders, (ii) approved this Agreement and the
transactions contemplated hereby and (iii) resolved, subject to
Section 5.02(b), to recommend to such stockholders their approval of the
Merger and this Agreement;
WHEREAS the parties hereto intend and acknowledge that, assuming
the Merger takes place as contemplated hereunder, (i) the Merger will be
treated for Federal income tax purposes as a taxable stock acquisition, and
(ii) immediately after the Merger, the aggregate tax basis of the Company
Common Stock (as defined below) owned by Parent and its Subsidiaries (as
defined below) will be equal to the sum of (A) the aggregate tax basis of the
Company Common Stock owned by Parent and its Subsidiaries immediately before
the Merger, (B) the aggregate Merger Consideration (as defined below) paid in
the Merger pursuant to Section 2.01(c), (C) the aggregate amount paid to
Dissenting Stockholders (as defined below), if any, in respect of such
Dissenting Stockholders' Company Common Stock pursuant to Section 2.01(d), and
(D) any other amounts paid or costs incurred by Parent and its Subsidiaries
that are properly capitalized into the tax basis of the Company Common Stock
owned by Parent and its Subsidiaries immediately after the Merger;
WHEREAS the Board of Directors of each of Parent and Sub have each
approved the merger (the "Merger") of Sub into the Company in accordance with
the General Corporation Law of the State of Delaware (the "DGCL") upon the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. EFFECTIVE TIME OF THE MERGER. Subject to the
provisions of this Agreement, a certificate of merger (the "Certificate of
Merger") shall be duly prepared, executed and acknowledged by the Company and
thereafter delivered to the Secretary of State of the State of Delaware for
filing, as provided in the DGCL, as soon as practicable on or after the
Closing Date (as defined in Section 1.02). The Merger shall become effective
upon the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware or at such time thereafter as is agreed to between
Parent and the Company and provided in the Certificate of Merger (the
"Effective Time").
SECTION 1.02. CLOSING. The closing of the Merger (the
"Closing") will take place at 9:00 a.m., Washington, D.C. time, on a date to
be specified by the parties, which shall be the later of (i) January 2, 1996,
and (ii) the second business day after satisfaction of the latest to occur of
the conditions set forth in Section 7.01 (provided that the other closing
conditions set forth in Article VII have been met or waived as provided in
Article VII at or prior to the Closing) (the "Closing Date"), at the offices
of the Company, unless another date or place is agreed to in writing by the
parties hereto.
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time Sub
shall be merged with and into the Company which shall continue as the
surviving corporation (the Company is sometimes referred to herein as the
"Surviving Corporation").
SECTION 1.04. CERTIFICATE OF INCORPORATION AND BY-LAWS.
(a) The certificate of incorporation of the Company, as in effect immediately
prior to the Effective Time, shall be the certificate of incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein
or by applicable law.
(b) The by-laws of the Company as in effect at the Effective Time
shall be the by-laws of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
SECTION 1.05. DIRECTORS. The directors of Sub immediately
prior to the Effective Time shall be the directors of the Surviving
Corporation until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
SECTION 1.06. OFFICERS. The officers of the Company
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01. CONVERSION OF CAPITAL STOCK. As of the
Effective Time, by virtue of the Merger and without any action on the part of
the holder of any shares of Common Stock, par value $1 per share, of the
Company (the "Company Common Stock") or capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
the capital stock of Sub shall be converted into and become that number of
shares of fully paid and nonassessable shares of Company Common Stock
equivalent to the quotient obtained by dividing (i) the difference between
(A) the total number of outstanding shares of Company Common Stock immediately
prior to the Effective Time and (B) the total number of shares of Company
Common Stock owned by Parent and its Subsidiaries immediately prior to the
Effective Time by (ii) 10,000.
(b) Cancelation of Treasury Stock; Parent-Owned Stock to Remain
Outstanding. All shares of Company Common Stock that are owned by the Company
as treasury stock shall be canceled and retired and shall cease to exist and
no consideration shall be delivered in exchange therefor. All shares of
Company Common Stock owned by Parent or any Subsidiary of Parent shall remain
outstanding without change. As used in this Agreement, the word "Subsidiary"
means, with respect to any party, any corporation or other organization,
whether incorporated or unincorporated, of which (i) such party or any other
Subsidiary of such party is a general partner (excluding partnerships, the
general partnership interests of which held by such party or any Subsidiary of
such party do not have a majority of the voting interest in such partnership)
or (ii) at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to such corpora-
tion or other organization is directly or indirectly owned or controlled by
such party or by any one or more of its Subsidiaries, or by such party and one
or more of its Subsidiaries.
(c) Conversion of Company Common Stock. Subject to
Section 2.01(d), each share of Company Common Stock issued and outstanding
(other than shares to be canceled or to remain outstanding in accordance with
Section 2.01(b)) shall be converted into the right to receive $70.00 in cash
without interest (the "Merger Consideration"). As of the Effective Time, all
such shares shall no longer be outstanding and shall automatically be canceled
and shall cease to exist, and each holder of a certificate representing any
such shares shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration without interest. At the Effective
Time, each holder of a then outstanding option to purchase shares of Company
Common Stock under the Company Stock Plans (as defined below) shall, in
settlement thereof, receive from the Company for each share of Company Common
Stock subject to such option an amount (subject to any applicable withholding
tax) in cash equal to the excess of the Merger Consideration over the per
share exercise price of such option (such amount being hereinafter referred to
as the "Option Consideration"); provided, however, that with respect to any
person subject to Section 16(a) of the Exchange Act, any such amount shall be
paid as soon as practicable after the first date payment can be made without
liability to such person under Section 16(b) of the Exchange Act. Upon
receipt of the Option Consideration, the option shall be cancelled. The
surrender of an option shall be deemed a release of any and all rights the
holder had or may have had in respect of such option.
(d) Shares of Dissenting Stockholders. Notwithstanding anything
in this Agreement to the contrary, any issued and outstanding shares of
Company Common Stock held by a person (a "Dissenting Stockholder") who duly
demands appraisal of his shares of Company Common Stock pursuant to the DGCL
and complies with all the provisions of the DGCL concerning the right of
holders of Company Common Stock to demand appraisal of their shares in
connection with the Merger ("Dissenting Shares") shall not be converted as
described in Section 2.01(c) but shall become the right to receive such cash
consideration as may be determined to be due to such Dissenting Stockholder as
provided in the DGCL. If, however, such Dissenting Stockholder withdraws his
demand for appraisal or fails to perfect or otherwise loses his right of
appraisal, in any case pursuant to the DGCL, his shares shall be deemed to be
converted as of the Effective Time into the right to receive the Merger
Consideration without interest. The Company shall give Parent (i) prompt
notice of any demands for appraisal of shares received by the Company and
(ii) the opportunity to participate in and direct all negotiations and
proceedings with respect to any such demands. The Company shall not, without
the prior written consent of Parent, make any payment with respect to, or
settle, offer to settle or otherwise negotiate, any such demands.
(e) Withholding Tax. The right of any stockholder to receive
the Merger Consideration shall be subject to and reduced by the amount of any
required tax withholding obligation.
SECTION 2.02. EXCHANGE OF CERTIFICATES. (a) Paying Agent.
Prior to the Effective Time, Parent shall designate a bank or trust company to
act as paying agent in the Merger (the "Paying Agent"), and, from time to time
on and after the Effective Time, Parent shall make available, or cause its
Subsidiaries (other than the Surviving Corporation) to make available, to the
Paying Agent funds in amounts and at the times necessary for the payment of
the Merger Consideration pursuant to Section 2.01(c), and any payments to
Dissenting Stockholders pursuant to Section 2.01(d), it being understood that
any and all interest earned on funds made available to the Paying Agent
pursuant to this Agreement shall be turned over to Parent or the Subsidiary
providing such funds, as applicable.
(b) Exchange Procedure. As soon as reasonably practicable after
the Effective Time, the Paying Agent shall mail to each holder of record
(other than Parent or any of its Subsidiaries) of a certificate or
certificates which immediately prior to the Effective Time represented shares
of Company Common Stock (the "Certificates") (i) a letter of transmittal
(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 a form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancelation to the Paying Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly executed, and such other documents as may reasonably be
required by the Paying Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor the amount of cash into which the shares
theretofore represented by such Certificate shall have been converted pursuant
to Section 2.01, and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of shares that is not
registered in the transfer records of the Company, payment may be made to a
person other than the person in whose name the Certificate so surrendered is
registered, if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other
than the registered holder of such Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is
not applicable. Until surrendered as contemplated by this Section 2.02, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the amount of cash, without
interest, into which the shares theretofore represented by such Certificate
shall have been converted pursuant to Section 2.01. No interest will be paid
or will accrue on the cash payable upon the surrender of any Certificate.
(c) No Further Ownership Rights in Company Common Stock. All
cash paid upon the surrender of Certificates in accordance with the terms of
this Article II shall be deemed to have been paid in full satisfaction of all
rights pertaining to the shares of Company Common Stock theretofore
represented by such Certificates. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares that were outstanding immediately prior to the
Effective Time, except for shares owned by Parent or its Subsidiaries. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation or the Paying Agent for any reason, they shall be canceled and
exchanged as provided in this Article II.
(d) No Liability. None of Parent, Sub, the Company or the
Paying Agent shall be liable to any person in respect of any cash delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
SECTION 3.01. ORGANIZATION. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and corporate authority and all necessary
governmental approvals to own, lease and operate its properties and to carry
on its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority and
governmental approvals would not have a material adverse effect on the Company
and its Subsidiaries taken as a whole. As used in this Agreement, any
reference to any event, change or effect being material or having a material
adverse effect on or with respect to an entity (or group of entities taken as
a whole) means such event, change or effect is materially adverse to the
consolidated condition (financial or otherwise), properties, assets (including
intangible assets), liabilities (including contingent liabilities), businesses
or results of operations of such entity (or, if with respect thereto, of such
group of entities taken as a whole). The Company and each of its Subsidiaries
is duly qualified or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not in the aggregate have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
SECTION 3.02. CAPITALIZATION. As of the date hereof, the
authorized capital stock of the Company consists of (i) 150,000,000 shares of
Company Common Stock of which, as of June 30, 1995, 67,835,260 shares were
issued and outstanding and 3,801,249 shares were held in treasury,
(ii) 10,000,000 shares of Cumulative Senior Preferred Stock, par value $1 per
share, no shares of which are issued and outstanding and
(iii) 15,000,000 shares of Cumulative Junior Preferred Stock, par value $1 per
share, no shares of which are issued and outstanding. As of the date hereof,
1,958,002 shares of Company Common Stock are reserved for issuance upon
exercise of outstanding options pursuant to the Company's 1985 and 1992 Stock
Option Plans and payment of outstanding awards under its Performance Share
Plan (the "Company Stock Plans"). All the outstanding shares of Company
Common Stock are, and all shares which may be issued pursuant to Company Stock
Plans will be, when issued in accordance with the terms thereof, duly
authorized, validly issued, fully paid and nonassessable and free of any pre-
emptive rights in respect thereto. As of the date hereof, no bonds,
debentures, notes or other indebtedness convertible into securities having the
right to vote ("Convertible Debt") of the Company are issued or outstanding.
Except as set forth above, as of the date hereof, there are no existing
options, warrants, calls, subscriptions or other rights or other agreements or
commitments of any character relating to the issued or unissued capital stock
or Convertible Debt of the Company or any of its Subsidiaries or obligating
the Company or any of its Subsidiaries to issue, transfer or sell or cause to
be issued, transferred or sold any shares of capital stock or Convertible Debt
of, or other equity interests in, the Company or of any of its Subsidiaries or
securities convertible into or exchangeable for such shares or equity
interests or obligating the Company or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call, subscription or other
right, agreement or commitment. As of the date hereof, there are no out-
standing contractual obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its Subsidiaries.
SECTION 3.03. AUTHORITY. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby (subject to, with respect to
the Merger, the approval and adoption of this Agreement by the holders of 80%
of the outstanding shares of Company Common Stock which shall include,
pursuant to the terms of this Agreement, the holders of a majority of the
outstanding shares of Company Common Stock not owned by Parent and its
Subsidiaries (the "Independent Stockholders")). The execution, delivery and
performance of this Agreement and the consummation of the Merger and of the
other transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated (other than as
aforesaid). This Agreement has been duly executed and delivered by the
Company and, assuming this Agreement constitutes a valid and binding
obligation of Parent and Sub, as the case may be, constitutes a valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms.
SECTION 3.04. CONSENTS AND APPROVALS; NO VIOLATIONS. Except
for filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), state insurance laws and
the DGCL, neither the execution, delivery or performance of this Agreement by
the Company nor the consummation by the Company of the transactions contem-
plated hereby nor compliance by the Company with any of the provisions hereof
will (i) conflict with or result in any breach of any provision of the charter
or by-laws of the Company or of any of its Subsidiaries, (ii) require any
filing with, or permit, authorization, consent or approval of, any court,
arbitral tribunal, administrative agency or commission or other governmental
or other regulatory authority or agency (a "Governmental Entity") (except
where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings would not have a material adverse effect on
the Company and its Subsidiaries taken as a whole), (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancelation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which the Company or any of its Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound or (iv) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company, any of its Subsidiaries or any of their
properties or assets, except in the case of (iii) or (iv) for violations,
breaches or defaults which would not, individually or in the aggregate, have a
material adverse effect on the Company and its Subsidiaries taken as a whole.
SECTION 3.05. SEC REPORTS AND FINANCIAL STATEMENTS. Each of
the Company and its Subsidiaries has filed with the Securities and Exchange
Commission (the "SEC") and has heretofore made available to Parent true and
complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it since January 1, 1994, under the Exchange
Act or the Securities Act of 1933, as amended (the "Securities Act") (as such
documents have been amended since the time of their filing, collectively, the
"Company SEC Documents"). The Company SEC Documents, including without
limitation any financial statements or schedules included therein, at the time
filed, (a) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading and (b) complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the
case may be, and the applicable rules and regulations of the SEC thereunder.
The financial statements of the Company included in the Company SEC Documents
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
the unaudited statements, as permitted by Form 10-Q of the SEC) and fairly
present (subject, in the case of the unaudited statements, to normal,
recurring audit adjustments) the consolidated financial position of the
Company and its consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended.
SECTION 3.06. ABSENCE OF CERTAIN CHANGES. Except as disclosed
in the Company SEC Documents filed with the SEC prior to the date hereof,
since December 31, 1994, there have been no events, changes or effects having,
individually or in the aggregate, a material adverse effect on the Company and
its Subsidiaries taken as a whole.
SECTION 3.07. NO UNDISCLOSED LIABILITIES. Except as and to
the extent set forth in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994, as of December 31, 1994, neither the Company nor any
of its Subsidiaries had any liabilities or obligations of any nature, whether
or not accrued, contingent or otherwise, that would be required by generally
accepted accounting principles to be reflected on a consolidated balance sheet
of the Company and its Subsidiaries (including the notes thereto). Since
December 31, 1994, neither the Company nor any of its Subsidiaries has
incurred any liabilities of any nature, whether or not accrued, contingent or
otherwise, which would have, individually or in the aggregate, a material
adverse effect on the Company and its Subsidiaries taken as a whole.
SECTION 3.08. BENEFIT PLANS. (a) With respect to each
employee benefit plan (including, without limitation, any "employee benefit
plan", as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), and any material bonus, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, vacation, severance, death benefit,
insurance or other plan, arrangement or understanding (whether or not legally
binding), in each case maintained or contributed to for the benefit of
employees of the Company or any of its Subsidiaries (all the foregoing being
herein called the "Company Benefit Plans"), individually and in the aggregate,
no event has occurred, and to the knowledge of the Company or any of its
Subsidiaries, there exists no condition or set of circumstances, in connection
with which the Company or any of its Subsidiaries could be subject to any
liability that is reasonably likely to have a material adverse effect on the
Company and its Subsidiaries, taken as a whole (except liability for benefits
claims and funding obligations payable in the ordinary course), under ERISA,
the Internal Revenue Code of 1986, as amended (the "Code") or any other
applicable law.
(b) With respect to the Company Benefit Plans, individually and
in the aggregate, there are no funded benefit obligations for which
contributions have not been made or properly accrued and there are no unfunded
benefit obligations which have not been accounted for by reserves, established
in accordance with generally accepted accounting principles, or otherwise
properly footnoted in accordance with generally accepted accounting
principles, on the financial statements of the Company or any of its
Subsidiaries, which obligations are reasonably likely to have a material
adverse effect on the Company and its Subsidiaries, taken as a whole.
SECTION 3.09. OTHER BENEFIT PLANS. Neither the Company nor
any of its Subsidiaries is a party to any oral or written (i) consulting
agreement not terminable on 60 days' or less notice involving the payment of
more than $200,000 per annum or union or collective bargaining agreement which
covers more than 1,000 employees, (ii) agreement with any executive officer or
other key employee of the Company or any of its Subsidiaries, 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
by this Agreement or agreement with respect to any executive officer of the
Company providing any term of employment or compensation guarantee extending
for a period longer than one year and for the payment of in excess of $200,000
per annum, or (iii) agreement or plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement, provided that (A) the
employee stock options outstanding on the date hereof under the 1992 Company
Stock Plan will, as provided in such Plan, be accelerated as to vesting, (B)
pursuant to the terms of the Pension Plan for Retired Non-Employee Directors,
participants who have not attained age 65 shall be deemed to be age 65 and all
participants shall be entitled to a lump sum payment of the benefits
thereunder and (C) all deferred bonus awards under the Equity Cash Bonus Plan
will, as provided in such Plan, be vested and paid out in full.
SECTION 3.10. LITIGATION. There is no suit, claim, action,
proceeding or investigation pending or, to the best knowledge of the Company,
threatened against, the Company or any of its Subsidiaries before any
Governmental Entity which, individually or in the aggregate, is reasonably
likely to have a material adverse effect on the Company and its Subsidiaries
taken as a whole or a material adverse effect on the ability of the Company to
consummate the transactions contemplated by this Agreement. Except as
disclosed in the Company SEC Documents filed prior to the date of this
Agreement, neither the Company nor any of its Subsidiaries is subject to any
outstanding order, writ, injunction or decree which, insofar as can be
reasonably foreseen, individually or in the aggregate, in the future would
have a material adverse effect on the Company and its Subsidiaries taken as a
whole or a material adverse effect on the ability of the Company to consummate
the transactions contemplated hereby.
SECTION 3.11. COMPLIANCE WITH APPLICABLE LAW. The Company and
its Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Company Permits"), except for failures to
hold such permits, licenses, variances, exemptions, orders and approvals which
would not, individually or in the aggregate, have a material adverse effect on
the Company and its Subsidiaries taken as a whole. The Company and its
Subsidiaries are in compliance with the terms of the Company Permits, except
where the failure so to comply would not have a material adverse effect on the
Company and its Subsidiaries taken as a whole. Except as disclosed in the
Company SEC Documents filed prior to the date of this Agreement, to the best
knowledge of the Company, the businesses of the Company and its Subsidiaries
are not being conducted in violation of any law, ordinance or regulation of
any Governmental Entity, except for possible violations which individually or
in the aggregate do not, and, insofar as reasonably can be foreseen, in the
future will not, have a material adverse effect on the Company and its
Subsidiaries taken as a whole. No investigation or review by any Governmental
Entity with respect to the Company or any of its Subsidiaries is pending or,
to the best knowledge of the Company, threatened, nor has any Governmental
Entity indicated an intention to conduct the same, other than, in each case,
those the outcome of which, as far as reasonably can be foreseen, in the
future will not have a material adverse effect on the Company and its
Subsidiaries taken as a whole.
SECTION 3.12. OPINION OF FINANCIAL ADVISOR. The Company has
received the opinion of Morgan Stanley & Co. Incorporated, dated the date
hereof, to the effect that, as of such date, the consideration to be received
in the Merger by the Independent Stockholders is fair to such Stockholders
from a financial point of view, a copy of which opinion has been delivered to
Parent.
SECTION 3.13. VOTE REQUIRED. The affirmative vote of the
holders of 80% of the outstanding shares of Company Common Stock, including
Independent Stockholders holding a majority of the outstanding shares of
Company Common Stock not owned by Parent and its Subsidiaries, is the only
vote of the holders of any class or series of the Company's capital stock
necessary to approve this Agreement and the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
SECTION 4.01. ORGANIZATION. Each of Parent and Sub and
Parent's Subsidiaries which own shares of Company Common Stock is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and corporate authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as now being
conducted except where the failure to be so organized, existing and in good
standing or to have such power, authority, and governmental approvals would
not have a material adverse effect on Parent and its Subsidiaries taken as a
whole. Parent and each of its Subsidiaries which owns shares of Company
Common Stock is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so duly qualified or
licensed and in good standing would not in the aggregate have a material
adverse effect on Parent and its Subsidiaries taken as a whole.
SECTION 4.02. AUTHORITY. Parent and Sub have requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the Merger and of the
other transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Parent, and no other corporate
proceedings on the part of Parent and Sub are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement
has been duly executed and delivered by Parent and Sub, as the case may be,
and, assuming this Agreement constitutes a valid and binding obligation of the
Company, constitutes a valid and binding obligation of each of Parent and Sub,
as the case may be, enforceable against Parent and Sub in accordance with its
respective terms.
SECTION 4.03. CONSENTS AND APPROVALS; NO VIOLATIONS. Except
for filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the Exchange Act, the
HSR Act, state insurance laws and the DGCL, neither the execution, delivery or
performance of this Agreement by Parent and Sub nor the consummation by Parent
and Sub of the transactions contemplated hereby nor compliance by Parent and
Sub with any of the provisions hereof will (i) conflict with or result in any
breach of any provision of the respective certificate of incorporation or
by-laws of Parent and Sub, (ii) require any filing with, or permit, authoriza-
tion, consent or approval of, any Governmental Entity (except where the
failure to obtain such permits, authorizations, consents or approvals or to
make such filings would not have a material adverse effect on Parent and its
Subsidiaries taken as a whole), (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancelation or acceleration) under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, lease, contract, agreement or other instrument or obligation to which
Parent or any of its Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent, any of
its Subsidiaries or any of their properties or assets, except in the case of
(iii) and (iv) for violations, breach or defaults which would not,
individually or in the aggregate, have a material adverse effect on Parent and
its Subsidiaries taken as a whole.
SECTION 4.04. INFORMATION IN PROXY STATEMENT. None of the
information supplied by Parent or Sub in writing specifically for inclusion or
incorporation by reference in the Company's Proxy Statement for the special
meeting of its stockholders to be called to consider the Merger (the "Proxy
Statement") will, at the date mailed to stockholders and at the time of the
meeting of the Company's stockholders to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading.
SECTION 4.05. INTERIM OPERATIONS OF SUB. Sub was formed
solely for the purpose of engaging in the transactions contemplated hereby,
has engaged in no other business activities and has conducted its operations
only as contemplated hereby.
ARTICLE V
COVENANTS
SECTION 5.01. COVENANTS OF THE COMPANY. During the period
from the date of this Agreement and continuing until the Effective Time, the
Company agrees as to itself and its Subsidiaries that (except as expressly
contemplated or permitted by this Agreement, or to the extent that Parent
shall otherwise consent in writing):
(a) Ordinary Course. The Company and its Subsidiaries shall
carry on their respective businesses in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted and use all
reasonable efforts to preserve intact their present business organizations,
keep available the services of their present officers and employees and
preserve their relationships with customers, suppliers and others having
business dealings with them to the end that their goodwill and ongoing
business shall not be impaired in any material respect at the Effective Time.
(b) Dividends; Changes in Stock. The Company shall not, nor
shall it permit any of its Subsidiaries to, nor shall it propose to,
(i) declare or pay any dividends on or make other distributions in respect of
any of its capital stock, except that it may continue the declaration and
payment of regular quarterly cash dividends in an amount not in excess of
$0.27 per share, with usual record and payment dates for such dividends in
accordance with the Company's past dividend practice, and except for dividends
by any Subsidiary to the Company or to another Subsidiary, (ii) split, combine
or reclassify its capital stock or issue or authorize or propose the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock or (iii) repurchase, redeem or otherwise acquire,
or permit any Subsidiary to repurchase, redeem or otherwise acquire, any
shares of capital stock of the Company or any of its Subsidiaries.
(c) Issuance of Securities. The Company shall not, nor shall it
permit any of its Subsidiaries to, issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock of
any class or any securities convertible into, or any rights, warrants, calls,
subscriptions or options to acquire, any such shares or convertible
securities, other than (i) the issuance of shares of Company Common Stock upon
the exercise of employee stock options outstanding on the date hereof under
the Company Stock Plans and (ii) issuance by a wholly owned Subsidiary of its
capital stock to its parent.
(d) Governing Documents. The Company shall not amend or propose
to amend its Certificate of Incorporation or By-laws.
(e) Advice of Changes; Filings. The Company shall confer on a
regular and frequent basis with Parent, report on operational matters and
promptly advise Parent orally and in writing of any change or event having, or
which, insofar as can reasonably be foreseen, could have, a material adverse
effect on the Company and its Subsidiaries taken as a whole. The Company and
Parent shall promptly provide the other copies of all filings made by such
party with any Federal, state or foreign Governmental Entity in connection
with this Agreement and the transactions contemplated hereby, other than the
portions of such filings that include confidential information not directly
related to the transactions contemplated by this Agreement.
(f) The Company shall not (i) enter into, adopt, amend in any
material respect (except as may be required by law) or terminate any Company
Benefit Plan or other employee benefit plan or any agreement, arrangement,
plan or policy between the Company and one or more of its directors or
officers or (ii) except for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not result
in a material increase in benefits or compensation expense to the Company,
increase in any manner the compensation or fringe benefits of any director,
officer or key employee or pay any benefit not required by any plan and
arrangement as in effect as of the date hereof (including, without limitation,
the granting of stock options or Performance Share awards) or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing,
except as provided in Section 6.05(d).
SECTION 5.02. NO SOLICITATION; FIDUCIARY OUT. (a) The Company
shall not authorize or permit any of its executive officers or directors or
any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its Subsidiaries to (i) solicit,
initiate or encourage (including by way of furnishing information), or take
any other action to facilitate, any inquiries or the making of any proposal
which constitutes, or may reasonably be expected to lead to, any Takeover
Proposal (as defined below) or (ii) participate in any discussions or
negotiations regarding any Takeover Proposal; provided, however, that, if at
any time prior to the Effective Time the Board of Directors of the Company
determines in good faith, after consultation with counsel, that it is
necessary to do so in order to comply with its fiduciary duties to the
Company's stockholders, the Company may, in response to an unsolicited
Takeover Proposal, and subject to compliance with Section 5.02(c), (x) furnish
information with respect to the Company to any person pursuant to a
confidentiality agreement and (y) participate in negotiations regarding such
Takeover Proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any
director or executive officer of the Company or any of its Subsidiaries or any
investment banker, financial advisor, attorney, accountant or other
representative of the Company or any of its Subsidiaries shall be deemed to be
a breach of this Section 5.02(a) by the Company. For purposes of this
Agreement, "Takeover Proposal" means any inquiry, proposal or offer from any
person (other than Parent or any of its Subsidiaries) relating to any direct
or indirect acquisition or purchase of a substantial amount of assets of the
Company or any of its Subsidiaries or of 50% or more of the shares of Company
Common Stock, any tender offer or exchange offer that if consummated would
result in any person beneficially owning 50% or more of the shares of Company
Common Stock, any merger, consolidation, business combination, sale of
substantially all the assets, recapitalization, liquidation, dissolution or
similar transaction involving the Company, other than the Merger, or any other
transaction the consummation of which could reasonably be expected to impede,
interfere with, prevent or materially delay the Merger or which would
reasonably be expected to dilute materially the benefits to Parent of the
transactions contemplated hereby.
(b) Except as set forth in this Section 5.02(b), neither the
Board of Directors of the Company nor any committee thereof shall (i) withdraw
or modify, or propose to withdraw or modify, in a manner adverse to Parent,
the approval or recommendation by such Board of Directors of this Agreement or
the Merger, (ii) approve or recommend, or propose to approve or recommend, any
Takeover Proposal or (iii) cause the Company to enter into any agreement with
respect to any Takeover Proposal. Notwithstanding the foregoing, in the event
that prior to the Effective Time the Board of Directors of the Company
determines in good faith, after consultation with counsel, that it is
necessary to do so in order to comply with its fiduciary duties to the
Company's stockholders, the Board of Directors of the Company may withdraw or
modify its approval or recommendation of this Agreement and the Merger,
approve or recommend a Takeover Proposal or cause the Company to enter into an
agreement with respect to a Takeover Proposal. While the fact that any
Takeover Proposal may be conditioned on Parent's agreeing to it may be
considered by the Company's Board of Directors, such fact shall not prevent
the Company's Board of Directors from taking any action pursuant to this
Section 5.02(b) even if Parent has stated or indicated in any way that it will
not agree to such Takeover Proposal.
(c) In addition to the obligations of the Company set forth in
Section 5.02(a), the Company shall immediately advise Parent orally and in
writing of any request for information or of any Takeover Proposal, or any
inquiry with respect to or which could lead to any Takeover Proposal, and
shall describe the material terms and conditions of such request, Takeover
Proposal or inquiry and the identity of the person making such request,
Takeover Proposal or inquiry. The Company will keep Parent fully informed of
the status and details (including amendments or proposed amendments) of any
such request, Takeover Proposal or inquiry.
(d) Nothing contained in this Section 5.02 shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to the Company's stockholders if, in the opinion of the Board of
Directors of the Company, after consultation with counsel, failure so to
disclose would be inconsistent with its fiduciary duties to the Company's
stockholders; provided, however, that neither the Company nor its Board of
Directors nor any committee thereof shall, except as permitted by
Section 5.02(b), withdraw or modify, or propose to withdraw or modify, its
position with respect to the Merger or approve or recommend, or propose to
approve or recommend, a Takeover Proposal.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. PREPARATION OF THE PROXY STATEMENT. The Company
shall promptly prepare and file with the SEC preliminary and final versions of
the Proxy Statement and a Schedule 13E-3. The Company shall use its best
efforts to have the Proxy Statement cleared by the SEC and mailed to its
stockholders at the earliest practicable date. The Company shall cooperate
and consult with Parent with respect to the Proxy Statement and the
Schedule 13E-3 and any related SEC comments. The Company covenants that
(i) the Proxy Statement and the Schedule 13E-3 will comply in all material
respects as to form with the requirements of the Exchange Act and the rules
and regulations thereunder and (ii) as of the date of mailing of the Proxy
Statement and at the time of the meeting of the Company's stockholders to be
held in connection with the Merger, the Proxy Statement and the Schedule 13E-3
will not contain any untrue statement of material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading, provided that no representation is made by the Company with
respect to any information included in the Proxy Statement and the
Schedule 13E-3 regarding Parent or its Subsidiaries supplied by Parent in
writing specifically for inclusion in the Proxy Statement and the
Schedule 13E-3.
SECTION 6.02. ACCESS TO INFORMATION. Upon reasonable notice
and subject to restrictions contained in confidentiality agreements to which
such party is subject (from which such party shall use reasonable efforts to
be released), the Company shall (and shall cause each of its Subsidiaries to)
afford to the officers, employees, accountants, counsel and other
representatives of Parent, access, during normal business hours during the
period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, the Company shall (and shall
cause each of its Subsidiaries to) furnish promptly to Parent (a) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of Federal
securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request. Unless otherwise
required by law, Parent will hold any such information which is nonpublic in
confidence until such time as such information otherwise becomes publicly
available through no wrongful act of either party, and in the event of
termination of this Agreement for any reason Parent shall promptly upon
request return all nonpublic documents obtained from the Company, and any
copies made of such documents, to the Company.
SECTION 6.03. STOCKHOLDERS MEETING. The Company shall call a
meeting of its stockholders to be held as promptly as practicable for the
purpose of voting upon this Agreement and the Merger. Subject to
Section 5.02(b), the Company will, through its Board of Directors, recommend
to its stockholders approval of this Agreement and the Merger and shall use
its best efforts to hold such meeting as soon as reasonably practicable after
the date hereof.
SECTION 6.04. LEGAL CONDITIONS TO MERGER. Each of the
Company, Parent and Sub will take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on itself with
respect to the Merger (which actions shall include, without limitation,
furnishing all information required under the HSR Act and in connection with
approvals of or filings with state insurance authorities and any other
Governmental Entity) and will promptly cooperate with and furnish information
to each other in connection with any such requirements imposed upon any of
them or any of their Subsidiaries in connection with the Merger. Each of the
Company, Parent and Sub will, and will cause its Subsidiaries to, take all
reasonable actions necessary to obtain (and will cooperate with each other in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity or other public or private third party, required
to be obtained or made by Parent, the Company or any of their Subsidiaries in
connection with the Merger or the taking of any action contemplated thereby or
by this Agreement.
SECTION 6.05. EMPLOYEE BENEFIT PLANS. (a) Parent and the
Company agree that the benefit plans of the Company and its Subsidiaries in
effect at the date of this Agreement (other than the Company Stock Plans and
the Company's Employee Stock Ownership Plan (the "ESOP")) shall, to the extent
practicable, remain in effect without amendment until the Effective Time and
that thereafter the Surviving Corporation will maintain, subject to such
changes and modifications as may be necessary or desirable to facilitate
compliance by Parent and its Subsidiaries (including the Surviving
Corporation) with applicable statutory and regulatory requirements, for a
period of three years after the Effective Time, benefit plans (other than the
Company Stock Plans and the ESOP) which are no less favorable, in the
aggregate, to the employees covered by such plans as the benefit plans in
effect at the Effective Time (other than the Company Stock Plans and the
ESOP).
(b) Parent will, and will cause the Surviving Corporation to,
honor without modification for a period of three years after the Effective
Time all employee severance plans (or policies) and employment and severance
agreements of the Company or any of its Subsidiaries in existence on the date
hereof as such plans, policies and agreements shall be in effect in accordance
with the terms of this Agreement at the Effective Time.
(c) Parent and the Company will use their best efforts to agree
on compensation plans for the officers and employees of the Company after the
Effective Time to provide them incentive compensation that in the aggregate is
reasonably comparable (without giving effect to the payments to them resulting
from the Merger) to that historically provided by the Company Stock Plans and
the ESOP, except that Parent shall not be required to issue any shares of its
equity securities in connection with such compensation plans.
(d) The Company agrees that (i) all the outstanding borrowings
by the ESOP will be paid in full from the unallocated assets of the ESOP, any
remaining unallocated assets of the ESOP will be allocated among ESOP
participants, the interests of all participants in the ESOP will be vested and
distributed and, pursuant to resolutions adopted by the Company's Board of
Directors prior to the execution of this Agreement, the ESOP will be
terminated and (ii) in accordance with amendments to the Performance Share
Plan effected prior to the execution of this Agreement, all Performance Share
awards outstanding on the date hereof will remain in effect in accordance with
the terms of such awards on such date except that any payments after the
Effective Time will be made on the basis of the Merger Consideration and no
Company Common Stock shall be issued after the Effective Time. The Company
represents and warrants to Parent that, following the Effective Time, the
unallocated assets of the ESOP will substantially exceed the amount required
to prepay in full the borrowings of the ESOP.
SECTION 6.06. EXPENSES. Whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expense.
SECTION 6.07. BROKERS OR FINDERS. Each of Parent and the
Company represents, as to itself, its Subsidiaries and its affiliates, that no
agent, broker, investment banker, financial advisor or other firm or person is
or will be entitled to any brokers' or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement except Morgan Stanley & Co. Incorporated, whose fees and expenses
will be paid by the Company in accordance with the Company's agreement with
such firm (copies of which have been delivered by the Company to Parent prior
to the date of this Agreement), and each of Parent and the Company agree to
indemnify and hold the other harmless from and against any and all claims,
liabilities or obligations with respect to any other fees, commissions or
expenses asserted by any person on the basis of any act or statement alleged
to have been made by such party or its affiliate.
SECTION 6.08. INDEMNIFICATION; INSURANCE. (a) The Company
shall, and from and after the Effective Time Parent and the Surviving
Corporation shall, indemnify, defend and hold harmless each person who is now,
or has been at any time prior to the date of this Agreement or who becomes
such prior to the Effective Time, an officer, director or employee of the
Company or any of its Subsidiaries (the "Indemnified Parties") against (i) all
losses, claims, damages, costs, expenses, liabilities or judgments or amounts
that are paid in settlement with the approval of the indemnifying party (which
approval shall not be unreasonably withheld) of or in connection with any
claim, action, suit, proceeding or investigation based in whole or in part on
or arising in whole or in part out of the fact that such person is or was a
director, officer or employee of the Company or any of its Subsidiaries,
whether pertaining to any matter existing or occurring at or prior to the
Effective Time and whether asserted or claimed prior to, or at or after, the
Effective Time ("Indemnified Liabilities") and (ii) all Indemnified
Liabilities based in whole or in part on, or arising in whole or in part out
of, or pertaining to this Agreement or the transactions contemplated hereby;
provided, however, in the case of the Company and the Surviving Corporation
such indemnification shall only be to the fullest extent a corporation is
permitted under the DGCL to indemnify its own directors, officers and
employees; in the case of Parent, such indemnification shall not be limited by
the DGCL but such indemnification shall not be applicable to any claims made
against the Indemnified Parties (A) arising out of, based upon or attributable
to the gaining in fact of any personal profit or advantage to which they were
not legally entitled or (B) arising out of, based upon or attributable to the
committing in fact of any criminal or deliberate fraudulent act; and the
Company, Parent and the Surviving Corporation, as the case may be, will pay
all expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party, in the case of the Company and the
Surviving Corporation only to the fullest extent permitted by law upon receipt
of any undertaking contemplated by Section 145(e) of the DGCL. Without
limiting the foregoing, in the event any such claim, action, suit, proceeding
or investigation is brought against any Indemnified Party (whether arising
before or after the Effective Time), (i) the Indemnified Parties may retain
counsel satisfactory to them and the Company (or them and Parent and the
Surviving Corporation after the Effective Time), (ii) the Company (or after
the Effective Time, the Surviving Corporation) shall pay all reasonable fees
and expenses of such counsel for the Indemnified Parties promptly as
statements therefor are received, and (iii) the Company (or after the
Effective Time, Parent and the Surviving Corporation) will use all reasonable
efforts to assist in the vigorous defense of any such matter, provided that
none of the Company, Parent or the Surviving Corporation shall be liable for
any settlement of any claim effected without its written consent, which
consent, however, shall not be unreasonably withheld. Any Indemnified Party
wishing to claim indemnification under this Section 6.08, upon learning of any
such claim, action, suit, proceeding or investigation, shall notify the
Company, Parent or the Surviving Corporation (but the failure so to notify an
Indemnifying Party shall not relieve it from any liability which it may have
under this Section 6.08 except to the extent such failure prejudices such
party), and shall deliver to the Company (or after the Effective Time, the
Surviving Corporation (but not Parent)) the undertaking contemplated by
Section 145(e) of the DGCL. The Indemnified Parties as a group may retain
only one law firm to represent them with respect to each such matter unless
there is, under applicable standards of professional conduct, a conflict on
any significant issue between the positions of any two or more Indemnified
Parties.
(b) The provisions of this Section 6.08 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party, his or
her heirs and representatives.
SECTION 6.09. (a) Additional Agreements; Best Efforts.
Subject to the terms and conditions of this Agreement, each of the parties
hereto agrees to use best efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including cooperating fully with
the other party, including by provision of information and making of all
necessary filings under the HSR Act and state insurance laws. In case at any
time after the Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement or to vest the Surviving Corporation
with full title to all properties, assets, rights, approvals, immunities and
franchises of either the Company or Sub, the proper officers and directors of
each party to this Agreement shall take all such necessary action.
(b) Parent agrees that it will not, as permitted by Section
2(b)(ii) of the Proxy Agreement to which it is a party with NationsBank of
Maryland, instruct the proxy named therein (i) not to vote the shares of
Company Common Stock owned by its Subsidiaries on the Merger or (ii) to vote
such shares on the Merger in the same proportion as the votes cast by the
Independent Stockholders, so long as this Agreement has not been terminated
pursuant to Article VIII.
(c) Parent or Surviving Corporation agrees, subject to
consummation of the Merger, to pay, without deduction or withholding from any
amount payable to the holders of Company Common Stock, any New York State Tax
on Gains Derived from Certain Real Property Transfers and any other similar
taxes that become payable by the Company or the Surviving Corporation on
transfers of the Company's tangible assets. The Company and Parent shall
cooperate in the preparation, execution and filing of any returns,
questionnaires, applications and other documents related to such taxes
required or permitted to be filed on or before the Effective Time.
ARTICLE VII
CONDITIONS
SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligation of each party to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the affirmative vote of the holders of 80%
of the outstanding shares of Company Common Stock, including the affirmative
vote of Independent Stockholders holding a majority of the outstanding shares
of Company Common Stock not owned by Parent and its Subsidiaries.
(b) Other Approvals. Other than the filing provided for by
Section 1.01, all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by,
any Governmental Entity the failure to obtain which would have a material
adverse effect on Parent and its Subsidiaries or the Surviving Corporation and
its Subsidiaries, in each case taken as a whole, shall have been filed,
occurred or been obtained.
(c) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect.
SECTION 7.02. CONDITIONS OF OBLIGATIONS OF PARENT AND SUB.
The obligations of Parent and Sub to effect the Merger are subject to the
satisfaction of the following conditions unless waived by Parent and Sub:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and (except
to the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date, except as
otherwise contemplated by this Agreement.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date.
(c) Opinion of Counsel to the Company. Parent and Sub shall
have received, on and as of the Closing Date, an opinion of Cravath, Swaine &
Moore, counsel to the Company, in usual and customary form reasonably
acceptable to Parent and Sub, substantially as to the matters set forth in
Sections 3.01 (only with respect to the first sentence thereof), 3.03 (subject
to customary exceptions regarding insolvency and equitable remedies), and 3.04
(only with respect to clause (i) thereof).
SECTION 7.03. CONDITIONS OF OBLIGATIONS OF THE COMPANY. The
obligation of the Company to effect the Merger is subject to the satisfaction
of the following conditions unless waived by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Sub set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and (except
to the extent such representations speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, except as otherwise
contemplated by this Agreement.
(b) Performance of Obligations of Parent and Sub. Parent and
Sub shall have performed in all material respects all obligations required to
be performed by them under this Agreement at or prior to the Closing Date.
(c) Opinion of Counsel to Parent and Sub. The Company shall
have received, on and as of the Closing Date, an opinion of Munger, Tolles &
Olson, counsel to Parent and Sub, in usual and customary form reasonably
acceptable to the Company, substantially as to the matters set forth in
Sections 4.01 (only with respect to the first sentence thereof), 4.02 (subject
to customary exceptions regarding insolvency and equitable remedies), and 4.03
(only with respect to clause (i) thereof).
ARTICLE VIII
TERMINATION AND AMENDMENT
SECTION 8.01. TERMINATION. This Agreement may be terminated
at any time prior to the Effective Time, whether before or after approval of
the matters presented in connection with the Merger by the stockholders of the
Company:
(a) by mutual consent of Parent and the Company;
(b) (i) by either Parent or the Company if there shall have been
a material breach of any representation, warranty, covenant or agreement
on the part of the other set forth in this Agreement which breach shall
not have been cured within two business days following receipt by the
breaching party of notice of such breach, or (ii) by either Parent or
the Company if any permanent injunction or other order of a court or
other competent authority preventing the consummation of the Merger
shall have become final and non-appealable;
(c) by either Parent or the Company if the Company's Board of
Directors takes any of the actions permitted by Section 5.02(b);
provided the Company may so terminate only if it has complied with all
the provisions of Section 5.02(c);
(d) by either Parent or the Company if the Merger shall not have
been consummated on or before March 31, 1996; or
(e) by either party if the required approval of the stockholders
of the Company shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of stockholders or at
any adjournment thereof.
SECTION 8.02. EFFECT OF TERMINATION. In the event of a
termination of this Agreement by either the Company or Parent as provided in
Section 8.01, this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Parent, Sub or the Company or their
respective officers or directors, except with respect to any breach of any
provision of this Agreement prior to such termination and except that the last
sentence of Section 6.02 and all of Sections 6.06 and 6.07 shall continue in
effect.
SECTION 8.03. AMENDMENT. This Agreement may be amended by the
parties hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company, but, after any
such approval, no amendment shall be made which by law requires further
approval by such stockholders without such further approval in accordance with
Section 7.01(a). This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
SECTION 8.04. EXTENSION; WAIVER. At any time prior to the
Effective Time, the parties hereto, by action taken or authorized by their
respective Boards of Directors, may, to the extent legally allowed, (i) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall sur-
vive the Effective Time, except for the agreements contained in Sections 2.01,
2.02, 6.05, 6.06, 6.07, 6.08 and 6.09 and this Section 9.01.
SECTION 9.02. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (which is confirmed) or mailed by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to
Berkshire Hathaway Inc.
1440 Kiewit Plaza
Omaha, Nebraska 68131
Attention: Marc D. Hamburg
Vice President, Treasurer
Telecopy No.: (402) 346-0476
with a copy to
John B. Frank, Esq.
Munger, Tolles & Olson
355 South Grand Avenue, 35th floor
Los Angeles, California 90071-1560
Telecopy No.: (213) 687-3702
and
(b) if to the Company, to
GEICO Corporation
5260 Western Avenue
Washington, D.C. 20076
Attention: Rosalind A. Phillips
Secretary
Telecopy No.: (301) 986-3054
with a copy to
Samuel C. Butler, Esq.
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019-7475
Telecopy No.: (212) 474-3700
SECTION 9.03. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES;
RIGHTS OF OWNERSHIP. This Agreement (including the documents and the
instruments referred to herein) (a) constitute the entire agreement and super-
sede all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof and (b) except as provided
in Sections 6.05 and 6.08, are not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
SECTION 9.04. GOVERNING LAW. This Agreement shall be governed
and construed in accordance with the laws of the State of Delaware without
regard to any applicable conflicts of law.
SECTION 9.05. PUBLICITY. Except as otherwise required by law
or the rules of the New York Stock Exchange, for so long as this Agreement is
in effect, neither the Company nor Parent shall, or shall permit any of its
Subsidiaries to, issue or cause the publication of any press release or other
public announcement with respect to the transactions contemplated by this
Agreement without the consent of the other party, which consent shall not be
unreasonably withheld.
SECTION 9.06. ASSIGNMENT. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent.
Subject to the preceding sentence, this Agreement will be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
as of the date first written above.
BERKSHIRE HATHAWAY INC.,
By: /s/ Warren E. Buffett
Name: Warren E. Buffett
Title: Chairman and Chief Executive Officer
HPKF INC.,
By: /s/ Warren E. Buffett
Name: Warren E. Buffett
Title: Chairman and Chief Executive
Officer
GEICO CORPORATION,
By: /s/ Olza M. Nicely
Name: Olza M. Nicely
Title: President and Chief Executive
Officer
By: /s/ Louis A. Simpson
Name: Louis A. Simpson
Title: President and Chief Executive
Officer
EXHIBIT 2
BERKSHIRE HATHAWAY AGREES TO BUY BALANCE OF GEICO STOCK FOR $70 PER SHARE
FOR IMMEDIATE RELEASE
Omaha, Neb. and Washington, D.C., August 25, 1995 -- Berkshire
Hathaway Inc. (NYSE:BRK) and GEICO Corporation (NYSE:GEC) today announced that
they have agreed that Berkshire Hathaway will acquire all the GEICO shares it
does not now own for $70 per share, or approximately $2.3 billion. The
transaction will take the form of a merger of a newly formed subsidiary of
Berkshire Hathaway into GEICO in which GEICO's shares not owned by Berkshire
Hathaway will be converted into cash. The Merger Agreement has been approved
by the Boards of Directors of both companies.
As a result of the transaction, GEICO will become a subsidiary of
Berkshire Hathaway. Olza M. (Tony) Nicely and Louis A. Simpson will continue
as Co-Presidents and Co-Chief Executives of GEICO. They noted that, since
GEICO will continue to be run by its present management team as a separate
business operation, they and Warren E. Buffett, the Chairman of Berkshire
Hathaway, do not expect any reduction in staff at GEICO as a result of the
merger.
The merger is subject to the required approval of state insurance
regulators and to the approval of the holders of 80% of GEICO's stock. Since
Berkshire Hathaway owns about 51% of GEICO's outstanding shares, this means
that the holders of a majority of GEICO's shares not owned by Berkshire
Hathaway must also vote in favor of the merger in order for it to be approved.
Pursuant to an order of the insurance regulatory authorities issued in
connection with Berkshire Hathaway's purchase of GEICO stock in 1976,
Berkshire Hathaway has granted a proxy to an independent bank which in voting
such shares is guided solely by its judgment as to the best interests of
Berkshire Hathaway.
The parties expect the closing of the merger to take place in
early January 1996. The Merger Agreement permits the GEICO Board of
Directors, if so required by its fiduciary duties, to consider an unsolicited
proposal for an alternative transaction, to withdraw its recommendation of the
merger and to terminate the Merger Agreement.
Mr. Buffett said, "In 1951, when I was 20, I invested well over
half of my net worth in GEICO. I felt very comfortable with that commitment,
and I feel equally comfortable with the major commitment that Berkshire
Hathaway has made today.
"GEICO delivers auto insurance in an extraordinarily efficient
manner that benefits its more than 2.5 million policyholders as well as its
owners. GEICO will be run in the future as in the past; it's impossible to
improve on the jobs done by Tony Nicely in underwriting and Lou Simpson in
investments.
"On a personal note, I would like to thank Lorimer A. Davidson,
former CEO of GEICO, for first opening my eyes to the potential for GEICO some
44 years ago."
Mr. Nicely and Mr. Simpson added, "Since GEICO's founding in 1936
the value of our franchise has been based on high quality service and low
operating cost. We believe that the merger with Berkshire Hathaway will
enable GEICO to become even more efficient and thus benefit our customers and
fellow associates. We are looking forward to continuing our long working
relationship with Warren Buffett and many years of growth."
(End of Release)
